EnerSys (ENS) Q2 2024 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Q2 Fiscal Year 2024 EnerSys Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to Lisa Hartman Vice President of Investor Relations.

Good morning, everyone. Thank you for joining us today to discuss EnerSys second quarter fiscal 2024 results. On the call with me today are David Shaffer, EnerSys' President and Chief Executive Officer, and Andrea Funk, EnerSys' Executive Vice President and Chief Financial Officer. Last evening, we published our second quarter results and filed our 10-Q with the SEC, which are available on our website. We also posted slides that we will be referencing 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 those 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 10-Q 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 8-K, which includes our press release dated November 8 2023. Now I'll turn the call over to EnerSys' President and CEO, Dave Shaffer.

Thank you, Lisa, and good morning. We delivered solid results in the second quarter, achieving record gross margins as we continue to hold price, a reflection of the strong customer value of our solutions. We are executing our strategy for long-term growth, which resulted in impressive operating earnings, EBITDA, and EPS expansion and we continue to maintain a healthy balance sheet with another quarter of significant operating and free cash flow generation. We're delivering on our innovation roadmap and are excited to have received the initial order for 50 systems of our fast charge and storage solution from our launch customer, Landmark Dividend. I'm very proud of our team's hard work and pleased with our momentum in this exciting new venture for EnerSys. Please turn to Slide 4. Before I go into details of our results, I'd like to start with a macro view of the environment and end markets we serve. The need for reliable, resilient, and sustainable power has never been more critical. Megatrends of digitization, automation, electrification, and de-carbonization will only continue to fuel demand for energy storage and power solutions. That said, consistent with our peers' communications networks customers have reduced CapEx as they digest existing inventory, manage their balance sheets, and plan for the next wave of network build-outs. The diversification of our business model and end markets is indeed a strategic advantage for EnerSys as inherent cycles and seasonality of the different markets we serve tend to offset each other and enable us the opportunity to invest in preparation for the next wave of demand surges. We fully expect the release of new network-powering projects in calendar year 2024. In addition, with the transformation we've led over the past several years, we have further diversified our end markets, making us less reliance on a limited customer or market base. While communications and markets represent approximately one-third of EnerSys' revenue, our Telecom and Broadband business is a combination of network expansion and ongoing network resiliency investment. We also see positive demand trends continuing in data center. Coming out of this summer, we are seeing double-digit year-on-year increases in our order rates at our Motive Power and Specialty segments. This provides further confidence in the long-term capabilities of our business and how the diversification of our model is the right strategy. Andy will provide details on our second quarter fiscal 24 performance and outlook, but I will first provide a few highlights. Please turn to Slide 5. Revenue of $901 million was consistent with our exceptionally strong prior year. Our performance was broadly in line with our expectations and largely driven by strong maintenance-free product demand within Motive Power and our ability to maintain pricing. For the second quarter, our overall book-to-bill was close to one, excluding telecom and broadband equipment orders. Adjusted gross margin in the quarter improved nearly 500 basis points over prior year to 26.6% due to our impressive price cost capture and mix improvements combined with IRA benefits. Our gross margin was also supported by the continued easing of supply chain pressures. Adjusted operating earnings of $103 million and adjusted EPS of $1.84, both represent significant increases over prior year. Please turn to Slide 6. The team is making tremendous progress against our strategic priorities. Let me share a few highlights from the second quarter. Starting with Innovate. We continued to make significant strides on our innovation roadmap. At Mobile World Congress in September, we launched our DPX, Distributed Power System, featuring our new EnShield technology, which minimizes time consuming and expensive connections to the electrical grid when deploying outdoor small cells. The DPX system enables operators to accelerate 5G deployment and expedite revenues for their 5G service. This important technology is a competitive differentiator that provides our customers with a unique advantage in the marketplace in which we expect will outdrive growth in 2024 and beyond. In October, we were proud to announce that our Alpha ADOM outdoor gateway, DOCSIS 3.1 enabled OEM module, was recognized among the best in industry for its innovative design and value at the 2023 CableTec