EnerSys (ENS) September 11, 2026 Conference Transcript

Thank you, everyone. We're going to be transitioning to our next company team, Enersys. And I'm also going to be throwing the ball over to our newest team member. We're super excited to have Carter on our team. Take a quick second to introduce him to the people who don't know him. We're very thrilled to have him. Long-time buy-side, sell-side clean energy guru who knows this stuff a lot better than I do. So I'm very pleased to have Carter on board as well. But, yes, we're going to have the Enersys team. I think I see the names there. I don't see the camera on. Oh, there we go. Thank you, Sean. Thank you, Carter. If you want to kick it off with a little bit of background on the company, yourselves, and then a lot of areas to dive into.

Yeah, sure. Good morning, and thank you for having us. You know, it's fascinating just to hear the tail end of one nuclear. Enersys is a market leader in stored energy for some of the most critical applications on the planet. And we have a technology stack that begins with a battery, is coupled with power electronics that charge that battery and manage the power flow to the end application. software that manages that whole solution. And then we have a full-time company-owned service group that makes it all run smoothly on-site when those on-site services are needed. Our customers are grappling with the same issues I heard Juan Nuclear talk about, and it's energy security. And on the other hand, labor scarcity. So there's not enough electrons currently on the planet being generated and sent to the right places, and there's not enough electricians to help manage all that. So Enersys has solutions certainly to offset both. A bit about our markets, just quickly. We have three business segments, network and infrastructure solutions. This is very specialized backup power solutions for data centers, for telecommunications, communications entities and cable broadband entities, and then power utilities. And across those, Enersys would have a commanding market share in our area in all of those. Our next business is industrial mobility solutions. It's think material handling and mining type devices, forklifts, powering electric forklifts, and then the class eight trucks that move those same goods that were loaded by the forklifts. So think APU on a Class 8 truck. And then our final segment is what we call precision power. And it's largely aerospace and defense. And Enersys is the largest battery supplier to the U.S. Department of War and many of our NATO allies. And that is manned and unmanned systems, satellites, submarines, fighter aircraft, standoff weapons. So when you think about the stockpile depletions that are going on right now, many of the stockpiles that now have to be added to feature one of the Enersys lithium technologies, managing guidance systems and other things on that platform. So those are our three market segments. They're very specialized. They are high trust environments that require a lot of learning, a lot of customer intimacy. And so Enersys tends to focus very specifically in our lane because we have a right to win. We're not in the open C&I market. We're We're not outputting large trailers of just battery energy storage together for utility scale type applications. That's not us. Again, we stay in our lane and stay very, very specialized. So with that, I'll pause and see where Carter takes us.

Thanks, Sean. That was a very helpful overview. And thank you guys for joining us. I'll just point out for the audience as well, if you have any questions, feel free to send over an email or Bloomberg or whatever, and we try to incorporate those. So you guys touch a lot of different end markets. I know, I think you just had your analyst day in June, talked about expectations for market growth and aggregates, and you expect to go a little bit above that. I'm curious, as you think about those three different kind of businesses you laid out, which markets you're most excited about as we think about the next three to five years, and then outside of market growth, where you think you have the opportunity to kind of gain share above that, essentially?

