Q2 2025 EnerSys Earnings Call

November 7, 2024

Only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During this session you will need to press star one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star one again.

Speaker Change: Good day, and thank you for standing by and welcome to the quarter to 2025 Enersys earnings Conference call.

At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During this session you will need to press star one one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star one once again.

Please be advised that today's conference is being recorded.

Speaker Change: I would now like to hand, the conference over to your first speaker today, Lisa Hartman VP of Investor Relations. Please go ahead.

Speaker Change: Please be advised that today's conference is being recorded I would now like to hand, the conference over to your first speaker today, Lisa Hartman VP of Investor Relations. Please go ahead.

Lisa Hartman: Good morning, everyone. Thank you for joining us today to discuss <unk> second quarter fiscal 2025 results.

Lisa Hartman: On the call with me today are David Shaffer, Enersys, Chief Executive Officer, Shawn O'connell, <unk>, President and Chief operating Officer, and Andrea Funk, Enersys Executive Vice President and Chief Financial Officer.

Lisa Hartman: Good morning, everyone. Thank you for joining us today to discuss Enersys second quarter fiscal 2025 results.

Lisa Hartman: Last evening.

Published an announcement about our planned leadership succession, our second quarter 2025 results and our 10-Q with the SEC, which are available on our website. We also posted slides that we will be referencing during this call. The slides are available on the presentations page within the Investor Relations section of our website.

Speaker Change: Last evening, we published an announcement about the planned leadership succession, our second quarter 2025 results and our 10-Q with the SEC, which are available on our website.

Lisa Hartman: Yeah.

As a result, 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 these 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.

Speaker Change: Also posted slides that we will be referencing during this call.

Speaker Change: Slides are available on the presentation page within the Investor Relations section of our website.

Speaker Change: As a result, 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 these forward looking statements for a number of reasons. These statements are made only as of today.

Please refer to our recent 10-K filed with the SEC.

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 EBITDA, which excludes certain items for an explanation of the difference between the GAAP and non-GAAP financial metrics. Please see.

Speaker Change: The forward looking statements and factors, which could affect our future results. Please refer to our recent 10-K filed with the SEC.

Speaker Change: 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 EBITDA, which excludes certain items for an explanation of the differences between the GAAP and non-GAAP financial metrics.

Lisa Hartman: Our company's form 8-K, which includes our press release dated November six 2020 for now I will turn the call over to Enersys CEO, Dave Schaeffer.

Dave Schaeffer: Thank you Lisa and good morning. Please.

Speaker Change: Please see our company's form 8-K, which includes our press release dated November six 2024, now I will turn the call over to Enersys T O Dave Shaffer. Thank.

Dave Schaeffer: Please turn to slide four.

Dave Schaeffer: Before we dive into our quarterly results I'd like to share some personal news.

Last night, we announced that after much thought and reflection.

Dave Shaffer: Thank you Lisa and good morning. Please.

Dave Shaffer: Please turn to slide four.

Dave Schaeffer: The decision to retire as president and CEO of Enersys effective in May 2025.

Dave Shaffer: Before we dive into our quarterly results I'd like to share some personal news.

It's a decision I do not take lightly but it feels like the right time for both Mi and Enersys.

Dave Shaffer: Last night, we announced that after much thought and reflection I have made the decision to retire as president and CEO of Enersys effective in May 2025.

Dave Schaeffer: Solid foundation strong momentum and a clear path forward and I'm confident in the opportunities that lie ahead for this great company.

Dave Shaffer: It's a decision I do not take lightly but it feels like the right time for both Mi and Enersys.

Dave Schaeffer: I am pleased to announce that our board of directors as named Sean O'connell, Our president of energy systems Global as my successor.

Speaker Change: Solid foundation strong momentum and a clear path forward and I'm confident in the opportunities that lie ahead for this great company.

Dave Schaeffer: Sean will assume the role of President and CEO and join the <unk> Board of directors upon my retirement in May.

Speaker Change: I am pleased to announce that our board of directors as named Shawn O'connell, our president of energy systems Global as my successor.

Dave Schaeffer: To ensure a seamless transition Sean has been promoted from president of energy systems Global to President and Chief operating officer effective immediately.

Speaker Change: Sean will assume the role of President and CEO and join the <unk> Board of directors. Upon my retirement in May two.

Dave Schaeffer: Sean will continue to serve as President energy systems go until his successor is named a search for his successor is underway.

Speaker Change: To ensure a seamless transition Sean has been promoted from president of energy systems Global to President and Chief operating officer effective immediately.

Dave Schaeffer: Shawn has held key executive positions in each of our core businesses and international operating regions as President Energy systems Global Since November 2023, Sean has led a significant business transformation, including reshaping the go to market and operating strategies and reducing annual cost.

Speaker Change: Sean will continue to serve as president energy systems grow until his successor is named a search for his successor is underway.

Speaker Change: Shawn has held key executive positions in each of our core businesses and international operating regions as President Energy systems Global Since November 2023, Sean has led a significant business transformation, including reshaping the go to market and operating strategies and reducing annual cost by.

Speaker Change: Nearly $50 million.

Dave Schaeffer: Previously as president motive power, Sean introduce several transformative initiatives that delivered 20% operating earnings growth and 210 basis points of margin expansion.

Speaker Change: Nearly $50 million.

Speaker Change: Previously as President motive power, Sean introduced several transformative initiatives that delivered 20% operating earnings growth and 210 basis points of margin expansion.

Dave Schaeffer: But what gives me the steadfast confidence and Sean CEO candidates see is as ethics and character.

Dave Schaeffer: <unk> unwavering commitment to doing things the right way and natural leadership capabilities have supported our customer and supplier relationships and added to our culture.

Speaker Change: But what gives me the steadfast confidence and as John CEO candidates.

Speaker Change: As ethics and character.

Dave Schaeffer: Over the past 11 years. He has successfully executed every challenge presented and his deep understanding of our business and strategic vision makes him the ideal leader to build on our success with.

Speaker Change: <unk> unwavering commitment to doing things the right way and natural leadership capabilities have supported our customer and supplier relationships and added to our culture.

Speaker Change: Over the past 11 years. He has successfully executed every challenge presented and his deep understanding of our business and strategic vision makes him the ideal leader to build on our success with.

Speaker Change: With veterans day soon upon us I would be remiss not to mention that Sean started his career serving the armed forces as a member of the U S Army's 82nd Airborne Division.

Speaker Change: And to thank Sean and our other dedicated veterans for their brave service to our country.

Speaker Change: With veterans day soon upon us I would be remiss not to mention that Sean started his career serving the armed forces as a member of the U S. Army's 80, <unk> Airborne Division.

Speaker Change: Over the next six months I'll work closely with Sean to ensure a smooth transition.

Dave Schaeffer: Together, we remain fully focused on maintaining our operational excellence and strong customer relationships and supporting our ongoing initiatives with continuity and dedication.

Speaker Change: Thanks, Sean and our other dedicated veterans for their brave service to our country.

Speaker Change: Over the next six months I'll work closely with Sean to ensure a smooth transition.

Speaker Change: Together, we remain fully focused on maintaining our operational excellence and strong customer relationships and supporting our ongoing initiatives with continuity and dedication.

Sean: Now I will turn it over to Sean for a few comments.

Sean: Thanks, Dave and Hello, everyone I'm honored to succeed Dave <unk> CEO and thank our board for their trust and confidence in me.

Sean: Now I'll turn it over to Sean for a few comments.

Sean: Having been a part of this incredible company for 21 years, including the decade prior to joining nurses as an outside reseller vendors as products within my own company.

Sean: Thanks, Dave and Hello, everyone I'm honored to succeed Dave <unk> CEO and thank our board for their trust and confidence in me.

Sean: I've had the privilege of working with some of the most talented people in the industry and witnessed tremendous progress made under Dave's leadership for which I am deeply grateful.

Sean: Having been a part of this incredible company for 21 years.

Sean: <unk> the decade prior to joining nurses as an outside reseller vendors. This products within my own company I've had the privilege of working with some of the most talented people in the industry and witnessed tremendous progress made under Dave's leadership for which I am deeply grateful.

Sean: Under Dave's leadership Enersys has transformed from a traditional lead acid battery company with limited scale into a global leader in energy system solutions growing revenue by some 35% through strategic acquisitions and groundbreaking product innovations.

Sean: These efforts have built a unique portfolio of smart battery and energy management technologies, including both lithium ion and led Chemistries, leaving an indelible mark on the company and our industry.

Speaker Change: His efforts have built a unique portfolio of smart battery and energy management technologies, including both lithium ion and led Chemistries, leaving an indelible mark on the company and our industry.

Speaker Change: I look forward to building on that strong foundation, we've established working with our team to continue our journey of innovation and growth as we pursue new opportunities that align with our long term vision and delivering stakeholder value as.

Speaker Change: As Dave mentioned, we will be working closely together to ensure a seamless transition over.

Speaker Change: Over the next six months I'll be conducting the listening tour across the organization and with other key stakeholders, including customers partners, our analysts and investors as I get up to speed on my expanded role and responsibilities for now it's business as usual our goals initiatives and day to day off.

Speaker Change: As Dave mentioned, we will be working closely together to ensure a seamless transition over.

Dave Schaeffer: Operations remain our focus with minimal changes now I'll turn it back over to Dave to discuss the results of our second quarter.

Dave Schaeffer: Thanks, Sean before I go into an overview of the quarter I would like to extend our sympathies to those impacted by the devastating hurricanes in the southeast I.

Dave Shaffer: Operations remain our focus with minimal changes now I'll turn it back over to Dave to discuss the results of our second quarter.

Speaker Change: I would also like to thank and recognize our Enersys service teams for working tirelessly to maintain power continuity for our customers affected by the storms.

Dave Shaffer: Thanks, John before I go into an overview of the quarter I would like to extend our sympathies to those impacted by the devastating hurricanes in the southeast I.

Speaker Change: Please turn to slide five for a review of our second quarter performance.

Dave Shaffer: I would also like to thank and recognize our Enersys service teams for working tirelessly to maintain power continuity for our customers affected by the storms.

Speaker Change: In the second quarter, we delivered revenue and EPS in line with our guidance ranges and demonstrated our ability to generate strong and accelerating financial results in an uncertain market environment.

Speaker Change: Our balanced business portfolio has proven resilient, allowing us to leverage exciting areas of profitable growth, while weathering softer demand in other end markets.