Expo. The ADOM outdoor gateway is an enabler for deploying 5G small cells across the cable broadband hybrid fiber-coaxial infrastructure. And we were proud to announce a collaboration with Samsung to incorporate our gateway into their 5G CBRS Strand small cell, which is designed for multi-system operators to deploy their mobile networks. We are optimizing the business evidenced through our operational excellence initiatives, which will continue to drive our strong margin expansion. Our cost reduction efforts in Specialty including our exit from Sylmar, will begin to contribute to performance in the third quarter. We have undertaken additional footprint rationalization actions this quarter in Energy Systems. We recently announced the closure of our Spokane production facility in which we will be able to transfer capacity to our other facilities, thanks to our EOS or EnerSys Operating System Lean tools. We also made the decision to exit our Residential Renewables business, which includes our Outback and Mojave branded products. This will enable us to focus our engineering efforts on higher growth and higher margin opportunities in commercial energy solutions for enterprise customers such as fast charge and storage and accelerating. We are marked progress on planning for our new lithium battery gigafactory in the U.S. This factory will be a competitive advantage for EnerSys, providing innovative battery solutions for both our commercial and U.S. government customers with independence from non-domestic cell suppliers. We have narrowed down our site selection and continue to pursue significant government funding to support this investment. We have also advanced our partnership agreement with Verkor. We are developing this project with a highly disciplined view on capital allocation and we will not proceed without high confidence in achieving an accretive return on invested capital. Also consistent with our efforts to accelerate, I am pleased to announce that during the quarter, we hired Jamie Gebbia as our Vice President, Corporate and Business Development, reporting to me. Jamie has extensive experience in corporate strategy, M&A, finance, and bringing tremendous capability to our team as we evaluate potential partnerships and acquisitions with continued focus on the best strategic opportunities in a highly disciplined approach to capital allocation. Please turn to Slide 7. I could not be more proud to begin in earnest the launch of our revolutionary fast charge and storage business with our initial 50 system order from Landmark, including applications for demand charge reduction, utility backup power, and dynamic fast-charging for electric vehicles. EnerSys is delivering the only system combining energy management with 1.2 megawatt hours of energy storage capacity and the dynamic DC fast-charging with parallel charging capabilities from a single pedestal. We look forward to updating you on sales growth in this area in the coming quarters. Please turn to Slide 8. Along with our strategic framework, we remain highly focused on our sustainability goals. During the quarter, we were honored with a distinguished Energy Efficiency Initiative of the Year Award as part of Environmental Finance's Sustainable Company awards. The recognition was given specifically for water and energy reduction achievements related to the implementation of our EOS lean management program. I would like to congratulate the team on this recognition for our commitment to sustainability and efficiency. Before I turn it over to Andy, I would be remiss if I didn't recognize some incredible leaders on our EnerSys team. As we announced in September, after an outstanding 30-year career in the broadband, telecommunications, renewable energy, and technology industries Drew Zogby, President of our Energy Systems Global segment will retire on March 31, 2024. Drew has been pivotal in leading the Energy Systems business through a major transformation and positioning our company as an industry leader. Drew, we thank you for your dedication and leadership and wish you all the best in your next chapter. But not just yet, Drew will be helping lead in an executive advisory role for the next five months. Shawn O'Connell has transitioned from President, Motive Power Global to succeed Drew. Shawn had previously lead our Reserve Power business prior to the Alpha acquisition. Shawn has held a variety of leadership roles within the company and has introduced several transformative initiatives driving the Motive Power business's impressive performance including significant revenue growth from our maintenance-free battery offerings, increasing operating discipline and OpEx flexing, driving innovative solutions, and delivering record operating earnings. Finally, I'm pleased to announce Chad Uplinger has been named as Shawn's successor. Since 2017, Chad held the position of Vice President, Motive Power Americas and has played a pivotal role developing and executing our strategy to grow maintenance-free revenue. Over the past two decades, Chad has developed a proven track record and strong internal and external relationships, which make him the ideal successor to lead the Motive Power Global business. I will now turn it over to Andy to take you through our results and outlook in greater detail. Andy?