Yeah, so we're tremendously excited about what's going on in the world with data. And even before we get to the AI conversation and look at what the growth was in the area of hyperscale, it's just a massive growth cycle. And AI is only accentuating that. But the demands for data continue to increase on the planet. There are tens of thousands of data centers on planet Earth. Enersys has a commanding market share. Traditionally, we've been mostly a lead acid battery play. We've now launched a lithium battery. Both will be very important in the growth of those data centers. So we have a lot of upside in that area, and it's being reflected in our order book. But it's not just the data being created and generated and managed somehow. It also needs to be transmitted around the planet. And so if you look at our cable and broadband business. Right now, we have very robust growth as we see DOCSIS 4.0 come online and the need to expand the data pipeline over the mediums that exist out there. So that's very exciting for us. And then, of course, we already talked about this energy equation. Our power utility business, we have over 50 percent market share in the U.S., for example, in electric substation. So we're seeing double digit growth there in our substation business to support these power demand needs. On the other hand, in our precision power and aerospace and defense, we're seeing very robust growth there. And Enersys has some unique technologies. We're involved in about nine chemistries of lithium, different lithium batteries today. But we have specialized chemistries, for example, our lithium silicon cobalt thysulfide is the most energy density you can get for a joint standoff weapon. So if you see the large announcements about stockpile replenishment. You see Enersys, the reason why we're seeing very robust backlog growth and accumulation in those businesses. So we're very excited about A&D. Our Brentronics acquisition got us deeper into soldier power, deeper into drone power and power management, hybridized power systems at the forward edge of battle. And again, Enersys is right in the middle of that conversation with the U.S. Department of War and a leading provider in how we're going to solve for the electrification of the battlefield. And so it's just a really, really nice position for us to be in. I don't want to discredit our mode of power material handling business, our industrial mobility. Right now, we're seeing a resurgence of the transportation markets, which is fantastic. There was the great transportation recession kept us slow for a while in that business. Now with the new truck regulations coming out, the new NIACS truck requirements and just the backlog, we're seeing robust growth there. And our material handling business, the forklift powering business, we've seen only a couple of down cycles in our history like this one, but the recovery is usually pretty strong. It's a very dependable business, That's a very important part of our margin and cash generation, and we definitely see that showing some green suits and coming back. But certainly, between the data center and data situation and the airspace and defense situation, we're in two of some of the best super cycles we've seen in our career.

Yeah, there's a lot of secular tailwinds across those markets, for sure. um maybe zooming a bit on on the data center opportunity um could you speak to kind of like the size of that business today and maybe some of the order momentum you're seeing of late um any uh commercial relationships you can talk about in terms of hyperscaler or something like that um would be helpful yeah so so we have a seat at the table i'll start with the relationship part this is what you know i mentioned high trust in the beginning data center for as large as that industry seems, it is a fairly small and incestuous business, you know, and there's

actually a fairly small cadre of people that manage the environmentals across those hyperscalers and in that arena. So they really can't make a bad bet on a supplier. They really need reliability. And the next shiny widget isn't enough for them. They need somebody that's going to walk the walk, be there when there's a problem, have quick resolution. And Enersys has established that position over decades. So I won't mention specific names, but I can tell you that we have a primary seat at the table with all of the hyperscalers. In addition to that, we also serve the OEMs. So those would be the names you know of the large uninterruptible power supply manufacturers are also our customers. So we're really coming to market through both of those channels. Our data center business today for Enersys is, Andy, correct me if I get the numbers wrong, about $400 million.

This year, we'll be, we'll round up to $500 million this year, Sean.

$500 million this year. I got to stay ahead of the growth. But so about $500 million this year for us. And we've said publicly in our earnings calls, we've talked about having a very high double digit additions in our order book. So we're seeing tremendous growth in that area.

And I think historically, you've been focused on the lead acid side. I think you have a lithium product that you are introducing or have introduced to the market on the data center side. I'm curious, you know, what you think that's adding for customers and some of the early traction there.

Yeah, so we, first of all, on the lead-acid side, we have a battery called thin plate pure lead, which is really a bridge between traditional lead-acid and lithium. And it's very difficult to make. The handling of it's difficult because of the plate thickness. But we've perfected it. In fact, it's the same battery that we deploy in nuclear submarines in the U.S. fleet. So it's a very high-performing battery, and it kind of gets you up near the bottom end of lithium without some of the risks. So that's where we're seeing really tremendous growth. So when we talk about that high double-digit growth, that was before launching our lithium product over the summer. Validations are going very well in our lithium product, and it's not a situation, Carter, where we have a customer acquisition issue or we're out trying to peddle a product. It's quite the opposite. that we've had our customers come to us and say, boy, we love everything about what you do for us. We love the service company. We love the immediate responsiveness. We love the longevity of the product and the quality. We really need you to step into the lithium space. So it's been more of a pull from our customers and a push from us. And so we feel very good about where that's headed for us.

Yeah. And if I could just add a little data behind that, Carter, you know, one of the things I think that's special about Enersys is we have greater than 50% market share in almost all of the end markets we compete in. And the lead-acid portion of the business, as Sean mentioned, we had mid-teens year-on-year growth. We expect the lead-acid portion of the data center business to be up high single to low double digits, but sustainable. Our order rates this year were up in the mid-80s in the first quarter year-on-year. So I think what that demonstrates as lead is here to stay, it's significant, it is growing, and the data center noir is all going to just be incremental share of wallet and an even faster growing portion of the data center market for us.

