Enersys at Oppenheimer Conference: Strategic Growth Amid Challenges

On Thursday, 08 May 2025, EnerSys (NYSE:ENS) presented at the Oppenheimer 20th Annual Industrial Growth Conference, outlining a strategic approach to navigate current economic challenges. The company is focusing on short-term tariff mitigation and long-term growth, while maintaining investor credibility. Despite macroeconomic hurdles, EnerSys is optimistic about its future.

Key Takeaways

• EnerSys is prioritizing tariff mitigation and supply chain diversification.
• The company is experiencing robust demand in data centers and a recovering telecom sector.
• Strategic acquisitions, like Brentronics, are boosting growth.
• EnerSys is actively pursuing M&A opportunities in aerospace and defense.
• The company emphasizes innovation and operational efficiency to capitalize on energy storage opportunities.

Financial Results

• Motive Power Performance During COVID:

- Revenue decreased from $1.348 billion to $1.164 billion.

- Operating earnings slightly fell from $149 million to $144 million.

• Projected Motive Power Growth (2020-2025):

- Revenue is expected to rise by about 10%.

- Operating earnings are projected to increase by over 50%.

• Brentronics Acquisition:

- Outperforming expectations and contributing to growth.

Operational Updates

• Supply Chain Diversification:

- Production shifted from China to Vietnam and Mexico to reduce tariff risks.

- European TPPL factories serve 90% of the European market.

• Tariff Mitigation:

- A dedicated task force is addressing tariff impacts with swift pricing actions.

• Lithium Sourcing:

- Multiple lithium battery chemistries are maintained, with three months of inventory on hand.

• Gigafactory Plans:

- Production dates projected for 2027 or later.

Future Outlook

• Market Trends:

- Strong demand in data centers, supported by significant investments.

- Telecom sector recovering as deferred maintenance spend resumes.

• BESS Deployment:

- Expanding Battery Energy Storage Systems across various segments.

• Maintenance-Free Conversion:

- Growth driven by conversion to maintenance-free batteries and electric trucks.

• M&A Opportunities:

- Actively pursuing opportunities, especially in aerospace and defense.

Q&A Highlights

• Electric Forklifts and Tax Credits:

- Electric forklifts do not qualify for the $7,500 EV tax credit.

• Tariff Impact on ES Segment:

- Significant efforts to mitigate tariff impacts through offshore and nearshoring production.

• Data Center and Telecom Markets:

- Robust data center market driven by increasing data demands.

- Telecom market showing recovery signs.

EnerSys’ detailed strategies and future plans are available in the full transcript below.

Full transcript - Oppenheimer 20th Annual Industrial Growth Conference:

Noah, Oppenheimer Analyst, Oppenheimer: Well, good morning, and, welcome back to day four of Oppenheimer’s twentieth Annual Industrial Growth Conference. We’re delighted to welcome back the management team of EnerSys to our conference. We have president and CEO, Sean O’Connell and CFO, Andy Funk. Thank you both for being here.

Sean O’Connell, President and CEO, EnerSys: Thank you so

Andy Funk, CFO, EnerSys: much for having us, Noah.

Noah, Oppenheimer Analyst, Oppenheimer: Now I wanna give Andy the opportunity to make a few, safe harbor related statements just given where we sit in the earnings cycle. Andy?

Andy Funk, CFO, EnerSys: Appreciate that. Just before we begin, I want to point out that we’re reporting earnings on May 21, followed by our conference call on May 22. So we won’t be able to, in this meeting, provide a current quarter update during this conference. I also just want to remind everyone about our safe harbor. We may be presenting certain forward looking statements on this call that are subject to uncertainties and changes in circumstances, and our actual results may differ materially from these forward looking statements for a number of reasons.

For a list of our forward looking statements, which could affect our future results, please refer to our recent Form eight ks and 10 ks filed with the SEC. Back over to you, Noah.

Noah, Oppenheimer Analyst, Oppenheimer: Thanks, Cindy. I will now throw out all of my forward looking questions. Well, maybe we can start with you, Sean, coming into the President and CEO role with a little over, I think, twenty years experience with the company. Just give us a sense of immediate near term priorities for you know, any shifts you would call out in the medium term strategy for the company?

