EnerSys

EnerSys is a world leader in stored energy solutions for industrial applications, designing, manufacturing, and distributing energy systems solutions, motive power batteries, specialty batteries, battery chargers, power equipment, battery accessories, and outdoor equipment enclosure solutions to customers worldwide. The Company serves over 10,000 customers in more than 100 countries through a network of distributors, independent representatives, and its internal sales force. The industrial energy storage market is highly competitive, and the Company competes primarily on the basis of reputation, product quality, reliability of service, delivery lead time, and price.

In Energy Systems, the Company competes principally with East Penn Manufacturing, Exide Technologies (Stryten), Fiamm, SAFT, Hoppecke, New Power, C&D Technologies Inc., Vertiv, OmniOn Power, Yuasa, Amphenol, Delta Electronics, as well as Chinese producers. In Motive Power, primary global competitors in traditional lead-acid include East Penn Manufacturing, Exide Technologies (Stryten), Hoppecke, Eternity, Midac, Sunlight and TAB, as well as a number of domestic Chinese manufacturers, and lithium-ion integrators include forklift original equipment manufacturers. In Specialty, major competitors in AGM technology are Clarios, East Penn Manufacturing, Exide Technologies (Stryten), Fiamm, C&D Technologies, Inc., Banner and Atlas, while in Aerospace and Defense specialized markets main competitors are EaglePicher and SAFT. In New Ventures, primary competitors are Jule, Tritium, and ABB. The Company believes it is the leader in TPPL technology and that a significant capital investment would be required by any party desiring to produce products using TPPL technology for its markets.

The Company generates revenue through the design, manufacture, and distribution of energy systems solutions, motive power batteries, specialty batteries, battery chargers, power equipment, battery accessories, and outdoor equipment enclosure solutions. Revenue is recognized when performance obligations are satisfied by transferring control of the performance obligation to a customer, which typically occurs at the point in time when goods are shipped. Service revenues related to work performed by maintenance technicians represent a separate performance obligation, with control passing to the customer as services are performed. The Company also provides aftermarket and customer support services. Customer pricing changes generally lag movements in lead prices and other costs by approximately six to nine months, and approximately 25% of revenue is subject to agreements that adjust pricing to a market-based index for lead.

The Energy Systems segment provides uninterruptible power systems (UPS) applications for computer and computer-controlled systems, telecommunications systems, switchgear and electrical control systems used in industrial facilities and electric utilities, large-scale energy storage and energy pipelines, as well as highly integrated power solutions and services to broadband, telecom, data center, and industrial customers, and thermally managed cabinets and enclosures for electronic equipment and batteries. Net sales of the Energy Systems segment in fiscal 2026 were $1,651.3 million ¹, a 7.8% increase compared to fiscal 2025, driven by a 3% increase in organic volume, a 3% increase in pricing, and a 2% increase in foreign currency translation. Operating earnings for Energy Systems were $145.5 million ², or 8.8% of net sales, compared to $103.2 million ³ or 6.7% of net sales in the prior year.

The Motive Power segment provides power for electric industrial forklifts, AGVs, and other material handling equipment used in manufacturing and warehousing operations, as well as equipment used in floor care, mining, rail and airport ground support applications. Net sales of the Motive Power segment in fiscal 2026 were $1,431.0 million ⁴, a 3.6% decrease compared to fiscal 2025, due to an 8% decrease in organic volume, offset by a 2% increase in foreign currency translation and a 2% increase in pricing. Operating earnings for Motive Power were $199.8 million ⁵, or 14.0% of net sales, compared to $232.8 million ⁶ or 15.7% of net sales in the prior year. The Specialty segment provides premium starting, lighting and ignition applications in transportation, energy solutions for satellites, spacecraft, commercial aircraft, military, aircraft, submarines, ships, other tactical vehicles, defense applications and portable power solutions for soldiers in the field, as well as medical devices and equipment. Net sales of the Specialty segment in fiscal 2026 were $665.1 million ⁷, a 12.1% increase compared to fiscal 2025, due to an 8% increase from acquisitions and a 4% increase in pricing. Operating earnings for Specialty were $62.1 million ⁸, or 9.3% of net sales, compared to $37.0 million ⁹ or 6.2% of net sales in the prior year. The New Ventures segment provides energy storage and management systems for demand charge reduction, utility back-up power, and dynamic fast charging for electric vehicles.