I think you might have just answered my follow-up. I was going to ask if you view this business as incremental wallet share or like taking some of the lead asset volume, essentially. Sounds like it's the former.

Yeah, I think it's incremental. All the projections that we get and see in our internal projections have lead acid continuing to grow. And there's a couple of reasons for that. One, if you're in a brownfield location and you have a certain technology in the building today and need to grow, you're likely to continue to use that technology. For example, lead acid, because the fire suppression systems, the architecture, there's a lot of things that go into enabling a lithium technology versus a lead technology. So brownfield expansion, which is going to continue is likely to stay like for like. And then even in Greenfield, there are some municipalities and some areas that just aren't ready for lithium in their current state with aqueous electrolytes and some of the risk profile. So we're still seeing Greenfield be deployed with our TPPL solutions. But we definitely see the highest rate of growth in the future in the new technology in the lithium space.

Right. That makes sense. You know, something we think a lot about on the clean energy side is exposure to China and the supply chain, particularly as it relates to, you know, battery storage. And you guys are a little bit different here, but I'm curious in general, you know, your supply chain on the battery side and particularly on the lithium side, you know, what you think kind of differentiates you guys and particularly as it relates to Chinese exposure?

Yeah, it's a great question. I think Enersys, we're sort of chemistry agnostic. We manufacture multiple lithium chemistries today. And as we talk about getting into our Greenville facility that we're doing largely for the Department of War, we think there's going to be some follow-on opportunities for the BBU side of the UPS business. But without getting in you know going down that that rabbit hole yet um we we have a make versus buy strategy today that um if if we have commercially available uh uh cells that are better or cheaper or or uh more more cost effective or some other reason to sell them in the marketplace and we can add value beyond that we will do that and so we do sell uh source cells all over the world uh and at our volume, you know, we have a lot of buying power. Our value add, Carter, if you just look at EV pricing, battery pricing in the open market, which a lot of times happens, it's really a misnomer that we're subject to the same market forces. Certainly the sell purchase occurs at that level, but everything we do at Enersys, our value add in many cases comes after the cell. So putting the cell into the right form factor for, let's say, a data center. The battery management system is entirely different for that application that would have been embedded in that electric vehicle price. Then we have to go through all of the communications interfaces with a UPS that is not the same as with an automobile. Then we have to go through the regulatory requirements, which are very different, NFPA, UL, than they are for an EV. So by the time we do all that, the end solution for us and what the customer is going to receive looks nothing like that EV battery. And in there is our value creation. And that enables us to be very flexible in cell sourcing and that sort of thing, whether we're going to make it or buy it.

Right. That makes sense. I think maybe one more on the data center side. You referenced BBO a little bit. I'm curious if you think about the shift to 800 volt DC architectures, kind of what that means for your data center business generally.

Yeah, you know, there are, I probably, I think I mentioned at the beginning of the call, there are tens of thousands of data centers on the planet. And you're going to have a very wide range. You're going to have centralized UPS isn't going anywhere. You're going to have some architecture shifts where they need the density in some of these new centers for us. And it makes sense, right? Because if you can get the voltage up and if you can have batteries proximal to the load, you're going to reduce the total amount of copper required to move power around that data center. Copper is expensive. It's getting harder to get. And so you get into properties of electrical resistance and this sort of thing. But for us, we've dealt with up and down the voltage scale our entire existence. Our technology stack, the reason we're able to so elegantly deploy it into these seemingly diverse end markets is because for us, it simply is a change in form factor and voltage. But the tenets of energy storage tend to stay the same. And we still get back to that issue of who's high trust, who's going to be there for the customer. one of the largest suppliers of lithium into the data center space prior to us entering gives the customers a website that if they send an email, they get a 72-hour response. Five nines of reliability in a data center means you have five minutes of downtime a year that you're allocated that you can have. So that just isn't fast enough. So for us, it's, yes, the form factors will change, how we manage those voltages will change, the battery management system will change, but it's really no different than what we do. And we're looking forward to that as an expansionary opportunity for us.

Right. Yeah, you can definitely see how the reliability requirements from these data center customers, you know, you guys, you know, fit well into that given your long-term relationships there. I don't want to get too myopically focused here on the data center side within the network and infrastructure business. So, you know, anything else within NIS you'd like to highlight in particular, maybe on the telecom and broadband side would be helpful?

