Hello everyone. Thank you for joining us and welcome to the NRSYS second quarter fiscal 2027 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Lisa Hartman Langell, VP of Investor Relations and Corporate Communications. Lisa, please go ahead.

Good morning, everyone. Thank you for joining us today to discuss Enersys second quarter 2027 results. On the call with me are Shawn O'Connell, Enersys President and Chief Executive Officer, and Andy Funk, Enersys Executive Vice President and Chief Financial Officer. This morning we published our second quarter fiscal year 2027 results with the SEC, which are available on our website. We also posted slides that we'll be referring to 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. Thank you so much for joining us today. 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 8K, which includes our press release dated November 11th, 2026. Now I'll turn the call over to NRSA's CEO, Shawn O'Connell.

Thank you, Lisa, and good morning. Please turn to slide four. During today's call, we will review our second quarter results and discuss demand trends across our end markets. We'll also highlight progress advancing our energized strategy, including our recently announced proposed acquisition of Ultralife and new product milestones. We will close with guidance for the third quarter of fiscal year 2027. Please turn to slide five. In the second quarter, we delivered adjusted gross margin expansion, adjusted operating margin expansion, and adjusted EPS growth reflecting the strength of our balanced business within attractive end markets. Looking across our businesses, robust defense demand drove over 20% sales growth in our PPS segment and data centers delivered another quarter of double digit sales growth, driving total NIS segment revenue growth of 3% against an unusually high Q2 prior year. We saw a mixed demand trends in IMS with robust transportation demand only partially mitigating the weight of the broad material handling market softness on total segment performance. In addition to our financial results, we achieved several important strategic milestones this quarter that demonstrate tangible progress towards our longer-term growth objectives. Turning to slide six, we are excited about our recently announced proposed acquisition of Ultralife, a leading provider of advanced battery technologies and power solutions for defense and other specialized applications. Headquartered in New York, Ultralife will bring an established portfolio of rechargeable and non-rechargeable lithium batteries, battery systems, and related accessories. We expect that following closing, these capabilities would help us accelerate our growth in mission critical defense applications, particularly high growth drone and counter drone systems. Turning to the transaction details, under the terms of our agreement, we have agreed to acquire Ultralife for an enterprise value were approximately 320 million funded with cash on hand. Following closing, we plan to integrate Ultralife into our precision power solution segment. We expect to deliver approximately 15 to 20 million in annual run rate cost synergies within 18 months of closing, with the transaction expected to be accretive to adjusted earnings per share within that same timeframe. The valuation applies an 8.3 times multiple of Ultralife synergy adjusted trailing 12-month adjusted EBITDA. Subject to customary closing conditions, including required regulatory approvals, we expect to close in the first quarter of calendar 2027. Until closing, Enersys and Ultralife will continue to operate as separate and independent companies. We are confident that our shared commitment to engineering, problem solving, and customer focus will create a strong cultural fit. Following closing, we look forward to combining our strengths to accelerate growth enhance performance and deliver greater value to our customers and shareholders. Turning to slide seven. Ultralife is a compelling strategic fit for us, complementing our multi-chemistry expertise and our liquid reserve technologies with an impressive patent portfolio and strong, long-standing customer relationships. The strategic rationale for us is highly compelling. First, it expands Enersys advanced defense power technology portfolio with the addition of differentiated multi-chemistry capabilities, purpose-built advanced manufacturing capacity with existing security and environmental permits and operational expertise to scale production of Venice's proprietary liquid reserve battery technology. Second, it would increase our scale and broaden our exposure to the large and rapidly growing defense market with capabilities across mission-critical applications in munitions, soldier power, drones, Counter Drones and Autonomous Systems Accelerating Enersys Focus Growth Strategy. Third, it would deepen our customer relationships by creating a broader foreign entity of concern compliant product portfolio for US defense and allied customers that delivers leading edge cost effective technologies for the increasingly electrified battlefield of the future. And fourth, it supports an attractive financial profile As mentioned, we expect to generate approximately 15 to 20 million in annual cost synergies and for the transaction to be accretive to adjusted EPS within approximately 18 months of closing. Please turn to slide eight. Looking more broadly at our growth strategy to leverage our core technology platforms and leading market positions across diverse end markets, we achieved several important new product milestones this quarter we'd like to share with you now. Starting with our lithium data center offering, We are seeing encouraging commercial traction with DataSafe Noir. We received our first customer order from a provider of backup power for major sporting and entertainment events. Following testing and evaluation, the customer selected DataSafe Noir, noting its high power density is an important factor in