Speaker Change: Adjusted gross margin of 28, 7% up 210 basis points over prior year with adjusted operating earnings up 11% year over year and 8% sequentially.

Speaker Change: These results were attributable to impressive motive power performance on continued customer enthusiasm for our maintenance free offerings.

Speaker Change: Growth in our A&D business, including the accretive addition of <unk>.

Speaker Change: Solid cost discipline, particularly in our energy systems line of business as well as increased <unk> benefits.

Speaker Change: Ongoing, but easing headwinds in our communications and transportation markets and FX pressure.

Speaker Change: While we have adjusted our full year revenue guidance modestly to account for the spending weakness in the class eight OEM truck market and deployment delays and fast charging storage, we remain confident in our core strategy and the significant opportunities across our entire portfolio visible on the horizon.

Speaker Change: Our focus remains on delivering results were.

Speaker Change: We're maintaining price and developing higher value products that lift our portfolio mix and create enhanced customer intimacy.

Speaker Change: We're optimizing our cost structure to adapt through cycles.

Speaker Change: We're improving productivity with investments in automation and flexibility.

Speaker Change: And perhaps what I'm most excited about we're advancing our transformative strategic priorities.

Speaker Change: This quarter, we achieved several key milestones in our transformative strategy. We were pleased to have been selected for a $200 million Department of Energy Award to partially fund our planned lithium Giga factory.

Speaker Change: And have received formal board approval to proceed with this important project.

Speaker Change: The integration work and results of the <unk> acquisition are exceeding our expectations and we're and we've installed our first fast charge the storage system at our launch customer site.

Speaker Change: We are seeing promising demand indicators and positive momentum across our business, which gives us optimism heading into the second half of the fiscal year.

Speaker Change: Overall orders were up year over year with particular strength in energy systems, Americas, and which we received a 30% increase in orders this quarter on 10% lower revenue.

Speaker Change: Clearly, indicating the inflection points in both years and driving the second consecutive quarter of increases in energy systems backlog.

Speaker Change: Andy will give details on our second quarter fiscal 'twenty, five financial performance and outlook, but I'll first provide a few more highlights and business drivers behind the results.

Speaker Change: Starting with energy systems, we saw a sequential increase in revenue for the first time in six quarters driven by improvements in communications and we were pleased to deliver higher adjusted operating earnings for the third consecutive quarter.

Speaker Change: Sales were down $40 million versus prior year, but up $21 million sequentially, driven by the softer, but recovering spending by our communications customer as well as robust data center demand.

Speaker Change: Service revenue was notably challenged this quarter due to timing of projects, which we expect to come back in the second half of the year.

Speaker Change: We were particularly pleased to see the increase in communications orders in Q2.

Speaker Change: As we have previously mentioned network resiliency can only be deferred so long and that spending resumption is what we are witnessing in our order book we.

Speaker Change: We are not yet seeing significant investments in network expansion, but with lower interest rates and increasing last mile delivery volumes on higher traffic spurred by the surge in AI. We are confident it is imminent.

Speaker Change: Motive power was once again, a bright spot with increasing volumes and margins versus the prior year.

Speaker Change: Our warehouse and logistics customers recognize the value of our higher margin proprietary maintenance free offerings seeing us not only is the power provider, but as an energy solutions provider, who helps them address their profit and labor challenges and achieve their sustainability goals.

Speaker Change: We are seeing more inbound customer interest in our lithium solutions and the announcement of our own lithium ion cell factory to supply our products has gained customer attention and support.

Speaker Change: In Q2 sales of our maintenance free product offerings were up 24% compared to the prior year, representing 26% of total motive power sales compared to 22% in the prior year. This growth underscores our competitive positioning and reinforces motive powers ongoing success.

Speaker Change: Yes.

Speaker Change: Industry data continues to support our expectations of mid and long term market growth opportunities, a leading industry Association's research conveyed a 50% increase in current conditions confidence levels compared to last quarter.

Speaker Change: And industry experts are anticipating lift truck shipments to reach their double digit growth for next calendar year.

Speaker Change: Although dealer truck inventories currently elevated we expect to enjoy a heightened battery orders when our dealer sales pickup and the excess inventory is depleted we believe that the uncertainty associated with the presidential election has delayed decision, making and should now begin to resume momentum.

Speaker Change: And specialty revenue and adjusted operating earnings growth was driven by strong performance in aerospace and defense bolstered by the accretive impact of our <unk> acquisition, but offset by continued softness in class eight truck OEM demand, which is not specific to enersys and reflects the broader truck market.

Speaker Change: A&D demand remained very healthy with a solid order book and several aerospace and defense opportunities Department of defense opportunities in the pipeline.

Speaker Change: Despite the year over year and sequential improvements in this business our transportation volumes were below our expectations for the quarter. Although we grew our U S transportation aftermarket revenue, 31% in the first half of fiscal 2025 versus the first half of 'twenty four we were not able to fully offset the.

Speaker Change: Ongoing softness in class eight truck OEM revenue, which was down 37% first half of fiscal 'twenty five versus prior year.

Speaker Change: Class eight truck demand is expected to remain suppressed through the end of our fiscal year due to high truck inventory and flat tonnage delay OEM requirements.

Speaker Change: Encouragingly U S class eight net truck orders picked up in September and our fleet customers indicate plans to increase truck procurement towards the end of our fiscal year.

Speaker Change: Which should boost battery demand with a one quarter lag.

Speaker Change: Combined with the historical battery cycle data, we anticipate stronger transportation demand entering our next fiscal year.

Speaker Change: Additionally, much of our aftermarket volume comes from premium automotive sales with customers such as Autozone in Napa enthusiastic about the superior performance of our Odyssey batteries.

Speaker Change: We are actively negotiating new retail contracts and anticipate increasing our spot buy activities until these contracts are in place later in the fiscal year <unk>.

Speaker Change: Positioning us for both volume and margin expansion as timing is well aligned with the completion of our Missouri plant one investments.

Speaker Change: And our new ventures business. We are excited to have delivered our first fast charging storage system at the end of the second quarter.

Speaker Change: This marks an important milestone signaling in the beginning of a new chapter in energy management solutions for Enersys the.

Speaker Change: The system installation was executed within four hours and as expected.

Speaker Change: Please turn to slide six.

Speaker Change: Let me share some highlights from our progress on our strategic priorities during the second quarter.

Speaker Change: Starting with innovate.

Speaker Change: We continue to deliver cutting edge, new product introductions, including software driven energy management systems, providing customers with flexible and efficient solutions that meet their evolving needs.

Speaker Change: In September our envision connect solution for wireless system monitoring and optimization of network batteries was recognized by Lightwave plus broadband technology report as among the best in the industry for cable broadband innovation.

Speaker Change: With a small Bluetooth chip embedded into the battery envision connect enables our customers to proactively manage and monitor their battery assets with real time data.

Speaker Change: In October the <unk> ABS cell lithium ion based battery was successfully launched onboard masses Europa Clipper spacecraft.

Speaker Change: Our battery powered the spacecraft flight and scientific instrumentation.

Speaker Change: The battery it provides over 540 amp per hours of capacity through a 28 volt system performing various charge and discharge cycles throughout the emissions duration.

Speaker Change: The lithium battery was specifically designed and minimises the magnetic interference within the spacecraft.

Speaker Change: This achievement underscores our lithium engineering excellence and decades of experience collaborating with NASA to develop custom high performance energy storage solutions for space exploration.

Speaker Change: We continue to focus on optimizing the business as well.

Speaker Change: Our investments in TPP L production flexibility across our Missouri plants are progressing according to plan and will be complete by the end of the fiscal year.

Speaker Change: This initiative, including the installation of two new automated lines and plant one will double production capacity, while requiring only half the labor enhancing our production flexibility and reducing operating costs.

Speaker Change: The increased volume and improved cost absorption will further drive earnings expansion delivering meaningful benefits to our business.

Speaker Change: And accelerating the highlight of the quarter is the advancement on the new phase of construction plans for our lithium ion cell Giga factory for which I will now provide a brief overview.

Speaker Change: Please turn to slide seven.

Speaker Change: We discussed our Giga factory and detailed during our recent tech talk and I will summarize a few key points today, our new factory will be approximately 500000 square feet in size with an initial capacity produced five gigawatt hours of lithium ion cells annually located in Greenville, South Carolina.

Speaker Change: Our total investment is estimated at $665 million and will be partially funded by federal state and local incentives, including the $199 million Doe Award.

Speaker Change: From a strategic perspective this new factory provides a reliable domestic supply of lithium ion cells for Enersys lithium battery production supporting our mix shift to higher performance lithium solutions. It has the scale and the flexibility to meet our customers' diverse needs and importantly will meet stringent Dod.

Speaker Change: Requirements strengthening our relationship with this important customer.

Speaker Change: From a financial perspective benefits include Derisking, our long term revenue and earnings growth, reducing our input costs and unlocking additional and incremental high margin revenue opportunities, which collectively drive a strong financial return profile for our shareholders.

Speaker Change: We are forging ahead with our plans and we will provide ongoing updates as we progress with this strategic investment.

Speaker Change: Please turn to slide eight.

Speaker Change: We also continued to progress on our sustainability journey and recently published our detailed climate action plan roadmap to achieve scope, one neutrality by 2040 and scope to neutrality by 2050.

Speaker Change: We are unwavering in our dedication to collaborate with our customers and suppliers and Decarbonising our value chain and are excited to share our continued progress on this path.

Speaker Change: In closing, while we expect that market uncertainty will persist through the coming months. We are confident our second half of the fiscal year is on track for continued top line and profit expansion.

Speaker Change: We're bullish about our strong position as the leading provider of energy storage solutions as we continued to deliver innovative products and services and growing end markets, where the needs for access to reliable power is increasing exponentially. We remained focused on delivering profitable long term.

Speaker Change: Growth to our shareholders I will now turn it over to Andy to take you through our results and outlook in greater detail Andy.

Andy: Thanks, Steve Please turn to slide 10.

Andy: Second quarter net sales of $884 million were down 2% from prior year, driven by a 3% decrease in Oregon net organic volume from the headwind and communications and class eight OEM market, Steve mentioned as well as 1% price mix pressure from lower proportionate sales.

Andy: March and power electronics, <unk> communications customers, which were partially offset by 2% positive impact from the <unk> acquisition.

Speaker Change: We achieved adjusted gross profit of $254 million up $14 million year on year, including irate benefits booked as a reduction to cost of goods sold in the quarter.

