Q4 2025 EnerSys Earnings Call

Yeah.

Speaker Change: Good day, and thank you for standing by and welcome to <unk> fourth quarter and full year fiscal 2025 results. 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 the session 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: Please be advised today's conference is being recorded I would now like to hand, the conference over to your speaker today, Lisa Hartman, Vice President of Investor Relations. Please go ahead.

Lisa Hartman: Good morning, everyone. Thank you for joining us today to discuss <unk> fourth quarter and full year fiscal 2025 results on.

David Shaffer: On the call with me today are David Shaffer, Enersys, Chief Executive Officer, Shawn O'connell, <unk>, President and Chief operating officer, and incoming CEO and Andreas Honk, Enersys Executive Vice President and Chief Financial Officer.

Lisa Hartman: Last evening, we published our fourth quarter and fiscal year 2025 results under our 10-K with the SEC, which are available on our website.

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.

Lisa Hartman: A reminder, we will be presenting certain forward looking statements on this call that are subject to uncertainties and changes in circumstances. Our actual results may differ materially from 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. Please.

Lisa Hartman: Refer to our recent form 8-K, and 10-K filed with the SEC.

Lisa Hartman: 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 to non-GAAP financial metrics. Please.

Speaker Change: See our company's form 8-K, which includes our press release dated May 21, 2025, now I will turn the call over to <unk> CEO, Dave Schaeffer.

Speaker Change: Thank you Lisa and good morning.

Speaker Change: Please turn to slide four for a review of our fourth quarter and full year performance Andrew.

Speaker Change: <unk> has delivered a very strong fourth quarter, demonstrating the earnings power of our balanced business. We grew revenue, 7%, our second highest revenue quarter ever and delivered record adjusted diluted EPS of $1 86, excluding 45 X benefits highlight.

Speaker Change: Highlights included record motive power margins significant margin expansion in the energy systems and specialty and strong contributions from the <unk> acquisition.

Speaker Change: In energy systems, we saw growth in data centers and continued moderate recovery in communications.

Speaker Change: <unk> power generated 15% earnings growth on similar volumes to prior year fourth quarter with increased maintenance free products, reaching a record 29% of segment sales.

Speaker Change: Specialty benefited from sustained strength in A&D markets and outperformance from Brent Tronox full.

Full year revenue was $3 6 billion with meaningful gains in adjusted gross margin adjusted operating earnings and adjusted earnings per share, even before 45 X benefits.

We've made meaningful progress in fiscal year 2025.

Speaker Change: We executed our strategy in a challenging environment.

Speaker Change: We expanded our share in the attractive and growing defense market.

Speaker Change: Our higher margin maintenance free offerings.

Speaker Change: Reduced cost optimized our manufacturing footprint invested in high speed lower cost flexible domestic production capacity and develop new product offerings strengthening our foundation for future growth.

Speaker Change: As announced in November today marks my final day as CEO, Shawn O'connell takes the helm as CEO tomorrow.

Speaker Change: With deep industry experience and proven leadership across Enersys I am confident he will lead the company to continued success. It is.

Speaker Change: It's been an honor to serve as Enersys as CEO I would like to thank our employees for their consistent hard work and dedication in supporting each other and our customers every day.

Speaker Change: Our board of directors for their support and our.

Speaker Change: Shareholders for your trust.

Sean: I will now turn it over to Sean to take you through more detail on our results and business drivers.

Sean: Sean.

Sean: Thank you Dave for your leadership and for positioning <unk> for future success, I know I speak for the entire Enersys family and wishing you. The very best in your next chapter please turn to slide six as I can.

Sean: Begin my remarks today I would like to start with my perspective on our business.

Sean: <unk> enjoys deep customer relationships and leading market share positions in diverse end markets.

Sean: Key to our future growth is at our solutions help our valued customers address their shared mounting concerns in two main areas.

Sean: Security and labor scarcity, our products help our customers manage our energy costs and consumption, while also making it possible for them to perform the same missions with fewer people through maintenance free products in automation enabled by intelligent stored energy solutions.

Sean: Over the past six months, we have taken my strategic hypotheses.

Sean: To them with external advisors and are finalizing a focused roadmap to go deeper and helping our customers address these challenges, while resetting our operations and reinforcing intense discipline on ROIC.

Sean: There are opportunities for us to narrow our focus on select growth verticals expand our service capabilities and achieve further operational efficiencies, which I will share more with you on our August call in upcoming quarters in the near term our focus is on disciplined execution as we move through a transitional period shaped by evolving.

Sean: Macro and policy dynamics before I get into the quarter I'd like to take a step back to address the broader macroeconomic environment, our tariff exposure and our approach to mitigating the associated risks please turn to slide seven.

Sean: March we established a dedicated cross functional task force dedicated solely on analyzing coordinating and mitigating tariff impacts considering both supply chain and pricing actions. This team is also monitoring both the tertiary impact of tariffs on inflationary pressures as well as and perhaps more.

Sean: Importantly market dynamics, both positive and negative from suppressed demand to opportunities, where our global footprint offers competitive advantages.

Sean: Thanks to our longstanding practices are producing in region for region Onshoring from China dual sourcing and footprint rationalization, we already have structural buffers in place. We are committed to fully mitigating any financial impact to our shareholders can see opex reductions as an effective lever for what.

Sean: Cannot be offset by supply or pricing actions.

Sean: To put our tariff exposure in perspective about two thirds of our global revenue comes from the U S in which 80% of our U S supply is either domestic or U S. MCA trade compliance.

Sean: Only 5% of this is sourced from China, where the highest tariff rates still exist at current.

Sean: Tariff levels are direct tariff exposure is approximately $92 million down from 160 million prior to the May 12 U S administration updates, we intend to fully offset this impact but expect some near term friction in Q1 due to stranded tariffs that can't be passed onto customers and shifting.

Sean: Customer order patterns, the biggest unknown to us is timing and the scope of broader inflation <unk> slowdown effects across the industrial sector.

Sean: That said, we are prepared for a range of outcomes guided by our proven and refined playbook, we will remain well positioned to weather, both tariffs and the potential downturn if one materializes.

Sean: Please turn to slide eight.

Sean: In addition to our resilient balance sheet and conservative capital structure Enersys has a number of structural advantages to help us mitigate economic downturns.

Sean: A large portion about 60% of our business follows GDP independent cycles with limited sensitivity to general economic conditions as they follow their own investment timelines. This includes A&D and data centers, which are currently enjoying robust market momentum as well as network communications.

Sean: Which is poised for further recovery and expansion.

Sean: Our global manufacturing footprint provides flexibility in our production and distribution capabilities, which enable us to respond and leverage varying geopolitical dynamics by market better than many of our competitors.

Sean: Third our primary operating capital investments have historically been a cash generator during recessionary periods and finally, we maintained consistent opex discipline, enabling us to respond quickly when needed while shifting conditions may temporarily affect market rhythm, we remain well positioned to exceed.

Sean: Protect both earnings and cash flow, please turn to slide nine.

Sean: Now I'd like to turn your attention to current business performance. Our overall book to Bill in the fourth quarter was just over one with energy systems and specialty above one offset by motive power below one energy systems had positive order rates for the third consecutive quarter, driven both by data centers and communications and specialty.

Sean: A&D projects and orders have been robust it's worth noting that we did see some order moderation early in the first quarter as customers adjusted to tariff related developments, but activity rebounded quickly when tariff actions were passed to provide more visibility in what we're seeing today versus prior year, our first quarter.

Sean: Year to date order rates for motive power were up 16% energy systems are up 10% and specialty are up 33% with the Brent Tronox add while we anticipate demand demand signals to be variable in the coming months. We view this as temporary recalibration phase and not a structural change in markets.

Sean: Sectary.

Sean: Now I'll provide some more detail on the business drivers behind our strong fiscal Q4 performance.

Sean: In our energy systems business I am pleased with the team's execution nearly doubling adjusted operating earnings. These improved results highlight the benefits of structural improvement actions, along with 22% year on year increase in quarterly data center revenue and continued signs of recovery in U S Communications spend.

Sean: <unk>.

Sean: While we are encouraged by early project work and network expansion planning in U S communications, particularly driven by AI related data demand many customers are selectively managing capital expenditures.

Sean: As such we expect the pace of network expansion to remain gradual and potentially uneven in the upcoming quarters.

Sean: Order rates were sequentially higher with particular strength in the Americas continued sequential order rate growth in EMEA is encouraging as a sign that the regional spend is increasing and off prior lows. It is important to note that while we are seeing strong order rates lead times can extend the revenue conversion timeline in this business.

Sean: Further although the segment is one most exposed to tariffs and supply chain disruptions, we have significantly improved our monitoring and ability to respond more quickly than in the past.

Sean: Finally, as an additional future tailwind our services revenues continue to be challenging for us as an increasing area of focus for Keith we see this as a tremendous opportunity to add value to our customers and grow profitably in the future.

Sean: In motive power are very strong performance was driven by another quarter of favorable price mix on increasing TPP L with charter mix, despite relatively flat sales year over year on lower volumes in EMEA and APAC in Q4 sales of maintenance free products were up 16% year over year.

Sean: Representing a record 29% of total amount motive power revenue with customer enthusiasm over how our products help them address their labor challenges as I had mentioned at the beginning of my remarks.

Sean: Industry estimates for lift trucks indicate calendar year 'twenty five may be down slightly over prior year with continued expectations for a better recovery in calendar year 2006, we are receiving mixed signals on the near term outlook for motive power are April May order book has been stable to promising in April.

Sean: Truck orders were up over 19% over last year's historical lows. Conversely, we have a lower starting backlog on both a year ago and last quarter slower book and ship activity in the current quarter and anticipate disruption will continue to be impacted in the near term with major ports reporting dramatic fluctuations in container volume.

Sean: Over the past three months as importers drastically adjust shipments week by week in response to ongoing tariff updates.

Sean: As a reminder, this business is largely correlated with GDP, but also has unique upside opportunities driven by macro trends of electrification and automation as well as increasing market demand for our higher performing higher value maintenance free products. We believe the market pulled in some shipments into our fiscal Q4.

Sean: In anticipation of announced tariffs, which will reverse out in the first quarter, creating a temporary drag.

Sean: That said, we also see potential upside opportunities as lithium pricing pressure from Chinese suppliers may drive increased customer interest in <unk> going forward, but it is difficult to predict how and when these market dynamics will play out.

Sean: In specialty we delivered significant year over year and quarter over quarter improvements in both revenue and adjusted operating earnings driven by solid performance in aerospace and defense supported by the continuing outperformance of our <unk> acquisition growth in <unk> was fueled by robust demand for Chargers soldier power and.

Sean: And Expeditionary power systems, as well as increased demand from the European defense market the.

Sean: The impressive A&D results were partially offset by slower class eight truck OEM volume recovery that we had initially anticipated.

Sean: Tariff and macro uncertainty a pause the class eight truck recovery, where youre expecting for early fiscal 'twenty, six and where you're seeing slower and choppy order rates as major Oems continue to revised forecasts.

Sean: A&D markets remain robust and will be strengthened by the macro although we have seen some near term delays that we believe to be timing related with personnel reductions in the administration temporary clogging the flow of orders with strong momentum and bread products and broader Andy amid opportunities for improvement in transportation win.

Sean: <unk> has come back and our Missouri plant investments come online our specialty business remains well positioned for continued growth and profit expansion. Please.

Sean: Please turn to slide 10.

Sean: Our recent performance reflects a business not only built for resilience, but ready to adapt.

Sean: As we transition leadership, we are sharpening our focus executing with discipline building operational momentum and listening closely to customers as their challenges evolve.

Sean: We've made meaningful strides, bringing new technologies to market, introducing cutting edge products, such as software driven energy management systems, which will help our customers address their energy scarcity challenges that I had mentioned earlier.

Sean: These advancements equip our customers with adaptable and efficient solutions that evolve alongside their needs. The preview of our synovus, St Charger and battery energy storage system or bes for warehouse and distribution center customers generated a lot of excitement at recent trade shows.

Sean: <unk>, our new generation battery charger delivers high efficiency.

Sean: Compatibility for monitoring and over the air firmware updates advancing our Iot ecosystem, while in the development phase our best resonated with our customers looking for a solution to tackle power continuity challenges costly infrastructure upgrades long lead times and limited flexibility barrier.

Sean: That often slow electrification efforts.

Sean: Engineered for rapid deployment and semi portability customers were enthused by the enhanced flexibility and efficiency of our bes and what they will offer their operations.

Sean: Operationally, we are building on progress from fiscal 'twenty, five with a heightened focus on execution.

Sean: The first new high speed line in our Missouri Springfield, One factory began production this quarter and is performing to expectations with the second high speed line on track to become operational in the fall at the same time, we are actively reshaping our manufacturing footprint as previously announced we are closing are flooded lead acid battery.

Sean: Factoring facility in Monterrey, Mexico, and transitioning production to our existing plant in Richmond, Kentucky.

Sean: This move will enable us to optimize our cost structure as market demand continues to shift to our higher performing TPP all batteries the.

Sean: The transition will also allow us to maximize near term IRC 45, ex tax benefits and aligns with our philosophy of producing and market. The restructuring is expected to deliver an estimated pretax benefit of $19 million annually, beginning fiscal year 2027, while ensuring continued product availability and customer.

Sean: <unk> support.