the decision. This initial win provides early validation of our technology's differentiated performance and reinforces our confidence in Noir's potential to expand our participation in the growing data center market. I'd also like to address our expectations of the impact from the recent U.S. midterm elections on our data center business. As a reminder, we are in an advantaged position, enjoying over 50% of U.S. market share of lead-acid batteries used in UPS systems. Our data-safe new product launch enables us to expand our share of wallet with existing valued customers who may choose lithium batteries. which is largely skewed to new data center construction. While there is potential for delays in building out these new sites, if this would occur, the ongoing demand acceleration for data would put more focus on existing data centers where we have the leading share position with our TPPL batteries providing the highest energy density of lead offerings. The demand for noir is all incremental to our existing robust data center growth. We took into consideration contingencies for new product ramp timing in our longer-term growth algorithm and thus do not anticipate a material change to our data center outlook as a result of the elections. Within aerospace and defense, our PPS line of business continues to see robust demand and we've received several notable awards in the quarter. We secured approximately $15 million in funding to expand munitions battery production capacity. We also received the $50 million multi-year order in Europe for Soldier Power Solutions. Both of these awards reinforce the breadth of demand for our solutions across US and allied defense markets. Additionally, we continue to make progress advancing plans for our defense-focused lithium cell manufacturing facility in South Carolina. We recently held a week-long planning workshop in South Carolina with our facility engineering, design, construction and technology partners in which we established critical milestones and strengthened execution plans. We are excited and preparing to begin construction in the first half of fiscal 2028 once the NEPA process, which is our gating milestone, is concluded. The material handling, we recognized our first revenue from our next-gen lithium offering this quarter. The strategic new product introduction will enable us to enjoy more growth at a better price point for our customers with higher margins for our investors. The speed of this new product introduction to market is a testament to Energize in action and our Centers of Excellence model taking shape. In addition to these notable milestones to optimize our core and accelerate our growth, we're also making progress invigorating our operating model by strengthening the capabilities needed to execute our Energize strategy. We recently appointed Navi Grewal as our Chief Digital, AI, and Information Officer. In this role, Navi will lead our digital transformation efforts, leveraging data and AI to simplify our systems, enhance productivity, and drive greater operational efficiency across the organization. We are so pleased to have Navi on the NSYS team and look forward to working with her to advance our digital and AI strategies. Please turn to slide nine. Turning to current demand trends across our end markets, Q2 27 orders were up 21% versus prior year with our book to bill at 1.09 and backlog up 36% versus prior year. While orders were up across every one of our lines of business, it is worth noting that PPS orders were up an impressive 203% over prior year on program awards with very robust demand for our critical A&D solutions. Within IMS, transportation orders were up 60% year over year and 45% sequentially, with backlog doubling for the same periods. Material handling orders, however, were down lower single digits year over year as the market continues to show mixed signals on timing of recovery in response to a volatile macro environment. We remain ready to capture pent-up demand to maintain a high degree of confidence that the material handling market will improve later this fiscal year with return to growth by fiscal year end. We also look forward to enjoying the incremental sales of our previously mentioned next-gen lithium batteries and Synova chargers, which we expect will begin to ramp leading into our next fiscal year, and we're off with significant growth opportunities, particularly when integrated with our Fortix Warehouse battery energy storage system mid-next fiscal year. In NIS, communication sales were flat in the quarters, continued strong demand for power electronics, supporting DOCSIS 4.0 upgrades was muted by a strong prior year comp. Data center backlog more than doubled and orders were up mid-teens year over year, reflecting the continued demand for our lead offerings in this space, which will be further complemented by incremental sales of DataSafe Noir. In PPS, we saw strong bookings and backlog increase in the quarter, which I mentioned earlier. Our 21% year-on-year revenue growth was driven by increases across our A&D products, particularly in Soldier Power. In closing, I'm increasingly confident in our strategy and the opportunities across our core markets, with particularly exciting growth opportunities ahead in defense, as well as our new product launches with Noir, NextGen Lithium, our Synova charger, and our Fortics battery energy storage system. We are building momentum in some of the most attractive areas of our business while strengthening our operations and expanding our core capabilities. These efforts are positioning Enersys to accelerate growth and deliver sustained profitability over the longer term. I want to thank our entire Enersys team for their dedication and commitment to our customers. Their hard work is what makes this progress possible and sets us up for sustained compounding financial results. Now I'll turn it over to Andy to discuss our financial results and outlook in greater detail. Andy?

