Q2 2024 EnerSys Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to the Q2 fiscal year 'twenty 'twenty for Enersys earnings Conference call.
At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone.
You will then hear an automated message advising your hand, just raised to withdraw your question. Please press star one again, please be advised that today's conference is being recorded.
I would now like to turn the call over to Lisa Hartman, Vice President of Investor Relations.
Good morning, everyone and thank you for joining us today to discuss <unk> second quarter fiscal 2024 results on the call with me today are Dave Shaffer.
And Chief Executive Officer, and Andrea I understood as executive Vice President and Chief Financial Officer.
Last evening, we published our second quarter results and filed our 10-Q with the FCC, which are available on our website. We also posted slides that we will be referencing during this call are available on the presentation page within the Investor Relations section of our website.
As a reminder, we will be presenting certain forward looking statements on this call that are subject to uncertainties and changes in circumstances. Our actual results may differ materially from those forward looking statements for a number of reasons. These statements are made only as of today for a list of forward looking statements and factors, which could affect our future results.
Please refer to our recent 10-Q filed with the FCC.
In addition, we will be presenting certain non-GAAP financial measures, particularly concerning our adjusted consolidated operating earnings performance free cash flow adjusted diluted earnings per share and adjusted EBIDTA, which excludes certain items for an explanation of the difference between the GAAP and non-GAAP.
Metrics. Please see our company's form 8-K, which includes our press release dated November eight 2023.
I'll turn the call over to intercept president and CEO, Dave Shaffer.
Thank you Lisa and good morning.
We delivered solid results in the second quarter, achieving record gross margins as we continue to hold price.
A reflection of the strong customer value of our solutions.
We are executing our strategy for long term growth, which resulted in impressive operating earnings EBITDA and EPS expansion and we continue to maintain a healthy balance sheet with another quarter of significant operating and free cash flow generation.
We are delivering on our innovation roadmap and are excited to have received the initial order for 50 systems of our fast charging storage solution for my launch customer landmark dividend.
I am very proud of our team's hard work I'm pleased with our momentum in this exciting new venture for Enersys.
Before I go into details of our results I would like to start with a macro view of the environment and end markets we serve.
The need for reliable resilient and sustainable power has never been more critical mega.
Mega trends of Digitization automation electrification and decarbonization.
We continue to fuel demand for energy storage and power solutions.
That said consistent with our peers communications networks customers have reduced capex as they digest existing inventory manage their balance sheets and plans for the next wave of network build outs.
The diversification of our business model and end markets is indeed, a strategic advantage for Enersys is inherent cycles and seasonality of the different markets. We serve tend to offset each other and enable us the opportunity to invest in preparation for the next wave of demand surges.
We fully expect the release of new network powering projects in calendar year 2024.
In addition, with the transformation we've led over the past several years, we have further diversified our end markets, making us less reliant on a limited customer or market base.
While communications end markets represent approximately one third of Enersys as revenue, our telecom and broadband business is a combination of network expansion and ongoing network resiliency investment.
We also see positive demand trends continuing in data center.
Out of this summer, we're seeing double digit year on year increases in our order rates and our motive power and specialty segments.
This provides further confidence in the <unk>.
Long term capabilities of our business and how the diversification of our model is the right strategy.
Andy will provide details on our second quarter fiscal 'twenty four performance and outlook, but I will first provide a few highlights.
Please turn to slide five.
Revenue of $901 million was consistent with our exceptionally strong prior year.
Our performance was broadly in line with our expectations and largely driven by strong maintenance III product demand within motive power.
Our ability to maintain pricing.
For the second quarter, our overall book to Bill was close to one excluding telecom and broadband equipment orders.
Adjusted gross margin in the quarter improved nearly 500 basis points over prior year to 26, 6% due to our impressive price cost capture and mix improvements combined with IRA benefits.
Our gross margin was also supported by the continued easing of supply chain pressures.
Adjusted operating earnings of $103 million and adjusted EPS of $1 84, both represent significant increases over prior year.
Please turn to slide six.
The team is making tremendous progress against our strategic priorities, let me share a few highlights from the second quarter.
Starting with innovate.
We continued to make significant strides on our innovation roadmap.
At mobile World Congress in September we launched our Dps distributed power system, featuring our new <unk> technology, which minimizes time consuming and expensive connections to the electrical grid when deploying outdoor small cells the.
