EnerSys

and thank you for standing by welcome to the fourth quarter 2024 nfs earnings conference call at this time all participants are on a listen-only mode after the speaker's presentation there'll be a question and answer session to ask a question during the session you'll need to press star 1-1 on your telephone you'll then hear an automated message advising your hand is raised to withdraw your question please press star 1-1 again please be advised today's conference is being recorded i would not like to end the conference over you speak today lisa hartman please go ahead

Good morning, everyone. Thank you for joining us today to discuss NRSIS fourth quarter and full year fiscal 2024 results. On the call with me today are David Schaffer, NRSIS President and Chief Executive Officer, and Andrea Funk, NRSIS Executive Vice President and Chief Financial Officer. Last evening, we published our fourth quarter and fiscal year 2024 results and filed our 10-K with the SEC, which are available on our website. We also posted slides that we will be referring during this call. The slides are available on the Presentations page within the Investor Relations section of our website. As a reminder, we will be presenting 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 refer to our current 10-K filed with the SEC. In addition, we will be presenting certain non-GAAP financial measures, particularly concerning our adjusted consolidated operating earnings performance, free cash flow, adjusted diluted earnings per share, and adjusted EBITDA, which excludes certain items. For an explanation of the differences between the GAAP and non-GAAP financial metrics, please see our company's Form 8-K, which includes our press release dated May 22, 2024. Now I'll turn the call over to NRCS President and CEO, Dave Schaefer.

