Okay. Good afternoon. Thanks for joining this fireside chat, which will be preceded by a short presentation. I'm here, my name is Tripp Caldwell. I'm with Wells Fargo on the banking side, and here with me from EnerSys today is Mark Matthews, who leads the specialty business for the company, which includes aerospace, defense, and transportation. But Mark has a lot of experience and a range of responsibilities for EnerSys, which we'll touch on today, and Lisa Hartman, who leads the company's investor relations function. Mark, I'm gonna start by allowing you to provide a brief overview.
It's the first time EnerSys has been to the Industrials Conference here at Wells, so thought it might make some sense just to give a quick overview of the company, and maybe as you do that, introduce yourself and some of your background and responsibilities for the business.
Okay. I'm gonna stand up if that's okay, just to go through this presentation, 'cause I, if there's 100 or 5 or 2,000 people, I get really excited about batteries, so I wanted to go through this and make sure I talk. First thing, just to make sure you're aware, we're gonna have some forward-looking statements today. Per the standard, we wanna make sure we show this presentation as we look at moving forward and some of the numbers we're gonna talk about. So, just to give you a little bit of my background, I've been doing batteries now for 30 years.
So I've been doing—I'm a chemical engineer, designed batteries for aerospace and defense, going back to the mid-early 1990s, which is scary, and was told this morning that batteries are sexy, and I was like, "Well, that's the first time I've heard batteries are sexy in 30 years," so I'm finally making it to get to that point. So just to give you a background on EnerSys, we're a $4 billion company, $4 billion market cap company. Really focused globally, but our presence is really strongest in both the Americas as well as in Europe. So we'll talk a lot about the opportunities we have, the business segments we have, and where we're headed. But what I'd really like to talk about is the customer base that we have, 10,000 customers over a variety of applications.
So one thing that's always a challenge when we talk about EnerSys is understanding our different business segments, understanding how a common core of technology, batteries, inverters, electronic software, can be applied to a great deal, a number of industries, from aerospace and defense, to the James Webb Telescope, to powering 5G networks. All those similarities come out, and we're able to play in a lot of those industries with a very unique set of capabilities that we put in place. So this is kind of who we are. I'm lucky enough to be able to run the specialty division. Typically, if I was not using a corporate presentation, I would show you pictures of all the cool things we do in specialty, because it's missiles, it's missile defense. We do the James Webb Telescope.
We do a lot of vehicles for military applications and over-the-road trucking. So I'll spare my counterparts showing them fork truck batteries versus the James Webb Space Telescope one last time. So when we talk about where we're positioned for long-term growth, this is really the strength of EnerSys. We have a highly diversified portfolio of products and energy solutions, and that's to match up with the highly diversified markets that we go after. We'll talk about those markets and those segments, but I think the most exciting part for us, as we talk about the future in the next three to five years, is this evolution of electrification in the field. So, everyone understands electrification in the automotive industry. What we're seeing is electrification across all industries.
We see it in telecom, we see it in broadband, we see it in the motive power, fork trucks. We're seeing it in transportation, and we're seeing it in aerospace and defense. So we're seeing this electrification piece becoming more and more critical, not only for mobilization, but also for decarbonization. So both those things are elements to us as we go forward, and we'll talk about them today. Very resilient business model, and really a fundamental focus on making sure that we are fiscally responsible, and we make the right investments as we go forward into not only our future, but into our markets, make sure we have the right products as we move into the next generation. I started eight or nine years ago now. David Shaffer, our current Chief Executive Officer, started in 2016.
At that point, we were a flooded lead-acid company. So what we did, and grown this company around, was flooded lead-acid into telecom or Motive Power markets. We, at that point, decided that we needed to change who we were, and we started this trajectory of change from both a chemistry standpoint, but also from an electronics standpoint. And we've made investments over the last eight years to transform ourselves from being a flooded lead-acid company to a solutions company. And a big part of that, for us, was gaining the electronic solution, but also evolving our existing lead-acid chemistry into Thin Plate Pure Lead and now lithium technology. So as we've made that road, if you'd have looked at us in 2016, you would have seen a company that was 78% of every battery we sold or every dollar we earned was on flooded lead-acid.