The <unk> system enables operators to accelerate <unk> deployment and expedite revenues for that <unk> service. This important technology as a competitive differentiator that provides our customers with a unique advantage in the marketplace.
Which we expect will help drive growth in 2024 and beyond.
In October we were proud to announce that our alpha Adam outdoor gateway a DOCSIS three one enabled OEM module was recognized among the best in industry for its innovative design and value at the 2023 cable Tec Expo.
Hey, Adam outdoor gateway is an enabler for deploying small cells across the cable broadband hybrid fiber coaxial infrastructure.
And we were proud to announce a collaboration with Samsung to incorporate our gateway into their <unk> strand small cell, which is designed for multi system operators to deploy their mobile networks.
We are optimizing the business evidenced through our operational excellence initiatives, which will continue to drive our strong margin expansion.
Our cost reduction efforts and specialty including our exit from Sylmar will begin to contribute to performance in the third quarter.
We have undertaken additional footprint rationalization actions this quarter in energy systems, We recently announced the closure of our Spokane production facility, and which we will be able to transfer capacity to our other facilities. Thanks to our Eos or enersys operating system lean tools.
We also made the decision to exit our residential renewables business, which includes our outback in Mojave branded products.
This will enable us to focus our engineering efforts at a higher growth and higher margin opportunities in commercial energy solutions for enterprise customers, such as fast charging storage.
And accelerating.
We are making marked progress in planning for a new lithium battery Giga factory in the U S. This factory will be a competitive advantage for enersys, providing innovative battery solutions for both our commercial and U S government customers with independence from non domestic cell suppliers.
We have narrowed down our site selection and continued pursue significant government funding to support this investment.
We have also advanced our partnership agreement with FERC Court.
We are developing this project with a highly disciplined view on capital allocation and we will not proceed without high confidence in achieving an accretive return on invested capital.
Also consistent with our efforts to accelerate I am pleased to announce that during the quarter, we hired Jamie <unk> as our vice President corporate and business development reporting to me.
Jamie has extensive experience in corporate strategy, M&A finance, and bringing tremendous capability to our team as we evaluate potential partnerships and acquisitions with continued focus on the best strategic opportunities in a highly disciplined approach to capital allocation.
Please turn to slide seven.
I could not be more proud to begin in earnest the launch of our revolutionary fast charging storage business with our initial 50 system orders from landmark, including applications for demand charge reduction utility backup power and dynamic fast charging for electric vehicles.
And our systems delivery only system, combining energy management with one two megawatt hours of energy storage capacity and the dynamic DC fast charging with parallel charging capabilities from a single pedestal.
We look forward to updating you on sales growth in this area in the coming quarters. Please.
Please turn to slide eight.
Along with our strategic framework, we remain highly focused on our sustainability goals.
During the quarter, we were honored with a distinguished energy efficiency initiative of the year Award as part of environmental finances Sustainable Company Awards the.
The recognition was given specifically for water and energy reduction achievements related to the implementation of our Eos Lean management program.
I would like to congratulate the team on this recognition for our commitment to sustainability and efficiency.
Before I turn it over to Andy I would be remiss, if I didn't recognize some incredible leaders on our Enersys team.
As we announced in September after an outstanding 30 year career in the broadband telecommunications renewable energy and technology industries drew Zogby President of our energy systems Global segment will retire on March 31, 2020 for drew.
Drew has been pivotal in leaving the energy systems business through a major transformation and positioning our company as an industry leader through we thank you for your dedication and leadership and wish you all the best in your next chapter, but not just yet drew will be helping lead and an executive advisory role for the next five.
Months.
Shawn O'connell has transitioned from president motive power global to succeed drew.
<unk> had previously that our reserve power business prior to the Alpha acquisition.
Sean has held a variety of leadership roles within the company and has introduced several transformative initiatives driving the motive power business is impressive performance.
<unk> significant revenue growth from our maintenance free battery offerings, increasing operating discipline in opex blessing flexing driving innovative solutions and delivering record operating earnings.
Finally, I am pleased to announce Chad <unk> has been named as Sean successor, since 2017, Chad held the position of Vice President motive power Americas and has played a pivotal role developing and executing our strategy to grow maintenance free revenue.
Over the past two decades, Chad has developed a proven track record and strong internal and external relationships, which make him the ideal successor to lead the motive power global business.
I'll now turn it over to Andy to take you through our results and outlook in greater detail Andy.
Thanks, Steve Please turn to slide 10.