Sean O’Connell, President and CEO, EnerSys: Yeah, thanks, Noah. Well, look, I, first of all, I’m very excited about the opportunity. And I just want to say that, you know, the macros in our business, I don’t think ever been as strong in our career. And I really think the job of EnerSys is to do two main things. It’s to help our customers who operate critical infrastructures through this question of energy security and and being able to operate and through, labor security and being able to, perform missions with less people, less qualified people, or less cost to people.

So as I look at that and, you know, being an insider to your point, being in every one of our businesses, my main goal has been to use the six month transition period to take some of the hypotheses we’ve had, test them, and make sure that we’re going to be crisping up and being very clear about how we address those two main challenges. We’ll give you some color just to make sure as an insider, I wasn’t breathing my own exhaust, and we were pressure testing my hypotheses. We brought in one of the big consulting firms, they’ve given us a lot of benchmarking, a lot of outside in view, a lot of their view of industry and footprint, and that’s been extremely helpful. So again, we’ve made good use of the six months in the transition. And so just to further answer the question, near term strategy will be focused on, you know, navigating what’s going on with this administration, mitigating tariffs, that sort of thing, and just focusing very heavily on execution.

In my listening tour, I’ve heard acutely that what our investors want from the new CEO is building credibility over time. And so we’re going to focus very, very carefully on that. And then, in the midterm and longer term, we’re going to go after those macros and make sure we’re being very sharp and very, very meaningful about where we’re to pick our spots.

Noah, Oppenheimer Analyst, Oppenheimer: One of the things that’s also happened is, you know, bringing in Keith Fisher, right, to fill your role at the head of energy systems. So maybe can you offer some color on the perspective he brings to that business and, you know, where he might be extending initiatives that started under your leadership and where there might be some incremental efforts to flag.

Sean O’Connell, President and CEO, EnerSys: Sure. Well, you know, we, I was just talking to Keith this morning and, Honeywell got a nice bump and largely because of the business he was running, the industrial sector, which looks a lot like our motive power business. So, he was he was complaining to me. I pulled him out too soon. But anyway, Keith Keith has got great experience across multiple industries.

One of them, previous to the Intelligrated experience, he was in the building management side of Honeywell. And if you look at, you know, what I said about our macros in terms of building an energy secure future and for our customers, there’s no such thing as a battery in a in a application that isn’t critical. Keith brings really intimate experience in helping manage energy journeys for for certain customers. So he’s going to be very helpful with that. He’s going to be very helpful in that he’s managed through service transitions.

So if our job is to help mitigate the labor exposure to our customers and to assume more of the control of their environments to help with that, he’s got primary experience there. And then I would just tell you, he’s a phenomenal operator. He sees the world through the lens of accretive growth, of managed OpEx structures. He grew up as in the operation side of the Honeywell business. And so he’s been a great partner in terms of, you know, the cost, the cost control measures that I started, but not just doing it for the sake of cost, really building, towards the future that we want to operate.

So, probably the biggest compliment I’ve gotten about Keith, we were at a recent meeting and somebody said to me that we couldn’t discern Keith as a new player on your team. Seems like he’s been with you guys a long time already.

Noah, Oppenheimer Analyst, Oppenheimer: I was listening to, what you said in both of your responses now, Sean, about, helping with labor productivity, and reducing labor intensity. I do think, for example, of, the maintenance free offerings, that Anasys has in Motive as an example. But can you maybe unpack for us a little bit more some of the types of value props and offerings that speak to that?

Sean O’Connell, President and CEO, EnerSys: Unequivocally, you know, we, right now, one of our largest opportunities that, we’re implementing is with a wireless carrier, major wireless carrier. And, they, they are beginning to see their networks, not only increasing demand with things like AI and processing all the data, but they’re beginning to see their networks in terms of energy, energy footprint, energy spend. And for the first time ever, our products, we have this great controller called our Insight controller. They’re managing the power and the they’re giving all sorts of other diagnostics in the cell site. For example, we have through that controller, the ability to now look at power associated with traffic patterns.

We’re providing for the first time ever the association between traffic and energy. And then on top of that, we have something called our energy router, which is smart distribution, where we’re actually throttling energy based on traffic to each one of the loads in the sites. And with the advent of lithium batteries, we are now, far exceeding their need for FCC regulations for backup. So we’re actually giving them optionality back. If you think about the thousands of cell sites they might have in the utility sector, they now have the ability to go back and make a deal with a utility, a particular utility to, enable themselves to be curtailed, so that, they get better rates or a more favorable, tariff rate, on across that volume of sites for that particular utility.