Thanks, Shawn. Please turn to slide 11. Net sales came in at $950 million, roughly flat versus the prior year, as price mix, volumes, and foreign currency translation were all similar to the prior year second quarter. We came in at the low end of our sales guidance range before FX, on prolonged material handling market delays that pressured top line more than we had expected. In the quarter, we had a $2 million or 4 cents per share reduction to tariff refunds that are excluded from line of business results, bringing our year-to-date tariff expense refunds to $29 million or 59 cents per share. We will discuss all results excluding the tariff refund impact to reflect ongoing operations. Excluding the tariff refund, We achieved adjusted gross profit of $287 million, up $10 million or 4% versus same prior year period. X45 benefits and the tariff refund adjusted gross profit increased approximately $5 million or 2% year over year. Q227 adjusted gross margin excluding tariff funds of 30.2% was up 110 basis points versus the prior year. adjusted gross margin X45X benefits in the tariff refund was 25.6% up 60 basis points. This improvement reflects favorable volumes and price mix in NIS and PPS that more than offset the impact of lower material handling volumes and price mix in IMS. Our adjusted operating earnings excluding tariff refunds were $154 million in the quarter, up 15% versus the prior year with a margin of 16.2% and improvement of 210 basis points. X45X benefits and the tariff refund, adjusted operating earnings of $110 million increased 17% year over year with a margin of 11.6% up 170 basis points. Adjusted EBITDA excluding tariff refunds was $172 million, an increase of $22 million or 15% versus prior year with a margin of 18.1%. up 230 basis points. X45X benefits and the tariff refund adjusted EBITDA with $128 million up $17 million or 16% year-on-year with a margin of 13.5% up 180 basis points from the prior year. Adjusted diluted EPS excluding the tariff refund was $3.26 per share, a 23% increase over prior year. X45X benefits and the tariff refund adjusted EPS was $2.06 up 28% versus prior year. Our Q2 of 27 effective tax rate was 12.6% on an as reported basis and 21.6% on an as adjusted basis before the benefit of 45X compared to 22.9% in Q2 26 and 21.8% in the prior quarter. We expect our full year tax rate on an as-adjusted basis before the benefit of 45X for fiscal year 2027 to be in the range of 21.5% to 23.5%. Please turn to slide 12. We are realizing the benefits of our strategy to maximize near-term IRC 45X tax benefits and mitigate future risks associated with potential tariffs while reinforcing our commitment to strengthen domestic industrial security. Our 45X benefits in the quarter increased $5 million year over year on flat volumes as a result of transitioning production from Mexico to our existing facilities in the U.S. Going forward, we will continue to share our results both with and without 45X, but will not be separately guiding 45X. While the tariff policy environment continues to evolve, our approach remains unchanged. We continue to leverage our global manufacturing footprint Sourcing Flexibility, and Targeted Pricing Measures to Mitigate Potential Impacts. During the quarter, we received an additional $28 million of total expected IEPA tariff cash refund following receiving $16 million in cash in the prior quarter. Let me now provide details by segment. Please turn to slide 13. In the second quarter, NIS revenue increased 3% from prior year to $449 million. primarily driven by volume growth against a seasonally strong prior year comp. Adjusted operating earnings increased 38% from prior year to $50 million, primarily reflecting benefits from improved cost efficiencies and higher volumes. Adjusted operating margin of 11.2% increased 290 basis points versus prior year on an exceptionally favorable mix of higher margin products. IMS revenue decreased 8% from prior year to $397 million, reflecting lower volumes and unfavorable price mix from ongoing market softness and material handling. IMS adjusted operating earnings were $38 million, down 13% from prior year, resulting in adjusted operating margins of 9.5% down 60 basis points versus prior year, reflecting the unfavorable mix from higher proportionate transportation sales and lost leverage on lower material handling volumes. While near-term material handling markets remain challenged and recovery is taking longer than expected at the beginning of the year, we expect to start seeing more consistent signs of recovery in Q4 and entering fiscal year 2028. IMS remains very well positioned for growth, supported by our new product introductions and a market recovery. as well as ongoing material handling electrification, automation, and customer enthusiasm for our maintenance-free and charger solutions. PPS revenue increased 21% from prior year to $104 million, driven by strong volume growth in defense batteries and favorable price mix. PPS adjusted operating earnings were $23 million, up 43% versus prior year, driven by the criticality of our product offerings in this very robust market. Adjusted operating margin of 21.9% increased 340 basis points year over year. We continue to have confidence in sustained top line growth and margin performance within