If you look at us now, we're about 60% everything but flooded and 40% flooded. So we've started this transition and are at an inflection point on our journey to continue to move forward into optimizing that solution. We have four segments, so we'll start with specialty because it is my favorite of the four. So specialty really is focused on the transportation, aerospace, and defense, and when you think about what we do is we do large fleets. So we won, just recently won 70% of the United States Vehicle Army Command's DLA, Defense Logistics Agency, orders for the next generation of lead-acid batteries to power their vehicles.
So for us, that's a huge win, but we see the same thing happening in the rest of the fleets we address in the transportation market. So we'll see 1 out of every 3 batteries now that are coming off the OEM lines, 1 out of every 3 Class 8 trucks coming off the OEM lines are powered by our Odyssey product line, and that's because of the capability it provides to them. It provides an ability to provide a product that does multiple things, but ultimately, it eliminates the need for an APU. We know the non-idle performance that's required in trucks are now made capable by an advanced technology that we developed. Similarly, in energy systems, this is data centers, telecoms, telecom, communication network. This is backup power and power for things that cannot fail.
So anything that you're talking about, the CVS model that we did in California, where we're doing lithium-ion and lead-acid solutions into providing structure and stability into the grid networks or into a telecom system, we're providing backup and sustainable power for telecoms, 5G, 4G networks that are going forward as we move into 6G. Those are all basically the same type of technologies applied in a different way. Similar in motive power, where we're really leading the change between going from fuel-powered or propane-powered trucks into electric trucks. We see that in the moving from our flooded batteries to our thin plate pure lead, and ultimately, to the lithium and motive power as we continue to dominate that market.
And then new ventures, this is probably the one of the most exciting things we've taken on in years, which is, we'll talk about the lithium plant that we're potentially going to build, and we're also going to talk about our fast charging storage, battery energy storage systems on the grid that are helping solve some of the grid's problems today. Okay? From a modular standpoint, this is probably one of the most important slides I want people to understand, because we talk about an incredible number of end markets, but we want to talk to around how do we solve those problems with a finite number of solutions.
And so when you look at EnerSys, really what we do is chemistry on the left-hand side, so flooded, thin plate, pure lead, or lithium-ion, and then we combine that with our power electronics and our software. And that enables us to solve that variety of solutions that we have. So that may be a trucking solution with intelligence, up to an AI-driven fast charger storage solutions that's monitoring the grid and providing offsets to peak demand charges. We do both those things, and we have the software and capabilities to do all that moving forward. So when you look at our technology portfolio, this is where we fundamentally changed over the last eight years. We just would have been the bottom left to start with.
Everything else that's on that sheet is new to us and is new to our customer base as we've evolved in the recent years. The addressable markets, so this is something that we like to talk about a lot. It is really where we are coming from, from a, from a market size. So we view—we have a $30 billion addressable market. We're at $3.6 billion. How do we grow market share? We grow market share by moving up the supply chain and also riding these energy transition waves that are happening. So we see, we see energy transition, industry security, you know, connectivity, automation, decarbonization. So batteries, particularly advanced batteries, are the key to make all five of those things happen.
So when we look at what we're building there for an energy transition, modernizing grids, for example, you're going to have hardware invest into grids as EVs come online, and we put stress on the grids, but you're also going to have a significant part of that solution is just level loading the amount of power on the grid, and that's what Battery Energy Storage Systems can do, and that's what our new solutions do. Energy security, if you're talking to base power in the military, or we're talking, telecom power, having energy security, having the energy secure, having it safe, having it known, and also having it 100% reliable, is critical, and that's what we've been able to accomplish with our product portfolio that we've built. Then we look for automation.
This is really where we see motive power starting to take charge. We see investments being made all the time to increase automation into data distribution, into warehousing, into logistics centers that are moving our goods and services. That's become more and more a part of our future, and that's where lithium plays a significant role. So we still have large lead-acid batteries for significant size fork truck entities for fork truck batteries. We're now seeing some lithium being rolled in there, and even on the smaller side, like an AGV, that might be lithium-powered going forward. That's critical to us, that we service our customers from the largest of fork trucks up to the smallest of AGVs, so we're making that happen. And decarbonization, this is a weird one I heard the other day.