So instead of seeing us now just as a necessary evil and a cost driver, they’re seeing us as an unlock for revenue potential on top of this operational security issue.

Noah, Oppenheimer Analyst, Oppenheimer: A great example, Sean. Thanks. Want to ask you a little bit about investment priorities. I think you might be the only company within our industrials conference that’s actually announced closure of capacity in Mexico in favor of expanding U. S.

Capacity, the tariffs were announced. I would love to get a sense of what drove that decision and how important kind of the carrot of say 45x benefits versus a stick of tariffs, was in determining your decision.

Sean O’Connell, President and CEO, EnerSys: Yeah. In in actuality, you know, we we by by, you know, publicly stating that we’re strengthening US supply chain in those things, we’re the largest supplier to the department of defense for battery in The United States. So we we we, of course, we get some optical benefit for for doing that. But the reality is with our maintenance free conversion over time and going to things like TPPL and new technologies, we knew all along that we would be reducing the flooded lead acid battery footprint as we converted to these technologies. So it was always in the plan.

But right now, it just seemed to make more sense to do it to capture, you know, the the remaining portion benefits of IRA, potential tariff mitigation and to increase absorption in Kentucky. Then the other thing I’ll tell you, you know, we’ve been very diligent about how we’ve spent the IRA money. We’ve kept it separate from our pricing. We haven’t returned that to customers at all. We’ve done what the law is intended and expanded manufacturing footprint and invested in our facilities.

So the throughput in Kentucky today is higher than it’s ever been, as, we’ve given ourselves that optionality. So this is more about going sooner and taking some of the benefits of going sooner, but not really, any different than the decision we would have taken maybe a year from now or two years from now.

Noah, Oppenheimer Analyst, Oppenheimer: Mhmm. Now now, you know, we we do view 45x as relatively low, in terms of, being at risk in the budget process, for some obvious reasons. I do think it’s fair to say that the market is discounting the 45X portion of your earnings. So outside of, the Gigafactory, which I’m sure we’ll discuss, you know, what do you see as the best opportunities for deploying 45X dollars in order to grow earnings? Is it M and A?

Is it, you know, R and D? Talk to us a little bit about how you’re using the money.

Sean O’Connell, President and CEO, EnerSys: Yeah. I think it’s all of the above. You know, you saw the Brentronics acquisition and, the lift that it’s giving us, that that’s outperforming our expectations, frankly. And as a part of our strategic factoring, you know, we’re looking very carefully at this aerospace and defense space because we just have this amazing footprint with with the department of defense and and the US government as well as other ministries of defense around the world. So I think there’s a lot of opportunity manifesting that space.

Some of the near term pressure on businesses is providing even more motivation for M and A and for smaller players to get with larger players. So certainly that dry having some dry powder for M and A is going to be very helpful for us. You mentioned R and D and some of those types of investments. You know, we have been on this journey. My predecessor, Dave Schafer, always says putting the SIS and EnerSIS.

Well, now managing those systems in that environment for customers is going to require just slightly different. We put most of the pieces in place, but it’s going to require more emphasis on software and controls and those types of things. So we’re going to continue to invest in that area of our business for sure. And we’re going to be, I would tell you, we’re going to be fairly opportunistic with capital allocation as we move forward. And when opportunities present themselves, we want to be very agile and be able to go after them.

Noah, Oppenheimer Analyst, Oppenheimer: You know, I was really struck when we visited at Promat around some of the innovation and, you know, product quality improvements for, you know, the next generation of NexSys Ion. I would love to understand the lithium sourcing strategy, you know, with the Gigafactory seemingly on hold for the time being, you know, how are you approaching lithium ion cell sourcing? Do the China tariffs require you to, you know, change anything you’re doing, reevaluate the supply chain? Maybe just talk to that a little bit.

Sean O’Connell, President and CEO, EnerSys: Well, I think I’ll start the comment by saying, you know, we deal, make and buy nine chemistries of lithium batteries in our, aerospace and defense business today. And we have robust supply chains that go, all throughout the world, including, Korea, Japan, China, and other other, sovereign areas. So what I would tell you is we have we have a lot of experience in this area. And depending upon, what the application is, I would tell you that there’s there’s a great deal of optionality. With that said, China controls 90% or better of the world’s supply chain in lithium.

