ENS

• Overall Quarterly Performance

  • Delivered record Q1 fiscal 27 results driven by favorable price mix, higher volumes, operating expense discipline, and strong free cash flow conversion enabling stock buybacks.
  • Total net sales hit $936 million, up 5% year-over-year; orders grew 7% year-over-year with a book-to-bill ratio of 1.06, and backlog was flat year-over-year and up 2% sequentially.
  • Recognized a one-time $31 million positive impact from tariff refunds, and expanded 45X U.S. tax benefits to $9 million following production relocation from Mexico to Kentucky.
  • Generated $218 million in free cash flow (up from negative $32 million year-over-year) with 187% free cash flow conversion; improved working capital efficiency by 490 basis points year-over-year, reduced net debt by over $160 million since fiscal 26 end, and maintained a leverage ratio of 0.8x EBITDA, well below target.
  • Increased the quarterly dividend by 10% to 28.75 cents per share for Q2 fiscal 27, repurchased 219,000 shares for $50 million, and has nearly $900 million remaining in share repurchase authorization.

• Strategic Growth Initiative Progress

  • Fordex 172 kWh warehouse battery energy storage system (BESS) received UL and NFPA 855 approval, clearing a key milestone for commercial deployment and enabling an integrated warehouse energy ecosystem combining forklift batteries, chargers, and BESS.
  • Data center lead-based top line grew low teens year-over-year in Q1, in line with full year expectations; the newly launched DataSafe Noir lithium offering has strong customer interest, with meaningful revenue contribution expected to begin in fiscal 2028.
  • Secured a $150 million U.S. Department of Energy (DOE) grant for a new 1 GWh annual capacity defense-focused lithium cell manufacturing campus in Greenville, South Carolina, with a total project cost of $650 million (EnerSys net investment of $500 million, funded via operating cash flow) and an additional $200 million in state/county incentives. The facility will support FEOC-compliant supply chains for defense applications, target a mid-20s internal rate of return, with construction planned to start in H1 fiscal 2028 and full production three years after construction begins.
  • A&D segment growth is supported by accelerating global demand for battery-powered defense technologies (drones, counter-drones, missile defense), with expected annual market growth of 9-11% and strong growth already observed in European NATO ally markets.

• End Market Demand Updates

  • IMS: Transportation orders nearly doubled year-over-year; material handling orders were down high single digits year-over-year, but management expects demand to recover in the back half of fiscal 27 driven by pent-up demand, leading to full year IMS revenue growth.
  • NIS: Communications demand and shipments remained at record levels driven by DOCSIS 4.0 network upgrades; data center orders grew over 80% year-over-year, with deliveries extending 12-36 months out providing long-term demand visibility.
  • PPS: A&D revenue grew 24% year-over-year driven by strong demand for counter drone liquid reserve batteries and missile defense thermal batteries, with demand expected to accelerate through at least 2030.

• Full-year fiscal 2027 capital expenditure guidance is maintained at $70 million, with no spending on the Greenville lithium plant planned in fiscal 2027.
• Full-year fiscal 2027 adjusted as-reported effective tax rate (before 45X benefits) is guided to a range of 21.5% to 23.5%.
• Q2 fiscal 2027 net sales are guided to a range of $955 million to $995 million; adjusted diluted EPS is guided to $3.15 to $3.25 per share (including $42 million to $47 million of 45X cost of sales benefits), with adjusted diluted EPS up 21% year-over-year at the midpoint. Excluding 45X benefits, adjusted diluted EPS is guided to $1.95 to $2.05 per share, up approximately 25% year-over-year.
• Management expects stronger year-over-year revenue growth in H2 fiscal 2027 driven by the expected material handling demand recovery on top of ongoing momentum in data center, communications, and A&D markets.
• Fiscal 2027 earnings growth is expected to be driven primarily by margin expansion in H1, shifting to higher top line growth by the end of the fiscal year.