We were talking to Sam Sharaf, who runs our sustainability program, and he indicated the amount of fork trucks that we sell, have sold, has reduced the amount of cars, the equivalent number of cars in the U.S., of 1.6 million. So when you talk about decarbonization, moving to electric, putting electric into a solution, taking a fork truck, going from propane to electric, has a massive impact to the 1.6 million cars. I just found that to be a really big stat in terms of where we are along this road. I like this slide, so I'm going to spend one second on this slide. This slide is really the core of what specialty and why specialty has grown. So we have really focused on a cyclical nature in terms of product development.
So you know, we've kind of trained our people within our group, our engineers, our program managers, our sales team, as all around creating a customer experience where we're getting that customer feedback back and then aligning technology roadmaps. It seems simple, but it's a really powerful tool that you can go to any one of our customers, be it Raytheon, be it Daimler, or whoever it may be they're working with. We are engaged in their technology roadmaps to make sure we have the right product today and the right product in five years. And so when we talk about what we're doing and the investments we're making as a company, it comes back to innovating to that technology roadmap, and then how do we optimize and accelerate that as quickly as possible?
As soon as we've done that, how do we obsolete what we've already done? So that has been a very strong point of what EnerSys, and particularly the specialty group, has done to experience the growth we've experienced. When we talk about sustainability and what our journey looks like in sustainability, this has probably been, in my time at EnerSys, a huge change that we've seen. So we've our Class 1 or our Class 1, I think it's Class 1, reduction is 25% in the last five years in terms of our emissions. We've now that we started by just defining who we were, putting a plan together of who we're going to be, and now executing on taking the cost, and taking the carbon footprint down to a reasonable number.
We've done that over the last five years, and that's really just the beginning of our journey around sustainability. I can say that, you know, all 11,000 people in the company have embraced and appreciate that, particularly our younger generation of engineers, that, that really see this as a reason to be part of our company, that we're part not only of a journey on our own, but a larger journey in society around reducing sustainability or increasing sustainability and reducing our carbon footprint. So just to kind of give you a highlight on last year's numbers, had a very good Q4 for us. We've really seen our adjusted EBITDA grow. Now, keep in mind, some of that is the IRA benefit we receive on our batteries.
So we received around $130 million in benefit last year from the IRA. But even taking that out, we saw significant growth in our EBITDA numbers year-on-year, and that is the focus of our success. How do we continue to see the top line grow in the face of some of the telecom challenges that we have, and then maintain the financial discipline to see that bottom line turn out. And that's these numbers are the result of a lot of efforts throughout the company to make sure that we saw that $500 million of adjusted EBITDA become a reality for us. Okay? All right, so two things that I wanted to talk about that are particularly important to me. The first is the Bren-Tronics acquisition.
So Bren-Tronics is a company in Long Island, New York, has an incredible reputation in aerospace and defense. I've known the management team there. Our team's been engaged with them for 20 years, doing programs together, having a lot of respect for what they do. We agreed to acquire them. We came to terms about 6 weeks ago. We're going through the antitrust period, both here and in France. We expect that to be through and closed here in the next few weeks. This represents a significant growth for us, and it not only because we love what they do in the soldier power market, we love what they do in the end markets for directed energy, for energy security for the military. We love what they do, too, because a lot...
They buy cells to go lithium-ion cells to go into their products, and we are now able to build those cells in a new factory and completely vertically integrate with them. So as we grow and as the criticality becomes more and more important to see U.S.-manufactured cells and things like the defense industry or things like the U.S. grid, this is a partner for us that has the electronics, the packaging, the hardening, that allows us to really throw our cells up through that entity and become a fully vertically integrated supplier to the Department of Defense and some other security forces through making not only the cells, but the batteries and ultimately the charging solutions and vehicle hybridization, hybridization batteries through Bren-Tronics. So huge opportunity for us.
Really excited to have them on board, and represents a significant expansion in the specialty line of business as we go forward. And probably the last, probably biggest initiative that I'm personally involved with is the Gigafactory. So about 18 months ago, we got approached by the Department of Defense saying, "We need to increase our, the number of cells that we're making. We need U.S.-manufactured lithium-ion cells." We worked with them, and ultimately, the Department of Energy has come up with this opportunity to help fund this. So we've gone through the work of identifying a model that makes sense. We've done a down select of facilities, and we are waiting to see how we make it through with the Department of Energy grants that are coming out in August.