Sean: To further strengthen our focus on high impact technology execution as previously announced in March Mark Matthews President of our specialty Global line of business has been appointed acting Chief Technology Officer, Mark brings more than three decades of engineering and operations operational leadership, including deep technical expertise.

Sean: <unk> and lithium ion chemistry.

Sean: Currently leads our aerospace and defense business, which utilizes multiple distinct lithium chemistries across mission critical applications. This experience combined with his deep relationships across the department of defense and department of energy positions him well to guide the next phase of our lithium strategy and align it with national priorities.

Sean: Mark is actively reviewing our lithium technology roadmap and investment plans to ensure they reflect evolving market demands and long term supply needs is dual role insurers commercial alignment with our R&D and capacity planning as we position <unk> for future growth and domestic lithium battery manufacturing.

Sean: While the funding of the Doe award for our domestic lithium plant remains pending we are encouraged by recent engagement with the Doe and remain optimistic given the project's alignment with defense readiness domestic supply assurance and American manufacturing.

Sean: In the meantime, we are taking a disciplined risk aware approach adjusting our plans maintaining flexibility and closely managing cost dynamics as we update our financial model for evolving cost and benefit assumptions to ensure our future path delivers an attractive return on investment for our shareholders, we remain well positioned.

Sean: <unk> to move with speed and confidence once greater policy clarity emerges.

Sean: In closing I want to express my deep confidence in the strength of our business the relevance of our solutions and the dedication of the <unk> team. We are energized by the critical role we play in supporting the industries that keep data and products across the world moving I look forward to sharing more about our evolving strategy.

Sean: And growth roadmap during our fiscal Q1 earnings call in August now I'll turn it over to Andy to discuss our financial results and outlook in greater detail Andy.

Andy: Thank you Sean Please turn to slide 12.

Andy: Fourth quarter net sales of $975 million were up 7% from prior year. The second highest revenue quarter for the company driven by a 4% increase in organic volume largely on energy systems communications, continuing recovery and strength in data centers as well as 1%.

Andy: Positive price mix across motive power and energy system, and a 4% positive impact from the <unk> acquisition.

Andy: Partially offset by 2% FX headwind.

Andy: We achieved adjusted gross profit of $304 million up $49 million year on year and up $41 million. If you exclude 45 X benefit.

Andy: Q4, 25, adjusted gross margin of 31, 2% was up 320 basis points versus prior year, and excluding 40 Fedex adjusted.

Andy: Adjusted gross margin was up 260 basis points, despite the FX headwind.

Andy: Our adjusted operating earnings were $152 million in the quarter.

Andy: Up $43 million versus prior year with an adjusted operating margin of 15, 6%.

Andy: Excluding 45 X benefits adjusted operating earnings increased $35 million or 48% with an adjusted operating margin of 11, 1% on 7% revenue growth driving a 360 basis point margin improvement year on year.

Andy: Adjusted EBITDA was $167 million, an increase of $42 million versus prior year, while adjusted EBITDA margin was 17, 1% up 340 basis points versus prior year.

Andy: Adjusted EPS for the fourth quarter came in above the high end of our guidance range at $2 97 per share an increase of 43% over prior year.

Andy: Excluding 45 X adjusted EPS was a record $1 86 per share up 66 cents per share versus prior year, demonstrating the strong earnings power of our diversified business and more than 40 cents per share higher than our previous record.

Andy: In the fourth quarter of fiscal 2012, our effective tax rate was 15, 9% on an as reported basis and 18, 9% on an as adjusted basis before the benefit of 40, Fedex compared to 22% in Q4 of 24 and 23, 3% in the prior quarter.

Andy: Full year net sales of $3 $6 billion were up 1% year effort here with.

Andy: We generated adjusted operating profit of $528 million.

Andy: Including $185 million benefit from IRC 45 ex tax credit.

Andy: Excluding the 45 X benefit we generated record adjusted profit of $343 million of.

Andy: Adjusted diluted EPS was $10 15 per share an increase of 22% and adjusted diluted EPS before 45 X benefit with a record $5 58 per share an increase of 53 from our prior record.

Andy: Let me now provide some details by segment, please turn to slide 13.

Andy: In the fourth quarter energy systems revenue increased 8% from prior year to $399 million.

Andy: Primarily driven by increased volumes as well as price mix and partially offset by FX.

Andy: Revenue was up over $10 million sequentially to third consecutive increase.

Andy: We continue to see steady improvement in these end market.

Andy: Adjusted operating earnings of $35 million grew for the fifth consecutive quarter, reflecting higher operating leverage to our optimized cost structure and were $17 million higher than prior year.

Andy: Adjusted operating margin of eight 7% increased an impressive 400 basis points versus prior year.

Andy: We exited the quarter with encouraging order trends in this business and expect to deliver year over year margin expansion as revenue growth and we continue with our structural improvement effort.

Andy: While we remain fully confident in our ability to proactively mitigate tariffs and supply chain disruption when the macro environment stabilizes, we expect to absorb some short term headwinds from stranded tax in the upcoming quarter.

Andy: As Sean mentioned, although this segment is our most sensitive to tariffs and supply chain volatility, we have enhanced our visibility and responsiveness.

Andy: Allowing us to act with greater speed and precision than in prior cycles.

Andy: Please turn to slide 14.

Andy: Motive power revenue was in line with the prior year at $392 million.

Andy: As FX headwinds and flat volumes were offset by positive price mix.

Andy: Motive power again reported robust adjusted operating earnings this quarter.

Andy: <unk> $67 million.

Andy: Up 15% versus prior year on flat revenue largely on favorable price mix.

Andy: As well as some lower commodity and manufacturing costs.

Andy: Maintenance free conversion continued its impressive trend at a record 29% of motive power revenue in Q4.

Andy: Adjusted operating margins were 17, 1% up 240 basis points versus the prior year.

Andy: Just the implementation of tariffs a leading industry report indicates a significant decline in market sentiment, reflecting a more than 50% drop in confidence for both current and future business.

Andy: The broader market is digesting this evolving market dynamic.

Andy: While our products play a critical role in global supply chain, we expect a temporary short term negative impact on new lift truck orders as companies reassess their investment strategies in response to the evolving trade landscape.

Andy: We see meaningful upside to this business once conditions settle supported by long term tailwind from electrification and automation along with growing customer preference for our higher performing maintenance free solutions.

Andy: Please turn to slide 15.

Andy: Specialty revenue increased 21% from prior year to $178 million driven by a 22% positive impact from the <unk> acquisition and a 1% increase in organic volume, partially offset by 2% decrease in price mix.

Andy: Q4, 25, adjusted operating earnings of $15 million for nearly double prior year with an adjusted operating margin of eight 5% up 270 basis points.

Andy: Specialties performance reflects focused execution with A&D and <unk> driving the current result, with additional leverage expected from our Missouri investments and longer term transportation improvement, we anticipate further gains ahead.

Andy: Please turn to slide 16.

Andy: Positive operating cash flow of $135 million.

Andy: Offset by Capex of 30 million resulted in free cash flow of $105 million in the quarter.

Andy: I would like to note that we have not yet received a $137 million U S tax refund, which we had expected in the fourth quarter. We fully attribute this delay the IRS staffing issues and anticipate receiving the refund with interest any day.

Andy: We had strong primary operating capital management, ending the year with $932 million on hand up $79 million versus prior year as we build the business for future growth.

Andy: As of March 31, 2025, we had $343 million of cash and cash equivalents on hand.

Andy: Net debt of $781 million represents an increase of approximately $270 million since the end of fiscal 'twenty four as we made our acquisition of <unk>.

Andy: Turned $192 million to shareholders through share repurchases and dividend and continued to invest in our business.

Andy: Our credit agreement leverage ratio with one three times EBITDA.

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

Andy: We anticipate maintaining our net leverage at or below the low end of our two to three times target range, providing us with ample dry powder for our capital allocation decisions and to absorb any macroeconomic dynamics that may impact us.

Andy: Please turn to slide 17.

Andy: During the fourth quarter, we paid $95 million in dividends and repurchased $40 million in Shannon.

Andy: We currently have approximately $200 million remaining on our board buyback authorization.

Andy: We continue to evaluate promising bolt on acquisition opportunities like <unk> that align with our disciplined strategic and financial criteria and are focused on strengthening customer intimacy expanding share of wallet with our leading positions and exciting end markets and making progress on our transformation journey.

Andy: Given the strong cash flow generation of our business, we have the opportunity to be more aggressive in our opportunistic share buyback activity, particularly during these volatile market conditions.

Andy: Please turn to slide 18.

Andy: As Sean mentioned, we remain very confident in our ability to effectively manage our business and the evolving macro environment and deliver strong earnings performance.

Andy: We are committed to fully shielding our investors from the ongoing impact of tariffs. Although we may have some short term headwinds and uncertainty creates pockets of volume disruption and stranded costs.

Andy: Our fiscal first quarter 2026 guidance reflects typical seasonal volume softness in motive power and transportation exacerbated by these short term macro dynamics.

Andy: For the first quarter of fiscal 2026, we expect net sales in the range. This range of $830 million to $870 million with adjusted diluted EPS of $2 three to $2 13 per share, which includes $35 million to $40 million of 45.

Andy: Ex benefits to gross profit.

Andy: The largest driver of our anticipated Q1 sequential decline in revenue and EPS can be attributed to motive power volumes, which are expected to be pressured on seasonality and tariff disruptions with motive power Americas Q4 orders down 14% year on year as well as to a lesser extent approximately 5 million.

Andy: Of stranded tariff costs.

Speaker Change: Ron and I are working on scenario plans to effectively respond to any and all outcomes as it relates to further tariff policy dynamics.

Speaker Change: Given the evolving policy environment and pacing of demand normalization, we are temporarily pausing quantified full year guidance.

Andy: That said, we believe Q1 will be the low point of our fiscal year.

Andy: We anticipate full year adjusted operating earnings growth, excluding 40, Fedex benefit to outpace revenue growth for the fiscal year.

Andy: With improvement in our order book during Q1 year to date, we expect revenue will be bolstered by our customers' enthusiasm for our maintenance free offering robust A&D and data center market and ongoing improvements in our communication and transportation businesses as well as the ongoing improvements in our manufacturing cost disciplined opex.

Andy: And reductions in our capital expenditures year on year.

Andy: All of which will be tempered by macro dynamics.

Andy: To proactively mitigate these market dynamics, we have implemented direct and indirect cost controls and also are currently reviewing additional reductions in both opex and capex as part of <unk> strategic business improvement roadmap.

Andy: Please turn to slide 19.

Andy: Before we move to Q&A with the completion of our fiscal year 2005 results I would like to provide an update on our progress towards the fiscal year 2027 financial targets, we set at Investor Day in June of 2023.

Andy: In aggregate, we are on track towards our earnings target with strong performance on adjusted operating margin EBITDA, and EPS and future upside potential from the reinvestment of our excess cash flow.

Andy: As with any multiyear plans there are puts and takes.

Andy: We're very pleased with our maintenance reconversion, realizing a richer mix of product sales across the business, our TPP L capacity investments energy systems business optimization actions.

Andy: The expanded 45 X benefit.

Andy: And the accretive impact of our <unk> acquisition.

Andy: On the flip side, our sales CAGR is have been below where we still believe our longer term potential resides largely an unforeseen market wide disruptions.

Andy: Outcomes have informed Sean strategy, which we'll be updating you on in August.

Andy: As Shawn steps into the CEO role she is advancing our strategic work aimed at deepening customer intimacy accelerating our most high impact new product initiatives that help our customers address their energy and labor challenges and enhancing our operational efficiencies execution and return on invested capital.

Andy: These efforts combined with our strong foundation.

Andy: Sure enough to pursue the growth and margin expansion, we know our business is capable of.

Andy: We look forward to sharing further updates as the fiscal year progresses.

Andy: In closing global demand for energy storage solutions continues to build as our products and services remain essential to the industries that drive the global economy from resilient grids in communications networks to secure data centers and national security as well as global material distribution warehousing.

Andy: Coming off of a record shattering Q4, we are confident in the earnings power of our business and are optimistic about our ability to continue to expand margin grow revenue and create long term value for our shareholders.

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

Andy: Operator.

Speaker Change: Thank you ladies and gentlemen, if you have a question on retirement at this time. Please press star one on your telephone. If your question has been answered you were seeing with yourself from the queue. Please press star one again, we will pause for a moment, while we compile the Q&A roster.

Speaker Change: Our first question comes from Noah Kaye with Oppenheimer. Your line is open.

Noah Kaye: Hi, good morning, Thanks for taking the questions.

Noah Kaye: Hi, Noah.

Speaker Change: So.

Speaker Change: I guess just wanted to start first with understanding the <unk> guide.

Speaker Change: The revenue range I think you gave some.

Speaker Change: Color on where we would see weakness in motive, maybe a little bit of growth in energy systems in specialty can talk to that but.

Speaker Change: The EPS guide about 2000, and since higher year over year on flat revenues at the midpoint can you help sort of bridge.

Speaker Change: To that EPS growth with your expectations around operating margins and tax rate.

Speaker Change: Yes, good morning, no. It's Sean good to hear your voice and thank you for the question I'll provide a little color here on what we're seeing for Q1, and then I'll, let Andy handle that the EPS portion of it.

Speaker Change: But just just to give you a little idea of.