Well, I would just, you know, we're seeing a lot of lift in DOCSIS 4.0. You know, the issue is this, with the data demands increasing on the planet, before you even get to AI, just in general, data demands are increasing. The bandwidth to process and send that data around the around the world is also growing. So all of the wireless carriers, all of the hybrid fiber coaxial providers, they're having to expand and having to up their game. And, you know, I don't know if you knew this or not, but there's 80 percent of the commercial industrial Internet traffic in the U.S., for example, goes over the hybrid fiber coaxial network that these cable operators are managing. So you think about them in terms of the, you know, the TV shows, that's not it at all. Their main business now is that internet traffic. So they have to respond to those greater data loads. And we're seeing a lot of lift from that. And we're going to see a lot of it in the future. And even if you start to consider Starlink, a question I get a lot, how will Starlink influence the business? Everything that goes up through those satellites has to come down and somehow go through the terrestrial network. And that's why Right. You know, Elon has jokingly said he might buy Verizon or one of these guys because you absolutely need those pipelines on the planet to make that possible. So for us, we just see that, again, as expansionary and in the aggregate, increasing those data demands and the need to push that data around. And when every one of those systems, be it a wireless system, a fiber optic system, an HFC system, EnerSys is powering somewhere in that solution. So we we like all of it.

Yeah, I just add a little bit of color to Carter to that. Keith, who's our new president in that segment, is just a tremendous operator. Revenue up nine percent. A lot of reasons for a lot of the market growth that that Sean was sharing year on year. Our adjusted operating earnings in that segment up 65 percent year on year with a 360 BIP improvement in margin. So a lot of that's driven by the by the item Sean mentioned, but just tight cost, discipline, improvement in our services organization, which is really becoming a tailwind and key to a lot of the stickiness that we have with those customers.

Right. Yeah, that's that's very helpful. I think it's too easy to get overly focused on the data center side. But, you know, clearly there's a lot of tailwinds in broader network and infrastructure. So that makes sense. um you referenced the lithium facility uh in south carolina could you just kind of walk through you know exactly what you guys are doing there just so people have the context um and kind of how that's evolved where you are in the process ultimate capacity um things like that yeah let me start with the with the problem state from statement from the department of war that for them energy security is is a fairly acute issue at the moment if you look at some of the the chemistries out there, let's just take a lithium iron phosphate battery.

99% of the constituent material and production supply chain is controlled by China. So if the future of the battlefield is electric, and I think the Ukraine conflict has shown every ministry of defense around the world that the future of the battlefield is electric. If the future of the battlefield is indeed electric, your number one peer threat in the world, China, controls 99% of your ability to wage a defense. That's not sustainable. It's not a good position to be in. Certainly, from a geopolitical leverage perspective, it's a very weak position to be in. So what we're purporting to do is help the U.S. Department of War solve that. The other thing is they have some 42 programs involved in soldier power, hybridized power, everything that we do through Brentronics and these types of applications that are powering very similar applications. They want to consolidate that. Think about that logistically, 42 different sizes of batteries you're deploying with the soldier. It's not sustainable. They want to get that down to about under nine key programs that they can deploy across radio and other systems. So part of what we're doing in Greenville is just that, is helping them consolidate to a couple of cell sizes, helping them domesticate and get, you know, the foreign entity of concern issues sorted and give them very stable production. What they like about Enersys and what we've done historically, I mentioned thin plate pure lead being deployed in a submarine and a data center. Enersys has always taken the tech that we've used for defense and then later repurposed it for commercial applications because where we bring in is a lot of IP and manufacturing and process and cost control. So we know that we'll have those opportunities downstream. So the government was very happy to help fund us. Then we're getting some funding from South Carolina, from the local municipalities. And the funding from the Department of Energy is on a cost share basis. Some of the other incentives from the state and local municipalities are on an employment basis, where we take credits over time as we employ people. But the reality is we keep getting the projections, updated projections from the Department of War and what it means for hybridized soldier power, drones. And these are just massive upswings and projections. So that's the value prop. And by the way, Carter, one other thing I'd like to mention, this is not the open commercial market. These are defense programs. So it's not like if a new cell comes in cheaper from from some other part of the world, it could just be sold into these applications. That's not the way that apparatus works. And what they really want is the dependability. So we're not subject just to the open market price. We won't be building a cell that is really open market anyway. We'll be building very high performance to very high performance cells. But nonetheless, we're building them for a customer who's willing to pay for that security. And that's the big differentiator.