But we're optimistic that if we're successful in that, we're gonna be able to move forward with the board approval of building this Gigafactory. This is a 4-gigawatt-hour facility dedicated to providing battery cells to our own products, to vertically integrating our own products with lithium-ion cells. We're gonna use an NMC chem technology, so we're building a high-energy density cell. We've been able to find great partners in this space from the facility side, we've been able to find great partners from the design side, and ultimately, you've probably seen we're working with Verkor on the electrode manufacturing side. And the thought there is, we know how to make lithium-ion cells, we don't know how to do them at speed.
So what the partnership with Verkor does, it gives us the ability to make to really accelerate our learning on building anodes and cathodes through that facility at hundreds of meters a minute. So instead of doing it at hundreds of meters a day, we're doing hundreds of meters a minute, and that allows us to have confidence that this is gonna be successful for us going forward. And I think what we found with the ROIC model and not getting too high on our leverage levels here, we're gonna maintain below our 3x leverage target model. It's a very accretive ROIC model that we've built around this plant, and if everything goes the way we expect it to, we'll be breaking ground by the end of this year, early 2025, and be building cells at the end of 2027.
So this is a huge initiative for EnerSys, but I think it's one that really helps us continue that evolution from being a flooded to a thin plate pure lead, to a lithium chemistry, de-risk our entire supply chain going forward, and de-risk the cost of our customers for qualification. One thing that our customers know is that they don't have the buying power of Ford or Tesla. So for us to be able to have access to a chemistry that we can make cheaper than we can buy it, and then integrate into our systems, that's a huge solutions, solution opportunity, not only for us, but for our customer base, and there's been a lot of support as we started to roll this out.
So you'll be hearing more about this going forward, but this is probably one of the largest initiatives we've had in many years, and it really sets us up for growth in the future. Just a couple more slides before we get to questions, so you don't have to listen to me talk a whole lot longer. We're looking ahead at where we're going. So, you know, we've gone to yearly guidance at EnerSys, so you can see where we're headed next year. Significant improvement into not only the top line, but the bottom line going into next year. Really, the key for us is the return of telecom. So we are watching that telecom market.
We know we're starting to see some good signs that the activity is starting to pick back up, but we haven't, you know, we, we still expect those to see that really turn into orders the back half of last year. But certainly, conversations are headed in the right direction. Motive Power and Specialty are very heavy. We had, you know, a record, my highest quarter in the history of specialty, in terms of order intake, was Q4. Massive order intake that we're working with right now to be able to, to execute. So what we're doing is putting our capital to use to make all these things a reality.
So just for example, in my division, what we're trying to do is invest into our Missouri facilities to give us more flexibility on the lines to build products for specialty as telecom is lower on demand, and then when they come back, we'll have added capacity for the entire company. So we're making those investments to come online now. We're investing in the fast charge and storage systems. Those will be the first units are being installed in August or by the end of this end of Q2. We're excited about that, to demonstrate those first 15 units and then grow that particular market. I think that's gonna be a huge opportunity for us long term.
And then really look acquisition-wise, how can we use this cash that we're generating to make the right acquisitions in that $100-$300 million range that allows us to continue to grow, continue to keep our leverage number at a reasonable level, and continue to execute on all these large initiatives that we've put together? So it's an exciting time for us, and I think if you look at what that means for us long term, we really think we're on pace to start to approach $850-$950 million of EBITDA by our FY 2027.
We have visibility to 10% year-on-year CAGRs, and this really is a focus on seeing the telecom markets come back, continuing to grow in the existing markets we have, and then start to expand in that fast charge and storage market and some of these other acquisitions that can be accretive to our model. This is really, for us, the keys, the keys for success. Obviously, there are concerns with geopolitical tensions, general economic conditions, but one thing we love about our model is that we have great diversity in terms of our model. One, one market doesn't necessarily make or break us. So as we look at this, we need to continue to grow on all fronts. We always say there's like, it's a very shallow pool, and we're, we're three feet deep in any of it.