Speaker Change: What went on in anticipation of Liberation day, our motive customers just largely took a wait and see approach, which affected had some near term effect on orders, but then we probably saw a little bit of Poland too.

Speaker Change: Get ahead of that and then we saw some pickup with improving news from the administration and now overall as we mentioned in the remarks year to date orders are relatively flat.

Speaker Change: The current order rates broadly in line with normal cycles, So where we would expect to see in <unk>.

Speaker Change: Person to the last several cycles.

Speaker Change: So it's.

Speaker Change: While we have this noise.

Speaker Change: It feels like we're trending back to normal what we don't know is the.

Speaker Change: The effect of reciprocal tariffs.

Speaker Change: We have a some of these are still pauses and not settled science, but it feels like a strengthening for us and.

Speaker Change: So we anticipate that this.

Speaker Change: What we saw was totally tariff shock related and that the markets are largely getting back to business and then as you mentioned energy systems. We just continue to see activity coming in.

Speaker Change: For network Buildout the carriers realize they have a deficit when it comes to passing AI traffic through their networks.

Speaker Change: They are beginning to get active about solving those technical issues. So we feel very good about continued trajectory Etfs.

Speaker Change: And arising comfort level of motive if you will and then.

Speaker Change: We didn't see.

Speaker Change: You didn't ask about transportation, but we're we're kind of following the same.

Speaker Change: Trajectory, there, where we were on pace for a nice recovery and then just like in the forklifts.

Speaker Change: Transportation customers.

Speaker Change: To hit pause to sort through this tariff tariff noise with that I will turn it over to Andy Thanks, Sean So.

Speaker Change: I think you've covered the market as well.

Speaker Change: Might help is if we level set to last year. So largely we think Q1 'twenty six it's really going to look a lot like Q1 of 'twenty five revenues in line.

Speaker Change: If you look at our guide, but we're seeing lower volume mostly in motive power in some in transportation as Sean mentioned offset by the accretive benefit that we're having from Brent <unk> and really strong favorable price mix, we've been able to achieve.

Speaker Change: So if I'm looking at EPS EPS. Our guide is up about mid point up about 10 cents year on year, but first normalize it so pull out maybe 25% to 30 per share that we should have had of an uplift from Brent <unk> from the 45 45 X expanded.

Speaker Change: EAM impact, but then add back we probably are seeing about <unk> 15 per share from pressure from FX and that gets you to really a flat EPS year on year, So why flat.

Speaker Change: With lower volume as Sean mentioned, and Thats really related mostly to motive power driving that and then a little bit of stranded tariff costs and those items offset this really robust favorable price mix gains that we've been able to achieve over the course of fiscal year 'twenty. Five. So we are seeing our Q4 orders down on the tariff disruption.

Speaker Change: But if you look full year the orders are pretty much flat year on year. So we would expect without a doubt that Q1 is going to be the low point and we should see recovery going on from there absent additional cash op shocks.

Speaker Change: Okay. Thanks, Andy, Yes, sorry, Vince to 10 cents higher year over year, but.

Speaker Change: Thank you for bridging that I guess, just maybe explain the decision process around kind of pausing guidance because I wanted to make sure we get that number again, because there's a lot of numbers.

Speaker Change: You guys give up but.

Speaker Change: The one Q to date order book is is year over year up how much.

Speaker Change: And then just help us understand why pause full year guidance.

Speaker Change: It's kind of to your point, we seem to be kind of experiencing some some recovery.

Speaker Change: In orders off of the early April uncertainty.

Speaker Change: Yes, so if we look at our Q4 orders and I think what we were referring to was within motive power Americas, we had about 14% pressure.

Speaker Change: You look at orders overall different.

Speaker Change: Energy systems was up year on year, obviously, where during the recovery.

Speaker Change: <unk>.

Speaker Change: Basically flat A&D choppy, but what we really saw the big pause and then kind of a research and so if we look at full year to date within motive power calendar year or calendar year is flat year on year. So we saw a big decline during Q4, which we're going to feel the effects of that coming out into Q1, and then at risk.

Speaker Change: Surgeons in in Q1, so far of what we're seeing as far as order Sal.

Dave Schaeffer: No. This is Dave just just for a little bit more clarification. If you look at motive power orders calendar year to date.

Speaker Change: They're very consistent with last year so there.

Speaker Change: There was the cycles the normal cycle has been very disruptive as.

Speaker Change: As Sean said people took a wait and see attitude.

Speaker Change: And the main reason we're just.

Speaker Change: Not in a position to provide annual guidance right now is just awaiting the.

Speaker Change: Final outcome.

Speaker Change: The reciprocal tariff negotiations and how that's all going to shake out that could have both positive and negative impacts for us and we want to make sure. We have that clarification clarity before we go and provide.

Speaker Change: Full annual guidance.

Speaker Change: The situation risk today.

Speaker Change: It's it's all very manageable, we just want to make sure that.

Speaker Change: Especially with Sean coming onboard that.

Speaker Change: We provide the best information, we have going forward and that's going to include fully understanding how these when these holds on the temporary and reciprocal tariffs kind of.

Speaker Change: Wind down so that's what we're waiting to see.

David Shaffer: Thanks, Dave that's helpful. I, just I need to maybe get some clarification.

David Shaffer: I apologize for not understanding around.

David Shaffer: What you're actually saying around order recovery in this quarter to date the current quarter I thought you gave some color on that and some some numbers overall so can we just have it one more time.

David Shaffer: What rebound <unk> seen since April.

David Shaffer: Again, what we talked about with some we don't provide necessarily the full order book for Q1, obviously.

David Shaffer: Evolving as we speak right now.

David Shaffer: But what we what we were giving you know it was when we talked about the decline in Q4, we saw a bounce back in Q1, so year to date.

David Shaffer: Flat. So I think we gave a couple of stats on what we're seeing throughout the course of the year.

David Shaffer: What.

David Shaffer: What we're looking at is just the bounce back that we're seeing in Q1 if that helps.

David Shaffer: Got it okay very helpful. Thank you I'll turn it over.

David Shaffer: One moment for our next question.

David Shaffer: Yeah.

Speaker Change: Our next question comes from Brian Drab with William Blair. Your line is open.

Brian Drab: Good morning, Good morning, Good morning, Hey, good morning, Thanks for taking my questions I'm always hesitant to use people's time to.

David Shaffer: Okay.

Speaker Change: Things like thanks, Dave for everything.

Speaker Change: Well, it's been great working with you and good luck in the next chapter.

Speaker Change: And.

Speaker Change: I'll leave it at that.

Speaker Change: So.

Speaker Change: First I just wanted to ask Andy I mean, now you gave out a new.

Speaker Change: Number here.

Speaker Change: In the Q&A the calendar year to date orders for motive.

Speaker Change: Could I ask you if you could give that same year to date.

Speaker Change: <unk> growth or decline for energy storage and for specialty excluding <unk> for specialty.

Speaker Change: Yeah.

Brian Drab: Only thing Brian.

Speaker Change: This quarter was unfolding obviously, we're halfway through there is a lot of the actions that are going what we the main message that we were trying to convey is Q4 orders were pressured and we saw a rebound in Q1 and thats whats driving kind of that pressure that we're seeing in Q1.

Speaker Change: That's similar to the question that Noah was asking if I look at my Q4 orders in general, though just so you know versus prior year I'm seeing a significant pickup in energy systems, that's coming up the last year pressure that that.

Speaker Change: Last year was when they started that U shaped recovery. So that recovery is continuing although we do see some pull ins from energy systems into Q4, So our Q1 volumes in our <unk> systems might be more or less flat, but additional ongoing opportunity from there.

Speaker Change: Per patient year on year as the orders have been mostly flat to a little up off the last year, but.

Speaker Change: Again, what we've talked about is on the Q3 call you probably remember we had like we'd seen a 40% increase in sequential transportation orders.

Speaker Change: Then as Sean mentioned, we saw a big decline.

Speaker Change: The main story, we're trying to get here.

Speaker Change: <unk>.

Speaker Change: Week by week, it's a little bit all over the place the market is responding, especially things like class eight OEM trucks forklifts. Those are capital purchases are products are essential to moving products and information.

Speaker Change: Globally. So so a lot of it's kind of.

Speaker Change: One we could pause its next week, it's up one week, it's not sustainable things have to level out.

Speaker Change: And we know that our products solve critical.

Speaker Change: <unk> provided a critical benefit.

Speaker Change: The map in the global economy, but we're seeing just a lot of volatility as everyone's trying to digest, what's happening in the landscape as a result of these tariff call.

Speaker Change: Okay. Okay. Thanks.

Speaker Change: I'll follow up more later on that but it.

Speaker Change: Can you.

Speaker Change: Talk a little bit more about the.

Speaker Change: Section 45 X and I guess specifically.

Speaker Change: I'm wondering have you seen anyone else in the industry because I know a lot of people are looking for these checks have you seen anyone else in the industry get that check to them and are you.

Speaker Change: And in active dialogue with the with the IRS regarding.

Speaker Change: Getting getting the cash.

Brian Drab: Yes, Brian happy to happy to take that one.

Speaker Change: Yes, other companies or other lead acid battery companies have received their check with us being at $3 31 year end, we're in a slight delay.

Speaker Change: Theres been a lot of administrative changes in the IRS and we have individuals just with a regular ongoing tax filings. We have contacts at the IRS had said there's no holdup put in particular on your refund. We're just short staffed.

Speaker Change: We've received no indication from both political connections, we have as well as from agents at the IRS themselves that there is anything other than just staffing delays.

Speaker Change: And we will we expect I mean any day I thought maybe we would even get it yesterday and have an update to this Q&A, we expect to get at any day and interest accrues as well so.

Speaker Change: We will get an additional benefit from them also.

Speaker Change: Yes, Brian it's Sean I don't know if youre watching the up to date news on all the happenings on the hill, but as we have been socializing.

Speaker Change: Broad bipartisan support of 45 X.

Speaker Change: The package that was passed and that has to go to the Senate and it's still open to it.

Speaker Change: The final tweaks, but the package was passed was largely in line with what we thought it would be.

Speaker Change: And.

Speaker Change: Nearly all of the tenants are 45 X that were important to us are intact. If not all there is a little bit of a of an increased sunset past 2031, and they remove some wind stuff that didn't apply to us anyway, but broadly 45 X appears to be moving the direction, we thought it.

Speaker Change: Would be and we will continue.

Speaker Change: Yes, I think everyone. That's following enersys is following that.

Speaker Change: Closely so thanks for that update and I guess, the last thing if I could sneak in one more just.

Speaker Change: Sorry, if I missed this but are you, making any comments today regarding your latest thinking on that.

Speaker Change: Lithium plant.

Speaker Change: Sure I'll take that one Brian So we continue to have direct conversations with the administration.

Speaker Change: And we haven't seen.

Speaker Change: Our talks with the Doe.

Speaker Change: Any wavering at all of their support of the lithium plant and to remind you. The impetus for the funding was rooted in our largely our defense programs.

Speaker Change: And just for a bit of color there is over 40 programs today.

Speaker Change: The department of defense that are.

Speaker Change: Sourced in Asia, and many of them from China for our National Defense and they try to consolidate those programs and bring them back home. So again the support has been very strong and then we have Mark Matthews, who we mentioned on the call who has been involved in the program since day, one who maintains these dirt.

Speaker Change: Our relationships and we have mark going through and just and just making sure that along with our finance team, we keep our model updated.

Speaker Change: Make sure we understand all of the change in cost inputs, if any and then now with the 45 X news.

Speaker Change: We'll add that into our thinking I will tell you also that we have never slowed down or sell development.

Speaker Change: Program, so that while we've been waiting to see what's happening with funding we've been working with our development partner to advance our <unk> samples and be ready to go when we get the right news so.

Speaker Change: Again at this time, we feel very positive about that but as we update the model and what that looks like we'll keep you updated.

Speaker Change: Okay perfect. Thanks very much.

Speaker Change: Thank you, Brian one of them for our next question.

Speaker Change: Our next question comes from Greg Lewis with <unk>. Your line is open.

Greg Lewis: Yes, Thank you and good morning, everybody and thanks for taking my questions and Dave I don't know I think your last quarter, but thanks again for all the help over the last few years and good luck.

Speaker Change: Andy and Sean I guess this question is for you guys as we think about going forward.

Speaker Change: Probably a couple.

Speaker Change: Questions inside this question, but.

Speaker Change: As we look at the leverage target you alluded to the tax refund youre going to get that pushes it down even lower.

Speaker Change: So clearly we're in a good position.

Speaker Change: The.

Speaker Change: Kind of you mentioned the buyback or organic growth as we look around the landscape.

Speaker Change: Over the next few quarters.

Speaker Change: Howard how are you thinking about the potential for.

Speaker Change: Inorganic growth and just as a point of clarification.

Speaker Change: In the prepared comments, where we talked about.

Speaker Change: Sequential or year over year.

Speaker Change: <unk> growth.

Speaker Change: Just to clarify there is no expectation of bolt ons in that number correct.

Speaker Change: No no no no bolt ons at all in our number at all.

Speaker Change: Okay, and then Tonight.

Greg Lewis: I know it sounds like you have a bunch of other questions in there Greg So just want to make sure that we can be synced in getting to those.

Greg Lewis: And so and so as we look as we look at today what is what is the opportunities on the M&A front.

Speaker Change: Given your balance sheet.

Speaker Change: As we look at previous cycles.