So, even with the the advent of the gig Gigafactory, if we hadn’t paused, our earliest production dates would have been, you know, calendar twenty seven or better. So it’s important to remember that that we were always going to be buying cells. With that said, we sort of looked over the hill a little bit at the end of last year and said, you know, we’re going to take some action. So we put some additional inventory on hand just to mitigate. We weren’t so worried as much about the total cost of sales because of their relative percentage in the overall system.

We’re more worried about the movement of cost and being able to get that right and being able to price right to market. So we’ve got at least three months of inventory on hand or better and a pretty fixed supply chain based on what’s going to happen with lithium. The other thing that we’ve done, just to give you some color on lithium, remember that TPPL gets you most of the way of lithium without the risk, without the technology risks, some of the safety issues, and without some of these, you know, we have TPPL factories in Europe and in The United States. Should that should the market turn to burst to lithium, we believe we’re in an excellent opportunity to capitalize more on the investments we’ve made in TPPL. So again, we we we either way that it comes, we we feel very good about it.

Noah, Oppenheimer Analyst, Oppenheimer: It’s a great point around your your your chemistry and mix optionality there. Can we talk a little bit about the overall exposure to the current tariff regime and what risk mitigation plans you have in place?

Sean O’Connell, President and CEO, EnerSys: Yeah. So look, it’s, you know, in the wake of COVID, we were sort of fat, dumb, and happy with a fixed supply chain that we’d enjoyed for years and years. And what it told us is, guys, you got to get off your butts, get back to work and, you know, develop some flexibility in that supply chain. So we’ve, we’ve spent a tremendous amount of time, effort and energy, moving things around the world, doing a better job for in market for market. So for example, our two TPPL factories in Europe are largely 90% for the European market today.

And so we’ve done that work. You know, some of our strategies, you know, we’re we’ll see how they play out. For example, we moved a lot of stuff from China to Vietnam and Mexico. We never thought Mexico would be at risk with USMCA and that sort of thing. You know, Mexico’s had a little bit a few bumps lately, but all in all, I think we’ve, I don’t want to say that we don’t have tariff exposure.

We certainly do, but we’re in a much more flexible position to deal with it today than we’ve been. And then, you know, I think what you saw from me and Motive know is that, I’m a fairly disciplined operator by nature. So we’re going to make sure that, any any tariffs that, we can’t reprice, oh, that’s the other thing I’ll mention. We’ve really scrubbed through our, the contractual side and given ourselves a lot more optionality in some of those legacy contracts, but anything that we’re not going to be able to, to capture through pricing or mitigation strategies, we’re going to attack on the OpEx side.

Noah, Oppenheimer Analyst, Oppenheimer: Yeah, go ahead, Andy. Sorry.

Andy Funk, CFO, EnerSys: I’d just add a little bit to that as well. Sean has been just like he was in both Motive Power and ES, I think swift action on this. We have a dedicated task force team where we have individuals from finance, SIOPs, supply chain, pyramid that are taken out of their day to day roles and put on as a dedicated team to address this. They’re doing a weekly executive team readout where we’re talking not just about the tariffs that we’re exposed to and what our mitigating activities are up to price, which we’re being much swifter on making pricing actions and and supply chain movements. But let’s talk about the market dynamics even more importantly.

So what’s the elasticity of demand in the markets we compete in? Both the headwinds as well as where we’re competitively positioned. I think relative to a lot of the other players in this market, we’ve got a global footprint of manufacturing operations that we can leverage, and we’ve got diverse end markets. So there’s a lot of levers that we can pull and we’re proactively looking to get ahead of all of those.

Noah, Oppenheimer Analyst, Oppenheimer: If I can double click on that for the ES segment in particular, because I remember, you know, during supply chain crunch, I mean, that was really when ES faced a lot of challenges and realizing the price recovery of inflation in a timely manner. So, yeah, I think you started to allude to it, both of you, but, help us understand better what’s changed since then in contracting structures that would enable you to absorb tariff impacts. Are there pre negotiated pass throughs? Is it something that you have to open up as commercial discussion? How does it impact volumes?

Just trying to understand how it works now.

Sean O’Connell, President and CEO, EnerSys: Yeah. It’s interesting. So to answer your question, you’re precisely right. You know, we’ve had to get smarter about how we price and the length of the supply chain and the timing of supply chain. As as you mentioned in during that whole COVID period, we are most broadly ex exposed to tariffs in the ES segment, and we had the most work to do in that area to mitigate.