We're not the Mariana Trench in any one dip. So we have a large, large number of shots on goal, and we need to be successful across the board, and that allows us to weather some of the storms that we see from market conditions. And then finally, before we go into questions, is just kind of the compelling investment thesis for us. You know, we are in the process and in that inflection point of transforming this company. We're gonna continue to drive through that. We're seeing the benefits of that. You know, as we grow forward, you're seeing the benefits from a margin perspective, and you're seeing the benefits from that.
Certainly from a growth perspective, as we look out to 2027, we feel like we're in the right markets to take advantage of our technology and to value our technology, to make sure we're paid what we need to for that. And then we have a team that's very excited to continue to grow. So with that, I'll let Tripp ask any questions, but I just wanted to go through that and kind of give you a background of what I think of EnerSys and how we're moving forward. Thank you.
Great. Super. Thanks, Mark. That was a great overview, and I think gives a wonderful framework for the vision of the company and the market you're serving. Maybe a little bit more real time.
Mm-hmm.
I think it would be helpful if you could provide an update on what's happening within the segments currently.
Yep.
You noted the telecom weakness. How is that unfolding, you know, today? And what visibility do you have, what data points do you have to encourage you that it's getting better?
So I mean, the telecom market, you know, Shawn and his team have done a great job of reacting over the last six months to the reality of what those markets are. We've seen... I think everyone knows there's been a hold off on the amount of investments that is made, particularly the CapEx investments made in those markets. We know over history that they will return.
Mm-hmm.
So our challenge has been: how do we structure ourselves or restructure ourselves to be able to weather this storm, to maintain the cash coming into the company that we need to? And where we see it starting to turn is we're starting to see conversations about, you know, modeling and looking at CapEx spend. And that hasn't happened in the last six months. So I think talking to Shawn and his team at our sales meeting last, you know, two weeks ago, that was the first time you're starting to see some optimism on the engineers, on the conversations with the big telecom providers to say, "Yeah, we're starting to model that again, to look forward." So certainly not to the point where we're saying we're ready to round the bases and call it a home run-
Mm-hmm.
but we're starting to see the beginnings of that transition back to where we know. I think the way we would say it best is we've hit the bottom of the trough.
Mm-hmm
and we're now hopeful, and we're starting to see that come back up.
Right. How about on the motive side? You've publicly talked a lot about the growth opportunity in the maintenance-free category.
Mm-hmm.
For those that may not be familiar, you may want to explain what that is. But is that, is that net new growth? Is it cannibalizing old, old, installed base? How do you think about the, the runway there?
So when we think about motive power, I mean, we really think about it a couple different ways. So, one of the advantages of lead motive power is the counterweight, right? So it's always had a nice place as we transitioned from an engine to an electric vehicle. We still have... You know, this has been ongoing for some time, that this transition from powered or gas-driven fork trucks into battery fork trucks has been going on for some time. What we're seeing is there's still 40% more of that market to convert. So we still feel very optimistic that we're showing ROIs with our customer as they move to just batteries, there's an advantage to that.
Mm-hmm.
Now, within the battery sector itself, there's real efficiency gains by going to maintenance-free versus flooded.
Mm-hmm.
So what we see happening now is a lot of people that have embraced in looking at flooded batteries, replacing those batteries, or designing new systems with thin plate pure lead, 'cause it, it takes the watering element away, it runs at a higher efficiency. There's real utility, measurable utility cost on the efficiency of advanced chemistries versus flood chemistries in terms of the savings in charging those, those fork trucks. And then longer term, we'll start to see lithium come in as well, because lithium takes it another step further in front of cost savings, but it has to have the right fit. TPP does what it does very well, and so we see a long life for both of those, those elements going forward. But ultimately, we see the market continue to convert from that gas, gas-powered fork truck to electric fork trucks.
And that's one, because it makes financial sense, but two, because it makes sustainability sense. You're significantly taking down the carbon footprint of a gas-powered fork truck when you replace it with electric.
Yeah. And maybe on the specialty side, I know, a passion of yours.
Yeah. Yeah.
Can you pick up a little bit more specifically about what you're doing? You have 2 plants in Missouri, actually, right?
Mm-hmm.
There are different initiatives occurring in both of those plants. What are you trying to solve for, and what's the-- what, what comes out at the end of the tunnel?
