EnerSys generated $230.2 million of operating cash flow in its fiscal first quarter of 2027, up from less than $1 million a year earlier, as stronger earnings, improved working capital and a U.S. federal tax refund helped drive free cash flow conversion to 187%.
Free cash flow reached approximately $217.8 million compared with a $32.1 million outflow in the prior-year quarter. Capital expenditures fell to $12.4 million from $33 million, while operating cash flow increased to $230.2 million from just $1 million. EnerSys said the improvement benefited from higher earnings as well as the receipt of a U.S. federal tax refund.
The cash generation came alongside stronger operating performance. Net sales increased 4.8% to $935.6 million from $893 million, with the growth consisting of approximately 3% from pricing, 1% from foreign currency translation and 1% from organic volume.
Gross profit increased to $313.4 million from $253.2 million, while gross margin expanded 510 basis points to 33.5%. Even after excluding benefits from the IRC Section 45X Advanced Manufacturing Production Credit, gross margin increased 440 basis points to 28.5%, pointing to substantial underlying improvement in profitability.
Operating earnings increased to $151.4 million from $86.5 million. Adjusted operating earnings rose to $178.8 million from $121.5 million, while adjusted EBITDA increased approximately 50% to $195.8 million from $130.5 million.
GAAP net earnings more than doubled to $116.5 million from $57.5 million, while diluted EPS increased to $3.09 from $1.46. Adjusted diluted EPS increased 64% to $3.66 from $2.23 and finished above EnerSys’ prior guidance range of $2.80 to $2.90.
The company’s underlying earnings growth remained significant even after stripping out government manufacturing incentives and a one-time tariff-related benefit. Adjusted diluted EPS excluding IRC 45X benefits increased 92% to $2.41. After also excluding $30.9 million of tariff refunds received during the quarter, adjusted diluted EPS was $1.78, still representing 42% year-over-year growth.
Management attributed the performance to strength across several infrastructure-oriented markets. Data centers, communications, and aerospace and defense continued to generate sales growth and margin expansion, offsetting a slower-than-expected recovery in material handling. EnerSys also said improved volumes and favorable price and mix in its Networked Infrastructure Solutions and Specialty businesses helped offset weakness in Motive Power.
The company continues to invest in next-generation products and production capacity despite the lower quarterly capital spending. EnerSys said it is advancing commercialization of new products, progressing its planned lithium cell facility and expanding services capabilities. The company has also highlighted energy security and labor scarcity as customer challenges it believes its storage technologies can address.
EnerSys’ stronger cash position also supported capital returns. The company returned approximately $59.6 million to shareholders during the quarter, including $50 million used to repurchase about 219,000 shares and $9.6 million through dividends.
The board subsequently increased the quarterly dividend by 10% to $0.2875 per share, marking the fourth consecutive year of dividend increases. The dividend is payable on October 2, 2026, to shareholders of record as of September 18.
The balance sheet also strengthened considerably. EnerSys ended the quarter with $530.7 million in cash and cash equivalents and net debt of $521.5 million. Its net leverage ratio declined to 0.8x EBITDA from 1.6x a year earlier, reflecting lower debt, higher earnings and the federal tax refund.
Looking ahead, EnerSys expects second-quarter fiscal 2027 sales of $955 million to $995 million. Adjusted diluted EPS is expected between $3.15 and $3.25, including expected IRC 45X benefits, while adjusted diluted EPS excluding those benefits is projected between $1.95 and $2.05.
Management expects earnings growth during the first half of fiscal 2027 to be driven primarily by margin expansion, with a shift toward stronger top-line growth later in the fiscal year. That expectation assumes an eventual recovery in material handling alongside continued demand across data centers, communications, aerospace and defense, with early signs of recovery also emerging in transportation.
KEY QUOTES:
“In the first quarter of fiscal year 2027, we delivered top line growth aligned with our long-term value creation framework. Adjusted diluted EPS excluding IRC 45X increased 92% year-over-year, or 42% year-over-year excluding a one-time benefit from tariff refunds, demonstrating the effective combination of our diversified business and EnerGize strategic framework.”
“Momentum across data centers, communications, and aerospace & defense is generating strong sales growth and margin expansion, offsetting the delayed recovery of material handling demand, and enabling another record first quarter result. We continue to advance on the commercialization of our next-generation products, progress on our planned lithium cell facility, and expand our services capabilities to accelerate our growth.”
Shawn O’Connell, President and CEO of EnerSys
“We also delivered exceptional free cash flow conversion of 187%. Excluding the benefit of the tariff refund in the quarter and normalizing for stock compensation accounting changes, the underlying performance demonstrates a record first quarter and that our actions are delivering meaningful results.”
Andrea Funk, Chief Financial Officer of EnerSys