Speaker Change: It is uncertainty that we're in right now.

Speaker Change: Is that kind of going to keep people on the sidelines in terms of your ability to.

Speaker Change: Acquire additional companies or is it kind of from your side is it still.

Speaker Change: Business as usual.

Speaker Change: Yes, correct.

Greg Lewis: Greg This is Sean and thank you for your question.

Speaker Change: Let me just say we have a fantastic business all of our macros are good.

Greg Lewis: You have this whole situation happening in the world and particularly in the U S.

Speaker Change: The grid margin that is the gap between the grid capacity.

Speaker Change: <unk> load growth is shrinking everywhere and our customers are really looking for us to step in and help them manage that and as you mentioned we have this.

Speaker Change: Fantastic balance sheet with a lot of dry powder.

Speaker Change: And I think the inverse is true we're not going to wait on the sidelines I think probably some of this uncertainty will pressure.

Speaker Change: Some of the smaller players and probably actually increase our ability to go out and find good targets.

Speaker Change: With that said, we still see a very long runway in A&D.

Speaker Change: Along with a lot of synergies with our domestic lithium manufacturing.

Speaker Change: You saw the lift we're getting from brand products. They are not the only only target for us. So we're going to be very opportunistic with that dry powder and stay acquisitive and as long as.

Speaker Change: Those targets fit our ROIC model, and we're really going to be putting a lot of rigor around what that should look like for our shareholders.

Greg Lewis: If I can add a little bit more to that Greg.

Speaker Change: Yeah.

Speaker Change: Early in Q4, we're wrapping up our budget and this is before a lot of these terrorists disruptions occurred.

Speaker Change: We had double digit revenue growth built into our budget low double digit revenue growth no acquisition base business.

Speaker Change: We just had an.

Speaker Change: An outstanding Q4 that was not an anomaly that outstanding Q4 was even with comms and trans being slow with the opportunity for those to improve from there. That's the base that we're building the strategy office and the business will improve from there we've got growth verticals that Sean looking at efficiencies and execution and all of that is before looking at any.

Speaker Change: Any mergers and acquisitions, although with our deep rich balance sheet that we have we have the ability to move fast and we look at that on an ongoing basis.

Speaker Change: We do think Q1 is going to be the low point with our results trending back to this record Q4 and upside from there as we have done in our original budget before all of this visa.

Speaker Change: These tariff issues started to arrive, but albeit it's going to be tempered by the macro so are we going to get back there this year.

Speaker Change: We could get back there earlier in this year.

Speaker Change: Or is it going to be later, it's going to depend or the tariff is going to get negotiated and tax rate. The tax rate cuts hold will tariffs be expanded will be expanded will there be another liberation day kind of shock.

Speaker Change: That's all what we don't want to do is make promises for things that we don't have full visibility of and are able to commit to fully.

Speaker Change: Our Q1 order book is improving.

Speaker Change: We mentioned that motive power was pressured in Q4, but year on year, it's flat.

Speaker Change: Sean mentioned, we expect revenue lift from our maintenance free offerings, A&D and datacenter robustness ongoing constant trans recovery and we know the strength of our balance sheet offers optionality for us to proactively mitigate whatever comes at us.

Speaker Change: We know where all over and ahead of tariffs. We can talk about that later, we've got a great playbook, we're committed to fully offsetting the impact we've got a proven and effective refined playbook and we know our products serve a critical role in these global markets. The real question is volatility and a three months span our stock lost in <unk>.

Speaker Change: <unk> $900 million in the marketplace that the.

Speaker Change: Truth is nothing really changed our business potential is still there whatever wherever tariff ends up and we got it whatever happens to the macro we've got a playbook. It's just the timing that we're struggling with.

Speaker Change: Okay, and then you mentioned motive and <unk>.

Speaker Change: The orders the order intake I guess and I think it might have been Dave that mentioned, depending on how that realizing that it's a house bill that needs to get through the Senate and Theres a lot of work that needs to be done around that.

Speaker Change: Did the change really anything.

Speaker Change: But there was a comment from somebody about it potentially being good.

Speaker Change: Is that related to all.

Speaker Change: Competition for PPL from other.

Speaker Change: Other it's <unk>.

Speaker Change: Electric battery electric or hydrogen or.

Speaker Change: Just maybe you could talk a little bit more about why.

Speaker Change: Changes to the.

Speaker Change: Or it could be good.

Speaker Change: And does that also is that going to be an impact from tariffs as well just given where some of your competition in motive is sourced.

Speaker Change: Kind of a fair way to think about it Oh I can start Gregg and then Sean can add a little color.

Greg Lewis: Comments I made were about the fundamentals of the business and the orders are very stable in terms of the <unk> in terms of change in the competitive landscape.

Greg Lewis: That's not really on the radar screen as much as that.

Greg Lewis: The tariff issues and how thats going to shake out in <unk>.

Greg Lewis: Depending on what the plant of origin is for various competitors and us and so that's really kind of the well.

Greg Lewis: We'll wait and see as how all of the tariff plans.

Greg Lewis: It does to the competitive landscape, but in terms of <unk> 45 that store.

Greg Lewis: Any.

Greg Lewis: That's really that's what you heard from my comments.

Greg Lewis: But that wasn't meant.

Greg Lewis: Have any impact on that.

Greg Lewis: Again, just want to reiterate.

Greg Lewis: Some hesitancy for us to give out order data because we don't normally do that.

Greg Lewis: But the orders in Q1 year to date.

Greg Lewis: Have been on very solid footing across all our businesses.

Greg Lewis: Order softness in Q4 as Andy said, the things that really if you look at it over a longer time period things have normalized and all indications from our order book.

Greg Lewis: Business as usual.

Speaker Change: What we see with these reciprocal terrorists, Sean do you want to add any color to that.

Speaker Change: Yes, I think the other part of your question Greg.

Speaker Change: How do we see the market and are there opportunities and certainly if you heard in the prepared remarks, we're now at 29% maintenance free in motive power and there is just so much meat on that bone to continue that conversion, we talk about that energy scarcity and then the other side of that coin.

Speaker Change: Energy security the other side of that coin is labor scarcity and our customers not only do they not want to spend the money on the labor element to manage these systems. They can't get the people and so the people that they do get they want to dedicate towards revenue facing.

Speaker Change: Opportunities in the warehouse of revenue facing activities. So that maintenance free conversion is going to continue I will tell you. We don't publish our quote rates, but our quote rates are far above that that 29% and so we know that that's resonating with customers and at the same time were being added into more and more.

Speaker Change: <unk> of the large OEM and customer programs. So we continue to see ourselves with share pickup opportunities and then the one thing that may be influenced by tariff activity relative to your question about competitive positioning.

Speaker Change: Tariffs continue to remain high for Asia, based lithium or incoming lithium cells.

Speaker Change: <unk> gets you most of the way of lithium without some of the downside risks and safety considerations. So we could actually see an uptick in our <unk> offering should that should that tariff environment stay robust robust on lithium.

Speaker Change: Your point the macros.

Speaker Change: That are giving us lift and allowing us on flat volumes to have the revenue and margin conversion that we've enjoyed we expect fully expect to continue and to Dave's point, we just need the market.

Speaker Change: To settle down a bit.

Speaker Change: This tariff activity, which we believe we are beginning to see.

Greg Lewis: I'll add one other one other item Greg just to make sure. There's no confusion there as as Sean mentioned and I think this is important to keep in mind, we do not allocate 45 X into <unk> at all so no impact on pricing.

Speaker Change: Only thing that we do which is always been part of our strategy is to produce in region. So increase our domestic capacity.

Speaker Change: Our margins in motive power 17, 1% in the quarter up 240 basis points I mean, just.

Speaker Change: Nominal quarter for motive power and going forward other than this tariff disruption that we saw in our Q4 books, that's going to play out in Q1.

Speaker Change: The higher conversion of maintenance free Sean mentioned, managing Opex tightly, but the NPI is that he is looking at you know we're talking about the motive power BSS.

Speaker Change: Our customers manage their energy, there's a lot of enthusiasm on that we should be launching that at the end of this year.

Speaker Change: Also announced the closure of our Monterey plant transitioning production to Richmond.

Speaker Change: That also aligns with the strategy gets us maintenance as maintenance free adoption grows.

Speaker Change: Right sizes, our footprint, we estimate that will save about $19 million a year beginning in fiscal year 2007, so while we know and whereas as unhappy with the pressure that we're seeing temporarily in Q1 as I'm sure. All of you are I'm not worried about motive power at all going forward.

Speaker Change: Okay.

Speaker Change: Thank you very much.

Speaker Change: One moment for our next question.

Speaker Change: Yeah.

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

Chip Moore: Good morning, Hey, good morning, Thanks for taking the question.

Chip Moore: Hey, I wanted to.

Chip Moore: Maybe dive deeper on energy systems, I guess more any more color on sort of the green shoots you're seeing on potential network expansion and particularly anything around sort of this last mile Communications open AI is now talking about mobile hardware. These types of things are you seeing some of those.

Chip Moore: <unk> is underway.

Chip Moore: Yes chip.

Chip Moore: Good morning, Sean.

Chip Moore: Thank you for your question listen I think the what we're really seeing as we.

Chip Moore: We saw that the pause is just as I was coming into the energy systems business.

Chip Moore: A little over a year and a half ago, we saw that pause happening and.

Chip Moore: Coming out of that.

Chip Moore: There was a couple of issues that occurred one.

Chip Moore: These things. These pauses are always particularly in these systems that we support they always just create technical debt.

Chip Moore: It's one of those things that.

Chip Moore: Operators can put off but they can't forestall forever, So youre seeing.

Chip Moore: Part of the recovery is just solving for the technical debt issues that they created and.

Chip Moore: And keeping the network back up and running and handling the break fix and that part of it the second part of what we're seeing directly from users relate.

Chip Moore: It relates to what we're talking about energy scarcity, but then also what I mentioned about processing AI center traffic. So a lot of the investment we are seeing early investment as you might imagine are in upgrading macro sites. They're also upgrading.

Chip Moore: Years ago Central offices were being decommissioned or.

Chip Moore: Even sold off because the land lines are being decommissioned now operators are seeing those that brick and mortar as small AI data centers. If you will so.

Chip Moore: The Verizon and frontier.

Chip Moore: I would call it re marriage and so we're seeing some.

Chip Moore: Some of those upgrades, but it's not it isn't yet and I just want to stress it's not the.

Chip Moore: One of the.

Chip Moore: We're not getting the lift of one of the <unk> build outs of years past, but to your point and green shoots we are starting to see the backbone enhanced and some of that investment going in.

Chip Moore: Thanks, that's helpful and maybe on sort of that more near term break fix and Thats in that segment and just help us think about inventory dynamics.

Chip Moore: Service utilization and some of those.

Chip Moore: Some of those things.

Chip Moore: Yes, most of I think most of the inventory pain that we saw with inventory oversupply.

Chip Moore: Largely moved through that we're seeing a lot of.

Chip Moore: New equipment orders and you bring up the service utilization fees, we always see equipment orders proceed.

Chip Moore: <unk> and service and it's intuitive right because.

Chip Moore: Materials being provisioned as site acquisitions are being done in.

Chip Moore: Site permitting and then the service tends to follow.

Chip Moore: So I would tell you that our product performance has been robust over the past couple of quarters and service is gradually catching up to it but we expect more upside in services as that materializes.

Chip Moore: I appreciate it and maybe if I can sneak one last one in.

Speaker Change: Maybe on the on the outlook.

Speaker Change: Any thoughts to what might give you comfort to.

Speaker Change: To resume full year guidance at some point would that be sort of working through some of these temporary headwinds and see what happens on reciprocal tariffs.

Speaker Change: How are you thinking about that thanks.

Speaker Change: Yes.

Chip Moore: Take that chip and thanks for the question, we absolutely are committed to resuming full year guidance as soon as there is a little more clarity on what's happening.

Chip Moore: With the overall landscape a lot of news even happening today.

Speaker Change: As you know.

Speaker Change: Hopefully, we'll be able to resume guidance next next quarter.

Speaker Change: But.

Speaker Change: It's going to depend on what happens in the macro.

Speaker Change: We are just committed to making sure that.

Speaker Change: What we what we give in our guide.

Speaker Change: We've got visibility into.

Speaker Change: Thank you I appreciate it.

Speaker Change: I'm not showing any further.

Speaker Change: Im not showing any further question at this time I would like to turn the call back over to Dave for any closing remarks.

Dave Schaeffer: Thank you Kevin.

Speaker Change: Illinois again express my deep appreciation to our investors for their continued confidence and I understand it's been a privilege to help guide this company through its transformation into a global leader in energy solutions with a strong team in place and clear momentum heading into fiscal year 2000 sites.

Speaker Change: Did you see what emphasis will accomplish that.

Speaker Change: Under Sean's leadership, Thank you all.

Speaker Change: Thank you ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.

Speaker Change: Yes.

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Speaker Change: Good day, and thank you for standing by and welcome to <unk> fourth quarter and full year fiscal 2025 results. 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 the special 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: Please be advised today's conference is being recorded I would now like to hand, the conference over to your speaker today, Lisa Hartman, Vice President of Investor Relations. Please go ahead.

Speaker Change: Good morning, everyone. Thank you for joining us today to discuss <unk> fourth quarter and full year fiscal 2025 results.