Right, right. So you guys have been working, it sounds like, fairly closely with the government here. And you mentioned the DOE grant. If you could just lay out the CapEx for that facility, how much is offset by the DOE funding, and then generally timing of the capacity ramp. And I believe it's a gigawatt hour, ultimately. Lee?

Yeah, I'll let Andy handle the cap. I'll just tell you quickly, we had an original proposition to build a plant around a very different value model. When I became CEO, we changed that. And so there was a conversion. What we're purporting to do now for that same gigawatt-ish of power is build something on the order of magnitude of 40 million cells. The previous plant was going to build eight to nine million cells for that same total output because they were a much larger cell format. So it didn't it doesn't directly translate. It's not apples to apples. So there is some some difference in those numbers. Well, let Andy speak to the CapEx.

Sure, Sean. Happy to happy to share, Carter. Our total capital investment we're expecting. conservatively, we would estimate around $650 million. We did get our revised DOE award for $150 million, which is not a loan. Obviously, it's for funding for equipment, so it's a cost share. Typically expect to have that in about a one-quarter lag of reimbursement, so net capital investment in the range of $500 million. We also do have about $200 million of state and local incentives. About a quarter of those to a third is short-term, or the rest of the balance of it is going to be over the life of the plant. So things like tax subsidies and training, et cetera. So our IRR, again, conservatively, we expect to be in the mid-20s. This is just really a nice project for us.

Right. Yeah. Again, a bit different, but I think we certainly see on the utility scale battery side that there's just how much value there is today in having domestic capacity, which I think is, you know, largely the case in a lot of these other spaces. The offtake for that facility, is that in any way like, you know, guaranteed here? How does that work?

Not a guarantee, but when you have your customer, the Department of War saying we desperately need this, in effect, we're probably going to need bigger. And we've got a long history of funded capital investment projects with the with the dow um so our our expectation is um this is just going to be the initial uh the initial investment right yeah my follow-up question was almost going to be why stop at a gigawatt hour i mean you know there's some you know wood to chop but i would imagine the demand is is much higher than that um so yeah we we have 140 acres on that campus that we purchased.

And we did so with the intent to do a couple of things. We're installing the Lithium Center of Excellence there. We're going to be doing some other testing. We're going to be inbounding some other parts of our PPS business there. So we see a lot, a very long-term, robust, very important site for our company and with a lot of optionality to expand and do different things as we go forward.

And I think it's fair to say, Sean, that we don't expect, well, we'll need to do additional capital expansion over and above the plant before the plant is operational. I mean, this market, we're really walking on, coming up on a very steep slope of demand.

Right. Yeah, no, I can, that makes sense. Maybe shifting just to make sure we touch on the industrial mobility business. You addressed it a little bit at the beginning. I think material handling has been a bit weak, but it sounds like maybe we're at the trough here and seeing some positive signs. If you could talk through what you are seeing there, what you're hearing from customers that gives you some of that confidence in some of the demand coming back more robustly there.

Yeah. It's a business that we traditionally just don't worry about. We have data that goes back to the 90s. And it's a very stable, very steady, not high growth, but steady growth business. You have a couple of tailwinds that are precipitating that. One, in the U.S., for example, there's still only about 67, 68 percent of the fleets have been converted to electric. So you have a lot more electric conversion to go from like LPG trucks and that kind of thing. And you have states like California that have sunset the ability to run those gas trucks. So you have to do the conversion. So that's continuing. Then you had the old flooded lead acid battery business that's going largely to maintenance free. Now, some of that for us is lithium, where we're already been selling our lithium. Some of that's our thin plate pure lead battery solution. But that conversion to maintenance free gives us some revenue and margin lift. So we have some nice tailwinds there. And those conversion realities continue out in the marketplace. I think what happened, material handling kind of got caught up in the same thing that transportation did and just the normalization. After everything went crazy during COVID, all the good purchases, then you had the settle out period afterward, the inventory drawdowns. And these forklifts are large capital purchases and capital events or capital leases. And so you just had a slowing, the general slowing. And if you look at, there's only a couple of public forklift or people that split out the results publicly on the forklift side. But you can see they were down like, you know, mid-teens, double digits. And we were not, by the way, because we have the battery replacement. Anyway, back to your fundamental question, what we've seen now, and we get all the forklift data from around the world and the new order data, we've finally started to see the nose up on the future orders of the trucks themselves. We usually lag that by about a quarter or so because they order the truck and then they can order the power system sort of at the tail end of that order cycle. But in talking to our customers, they are seeing what we're seeing in the transportation side, that there's a growing confidence that the situation has normalized, that we have seen the trough. Customers that delayed, large customers that delayed purchases, you know, what starts to happen, you can delay a forklift for a while, but the maintenance of those forklifts begin to become more expensive than buying a new fleet. And so you're sort of at the tail end of, you know, maybe they could extend it a year or two, but not more than that and have it make sense from a cost perspective. So you do have a, you know, we're being told by our customers, you've sort of had this pent up demand that is beginning to break free. It's not steady yet, I would tell you. We're seeing it in sort of fits and starts. So we're still managing through that, but we are optimistic and based on history that this business will, you know, be coming back.