Speaker Change: Q2, adjusted gross margin improved by over 200 basis points versus prior year to 28, 7%.

Speaker Change: Nearly half was due to an increase in higher margin power revenue and the accretive impact of the <unk> with the balance being attributable to higher IRA benefit.

Speaker Change: Our adjusted operating earnings were $115 million in the quarter up over $10 million versus prior year with an adjusted operating margin of 13% excluding.

Speaker Change: Excluding the iron benefits adjusted operating margin increased approximately 20 basis points year on year adjust.

Speaker Change: Adjusted operating earnings benefited from the realization of our cost improvement actions and energy systems.

Speaker Change: Adjusted EBITDA was $129 million, an increase of approximately $13 million versus prior year, while adjusted EBITDA margin was 14, 6% up 170 basis points versus the prior year.

Speaker Change: Adjusted EPS for the second quarter came in above the midpoint of our guidance range at $2 12 per share an increase of 15% over prior year.

Speaker Change: In the second quarter of fiscal 'twenty, five our effective tax rate with two 3% on an as reported basis and 19, 4% on an as adjusted basis before the benefit of the IRA compared to 18, 3% in key team of 24.

Speaker Change: Let me now provide detail by segment.

Speaker Change: Please turn to slide 11.

Speaker Change: In the second quarter energy systems revenue declined 10% from prior year to $382 million, primarily driven by the lower volumes and price mix pressures previously mentioned.

Speaker Change: Revenue was up over $20 million sequentially. The first increase in six quarter as we begin to see improvement in these challenged end markets.

Speaker Change: Adjusted operating earnings of $24 million improved for the third consecutive quarter, reflecting the increased revenue on top of the optimized cost structure and were in line with prior year, despite the softer market conditions and lower revenue.

Speaker Change: Adjusted operating margin of six 4% was up over 100 basis points sequentially and increased 30 basis points versus prior year.

Speaker Change: We exited the quarter with very encouraging order trends in communications resilience spending and we expect to be able to hold opex restraint Ethernet revenue further recovery.

Speaker Change: Please turn to slide 12.

Speaker Change: Versus prior year motive power revenue increased 3% to $367 million largely driven by volume growth.

Speaker Change: Motive power again reported strong adjusted operating earnings this quarter contributing $58 million up 8% over prior year, representing our highest Q2 ever.

Speaker Change: Adjusted operating margins were at record highs at 15, 7% up 70 basis points of our Q2 24.

Speaker Change: We remain optimistic coming out of the seasonally slow Q2 with good disability from industry order data.

Speaker Change: As lithium product sales increase.

Speaker Change: We expect healthy margin, but in the near term the growth will be reflected as higher volume increases with depressed price mix due to the elevated ramp up cost pass through impact of these batteries.

Speaker Change: Please turn to slide 13.

Speaker Change: Specialty revenue increased 9% from prior year to $135 million driven by a 12% positive impact from the <unk> acquisition, and a 1% increase in price mix, partially offset by a 4% decline in organic volume.

Speaker Change: Q2, 25% adjusted operating earnings of $8 million were up approximately $2 million versus prior year with an adjusted operating margin of five 4% up 90 basis points.

Speaker Change: Margins remain below our target range of low double digits due to pressure from lower class eight OEM transportation volumes and the impact of under absorption in our Missouri plant.

Speaker Change: However, we are seeing the early benefits from the <unk> acquisition and beginning to grow our higher margin transportation aftermarket volume.

Speaker Change: Given the incremental transportation aftermarket opportunities and the strength of the A&D end market combined with the enhanced high speed flexible capacity expansion and the full contribution from brand <unk>, we remain optimistic about our opportunities in specialty and expect to see ongoing improvements over the next several quarters.

Speaker Change: Please turn to slide 14.

Speaker Change: Positive operating cash flow of $34 million.

Speaker Change: Offset by Capex of $30 million resulted in free cash flow of over $3 million in the quarter.

Speaker Change: Operating cash flow absorb a transition tax payment of $11 million and over $40 million of investment in primary operating capital as sales accelerated during Q2 25, leading into a more robust second half of the year versus softening demand in the prior year.

Speaker Change: In addition, we increased capital spending by $11 million year on year, primarily from the incremental mystery investments previously mentioned.

Speaker Change: Net that the benefit of our IAA credits will not have the full positive impact on our cash flow until our fiscal year 2020 for tax filings are finalized and we received our first 45 ex tax refund of over $100 million.

Speaker Change: Which we expect to get near the end of this fiscal year.

Speaker Change: During the quarter final section 45 ex regulations were issued by the U S Treasury Department and made public on October 24.

Speaker Change: We believe these align with and support our current interpretation and application of the law.

Speaker Change: As of September 29, 2024, we had $408 million of cash and cash equivalents on hand, and net debt of $840 million, representing an increase of approximately $329 million since the end of fiscal 'twenty for.

Speaker Change: This increase is primarily attributable to the $206 million acquisition of <unk>.

Speaker Change: $75 million of stock buybacks $19 million in dividends.

Speaker Change: $66 million of Capex, including the misery production investments and the purchase of land for a planned lithium plant.

Speaker Change: And a $58 million investment in primary operating capital to support the underlying business ramp as we anticipate in the second half of this fiscal year.

Speaker Change: Our credit agreement leverage ratio was one six times EBITDA.

Speaker Change: Our balance sheet remains strong and positions us to invest in growth and navigate the current economic environment.

Speaker Change: Our credit agreement leverage ratio was one six times EBITDA.

Speaker Change: Although our leverage increased modestly during the quarter, we anticipate maintaining our net leverage at or below the low end for two to three times target range, providing us with ample dry powder for our capital allocation decisions.

Speaker Change: Our balance sheet remains strong and positions us to invest in growth and navigate the current economic environment.

Speaker Change: Please turn to slide 15.

Speaker Change: During the quarter, we paid $10 million in dividends and repurchased $64 million in shares. We currently have approximately $258 million remaining on our buyback authorization, including $200 million incremental authorization approved by our board yesterday.

Speaker Change: Please turn to slide 15.

Speaker Change: We continue to screen for additional attractive bolt on acquisition opportunities, such as <unk>, which meet our disciplined strategic and financial criteria.

Speaker Change: Please turn to slide 16.

Speaker Change: We continue to screen for additional attractive bolt on acquisition opportunities, such as <unk>, which meet our disciplined strategic and financial criteria.

Speaker Change: We are seeing encouraging demand trends and the majority of our end markets, including healthy trends in our motive power data center, and aerospace and defense businesses, and while still challenged nicely improving orders in our communications market.

Speaker Change: Please turn to slide 16.

Speaker Change: And positive early demand signals and class eight truck OEM market.

Speaker Change: Which we expect to improve steadily over the next several quarters.

Speaker Change: We are excited about our progress in new venture delivering our first SaaS catch and storage system at the end of the second quarter, although deployments have taken longer than originally expected.

Speaker Change: And positive early demand signals in class eight truck OEM market.

Speaker Change: Which we expect to improve steadily over the next several quarters.

Speaker Change: Our fiscal third quarter 2025 guidance range is $920 million to $960 million in net sales with adjusted diluted EPS of $2 20 to $2 30 per share.

Speaker Change: We are excited about our progress in new venture delivering our first fast charging storage system at the end of the second quarter, although deployments have taken longer than originally expected.

Speaker Change: Our fiscal third quarter 2025 guidance range is $920 million to $960 million with net sales with adjusted diluted EPS of $2 20 to $2 30 per share.

Speaker Change: Our guidance anticipates, a modest sequential improvement in both communication spending and transportation aftermarket volume incremental revenue and earnings from <unk>.

Speaker Change: And ongoing revenue growth in motive power.

Speaker Change: Our guidance anticipates, a modest sequential improvement in both communication spending and transportation aftermarket volume incremental revenue and earnings from <unk>.

Speaker Change: In consideration of the current market conditions and delays in fast charging storage were modest modestly lowering our fiscal 2025 revenue guidance range now set at $3 billion $675 million to $3 billion $765 million of net sales versus prior guidance of <unk>.

Speaker Change: And ongoing revenue growth in motive power.

Speaker Change: In consideration of the current market conditions and delays in fast charging storage were modest modestly lowering our fiscal 2025 revenue guidance range now set at $3.675 billion to $3 billion $765 million of net sales versus prior guidance of <unk>.

Speaker Change: $3 billion $735 million to $3 billion $885 million.

Speaker Change: As we enter the second half of the year, we expect the profitability of our business to delivering accelerating returns.

Speaker Change: $3 billion $735 million to $3 billion $885 million.

Speaker Change: Driven by improving volume.

Speaker Change: Favorable product mix decree.

Speaker Change: As we enter the second half of the year, we expect the profitability of our business to deliver accelerating returns.

Speaker Change: The accretive contribution of <unk>.

Speaker Change: Continued cost improvements and.

Speaker Change: And benefits from operational efficiencies flowing through to our bottom line.

Speaker Change: Driven by improving volume.

Speaker Change: Favorable product mix decree.

Speaker Change: With recent board approval, we are excited to advance the next phase of construction plan for lithium ion Giga factory in Greenville, and expect to incur modest related non capitalized expenses in the second half of the year as we move forward with this strategic project.

The accretive contribution of Brent Tronic Kantar.

Speaker Change: Continued cost improvements.

Speaker Change: And benefits from operational efficiencies flowing through to our bottom line.

Speaker Change: With recent board approval, we are excited to advance the next phase of construction planned for lithium ion Giga factory in Greenville, and expect to incur modest related non capitalized expenses in the second half of the year as we move forward with this strategic project.

Speaker Change: As a result, we are tightening our fiscal 2025 EPS guidance range, an increased confidence in previous earnings expectation, but slightly lowering the midpoint by <unk> 10 per share to account for these increased expenditures.

Speaker Change: Our expected adjusted diluted EPS range is now $8 75 to.

Speaker Change: To $9 <unk> per share versus our prior guidance of $8 80 to $9 20 per share with an with a pre IRS tax rate of 20% to 21%.

Speaker Change: Our expected adjusted diluted EPS range is now $8 75 to.

Speaker Change: To $9 <unk> per share versus our prior guidance of $8 80 to $9 20 per share with an with a pre IRA tax rate of 20% to 21%.

Speaker Change: Our capex expectation for the full fiscal year 2025 remains in the range of $100 million to $120 million after absorbing incremental spending on our plant domestic our planned domestic lithium plant.