And that’s where we spent a tremendous amount of our energies since COVID moving things around. So those that business, if you look at the enclosures or power electronics or the things that go into the ES business, they’re broadly exposed to contract manufacturing. So we, those are the areas that we’ve taken additional actions in, in, offshore and moved out of China. We’ve near shored or, you know, put in more optionality around the world. And in fact, I would tell you, you know, in spite of the pressures, some of that now is providing a, you know, potential for lift as well as, you know, customers are sort of coming back to us and saying, you know, we didn’t migrate away from those supply chains as quickly and can you help us out, you know, now that you’ve developed this other capability.

So we see opportunity in it too, but that the you hit the nail on the head, the contract work and the supply chain work in ES has been for that business, the most important work and for EnerSys, broadest exposures to tariff pressure in the past.

Noah, Oppenheimer Analyst, Oppenheimer: I’m sure we’ll hear more about that in the coming weeks with earnings. I wanna ask you about the end markets there. You know, data center, like, I think we’ve heard from companies all throughout earnings and at our conference that just the projectivity continues to be really robust. Telecom seems to be getting a little bit more traction on the recovery. So just give us your broad view of the markets and the opportunity in both of those verticals.

Sean O’Connell, President and CEO, EnerSys: Yeah, I’ll start with communications. As we mentioned know, in our previous remarks, we see continued strengthening in in the communications space. You know, I can point to public statements by Hans Vesperg where, you know, he’s he feels pretty good about where things are trending. And, you know, if you if you just think about it broadly now, and and this gets into the data center space, you know, Satya Nadella has reaffirmed his position on 80,000,000,000 in spend this year for data center and and and what that looks like. So the data environment is increasing and the communications environment, they’re going to be the last mile delivery for that data.

So they’ve got to synergistically increase their network during the whole when we had the sort of the fallout at the end of calendar twenty three, they paused tech spend, they paused break fix, they paused everything to bleed down inventories. But those things are always pay me now, pay me later type events. And, you know, they’ve got to get back after the, you know, the ability for those networks to process that data. So we’re getting the same lift in lead and TPPL in the data center space that you’re seeing with some of our customers that report publicly. And we’re getting a, I think, a synergistic benefit in the communications networks that have to be ready to process the data.

Certainly data center is more robust at the moment, and we haven’t seen telecom turn back on as a full build cycle environment like we’ve seen with some of the G spends and that sort of thing. With that said, though, I think we’ve seen a lot of there’s a lot of positive macros that we’re keeping an eye on and making sure that we’re ready to respond to when they hit.

Noah, Oppenheimer Analyst, Oppenheimer: Yeah. It was only a matter of time. Right? I mean, you know, think the spend was at like a twenty year low. And, you know, you had talked about this in, you know, some of our prior discussions, like you can’t defer maintenance spend and, you know, certain upgrades forever.

And so if if what we’re really just seeing now is kind of that like deferred spend, you know, starting to come through and there’s still a build cycle to go, I mean, you know, we could be in really the top of the first inning on a multi year recovery for your business there. And that’s what our view is. You can feel free to disagree.

Sean O’Connell, President and CEO, EnerSys: I think the macros are incredible. I, you know, there’s no way that we’ve become so spoiled with our handsets that we’re going to settle for an environment where we don’t get all of the AI functionality at our handset. And if you just think about it in those terms, you you have to be very excited. And then you think about the ramifications on grid. I was just at a conference where just reshoring and industrial reindustrialization, if if that’s the goal of this tariff environment were to happen, you would take it would need two times today’s grid capacity to power all of that before you considered the first data center.

So even if you look at the material handling space that is not as sexy, certainly in in in some cases as data center, AI communications. But if you look at it in terms of how are those folks going to continue to guarantee operational continuity without more local ability to manage power. So you were at ProMat, you saw the BESS system in our booth. Was the star of the show. Our new Motive Power chargers are bidirectional so they can provide power to the battery or they can turn the forklift battery into a component of energy storage for our best system and provide more operation or more optionality for operations back to the warehouse operator.

So those macros we see are very strong across those segments.

Noah, Oppenheimer Analyst, Oppenheimer: I’m glad you brought that up. I wanted to ask you about that, because it was really notable that you were able to kind of take the BSS and redeploy it, with some adaptations into motive. One would think, the same would be possible in ES and particularly with some of these mission critical customers that are dealing with increasing power constraints. So, you know, can you talk a little bit about the roadmap and the opportunity for the BESS offering, you know, across segments?