Yeah, so, so really we have what we think of as three locations in Missouri—four locations in Missouri. So one is our Orangeburg plant. That's been around for a long time. That does a lot of our traditional batteries. When we bought NorthStar, 2018, I believe it was, the plan there was to expand our thin plate pure lead capabilities into that—the NorthStar footprint. And so there's two facilities in Springfield, Missouri, and recently we bought a distribution center there to help us in those markets. And traditionally, those plants were set up to address telecom, to address the telecom markets.
What we've been trying to do the last, you know, 7 or 8 months, as we started to see, or probably longer than that now, as we start to see this trend, is to repurpose those facilities to be able to manage specialty product.
Mm.
So we wanna continue... You know, our goal in specialty, if you're gonna install our battery in a PACCAR truck or a Kenworth or a Daimler vehicle, when that battery needs replaced, I wanna have an ODYSSEY battery on the shelf at that time to be able to replace it. That is, that is our key. That's not been our traditional model at EnerSys.
Mm-hmm.
We've always been more of an OEM provider, a telecom provider, so we've invested in a distribution center to allow us to get those batteries in 4-6 days into those people's hands, and now we're investing in, and really redesigning those lines. It's not just tooling, it's redesigning those lines to make the products that work for the transportation sector. What that will give us is the flexibility in all three of those plants to make whatever mix we need going forward.
Mm-hmm.
We won't have bespoke lines assigned to specific product or specific end markets. So as we do that, that flexibility come online, and we'll see that start to hit in the last half of this year. And, and it aligns... It's a, it's a huge, huge effort of ours, because we want it to align with when we know the demand cycle for transportation hits, because it is seasonal in the back half of the year. So that's, that's our focus. The other thing we've really been focusing on is increasing our output and increasing our operational efficiencies in those plants. So Patrice and his team have, have been really trying to make sure that we are increasing our throughput out of those to be able to service our markets.
I think, you know, the demand continues to be strong for Thin Plate Pure Lead, but that flexibility is critical to us as we run into problems like we saw with telecom.
It sounds like it opens up a bit more, with the additional capacity, an aftermarket opportunity-
Mm
as well. Is that new business? Is that-
That's new business for us. So, so we've been, as we've been focused in this, in growing our Odyssey product line, we've had a lot of success with the fleets. The fleets, you know, you're talking about the large transportation fleets, seeing the value that we create for them: less downtime, less changeovers. We, we now have those batteries. As they are speccing in our batteries when they buy a vehicle, we have not, in the past, been able to react quickly enough to be able to get those batteries on the shelf at a, at a dealer or at a, a repair shop, or even at a home operator, to say, "I can get a battery in 24 hours," 'cause uptime is so critical-
Mm
to that industry. So with this extra capacity at the distribution center, we're now able to respond to that in the way we haven't in the past. Absolutely.
Yeah.
So that's new growth for us.
You talked a lot about the technology roadmap, the journey-
Mm-hmm
You've been on. Where... Are there gaps still in the technology you have serving current applications? And I guess, where do you go from here? What are the next iterations of technology evolution for EnerSys?
Well, I think you see, and it depends on what market. And there clearly is technology improvements as, you know, technology drive is happening so fast. The demand for electrification is happening so quick-
Mm
that we need to move faster, and our batteries continue to have to perform better. So when we made the investments 7, 8 years ago, really to go all in on thin plate pure lead, it's because we knew that our customers were gonna need extra cycle life.
Mm.
They were gonna need higher energy capacity and better power. So as we've done that, we're now looking at it and saying, in the next five years, we're gonna see that same transition with lithium. Not in all applications, but certainly some emerging applications. A great example is fast charger storage. You know, lead doesn't cycle long enough to make that work.
Mm.
So that's a, that's a lithium sweet spot. So we wanna make sure we have the right lithium solutions in place, and we wanna have control of that cell or control of that technology, such that it doesn't get completely customized for an EV. It's really designed for the applications and how it needs to be used in our markets. So yeah, I think that, you know, there's, there's always gaps that we're identifying-
Mm
- and I think that's kind of our key with these technology roadmaps, so close that down. And then you go to the electronic side, that's probably where we made the biggest strides, is bringing on the battery management systems, bringing on the hardware and connectivity to a grid, and then ultimately, getting that software overlay to be able to program those batteries to do what they need to do. So, you know, we talk about, you know, AI or machine learning, however you want to define it, we wanna make sure that we continue to grow the intelligence in our batteries to react to what the customer needs real time.