On July 26, 2024, the Company completed the acquisition of all of the equity of Bren-Tronics Defense LLC for $206.4 million ¹⁰ in cash consideration. On March 25, 2026, EnerSys announced a plan to close its facility in Tijuana, Mexico, which is estimated to result in a reduction of approximately 474 employees ¹¹ and a pre-tax charge of approximately $37 million ¹², of which $14 million ¹³ is expected to be non-cash charges and $23 million ¹⁴ in cash charges. On March 25, 2026, EnerSys announced a plan to close its facility in Sao Paulo, Brazil, which is estimated to result in a reduction of approximately 141 employees ¹⁵ and a pre-tax charge of approximately $7.5 million ¹⁶, including cash charges of approximately $4.5 million ¹⁷. On April 1, 2025, the Company's Board of Directors approved a plan to close its facility in Monterrey, Mexico, with an expected pre-tax charge of approximately $13.7 million ¹⁸, of which $1.5 million ¹⁹ is expected to be non-cash charges and $12.2 million ²⁰ in cash charges. During fiscal 2026, the Company repurchased 3,457,688 ²¹ shares of common stock for $370.7 million ²². On August 6, 2025, the Company announced the establishment of a $1.0 billion ²³ stock repurchase authorization. During the second quarter of fiscal 2026, the Company entered into the Sixth Amended Credit Facility, which provides an upsized revolving credit facility in an aggregate committed amount of $1.0 billion ²⁴ (the Third Amended Revolver), maturing on September 30, 2030. In January 2025, the Company entered into an agreement with the DOE's Office of Manufacturing and Energy Supply Chains for a $199 million ²⁵ award to support the construction of a new lithium-ion cell production facility in Greenville, South Carolina.

Net sales for fiscal 2026 were $3,751.4 million ²⁶, a 3.7% increase from $3,617.6 million ²⁷ in fiscal 2025. Gross profit was $1,097.6 million ²⁸ compared to $1,092.4 million ²⁹ in the prior year, with gross margin decreasing 100 basis points to 29.2% ³⁰. Operating earnings were $426.4 million ³¹ compared to $464.7 million ³² in fiscal 2025. Net earnings attributable to EnerSys stockholders were $293.6 million ³³ compared to $363.7 million ³⁴ in the prior year. Diluted earnings per share were $7.70 ³⁵ compared to $8.99 ³⁶ in fiscal 2025. Cash provided by operating activities was $547.6 million ³⁷ compared to $260.3 million ³⁸ in the prior year.

The Company's growth strategy depends on its ability to continue to expand its market presence through acquisitions. The Company plans to grow the volume and profitability of its energy storage products, which depends on significant lithium-ion battery cell production, including by its partner Verkor SAS at a proposed gigafactory in South Carolina. The Company has an agreement with the DOE's Office of Manufacturing and Energy Supply Chains for a $199 million award to support the construction of a new lithium-ion cell production facility in Greenville, South Carolina, though the disbursement of funds is currently under review due to executive orders. The Company is also focused on developing or acquiring new technologies, including lithium-based battery technologies, for growing markets served by its Motive Power and Energy Storage business segments.

The Company is focused on expanding its presence in the Aerospace and Defense markets, as evidenced by the acquisition of Bren-Tronics Defense LLC for $206.4 million in cash consideration, which is a leading manufacturer of highly reliable portable power solutions for military and defense applications. The Company also sees growth in the data center market, which is in the midst of a growth cycle driven by AI and increasing digitization, and the communications market, which is in a modest but slow spending recovery. Global defense budgets are increasing in response to rising geopolitical tensions, with spending in EMEA increasing at a higher rate than in the US.

The Company has implemented efficiency and cost reduction initiatives intended to improve profitability, including relocating manufacturing to lower cost regions, consolidating and closing facilities, working with material suppliers to lower costs, product design and manufacturing improvements, personnel reductions, and strategically planning capital expenditures. The Company recorded restructuring and other exit charges of $51.0 million ³⁹ in fiscal 2026 compared to $14.4 million ⁴⁰ in fiscal 2025. The Company expects to incur a pre-tax charge of approximately $37 million for the Tijuana facility closure, $7.5 million for the Sao Paulo facility closure, and $13.7 million for the Monterrey facility closure. The Company's gross profit margin decreased 100 basis points in fiscal 2026 compared to fiscal 2025, reflecting greater IRC 45X benefits in fiscal 2025 as the prior year included a change in estimate impacting prior amounts to IRC 45X tax credits.