Second quarter net sales of $901 million were slightly up from prior year, driven primarily by a 6% increase in price mix and a 1% positive impact from currency offset by a 7% decrease in organic volume due primarily to slower sales into our network communications and <unk>.
Markets that Dave discussed as well as the very robust prior year comp.
Any demand softness in the quarter with largely limited to our telecom and broadband markets as evidenced by our book to Bill which is approximately one for the rest of our businesses.
As expected total volumes were flat sequentially with motor motive power up despite Q2 being our traditionally lowest seasonal quarter.
During the quarter, we booked an IRI benefit of $22 million as a reduction of cost of goods sold.
This benefited our results from gross margin through net income.
It is important to note that our results are exceptional year over year improvement even before the IRA benefit.
We achieved adjusted gross profit of $240 million and 26, 6% of net sales in the quarter in line with guidance.
Excluding the IRA benefit adjusted gross profit was $218 million and 24, 2% of revenue, reflecting an improvement of 230 basis points over prior year, driven by strong price mix performance, which more than offset $27 million of higher quarterly costs versus prior year.
And understates, our true operational improvement due to the impact of margin.
Our adjusted operating earnings were $103 million in the quarter of $38 million improvement over prior year, resulting in an adjusted operating margin of 11, 5% excluding.
Excluding the IRA benefits, we achieved adjusted operating earnings of $82 million up $16 million versus prior year with an adjusted operating margin of nine 1%, improving 180 basis points year on year.
Adjusted EBITDA was $116 million and adjusted EBITDA margin was 12, 9% an increase of $31 million and 340 basis points, respectively versus prior year.
Please turn to slide 11.
Coming in at the higher end of our guidance adjusted EPS was $1 84 per share an impressive increase of 66% over prior year, including III benefit of 52 cents per share in the quarter.
Adjusted EPS, excluding the <unk> benefit was $1 31, even still an impressive 19% increase over prior year to $1 11 adjusted EPS.
Similar to margins adjusted EPS benefited from favorable price mix actions, which outpaced year on year cost increases in the quarter.
In the second quarter, our effective tax rate was 11, 2% and 18, 3% on an as adjusted basis before the benefit of the higher Ed.
On the right path of the page you can see the detail of net sales in AOE by segment, including our consolidated totals.
Let me now provide details of demand and the performance for each of our segments.
Please turn to slide 12.
In the second quarter energy systems revenue declined 3% from prior year to $422 million primarily.
Primarily driven by lower volumes, partly offset by improvements in price mix.
Services within energy systems continue to grow nicely and achieved record revenue in the Americas in the second quarter.
As previously discussed energy systems volumes are pressured by several large telecom and broadband customers pushing out capital expenditures.
Energy systems second quarter results were highlighted by strong margin improvement as a result of positive price mix cost recapture.
Adjusted operating earnings of $26 million improved $9 million from prior year and adjusted operating margins of six 1% improved 230 basis points over prior year.
While we remain very bullish on the mid and long term megatrend opportunities in this line of business.
We continue to work with their telecom and broadband customers as they digest inventory and prepare for their upcoming network build outs.
Based on our recent customer discussions on projects and network expansion plan. We view this slowdown is temporary.
As such we are taking advantage of the timing of this command pods to invest in restructuring actions within our energy systems segment with additional plans to consolidate our footprint.
Closing, our Spokane facility and exiting our resi renewables business, which represent some minimal Sarah for annual sales and significant bottom line contribution.
These actions have more than a restructuring program to reduce costs, we are right sizing our footprint, making strategic decisions to influence what is within our control and prioritizing engineering resources to the highest growth opportunities with the best returns while preparing for the next wave of network build outs.
We anticipate generating a combined annual savings of approximately $18 million per year on an ongoing basis from these initiatives, which we will fully realized next fiscal year with one time costs in the range of $25 million to $35 million.
Of which approximately $6 million represents cash outlay.
Please turn to slide 13.
Motive power turned in an impressive quarter growing revenues, 5% to $355 million as a result of ongoing exceptionally strong price mix.
We continue to see a return to normalcy in ordering patterns and benefit from our customers growing enthusiasm of our proprietary maintenance free offering.
Motive power reported its highest adjusted operating earnings in our company's history this quarter contributing $53 million.
Which improved 34% over prior year.
Adjusted operating margins were 15%, which advanced approximately 330 basis points over prior year.
