EnerSys (NYSE:ENS) Q1 2021 Earnings Conference Call - Final Transcript
Aug 13, 2020 • 09:00 am ET
David M. Shaffer
focus throughout the pandemic has been on the health and safeties of our employees worldwide, and that focus won't change. Wherever possible, our employees continue to work from home, and every factory is operating in compliance with all applicable health and safety guidelines rules and regulations. I'm extremely proud of the continued adaptability of our employees in the face of this crisis as they remain committed to delivering for our customers.
In addition to prioritizing our employees' health, as we began experiencing lower demand during the quarter, we leveraged our business model by aggressively flexing costs and operating capacities at our facilities. Operations pushed extensive cost reduction actions in all areas with a combination of furloughs, wage and salary freezes, short time work, vacation, spend reductions and other measures in addition to the cost savings on travel and entertainment coming from the lockdown. SG&A costs were down $10 million or 8%, and remained constant with the prior year's percentage of sales.
As you can see in the numbers, our relatively variable cost structure and global footprint allows us to react quickly and appropriately to changing market conditions, flexing costs up and down throughout various economic cycles. Just as importantly, we flex our capex and opex without impacting our revenue growth objectives or quality of service. We will continue to adjust our costs further in response to demand shift in the months ahead.
We are working to enhance our balance sheet in order to, one, maintain the flexibility and resources necessary to adapt to a changing economy, and two, ensure we have the resources necessary to capitalize on opportunities as they arise. As the market leader, we appreciate the strong position we are in. We will continue to invest in the business to expand our competitive edge, work to increase market share from our competitors and ensure we continue to deliver the high-quality products and services our customers have come to expect from EnerSys.
Our liquidity is strong and positions us well in today's market. We put our robust cash flow to work in the first quarter by reducing net debt by $67 million, while generating $90 million in free cash flow, and we will work hard to reduce our leverage further. Mike will talk more about strong cash generation and balance sheet in his portion of the call.
In the face of customer disruptions and ongoing headwinds caused by the COVID-19 outbreak during the quarter, we are pleased to report Q1 fiscal 2021 adjusted earnings of $0.92 per diluted share. China was the first economy to bounce back in Q1 after being hardest hit in Q4. European countries are having controlled reopenings, albeit with a reduced demand that was presenting itself pre-COVID. Specifically, EMEA has been softening from our traditional Motive Power OEM customers. Despite these challenges, EMEA demand for higher-margin Motive Power TPPL products continues to improve. In the US, after several weeks of staggered openings throughout the country, we have seen business in energy systems and specialty rebound,