And so that's, that's probably been a big challenge for us as we've gone down this, this roadmap, and Joern and his team have done a great job of identifying how we're gonna manage that to keep the security, cybersecurity requirements that we need in place, but also be able to react quickly to when a customer's need changes overnight. And so that—those elements of us, we are a completely different company than we were ten years ago by even talking around that-
Mm
Let alone following that. But we have. We're still, we're still amid our journey. There's still a long way for us to go to get to where we need to be to, to solve those problems... on a real-time, on a real-time basis, on a grid level, on a charging level, intelligently using energy, all those opportunities are laid in front of us right now as we have this massive installed base of, of, of storage out there. How do we optimize that? It's, it's part of where we are going in the next generation, so.
It's a good segue to maybe just a double click on the DC fast charging initiative.
Yeah.
which you mentioned. What are the next milestones? This is coming to life.
Mm-hmm.
What are the milestones you all have established internally, and how does that begin to translate into financial impact over time?
Well, I mean, the next big milestones for us is the installation of the first 15 systems. So we have 15 systems that we've identified, we've located. We're installing those, starting, you know, next quarter. We want to get those systems installed. We wanna demonstrate the savings and the profitability those can create, and then it's a matter of how we scale ourselves correctly to grow after that. There's a lot of demand, as you can imagine, for the type of systems we're building and the ability to do the application stacking that we're talking about, in terms of managing someone's grid power, as well as providing fast charging to a vehicle. So for us, it's, you know, it's this first $20 million opportunity.
Let's get these installed, let's get them up to speed, and then let's figure out how we get the next 50 and the next 50. But we do not wanna lean over our skis so that we lose credibility with our customer base.
Mm-hmm.
So, you know, I think if you ask me, and Shawn, and Chad, and we would love to have 100 of these things ready to go, 'cause we see... When I'm talking to a fleet in transportation, charging is their biggest problem for electric vehicles, and they want this solution. But we have to make sure it's right, and it's gonna work right, and be repeatable every time. So I think, you know, when we're talking in six months, and we have three months worth of data on those-
Yeah
... those first 15 units, that's gonna be a really good spot for us to be in, to be able to, to move forward.
Great. Got a couple of minutes. I'll open for questions if anybody has one, and if not, I'll come with one more. Any other questions? Maybe last, last point on the Gigafactory project-
Mm-hmm, mm-hmm.
and you've communicated it as really a captive investment. You, you-
Mm-hmm
... you intend to utilize all of the production internally for current, current applications for the business.
Correct. Yep.
Does it, does it open up new opportunities for you, though, in terms of new applications, new end markets, product categories you're not in today?
Yeah, I mean, it does, and I, I'll just speak from, to give you an example from the specialty line, because I know that best. So one of the challenges that we've had in the past as we go into an unmanned, you know, a UA, a UAM or unmanned, a UAV, a manned aerial vehicle or an unmanned aerial vehicle, is the qualification cost is so high. And so as you source cells to do that, and that cell changes, you're asking Boeing or Raytheon, or whoever it may be, to re-qualify-
Mm-hmm
... a product. So what we do is now we control the qualification of that cell. So that opens up these new critical markets, where the upfront cost to get in is very high, and we can then guarantee that you're not gonna have to go-- We're gonna guarantee not only your supply chain but your design of that supply chain going forward.
Mm-hmm.
So that opens up a lot of new markets for us, particularly anything that has significant regulatory or testing in front of it. There also is a real concern about people going all in, and having... You know, with the, the tariffs that have just come out, we've seen those, the cost. You know, we know the cost is going down for a cell sourced from China, but it's for gigawatt and higher.
Mm-hmm.
There’s a concern, can I consistently get cells? So how willing am I to transition a technology to a lithium technology if I don’t have a secure supply chain? That’s where I think we play well.
Mm-hmm.
Fortunately for us, that aligns with a lot of our end markets, because our end markets are mission-critical markets that have significant qualification cycles, and we can really go after that and help to diversify that and de-risk that for those people.
Awesome. Thank you for your time.
Thank you, guys.
Thank you for being here. Thank you all.
Thanks.
Thank you.