Thanks, Dave. Please turn to Slide 10. Second quarter net sales of $901 million were slightly up from prior year, driven primarily by a 6% increase in price mix and a 1% positive impact from currency, offset by a 7% decrease in organic volume due primarily to slower sales into our network communications end markets that Dave discussed, as well as the very robust prior year comp. Any demand softness in the quarter was largely limited to our telecom and broadband markets, as evidenced by our book-to-bill, which was approximately one for the rest of our businesses. As expected, total volumes were flat sequentially with Motive Power up despite Q2 being our traditionally lowest seasonal quarter. During the quarter, we booked an IRA benefit of $22 million as a reduction of cost of goods sold. This benefited our results from gross margins through net income. However, it is important to note that our results saw exceptional year-over-year improvement even before the IRA benefit. We achieved adjusted gross profit of $240 million and 26.6% of net sales in the quarter, in line with guidance. Excluding the IRA benefit, adjusted gross profit was $218 million and 24.2% of revenue, reflecting an improvement of 230 basis points over prior year, driven by strong price mix performance, which more than offset $27 million of higher quarterly costs versus prior year and understates our true operational improvement due to the impact of margin math. Our adjusted operating earnings were $103 million in the quarter, a $38 million improvement over prior year, resulting in an adjusted operating margin of 11.5%. Excluding the IRA benefits, we achieved adjusted operating earnings of $82 million, up $16 million versus prior year with an adjusted operating margin of 9.1%, improving 180 basis points year-on-year. Adjusted EBITDA was $116 million and adjusted EBITDA margin was 12.9%, an increase of $31 million and 340 basis points respectively versus prior year. Please turn to Slide 11. Coming in at the higher end of our guidance, adjusted EPS was $1.84 per share, an impressive increase of 66% over prior year including IRA benefits of $0.52 per share in the quarter. Adjusted EPS, excluding the IRA benefit was $1.31, even still an impressive 19% increase over prior years $1.11 adjusted EPS. Similar to margins, adjusted EPS benefited from favorable price mix actions which outpaced year-on-year cost increases in the quarter. In the second quarter, our effective tax rate was 11.2% and 18.3% on an as adjusted basis before the benefit of the IRA. On the right half of the page, you can see the detail of net sales and AOE by segment including our consolidated totals. Let me now provide details on demand and the performance for each of our segments. Please turn to Slide 12. In the second quarter, Energy Systems revenue declined 3% from prior year to $422 million, primarily driven by lower volumes, partly offset by improvements in price mix. Services within Energy Systems continue to grow nicely and achieved record revenue in the Americas in the second quarter. As previously discussed, Energy Systems volumes are pressured by several large telecom and broadband customers pushing out capital expenditures. Energy Systems' second quarter results were highlighted by strong margin improvement as a result of positive price mix cost recapture. Adjusted operating earnings of $26 million, improved $9 million from prior year, and adjusted operating margins of 6.1%, improved 230 basis points over prior year. While we remain very bullish on the mid and long-term megatrend opportunities in this line of business, we continue to work with our telecom and broadband customers as they digest inventory and prepare for their upcoming network build-outs. Based on our recent customer discussions on projects and network expansion plans, we view this slowdown as temporary. As such, we are taking advantage of the timing of this demand pause to invest in restructuring actions within our Energy Systems segment with additional plans to consolidate our footprint by closing our Spokane facility and exiting our resi renewables business, which represents the minimal share of our annual sales in significant bottom line contribution. These actions are more than a restructuring program to reduce costs. We are rightsizing our footprint, making strategic decisions to influence what is within our control, and prioritizing engineering resources to the highest growth opportunities with the best returns, while preparing for the next wave of network build-outs. We anticipate generating a combined annual savings of approximately $18 million per year on an ongoing basis from these initiatives, which we will fully realize next fiscal year with one-time costs in the range of $25 million to $35 million of which approximately $6 million represents cash outlay. Please turn to Slide 13. Motive Power turned in an impressive quarter, growing revenues 5% to $355 million as a result of ongoing exceptionally strong price mix. We continue to see a return to normalcy in ordering patterns and benefit from our customers' growing enthusiasm over our proprietary maintenance-free offerings. Motive Power reported its highest adjusted