We are extremely confident in motive power to robust demand and profit growth opportunities that we called out at Investor day, and our motive power customers have expressed their strong support over our pursuit of our own domestic lithium plant.
Please turn to slide 14.
Specialty revenue declined 1% from prior year to $123 million.
A 4% decrease in volume was partially offset by a 2% increase in price mix and a 1% positive FX impact.
We are seeing robust and accelerating demand from both our transportation and our aerospace and defense customers.
This was muted by the timing of GPL capacity reallocation and the temporary impact of first fill more plant closures this quarter.
Adjusted operating earnings of $6 million declined $4 million from prior year and adjusted operating margin of four 5% was down approximately 290 basis points.
Earlier in the quarter, we experienced plant loading issues as we transition to energy storage capacity from telecom and broadband to transportation.
By September and October and factory performance is back in line with expectations, but the under loading in July and August as well as the production transfers out of our Sylmar plant put pressure on specialties operating earnings in the second quarter.
We are laser focused on optimizing the ongoing flexibility as well as the performance of our operations and returning to full productivity levels.
We are extremely bullish on this segment due to our opportunities in the transportation aftermarket and significant A&D program wins combined with the enhanced capacity flexibility and expansion, we anticipate benefiting from beginning in the second half of this fiscal year.
Please turn to slide 15.
Our balance sheet remains extremely strong and positions us well to invest in growth and navigate the current economic environment.
As of October one 2023, we had $328 million of cash and cash equivalents on the balance sheet and our net debt position of $662 million represented a reduction of approximately $385 million from prior year.
Our credit agreement leverage ratio was one four times EBITDA, adding back our off balance sheet asset securitization program. Our leverage ratio was one seven times EBITDA below our target range of two to three times and an improvement of <unk> one times from the end of the first quarter of fiscal 2024.
<unk> us to mitigate higher interest rates and provide dry powder going forward.
In the quarter, we achieved an adjusted free cash flow conversion rate of approximately 120% on strong free cash flow of $91 million.
Our capital expenditures were $20 million.
Please turn to slide 16.
Our capital allocation strategy remains focused and disciplined around investing in organic growth.
Complimented by strategic M&A, maintaining our net leverage ratio at the lower end of our two to three times adjusted EBITDA target range in the current interest rate environment.
And returning capital to shareholders through dividend and share buybacks.
During the second quarter, we paid $9 million in dividend and repurchased $47 million in shares.
Please turn to slide 17.
We expect to continue to operate in a dynamic macro environment and anticipate some headwinds to persist for some time.
While it is difficult to predict exact timing, we expect to see the impact of U S Telecom and broadband capex push outs to continue partially offset by continued growth in our maintenance free solutions and motive power specialty demand.
Based on this we expect Q3 to represent a modest improvement in sequential volumes, but a slight decrease versus prior year.
These volume expectation.
Coupled with continued price mix strength should result in top line increasing sequentially roughly in line with the prior year.
Our fiscal third quarter 2024 guidance range is $1 80 to $1 90, adjusted diluted EPS inclusive of 50 to 60 per share from IRA benefits.
Excluding the IRA credit this is in line with a very strong prior year.
I'd like to remind everyone that the IRS has not yet issued additional clarification guidance related to the section 45 X, which could materially increase or decrease the quantity of our U S produced batteries that qualify for this credit.
We will update you on additional guidance as provided which is currently expected towards the end of the calendar year.
We anticipate realizing gross margins of 25% to 27%, including 150 to 250 bps from the IRI benefits.
Our capex expectation for the full year fiscal 2024 will be in the range of $100 million to $120 million.
<unk> investments in new products, including lithium production lines and continued expansion and flexibility of our TPP L capacity.
I would like to highlight again that we are key participants in large and growing end markets supported by global Megatrends.
We continue to generate healthy cash flow and have clear capital allocation priorities.
Our team is energized and focused on executing our strategic initiatives to achieve our long term goals.
With that let's open it up for questions.
Operator.
Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again please.
Please standby, while we compile the Q&A roster.
One moment for our first question.
Yes.
And our first question comes from Noah Kaye of Oppenheimer <unk> company.
Hi, good morning, Thanks for taking the question. Good good good morning, Thanks for taking my questions I've got about a dozen all tried to eliminate to that's helpful.
Okay.
Yes.
So first of all I guess.
Randy what kind of step up should we get.
In specialty margins as you reallocate production to that business, which is the mix favorable and move past some of these transition loading issues.