this important and strategic segment driven by the electrification of the battlefield and the priority of FEOC compliant battery supply chains in aerospace and defense. Please turn to slide 14. Impressive cash flow generation and a strong balance sheet continue to deliver value and capital allocation options for our shareholders. Operating cash flow of $143 million, offset by CapEx of $12 million, resulted in free cash flow of $130 million in the quarter. As a reminder, last fiscal year, cash receipt of our U.S. federal tax refund happened in the second fiscal quarter, while this fiscal year we received it in our first fiscal quarter. Excluding the cash benefit of 45X, free cash flow was $68 million higher year over year. Fiscal year to date, our total free cash flow of $348 million is up $183 million. Free cash flow conversion in the quarter was 146%. Excluding the benefit of 45X to earnings and cash, free cash flow conversion was an impressive 275% on improved earnings, Discipline Capital Allocation Decisions and Targeted Emphasis to Optimize Primary Operating Capital or POC. At the end of Q2, POC decreased to $836 million versus $877 million at the end of fiscal 2026 on improved receivables measured internally by POC as a percentage of annualized sales improving 20 basis points versus fiscal 2026 year end. Versus the prior second quarter, and others, POC decreased $170 million and POC as a percentage of annualized sales improved 450 basis points on targeted inventory efficiency actions, as well as benefits of our Q3 26 expanded receivables purchasing agreement. As we continue to invigorate our operating model, our COEs are focused on further enhancing POC discipline, which we expect will unlock additional value for our shareholders over time. In the quarter, we repatriated approximately $300 million of cash from EMEA, which was used to pay down a revolver and reduce future interest expense exposure. As of October 4th, 2026, we had $276 million of cash and cash equivalents on hand. Net debt of $555 million represents a decrease of nearly $130 million since the end of fiscal 26. Our leverage ratio of 0.8 times EBITDA remains well below our target range, leaving us with ample dry powder for capital allocation optionality. Please turn to slide 15. Capital expenditures were $12 million in the quarter, with our expectation for approximately $70 million of CapEx in fiscal year 27 remaining unchanged. During the second quarter, we repurchased 679,000 shares for $130 million at an average price of approximately $191 per share, as well as approximately 239,000 shares for approximately $40 million post quarter end as of November 6th. We also paid $10 million in dividends. We have approximately $770 million in our buyback authorization as of October 4th, 2026, and we continue to be judicious in our share buyback activity with the capacity to increase buybacks in periods of market dislocation. While we look forward to closing the pending acquisition of Ultralife, and, following closing, integrating the business. Our capital allocation strategy, including M&A strategy, is unchanged. We will continue to evaluate the creative bolt-on acquisition opportunities that align with our discipline, strategic, and financial criteria and that could strengthen our customer intimacy, enhance technical capabilities, expand share of wallet, and accelerate our strategy in areas where we have a right to win. Please turn to slide 16. As we previously noted, our earnings growth in the first half of fiscal 2027 has been driven primarily by margin expansion and cost management, with top-line growth expected to contribute more meaningfully as we progress through the second half. We are pleased with the ongoing trajectory of our business. Our third quarter outlook reflects continued strength across aerospace and defense, data centers, and transportation, with communications picking up and Material Handling demonstrating early recovery that should transform IMS segment revenue to year-on-year growth. From a margin perspective, Q3 has a few nuances to keep in mind. First, we expect IMS to see margin pressure as transportation outpaces higher margin material handling growth, largely offsetting the margin lift from incremental volume. In PPS and NIS, the project nature of these businesses and related quarter-to-quarter fluctuations create tough comps as both segments delivered exceptionally strong margins in both Q3 fiscal 26 and Q2 fiscal 27. Finally, we're experiencing a step up in some freight and commodity inflation, which may take a quarter to fully recapture. For the third quarter of fiscal 2027, we expect net sales in the range of 935 million to 975 million with adjusted diluted EPS of $3.05 for $3.15 per share. I should note that we're continuing to exclude tariff refunds and any customer reimbursements of refunds from our guidance and will disclose and remove any such impact in our discussions next quarter as we did this quarter to provide better transparency into our ongoing operational performance. Our guidance also excludes any impact of the proposed acquisition of Ultralife We remain confident in our continued ability to generate strong cash flow, invest in growth, and return capital to shareholders. With this, let's open it up for questions. Operator?