Speaker Change: Although we expect the end markets may remain uncertain during here near term given the dynamic macro environment. We are excited to be standing on the threshold of our future.

Speaker Change: Although we.

Speaker Change: During days impactful 10 years to our CEO. He has established Enersys is a leading provider of energy systems and storage solutions.

Speaker Change: The end markets may remain uncertain during your near term given the dynamic macro environment. We are excited to be standing on the threshold of our future.

Speaker Change: We are confident in our positioning and strategy and we are extremely optimistic about the tremendous growth opportunities ahead of us.

Speaker Change: During days impactful 10 years, our CEO. He has established Enersys is a leading provider of energy systems in storage solutions we.

Speaker Change: I'm grateful for the leadership and mentoring and look forward to beginning the next leg of our journey under Shawn strong leadership in May we.

Speaker Change: We are confident in our positioning and strategy and we are extremely optimistic about the tremendous growth opportunities ahead of us.

Speaker Change: We remain focused on delivering long term value to our stockholders.

Speaker Change: I'm grateful for David's leadership, and mentoring and look forward to beginning the next leg of our journey under Shawn strong leadership in May.

Speaker Change: With that let's open it up for questions.

Speaker Change: Operator.

Speaker Change: Thank you.

Speaker Change: At this time, we will conduct a question answer session.

Speaker Change: We remain focused on delivering long term value to our stockholders.

Speaker Change: As a reminder to ask a question you will need to 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.

Speaker Change: With that let's open it up for questions.

Operator.

Thank you.

Speaker Change: At this time, we will conduct a question answer session.

Speaker Change: Please standby, while we compile the Q&A roster.

Speaker Change: Our first question comes from Brian Drab of William Blair. Your line is now open.

Speaker Change: Please standby, while we compile the Q&A roster.

Brian Drab: Good morning, Thanks for taking my questions and Dave It's been great working with you Congrats on your decision and Sean looking forward to know you better.

Speaker Change: Our first question comes from Brian Drab of William Blair. Your line is now open.

Dave Schaeffer: Thanks, Brian.

Brian Drab: Good morning, Thanks for taking my questions and Dave It's been great working with you Congrats on your decision and Sean looking forward to can I know you better.

Speaker Change: Morning, Brian.

Speaker Change: Thank you Brian good morning.

Speaker Change: Yes.

Speaker Change: Maybe.

Speaker Change: We can just start with a question on <unk>.

Speaker Change: <unk> charging and storage can you give a little more detail around what it is.

Speaker Change: Thanks, Brian.

Speaker Change: Morning, Brian.

Speaker Change: Causing some delay there.

Thank you Brian good morning.

Yes.

Speaker Change: How many units have shifted from that initial order of $50 million.

Maybe.

We can just start with a question.

Speaker Change: <unk> charging and storage can you give a little more detail around what is.

Speaker Change: Is it still just one customer landmark that we're talking about at this point.

Speaker Change: Causing some delay there.

Speaker Change: How many units have shifted from that initial order of $50 million.

Speaker Change: Yes, Brian we're still just talking about landmark to start and I think we.

Speaker Change: Is it still just one customer land market, we're talking about at this point.

Speaker Change: There's the technical elements of the UL certification process, which group completed I think what we underestimated a little bit was sort of the bureaucratic part of the certification process getting all the documents on file and through the system. So that's the main source of some of the delays and then.

Speaker Change: Yes, Brian we're still just talking about landmark to start and I think we.

Speaker Change: Theres been some site prep issues from the customer's perspective as well. So we've got one system in the ground. We've got a few more ready to go and our goal continues to be.

Speaker Change: To get 15 have 15 ready to go this fiscal year, that's what we're continuing to drive on.

Speaker Change: And as you can imagine the system, especially one as complicated as this.

Speaker Change: To get 15 have 15 ready to go this fiscal year, that's what we're continuing to drive on.

Speaker Change: The early phases are.

Speaker Change: Are a little choppy.

Speaker Change: And probably impacts some of the modeling that I know.

Speaker Change: And as you can imagine the system, especially one as complicated as this.

Speaker Change:

Speaker Change: Lisa and <unk> are working with you guys on.

Speaker Change: The early phases are.

Speaker Change: But.

Speaker Change: Are a little choppy.

Speaker Change: The key for me is the continued confidence by the end user about the business justification as a rationale for this investment which is the energy management mitigating demand charges and there is just continued I don't even want to say excitement, but pressure from the end customer about this project.

Probably impact some of the modeling that I know.

Speaker Change: Lisa and Andy or are working with you guys on.

But.

Speaker Change: So we're going to we're going to push through these.

Speaker Change: <unk> issues and.

Speaker Change: It's just us.

Speaker Change: It's just been hard to get the timing right from a modeling perspective, but the momentum is still very much going forward.

Speaker Change: So we're going to we're going to push through these.

Speaker Change: <unk> issues and.

Speaker Change: Andy is a reality.

Speaker Change: It's just us.

Speaker Change: No I think you hit it again, we've been focusing on this initial launch customer and that's going to allow us really to develop our pipeline more when we have the systems installed.

Speaker Change: It's just been hard to get the timing right from a modeling perspective, but the momentum is still very much going forward.

Speaker Change: Andy is here.

Speaker Change: And.

Speaker Change: It's exciting and the install a Brian the installation with extremely well they do they pre wire everything at the cm and so they just hoisted it right down and they had the big old system installed in four hours it was really impressive.

And.

Speaker Change: It's exciting and the install Brian the installation with extremely well they do they pre wire everything at the cm and so they just hoisted it right down and they had that big old system installed in four hours it was really impressive.

Speaker Change: Okay. Thanks.

Speaker Change: You said it might change the modeling a little bit I guess I'm looking at.

Speaker Change: Fiscal 'twenty seven doesn't seem that far away anymore.

Speaker Change: Okay. Thanks.

Speaker Change: Basically calendar 'twenty six.

Speaker Change: I guess.

Speaker Change: You said it might change the modeling a little bit I guess I'm looking at.

Speaker Change: I don't want to put words in your mouth, but I would imagine it looks a little bit tougher to get to.

Speaker Change: Fiscal 'twenty seven doesn't seem that far away anymore.

Speaker Change: $400 million to $700 million revenue run rate by.

Speaker Change: Basically calendar 'twenty six.

Speaker Change: I don't want to put words in your mouth, but I would imagine it looks a little bit tougher to get to.

Speaker Change: With this I don't know Cory by that time or no.

Speaker Change: Brian I think it's just these are startup issues and it's the I don't think Theres any we will certainly.

Speaker Change: $400 million to $700 million revenue run rate by.

Speaker Change: With this I don't know Cory by that time or no.

Speaker Change: Update models and let you folks know if we think there is any sort of major departure as far as I'm concerned most of the issues. We're talking about today are related to getting these first 15 systems in the ground and up and running and the.

Brian I think it's just these are startup issues and.

Speaker Change: It's the I don't think Theres any we will certainly.

Update models and let you folks know if we think there is any sort of major departure as far as I'm concerned most of the issues. We're talking about today are related to getting these first 15 systems in the ground and up and running and the other thing I'd comment Brian is the growing enthusiasm across our other lines of businesses for things like a BSS system in.

Speaker Change: The other thing I'd comment Brian is growing enthusiasm across our other lines of businesses for things like a BSS system and warehousing in motive power. So.

Speaker Change: Plenty of opportunity.

Speaker Change: I think it's just early ramp up a very large complicated project debt.

Speaker Change: We're excited with installations, one went very well for the first line gist.

Warehousing and motive power so.

Speaker Change: There is plenty of opportunity.

Speaker Change: Got to get the paperwork for the Yuan certification even that the tests are all done.

I think it's just early ramp that's a very large complicated projects that we're.

Speaker Change: We've got 15 locations that we are ready to to get the products installed in and then the balance of those 56 months since we talked about will follow after that.

Speaker Change: We're excited and installations, one went very well for the first one.

Speaker Change: Got to get the paperwork for the Yuan certification, even though the tests are all done.

We've got 15 locations that we are ready to to get the product installed in and then the balance of those 50 systems. Since we talked about will follow after that.

Speaker Change: Okay. Thanks, and then can you just put a little bit of a finer point on what youre seeing in the communications market in telecom and it sounds like orders.

Speaker Change: Picking up and I might have missed.

Speaker Change: Our growth rate in orders maybe sequentially, if you could give.

Speaker Change: Okay. Thanks, and then can you just put a little bit of a finer point on what youre seeing in the communications market in telecom and it sounds like orders.

Speaker Change: Give us some idea of how much orders improved sequentially or year.

Speaker Change: Year over year.

Picking up and I might have missed.

Speaker Change: We're definitely seeing a recovery in orders and Andy Yes. Once you remove the revenue was down 10% year on year, but orders were up 30% year on year. If I look at comps in particular, Brian You mentioned America comps book to Bill was one <unk> nine in Q2 of 2025.

Speaker Change: Our growth rate in orders, maybe sequentially, if you could give us an idea how much orders improved sequentially or.

Speaker Change: Year over year.

Speaker Change: We're definitely seeing a recovery in orders and Andy Yes question. So revenue was down 10% year on year, but orders were up 30% year on year. If I look at comps in particular, Brian You mentioned America comp book to Bill was one nine in Q2 of 2025.

Brian Drab: Five seven in Q2 of 2004 to give you an idea one nine last quarter as well, but that's leaning into on a sequential basis going up one 9%.

Speaker Change: Healthy increase so we're mostly seeing it and network resilience, we're not yet seeing as much of the network expansion. So I think we're leaning into a return to normalcy in the base business as we've talked about before our target is to be at 8% to 10%. During these down cycles. When it's really just resilient spending and 12% to 15 when its expansionary.

Speaker Change: Five seven in Q2 of 2004 to give you an idea one nine last quarter as well, but that's leaning into on a sequential basis going up one 9%.

Speaker Change: Healthy increase so we're mostly seeing it and network resilience, we're not yet seeing as much of the network expansion. So I think we're leaning into a return to normalcy on the base business as we've talked about before our target is to be at 8% to 10%. During these down cycles. When it's really just resilient spending and 12 to 15 when its expansionary.

Speaker Change: That the peak of the cycle and 10 to 12 overall, so as things continue to return to a normal baseline we expect to be in that range that eight to 10 by the end of this fiscal year with upside opportunity as a lot of it.

