EnerSys (ENS) Bank of America Securities 2024 Leveraged Finance Conference summary

Strategic transformation and business evolution

• Transitioning from an industrial battery company to an industrial technology company, with a focus on maintenance-free and lithium battery solutions.

• Revenue mix has shifted from 75% flooded lead-acid batteries in 2017 to 45% today, with continued decline expected.

• Three core business segments: Energy Systems (telecom, data centers), Motive Power (forklift batteries), and Specialty (trucking, aerospace, defense), plus an emerging fast-charging storage segment.

• New CEO, Shawn O'Connell, to take over in May 2025, following Dave Shaffer's retirement.

• Focus on customer-centric innovation, automation, and supporting decarbonization and ESG goals.

Growth initiatives and operational efficiency

• Significant investments in R&D, new product introductions, and operational optimization, including $47 million in cost reductions in Energy Systems.

• Expansion into fast-charging storage for commercial real estate and retail, with first system installed and strong market potential.

• Planning a 500,000 sq ft gigafactory in South Carolina, supported by $200 million from the Department of Defense and additional incentives.

• IRA benefits provide $120-$160 million annually, reducing cost of goods sold and supporting domestic manufacturing.

• Strategic M&A focus on tuck-in acquisitions in the $100-$300 million range, with recent successful deals like Bren-Tronics at 8.5x EBITDA.

Financial position and capital allocation

• Maintains a strong balance sheet with 1.6x leverage, targeting 2-3x long-term net leverage.

• S&P rating at BB+ (stable), Moody's at Ba2 (positive outlook), with ongoing dialogue about potential investment grade pursuit.

• Capital allocation priorities include growing dividends, opportunistic share buybacks, and disciplined M&A.

• Annual capital expenditures typically $80-$120 million, expected to rise with gigafactory construction.

• Flexible approach to financing, considering high-yield bonds and revolver refinancing for future M&A or growth opportunities.