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Noah Kay with Oppenheimer & Co. Your line is now open. Please go ahead.

Hey, good morning, all. How are you?

All right, Noah.

Just maybe starting with IMS, I guess first, maybe Give us a little bit of color on the price mix dynamics in the quarter. In an inflationary environment, maybe you can help us tease out what was price versus sort of mixed down. And then really what drives the confidence in materials handling recovery in 4Q and how you think about kind of a level of recovery needed before IMS margins start to improve.

Yeah, nice to hear your voice this morning, Shawn. I'll jump in and then Andy can provide some numbers detail. You know, our price mix calculations, that's where you started, takes into account what we're selling and the relative price and margin at each. I would tell you that it's more a function of less TPPL sales in the period and more flooded sales. So it was more of a mix issue, which is just relative to customer timing. but we you know that leads into the other part of your question and what's giving us confidence in the recovery you know if you saw some of the public reportings there's not many that publicly report from the truck side but sort of their public comments mirror what we're seeing in new truck orders so for example one of the reporters said their bookings are up 45 percent year on year and we're seeing that also in the truck data that we receive and we usually trail that by a couple of months, usually about a quarter tops on when we follow through with the actual battery sales. You'll also note that some of those folks reported being down in a sort of mid double digit teens again this year on a soft market and we didn't see that sort of pain and I think that's, while we were down a little bit, I think it's relative to, we have noted that we've picked up some share particularly in our flooded lead asset offering and been able to leverage a soft market to gain in that way. And also we have the continued benefit of the replacement market. So we do see it picking up. We have seen in earlier periods of the year some spikes in the order book. This one seems to be more meaningful. and I think we're ready to capitalize on it when it happens. Andy, would you add anything to that with the mix?

I'll add a few things, Noah. Good to hear your voice as well. The mix issue, there's actually a bright side to it. Two things. Number one, transportation is picking up, which we think could be a leading indicator of what we'll see in the forklift market when that comes up. These are large capital market decisions. a lot of which are indexed off of interest rates as far as when they decide to pull the trigger and as you know our transportation business I think we mentioned is up you know revenues up in the mid-20s so good signal there lower margins so you get a little bit of mixed pressure from that and then the other positive signal within the material handling mix component is we've got two very strategic significant new product launches that are going to start to kick in in Q3 and more in Q4 leading into the next year with our Gen 2 lithium batteries and our chargers. With selling a new chemistry like lithium, there tends to be a high attach rate to chargers. And also when you buy a new forklift, oftentimes the customer will place an order for a charger at that point in time. And our chargers are our highest margin portion of our material handling piece of our business. So we've got a high degree of confidence that as material handling comes back and these new product introductions come out, The margins, I can't see any reason why when things normalize, this shouldn't be mid to high teens business. And as that comes back, that should happen pretty quickly. The question is going to be the pace of the crevy, which was the second part of your question. I'll give a little data to support some of the things Shawn had mentioned. The market is showing recovery signs, although it can be mixed. You know, we have trade data. continued to show confidence for calendar year 27 growth by nearly 100% of the respondents, but they had some cautiousness in the expectations for the balance of 26. Another, there's one large OEM truck manufacturer has sort of things very consistent with what we're seeing. They said they had a miss in revenue, noting customers hanging onto lift trucks longer than normal, budget uncertainties, exactly what we're seeing with some delays into Q4. but their bookings were up 45%. So we understand the lag is frustrating. It's frustrating for us, but we really aren't concerned at all. It's just a matter of timing. We have so many great opportunities in front of us and the fact that we're able to deliver results like we did with this lingering market softness, the benefit when it comes back and then add to that more Gen 2 lithium, the Sinova, the Fortics, which integrates all three in the market recovery, gives us a lot of confidence going forward. Hope that helps.