Right, right. Right. Yeah, I'm sure with the benefit of all that history, you have a lot of visibility to how these cycles usually usually play out. It sounds like we're already seeing some of the green shoots there. Given we have a clean energy audience here, I'm curious your thoughts on, you know, fuel cells and material handling relative to batteries.

It's been, you know, we've we've seen a lot of our customers experiment with them. We've also seen some of our customers sort of reverse course. You know, what ends up happening is the it's it's you know, you're still dealing with, in some cases, a fuel delivery situation. You're trading LPG for hydrogen. So there's still that event. And, you know, there's some bumps in the road with that. And it's not it hasn't been consistent for some of our users. And then some of the efficiencies that they hope to gain just just simply weren't there. And, you know, we've been pretty successful. we don't just sell a power system. We have a program and a software program where we walk our users through. We actually monitor the power in their site, and we can walk our users through the optimum operational cadence with those trucks to maximize value, decrease energy usage. In some cases, we've decreased energy usage up to 30% for the forklift fleets. And now what we're purporting to do is bring in our battery energy storage system in places where there's energy famine, the utility won't give more circuits. They need to expand their fleet so we can actually couple a BESS with the forklift batteries where they're working in tandem with the battery energy storage system and maximize that power environment. So I think, Carter, if you looked at it in the aggregate, you still have, you know, less than a percent or two of total volume in the world of penetration for fuel cells in a material handling application. And we haven't seen it really move off of that very much the last couple of years.

Right, right. That makes sense. I thought your point on adding BESS was interesting. I think it, you know, ties in the broader narrative of, you know, we're in this world of load growth now. Everybody has to get smarter about how they manage, you know power um and you guys are helping with that um maybe zooming out a little bit i know only a few minutes left here i i realized we didn't touch on the energized framework um you guys have talked a lot about if you could kind of walk the audience here through you know what you've been focused on there how far along you are in that journey and you know what else is to come there yeah so it was for us it was a strategic reset and it you know and it started with optimizing our core.

That wasn't just about cost cutting. That was about getting back to the things that we do extremely well, not chasing adjacencies, but where we have a right to win and where we can move fast and how we build basically the foundation of the company to serve our customers because our customers have big needs. And so we don't really have to look too far afield for growth opportunities. The next part of that journey was putting in the operational rigor that enabled us to do just that, to move fast and to execute. And so we came up with centers of excellence. What these really are is respecting that what we do in the contract manufacturer, power electronics supply chain is very different than what we do in the asset-heavy lead-acid manufacturing portion of our business and very different from what we do in new chemistries, advanced lithium chemistries, this type of thing. So we just made it official. And we made those the three centers of excellence, power electronics, lead acid, and lithium. And we put them, we tucked them under a P&L leader so that we had a lot of financial discipline and rigor around how they are managed. And they still serve all businesses. So each of those COEs are serving all businesses, but under a central P&L leader. So that was about getting that operational rigor in. Once we have the core done and putting in that. And then it was about getting to growth. And so once we had those pieces in place, how do we move faster and go after these new markets or go after growth opportunities within these markets and place some bets? And our bets are very, very direct. So aerospace and defense growth and development, which is progressing very nicely. Things like a lithium battery in the data center because our customers want us to do it. So it's a fairly safe bet. And incremental growth in material handling with the battery energy storage systems in IMS. And that's our Fordix system, which has been really well received so far by customers.