David Shaffer: On the call with me today are David Shaffer, Enersys, Chief Executive Officer, Shawn O'connell, <unk>, President and Chief operating officer, and incoming CEO and Andreas Enersys.

Speaker Change: <unk> Executive Vice President and Chief Financial Officer.

David Shaffer: Last evening, we published our fourth quarter and fiscal year 2025 results under our 10-K with the SEC, which are available on our website.

David Shaffer: <unk> 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: As a reminder, we will be presenting certain forward looking statements on this call that are subject to uncertainties and changes in circumstances. Our actual results may differ materially from 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: Please refer to our recent form 8-K, and 10-K filed with the SEC and.

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 difference between the GAAP to non-GAAP financial metrics. Please.

Speaker Change: See our company's form 8-K, which includes our press release dated May 21, 2025, now I will turn the call over to <unk> CEO, Dave Schaeffer.

Speaker Change: Thank you Lisa and good morning.

Speaker Change: Please turn to slide four for a review of our fourth quarter and full year performance Andrew.

Speaker Change: Henderson has delivered a very strong fourth quarter, demonstrating the earnings power of our balanced business. We grew revenue, 7%, our second highest revenue quarter ever and delivered record adjusted diluted EPS of $1 86, excluding 45 X benefits highlight.

Speaker Change: Highlights included record motive power margins significant margin expansion in the energy systems and specialty and strong contributions from the <unk> acquisition.

Speaker Change: In energy systems, we saw growth in data centers and continued moderate recovery in communications.

Speaker Change: Power generated 15% earnings growth on similar volumes to prior year fourth quarter with increased maintenance free products, reaching a record 29% of segment sales special.

Speaker Change: Specialty benefited from sustained strength in A&D markets and outperformance from Brent Tronox full.

Speaker Change: Full year revenue was $3 6 billion with meaningful gains in adjusted gross margin adjusted operating earnings and adjusted earnings per share, even before 45 X benefits.

Speaker Change: We've made meaningful progress in fiscal year 2025.

Speaker Change: We executed our strategy in a challenging environment.

Speaker Change: We expanded our share in the attractive and growing defense market through our higher margin maintenance free offerings.

Speaker Change: <unk> cost optimized our manufacturing footprint invested in high speed lower cost flexible domestic production capacity and develop new product offerings strengthening our foundation for future growth.

Speaker Change: As announced in November today marks my final day as CEO, Shawn O'connell takes the helm as CEO tomorrow with.

Speaker Change: With deep industry experience and proven leadership across Enersys comp.

Speaker Change: Confidence you will lead the company to continued success.

Speaker Change: Been an honor to serve as <unk> CEO I would like to thank our employees for their consistent hard work and dedication in supporting each other and our customers every day, our board of directors for their support and our <unk>.

Speaker Change: Shareholders for your trust.

Sean: I will now turn it over to Sean to take you through more detail on our results and business drivers Shaun.

Speaker Change: Thank you Dave for your leadership and for positioning <unk> for future success, I know I speak for the entire Enersys family and wishing you the very best in your next chapter.

Speaker Change: Please turn to slide six as I begin my remarks today I would like to start with my perspective on our business.

Speaker Change: <unk> enjoys deep customer relationships and leading market share positions in diverse end markets. The key to our future growth is at our solutions help our valued customers address their shared mounting concerns in two main areas energy security and labor scarcity, our products help our customers manage their energy.

Speaker Change: Cost and consumption, while also making it possible for them to perform the same missions with fewer people through maintenance free products in automation enabled by intelligent stored energy solutions over the past six months, we have taken my strategic hypotheses tested them with external advisors and are finalizing.

Speaker Change: <unk> focused roadmap to go deeper and helping our customers address these challenges, while resetting our operations and reinforcing intense discipline on ROIC.

Speaker Change: There are opportunities for us to narrow our focus on select growth verticals expand our service capabilities and achieve further operational efficiencies, which I will share more with you on our August call in upcoming quarters in the near term our focus is on disciplined execution as we move through a transitional period shaped by <unk>.

Speaker Change: <unk> macro and policy dynamics before I get into the quarter I'd like to take a step back to address the broader macroeconomic environment, our tariff exposure and our approach to mitigating the associated risks.

Speaker Change: Please turn to slide seven in.

Speaker Change: In March we established a dedicated cross functional tariff task force dedicated solely on analyzing coordinating and mitigating tariff impacts considering both supply chain and pricing actions. This team is also monitoring both the tertiary impact of tariffs on inflationary pressures as well as in perhaps.

Speaker Change: Most importantly market dynamics, both positive and negative from suppress demand to opportunities, where our global footprint offers competitive advantages.

Speaker Change: So our longstanding practices are producing in region for region onshoring from China dual sourcing and footprint rationalization, we already have structural buffers in place. We are committed to fully mitigating any financial impact to our shareholders can see opex reductions as an effective lever for what.

Speaker Change: Not be offset by supply or pricing actions.

Speaker Change: To put our tariff exposure in perspective about two thirds of our global revenue comes from the U S in which 80% of our U S supply is either domestic or U S. MCA trade compliance.

Speaker Change: Only 5% of this is sourced from China, where the highest tariff rates still exist at current tariff levels are direct tariff exposure is approximately $92 million down from 160 million prior to the May 12 U S administration updates, we intend to fully offset this impact but <unk>.

Speaker Change: Some near term friction in Q1 due to stranded tariffs that can't be passed onto customers and shifting customer order patterns. The biggest unknown to us is timing and the scope of broader inflation <unk> slowdown effects across the industrial sector.

Speaker Change: That said, we are prepared for a range of outcomes guided by our proven and refined playbook, we will remain well positioned to weather, both tariffs and the potential downturn if one materializes.

Speaker Change: Please turn to slide eight.

Speaker Change: In addition to our resilient balance sheet and conservative capital structure Enersys has a number of structural advantages to help us mitigate economic downturns.

Speaker Change: Which is poised for further recovery and expansion.

Speaker Change: Our global manufacturing footprint provides flexibility in our production and distribution capabilities, which enable us to respond and leverage varying geopolitical dynamics by market better than many of our competitors.

Speaker Change: Third our primary operating capital investments have historically been a cash generator during recessionary periods and finally, we've maintained consistent opex discipline, enabling us to respond quickly when needed while shifting conditions may temporarily affect market rhythm, we remain well positioned to exceeding.

Speaker Change: Protect both earnings and cash flow, please turn to slide nine.

Speaker Change: Now I'd like to turn your attention to current business performance. Our overall book to Bill in the fourth quarter was just over one with energy systems and specialty above one offset by motive power below one energy systems had positive order rates for the third consecutive quarter, driven both by data centers and communications and specialty.

Speaker Change: A&D projects and orders have been robust it's worth noting that we did see some order moderation early in the first quarter as customers adjusted to tariff related developments, but activity rebounded quickly when tariff actions were passed to provide more visibility in what we're seeing today versus prior year, our first quarter.

Speaker Change: Year to date order rates for motive power were up 16% energy systems are up 10% and specialty are up 33% with the Brent Tronox add while we anticipate demand demand signals to be variable in the coming months. We view this as temporary recalibration phase and not a structural change in market trajectory.

Speaker Change: <unk>.

Speaker Change: Now I'll provide some more detail on the business drivers behind our strong fiscal Q4 performance.

Speaker Change: And our energy systems business I am pleased with the team's execution nearly doubling adjusted operating earnings. These improved results highlight the benefits of structural improvement actions, along with 22% year on year increase in quarterly data center revenue and continued signs of recovery in U S Communications spend.

Speaker Change: <unk>.

Speaker Change: While we are encouraged by early project work and network expansion planning in U S communications, particularly driven by AI related data demand many customers are selectively managing capital expenditures.

Speaker Change: As such we expect the pace of network expansion to remain gradual and potentially uneven in the upcoming quarters.

Speaker Change: Order rates were sequentially higher with particular strength in the Americas continued sequential order rate growth in EMEA is encouraging as a sign that the regional spend is increasing and off prior lows. It's important to note that while we're seeing strong order rates lead times can extend the revenue conversion timeline in this business.

Speaker Change: Further although the segment is one most exposed to tariffs and supply chain disruptions, we have significantly improved our monitoring and ability to respond more quickly than in the past.

Speaker Change: Finally, as an additional future tailwind our services revenues continue to be challenging for us as an increasing area of focus for Keith we see this as a tremendous opportunity to add value to our customers and grow profitably in the future.

Speaker Change: In motive power are very strong performance was driven by another quarter of favorable price mix on increasing TPP L with charter mix, despite relatively flat sales year over year on lower volumes in EMEA and APAC in Q4 sales of maintenance free products were up 16% year over year.

Speaker Change: Representing a record 29% of total MAU motive power revenue with customer enthusiasm over how our products help them address their labor challenges as I had mentioned at the beginning of my remarks.

Speaker Change: Industry estimates for lift trucks indicate calendar year 'twenty five may be down slightly over prior year with continued expectations for a better recovery in calendar year 'twenty six we are receiving mixed signals on the near term outlook for motive power are April may order book has been stable to promising in April.

Speaker Change: Truck orders were up over 19% over last year's historical lows. Conversely, we have a lower starting backlog on both a year ago and last quarter slower book and ship activity in the current quarter and anticipate disruption will continue to be impacted in the near term with major ports reporting dramatic fluctuations in container volume.

Speaker Change: Over the past three months as importers drastically adjust shipments week by week in response to ongoing tariff updates as a reminder, this business is largely correlated with GDP, but also has unique upside opportunities driven by macro trends of electrification and automation as well as increase.

Speaker Change: <unk> market demand for our higher performing higher value maintenance free products, we believe the market pulled in some shipments into our fiscal Q4 in anticipation of announced tariffs, which will reverse out in the first quarter, creating a temporary drag that said, we also see potential upside opportunities as lithium pricing pressure from <unk>.

Speaker Change: <unk> suppliers may drive increased customer interest in <unk> going forward, but it is difficult to predict how and when these market dynamics will play out.

Speaker Change: In specialty we delivered significant year over year and quarter over quarter improvements in both revenue and adjusted operating earnings driven by solid performance in aerospace and defense supported by the continuing outperformance of our <unk> acquisition.

Speaker Change: Growth in <unk> was fueled by robust demand for Chargers soldier power and an expeditionary power systems as well as increased demand from the European defense market.

Speaker Change: Impressive A&D results were partially offset by slower class eight truck OEM volume recovery that we had initially anticipated.

Speaker Change: Europe and macro uncertainty of pause the class eight truck recovery, where youre expecting for early fiscal 'twenty, six and where youre seeing slower and choppy order rates as major Oems continue to revised forecasts.

Speaker Change: A&D markets remain robust and will be strengthened by the macro although we have seen some near term delays that we believe to be timing related with personnel reductions in the administration temporary clogging the flow of orders with strong momentum and Brent <unk> and broader A&D amid opportunities for improvement in transportation when mark.

Speaker Change: It's come back in our Missouri plant investments come online our specialty business remains well positioned for continued growth and profit expansion.

Speaker Change: Please turn to slide 10.

Speaker Change: Our recent performance reflects a business not only built for resilience, but ready to adapt as we transitioned leadership, we are sharpening our focus executing with discipline building operational momentum and listening closely to customers as their challenges evolve.

Speaker Change: We've made meaningful strides, bringing new technologies to market, introducing cutting edge products, such as software driven energy management systems, which will help our customers address their energy scarcity challenges that I had mentioned earlier.

Speaker Change: These advancements equip our customers with adaptable and efficient solutions that evolve alongside their needs. The preview of our Synovus, Inc. Charger and battery energy storage system or bes for warehouse and distribution center customers generated a lot of excitement at recent trade shows.

Speaker Change: <unk>, our new generation battery charger delivers high efficiency Iot compatibility for monitoring and over the air firmware updates advancing our Iot ecosystem, while in the development phase our best resonated with our customers looking for a solution to tackle power continuity challenges costly infrastructure.

Speaker Change: Structure upgrades long lead times and limited flexibility barriers that often slow electrification efforts engineer.

Speaker Change: Engineered for rapid deployment and semi portability customers were enthused by the enhanced flexibility and efficiency of our bes.

Speaker Change: What they will offer their operations.

Speaker Change: Operationally, we are building on progress from fiscal 'twenty, five with a heightened focus on execution.

Speaker Change: The first new high speed line in our Missouri Springfield, One factory began production this quarter and is performing to expectations with the second high speed line on track to become operational in the fall at the same time, we are actively reshaping our manufacturing footprint as previously announced we are closing are flooded lead acid battery.

Speaker Change: Factoring facility in Monterrey, Mexico, and transitioning production to our existing plant in Richmond, Kentucky.

Speaker Change: This move will enable us to optimize our cost structure as market demand continues to shift to our higher performing TPP all batteries.

Speaker Change: The transition will also allow us to maximize near term IRC 45, ex tax benefits and aligns with our philosophy of producing and market. The restructuring is expected to deliver an estimated pretax benefit of $19 million annually, beginning fiscal year 2027, while ensuring continued product availability and customer.

Speaker Change: <unk> support.

Speaker Change: To further strengthen our focus on high impact technology execution as previously announced in March Mark Matthews President of our specialty Global line of business has been appointed acting Chief Technology Officer, Mark brings more than three decades of engineering and operations operational leadership, including deep technical expertise.

Speaker Change: <unk> and lithium ion chemistry.