It does, thanks. I'm just trying to think through cadence for NIS from here through the balance of the year. You called out some of the margin comp challenges from 3Q of last year, which you were at 10.9% margins in the segment. That had been a big step up sequentially from 2Q. So, you know, recognize that there may be some mixed issue there. But I mean, is the right way to think about this just, you know, lower margins, but higher volumes, higher revenues. So just a little bit lower incremental margins. I mean, I think just directionally trying to figure out how to model the cadence of the segment, especially with the continued kind of growth and backlog and DC orders.

Yeah, I'd be happy to answer that as well, Noah. The ongoing trajectory of this business is fantastic. I mean, you look in the quarter, you know, if you've got NIS was up, revenue was up 3%, but you had margins of AOE up 45% with a 320 basis point improvement in margins. But what we've said, and I think we called this out both last year as well as last quarter, there's a project basis to this and then there's also some larger customers and especially in December every year there can be some nuances of pulling in and pulling out if you recall last year in our third quarter we had some customers in the second quarter that had pulled their orders into second quarter and then pushed out and those were larger lower margin portions of our business the trajectory is great but quarter by quarter there can be a little bumpiness so for example if I just look at revenue and NIS and go quarter by quarter from Q1 through Q2. 391, you had that spike up last year of 435, down to 400 in Q3, then 426, then we had 428 and spike up this quarter of 449. Next quarter, you're going to have a nice year-on-year volume increase, but sequentially might be a little bit of a step back. Same thing, you look at margins, 7, 7, 8, 3, 11, 5, 11, 10 and a half, 11, 2. Nice trajectory. a little bumpiness quarter by quarter last Q3 11 and a half was a stronger margin on a lower revenue we're just going to be continuing with that trend line but um you've got Q3 of last year at 11 and a half percent AOE Q2 of this this year at 11.2 you're just going to be normalizing a little for that so you might have a little bit of a step back in margin temporarily but still following that trajectory of ongoing margin improvement so it's just um Again, nothing concerning. It's just if you want to model it, you've got to more look at averaging some of this business versus each quarter being an independent data point.

That's very helpful. I'll turn it over. Thank you.

Sure. Thanks. Thanks, Noah.

Your next question comes from the line of Brian Drab with William Blair. Your line is now open. Please go ahead.

Good morning, Brian. I can't tell if that's the AI agent that helped me get on the call or not, but I'm glad I corrected the spelling or the pronunciation of my name. It was pretty funny what the agent thought what my name was. So first I just wanted to ask on telecom, I don't see anything in the transcript and I had to join a little late. I don't see the mention of the word telecom in the transcript yet. I don't see it in the press release or the slides. I'm just wondering, did I miss something or can you talk about what that, I think that's still roughly like 20% or more of sales, what you're seeing specifically in telecom at the moment.

Yeah, Brian, good morning. Shawn, good to hear your voice. Before Keith came in, when I took over what was the energy systems business, we made some part of our operational overall was to merge our telecommunications and broadband business and we began referring to them collectively as communications and we will give color on like XM3 and broadband and you know what's happening in the wireless carriers and that type of thing individually or separately when we have updates to give but we do refer to them collectively as communications and you're correct our mix hasn't shifted much. So we talk about in the script, you'll note DOCSIS 4.0 continues to be fairly robust for us and is going well. A little bit choppier on the historic telecommunication side due to the project orientation of that business. And if you recall earlier in the calendar year, we were able to, in the last fiscal year, capitalize on some due to Energize, some nice cabinetized order systems for a large wireless carrier where we picked up some share and we saw that project move through the pipeline. But anyway, that's how we're reporting it. Based on that, did you have a more specific question about it?

Brian, I can give you some.

The specific question was just how much our telecom sales down because I'm seeing other companies like companies I cover like Valmont and Generac getting hammered in backup power and anything related to telecom and the carrier spending right now. And it's just been such an important part of the story here historically that I'm just surprised you're not talking about it.

