EnerSys — Second Quarter Fiscal 2027 Earnings Summary

Financial Performance:

• Net sales for the second quarter ended October 4, 2026, were $949.9 million, a decrease of 0.1% from $951.3 million in the prior year quarter.
• Gross margin was 29.9%, an increase of 80 basis points year-over-year; gross margin excluding IRC 45X was 25.2%, an increase of 30 basis points.
• Diluted EPS was $2.42, a 34% increase from $1.80 in the prior year quarter.
• Adjusted diluted EPS was $3.22, a 22% increase from $2.65 in the prior year quarter; adjusted diluted EPS excluding IRC 45X was $2.02, a 25% increase.
• Net earnings were $89.6 million compared to $68.4 million in the prior year quarter.
• Adjusted operating earnings were $152.4 million, up from $133.9 million in the prior year quarter.
• Adjusted EBITDA was $170.4 million, up from $150.5 million in the prior year quarter.
• Operating cash flow was $142.8 million, down from $218.0 million in the prior year quarter.
• Free cash flow was $130.4 million, down from $197.1 million in the prior year quarter.
• Net leverage ratio was 0.8x EBITDA, down from 1.3x in the prior year period.
• For the six months ended October 4, 2026, net sales were $1,885.5 million, up 2.2% from $1,844.3 million.
• For the six months ended October 4, 2026, diluted EPS was $5.52, up from $3.26.
• For the six months ended October 4, 2026, adjusted diluted EPS was $6.88, up from $4.88.
• For the six months ended October 4, 2026, free cash flow was $348.0 million, up from $165.1 million.

Guidance and Future Outlook:

• Third quarter fiscal 2027 net sales guidance is $935 million to $975 million.
• Third quarter fiscal 2027 adjusted diluted EPS guidance is $3.05 to $3.15.
• Full year fiscal 2027 capital expenditures are expected to be approximately $70 million.
• Outlook excludes impact from the proposed acquisition of Ultralife, expected to close in the fourth fiscal quarter of 2027.
• Outlook excludes impact of any IEEPA tariff refunds or customer reimbursements.
• Results included a one-time impact of ($2 million) or ($0.04) per share from tariff refund adjustments in the second quarter.
• Fiscal year to date results include an impact of $29 million or $0.59 per share from tariff refund adjustments.

Business Segments and Product Lines:

• Precision Power Solutions delivered more than 20% year-over-year sales growth, driven by strong demand for soldier power and munitions.
• Network and Infrastructure Solutions delivered 3% growth, driven by double-digit growth in data centers.
• Industrial Mobility Solutions faced continued pressure in material handling.
• Secured first order for DataSafe Noir™ lithium solution.
• Began generating sales from second-generation lithium offering for material handling.
• Operating margins for Precision Power Solutions were 21.9% (adjusted) in the second quarter.
• Operating margins for Network & Infrastructure Solutions were 11.2% (adjusted) in the second quarter.
• Operating margins for Industrial Mobility Solutions were 9.5% (adjusted) in the second quarter.

Market and Competitive Landscape:

• Management anticipates continued strength in Aerospace and Defense, Data Centers, and Transportation segments for the third quarter.
• Communications segment is expected to pick up in the third quarter.
• Material Handling is demonstrating early recovery expected to transform Industrial Mobility Solutions segment revenue to year-on-year growth.
• Transportation growth is expected to outpace higher-margin Material Handling growth, creating margin pressure in the Industrial Mobility Solutions segment.
• Project nature of Precision Power Solutions and Network and Infrastructure Solutions businesses creates quarter-to-quarter fluctuations.

Risks and Challenges:

• Continued pressure in material handling within the Industrial Mobility Solutions segment.
• Margin pressure in Industrial Mobility Solutions due to mix shifts between Transportation and Material Handling.
• Tough comparisons in Precision Power Solutions and Network and Infrastructure Solutions due to exceptionally strong margins in the prior year and prior quarter.
• Foreign currency translation contributed to net sales being below the guidance range.
• Proposed acquisition of Ultralife remains subject to customary closing conditions, including regulatory approvals.
• Forward-looking statements are subject to uncertainties including supply chain disruptions, interest rate changes, inflationary pressures, geopolitical developments, labor shortages, and changes in law or trade policy.

Management Commentary and Tone:

• CEO Shawn O'Connell stated the company delivered gross margin expansion, adjusted operating margin expansion, and adjusted EPS growth while advancing strategic priorities.
• Management highlighted the resilience of the diversified portfolio and operating discipline built through the EnerGize strategy.
• CFO Andrea Funk noted improved volumes and favorable price/mix in Precision Power Solutions and Network and Infrastructure Solutions balanced material handling softness.
• Management emphasized a focus on translating demand opportunities across all end markets into profitable growth.
• Management expressed confidence in the cultural fit and strategic value of the proposed Ultralife acquisition.

Other Key Points:

• Returned $140.3 million to shareholders in the second quarter, including $130.0 million in share repurchases (679,000 shares) and $10.3 million in dividends.
• Announced a definitive agreement to acquire Ultralife to expand differentiated battery technologies and accelerate growth in the defense market.
• Board of Directors approved a quarterly cash dividend of $0.2875 per share, payable December 31, 2026, to holders of record as of December 18, 2026.
• Cash and cash equivalents were $275.5 million as of October 4, 2026.
• Net debt was $554.9 million as of October 4, 2026.
• Capital expenditures were $12.4 million in the second quarter, down from $20.9 million in the prior year period.
• Free cash flow conversion was 146% for the second quarter.
• Stock-based compensation expense is excluded from adjusted operating earnings and adjusted net earnings beginning in the current fiscal year.