Sean O’Connell, President and CEO, EnerSys: Well, we see it the way you see it. Just incidentally, you know, forklifts are classified as off road electric vehicles. So if you take that broadest interpretation and you think of the work that we’ve done in DC fast charge and storage, what we’ve really done is given ourselves the ability to manage energy in a vehicle charging environment and forklifts are just another vehicle charging environment. So we’re really excited about that. All of the work we’ve done, you know, if this current administration sours on EV and they’ve cut some of the, you know, taken some of the wind out of those sails, we have a very, very strong roadmap in material handling warehouse operations to help our customers in that regard.

And the, you know, the excitement of ProMat was palpable from our customers around that. And at the same time, mentioned it can be taken into other segments. You know, years ago, I remember when the phone companies started shutting down central offices because they were no longer we were no longer going to need landlines. You know, now a lot of that brick and mortar is still there and the operators have said, you know what those are? Those are mini data centers.

Those are AI enablement centers. So they’re no longer being, you know, now they’re being repurposed for data and all of those sites are going to require more power being that they’re very old brick and mortar. They have less optionality, you know, because they’ve been there a while. They haven’t been provisioned with new transformers and all those things. So there’s a lot of opportunity there to help them manage power and be able to perform that mission.

So we’re excited about the communication space. We’re very excited about the material handling space. And then we have our aerospace and defense component where the bases are looking at their optionality and how they’re going to manage through grid challenges. And then certainly in theater and forward expeditionary power, which Frontronics has set the stage for that. We have our eyes on a few other targets for that.

Noah, Oppenheimer Analyst, Oppenheimer: You know, you mentioned the motive business, earlier in the context of, you know, the optionality around, you know, TPPL versus lithium. There has clearly been an ongoing mix shift towards maintenance free. Seems like that’s going to continue here with some of the portfolio decisions. Certainly seemed like demand was pretty resilient based off of what we saw at ProMat and what some others have reported. Maybe talk to that and, you know, the ability to the extent volume weakness might manifest, the extent you have, an ability to offset any weakness from an ongoing mix shift.

Sean O’Connell, President and CEO, EnerSys: Well, here here’s, you know, we we’ve always said we’re a GDP plus business in in motor power, and we trend with GDP. But here’s here’s, I think, what would be helpful, to how to look at us a bit differently and why we tend to weather, recessions a little bit better. First of all, we’re on this maintenance free conversion, as you mentioned, but we’re also on the conversion from internal combustion trucks, to electric trucks. And that’s been a steady march since, let’s say, the nineteen fifties, ’19 sixties, but there’s still a lot of meat on that bone to convert internal combustion to electric. And, that’s not just a a a a green energy thing.

That’s an OSHA thing. Nobody wants noxious fumes in the warehouse. Electric applications have come a long way. So you get a lot more, benefit from going to electric in in in many of the end applications and warehouses. So we have this internal combustion to electric conversion.

Then we have the flooded to maintenance free conversion that is providing us lift over and above the market. But then remember, growth is always associated with new trucks. The batteries have a replacement component to them. So when you see when GDP turns negative, if we turn negative, we never really bottom as far as the rest of the market. And then because of that, that those, all those factors I just mentioned within a quarter or two of GDP turning positive again, we’re back and running and we recover very quickly.

The other thing I would say in those recessionary cycles is we tend to generate a lot of cash. We tend to do really well and helps us with the dry powder, you know, scenario that we discussed. So we have that playbook. We don’t, you know, we can’t tell if there’s intermittency in the supply chain. Other thing you got to think about, if tariffs are being announced, being repealed, being announced, customers are doing things like putting material in bonded warehouses.

Why? So they can pull the material when, at a point in time that they think the tariff situation is favorable. That’s not a permanent supply shock, but it’s an intermittency that makes us very it gives us fits in the planning. And so, if we see some of that, you know, we’ll keep a close eye on it. Andy mentioned the weekly tiger team we have.

But I would tell you from a macro level, all of those drivers for EnerSys gives us a lot of confidence that we can weather a down cycle. There’s still a great degree of opportunity and up cycles. And so we’re, I’ll quote Hyster Yale since they’ve already announced publicly, cautiously optimistic about the marketplace.