operating earnings in our company's history this quarter, contributing $53 million, which improved 34% over prior year. Adjusted operating margins were 15%, which advanced approximately 330 basis points over prior year. We are extremely confident in Motive Power's robust demand and profit growth opportunities that we called out at Investor Day, and our Motive Power customers have expressed their strong support over our pursuit of our own domestic lithium plant. Please turn to Slide 14. Specialty revenue declined 1% from prior year to $123 million as a 4% decrease in volume was partially offset by a 2% increase in price mix and a 1% positive FX impact. We are seeing robust and accelerating demand from both our transportation and our aerospace and defense customers. But this was muted by timing of TPPL capacity re-allocation and the temporary impact of our Sylmar plant closure this quarter. Adjusted operating earnings of $6 million declined $4 million from prior year and adjusted operating margin of 4.5% was down approximately 290 basis points. Earlier in the quarter, we experienced plant loading issues as we transitioned to energy storage capacity from telecom and broadband to transportation. By September and October, factory performance was back in line with expectations, but the underloading in July and August, as well as the production transfers out of our Sylmar plant put pressure on Specialty's operating earnings in the second quarter. We are laser-focused on optimizing the ongoing flexibility as well as the performance of our operations and returning to full productivity levels. We are extremely bullish on this segment due to our opportunities in the transportation aftermarket and significant A&D program win, combined with the enhanced capacity flexibility and expansion we anticipate benefiting from beginning in the second half of this fiscal year. Please turn to Slide 15. Our balance sheet remains extremely strong and positions us well to invest in growth and navigate the current economic environment. As of October 1 2023, we had $328 million of cash and cash equivalents on the balance sheet and our net debt position of $662 million represented a reduction of approximately $385 million from prior year. Our credit agreement leverage ratio was 1.4 times EBITDA, adding back our off-balance sheet asset securitization program, our leverage ratio was 1.7 times EBITDA, below our target range of 2 to 3 times, and an improvement of 0.1 times from the end of the first quarter of fiscal 2024, enabling us to mitigate higher interest rates and provide dry powder going forward In the quarter, we achieved an adjusted free cash flow conversion rate of approximately 120% on strong free cash flow of $91 million. Our capital expenditures were $20 million. Please turn to Slide 16. Our capital allocation strategy remains focused and disciplined around investing in organic growth, complemented by strategic M&A, maintaining a net leverage ratio at the lower end of our 2 to 3 times adjusted EBITDA target range in the current interest rate environment and returning capital to shareholders through dividend and share buybacks. During the second quarter, we paid $9 million in dividends and repurchased $47 million in shares. Please turn to Slide 17. We expect to continue to operate in a dynamic macro environment and anticipate some headwinds to persist for some time. While it is difficult to predict the exact timing, we expect to see the impact of U.S. telecom and broadband CapEx pushouts to continue, partially offset by continued growth in our maintenance-free solutions in Motive Power and Specialty demand. Based on this, we expect Q3 to represent a modest improvement in sequential volumes but a slight decrease versus prior year. These volume expectations coupled with continued price mix strength should result in top-line increasing sequentially, roughly in line with the prior year. Our fiscal third quarter 2024 guidance range of $1.80 to $1.90 adjusted diluted EPS inclusive of $0.50 to $0.60 per share from IRA benefits. Excluding the IRA credit, this is in line with a very strong prior year. I would like to remind everyone that the IRS has not yet issued additional clarification guidance related to Section 45X, which could materially increase or decrease the quantity of our U.S.-produced batteries that qualify for this credit. We will update you on additional guidance if provided, which is currently expected towards the end of the calendar year. We anticipate realizing gross margins of 25% to 27% including 150 bps to 250 bps from the IRA benefits. Our CapEx expectation for the full year fiscal 2024 will be in the range of $100 million to $120 million reflecting investments in new products including lithium production lines and continued expansion of flexibility of our TPPL capacity. I would like to highlight again that we are key participants in large and growing end markets supported by global megatrends. We continue to generate healthy cash flow and have clear capital allocation priorities. Our team is energized and focused on executing our strategic initiatives to achieve our long-term goals. With that, let's open it up for questions. Operator?