Our comp business is doing well. Year-on-year we're flat, sequentially up about 6%. Year-on-year we'll be up again, but that gets to some of the comments that I was making on the choppiness in the NIS business. we have as you know some large customers both on the telecom and broadband stage they've got year-end budgets so that's what affects kind of that quarter to quarter and if you recall last year that's where we talked about we had some some of our lower margin it's mostly enclosures that have been pulled into our Q2 so our Q2 number was up that's why we have the flat year-end year but next year you know next quarter we're going to have a lower revenue but a higher margin because some of that Lower Margin Business have been pulled into Q2. So that's what we were referring to. But overall, the business is doing real well. And at the end of the day, there is a lot of demand for data. And the network upgrades are essential to support that data movement. So really, we have durable demand in there for reliable solutions. And we've got some good things coming with our XMH savings platform that we've received awards. And we have some field trials that are targeted starting this month with production next year. So good things in front of us. We didn't have any more comments just because I think there wasn't anything explicit to mention.

Yeah, Brian, where we might differentiate a little bit from some of your other coverage is just similar to material handling. We have the replacement aspect of the battery portion of the business in these accounts. So we tend to have a little bit more resiliency when they're not doing large project deployments. We've seen very few times in our history where they shut off that break-fix maintenance budget. We saw one in 2024, for example, but that's very unusual. We typically have, you know, a standard operating run rate with the replacement side.

Okay. Yeah, I mean, I don't know if I missed it, but I'm just wondering within comms, like how much is broadband up and how much is telecom down? But I'll leave it there for now and follow up more later. Thank you. Sure. Thanks, Brian.

Thanks, Greg.

Your next question comes from the line of Greg Lewis with BTIG. Your line is now open. Please go ahead.

Yeah, hi. Thank you and good morning and thanks for taking my questions. You know, I was hoping you could talk a little bit more about the, you know, the pending Ultralife acquisition. You know, I guess kind of The genesis of that, you know, we've kind of poked around and see what, you know, see how it scales you into the A&D business. But, you know, just kind of curious, you know, how we should be thinking about that. And I guess our, you know, opportunity for synergy, does it tie into, you know, the cell facility that we're going to be building, I guess, over the next couple of years? Yeah, that's kind of my first question.

Yeah, so good morning and great to hear your voice, Greg. Thanks for joining us. Yeah, listen, we know this business very well, having operated similarly in the space for a long time. And they have some, as we noted in the public comments, they have some very attractive chemistries. Some look a lot like the chemistries we're already doing. Some are new chemistries. and they'll be very helpful as we mentioned in pursuing drone and counter drone. They also, as we mentioned in the public remarks, have a purpose-built lithium reserve battery facility and Enersys operates in the liquid reserve space as well. Although we have a different, we've been more defense market orientation where they've been oil and gas for the liquid reserve, but nonetheless, it's a purpose-built facility that they have that has already got the permitting and understands the chemistry and how to handle that specific chemistry. And we have a need to expand. So for that, for us, it's just an accelerator of our expansion plans into that space. So we see this as a very good fit. You know, there are certainly things that, you know, we're still separate companies. So, you know, we won't have a full plan until we close after the first of the year. and have the opportunity to fully dig in and understand how the pieces might all come together. But back to your point in terms of how it looks in the defense space, we find it very, very compelling. We see those chemistry opportunities just augmenting what we already do in our nine chemistries of lithium today. And we're very excited about it. Plus, we're very excited about their team. They're a very, very good team over there. And they understand how to how to operate in these chemistries and how to deploy these chemistries, which would be a great fit with NRSYS.

Okay, great. And then my other question was kind of around the backlog. I feel like over the last couple months you can't turn on the TV or look at the news and not see something about data centers. And so really what I'm kind of wondering is, and maybe we can talk to data centers, maybe we can talk to other pieces of the backlog. Has there been any shifting of the backlog? I mean, I imagine historically things in the backlog always push right. I guess I'm curious, you know, over the last couple months, have some things pulled forward, other things pushed down? Any kind of noticeable changes to the backlog or is it really across the, you know, is it kind of just business as usual?