Andy Funk, CFO, EnerSys: Yeah. I just want to put a little data behind that real quick. If you look at COVID year when everything shut down, Motive Power being the one that’s GDP indexed, revenue fiscal year ’20 ’20, which with the threethirty one year end, you know, that end of that year was right when COVID took off. Motor Power revenue went from a billion $3.48 to down to a billion 1 60 4, but the operating earnings went from a hundred 49 to a hundred 44,000,000. We had two quarters where we felt pressure.

What excites me is this was under Sean’s leadership where he really, you know, made swift action, put pricing, tightened the belt. We had the maintenance free conversion continued during that cycle. To give you an idea, as we round out fiscal twenty five, I can’t give specific numbers, but revenue up from fiscal twenty up to ’25 is going to be up in the range of 10% during that five year period because of a lot of the other headwinds. But operating earnings for that segment up is going to be up over 50%. So that just speaks to really the, in my mind, the robustness of our maintenance free options, the ability under Sean’s leadership to index costs during challenging periods.

And, you know, I think there’s a lot of exciting times in front of us.

Noah, Oppenheimer Analyst, Oppenheimer: Andy, that’s great color. Thank you. I want to ask about specialty, which, you know, now spans several markets, aerospace, defense, you know, transportation business. I think you mentioned earlier, Sean, some of the opportunities around A and D, but maybe just speak to leveraging capabilities across those different verticals and how we should think about the opportunity strategically for growth?

Sean O’Connell, President and CEO, EnerSys: Yeah, I think we feel very good about it. You know, we, I didn’t mention transportation, but we, you know, we have a very compelling value proposition in terms of particularly in the fleet area and we’ve been that aftermarket segment that we’ve targeted, you know, we’ve really gained a lot of traction because we’re talking about, you know, managing across a broad fleet asset base. You’re talking about the cost of downtime again, where revenues involved. So, it’s not as acute as the cost of downtime in a data center, but it’s still well understood, well known. And so our value proposition for TPPL makes a lot of sense in those areas.

With that being said, you know, transportation has exposure to GDP, but there again, you know, we have this replacement component that the whether you’re buying a new truck or not, you got to keep the existing fleet running. And so we have tend to have a better bottom in that, but we still feel very good. And we’ve seen a lot of activity around that aftermarket space and transportation. And then I spoke to A and D, but we have a very good relationship with the U. S.

Government, with the Department of Defense, and we’ve just been such a reliable and meaningful supplier to them that they continue to look for opportunities to increase their footprint with EnerSys.

Noah, Oppenheimer Analyst, Oppenheimer: We did have a question from the audience that I just want to, use in this forum. Somebody asked, do electric forklifts take advantage of EV tax credits domestically, just given your commentary that they’re electric off road vehicles? My understanding is no. You can clarify that, please.

Sean O’Connell, President and CEO, EnerSys: You know, there there in in certain municipalities or certain states, there have been, some incentives for, for, EV conversion. California was one of them. You know, there was a couple of states like that, but broadly, no. Broadly, the economics well, not broadly, entirely. The economics make sense on the electric conversion without any incentive.

So incentives would just be sort of icing on the cake. So we haven’t really factored that into our models at all because it just hasn’t it’s just not that material for us.

Noah, Oppenheimer Analyst, Oppenheimer: Yeah. I mean, to clarify, they’re not getting the $7,500, you know, EV tax credit. Right?

Sean O’Connell, President and CEO, EnerSys: No. No. No. No. It’s

Noah, Oppenheimer Analyst, Oppenheimer: more it’s

Sean O’Connell, President and CEO, EnerSys: more on the energy side. It’s all on the energy side. There’s no there’s no tax credit for the device itself, but there is an an energy mitigation and certainly a tariff offset or a tariffing offset. And I don’t mean tariff in the current sense we’re talking about, but I mean an energy tariff and a peak energy rate offset that they’re getting if they manage their energy better on-site. So we are helping customers realize that.

Noah, Oppenheimer Analyst, Oppenheimer: Yep. Yep. Well, we just had to make sure we cleared that up publicly. We want to thank you both for a great discussion. We have meetings going on the rest of the day and look forward to those.

Sean, Andy will speak again, of course, publicly in a couple of weeks. Looking forward to your earnings and thank you for taking the time today.

Sean O’Connell, President and CEO, EnerSys: Thank you for the opportunity, Noah. Great to be with you.

Andy Funk, CFO, EnerSys: Always pleasure.

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