Yeah, that makes sense. And maybe kind of a last one here, more strategic. I think M&A has been an important part of the story over the years. You guys are pretty far below your leverage target, I think. So you have a little bit of room there, just generally, like how you think about, you know, M&A and where it fits into the story.

We, we, we have a lot of, as you mentioned, dry powder. We want to put it to work. There are some compelling targets in the world that fit with our strategic framework and our filters are pretty simple. They have to enhance customer intimacy. You know, for us, M&A, we'd like it to be a quickly accretive. It's got to fit our strategy and where we're headed. and it may provide us some pieces that we don't have in that power management equation or rounding out some part of that core for us. So we have a very good M&A guy in John Andrews. We are actively in the market and looking at various pieces that fit that strategic framework for us. And we think there's some really compelling ones out there and we hope to be able to action on them.

Right, right. Um, you know, in the last couple of minutes here, maybe I'll turn it over to you, Sean and Andy, um, anything we haven't touched on that you guys want to highlight in particular about the business and generally like, you know, what ourselves, the investor community should be looking for, uh, over the next few years here.

I, you know, Carter, I would just, I'll, I'll speak and then I'll turn it over to Andy. I, you know, one of the things, the questions I get that I, that I just like to clarify, You know, I'll get a question that for me, because I'm an insider, I think is a little far afield, but I can see why the question comes about. And it's, hey, what, you know, in the race for backup power, how is a guy like Elon not going to win and Enersys is going to win? What I'd like investors to know is he doesn't do what we do, thank God, and we don't do what he does. We operate in these very, very specialized areas where, again, there's decades of learning, there's decades of knowledge and expertise, but they're not generally large enough to grab the attention of these larger players. But for us, a vitamin elephant's a meal, and we're very effective in these spaces. And we have a very, because of our market leverage and position, we have a very compelling growth story. So we're really talking about operating in a different part of the market where we truly do have a right to win. And we're very, very differentiated. And also from OpenC&I, you know, look at companies like Fluence out there that are, you know, putting large energy storage systems in utility scale. That's not us. We're behind the meter working with those customers to solve those issues. Interestingly enough, though, I would tell you the amount of power we manage on a daily basis, if you look at the average life of our products in the field, probably about 80 to 90 gigawatts every day in the world that Anarsis has got under management because of these unique applications. But that's the biggest thing. That's how we differentiate. And I wouldn't want investors to get lost in the story about some of those other data of points because they're just not the same markets for us.

And I'll be happy to wrap up maybe with our investor day algorithm card here. I really like this framework that we've shared. What we shared at our investor day is that we were very fortunate to participate in markets that are net growing faster than GDP. We think the basket of our end markets and our diversification is a unique value proposition we offer investors. It's growing around three to five percent. And we expect our new products will add an extra one to three percent, getting our top line growth in the range of four to eight percent. And we expect to continue to have margin expansion and the 50 to 100 bps per year and generate very strong cash flow with about an 80 to 100 percent free cash flow conversion. What we like about that is there's ranges that we think are sustainable over time. We've called out that we expect the beginning of this year to be mostly driven by margin expansion because a lot of the structural changes and cost discipline that Sean's leading with the Energize framework. And that later towards the end of this year and into next year is when our revenue is really going to start to grow. We had 42% year-on-year EPS growth this year driven by exactly those reasons that we called out. And just leaning in a little bit to some of the end markets, we expect our NAS market to grow around 4% to 6% over time, IMS to grow about 2% to 4% and PPS to grow 9% to 11%. With those three big bets, Sean called out, Noir, Bess, and A&D being really the large contributors to that aggregate growth. As an example, our last quarter, NIS was below that range because the material handling being in this recession Sean shared. So down negative 3%. We know when that rebounds, it's going to come back strong. But NIS was up 9% year-on-year, largely driven by some of the data center growth we talked about. and, you know, PPS was up, you know, in the 20% with our margins growing, our AOE margins were up 220 basis points. So just as we said, going to largely be indexed, we're on the lower end of our growth now, and that should start to drive a lot of the earnings growth next year with margin expansion really being heating up.

Right. I mean, it definitely sounds like a compelling algorithm and, you know, speaks to some of the tailwinds we walked through over the last 45 minutes or so. So anyways, I think, you know, maybe we'll wrap up there. But Sean and Andy, thank you very much. It's been very helpful and educational. So I really appreciate you guys taking the time.

Thank you for having us.