EnerSys (NYSE:ENS) Q1 2021 Earnings Conference Call - Final Transcript
Aug 13, 2020 • 09:00 am ET
Our first question comes from Noah Kaye with Oppenheimer.
Good morning, thanks for taking the questions. I appreciate the new segment reporting, and the redesigned website looks good. So well done there. Can we start with the TPPL capacity ramp and how that may start to impact the financials? If you start the high-speed line commissioning this month, and it sounds like the NorthStar integration and homologation to EnerSys's TPPL product is really well underway here, or should we say just ramping at this point? Maybe you can provide some color on that. That implies you could be sort of in October with about $400 million or so of incremental TPPL revenue. Do I have that right?
David M. Shaffer
Thanks, Noah. And this transition and your reference to bringing everybody to the same standards, has put a big drag in the last couple of quarters, and you see it acutely, you see that manufacturing variance drag in the Specialty segment. That's definitely going to start to improve as we ramp up new customers. Yes, your point is well taken. I'm headed out there, I think, end of this month. And we're going to look at all the new equipment. It's not just the high-speed line, but it's all the platemaking to feed it. We should be in a great position to bring on new and more customers starting, as you mentioned, in our second half. So that's going to ramp up. It's not -- we're not going to turn on the spigot and pick up $400 million overnight.
It's going to take time for the ops team to bring it on and the sales guys. But I'm very proud of our sales guys. Hopefully, you heard in the prepared remarks, they've done a great job of working with the ops team to get things teed up and queued up. In my 30 years at this business, it's been hard to get capacity or demand and supply in sync. I think we're doing a better job of that right now. So we're very excited about that. And I've been getting videos every day of the new equipment as it comes online. It was frustrating that COVID slowed us down but the team has responded, and I'm very excited about our second half. So yes, we're going to start to ramp that piece of our business starting in our second -- our third quarter. Mike?
Michael J. Schmidtlein
And Noah, I guess you threw out the $400 million of additional capacity. I think that's a decent number to use in terms of what that line is capable of doing when it's running at full production levels. What you might want to factor in is whether there might be cannibalization from other factories so it may not be a total $400 million because some of the other TPPL factories might have been able to make some of that product as well. So you'd want to temper that a little bit.
David M. Shaffer
Yeah. It's the ramp. Noah, one of