[Operator Instructions] One moment for our first question and our first question comes from Noah Kaye of Oppenheimer and Company.

Good morning, Noah.

Good morning, thanks for taking the questions. I've got about a dozen. I'll try to limit to a couple. So first of all, I guess, Andy, what kind of step-up should we get in Specialty margins as you reallocate production to that business, which should be mix-favorable and move past some of these transition loading issues?

Yes, good morning, Noah. Specialty, there were some temporary issues this quarter alone. As we mentioned before, about half of it comes from some of the transfers in our Missouri plants as a result of the telco drop and about half of the step-down came from the transfer of Sylmar, which was just temporary. So that $4 million additional will get us back to Q1 and prior year around the 8% range. But then, we have additional - the demand is just fantastic, aerospace and defense, transportation, past eight weeks, we're up double-digit order year-on-year in all these lines of businesses. Our distribution center is going well, so, you know, now that we've leveled out, we can start to focus on the growth opportunities. So you will see a continuous step-up. There'll be a return to normal, I'd say next quarter, and then continued step-up from there.

Yes, Noah, we've - a lot of the program wins we're seeing and it's exciting in A&D. Lot of that’s staged out, you know, phased down in our backlog a little bit. So in terms of Q3, it's - there's definitely some upside on the margin side because of the issues Andy noted, and - but we are really excited about this business in the long run.

Great. On ES margins, if I get my math right, these restructuring initiatives lift margin profile by about 100 bps. There's still, you know, I think a fair amount of ground to make up to kind of get this to a double-digit margin business, just how do you get there?

You know, as we mentioned, the initiatives that we put in place right now will generate about $18 million on an annualized basis, so that is the exit of our resi renewable business, which really wasn't in line with our strategic focus and will allow us to reallocate our engineering resources to a lot of these higher growth, higher margin opportunities. We also did a riff, and then we also consolidated our Spokane facility because of the EO tools that we were able to use to free up footprint in other areas. So that's all going to be effect for next fiscal year. It will start to bleed in throughout the balance of this year. And then, as you can imagine, Noah, our telco and broadband pause, a lot of that is some of our higher margin business. I mean, the good thing is we've got a lot of maintenance activity that's still ongoing. We had a record America Service business. So we'll be able to continue to cover our fixed costs, but the real margin expansion will come when that telco broadband network build-out resumes, which everyone is thinking is going to be sometime next year.

Okay, yes, that takes me to my last question which is just unpacking that visibility more into the network's improvement, because obviously, the telco budget cuts were pretty well telegraphed, you know, your expectation is that network's orders rebound next year, that's next calendar year or your next fiscal year?

It's next calendar, Noah. You know, I called John, one of our sales leaders yesterday, just to read the temperature on that. I can tell you, the pipeline is very, very active. It's one of our strongest pipelines. We've got projects going on with RDOF, strand mounted CBRS wireless for the HSC network. There's a lot of work on the small cell build-out densification opportunities. A couple of big projects that are kind of newer for us are private networks. There are some of these companies that are starting to build out their own networks for security reasons, for cost reasons. DOCSIS 4.0 is starting to pick up some steam. So the - and then, the - there's a couple of stadium thing, so the pipeline is really, really strong. We just need to work through. I know specifically in a couple of these projects that customers over-ordered, so they are working down inventory. As Andy noted and I don't - I want to make sure you heard it, that our service teams are extremely busy. We're - so the activity is going on. I think there is just a lot of - a lot of over-buying there for a while as supply chains are tight. We just need to kind of rightsize what's going on, but the pipeline is very good.

That's very helpful. Congrats on the fast-charging orders. I'll leave it there.

Thank you.

Thanks, Noah.

Thank you. One moment for your next question. And our next question comes from Brian Drab of William Blair.

Hi, Brian.

Hi, Brian.

Brian, your line is open.

Good morning. Can you hear me?

Yes, we can hear you, Brian.

Okay. I guess I need to press *6, I'm learning on all these conference calls this morning. Anyways, Andy, can you - I just missed when you talked about the revenue outlook. I want to make sure I got that right. You said the revenue volume up slightly sequentially, can you just repeat that? And then maybe, also add any color on how pricing effects total revenue in the outlook?

So you're looking at sequential, is that your question, Brain?

Sequential, yes. Just looking at the December quarter and the comment you made.

For the December quarter? So you're looking - you're talking about Q3?

Yes, Q3, I think you commented on Q3, if I heard it correct.

We'll likely have a slight volume increase. Specialty should have a nice increase because they're overcoming some of the challenges that they faced this quarter. Motive Power is continuing its trajectory and Energy Systems is where we'll probably have it offset some of that.

Yes, in terms of the pricing part of your question, Brian, the pricing is holding up on all segments.