Speaker Change: Currently leads our aerospace and defense business, which utilizes multiple distinct lithium chemistries across mission critical applications. This experience combined with his deep relationships across the department of defense and department of energy positions him well to guide the next phase of our lithium strategy and align it with national priorities.

Speaker Change: Mark is actively reviewing our lithium technology roadmap and investment plans to ensure they reflect evolving market demands and long term supply needs is dual role insurers commercial alignment with our R&D and capacity planning as we position <unk> for future growth and domestic lithium battery manufacturing.

Speaker Change: While the funding of the Doe award for our domestic lithium plant remains pending we are encouraged by recent engagement with the Doe and remain optimistic given the project's alignment with defense readiness domestic supply assurance and American manufacturing.

Speaker Change: In the meantime, we are taking a disciplined risk aware approach adjusting our plans maintaining flexibility and closely managing cost dynamics as we update our financial model for evolving cost and benefit assumptions to ensure our future path delivers an attractive return on investment for our shareholders, we remain well positioned.

Speaker Change: <unk> to move with speed and confidence once greater policy clarity emerges.

Speaker Change: In closing I want to express my deep confidence in the strength of our business the relevance of our solutions and the dedication of the <unk> team. We are energized by the critical role we play in supporting the industries that keep data and products across the world moving I look forward to sharing more about our evolving strategy.

Speaker Change: And growth roadmap during our fiscal Q1 earnings call in August now I'll turn it over to Andy to discuss our financial results and outlook in greater detail Andy.

Andy: Thank you Sean Please turn to slide 12.

Speaker Change: Fourth quarter net sales of $975 million were up 7% from prior year. The second highest revenue quarter for the company driven by a 4% increase in organic volume largely on energy systems communications, continuing recovery and strength in data centers as well as 1%.

Speaker Change: Positive price mix across motive power and energy system, and a 4% positive impact from the <unk> acquisition.

Speaker Change: Partially offset by 2% FX headwind.

Speaker Change: We achieved adjusted gross profit of $304 million.

Speaker Change: Up $49 million year on year and up $41 million, if you exclude 45 X benefit.

Speaker Change: Q4, 25, adjusted gross margin of 31, 2% was up 320 basis points versus prior year and excluding 45 <unk> adjusted gross margin was up 260 basis points. Despite the FX headwind.

Speaker Change: Our adjusted operating earnings were $152 million in the quarter.

Speaker Change: $43 million versus prior year with an adjusted operating margin of 15, 6%.

Speaker Change: Excluding 45 X benefits adjusted operating earnings increased $35 million or 48% with an adjusted operating margin of 11, 1% on 7% revenue growth driving a 360 basis point margin improvement year on year.

Speaker Change: Adjusted EBITDA was $167 million, an increase of $42 million versus prior year, while adjusted EBITDA margin was 17, 1% up.

Speaker Change: 340 basis points versus prior year.

Speaker Change: Adjusted EPS for the fourth quarter came in above the high end of our guidance range at $2 97 per share an increase of 43% over prior year.

Speaker Change: Excluding 45 X adjusted EPS was a record $1 86 per share up 66 cents per share versus prior year, demonstrating the strong earnings power of a diversified business and more than <unk> 40 per share higher than our previous record.

Speaker Change: In the fourth quarter of fiscal 'twenty five.

Speaker Change: Active tax rate was 15, 9% on an as reported basis and 18, 9% on an as adjusted basis before the benefit of 40, Fedex compared to 22% in Q4 of 24 and 23, 3% in the prior quarter.

Speaker Change: Full year net sales of $3 6 billion for up 1% year over year with.

Speaker Change: Generated adjusted operating profit of $528 million.

Speaker Change: Including $185 million benefit from IRC 45 ex tax credits.

Speaker Change: Excluding the 45 X benefit we generated record adjusted profit of $343 million.

Speaker Change: Diluted EPS was $10 15 per share an increase of 22% and adjusted diluted EPS before 45 X benefit with a record $5 58 per share an increase of 53 from our prior record.

Speaker Change: Let me now provide some details by segment, please turn to slide 13.

Speaker Change: In the fourth quarter energy systems revenue increased 8% from prior year to $399 million, primarily driven by increased volumes as well as price mix and partially offset by FX.

Speaker Change: Revenue was up over $10 million sequentially to third consecutive increase as we continue to see steady improvement in these end market.

Speaker Change: Adjusted operating earnings of $35 million grew for the fifth consecutive quarter, reflecting higher operating leverage through our optimized cost structure and were $17 million higher than prior year.

Speaker Change: Adjusted operating margin of eight 7% increased an impressive 400 basis points versus prior year.

Speaker Change: We exited the quarter with encouraging order trends in this business and expect to deliver year over year margin expansion as revenue growth and we continue with our structural improvement effort.

Speaker Change: While we remain fully confident in our ability to proactively mitigate tariffs and supply chain disruption when the macro environment stabilizes, we expect to absorb some short term headwinds from stranded tariffs in the upcoming quarter.

Speaker Change: As Sean mentioned, although this segment is our most sensitive to tariffs and supply chain volatility, we have enhanced our visibility and responsiveness, allowing us to act with greater speed and precision than in prior cycles.

Speaker Change: Please turn to slide 14.

Speaker Change: Motive power revenue was in line with the prior year at $392 million.

Speaker Change: As FX headwinds and flat volumes were offset by positive price mix.

Speaker Change: Motive power again reported robust adjusted operating earnings this quarter.

Speaker Change: <unk> $67 million.

Speaker Change: Up 15% versus prior year on flat revenue largely on favorable price mix.

Speaker Change: As well as some lower commodity and manufacturing costs.

Speaker Change: Maintenance free conversion continued its impressive trend at a record 29% of motive power revenue in Q4.

Speaker Change: Adjusted operating margins were 17, 1% up 240 basis points versus the prior year.

Speaker Change: Just the implementation of tariffs a leading industry reports indicate the significant decline in market sentiment, reflecting a more than 50% drop in confidence for both current and future business.

Speaker Change: The broader market is digesting this evolving market dynamic.

Speaker Change: While our products play a critical role in global supply chain, we expect a temporary short term negative impact on new lift truck orders as companies reassess their investment strategies in response to the evolving trade landscape.

Speaker Change: We see meaningful upside to this business once conditions settle supported by long term tailwind from electrification and automation along with growing customer preference for our higher performing maintenance free solutions.

Speaker Change: Please turn to slide 15.

Speaker Change: Hi.

Speaker Change: Specialty revenue increased 21% from prior year to $178 million.

Speaker Change: Driven by a 22% positive impact from the <unk> acquisition, and a 1% increase in organic volume, partially offset by a 2% decrease in price mix.

Speaker Change: Q4, 25, adjusted operating earnings of $15 million were nearly double prior year with an adjusted operating margin of eight 5% up 270 basis points.

Speaker Change: Specialties performance reflects focused execution with A&D and <unk> driving the current result, with additional leverage expected from our Missouri investments and longer term transportation improvement, we anticipate further gains ahead.

Speaker Change: Please turn to slide 16.

Speaker Change: Positive operating cash flow of $135 million.

Speaker Change: Offset by Capex of 30 million resulted in free cash flow of $105 million in the quarter.

Speaker Change: I would like to note that we have not yet received a $137 million U S tax refund, which we had expected in the fourth quarter. We fully attribute this delay the IRS staffing issues and anticipate receiving the refund with interest any day.

Speaker Change: We had strong primary operating capital management, ending the year with $932 million on hand up $79 million versus prior year as we build the business for future growth.

Speaker Change: As of March 31, 2025, we had $343 million of cash and cash equivalents on hand.

Speaker Change: Net debt of $781 million represents an increase of approximately $270 million since the end of fiscal 'twenty four as we made our acquisition of <unk> returned $192 million to shareholders through share repurchases and dividend and continued to invest in our business.

Speaker Change: Our credit agreement leverage ratio with one three times EBITDA or.

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

Speaker Change: We anticipate maintaining our net leverage at or below the low end ever two to three times target range, providing us with ample dry powder for our capital allocation decisions and to absorb any macroeconomic dynamics that may impact us.

Speaker Change: Please turn to slide 17.

Speaker Change: During the fourth quarter, we paid $9 $5 million in dividends and repurchased $40 million in Shannon.

Speaker Change: We currently have approximately $200 million remaining on our board buyback authorization.

Speaker Change: We continue to evaluate promising bolt on acquisition opportunities like <unk> that align with our disciplined strategic and financial criteria and are focused on strengthening customer intimacy expanding share of wallet with our leading positions and exciting end markets and making progress on our transformation journey.

Speaker Change: Given the strong cash flow generation of our business, we have the opportunity to be more aggressive in our opportunistic share buyback activity, particularly during these volatile market conditions.

Speaker Change: Please turn to slide 18.

Speaker Change: As Sean mentioned, we remain very confident in our ability to effectively manage our business and the evolving macro environment and deliver strong earnings performance.

Speaker Change: We are committed to fully shielding our investors from the ongoing impact of tariffs. Although we may have some short term headwinds and uncertainty creates pockets of volume disruption and stranded costs.

Speaker Change: Our fiscal first quarter 2026 guidance reflects typical seasonal volume softness in motive power and transportation exacerbated by these short term macro dynamics.

Speaker Change: For the first quarter of fiscal 2026, we expect net sales in the range. This range of $830 million to $870 million with adjusted diluted EPS of $2 three to $2 13 per share, which includes $35 million to $40 million.

Speaker Change: <unk> 45 X benefits to gross profit.

Speaker Change: The largest driver of our anticipated Q1 sequential decline in revenue and EPS can be attributed to motive power volumes, which are expected to be pressured on seasonality and tariff disruptions with motive power Americas Q4 orders down 14% year on year as well as to a lesser extent approximately five.

Speaker Change: Of stranded tariff costs.

Speaker Change: Sean and I are working on scenario plans to effectively respond to any and all outcomes as it relates to further tariff policy dynamics.

Speaker Change: Given the evolving policy environment and pacing of demand normalization, we're temporarily pausing quantified full year guidance.

Speaker Change: That said, we believe Q1 will be the low point of our fiscal year.

Speaker Change: We anticipate full year adjusted operating earnings growth, excluding 45 X benefit to outpace revenue growth for the fiscal year.

Speaker Change: With improvement in our order book during Q1 year to date, we expect revenue will be bolstered by our customers' enthusiasm for our maintenance free offering robust A&D and data center market and ongoing improvements in our communication and transportation businesses as well as the ongoing improvements in our manufacturing costs disciplined opex.

Speaker Change: And reductions in our capital expenditures year on year.

Speaker Change: All of which will be tempered by macro dynamics.

Speaker Change: To proactively mitigate these market dynamics, we have implemented direct and indirect cost controls and also are currently reviewing additional reductions in both opex and capex as part of <unk> strategic business improvement roadmap.

Speaker Change: Please turn to slide 19.

Speaker Change: Before we move to Q&A with the completion of our fiscal year 'twenty five results I would like to provide an update on our progress towards the fiscal year 2027 financial targets, we set at Investor Day in June of 2023.

Speaker Change: In aggregate, we are on track towards our earnings target with strong performance on adjusted operating margin EBITDA, and EPS and future upside potential from the reinvestment of our excess cash flow.

Speaker Change: As with any multiyear plans there are puts and takes.

Speaker Change: We are very pleased with our maintenance reconversion, realizing a richer mix of product sales across the business, our TPP L capacity investments.

Speaker Change: <unk> systems business optimization actions, the expanded 45 X benefit.

Speaker Change: And the accretive impact of our <unk> acquisition.

Speaker Change: On the flip side, our sales CAGR has been below where we still believe our longer term potential resides largely an unforeseen market wide disruption.

Speaker Change: Outcomes have informed Sean strategy, which we'll be updating you on in August.

Speaker Change: As Shawn steps into the CEO role she is advancing our strategic work aimed at deepening customer intimacy accelerating our most high impact new product initiatives that help our customers address their energy and labor challenges and enhancing our operational efficiencies execution and return on invested capital.

Speaker Change: These efforts combined with our strong foundation.

Speaker Change: Sure enough to pursue the growth and margin expansion, we know our business is capable of.

Speaker Change: We look forward to sharing further updates as the fiscal year progresses.

Speaker Change: In closing global demand for energy storage solutions continues to build as our products and services remain essential to the industries that drive the global economy from resilient grids in communications networks to secure data centers and national security as well as global material distribution warehousing.

Speaker Change: Coming off of a record shattering Q4, we are confident in the earnings power of our business and are optimistic about our ability to continue to expand margins and grow revenue and create long term value for our shareholders.

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

Speaker Change: Operator.

Speaker Change: Thank you ladies and gentlemen, if you have a question or comment at this time. Please press star one on your telephone. If your question has been answered you were seeing with yourself from the queue. Please press star one again, we will pause for a moment, while we compile our Q&A roster.

Speaker Change: Yes.

Speaker Change: Our first question comes from Noah Kaye with Oppenheimer. Your line is open.

Speaker Change: Yeah.

Noah Kaye: Hi, good morning, Thanks for taking the questions.

Noah Kaye: Hi, Noah.

Noah Kaye: So I guess just wanted to start first with understanding the <unk> guide.

Noah Kaye: The revenue range.

Noah Kaye: You gave some.

Noah Kaye: Color on where we would see weakness in motive, maybe a little bit of growth in energy systems in specialty can talk to that but the.

