Enersize Plc

Good morning, ladies and gentlemen, and thank you for standing by. My name is Calvin, and I will be your conference operator today. At this time, I would like to welcome everyone to the NSF Q1 fiscal year 2026 earnings webcast and conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. Thank you. I would now like to turn the call over to Lisa Hartman, Vice President of Investor Relations. Please go ahead.

Good morning, everyone. Thank you for joining us today to discuss NRCIS first quarter results. On the call with me today are Sean O'Connell, NRCIS President and Chief Executive Officer, and Anthony Funk, NRCIS Executive, Vice President and Chief Financial Officer. Last evening, we published our first quarter results with the SEC, which are available on our website. We also put the slides that we'll be referring to 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 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 refer to our recent form 8K and 10Q filed with the SEC. In addition, we will be presenting certain non-GAAP financial measures, particularly concerning our adjusted consolidated operating earnings performance, free cash flow, adjusted diluted earnings per share, and adjusted EBITDA, which excludes certain items. For an explanation of the difference between the GAAP and non-GAAP financial metrics, please see our company's form 8K, which includes our press release dated August 6, 2025. Now, I'll turn the call over to Enris's CEO, Sean O'Connell.

Thank you, Lisa, and good morning. Please turn to slide four. Here's what we'll cover today. First, I would like to introduce Energi. our strategic framework to transform and grow our company. Second, we will provide an overview of our first quarter results. Third, we will provide an update on potential tariff impacts. Fourth, we will report out on our capital allocation actions. And finally, we will provide color on our Q2 guidance. Please turn to slide five. In the first quarter, we launched Energize, our strategic framework to shape the next era of growth for energy. Energize builds on the hypothesis we have developed to unlock Eners' value. This framework focuses on three pillars, optimizing our core, invigorating our operating model, and accelerating growth. Optimizing our core consists of restructuring our organization to enhance our operational efficiency and effectiveness with a focus on maximizing returns on capital. We recognize that we need to be faster and more efficient to lead the way in our markets, and so we recently announced a strategic organizational realignment. Through this program, we are reducing 11% of our non-production workforce, generating $80 million in annualized savings beginning in fiscal year 2026. With this effort well underway, we expect to realize $30 million to $35 million in savings in the second half of this fiscal year. More importantly, this isn't just about cost savings. This restructuring is about speed and focus. We've reduced layers of management to make our teams more agile and decision-making more direct. We are also shifting our manufacturing organization from a centralized model to three centers of excellence, or COEs, aligned to our core technologies, lead acid, power electronics, and lithium-ion, which require very different skill sets. These teams are designed to drive operational clarity and deepen functional competency and will be managed within the lines of business or stronger aligned with the sales. By removing management layers and taking manufacturing supply chains out of a corporate silo, we are reducing complexities and sharpening skills to drive better and faster decisions to better serve our customers while lowering costs of operations. The second pillar of our strategy is to invigorate our operating model. This includes enhancing our strategic planning processes and operational excellence metrics throughout the organization, enabling decisions to be made with greater urgency, accountability, and coordination. We are confident these changes will enable us to bring new products to market faster, increase our productivity, and be more focused with our capital allocation choices. These first two pillars are part of a transformation that will fuel our ability to accelerate growth. We believe we are uniquely positioned to leverage our leading market positions in diverse end markets to deliver new products and services that play a key role in solving two of our customers' biggest common challenges, energy security and labor scarcity. We will be focused on accelerating new product development that our customers are asking us for, such as battery energy storage systems, predictive analytics and services, and markets that we know well and have a right to win. We will be rigorous with capital allocation choices tied to returns of future cash flow with a focus on accelerating our growth in current and adjacent markets. To help lead this next chapter, we've officially named Mark Matthews our Chief Technology Officer. Mark joined EnerSys in 2016 and has over 30 years of experience in energy storage and battery technology, specializing in lithium ion solutions. Mark co-developed breakthrough BESS technologies earlier in his career and has a proven customer-centered approach to new product development. Mark brings stronger alignment with sales and an outside-in perspective with his customer experiences, and he knows what it takes to bring high-performance solutions to market fast. As interim CTO, he has already realigned our engineering team to better focus on growth. We're excited about what's next under his leadership. Now I'd like to share a few more details on our center of excellence, or COEs. Please turn to slide six. Our COEs will serve as a cornerstone for how we operate. There are unique needs and expertise required to win in each of these technologies which, when operated centrally, left value on the table in terms of cost and speed we are now looking to unlock. Our lead-acid COE will drive global operational excellence and consistency across our lead acid and CPPL plants, as well as strategic sourcing, supply chain, and distribution activities to improve productivity and enhance delivery reliability to our customers. This team will implement standard work, benchmark performance, and continuously balance production requirements to optimize our more stable, capital-intensive lead acid manufacturing team. Our power electronics COE will manage contract manufacturing, assembly operations, strategic sourcing, and supply chain management of our power electronics offerings into one cohesive, highly skilled structure. This team will leverage strong external partnerships across our entire organization to accelerate speed to market and optimize the nimbleness and working capital requirements of this highly technical asset life portion of our company. And the third, our lithium ion COE will enable us to leverage deep lithium expertise in customer relationships we have across the company to accelerate innovation and improve execution in this high-tech landscape. This team will be focused