And you made a comment about revenue for the third quarter year-over-year as well, what did you say there?

Yes, so we expect Q3 is going to be modest improvement sequentially because as we mentioned Motive Power is up, Specialty's nice increase, offset by Energy Systems, but a slight decrease versus prior year, so pretty close to where we were in that range.

Telecom and broadband are bad debts right now. It's just on this as we pause, but the data center business is really doing well in the Energy Systems space as well, so it's - there's some things to be optimistic about.

Okay. If revenue is down slightly year-over-year in 3Q, I mean you have pricing though that offset some of that, right? I mean the price is up year-over-year, is that -

Yes. Yes, so revenue dollars won't be down, it's just the volume if that helps to clarify.

Okay. All right. I'll follow up more on that later. And then, can you talk at all about what you're hearing specifically from your broadband customers in terms of spending in the December quarter and into 2024? I know you're really positive on the outlook there longer term with the rural build-out, et cetera, but, you know, how is that looking now and in 24?

Yes, December quarter, you know, this - it's usually a fairly slow quarter in broadband anyway, so not a lot, but I think as we go into the new calendar year, there's some expectations for improvement.

Okay. I'll follow up more later. Thank you.

Thank you.

Thanks. Brian.

[Operator Instructions] One moment for our next question. And our next question comes from Greg Wasikowski of Webber Research and Advisory LLC.

Good morning, Greg.

Hi, Greg.

Hi, good morning, everyone. Thanks for taking the questions. I have a few on the fast-charging. I'll just rattle them off. I can repeat them if you need to. First, can you confirm that Landmark is the anchor customer that we've been talking about for the past couple of years? And then, what does the backlog look like now? Because, you know, we've always had that anchor customer kind of on the horizon, right? So what does it look like now and are you expecting more larger chunky orders or do you think it'll be more smaller demos at first? I'll stop there.

Yes. The Landmark is indeed been our target customer. The project has evolved over time. The units - the average size of the unit has dramatically increased on where we started. There's been a lot of complexity added to the initiative. We're extremely pleased with where we landed. The first group of orders of 50 is, we feel to start with this particular customer, and then in terms of pipeline activities with other customers, there's certainly and we're starting to see interest even within our other lines of business. So it's going to be managing the growth effectively and making sure that we do a great job as we - as we build this business up. But in terms of the revenue that we have outlined in our Investor Day model that we laid out, we still feel very good about that and couldn't be more excited and I'm just really proud of the team.

That's great. And then, could you maybe speak to the updated marketing strategy as you see it, you know, who you're really targeting now? I mean, imagine that similar REIT type customers probably still fit the mold, but you kind of alluded to maybe some overlap in some of your other areas of the business as well, is that something that you guys are actively seeking, maybe some not upselling, but, you know, overlap in material handling centers or what have you, wherever it makes sense?

Greg, I think the core of the device is its capabilities to manage energy effectively and so as you know, many of our businesses, be it data centers, be it networks, be it forklift charging, all our electrified devices, where users want to maximize or optimize their energy efficiency and minimize their costs. And so the opportunities for effective energy management are broad and the EV fast charges is - I always think of as the cherry on the Sunday, because electric cars are going to present a very high and unpredictable load on the grid, and so I think in the system as it relates to EVs as a shock absorber to protect the grids. But the most - the biggest payback our customers are going to see with this investment is their ability to manage their energy costs and they can take advantage of cheap electricity when it's available and primarily avoiding things like demand charges. So as you start to think about - and the other opportunities are finding us, we haven't really actively sought anything on the marketing yet. We've been so focused on getting it right on the engineering and getting the launch right. Our next one of the themes for our next Board meeting is how big how fast, and - but right now I want to stay very much in line with what we've committed to in the Investor Day model and we're very excited about it.

Got it. All right. Thanks, Dave. I'll take the rest offline. So that's it for me. All my best to Drew.

Thank you.

Thanks, Greg.

Thank you. I'm showing no further questions at this time, I would now like to turn it back to David Shaffer for closing remarks.

Thanks, Dede. I want to thank everyone for joining us on today's call, I want to thank you for your interest in EnerSys and we look forward to updating you again next quarter. Have a good day.

This concludes today's conference call. Thank you for participating and you may now disconnect.