Speaker Change: At the peak of this cycle and 10% to 12% overall, so as things continue to return to a normal baseline we expect to be in that range that eight to 10 by the end of this fiscal year with upside opportunity as a lot of this.

Speaker Change: In our expansion starts to kick in and Theres, certainly, Brian with some pent up demand as it relates to the resilience.

Speaker Change: I'll work resilience, we've said all along you can only defer that for so long.

Speaker Change: In our expansion starts to kick in and Theres, certainly, Brian with some pent up demand as it relates to the resilience network resilience. We've said all along you can only defer that for so long and so that's but in terms of the big new exciting projects, even though we've got.

Speaker Change: So that's but in terms of the.

Speaker Change: Big new exciting projects, even though we've got.

Speaker Change: We've got several small <unk> small cell area. We've got the advantage of having shown on the call with US today, Sean is there any additional information you want to provide to Brian as it relates to some of the.

Speaker Change: We've got several small <unk> small cell area, we've got the advantage of having Sean on the call with us today.

Speaker Change: The <unk>.

Speaker Change: Network resilience projects, but maybe some of the new network expansion projects.

Speaker Change: Shaun is there.

Any additional information you want to provide to Brian as it relates to some of the.

Speaker Change: Sure, Dave and good morning, Brian.

Speaker Change: There are several sales in the wind that we have for.

Speaker Change: The kind of network.

Speaker Change: Resilience projects, but maybe some of the new network expansion projects.

Speaker Change: Our network expansion and as Dave mentioned earlier these are in their early stages.

Speaker Change: Sure, Dave and good morning, Brian.

Speaker Change: But there are good signs nonetheless, just to give you a little color the first to be in our hyper based area and we socialize that previously, but we've been shifting beginning in January of this year.

Speaker Change: There are several sales in the wind that we have for <unk>.

Speaker Change: Network expansion and as Dave mentioned earlier these are in their early stages.

Speaker Change: But there are good signs nonetheless, just to give you a little color the first to be in our hyper boost area and we socialize that previously, but we've been shipping beginning in January of this year.

Speaker Change: A great deal of our hyper boost modules and this is allowing.

Speaker Change: Greater traffic to be handled by the antennas without climbing the tower, so doing doing power upgrades in the base stations and we have about 4000 high produce modules and growing and our pipeline.

Speaker Change: A great deal of our hyper boost modules and this is allowing.

Speaker Change: That's the first and as Dave mentioned, it's not a the next.

Speaker Change: G level build if you will but it's a good building signs that some of this is coming back.

Speaker Change: And then in our if you look at our <unk> area.

Speaker Change: That's the first and as Dave mentioned, it's not a.

Speaker Change: Formerly called touch safe week.

Speaker Change: The next.

Speaker Change: GE level build if you will but it's a good building signs that some of this is coming back.

Speaker Change: Completed our first right of way trial public right of way trial for one of the major carriers small cells.

Speaker Change: And our if you look at our Dps area.

Speaker Change: That trial was in Dallas, Texas using the direct.

Speaker Change: Formerly called touch safe.

Speaker Change: Cable buried method.

Speaker Change: We've completed our first right of way trial public right of way trial for one of the major carriers small cells.

Speaker Change: Went extremely well we have two more trials in process at the moment.

Speaker Change: Small cell trial of a node in the East Coast and then another one on the West coast with about 15 nodes, both with different carriers, so which is very encouraging for us.

Speaker Change: That trial was in Dallas, Texas, using the direct cable Barry method.

Speaker Change: And went extremely well with two more trials in process at the moment a small cell.

Speaker Change: Trial of a note of the East Coast and then another one on the West coast with about 15 nodes.

Speaker Change: And we're continuing to see excitement building around the specific use case of DPF and those applications. So we've got a stocking program, we're working on for our OEM partners.

Speaker Change: With different carriers, so which is very encouraging for us.

Speaker Change: We're continuing to see excitement building around the specific use case of DPF.

Speaker Change: We're getting them about 100 nodes now so they can have a rolling stock and begin to deploy more of these as the interest builds and then the final one I will talk about and really mentioned.

Speaker Change: And those applications. So we've got a stocking program, we're working on for our OEM partner.

Speaker Change: We are getting them about 100 nodes now so they can have a rolling stock and begin to deploy more of these as the interest builds and then the final one I'll talk about it.

Speaker Change: Our atom gateways, so our alpha DOCSIS OEM module and gateway programs, So charter and Comcast continue to deploy gateway connected devices.

Speaker Change: We mentioned.

Our atom gateways, so our alpha DOCSIS OEM module and gateway programs, So charter and Comcast continue to deploy gateway connected devices.

Speaker Change: To support both the <unk> and Wi Fi segments.

Speaker Change: And we're seeing consistently building demand for the next year.

Speaker Change: And.

Speaker Change: We are.

Speaker Change: Continuing those deployments and then and then sort of as a subset subsegment of that we're.

Speaker Change: To support both the <unk> and Wi Fi segments.

Speaker Change: We're seeing consistently building demand for the next year.

Speaker Change: We're seeing rural broadband beginning to really pick back up again. This week. This was sort of shut off during the last part of last year. When we saw the general order book decline.

Speaker Change: And we are.

Speaker Change: Continuing those deployments and then and then sort of as a subset subsegment of that we're.

Speaker Change: We're seeing rural broadband beginning to really pick back up again. This was this was sort of shut off during the last part of last year. When we saw the general order book decline.

Speaker Change: But we're seeing several.

Speaker Change: New broadband powered systems being provisioned, which is largely going to build into next calendar year. So again across the board. So good good indications that some of these network builds are forthcoming.

Speaker Change: But we are seeing several.

New broadband powering systems being provisioned, which.

Which is largely going to build into next calendar year, So again across the board.

Speaker Change: Yes, there is a lot going on and thanks for sharing all that detail.

Speaker Change: Okay.

Speaker Change: Good good indications that some of these network builds are forthcoming.

Speaker Change: You're very welcome.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Chip Moore of Roth Capital Partners. Your line is now open.

Speaker Change: Yes, Theres a lot going on and thanks for sharing all that detail.

Speaker Change: Okay.

Speaker Change: Very welcome.

Speaker Change: Hey, chip good morning, Thanks for taking taking the question Echo My congratulations Sean.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Chip Moore of Roth Capital Partners. Your line is now open.

Speaker Change: Maybe just a follow up there on energy systems.

Speaker Change: Hi chip.

Speaker Change: Can you expand a bit more on what youre seeing in the data center market.

Chip Moore: Good morning, Thanks for taking taking the question Echo my congratulations Sean.

Speaker Change: Yes, sure happy to go Datacenters is a bright spot for us.

Speaker Change: Maybe just a follow up there on energy systems.

Speaker Change: Can you expand a bit.

Speaker Change: Q2 was up high single digits year on year, and we do expect fiscal 'twenty five to be up double digits. The orders are healthy that strong year on year gains, particularly in the Americas our.

Speaker Change: More on what Youre seeing in the data center market.

Speaker Change: Yes, sure happy to go Datacenters is a bright spot for us.

Speaker Change: Americas orders are up.

Speaker Change: And we will take to stay at 50% year on year. Although these have long lead times. So the project nature tends to be these longer lead times.

Speaker Change: With new construction being much longer than the replacement <unk>.

Speaker Change: Americas orders are up.

Speaker Change: And we will take to stay at 50% year on year. Although these have long lead times. So the project nature tends to be these longer lead times.

Speaker Change: The DC build outs are flat.

Speaker Change: I'm sorry, the DC build out facing extended lead times due to the power issues and some of the critical components like Transformers, the new utility build out some switch gear to bring the power of the DC kind of lead times more than a year and some components, even as much as two to three years, which impacts the battery sales were doing builds for come through calendar <unk>.

Speaker Change: With new construction being much longer than the replacement.

Speaker Change: The DC build outs are flat.

Speaker Change: I'm sorry, the D C buildup facing extended lead times due to the power issues. Some of the critical components like Transformers, the new utility build out some switch gear to bring the power of the D. C kind of lead times more than a year and some components, even as much as two to three years, which impacts the battery sales were doing build for gone through calendar <unk>.

Speaker Change: 99 being planned they're much larger than the previous new installs like a recent large order that we had with 224 Upi system versus historically, a huge order was 10% to 15 EPS system. So that's what's driving really this order book, that's going to be longer term in nature.

Speaker Change: 29 being planned there are much larger than the previous new installs like a recent large order that we had with 224 ups's system versus historically, a huge order was 10% to 15 EPS system. So that's what's driving really this order book, that's going to be longer term in nature.

Speaker Change: This is one of the reasons why a mix of both new and replacement, which is more book and ship as.

Speaker Change: As well as these project aspect of these new larger install helps to balance some of the Choppiness that you can have with this project activity, but we expect robust DC demand continuing the multiyear trend and I think longer term chip.

Speaker Change: This is one of the reasons why our mix of bolstering replacement, which is more book and ship.

Speaker Change: As well as these project aspect of these new larger installed helps to balance some of the Choppiness that you can have with this project activity, but we expect robust DC demand continues a multi year trend and I think longer term chip.

Speaker Change: It's nice that we've got Shaun.

Speaker Change: Leaning in here because he has a lot of background in this particular area and we've actually added some talent to the team recently.

Speaker Change: It's nice that we've got Shaun.

Speaker Change: A lot of depth in data centers and really my focus with Sean over the next few months is we're really looking at bolt ons.

Speaker Change: Leaning in here because he has a lot of background in this particular area and we've actually added some talent to the team recently.

Speaker Change: Acquisition opportunities in this space and certainly working with <unk> our CTO.

Speaker Change: With a lot of depth in data centers and really my focus with Sean over the next few months is we're really looking at bolt ons.

Speaker Change: On some new product.

Speaker Change: Opportunities in this area as well so it's an exciting space and as Shaun shares with me often some of the demand outlooks for electricity, mostly associated with artificial intelligence and it's staggering how much the available availability of electricity is going to drive this market and to Andy's point.

Speaker Change: Acquisition opportunities in this space and certainly working with <unk> our CTO.

Speaker Change: On some new product.

Speaker Change: We will create some choppiness in terms of.

Speaker Change: When we see the orders, which come sort of we're sort of a very last is Sean you say where sort of the last thing that gets installed in the data center.

Speaker Change: We will create some choppiness in terms of.

Speaker Change: Yeah, we tend to be fairly down the line in that.

Speaker Change: When we see the orders, which come sort of we're sort of a very last Sean you would say we are sort of the last thing that gets installed in a data center.

