EnerSys Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Business Performance: EnerSys had a strong fourth quarter with 7% revenue growth, record adjusted diluted EPS of $1.86 (excluding 45x benefits). Highlights included record motive power margins, margin expansion in Energy Systems and Specialty, and strong contributions from the Brentronics acquisition.
• Segment Details: Energy Systems saw growth in data centers and moderate recovery in communications; Motive Power had 15% earnings growth with maintenance-free products at 29% of segment sales; Specialty benefited from A and D markets and Brentronics acquisition.
• Manufacturing and Technology: Closed flooded lead acid battery facility in Monterrey, Mexico, transitioning production to Richmond, Kentucky; invested in high-speed domestic production capacity; introduced new products like Cenova Sync charger and BETS; Mark Matthews appointed acting CTO to guide lithium strategy.
• Leadership Transition: David Shaffer stepped down as CEO, with Shawn O'Connell taking over, who emphasized addressing energy security and labor scarcity through solutions.

Segment Performance

• Energy Systems: Fourth quarter revenue increased 8% from prior year to $399 million, primarily driven by increased volumes and price mix, partially offset by FX. Adjusted operating earnings were $35 million, growing for the fifth consecutive quarter with an adjusted operating margin of 8.7%, up 400 basis points versus prior year.
• Motive Power: Revenue was $392 million, in line with prior year, offset by FX headwinds and flat volumes but positive price mix. Adjusted operating earnings were $67 million, up 15% versus prior year, with maintenance-free conversion reaching a record 29% of segment sales. Adjusted operating margin was 17.1%, up 240 basis points versus prior year.
• Specialty: Revenue increased 21% from prior year to $178 million, driven by the Brentronics acquisition and organic volume. Adjusted operating earnings were $15 million, nearly double prior year, with an adjusted operating margin of 8.5%, up 270 basis points.

Guidance

• Fiscal Q1 2026: Net sales expected in range of $830 million to $870 million, adjusted diluted EPS $2.03 to $2.13 per share, includes $35 million to $40 million of 45x benefits to gross profit. Anticipates Q1 will be the low point of the fiscal year.
• Full-Year: Temporarily pausing quantified full-year guidance due to evolving tariff policy; expects full-year adjusted operating earnings growth excluding 45x benefits to outpace revenue growth, with Q1 year-to-date orders bolstering revenue from maintenance-free, A and D, and datacenter markets.

Risks

• Tariff Uncertainties: Short-term headwinds from stranded tariffs, impact on new lift truck orders, and uncertainty around reciprocal tariff negotiations.
• Macroeconomic Impact: Volatility in market rhythm, potential negative impact from macroeconomic slowdown on orders, and uncertainty in tariff policy affecting business outlook.

Question and Answer

• Q: Noah Kaye asks about revenue range, EPS growth, and order recovery A: Shawn O'Connell mentions motive power customers had a wait-and-see approach affecting orders, but year-to-date orders are relatively flat. Andrea Funk explains EPS growth considering lower volume, favorable price mix, and stranded tariff costs, with Q1 expected to be the low point.
• Q: Brian Drab asks about 45x, lithium plant A: Andrea Funk and Shawn O'Connell provide updates on 45x progress, noting bipartisan support and ongoing IRS staffing delays for tax refund. Shawn O'Connell discusses positive DOE support for lithium plant and ongoing development of cell samples.
• Q: Greg Lewis asks about M&A opportunities, leverage target A: Shawn O'Connell states EnerSys is opportunistic with dry powder for acquisitions, seeing potential in A and D markets and synergies with domestic lithium manufacturer. Andrea Funk mentions Q1 expected to be low point with trends returning to record Q4 performance.
• Q: Chip Moore asks about energy systems green shoots, resuming full-year guidance A: Shawn O'Connell discusses green shoots in energy systems from network expansion and break fix, with service utilization expected to follow equipment orders. Andrea Funk states full-year guidance will resume when there's greater clarity on tariff policy.