Noah Kaye: The EPS guide about 'twenty since higher year over year kind of flat revenues at the midpoint can you help sort of bridge.

Noah Kaye: To that EPS growth with your expectations around operating margins and tax rate.

Noah Kaye: Yes, good morning, no. It's Sean good to hear your voice and thank you for the question I'll provide a little color here on what we're seeing for Q1, and then I'll, let Andy handle that the EPS portion of it.

Noah Kaye: But just just to give you a little idea of what went on in anticipation of Liberation day.

Noah Kaye: Our motive customers, just largely took a wait and see approach, which affected had some near term effect on orders.

Noah Kaye: Then, we probably saw a little bit of Poland too.

Noah Kaye: Get ahead of that and then we saw some pickup with improving news from the administration and now overall as we mentioned in the remarks year to date orders are relatively flat.

Noah Kaye: The current order rates broadly in line with normal cycles, So where we would expect to see and.

Noah Kaye: In comparison to the last several cycles. So it's.

Noah Kaye: While we have this noise.

Noah Kaye: It feels like we're trending back to normal what we don't know is the.

Noah Kaye: The effect of reciprocal tariffs, we have a some of these are still pauses and not subtle science, but it feels like a strengthening for us and.

Noah Kaye: So we anticipate that this.

Speaker Change: What we saw was totally tariff shock related and that the markets are largely getting back the business and then as you mentioned energy systems will just continue to see activity coming in.

Speaker Change: For network Buildout the carriers realize they have a deficit when it comes to passing AI traffic through their networks.

Speaker Change: We're beginning to get active about solving those technical issues.

Speaker Change: We feel very good about continued trajectory etfs.

Speaker Change: Arising comfort level of motive if you will and then.

Speaker Change: We didn't see.

Speaker Change: You didn't ask about transportation, but we're we're kind of following the same.

Speaker Change: Trajectory, there, where we were on pace for a nice recovery.

Speaker Change: And then just like in the forklifts.

Speaker Change: Transportation customers sort of hit pause to sort through this tariff tariff noise with that I'll turn it over to Andy Yeah. Thanks, Sean So I.

Speaker Change: I think you've covered the market as well.

Speaker Change: What might help is if we level set to last year. So largely within Q1 'twenty six it's really going to look a lot like Q1 of 'twenty five revenues in line.

Speaker Change: If you look at our guide, but we're seeing lower volume mostly in motive power in some in transportation as Sean mentioned offset by the accretive benefit that we're having from Brent <unk> and really strong favorable price mix, we've been able to achieve so if im looking at EPS EPS. Our guide is up about mid point up about 10 year on year.

Speaker Change: But first normalize it so pull out maybe 25% to <unk> 30 per share that we should have had of an uplift from Brent <unk> from the 45 45 X expanded.

Speaker Change: EAM impact, but then add back we probably are seeing about <unk> 15 per share from pressure from FX and that gets you to really a flat EPS year on year, So why flat.

Speaker Change: With lower volume as Sean mentioned, and Thats really related mostly to motive power driving that and then a little bit of stranded tariff costs and those items offset this really robust favorable price mix gains that we've been able to achieve over the course of fiscal year 'twenty. Five. So we are seeing our Q4 orders down on the tariff disruption.

Speaker Change: But if you look full year the orders are pretty much flat year on year. So we would expect without a doubt that Q1 is going to be the low point and we should see recovery going on from there absent additional cash op shocks.

Speaker Change: Okay. Thanks, Andy Yes, sorry, Vincent headsets are higher year over year, but.

Speaker Change: Thank you for bridging that I guess, just maybe explain the decision process around kind of pausing guidance because I wanted to make sure we get that number again, because there's a lot of numbers.

Speaker Change: You guys gave out but the one Q to date order book is is year over year up how much.

Speaker Change: And then just help us understand why pause full year guidance.

Speaker Change: It's kind of to your point, we seem to be kind of experiencing some some recovery.

Speaker Change: In orders off of the early April uncertainty.

Speaker Change: Yes, so if we look at our Q4 orders and I think what we were referring to was within motive power Americas, we had about 14% pressure if.

Speaker Change: If you look at orders overall different.

Speaker Change: Energy systems was up year on year, obviously, where during the recovery.

Speaker Change: Brands.

Speaker Change: Sickly flat A&D, it's choppy, but what we really saw the big pause and then kind of a resurgence. So if we look at full year to date within motive power calendar year or calendar year is flat year on year. So we saw big decline during Q4, which we're going to feel the effects of that coming out into Q1 and then it research.

Speaker Change: In Q1, so far of what we're seeing as far as order Sal.

Dave Schaeffer: No. This is Dave just just for a little bit more clarification.

Speaker Change: Look at motive power orders calendar year to date.

Speaker Change: They're very consistent with last year. So there was.

Speaker Change: The cycles the normal cycle has been very disruptive as.

Speaker Change: As Sean said people took a wait and see attitude.

Speaker Change: And the main reason we exist.

Speaker Change: Not in a position to provide annual guidance right now is just awaiting the.

Speaker Change: The final outcome of the.

Speaker Change: The reciprocal tariff negotiations and how that's all going to shake out that could have both positive and negative impacts for us and we want to make sure. We have that clarification clarity before we go and provide.

Speaker Change: Full annual guidance.

Speaker Change: The situation risk today.

Speaker Change: It's it's all very manageable, we just want to make sure that Oh.

Speaker Change: Especially with Sean coming onboard that we.

Speaker Change: We provide the best information, we have going forward and Thats going to include fully understanding how these when these holds on the temporary reciprocal tariffs kind of.

Speaker Change: Wind down so that's what we're waiting to see.

Speaker Change: Thanks, Dave that's helpful. I, just I need to maybe get some clarification.

Speaker Change: I apologize for not understanding around.

Speaker Change: What you were actually saying around order recovery in this quarter to date the current quarter I thought you gave some color on that and some some numbers overall so can we just have it one more time.

Speaker Change: What rebound <unk> seen since April.

Speaker Change: Again, what we talked about with some we don't provide necessarily the full order book for Q1, obviously.

Speaker Change: Evolving as as we speak right now.

Speaker Change: But what we what we were giving you know it was when we talked about the decline in Q4, we saw a bounce back in Q1, so year to date.

Speaker Change: It's flat so I think we gave a couple of stats on what we're seeing throughout the course of the year.

Speaker Change: What we're looking at is just the bounce backs that we're seeing in Q1 if that helps.

Speaker Change: Got it okay very helpful. Thank you I'll turn it over.

Speaker Change: One moment for our next question.

Speaker Change: Yeah.

Speaker Change: Our next question comes from Brian Drab with William Blair. Your line is open.

Brian Drab: Good morning, good morning, good morning.

Brian Drab: Hey, good morning, Thanks for taking my questions I'm always hesitant to use people's time to.

Speaker Change: Okay.

Dave Schaeffer: Things like thanks, Dave for everything.

Speaker Change: It's been great working with you and good luck in the next chapter.

Speaker Change: And.

Speaker Change: I'll leave it at that.

Speaker Change: So I first just wanted to ask Andy I mean, now you gave out a new.

Speaker Change: Number here.

Speaker Change: In the Q&A the calendar year to date orders for motive.

Speaker Change: Could I ask you if you could give that same year to date.

Speaker Change: <unk> growth or decline for energy storage and for specialty excluding <unk> for specialty.

Speaker Change: Yeah.

Brian Drab: Only thing Brian.

Speaker Change: This quarter was unfolding obviously, we're halfway through there is a lot of the actions that are going what we the main message that we were trying to convey is Q4 orders were pressured and we saw a rebound in Q1 and that's what's driving that pressure that we're seeing in Q1.

Speaker Change: That's similar to the question that Noah was asking if I look at Mike for orders in General, though just so you know versus prior year I'm seeing a significant pickup in energy systems, that's coming up the last year, it's pressure that that.

Speaker Change: Last year was when they started that U shaped recovery. So that recovery is continuing although we do see some pull ins from energy systems into Q4, So our Q1 volumes energy systems might be more or less flat, but additional ongoing opportunity from their.

Speaker Change: Transportation year on year as the orders have been mostly flat to a little up off the last year, but.

Speaker Change: What we've talked about is on the Q3 call you probably remember we have like we've seen a 40% increase in sequential transportation orders.

Speaker Change: And then as Sean mentioned, we saw a big decline.

Speaker Change: The main story, we're trying to get here.

Speaker Change: Week by week, it's a little bit all over the place the market is responding, especially things like class eight OEM trucks forklifts. Those are capital purchases are products are essential to moving products and information.

Speaker Change: Globally. So so a lot of this kind of.

Speaker Change: One we could pauses next week, it's up one week, it's not sustainable things have to level out.

Speaker Change: And we know that our products solve critical.

Speaker Change: <unk> provided a critical benefit.

Speaker Change: And the global economy, but we're seeing just a lot of volatility as everyone's trying to digest, what's happening in the landscape as a result of these tariff call.

Speaker Change: Okay. Okay. Thanks.

Speaker Change: I'll follow up more later on that but.

Speaker Change: Can you.

Speaker Change: Talk a little bit more about the.

Speaker Change: Section 45 X and I guess specifically.

Speaker Change: I'm wondering have you seen anyone else in the industry because I know a lot of people are looking for these checks have you seen anyone else in the industry get the check cut to them and are you.

Speaker Change: And in active dialogue with the IRS regarding.

Speaker Change: Getting getting the cash.

Speaker Change: Yes, Brian happy to happy to take that one.

Speaker Change: Yes, other companies or other lead acid battery companies have received their check with us being at $3 31 year end, we're in a slight delay.

Speaker Change: Theres been a lot of administrative changes in the IRS and we have individuals just with a regular ongoing tax filings. We have contacts at the IRS had said there's no holdup put in particular on your refund. We're just short staffed.

Speaker Change: We've received no indication from both political connections, we have as well as from agents at the IRS themselves that there is anything other than just some delays.

Speaker Change: And we will we expect I mean any day I thought maybe we would even get it yesterday and have an update to this Q&A, we expect to get at any day and interest accrues as well so.

Speaker Change: We will get a an additional benefit from that also.

Speaker Change: Yes, Brian it's Sean I don't know if youre watching the up to date news on all the happenings on the hill, but as we have been socializing.

Speaker Change: Broad bipartisan support of 45 X.

Speaker Change: The package that was passed and that has to go to the Senate and it's still open to.

Speaker Change: The final tweaks, but the packages was passed was largely in line with what we thought it would be.

Speaker Change: And.

Speaker Change: Nearly all of the tenants are 45 X that were important to us are intact, if not all.

Speaker Change: There is a little bit of a of an increase sunset past 2031.

Speaker Change: They remove some wind stuff that didn't apply to us anyway, but broadly 45 X appears to be moving the direction, we thought it would be and we will continue.

Speaker Change: Yes, I think everyone. That's following enersys is following that.

Speaker Change: Mostly so yes, thanks for the update and I guess, the last thing if I could sneak in one more is just.

Speaker Change: Sorry, if I missed this but are you, making any comments today regarding your latest thinking on the lithium plant.

Speaker Change: Sure I'll take that one Brian So we continue to have direct conversations with the administration.

Speaker Change: We haven't seen.

Speaker Change: Talks with.

Speaker Change: Any wavering at all of their support of the lithium plant and to remind you. The impetus for the funding was rooted in our largely our defense programs.

Speaker Change: And just for a bit of color there is over 40 programs today.

Speaker Change: For the department of defense that are.

Speaker Change: Sourced in Asia, and many of them from China for our National Defense, and they're trying to consolidate those programs and bring them back home. So again the support has been very strong and then we have Mark Matthews, who we mentioned on the call who has been involved in the program since day, one who maintains these dirt.

Speaker Change: Relationships and we have mark going through and just and just making sure that along with our finance team. We keep our model updated we make sure we understand all of the change in cost inputs, if any and then now with the 45 X news.

Speaker Change: We'll add that into our thinking I will tell you also that we have never slowed down or sell development.

Speaker Change: Program, so that while we've been waiting to see what's happening with funding we've been working with our development partner to advance our <unk> samples and be ready to go when we get the right news so.

Speaker Change: Again at this time, we feel very positive about that but as we update the model and what that looks like we'll keep you updated.

Speaker Change: Okay perfect. Thanks very much.

Brian Drab: Thank you, Brian one of them before our next question.

Greg Lewis: Our next question comes from Greg Lewis with <unk>. Your line is open.

Greg Lewis: Yes, Thank you and good morning, everybody and thanks for taking my questions and Dave I don't know I think your last quarter, but thanks again for all the help over the last few years and good luck.

Speaker Change: Andy and Sean I guess this question is for you guys as we think about going forward.

Speaker Change: Probably a couple.

Greg Lewis: Questions inside this question, but.

Greg Lewis: As we look at the leverage target you alluded to the tax refund youre going to get that pushes it down even lower.

Greg Lewis: So clearly we're in a good position.

Speaker Change: <unk>.

Speaker Change: The kind of you mentioned the buyback or organic growth as we look around the landscape.

Speaker Change: Over the next few quarters.

Speaker Change: Howard how are you thinking about the potential for.

Speaker Change: Inorganic growth and just as a point of clarification.

Speaker Change: In the prepared comments, where we talked about.

Speaker Change: Sequential or year over year.

Speaker Change: EPS growth.

Speaker Change: Just to clarify there is no expectation of bolt ons in that number correct.