Speaker Change: Procurement cycle long after Transformers and those other high tech cold items items are made their way through.

Speaker Change: Yes, we tend to be fairly down the line in that.

Speaker Change: Hey, good.

Speaker Change: Alright.

Speaker Change: Yes, that's very helpful and any can you give us any.

Speaker Change: Procurement cycle long after Transformers and those other high tech cold items items are made their way through.

Speaker Change: Insight on I guess chemistry mix in that market or how you see chemistry mix shifting over time.

Speaker Change: Hey, good.

Speaker Change: Alright.

Speaker Change: Chip led sleds really holding on and I think <unk> is where we're seeing the most interest and opportunity.

Speaker Change: Yes, that's very helpful and any can you give us any.

Speaker Change: Insight on I guess chemistry mix in that market or how you see chemistry mix shifting over time.

Speaker Change: Of course on our NPI side.

Speaker Change: Mostly lithium we're looking at to fill in some of the gaps it depends on every customer, but but we haven't seen the same maybe momentum across all elements of the data center space with lithium as we see in other markets. So it's really mix Shawn did I Miss anything there.

Speaker Change: Chip led sleds really hold not and I think <unk> is where we're seeing the most interest and opportunity.

Speaker Change: Of course on our NPI side.

Speaker Change: It's mostly lithium we're looking at to fill in some of the gaps it depends on every customer, but but we haven't seen the same maybe momentum across all elements of the data center space with lithium as we see in other markets. So it's really mix Shawn did I Miss anything there.

Dave Schaeffer: No Dave I think you captured it well and I think that CPL.

Speaker Change: Portion is an important piece if you look at it analogous to motive power and what <unk> done for price mix in motive power, we're enjoying some of the same.

Shawn: No Dave I think you captured it well and I think that TPP L.

Speaker Change: Of lift in <unk> and <unk> data center.

Speaker Change: Portion is an important piece if you look at it analogous to motive power and what <unk> done for price mix in motive power, we're enjoying some of the same.

Speaker Change: And chip if you think about it gets you a lot of the way of lithium TPP. All we've said in the past without some of the risk.

Speaker Change: Type of lift in <unk> data center and chip if you think about it it gets you a lot of the way.

Speaker Change: There's still we're still seeing.

Speaker Change: Some of the some of the uglier stuff and globally in data centers, where we've had some fires and other things.

Speaker Change: <unk>, we've said in the past without some of the risk.

Speaker Change: Venters as with the industry.

Speaker Change: There's still we're still seeing.

Speaker Change: And <unk> really aligned that risk with much better performance characteristics.

Speaker Change: Some of the some of the uglier stuff and globally in data centers, where we've had some fires and other things not <unk>, but the industry.

Speaker Change: Our CAGR is really quite nice in that in that space.

Speaker Change: Okay.

Speaker Change: And <unk> really a lane that risk with much better performance characteristics. So our CAGR is really quite nice in that in that space.

Speaker Change: Great.

Speaker Change: I appreciate it if I could sneak one more in just on motive power staying very resilient it sounds like.

Speaker Change: Just any more color on I think you called out I missed it some dealer inventory dynamics.

Speaker Change: Great.

Speaker Change: It's very helpful. Appreciate it if I could sneak one more in just on motive power sustained very resilient it sounds like.

Speaker Change: What's going on there and then.

Speaker Change: How do you see order trends playing out.

Speaker Change: Just any more color on I think you called out I missed it some dealer inventory dynamics.

Speaker Change: The near term.

Speaker Change: Most of the feedback we're getting is not dissimilar from what we hear from the transportation group, there's been a I would say.

Speaker Change: What's going on there and then.

Speaker Change: How do you see order trends playing out.

Speaker Change: The economic activity over the past few quarters has been somewhat muted.

Speaker Change: Near term I think.

Speaker Change: Most of the feedback we're getting is not dissimilar from what we hear from the.

Speaker Change: I think thats exacerbated some of these inventory positions.

Speaker Change: Transportation group, there has been I would say.

Speaker Change: Most of the feedback I receive and I was just with a bunch of these folks not too long ago.

Speaker Change: The economic activity over the past few quarters has been somewhat muted.

Speaker Change: Is that I think some of the uncertainty related to the election, we're going to clear that pretty quickly now and fuels.

Speaker Change: I think thats exacerbated some of these inventory positions.

Speaker Change: Most of the feedback I received and I was just with a bunch of these folks not too long ago.

Speaker Change: It feels like things are going to improve in.

Speaker Change: Is that I think some of the uncertainty related to the election, we're going to clear that pretty quickly now and fuels.

Speaker Change: So I think a lot of the same dynamics, but what we're leaning into mostly with some of the choppiness and the volume is just been mix.

Speaker Change: It feels like things are going to improve and.

Speaker Change: And just operation operating excellence the factories have been doing a fantastic job our on time deliveries.

Speaker Change: So I think a lot of the same dynamics, but what we're leaning into mostly with some of the choppiness and the volume is just been mix.

Speaker Change: So I'm just impressed as heck with that team.

Speaker Change: And just operation operating excellence the factories have been doing a fantastic job our on time deliveries.

Speaker Change: And we look forward to.

Speaker Change: A bit smoothing out.

Speaker Change: Orders, we've got some good as I noted in my prepared remarks, we've got some.

Speaker Change: So I'm just impressed as heck with that team and and we look forward to.

Speaker Change: So great indicators from some trade Association data reports that we look at and in.

Speaker Change: A bit smoothing out.

Speaker Change: Orders, we've got some good as I noted in my prepared remarks, we've got some.

Speaker Change: And really for us, it's just pushing maintenance free and technology and higher margin solutions into this market and the team's been doing a fantastic job and keep up I can follow up with some data as well I want to stress again. This was a record second quarter AOE for motive power and record <unk> percent for the <unk> latest considered continued and Nokia.

Speaker Change: So great indicators from some trade Association data reports that we look at <unk> and.

Speaker Change: Out of the park.

Speaker Change: And Thats on Q2, which tends to be our seasonally slow quarter with near holidays. So all the more impressive.

Speaker Change: One of our Oems has protected some modest declines mostly in EMEA, but I think it's important to remember that we sell both replacement and to the Oems and that our profit is improving despite the market being somewhat stagnant and I think having a lot of opportunity for growth in front of it.

Speaker Change: Out of the park.

Speaker Change: And Thats on Q2, which tends to be our seasonally slow quarter with EMEA holidays. So all the more impressive.

Speaker Change: One of our OEM has projected to modest declines mostly in EMEA, but I think it's important to remember that we sell both replacement and to the Oems and that our profit is improving despite the market being somewhat stagnant and I think having a lot of opportunity for growth in front of it.

Speaker Change: On a positive note July September lift truck orders were up 12% over prior year.

Speaker Change: And getting to some of this volatility thats largely behind us, but I would say not 100% back to normal. So again I think theres a lot more growth in front of us our backlog is still about 50% higher than pre pandemic levels. We exited Q2, 25% to $286 million of motive power backlog versus $196 million in Q2 of <unk>.

Speaker Change: On a positive note.

Speaker Change: July September lift truck orders were up 12% over prior year.

Speaker Change: Our backlog coverage right now is <unk> eight versus about six pre pandemic.

Speaker Change: Book to Bill with <unk> nine in both Q1 and Q2, so you always wonder when its below one whats, causing that that's because of a lot of it.

Speaker Change: Our backlog coverage right now is <unk> eight versus about six pre pandemic.

Speaker Change: Turn to more of a book and ship type of.

Speaker Change: Book to Bill with <unk> nine in both Q1 and Q2, so you always wonder when its below one whats, causing that that's because there's a lot of the return to more of a book and ship type of.

Speaker Change: Type of an environment.

Speaker Change: Our orders in October our strongest book to ship rate in 18 months at around I think it was around 35% or so so.

Speaker Change: There's a little bit of that return to normalcy till we get steady line and I think the slope is going to continue to improve.

Speaker Change: Type of an environment.

Speaker Change: Our orders in October our strongest book to ship rate in 18 months at around I think it was around 35% or so so.

Speaker Change: One of our customers Andy on the reach trucks is still thats kind of really I would say abnormally long lead times with the other major customer in that area.

Speaker Change: There's a little bit of that return to normalcy till we get a steady line and I think the slope is going to continue to improve.

Speaker Change: Got and sort of back to normal so I think we're almost through this.

Speaker Change: One of our customers Andy on the reach trucks is still thats kind of really I would say abnormally long lead times with the other major customer in that area has gotten sort of back to normal. So we I think we're almost through this.

Speaker Change: It is interrupted phase in order rates and is really starting to feel.

Speaker Change: Like you did in the old days I guess pre COVID-19.

Speaker Change: Exactly.

Speaker Change: Okay perfect.

Speaker Change: We're up to phase in order rates.

Speaker Change: Yes, no I appreciate all that color I'll hop back in queue. Thanks, very much. Thanks.

Speaker Change: Is really starting to feel.

Speaker Change: Like you did in the old days I guess pre COVID-19.

Speaker Change: Thank you.

Speaker Change: <unk>.

Speaker Change: Okay perfect.

Speaker Change: Our next question comes from Greg Lewis of BTG. Your line is now open.

Speaker Change: Yes, no I appreciate all that color I'll hop back in queue. Thanks very much.

Speaker Change: Yes.

Speaker Change: Thank you.

Speaker Change: Hey, Thank you and good morning, everybody and Hey, Dave, Yes, reiterate everybody I'll say, thanks for all that you've helped me learn over the last couple of years, it's really been great.

Speaker Change: Our next question comes from Greg Lewis of BTG. Your line is now open.

Speaker Change: I was hoping to talk a little bit more around the class eight market in specialty.

Speaker Change: On the prepared remarks, it sounds like were kind of bottoming.

Speaker Change: I was hoping to talk a little bit more around the class eight market in specialty.

Speaker Change: It seems like it's picking up.

Speaker Change: As we think about.

Speaker Change: Specialty margins, which have been are up sequentially in margins across the board are improving.

Speaker Change: The prepared remarks, it sounds like were kind of bottoming.

Speaker Change: It seems like it's picking up.

Speaker Change: Kind of looking back and trying to see what how.

Speaker Change: As we think about.

Speaker Change: How can we think about margin progression kind of from from this kind of mid single digits.

Speaker Change: Specialty margins, which have been are up sequentially in margins across the board are improving.