Yeah, so I'll take that one too. it is pretty much business as usual and I just want to speak to give you a specific example in the data center space that you mentioned it but you know our TPPL battery offering is the highest energy density battery offering in lead acid and is in fact it can do sub five minute rates it can do a lot of the things that lithium is doing without having to do new fire suppression systems or permitting or that sort of thing associated with lithium batteries because of the fact that it is sort of a safe, high-performance chemistry without those other concerns, all of our growth today, Greg, has been in brownfield data centers where the permitting already exists, the architecture already supports this chemistry, where there isn't a need to or capability to go out and redo that architecture. And so all of our growth has been in brownfield and even if the AI thing were to slow and without debating that point, we don't really see any cessation in brownfield expansion because even without AI, there's just this climbing need for data, data processing, data transport. So we've got no indication in our order book, our backlog, no indication from our customer base that that would change. In fact, we just continue to see adding to that backlog and adding to see new projects come online. As we get into data safe noir, that is our lithium offering. And that for us is expansionary and is accretive. There shouldn't be any of that that is cannibalization for us. But even there, our pipeline is increasingly robust. I think we have over 80 opportunities and Salesforce is our CRM. and representing over a thousand battery cabinets to date that are coming online. So we feel very good about where that's headed. I do believe also that what we're seeing from our customer base and from the data center operators and builders that they're willing to lean in more and work with their regulatory environments, work with their local and state federal officials to do more things to benefit the communities where they want to build these centers. So I am in the camp that I believe this will all be worked out. There's a lot of tax revenue to be had and a lot of really high-paying middle America jobs associated with these centers. So I tend to trend more optimistic. But in terms of the data that we're seeing, what we're seeing in our order book, really no change.

And I can give you a little bit of some framing by segments. Greg, if that's helpful and good to hear your voice as well. Year on year, our backlog is up 3% in IMS, trans up and obviously material handling, still feeling that pressure. NIAS is up 26%, PPS up 102%. Our quarterly backlog coverage is 1.3, which hasn't been, I'm looking at last quarter it was 1.1, last year it was 1.0. nice increase there you mentioned data centers data center bookings are up mid-teens and that's all again our lead asset portion of the business Shawn mentioned we got you know the nearly 80 customer pipeline opportunities with a thousand cabinets in our order book there's only six cabinets so far so obviously as we said it's not going to be a material piece this fiscal year but there's a lot of activity which gives us a lot of confidence in the fiscal 28 opportunity there so the lead asset will continue and then The Noir should be incremental.

All right. Super helpful. Thanks, and have a great day.

Thanks, you too, Grace.

Your next question comes from the line of Chip Moore with Roth Capital Partners. Your line is now open. Please go ahead.

Hey, morning. Thanks for taking the question. I wanted to ask one on, hey, Andy, Rand, you talked about midterms on the data center side and laid out some good color there on, you know, TPPL and your position. I'm curious, your thoughts on midterms on aerospace defense, if any, you know, just given some of the changes.

Yeah, hi, Chip. I'll lead in there. You know, none of our markets and our strategy about electrification, about bringing more energy efficiency to our customers. None of that seems to be across any of the dialogue in jeopardy or in challenge. And, you know, early stages from what we've seen in the bipartisan support that has existed in domesticating battery and FEOC compliance, that all seemed to have prevailed pretty well in the midterms. and I'll just remind you that the, you know, the whole impetus to start domesticating supply chain started in the Biden administration. So 45X, it was first introduced in the Biden administration. The FEC compliance now at the time, you know, what was different was the language. The language was more around green and other sustainability and other types of language, but bipartisan support for the critical elements and the critical drivers of domesticating those supply chains was very strong. It continued in the Trump administration. It was reaffirmed. We don't anticipate any major change. And we have very good representation on the Hill giving us an early view. And we're going to continue to work our plan. But as I said, nothing about the things that we're addressing seems to be at issue in terms of our desire to solve energy security, labor scarcity. They just don't seem to be in play for political discourse. They seem to be supported sort of table stakes items for both sides of the aisle. So we're not overly confident, but we're optimistic.

Perfect. Thanks very much.

We have reached the end of the question and answer session. I will now turn the call back to Shawn O'Connell, President and CEO, for closing remarks.

Thank you, Melissa. Thank you all for joining us today. We look forward to speaking with you again soon. Have a great day.

This concludes today's call. Thank you for attending. You may now disconnect.