The Company is engaged in a multi-year implementation of a global enterprise resource planning system (ERP) designed to standardize business processes. The Company is also focused on optimizing and balancing capacity at its battery manufacturing facilities globally. The Company's manufacturing expansion plans include the proposed gigafactory in South Carolina. The Company had approximately 9,682 employees ⁴¹ at March 31, 2026, of which approximately 31% were covered by collective bargaining agreements. The Company has announced plans to close facilities in Tijuana, Mexico (reduction of approximately 474 employees ), Sao Paulo, Brazil (reduction of approximately 141 employees ), and Monterrey, Mexico, as part of its restructuring initiatives.

Capital expenditures were $80.1 million ⁴² in fiscal 2026, compared to $121.0 million ⁴³ in fiscal 2025. The Company repurchased 3,457,688 shares of common stock for $370.7 million in fiscal 2026. As of March 31, 2026, approximately $876.4 million ⁴⁴ remains available under the two share repurchase programs. The Company declared aggregate regular cash dividends of $1.028 ⁴⁵ per share in fiscal 2026, compared to $0.945 ⁴⁶ per share in fiscal 2025. The Company recognized $158.6 million ⁴⁷ of Section 45X credits as a reduction to cost of sales during fiscal 2026.

The Company faces headwinds from global economic conditions, including the impacts from the uncertainty surrounding U.S. tariffs, elevated interest rates, and heightened geopolitical tensions. The war in Ukraine continues to have widespread economic repercussions, particularly in Europe, and the ongoing Israel-Hamas conflict is disrupting stability in the Middle East. The market demand in the forklift truck and Class 8 truck markets has been impacted by tariff policy uncertainty, causing some customers to pause larger projects. The Company also faces risks from volatile raw material costs, particularly lead, and foreign currency exchange rate fluctuations, with approximately 40% of net sales generated outside of the United States in fiscal 2026.

The Company faces constraints from the uncertainty of the Inflation Reduction Act of 2022, including the Section 45X production tax credits, which are dependent upon the federal government's ongoing implementation, guidance, regulations, and/or rulemakings. The Company's ability to benefit from the $199 million DOE funding is subject to review and will be subject to negotiation of specific terms and contingent on compliance with requirements. The Company also faces risks related to the start-up of operations at the proposed gigafactory, including reliance on short-term and long-term incentive packages through South Carolina and Greenville County, federal funding, and benefits under Section 45X of the Internal Revenue Code.

The Company operates in an extremely competitive industry and is subject to significant pricing pressures, with excess capacity in some sectors and consolidation among industrial battery purchasers. Volatile raw material costs, particularly lead which accounts for over half of cost of goods sold, can significantly affect operating results, and the Company cannot assure it can pass on increased costs to customers. The Company's growth strategy depends on acquisitions, which involve risks including difficulty identifying suitable targets, integrating operations, and realizing anticipated benefits. The Company's ability to benefit from Section 45X production tax credits under the Inflation Reduction Act is not guaranteed and is dependent upon the federal government's ongoing implementation, guidance, and regulations, with the Company recognizing $158.6 million in such credits in fiscal 2026. The Company had $1,120 million ⁴⁸ of total consolidated debt as of March 31, 2026, which could increase vulnerability to adverse economic conditions and limit operational flexibility.

Management's message emphasizes the Company's position as a world leader in stored energy solutions for industrial applications and its commitment to sustainability, including joining the United Nations Global Compact, Alliance to Save Energy, the U.S. Department of Energy's Better Plants Program (through which it committed to reducing its energy intensity by 25% over the next 10 years from a calendar year 2020 baseline), and the United Nations CEO Water Mandate. The Company has set net-neutral goals for Scopes 1 (2040) and 2 (2050) and has marked consistent decreases in both overall carbon emissions as well as carbon intensity. For fiscal year 2026, sustainability metrics were incorporated into the annual goals of the CEO and certain elements of employee compensation. The Company's strategic priorities include expanding its market presence through acquisitions, developing new technologies including lithium-based battery technologies, and implementing efficiency and cost reduction initiatives to improve profitability. The Company is also focused on the construction of a new lithium-ion cell production facility in Greenville, South Carolina, supported by a $199 million award from the DOE.