Speaker Change: To that that kind of high single digit low double digits that we saw a couple of years ago.

Speaker Change: Kind of looking back and trying to say.

Speaker Change: How can we think about margin progression kind of from from this kind of mid single digits.

Speaker Change: And is that how contingent on that is really that class eight recovery that we're talking to versus may.

Speaker Change: To that that kind of high single digit low double digits that we saw a couple of years ago.

Speaker Change: Maybe some other drivers that could see that that those margins.

Speaker Change: And is that how contingent on that is really that class eight recovery that we're talking to versus maybe some other drivers that could see that those margins start getting back to that 10% range.

Speaker Change: Start getting back to that 10% range.

Speaker Change: Well, it's a great question.

Speaker Change: As we said the class eight situation was was really sort of a slowdown overall, but what really caught maybe our customers off guard was their level of inventory. So we saw a very abrupt reduction in order activity as a result.

Speaker Change: Well, it's a great question.

Speaker Change: As we said the the class eight situation was was really sort of a slowdown overall, but what really caught maybe our customers off guard was their level of inventories. So we saw a very abrupt reduction in order activity as a result.

Speaker Change: And I would say the inventory situation is improving.

Speaker Change: Again, similar to our comments earlier on motive.

Speaker Change: In this post election environment, we think the overall tonnage and that at least our core of our customers are telling us that they expect that things are going to improve as we get through the uncertainties around this period and so.

Speaker Change: I would say the inventory situation is improving.

Speaker Change: And again similar to our comments earlier on motive in this post election environment, we think the overall.

Speaker Change: And that at least our core of our customers are telling us that they expect that things are going to improve as we get through the uncertainties around this period.

Speaker Change: The the transportation elements are going to improve largely as that volume returns and also as the new.

Speaker Change: And so.

Speaker Change: Our lines come up ramp up in Springfield plant, one I think those are going to be the major drivers as we've modeled into our.

Speaker Change: The the transportation elements are going to improve largely as that volume returns and also as the new.

Speaker Change: Our own forecast for the board.

Speaker Change: Our lines come up ramp up in Springfield plant. One I think those are going to be the major drivers as we've modeled into our own forecast for the board.

Speaker Change: And then Andy and then of course, just as a reminder, the other piece to specialty it would be on transportation is the aerospace and defense and we just see continued.

Speaker Change: And then Andy and then of course, just as a reminder, the other piece to specialty beyond transportation is the aerospace and defense.

Speaker Change: Buoyancy in terms of that piece of the business.

Speaker Change: The macros are all favorable <unk> has gone extremely well.

Speaker Change: And we just see continued.

Speaker Change: To date and so those are going to be the key drivers that margin progression, Andy any more detail or add a little bit more to that to Greg and I will tell you.

Speaker Change: <unk> in terms of that that piece of the business the.

Speaker Change: The macros are a favorable <unk> has gone extremely well.

Speaker Change: I'm sure you're disappointed, but we are even more disappointed in on market, especially this is a great job running this business at the OE percent because we know just how much potential there is here and we're very confident that we're going to be getting back.

Speaker Change: To date and so those are going to be the key drivers of that margin progression, Andy any more detail or add a little bit more to that to Greg and I will tell you.

Speaker Change: I'm sure you're disappointed, but we're even more disappointed than mark, especially this is a great job running this business at the OE percent because we know just how much potential there is here and we're very confident that we're going to be getting back.

Speaker Change: At or near that double digit by the end of this year and I'll give you a little bit of feedback as Dave mentioned remember that its specialty is made up of both the aerospace and defense, which we have a very healthy order book and now, adding <unk>, which we only keep in mind this past quarter with only a partial impact. So we will have in addition to an accelerating business full impact going forward.

Speaker Change: At or near that double digit by the end of this year and I'll give you a little bit of feedback as Dave mentioned remember that its specialty is made up of both the aerospace and defense, which we have a very healthy order book and now, adding <unk>, which we only keep in mind. This past quarter. It was only a partial impact. So we will have in addition to an accelerating business full impact going forward.

Speaker Change: As well as the transportation and remember that transportation made up of both OEM and the aftermarket.

Speaker Change: So as I mentioned after by spot buys are growing at plus 31%, but on a smaller base. It has trouble offsetting that 37% decline that we had in the OEM business.

Speaker Change: As well as the transportation and remember that transportation is made up of both OEM and the aftermarket.

Speaker Change: So as I mentioned after by spot buys are growing at plus 31%, but on a smaller base has trouble offsetting that 37% decline that we had in the OEM business year.

Speaker Change: Year to date, we built about $20 million of inventory to be able to accept that aftermarket business.

Speaker Change: As a reminder, we have three Missouri plants, <unk> Springfield, one which is with Springfield to both the Springfield plant, who bought from the Northstar acquisition.

Speaker Change: Year to date, we built about $20 million of inventory to be able to accept that aftermarket business.

Speaker Change: <unk> performance has turned the corner and is performing well, but to really see that financial impact.

Speaker Change: As a reminder, we have three Missouri plants, <unk> Springfield, one which is Springfield to both the Springfield plant that we bought from the Northstar acquisition.

Speaker Change: At both the Es and specialty absorbing from that under absorption we need more loading.

Speaker Change: <unk> performance has turned the corner and is performing well, but to really see that financial impact.

Speaker Change: That loading when it when it's back at normalized levels is probably about $10 million or <unk> 20 per share of opportunity and we've talked about some of the growth in es as well as this more aftermarket and then eventually that class eight coming back that these two new lines.

Speaker Change: Both the Es and specialty absorbing from that under absorption we need more loading.

Speaker Change: That loading when it when it's back at normalized levels is probably about $10 million or <unk> 20 per share of opportunity and we've talked about some of the growth in es as well as this more aftermarket and then eventually the class eight coming back but these two new lines just.

Speaker Change: Just to give you some perspective of cost about $25 million, that's part of the increase in our Capex that we had this year most of that spending is behind us.

Speaker Change: These new lines will provide flexibility incremental capacity and lower cost. So as Dave mentioned, we will be able to produce two extra volume with people.

Speaker Change: Just to give you some perspective of cost about $25 million Thats part of the increase in our Capex that we had this year most of that spending is behind us. These new lines will provide flexibility incremental capacity and lower cost. So as Dave mentioned, we'll be able to produce two extra volume with half the people.

Speaker Change: Give you some dimensions on that that revenue is about an incremental $150 million of revenue capacity and the west cost is about $30 million less cost of <unk> 60, a share now that probably will take us two to three years Max to until those lines are installed so we get the OE at the level that we need and then we fill that capacity.

Speaker Change: To give you some dimensions on that that revenue is about an incremental $150 million of revenue capacity.

Speaker Change: And the west cost is about $30 million less cost of <unk> 60 per share now that probably will take us two to three years Max to until those lines are installed till we get the OE at the level that we need and then we fill that capacity, but significant opportunities for improvement that will fall through to both the es and transportation.

Speaker Change: City, but significant opportunities for improvement that will fall through to both the es and transportation over time and that I think is really consistent with the story Patrice shared at our Investor day.

Speaker Change: Some of that capacity also with can be used to meet the surge in data center demand that we talked about before so the timing of that installation is very well aligned again, we said it should largely be complete by the end of this fiscal year.

Speaker Change: Over time and that I think is really consistent with the story Patrice shared at our Investor day.

Speaker Change: Net capacity also it's going to be used to meet the surge in data center demand that we talked about before so the timing of that installation is very well aligned again, we said it should largely be complete by the end of this fiscal year and.

Speaker Change: And that'll be aligned well with D C growth comps coming up the incremental aftermarket and then going into fiscal 'twenty six the resumption of the class eight OEM OEM demand so.

Speaker Change: And that'll be aligned well with DC growth comps coming up the incremental aftermarket and then going into fiscal 'twenty six the resumption of the class eight Oems OEM demand so.

Speaker Change: It's not going to happen overnight, but we do expect ongoing incremental improvements in revenue earnings and OE percent in specialty as a result of this and it's really a great business.

Speaker Change: It's not going to happen overnight, but we do expect ongoing incremental improvements in revenue earnings and <unk> percent in specialty as a result of this and it's really a great business.

Speaker Change: No no that's great to hear thanks. Thank you both for the for their thoughts I have a great day.

Speaker Change: Okay great.

Speaker Change: Thank you.

Speaker Change: Yeah.

Speaker Change: No no that's great to hear thanks. Thank you both for the for the for their thoughts have a great day. Thank.

Speaker Change: Our next question comes from Noah Kaye of Oppenheimer <unk> Co. Your line is now open.

Speaker Change: Thank you Greg.

Speaker Change: Dave I wish you well in retirement.

Speaker Change: Thank you.

Speaker Change: Yeah.

Speaker Change: Thanks for all the dialogue over the years and showing the big Congratulations to you and wish you luck.

Speaker Change: Our next question comes from Noah Kaye of Oppenheimer <unk> Co. Your line is now open.

Speaker Change: Thanks Noah.

Speaker Change: Thank you.

Speaker Change: Dave I wish you well in retirement.

Speaker Change: Maybe just start with the Giga factory.

Speaker Change: Thanks for all the dialogue over the years and showing the big Congratulations to you and wish you luck.

Speaker Change: We had a little bit of political news in the last couple of days.

Noah: Thanks Noah.

Speaker Change: At this point just wanted to understand.

Noah: Okay.

Noah: Maybe just start with the Giga factory.

Speaker Change: Because I think with the outlook for tariffs and.

Noah: We had a little bit of political news in the last couple of days.

Speaker Change: The.

Speaker Change: <unk> for developing a strong domestic manufacturing base I mean, the Giga factory, probably makes more sense than ever before.

Speaker Change: At this point just wanted to understand.

Speaker Change: Because I think with the outlook for tariff and.

Speaker Change: Our strategic standpoint, but.

Speaker Change: The implications for developing a strong domestic manufacturing base I mean, the Giga factory, probably makes more sense than ever before.

Speaker Change: On the funding side and the development.

Speaker Change: Just help us understand a little bit finer point, what the schedule should look like here, how how could this transition administration impact both the finalization and the timing and funding of the contract.

Speaker Change: For strategic standpoint, but.

Speaker Change: On the funding side and the development.

Speaker Change: Help us understand a little bit finer point, what the schedule should look like here.

Speaker Change: We don't anticipate any and.

Speaker Change: Any change.

Speaker Change: How could this transition administration impact both the finalization and the timing and funding of the contract.