Speaker Change: No no no no bolt ons at all in our number at all.

Speaker Change: Okay, and then Tonight.

Greg Lewis: I know it sounds like you have a bunch of other questions in there Greg So just want to make sure that we can be succinct in getting to those.

Greg Lewis: And so and so is like as we look at today what is what is the opportunities on the M&A front, just given your balance sheet.

Greg Lewis: As we look at previous cycles.

Greg Lewis: Is uncertainty that we're in right now.

Greg Lewis: Is that kind of going to keep people on the sidelines in terms of your ability to.

Greg Lewis: Acquire additional companies or is it kind of from your side is it still.

Greg Lewis: Business as usual.

Greg Lewis: Thanks, Greg.

Greg Lewis: Greg This is Sean and thank you for your question.

Speaker Change: Let me just say we have a fantastic business all of our macros are good.

Speaker Change: You have this whole situation happening in the world and particularly in the U S.

Greg Lewis: The grid margin that is the gap between the grid capacity.

Greg Lewis: <unk> load growth is shrinking everywhere and our customers are really looking for us to step in and help them manage that and as you mentioned, we have this fantastic balance sheet with a lot of dry powder.

Greg Lewis: I think the inverse is true we're not going to wait on the sidelines I think probably some of this uncertainty will pressure.

Greg Lewis: Some of the smaller players and probably actually increase our ability to go out and find good targets.

Greg Lewis: With that said, we still see a very long runway in A&D and.

Greg Lewis: Along with a lot of synergies with our domestic lithium manufacturing.

Greg Lewis: Saw the lift we're getting from Brent <unk>, they're not the only only target for us. So we're going to be very opportunistic with the dry powder and stay acquisitive.

Greg Lewis: And as long as.

Greg Lewis: Those targets fit our ROIC model, and we're really going to be putting a lot of rigor around what that should look like for our shareholders.

Speaker Change: If I can add a little bit more to that Greg.

Speaker Change: <unk>.

Speaker Change: Early in Q4, we're wrapping up our budget and this is before a lot of these terrorists disruptions occurred.

Speaker Change: We had double digit revenue growth built into our budget low double digit revenue growth no acquisition based business.

Speaker Change: We just had an.

Speaker Change: An outstanding Q4 that was not an anomaly that outstanding Q4 was even with comps and trans being slow with the opportunity for those to improve from there. That's the base that we're building the strategy office and the business will improve from there we've got growth verticals that Sean looking at efficiencies and execution and all of that is before looking at any.

Speaker Change: Any mergers and acquisitions, although with our deep rich balance sheet that we have we have the ability to move fast and we look at that on an ongoing basis.

Speaker Change: We do think Q1 is going to be the low point with our results trending back to this record Q4 and upside from there as we have done in our original budget before all of this visa.

Speaker Change: These tariff issues started to arrive, but albeit it's going to be tempered by the macro so are we going to get back there this year.

Speaker Change: We could get back there earlier in this year.

Speaker Change: Or is it going to be later, it's going to depend or the tariffs going to get negotiated and tax rate the tax rate cuts hold well tariffs be expanded will be expanded will there be another liberation day kind of shock.

Speaker Change: That's all what we don't want to do is make promises for things that we don't have full visibility of and are able to commit to fully.

Speaker Change: Our Q1 order book is improving.

Speaker Change: We mentioned that motive power was pressured in Q4, but year on year, it's flat.

Speaker Change: Sean mentioned, we expect revenue lift from our maintenance free offerings, A&D and datacenter robustness ongoing Thompson Trans recovery and we know the strength of our balance sheet offers optionality for us to proactively mitigate whatever comes at us.

Speaker Change: No. We're all over and ahead of tariffs we can talk about that later, we've got a great playbook, we're committed to fully offsetting the impact we've got a proven and effective refined playbook and we know our products.

Speaker Change: Critical role in these global markets. The real question is volatility and a three months span our stock lost and regained $900 million in the marketplace that the.

Speaker Change: Truth is nothing really changed our business potential is still there whatever wherever tariff ends up and we got it whatever happens to the macro we've got a playbook. It's just the timing that we're struggling with.

Speaker Change: Okay, and then you mentioned motive in the or.

Speaker Change: Orders the order intake.

Speaker Change: And I think it might have been Dave that mentioned, depending on how that realizing that it's a house bill that needs to get through the Senate and Theres a lot of work that needs to be done around that.

Speaker Change: The change really anything.

Speaker Change: But there was a comment from somebody about it potentially being good.

Speaker Change: Is that related to all.

Speaker Change: Competition for PPL from other.

Speaker Change: Whether it's electric.

Speaker Change: Electric battery electric or hydrogen or.

Speaker Change: Just maybe you could talk a little bit more about why.

Speaker Change: Changes to the.

Speaker Change: Or it could be good.

Speaker Change: And.

Greg Lewis: Does that also is that going to be an impact from tariffs as well just given where some of your competition. In motive is sourced is that kind of a fair way to think about it I can start Gregg and then Sean can add a little color.

Greg Lewis: The comments I made were about the fundamentals of the business and the orders are very stable in terms of the <unk> in terms of changing the competitive landscape.

Greg Lewis: That's not really on the radar screen as much as that.

Greg Lewis: The tariff issues, and how thats going to shake out and.

Greg Lewis: Depending on what the plant of origin is for various competitors and us and so thats really kind of.

Greg Lewis: We'll wait and see as how all the test to see what that does to the competitive landscape, but in terms of 45 acts or.

Greg Lewis: Any.

Greg Lewis: That's really that's what you heard from my comments.

Greg Lewis: But that wasn't meant.

Greg Lewis: Have any impact on that.

Greg Lewis: Again, just want to reiterate I know, there's some hesitancy for us to give out order data because we don't normally do that.

Greg Lewis: But the orders in Q1 year to date.

Greg Lewis: Have been on very solid footing across all our businesses.

Greg Lewis: Order softness into Q4 as Andy said.

Speaker Change: Things that really if you look at it over a longer time period things have normalized and all indications from our order book.

Greg Lewis: Business as usual.

Sean Thompson: I mean, what we see with these reciprocal terrorists, Sean do you want to add any color to that.

Greg Lewis: Yes, I do I think the other part of your question Greg.

Greg Lewis: How do we see the market and are there opportunities and certainly if you heard in the prepared remarks, we're now at 29% maintenance free in motive power and there is just so much meat on that bone to continue that conversion, we talk about that energy scarcity and then the other side of that coin.

Greg Lewis: <unk> security the other side of that coin is labor scarcity and our customers not only do they not want to spend the money on the labor element to manage these systems. They can't get the people and so the people that they do get they want to dedicate towards revenue facing.

Greg Lewis: Opportunities in the warehouse of revenue facing activities. So that maintenance free conversion is going to continue I will tell you. We don't publish our quote rates what our quote rates are far above that that 29% and so we know that that's resonating with customers and at the same time were being added into more and more.

Greg Lewis: Four of the large OEM and customer programs. So we continue to see ourselves with share pickup opportunities and then the one thing that may be influenced by tariff activity relative to your question about competitive positioning.

Greg Lewis: Tariffs continue to remain high for Asia, based lithium or incoming lithium cells.

Greg Lewis: <unk> gets you most of the way of lithium without some of the downside risks and safety considerations. So we could actually see an uptick in our <unk> offering should that should that tariff environment stay robust robust on lithium so to your point the macros.

Dave Schaeffer: That are giving us lift and allowing us on flat volumes to have the revenue and margin conversion that we've enjoyed we expect fully expect to continue and to Dave's point, we just need the market.

Greg Lewis: To settle down a bit.

Greg Lewis: On this tariff activity, which we believe we are beginning to see.

Speaker Change: I'll add one other one other item Greg just to make sure. There's no confusion there as as Sean mentioned and I think this is important to keep in mind, we do not allocate 45 setbacks into <unk> at all so no impact on pricing. The only thing that we do which is always been part of our strategy is to produce in region. So increase.

Greg Lewis: Our domestic capacity.

Greg Lewis: Our margins in motive power 17, 1% in the quarter up 240 basis points, I mean, just a phenomenal quarter for motive power and going forward other than this tariff disruption that we saw in our Q4 books, that's going to play out in Q1.

Speaker Change: The higher conversion of maintenance free Sean mentioned, managing Opex tightly, but the NPI is that he is looking at and you were talking about the motive power BSS, helping our customers manage their energy there's a lot of enthusiasm on that we should be launching that at the end of this year.

Speaker Change: We also announced the closure of our Monterey plant transitioning production to Richmond.

Speaker Change: That also aligns with the strategy gives us maintenance as maintenance free adoption grows.

Greg Lewis: Right sizes, our footprint, we estimate that will save about $19 million a year beginning in fiscal year 2007, so while we know and whereas as unhappy with the pressure that we're seeing temporarily in Q1 as I'm sure. All of you are I'm not worried about motive power at all going forward.

Greg Lewis: Okay.

Greg Lewis: Thank you very much.

Greg Lewis: One moment for our next question.

Greg Lewis: Yeah.

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

Chip Moore: Good morning, Hey, good morning, Thanks for taking the question.

Greg Lewis: Hey, I wanted to.

Greg Lewis: Maybe dive deeper on energy systems, I guess more any more color on sort of the green shoots you're seeing on potential network expansion and particularly anything around sort of this last mile Communications open AI is now talking about mobile hardware. These types of things are you seeing some of those dis.

Greg Lewis: <unk> is underway.

Chip Moore: Yes chip.

Chip Moore: Good morning, Sean.

Speaker Change: Thank you for your question listen I think the what we're really seeing as we.

Chip Moore: We saw that the pause is just as I was coming into the energy systems business.

Chip Moore: A little over a year and a half ago, we saw that pause happening and.

Chip Moore: Coming out of that.

Chip Moore: There was a couple of issues that occurred one.

Chip Moore: These things. These pauses are always particularly in these systems that we support they always just create technical debt.

Chip Moore: It's one of those things that the.

Chip Moore: <unk> can put off but they can't forestall forever, So youre seeing.

Chip Moore: Part of the recovery is just solving for the technical debt issues that they created and.

Chip Moore: And keeping the network back up and running and handling the break fix and that part of it. The second part of what we're seeing directly from users relates to what we're talking about energy scarcity, but then also what I mentioned about processing AI center traffic. So a lot of the investment we are seeing early investment as you might emerge.

Chip Moore: <unk> are in upgrading macro sites, they're also upgrading.

Chip Moore: Years ago Central offices were being decommissioned or.

Chip Moore: Even sold off because the land lines are being decommissioned now operators are seeing those that brick and mortar as small AI data centers. If you will so.

Chip Moore: The Verizon and frontier.

Chip Moore: I would call it re marriage and so we're seeing some.

Chip Moore: Some of those upgrades, but it's not it isn't yet and I just want to stress it's not the.

Chip Moore: One of the.

Greg Lewis: We're not getting the lift of one of the <unk> build outs of years past, but to your point and green shoots we are <unk>.

Greg Lewis: Are going to see the backbone enhanced and some of that investment going in.

Greg Lewis: Thanks, that's helpful and maybe on sort of that more near term break fix and Thats in that segment and just help us think about inventory dynamics.

Greg Lewis: Service utilization and some of those.

Greg Lewis: Some of those things.

Greg Lewis: Yes, most of I think most of the inventory pain that we saw with inventory oversupply.

Greg Lewis: Largely moved through that we're seeing a lot of.

Greg Lewis: New equipment orders and that's you bring up the service utilization fees, we always see equipment orders proceed.

Greg Lewis: <unk> and service and it's intuitive right because.

Greg Lewis: Materials being provisioned as site acquisitions are being done and site permitting and then the service tends to follow.

Greg Lewis: So I would tell you that our product performance has been robust over the past couple of quarters and service is gradually catching up to it but we expect more upside in services as that materializes.

Speaker Change: I appreciate it and maybe if I can sneak one last one in.

Greg Lewis: Maybe on the on the outlook.

Greg Lewis: Any thoughts to what might give you comfort to.

Greg Lewis: To resume full year guidance at some point would that be sort of working through some of these temporary headwinds and see what happens on reciprocal tariffs.

Greg Lewis: How are you thinking about that thanks.

Chip Moore: Yes, I'll take that chip and thanks for the question, we absolutely are committed to resuming full year guidance as soon as there is a little more clarity on what's happening.

Chip Moore: With the overall landscape a lot of news even happening today.

Greg Lewis: As you know.

Greg Lewis: Hopefully, we'll be able to resume guidance next next quarter.

Greg Lewis: But it's going to depend on what happens in the macro and I think we're just committed to making sure that.

Greg Lewis: What we what we give in our guide.

Greg Lewis: We've got visibility into.

Speaker Change: Thank you I appreciate it.

Greg Lewis: I'm not showing any further.

Greg Lewis: I'm not showing any further question at this time I would like to turn the call back over to Dave for any closing remarks.

Dave Schaeffer: Thank you Kevin.

Speaker Change: Closing, Illinois, again express my deep appreciation to our investors for their continued confidence.

Dave Schaeffer: It's been a privilege to help guide this company through its transformation into a global leader in energy solutions with a strong team in place and clear momentum heading into fiscal year 'twenty six I'm excited to see what emphasis will accomplish that.

Dave Schaeffer: Under Sean's leadership, Thank you all.

Speaker Change: Thank you ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.