Thank you, Lisa, and good morning. Please turn to slide four. NRCS delivered a strong finish to the fiscal year with our balanced business portfolio generating solid results in the fourth quarter. Adjusted earnings per share for the quarter of $2.08 was at the high end of our guidance range, and revenue of $911 million was in line with our expectations, with the diversification of our end markets helping to offset some of the continued softness in teleco broadband spending. We generated adjusted gross margin improvement and adjusted operating earnings growth, versus the prior fourth quarter by maintaining pricing on top of increased IRA benefits. Fiscal year 2024 marked a year of several exciting developments towards our long-term strategic goals as we took decisive actions to successfully navigate through a challenging environment. For the full year, revenue was $3.6 billion, down 3% year-over-year, but our adjusted gross margin, adjusted operating earnings, and adjusted earnings per share increased even before the impact of expanded IRA benefits. We remain focused on what we can control, driving price mix improvements, optimizing our cost structure to flex through cycles, and improving productivity through automation and flexibility while delivering new high-tech solutions for our customers. We are seeing healthy demand in our end markets with the exception of communications networks. Although we have not seen telco broadband capex spending fully return, we have seen some encouraging signals in overall company order rates, which were up 4% year over year with total book to bill above one. Andy will give details on our fourth quarter fiscal 24 performance and outlook, but I will first provide a few more highlights and business drivers behind the results. In energy systems, adjusted operating earnings improve sequentially as a result of us delivering our cost improvement actions faster than anticipated. We're actively adjusting our cost structure to be more resilient to cyclicality by making changes that will improve the overall margin profile of this business in both down and up cycles, leveraging our market position and proprietary customer solutions. There are plenty of reasons to be excited about our energy systems business. We're focused on meeting the increased needs of our data center customers, now 10% of our total revenue, with global demand accelerating. Industry research shows that AI-fueled data center growth will see hyperscale capacity doubling every four years. EnerSys' batteries, including our proprietary thin-plate pure lead technology, are a recognized leader in uninterruptible power systems, or UPS. These are the very heart of the data center where we enjoy a large share in some of the largest data center markets. Looking at the rising demand on the electrical grid, industry analysis shows that in the U.S. alone, there will be a need to be some $2 trillion of investments to meet the growth of data centers, renewables, and vehicle electrification. Enersys has a commanding market share in battery backup in all stages of electrical power generation and distribution, and we stand to benefit from our solid and common presence in these infrastructure investments. Realizing this AI-based data growth, we know that consumers will demand ubiquitous access, and as such, the last mile of consumer access will in many cases be delivered by communication service providers. from fiber to coax, copper to wireless, EnerSys has solutions to assist our customers in powering this next generation of content delivery. As an example, we see increasing interest in our DPX small cell densification platform for its ability to allow for multiple nodes to be delivered with a single utility feed over standard existing twisted pair telephone lines. Indeed, we are quite optimistic about our future ability to deliver increasing shareholder value through growth in our energy systems business. In Motive Power, revenue came in above our plan as we continue to realize robust maintenance-free conversions. Our maintenance-free solutions achieved another record quarter at 25% of total Motive Power sales in Q4 and a record 22% for the full year. The broader market demand remains healthy with WITS shipments data showing positive trends across all three regions. order rates have also returned to or surpassed pre-pandemic growth CAGR rates. Europe, in particular, has experienced a strong post-pandemic recovery in orders, while the North American market is still dealing with a larger-than-normal backlog of truck orders and longer lead times for some of the popular models. Although supply chain constraints are improving, they continue to affect some material handling OEMs. Despite these challenges, the industry remains optimistic about strong shipment performance throughout 2024 and beyond. Consequently, we anticipate some fluctuations in order trends, but see increased demand as we move into the new fiscal year. In specialty, we saw record order rates in the quarter and a slight improvement in adjusted operating earnings driven by improving performance out of our Missouri factories and lower freight costs. Aerospace and Defense remains extremely robust, marked by a recent large contract for our six T batteries at a substantial price increase. We are focused on filling our Missouri capacity with our transportation aftermarket products as our investments in production flexibility are on track for completion in the second half of the fiscal year. In our new Ventures line of business, we are progressing towards delivering our initial fast charge and storage systems in late summer with enhanced energy storage and software capabilities. Our sales pipeline is growing, and we are very excited to see this new line of business gaining momentum. Please turn to slide five. The team is consistently executing to deliver on our strategic priorities. Let me share some highlights from our fourth quarter, starting with Innovate. In our mode of power products, we are advancing the development of our next-gen charger, which offers advanced features such as over-air updates, energy management, and high energy efficiency. We are currently in the demonstration phase with customers and look forward to commercialization of this technological advancement. Last week, three of our energy systems TPPL products for data centers, industrials, and utility end markets were recognized at the Electrical Review and Data Center Review Excellence Awards. I'm proud that our PowerSafe SBS XL 2V was awarded the 2024 Energy Storage Product of the Year, which features the longest design life for stable grid applications, high energy density, and much reduced hydrogen emissions relative to previously installed flood batteries. We also continue to focus on optimizing the business. We are maintaining a transformational mindset, focusing on cost discipline and efficiencies across the organization, and particularly in energy systems. We have increased the scope of our energy systems restructuring and identified opportunities to streamline our operations through shared services, which will make our business more efficient and better serve our customers. These cumulative actions are expected to result in $47 million of hard annualized cost savings to be realized in fiscal year 25 and improvement of approximately $40 million over that already realized in fiscal year 24. With our optimized organization and footprint in energy systems, we are well positioned to capitalize on the growth opportunities ahead at elevated margins when our communication network customers resume normal spending patterns. Our TPPL manufacturing flexibility initiatives in Missouri are underway with noticeable productivity improvements in the quarter. We've begun to see sustainable improvements in our Springfield II factory since February, driven by refocusing manning, managing loading between plants, and increased efficiency for SKUs. However, we will only be able to realize substantial profitability improvements when all three Missouri factories are fully loaded. Looking ahead, we remain on track for tooling and production line upgrades to unlock additional flexibility and cost absorption, enabling increased capacity for specialty products in the second half of fiscal year 25. And accelerating. With growth trends including generative AI-deriving demand for power electronics and battery backup solutions, We saw increased traction in data centers as previously mentioned. Sales to data center customers in the Americas were up 14% year over year and up 50% versus fiscal year 22. We expect this trajectory to continue and are exploring new solutions for these customers which will enable us to expand both our offering on top of our current participation in this high growth market. In Motive Power, we leveraged our inside data analytics and Nexus TPPL solutions to prove our ability to accelerate a large national retail customer's sustainability initiatives through transitioning from our flooded lead acid to proprietary TPPL batteries, which will be implemented across 600 locations. We won this award as the pilot sites demonstrated annual cost-saving opportunities between $7 and $10 million, while enabling our customers reduce their carbon footprint by approximately 2,800 metric tons per year. We continue to advance on the development of our lithium ion cell gigafactory, selecting Greenville, South Carolina, and securing state and local funding totaling over $200 million. We have progressed on the readiness phase of this project, including purchasing land in Greenville, commencing an environmental evaluation of the site, and testing material from domestic and allied country suppliers to enable a Department of Defense compliant and reliable supply chain. We have obliged to the Department of Energy for additional funding, with awards expected to be announced in August of 2024. Please turn to slide six. On the topic of our lithium technology roadmap subsequent to the end of the quarter, we were pleased to announce our agreement to acquire Brentronics, which will expand our presence in critical defense applications, broaden our product offerings, and strengthen our product development capabilities. This acquisition will accelerate Enersys' progress in expanding our lithium product offerings, growing revenue and profitability, while advancing towards our fiscal year 2027 targets. We are working on detailed integration planning, which will ensure that the integration process is seamless for our customers day one post-close. We look forward to welcoming Brentronic's team into the inter-CCIC closing, which is anticipated near the end of our first fiscal quarter, subject to regulatory approval. Please turn to slide seven. Aligned with our strategic framework, we remain highly focused on sustainability. This week, we published our updated annual sustainability report, which highlights our progress towards our objectives and furthermore emphasizes the way in which our sustainability focus and our products help our customers to meet their own sustainability targets. Our 2023 accomplishments include reducing our absolute scope on emissions by 4.2% from calendar year 22, marking an overall 25% reduction since calendar year 19. and a 15% reduction in energy intensity since calendar year 2020. We also disclosed our scope three emissions for calendar year 22 and calendar year 23. We also earned several awards and recognition for our environmental and social initiatives across the organization. I am proud of our team's accomplishments, underscoring our commitment to sustainability, energy efficiency, and innovation within the manufacturing industry. In closing, I'm proud of all we've accomplished in fiscal year 24, from launching a new line of business with a world-class, high-tech battery energy storage system, growing maintenance-free share and motive power, undertaking a bold transformation and restructuring in energy systems, making significant progress on our path to constructing our own domestic lithium plant, to agreeing to add Brentronics into our specialty portfolio, We have come a long way from our history as a lead acid battery focused company. These accomplishments are giving us much to be excited about in fiscal year 2025 and beyond. In the past, energy was cheap, plentiful, and reliable. This is no longer the case. So, as a society, we must rethink the way we manage energy. The global grid infrastructure can no longer support the power consumption driven by energy transition and the electrification of everything. Energy scarcity will be an ongoing concern, further impacted by the climate and global decarbonization policies. This will require renewable energy coupled with energy storage to enable reliable distribution. We are delivering best-in-class technologies, intelligent batteries, and revolutionary energy management systems that are solving the problems of today and the future. We have the engineering expertise and customer relationships to capitalize on what's to come. I am confident FY25 will demonstrate the potential of all the investments we have made in our transformation, reflecting in the targets we laid out our Investor Day last June. Indeed, our future is bright. I will now turn it over to Andy to take you through our results and outlook in greater detail. Andy?