Speaker Change: With regards to timing of work.

Speaker Change: Likelihood of the of the Doe Award.

Speaker Change: And then in terms of the schedule.

Speaker Change: We don't anticipate any in.

Speaker Change: Andy you want to you got the timeline in front of you yet just to give you a little background on the scheduled Noah as you know we bought the Greenville land in Q1 that was about $10 million get included in our Capex numbers.

Speaker Change: Any change.

Speaker Change: With regards to timing or.

Speaker Change: Our likelihood of the of the Doe Award.

Speaker Change: And then in terms of the schedule.

Speaker Change: Andy you want to you've got the timeline in front of you yet just to give you a little background on the schedule now as you know we bought the Greenville land in Q1 that was about $10 million get included in our Capex numbers.

Speaker Change: Negotiations are expected to be complete before January 25.

Speaker Change: The team is doing an excellent job progressing there. This is largely administrative chastain I don't want to give the impression that we're negotiating whether we get it its been approved it's been authorized its just a question of <unk>.

Speaker Change: Negotiations are expected to be complete before January 25.

Speaker Change: The team is doing an excellent job progressing there. This is largely administrative just saying I don't want to give the impression that we're negotiating whether we get it its been approved it's been authorized its just a question of <unk>.

Speaker Change: Some of the specific logistics behind it some things like the environmental on detailed for the land.

Speaker Change: Sure we've got everything in.

Speaker Change: In line with what their expectations are so we don't see that being at risk we've already rented local space beginning to hire staff.

Speaker Change: Some of the specific logistics behind it some things like the environmental detailed for the land.

Speaker Change: Had our board meeting in Greenville.

Speaker Change: Sure we've got everything in line with what their expectations are so we don't see that being at risk we've already rented local space beginning to hire staff.

Speaker Change: Last week and everyone. We're thrilled with the economic development folks know if you haven't been down there in a while you need to have.

Speaker Change: A dynamic city I think the board was very happy and impressed with Greenville, Yeah, Adam di.

Speaker Change: We had our board meeting in Greenville.

Speaker Change: Just last week and everyone. We're thrilled with the economic development folks know if you haven't been down there in a while you need to.

Speaker Change: I want to move it there.

Speaker Change: Break ground in late calendar Q2, 25, probably begin construction in third quarter 'twenty five.

Speaker Change: A dynamic city.

Speaker Change: The board was very happy and impressed with Greenville, Yeah.

Speaker Change: I want to move it there.

Speaker Change: We expect the building to be commissioned at the end of calendar 'twenty seven obviously theres still a lot being ongoing here and expect to start production.

Speaker Change: They break.

Speaker Change: Break ground in late calendar Q2, 25, probably begin construction in third quarter, 25%.

Speaker Change: Q2, Q3 of calendar 'twenty eight we're undergoing environment site environmental site assessments.

Speaker Change: We expect the building to be commissioned at the end of calendar 'twenty seven obviously theres still a lot being ongoing here and expect to start production.

Speaker Change: We're doing material testing.

Speaker Change: So a lot of activity there and we couldnt be more excited.

Speaker Change: Q2, Q3 of calendar 'twenty eight we're undergoing environment site environmental site assessments.

Speaker Change: Yes.

Speaker Change: Don't expect any changes on the progress in fact, if anything you mentioned a lot of <unk>.

Speaker Change: We're doing material testing.

Speaker Change: The priorities of the administration I think just to underscore the importance and couldnt be thorough that David I think you've alluded to.

Speaker Change: A lot of activity, there and we couldnt be more excited.

Speaker Change: Don't expect any changes on the progress in fact, if anything you mentioned a lot of fee.

Speaker Change: When you when you started none of that.

Speaker Change: The priorities of the administration I think just to underscore the importance and couldn't be thrilled that Dave start with I think you've alluded to.

Speaker Change: There's probably very few things that are agreed upon in D. C. These days, but one of those seems to be the importance of a domestic supply chain, especially for defense related products. So it's a huge priority.

Speaker Change: When you when you started none of that.

Speaker Change: There's probably very few things that are agreed upon in D. C. These days, but one of those seems to be the.

Speaker Change: For the current administration, we anticipate.

Speaker Change: The importance of a domestic supply chain, especially for defense related products. So it's a huge priority.

Speaker Change: That to continue.

Speaker Change: As we transition.

Speaker Change: It just a timing question as well.

Speaker Change: For the current administration, we anticipate.

Speaker Change: I guess as you go through and spend the Capex on the plant.

Speaker Change: That to continue.

Speaker Change: Would the expectation be that the Doe.

Speaker Change: As we transition.

Speaker Change: Okay.

Speaker Change: I guess in local cost share funds get get disbursed, you more or less concurrently do you kind of net that out in terms of how you're reporting capex or do you have to sort of take the gross capex number and that that back.

Speaker Change: Oh timing question as well.

Speaker Change: I guess as you go through and spend the Capex on the on the plant would the expectation be that the Doe.

Speaker Change: I guess in local cost share funds get get disbursed do more or less concurrently do you kind of net that out in terms of how you're reporting capex or do you have to sort of take the gross capex number and that that back half.

Speaker Change: How will that all work in terms of both timing of funding and then the accounting.

Speaker Change: Yes, so and these are some of the items that are defined taxes are being made during the negotiation, but we have as you as I'm sure you know <unk> got such a long history with US Mark has a long experience in doing projects like this.

Speaker Change: How will that all work in terms of both timing of funding and then the accounting yes.

Speaker Change: Yes, so and these are some of the items that are.

Speaker Change: March but with the government and our expectation that we've modeled in that.

Speaker Change: Touches are being made during the negotiation, but we have.

Speaker Change: As you as I'm sure you know <unk> got such a long history with US Mark has a long experience in doing projects like does not not that large but with the government and our expectation that we've modeled in that.

Speaker Change: Consistent and then discussions we've been having with them is that it would likely be a reimbursement probably on about a one quarter delay. So we'd have outlay and then we'd get reimbursement in the second quarter, when we'd be making additional investments going forward.

Speaker Change: Insistent and then discussions we've been having with them is that it would likely be a reimbursement probably in about a one quarter delay. So we'd have outlay and then we'd get reimbursement in the second quarter, when we'd be making additional investments going forward.

Speaker Change: And.

Speaker Change: Or also what we've been able to confirm it's the bulk of it would be booked as a reduction to the basis of the assets. So that capital spending would be net of that.

Speaker Change: And.

Speaker Change: Or also what we've been able to confirm it's the bulk of it would be booked as a reduction to the basis of the assets. So that capital spending would be net of that.

Speaker Change: Since a lot of it is based on reimbursing of spending that has occurred.

Speaker Change: So that's our current understanding again all of that is being finalized in the negotiation.

Speaker Change: Hey.

Speaker Change: Very helpful and I guess, just last one since I walk past and Odyssey battery lying out on my Street. This morning, I guess I got asked about specialty you provided a lot of color here.

Speaker Change: Since a lot of it is based on reimbursing of spending that has occurred.

Speaker Change: So that's our current understanding again all of that is being finalized in the negotiation.

Speaker Change: Hey.

Speaker Change: The organic trends you also mentioned <unk> outperformance it looks like on a partial quarter basis about $16 million contribution to <unk> sales.

Speaker Change: Quarter is that and then annualize that that's kind of around 100 million, which it did last year. So just comment on any seasonality in that business and what you expect the business to do in sales this fiscal year.

Speaker Change: The organic trends you also mentioned <unk> outperformance it looks like on a partial quarter basis about $16 million contribution to <unk> sales.

Speaker Change: We haven't provided specifics on that.

Speaker Change: As you know I think I mentioned.

Speaker Change: One of my role is to be conservative. So obviously this is a new business.

Speaker Change: <unk> orders have been fantastic.

Speaker Change: We've very optimistic, but we're sticking with what we know already that we're building into the forecast.

Speaker Change: <unk> Li.

Speaker Change: About the run rate of where they were when we bought them, but we do see there is upside potential from there.

Speaker Change: I hope that helps hopefully that close enough, obviously will be reporting <unk> revenue in our Q, so youll get exposed to that ongoing basis, but without a doubt the team is phenomenal taken over there for there.

Speaker Change: For their annual picnic.

Speaker Change: It was just a great culture, great environment about half of that workers wearing enersys T shirt. She is really fun.

Speaker Change: The orders have been great synergies with the assets have been.

Speaker Change: Later than we expected we didn't bake much synergies into the plan at all.

Speaker Change: It's just been a great Goldman if I could do more of these types of acquisitions all day, if I could the team has been fantastic and they've been beating.

Speaker Change: Both their financial results, so far and.

Speaker Change: And we have high expectations.

Speaker Change: Alright, very good thanks for all the color.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Greg Koski of Weber Research and Advisory LLC. Your line is now open.

Greg Koski: Hey, good morning, everyone.

Speaker Change: Overall im already so I'll keep it brief.

Speaker Change: Could you just a follow up to the UL certification process is for clarification is that a once and done kind of issue or does it.

Speaker Change: Vary by customer geography, or a product what have you.

Greg Koski: So once and done kind of issue.

Speaker Change: So we just we have to get to the point where the.

Speaker Change: The contract manufacturer can mark the product.

Speaker Change: With the U S <unk> and part of our contractual requirements with our customers is to have that <unk> certification marked.

Speaker Change: The units so that's been some of the.

Speaker Change: And so there's just some of the steps we have been.

Speaker Change: Wrestling with on these initial units, but once we get this done it's done for everything in the systems that we've been quoting to other customers. Besides landmark or the same unit essentially that were selling landmark and as Andy mentioned.

Speaker Change: There is excitement building because the the same.

Speaker Change: Fee structures that are driving the payback for this for our customer in Canada demand charge mitigation and energy management.

Speaker Change: Energy arbitrage those same factors.

Speaker Change: Appeal to our.

Speaker Change: Our distribution center customers in California, and other parts. So there's a lot of momentum building in this.

Speaker Change: New line of business.

Speaker Change: Okay, great, that's what I thought, but good good to confirm.

Speaker Change: Thats It from me thanks.

Speaker Change: One last echo congratulations to David Sean.

Speaker Change: Thank you.

Speaker Change: Greg.

Speaker Change: Thank you. This concludes the question and answer session I would now like to turn it back to Dave Shaffer for closing remarks.

Dave Shaffer: Thank you everybody for joining us today, and we look forward to speaking again in about 90 days take care.

Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.

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