Yes, good morning, Noah specialty.
There was some temporary issues this quarter alone.
As we mentioned before about half of it comes from some of the transfers in our Missouri plant as a result of the telco dropped and about half of the step down came from the transfer of Sylmar, which was just temporary.
So that 4 million additional will get us back to Q1 and prior year around the 8% range, but then we have additional what the demand is just fantastic aerospace and defense.
Transportation past eight weeks.
We're up double digit order year on year and all of these lines of businesses, our distribution center is going well so.
Now that we've leveled out we can start to focus on the growth opportunities. So youll see continue with step up it'll be a return to normal I would say next quarter and then continued step up from there yes.
A lot of the program wins, we're seeing and it's exciting in A&D.
A lot of that is staged out.
<unk> phased out in our backlog a little bit.
So in terms of Q3, it's.
There is definitely some upside.
On the margin side because of the issues Andi noted and but we are really excited about.
This business in the long run.
Great.
And yes margins, if I did my math right.
These restructuring initiatives.
Initiatives lift margin profile by about 100 Bips.
There's still.
A fair amount of ground to make up to kind of get this to a double digit margin business, how do you get there.
Okay.
As we mentioned the initiatives that we put in place right now will generate about $18 million on an annualized basis. So that is.
The exit of a rescue renewable business, which really wasn't in line with our strategic focus and will allow us to reallocate our engineering resources to a lot of these higher growth higher margin opportunities.
We also did our reps and then we also consolidated our Spokane facility because of the iOS tools that we are able to use to free up footprint in other areas. So that's all going to be effect for next fiscal year. It will start to bleed in throughout the balance of this year and then as you can imagine our telco and broadband pause that's a lot of that.
Some of our higher margin business and the good thing is we've got a lot of maintenance activity. That's still ongoing we had a record America's service business. So we'll be able to continue to cover our fixed costs, but the real margin expansion will come when that telco broadband.
Network, Buildout resumes, which everyones thinking it's going to be some time next year.
Okay, Yes that take took my just my last question, which is just unpacking that that visibility more into the networks improvement I guess, obviously they'll go budget cuts were pretty well telegraphed.
You or your expectation is that.
Networks orders rebound next year, that's that's next calendar year or your next fiscal year.
<unk> calendar.
I called.
John one of our sales leaders yesterday just to read.
Read the temperature on that I can tell you. The pipeline is very very active it's one of our strongest pipelines, we've got projects going on with Argos.
Strand mounted Cvr's wireless.
Yeah.
HFC networks.
There's a lot of work on the small cell small cell build out densification opportunities a couple of big projects that are kind of newer for us our private networks. There is some of these companies are starting to build out their own networks.
For security reasons for cost reasons.
DOCSIS, Florida auto is starting to pick up some steam so the and then the there is a couple of stadium thing. So the pipeline is is really really strong we just need to work through I know specifically in a couple of these projects the customers over ordered.
So they are working down inventory as Andy noted.
I want to make sure you heard it that our service teams are extremely busy.
Sure.
So the activity is going on I think there was just a lot of.
A lot of over buying there for a while as supply chains, we're tight and we just need to kind of right size, what's going on but the pipeline is very good.
Yes.
Okay.
That's very helpful. Congrats on the.
Fast charging orders.
Leave it there.
Thanks Noah.
Thank you one moment for our next question.
Yes.
Okay.
And our next question comes from Brian Drab with William Blair.
Hi, Brian Hi, Brian.
Brian Your line is open.
Good morning can you hear me.
Now we can hear you Brian.
Okay.
I need to press Star six Im learning on all of these conference calls this morning.
Yes.
Okay.
Anyways.
Andy can you.
When you talked about the revenue outlook.
I want to make sure I got that right you said the <unk>.
Revenue.
Volume up slightly sequentially can you just repeat that and then maybe also add.
Any color on how pricing.
Perfect.
Total revenue in the outlook.
So you are looking at sequential is that your question Brett. So yes, just looking at the December quarter and the comment you made.
For the December quarter, So youre looking at.
Youre talking about Q3.
Yes, Q3, I think you commented that Q3, but we see very very slight.
We'll likely have a slight volume increase.
Specialty you should have a nice increase.
Because they are overcoming some of the challenges that they faced this quarter motive power is continuing its trajectory and energy systems is where we will probably have offset some of that.
Yes in terms of the pricing part of your question Brian.