on developing and aligning the evolving sourcing, engineering, and manufacturing skills required, especially as we prepare for future investments like our planned lithium cell facility. Their mission? deliver the next generation of products our customers are already asking for. Please turn to slide seven. The value of this new organizational design is visible in a strategic bolt-on acquisition we completed in June, Rebel Systems. While new to the market, the team at Rebel has quickly become a trusted solutions provider to the U.S. military, specializing in cost-effective, technology-driven lithium-ion-based hybrid power and energy storage systems. and communication solutions for the defense industry. Combined with our 2024 acquisition of Brentronics and leveraging Enersys' leading position in the defense sector, we now offer a fully integrated portfolio designed to meet the evolving demands of modern military operations. This strategic acquisition will not only provide an additional product stream in the A&D portion of our specialty LOB, but is also an example of how we are leveraging disciplined M&A to enhance our talent and skills that will benefit us across the company in both our new lithium COE and our battery energy storage systems product development. Overall, we are committed to ensuring our transformation initiatives and refresh strategy deliver stronger organic growth, higher margins, and higher returns on invested capital. We will continue to provide updates on Energize over the next several quarters. Please turn to slide eight. Net sales were up 5% year-over-year with a book-to-bill greater than one. Adjusted operating earnings were up 8%, and adjusted EBITDA was up 2%. Excluding 45x benefits, adjusted diluted EPS on our base business was down versus prior year on FX, and the anticipated impact of lower organic volumes, which were temporarily pressured by tariff uncertainty. Year-over-year revenue growth in the quarter was driven by strength from the Medtronic's acquisition which once again outperformed and is increasing our wallet share of the defense market. We also saw early recovery in U.S. communications and markets and continued strong data center deployments. These increases were partially offset by softer macro conditions in India across most of our businesses, additional pressure on already soft transportation market, as well as lower volumes among forklift customers where tariff uncertainty disrupted customers' buying behavior. We view this variability as near-term and expect improving clarity in public policy to support more stable market dynamics beginning in the second quarter and improving further as the fiscal year progresses. As typical in our first quarter, free cash flow is lower due to timing of annual payments, as well as an increase in inventory despite lower sales to support our expected ramp-up in revenue throughout the year. Yesterday, we announced the board approval for a $1 billion increase in our share repurchase authorization to be executed over the next five years. This authorization provides us flexibility to repurchase our shares when undervalued, as we did in Q1, while balancing our free cash flow generation with disciplined capital allocation to create shareholder value. During this period of macro uncertainty, we intend to keep our leverage below the low end of our target range, retaining a prudent level of dry powder for future capital allocation optionality. Please turn to slide nine. First, a few comments on public policy items impacting our business. With the passage of the One Big Beautiful Act, we saw favorable outcomes to NRSIS as 45X remains largely intact, along with the enactment of other favorable tax policies. With regard to tariffs, approximately 22% of our U.S. sourcing is affected by direct tariff costs. Our tariff task force continues to proactively mitigate direct and tertiary exposure, enhance supply chain optionality, and assess our competitive positioning's impact on demand. We remain confident we'll be able to fully offset the impact of tariffs to our P&L. Please turn to slide 10. I will now provide some additional detail on demand trends and the dynamics across markets we serve while Andy will provide more detail on the performance of our business segments later in the call. In Q1, orders and book to bill were up year over year, with strength beginning to accelerate across the business. Backlog has moderated since the peak levels we saw in fiscal 24, but has remained stable with a quarterly backlog coverage of 1.1, consistent with our historical trends. These order patterns are indicative of ongoing steady growth but with limited visibility beyond the next quarter. We are seeing communications orders picking up, and we expect customer spending behavior to continue growing at a measured pace. We see some network build-outs emerging, but we expect customer investments to be more disciplined in prior cycles and more closely tied to their specific growth plans. Data centers, where we enjoy a large share of the U.S. market for lead-acid-based uninterruptible power supplies, or UPS, is still in the early phases of the growth cycle. While orders can be uneven quarter to quarter, demand remains robust and we expect that to continue. The timing of our deployments tends to align with the later stages of build-outs, which are often faced by energy availability and infrastructure readiness. The dynamic geopolitical environment is driving an increase in global defense budgets and demand for next generation power technologies for both tactical applications and mobile soldier power applications. A&D activity is accelerating, but in the quarter, our U.S. A&D revenue, excluding Brentronics, was flat as actual spending is temporarily delayed by changes in U.S. personnel involved in procurement. We see this as a significant growth opportunity moving forward. Now, a few comments on our operations. In our Missouri plants, our output is improving, and our new assembly lines implementation and performance schedule is on track. As we shared last fall, the first assembly line is now running, and the second line is planned for the fall. However, realization of the financial benefits will be delayed due to suppressed transportation violence. As part of our transformation efforts, our lead COE team is refining our plant load balancing cadence to ensure that we maximize productivity and efficiency across our manufacturing facilities. Our plans for a new lithium factory remain on hold and upcoming discussions with the relevant government officials are scheduled later this month. We expect to have more to report on this important effort next quarter. In closing, we're taking clear, decisive steps to improve operations and position Enersys for growth. While the full impact of our energized strategic framework will take time, we're moving fast and seeing early progress. We're confident in our team our solutions, and our ability to deliver for customers and shareholders. Now I'll turn it over to Andy to discuss our financial results and outlook in greater detail. Andy?