1. Network Infrastructure Solutions (NIS): Revenue increased 9% year-over-year to $428 million, contributing 45.7% of total consolidated net sales. Adjusted operating earnings rose 50% year-over-year to $45 million, with an adjusted operating margin of 10.5% (up 280 basis points from prior year). Growth was driven by strong volume growth, favorable price mix, robust data center demand, and margin expansion in service offerings.
2. Industrial Mobility Solutions (IMS): Revenue decreased 3% year-over-year to $407 million, contributing 43.5% of total consolidated net sales. Adjusted operating earnings fell 11% year-over-year to $38 million, with an adjusted operating margin of 9.3% (down 70 basis points from prior year). Lower material handling volumes offset recovery in transportation demand and favorable price mix and foreign exchange impacts.
3. Precision Power Solutions (PPS): Revenue increased 24% year-over-year to $101 million, contributing 10.8% of total consolidated net sales. Adjusted operating earnings rose 48% year-over-year to $18 million, with an adjusted operating margin of 18.2% (up 280 basis points from prior year). Growth was driven by strong demand for aerospace and defense (A&D) products, particularly counter drone and missile defense power solutions.

• Material handling demand recovery timing is uncertain and outside of management's control, with current choppy and volatile order trends that have lagged earlier expected recovery timing.
• Evolving U.S. tariff policy creates ongoing uncertainty, though management notes annual tariff exposure estimates remain materially unchanged, and the company has proactively implemented pricing, sourcing, and operational mitigation measures via a dedicated Tariff Task Force.
• The Greenville lithium plant project is subject to external regulatory and permitting timelines for NEPA and local requirements that could impact construction start and progression.

Q: Given 80% year-over-year Q1 data center order growth, can you provide context on the durability of this demand, and do you already have order visibility for the new DataSafe Noir lithium product ahead of its fiscal 2028 revenue launch? / A: The 80% order growth is real, but most orders deliver out 12 to 36 months, giving long-term visibility to continuing demand for existing lead-based TPPL products, which are expected to grow high single-digit to low teens for the full year in line with guidance. Management already has 100 initial orders/supply chain commitments for DataSafe Noir, over 500 active customer quotations, and strong market enthusiasm, with no meaningful revenue contribution expected before fiscal 2028, as previously guided.

Q: What assumptions drive the mid-20s IRR target for the new Greenville defense lithium plant, and when will net capital expenditures for the project begin? / A: IRR is supported by the price premium commanded by FEOC-compliant batteries for critical defense applications, plus the ability to expand into new fast-growing A&D segments (such as large drone batteries) that drive incremental revenue and margin expansion. Construction-related capital expenditures are expected to begin in mid-fiscal 2028, and the project can be fully funded with existing operating cash flow without pushing leverage above target ranges; potential future expansion of the facility could further increase returns, which have not been included in base financial modeling.

Q: What is driving the expected sequential margin expansion in Q2 fiscal 27, and can you share details on the improvement in the NIS service business? / A: Early fiscal 2027 earnings growth is focused on margin expansion driven by facility rationalization (including recently announced closures of Bellingham and Brazil facilities), operational discipline under the Energize strategy, and growing mix of higher-margin offerings. NIS service revenue grew ~20% year-over-year in Q1, with double-digit margin improvement, driven by new disciplined project management infrastructure, software investments, and workforce upskilling; the growing service business also acts as an enabler for future growth initiatives across the company.

Q: What indicators support management's expectation that material handling demand will recover in H2 fiscal 27, and is the shift from lead to lithium accelerating faster than expected? / A: Leading indicators including forklift OEM order data show recent strong order growth (Hyster Yale just reported its strongest booking quarter in three years), with battery orders typically lagging OEM orders by one quarter or less. The conversion rate from lead to lithium remains steady, with no unexpected acceleration; EnerSys' product portfolio includes both lead and lithium offerings, so it is well positioned regardless of conversion pace. Transportation, another large IMS end market, has already started recovering strongly (orders up 91% year-over-year), signaling broad improvement in capital goods demand for industrial mobility.