The pricing is holding up on all segments.
And you made a comment about.
Revenue for the third quarter year over year.
Well what did you say there.
Yes. So we expect Q3 is going to be modest improvements sequentially, because as we mentioned motive power.
Nice increase offset by energy system, but a slight decrease versus prior year, so pretty close to where we note a range.
The telecom and broadband are bad.
Right now it's just on this as we pause, but the data center business is really doing well in the in the energy system space as well so it's there.
Theres some things to be optimistic about.
Okay.
And if revenue is down slightly year over year in <unk>.
You have pricing, though that offset some of that right.
Rice is up year over year is that yeah, yeah. So with any dollar coupon peaked out its just the volume if that helps to clarify.
Okay Alright.
I'll follow up more on that later.
And then Ken can.
Can you talk.
At all about what Youre hearing specifically from your broadband customers.
Spending in.
In the December quarter, and into 2024, and I know youre.
Really positive on the <unk>.
The outlook there longer term at the rural Buildout et cetera, but how is that looking now in in 'twenty four.
Yes, it does.
December quarter.
It's usually a fairly slow quarter in broadband anyway, so not a lot, but I think as we go into the new calendar year, there are some expectations for improvement.
Okay I'll follow up more later thank you.
Thanks, Brian.
Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, one moment for our next question.
Okay.
And our next question comes from Greg Wassa Koski of Weber Research and advisory LLC.
Good morning, Greg Hi, Greg.
Hey, good morning, everyone. Thank.
Thanks for taking my questions I have.
Few on the SaaS charging I'll, just rattle them off if I could repeat them if you need to.
First can you can you confirm that landmark is the anchor customer there.
We've been talking about for the past couple of years and then what does what does the backlog look like now because.
We've always had that anchor customer kind of on the horizon right. So what does it look like now and are you expecting.
More larger chunky orders or do you think it'll be more smaller.
Demos at first.
I'll stop there.
Yes.
Landmark has indeed been our target customer the project has evolved over time the units. The average size of the unit has dramatically increased on where we started there's been a lot of complexity added to the initiative. We're extremely pleased with where we landed the first.
Group of orders of 50.
As we feel the start with this particular customer and then in terms of pipe pipeline activities with other customers there.
Certainly and we're starting to see interest even within our other lines of business. So it's going to be managing the growth effectively and making sure that.
We do a great job.
As we as we build this business up but in terms of the.
Our revenue that we have outlined in our Investor day model that we laid out we still feel very good about that.
Couldn't be more excited and I would just really proud of the team.
That's great.
And then can you maybe speak to the.
Like updated marketing strategy as you see it you know who you are really targeting now I mean imagine that Sim.
<unk> you.
REIT type customers, probably still fit the mold, but you kind of alluded.
Maybe some overlap in some of your other areas of the business as well is that something that you guys are kind of actively seeking.
Maybe some.
Not upselling, but overlap in.
Material handling centers or what have you whatever wherever it makes sense.
Greg I think the core of the device is its capabilities to manage energy effectively and so as you know many of our businesses be it data centers be it.
Networks be it forklift charging all our electrified devices, where users want to maximize or optimize their.
Energy efficiency and minimize there.
Their costs.
So the opportunities for effective energy management are broad.
And the EV fast charging is I always think of as the Cherry on the Sunday because electric cars are going to present, a very high.
And unpredictable load on the grid and so I think of the system as it relates to Evs as a shock absorber to protect the grid, but the most the biggest payback our customers are going to see with this investment is their ability to manage their energy costs and they can take advantage of.
Cheap electricity when its available and primarily avoiding things like demand charges. So as you start to think about and the other opportunities are finding us we havent really actively sought anything on the marketing yet we've been so focused on getting it right on the engineering and getting.
The launch rate.
Our next one of the themes for our next board meeting is how big how fast.
But right now I want to stay very much in line.
With what we've committed to in the Investor Day model and we're very excited about it.
Got it alright, thanks, Dave.
I'll take the rest offline. So that's it for me all my best to drip.
Thanks, Greg.
Thank you I'm showing no further questions at this time I would now like to turn it back to David Shaffer for closing remarks.
Thanks, Neely I want to thank everyone for joining us on today's call I want to thank you for your interest in Enersys and we look forward to updating you again next quarter have a good day.
This concludes today's conference call. Thank you for participating and you may now disconnect Jack.
Okay.
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Okay.
Good.
Yes.
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