Record

WFMZ.com Reporter

BERN TWP., Pa. – Give a round of applause to the management of EnerSys.

The manufacturer of stored energy solutions for industrial applications, with headquarters in Berks County, reported record financial results for its fiscal year 2023 which ended March 31. The fiscal fourth quarter results were also unprecedented.

That made Wall Street very happy, and EnerSys’ stock was up over 10% in mid-morning trading.

Speaking to analysts on a webcast, president and chief executive officer David M. Shaffer, explained that he tries to keep things simple by focusing on what the company can control: pricing, operating efficiencies, foreign exchange and interest rate mitigation, profitable growth, and mitigation of supply chain restraints.

For the past few years, Shaffer said, EnerSys enjoyed a healthy backlog which helped to drive long-term growth. In the Energy Systems business segment, the backlog is normalizing as large program orders from fiscal year 2022 were closing. In the Motive Power business segment, the backlog has reached two times historic levels. The overall backlog is also twice historic levels, Shaffer pointed out, and orders are stabilizing toward pre-COVID trends.

Shaffer also took the time to explain to the analysts how EnerSys has benefited thus far from the Inflation Reduction Act (IRA). According to the law, the company receives advanced manufacturing tax credits for battery cells and battery modules produced in the United States. In the fourth quarter of fiscal 2023, he noted, the credit resulted in a $17 million reduction to cost of goods sold, translating to a $0.42 benefit to adjusted diluted earnings per share (EPS).

The threat of an impending recession was also addressed by Shaffer. He said the company has a deep history of disciplined cost management and cash generation in recessionary periods. The Motive Power segment would be most exposed since it tracks closely to industrial output, but the backlog and pent-up demand would soften the decline.

"In sum," Shaffer commented, "leadership knows the playbook and is prepared to act."

Overall results

Shaffer said in a statement, "In fiscal 2023, we delivered sales and earnings growth in excess of our expectations. The EnerSys team performed remarkably well in a challenging environment, mitigating continued inflation, rising interest rates, foreign exchange headwinds, and operational challenges, while executing collaboratively to deliver record results."

EnerSys reported an outstanding fourth quarter, with record revenue of $990 million, up 9% year-over-year, driven primarily by strong pricing and organic growth, partially offset by foreign currency conversion. The company achieved significant gross margin improvement, despite continued pressure from inflation.

The company realized record GAAP (Generally Accepted Accounting Principles) diluted EPS of $1.59 and adjusted diluted EPS of $1.82, up $0.62 versus prior year, including $0.42 benefit from the Industrial Recovery Act. EnerSys delivered $280 million of operating cash flow, $191 million of free cash flow and $51 million of capital returned to shareholders through repurchases and dividends.

Shaffer noted, "We continue to progress toward full commercialization of our proprietary and revolutionary EV Fast Charge and Storage system (FC&S) which combines energy storage, backup power and EV fast charging capabilities in a single solution. As global megatrends including electrification, decarbonization and automation drive increased demand for energy storage, EnerSys is well-positioned to deliver the solutions that our customers need."

Fourth Quarter 2023

Net sales for the fourth quarter of fiscal 2023 were $989.9 million, an increase of 9.1% from the prior year fourth quarter net sales of $907.0 million and increased sequentially 7.6% from the third quarter of fiscal 2023 net sales of $920.2 million. The increase compared to the previous year's quarter, Enersys stated, was the result of a 7% increase in pricing and a 4% increase in organic growth, partially offset by a 2% decrease in foreign currency translation impact. The sequential increase was due to a 2% increase in pricing.

Net earnings were $65.9 million, or $1.59 per diluted share, which included an unfavorable highlighted net of tax impact of $9.5 million, or $0.23 per diluted share.

Adjusted net earnings per diluted share for the fourth quarter of fiscal 2023, on a non-GAAP basis, were $1.82, compared to the guidance of $1.33 to $1.43 per diluted share for the fourth quarter given by the company on February 8, 2023.

Fiscal Year 2023

Net sales for the twelve months of fiscal 2023 were $3.708.5 billion, an increase of 10.5% from the prior year twelve months net sales of $3.357.3 billion. This increase was due to an 8% increase in pricing and a 7% increase in organic volume, partially offset by a 4% decrease in foreign currency translation impact.

Fiscal 2023 net sales for the Energy Systems segment were $1.738 billion, up 13.1% year-over-year. The Motive Power segment had net sales of $1.451 billion, an increase of 6.6%, while the Specialty segment had net sales of $519 million, a 13.0% increase over the previous year.

Net earnings for the twelve months of fiscal 2023 were $175.8 million, or $4.25 per diluted share. Adjusted net earnings per diluted share for fiscal 2023, on a non-GAAP basis, were $5.34. This compares to the prior year's twelve months adjusted net earnings of $4.47 per diluted share.

First Quarter 2024 Outlook

"As we enter Fiscal 2024," Shaffer noted," although significant uncertainty in the global markets remains, we could not be more excited about the growth potential of our company and the markets in which we compete."

EnerSys expects to continue to operate in a dynamic macro environment and anticipates headwinds including foreign exchange, geopolitical tensions, supply chain challenges and inflation to persist for some time. The company expects its first quarter of fiscal 2024 adjusted diluted earnings per share to be in the range of $1.77 to $1.87, inclusive of $0.40 - $0.50 from IRA benefits. Excluding the IRA credits, this represents an increase of approximately 20% over the prior year, at the midpoint, reflecting stable demand trends and a healthy backlog.

For the full year of fiscal 2024, EnerSys expects capital expenditures to be approximately $120 million.

About EnerSys

EnerSys (ENS) manufactures and distributes energy systems solutions and motive power batteries, specialty batteries, battery chargers, power equipment, battery accessories and outdoor equipment enclosure solutions to customers worldwide. EnerSys also provides aftermarket and customer support services to its customers in over 100 countries. With the NorthStar acquisition, EnerSys claims to have solidified its position as the market leader for premium Thin Plate Pure Lead batteries which are sold across all three lines of business.

WFMZ.com Reporter

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