Ladies and gentlemen, thank you for standing by, and welcome to EnerSys second quarter fiscal year 2023 earnings call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. Please be advised that today's call is being recorded. I would now like to hand the call over to Lisa Hartman, Vice President of Investor Relations. Please go ahead. Good morning, everybody. Welcome to the EnerSys Q2 fiscal year 2023 earnings conference call. On the call with me today are David Shaffer, EnerSys President and Chief Executive Officer, and Andrea Funk, EnerSys Executive Vice President and Chief Financial Officer. Last evening, we published our second quarter fiscal year 2023 results and filed our 10-Q with the SEC, which are available on our website. We also posted slides that will be referenced during this call. The slides are available on the presentations page within the investor relations section of our website at www.enersys.com. As a reminder, we will be presenting certain forward-looking statements on this call that are subject to uncertainties and changes in circumstances. Our actual results may differ materially from those forward-looking statements for a number of reasons. Our forward-looking statements are applicable only as of today, November 10th, 2022. For a list of forward-looking statements and factors which could affect our future results, please refer to our recent 10-K filed with the SEC. In addition, we will also be presenting certain non-GAAP financial measures, particularly concerning our adjusted consolidated operating earnings performance, 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 8-K, which includes our press release dated November 9th, 2022. Now I'll turn the call over to our President and CEO, David M. Shaffer. Thanks, Lisa, and good morning, everyone. Please turn to slide four. We delivered solid Q2 results with our second-highest quarterly revenue in what is typically a slow quarter, significant gross margin expansion as price is catching up with costs, and robust demand for our products across our diverse set of end markets. Second quarter net sales were $899 million, an increase of nearly 14% over Q2 2022, even after absorbing approximately $45 million of FX headwinds with strong volume growth in all lines of business. Despite ongoing supply chain and inflationary pressures, we reported second quarter adjusted earnings of $1.11 per diluted share above the midpoint of our guidance and up $0.10 versus prior year. We were encouraged by our adjusted gross margin expansion of 120 basis points from last quarter, a sign that we have begun to turn the corner on the long-anticipated catch up on price cost recapture. Margin improvement was driven by an impressive $30 million of favorable price mix accomplished across all segments of our business, which was partially offset by an additional $11 million of volume adjusted costs versus the first quarter. Let me put our price cost recapture opportunity into perspective. Our Q2 2023 costs were in excess of $100 million higher than Q2 2021 before inflation began to rise. On an annualized basis, over $400 million of higher costs equates to nearly $8 per share of EPS pressure, even while ignoring the incremental impact on primary working capital and interest expense. Further closing of the gap between price and cost represents a significant earnings opportunity for EnerSys in the quarters ahead. Commodity prices remain elevated relative to historical averages, and some supply chain shortages persist, both of which we are mitigating through alternative sourcing and increased stocking of critical raw materials. We are cautiously optimistic that we are approaching a supply chain inflection point with some notable easing. However, we continue to monitor how the supply chain environment is evolving, including energy allocation in Europe and uncertainties in China. Please turn to slide five. Backlog was up 38% versus prior year, and for the first time in several quarters, declined slightly to $1.4 billion due to an easing supply chain that enabled more products to be shipped, primarily for energy systems and specialty. Our backlog remains healthy and near all-time highs, with almost half attributable to program wins for energy systems projects and organic volume. Demand continues to be strong across all lines of our business. Please turn to slide six. Our strategy to invest in a diverse set of technology offerings and expand into energy systems end markets is paying off as secular trends and U.S. government mandates and funding are driving markets to us. While clarification from the U.S. government following the open comment period that closed last week is still needed, based on our initial assessment of the Inflation Reduction Act, EnerSys could benefit from substantial direct tax benefits as well as market growth incentives for our transportation, motive power, and EV charging businesses. Please turn to slide seven. Our fast charge and storage initiative continues to build momentum. We are installing a significant upgrade to our current on-site demo with a near production grade system offering the highest energy density currently in its class, with full artificial intelligence capabilities for optimized energy management and advanced cloud services. We are very pleased with our development on this project. However, as previously mentioned, the scope and scale of the project has increased throughout the design and development phase with our key customer. While this has led to a positive outcome, it has also added more time to the process than originally estimated. The proof of concept phase is also being impacted by extended supply chain lead times. As a result, we now expect our first revenue realization to be pushed out past this fiscal year. That said, we remain incredibly excited about our fast charge and storage initiative and the significant opportunity it poses for us. I'll now briefly walk through our business segment highlights. The slides contain additional details about each line of business that I won't cover in my comments. Please turn to slide eight. Energy Systems saw continued strong demand and volumes in the quarter, particularly in broadband and data center, reporting revenue of $437 million, or an 18% increase compared to the same prior year period. While we are realizing price and mix improvements across all end markets, resulting in sequential margin expansion and positive adjusted OpEx growth trajectory, we anticipate this top line growth to flow down to profitability as we continue to execute our price cost recapture strategy and continue to mitigate supply chain hurdles, which will yield a richer mix of sales for Energy Systems. Demand continues for our mid-spectrum 5G architecture DC power systems, and we are still in the early innings for small cell builds. We expect this to be accretive to our business as we hold a large share of this market and will ship a richer mix of products to support these projects. Deployment of outdoor 5G small cells is forecast to reach 5 million in the U.S. and 13 million globally by 2027, according to ABI Research. Massive 5G small cell deployments are expected around 2025, when network capacity on the C-band should run out without additional spectrum or small cell densification. Sales related to the California Public Utilities Commission, CPUC, Public Safety Power Shutoff Extended Network Powering Program are ramping as expected, with $40 million billed in 1H FY '23, including $20 million in the second quarter and $95 million remaining in backlog. Since this mandate was announced, we have booked over $170 million CPUC related orders to date, significantly higher than our original expectations of $50 million -$100 million revenue opportunity a year and a half ago. Motive Power delivered another solid quarter considering the typical seasonal slowdown in EMEA with 2Q 2023 revenue of $338 million, increasing 5% compared to Q2 2022. We were pleased to realize significant sequential price recapture of $11 million in the quarter, more than offsetting the $1 million of volume adjusted cost increases. Our overall results reflect the strong customer demand for our proprietary NexSys TPPL and lithium-ion maintenance-free product offerings. We expect the trend towards automation and electrification of material handling equipment, along with the value of our maintenance-free technologies and advanced wireless charging solutions to continue to drive Motive Power going forward. The strength of this business is evidenced by the successful launch of our recent NexSys Customer Day in our Arras, France plant, featuring TPPL and lithium-ion line tours with 300 key customer decision-makers across the globe, resulting in strong interest in orders for our proprietary maintenance-free solutions. Our specialty segment delivered revenue of $124 million in the quarter, up 23% year-over-year, primarily driven by strong volumes. Demand remained robust throughout the business, underscored by several customer wins during the quarter, including over 1,000 store locations at a national retailer for our three new Powersport batteries. Although this line of business is challenged by TPPL capacity constraints, Q2 price mix improvements more than offset sequential volume adjusted cost increases. In transportation, backlog was steady from the prior quarter and the outlook is bright as Class 8 truck OEM supply chains show signs of improvement. September U.S. Class 8 truck orders hit an all-time high in excess of 56,000, more than two times those of a year earlier and above the previous record high in August of 2018. We also remain very well positioned in our aerospace business and dominate the U.S. defense market with our premium TPPL and lithium technology. Moving on to some developments in our production capacity and operational efficiencies. The operations team experienced headwinds in Q2 due to unprecedented utility inflation, particularly in EMEA, along with a still unpredictable supply chain. These headwinds, coupled with a labor force in Missouri that has been difficult to build in a tight labor market, resulted in ongoing productivity challenges and inventory increases in Q2. However, we are pleased that our hiring targets have now been met across our TPPL factories, and our focus for the second half of the fiscal year is to train and retain new hires, which we expect to translate into productivity gains. We exited the quarter better positioned in our Missouri plant than we were at the beginning of this calendar year. In addition, with signs of supply chain headwinds easing, we have shifted our inventory strategy and developed reduction goals by plant and line of business that our teams are now working on in lockstep to execute against. The Ottawa transition to Richmond has been seamless to date, which is a testament to our comprehensive planning process and culture of teamwork, especially given the scope of this cross-functional project and the challenging global environment in which it was achieved. We will begin to realize a portion of the $8 million of annual cost savings benefit from this project in our Q4 2023 results. Please turn to slide nine. Sustainability is a core element of our growth strategy, and we are working toward the many ESG goals we announced this year. Our team has already identified additional ways to reduce waste, energy consumption, and costs. As part of our initial planning phase, we've allocated an average of $4 million of annual capital spending over the next five years to execute these goals with expectations for accretive returns on these investments. We look forward to sharing key milestones as we progress on our ESG journey. Please turn to slide 10. In closing, while we continue to monitor the supply chain environment and commodity markets, we are cautiously optimistic that our second quarter results represent a turning point, with costs starting to plateau and signs of supply chain constraints easing. Customer demand for our products remains strong, with secular trends in our diverse set of end markets providing support in a variety of economic environment scenarios. Our top near-term priorities are to increase productivity at our Missouri plants, execute our inventory reduction initiatives, and remain diligent in mitigating supply chain and inflationary pressures. As we affirmed last quarter, our long-term strategic initiatives remain unchanged, and we've made significant progress against them despite this highly disruptive period. We look forward to providing you details of our refreshed model and specific milestones, including our bottoms-up analysis reflecting current market conditions at our next Investor Day, which will be held June 15, 2023 in New York. I want to thank our employees for their continued focus and hard work, adapting quickly to changing environments and positioning EnerSys for success, both in the near and long term. We are excited about the many opportunities ahead of us and look forward to updating our shareholders as we continue to execute. With that, I'll now ask Andy to provide further information on our second quarter results and go-forward guidance. Thanks, Dave. I'll focus my discussion this morning on the key financial metrics and takeaways for the quarter. For more detailed information about our results, please refer to our second quarter 2023 10-Q, press release, and supplemental slides that were posted to our website last night. For those of you following along on our PowerPoint slides, I will begin on slide 12. Our second quarter fiscal 2023 net sales increased nearly 14% over the prior year to $899 million, driven by 10% organic volume growth and 9% price mix improvement, partially offset by a 5% decrease from foreign currency translation. Adjusted operating earnings were $65 million in the second quarter, up 7% from the second quarter of fiscal 2022 and in line with Q1. Foreign exchange negatively impacted our year-on-year and sequential comparisons by $5 million and $2 million, respectively. In constant currency, Q2 2023 adjusted OE improved over 14% versus the second quarter of prior year. Adjusted EBITDA for the second quarter was $86 million and 9.5% of net sales, compared to $79 million and 9.9% of net sales in the prior year second quarter. FX pressured the year-on-year comparison by $6 million. It is worth noting again that our margins are artificially deflated from the margin math impact of cost pass-through. A reconciliation of net earnings to Adjusted EBITDA is presented in the appendix of our slides for your reference. Our adjusted EPS was $1.11 in the second quarter of fiscal 2023, compared to $1.01 in prior year second quarter and $1.15 in the first quarter of fiscal 2023. I will present a reconciliation of Q2 2023's sequential and year-on-year EPS shortly. Please turn to slide 13. On a segment basis compared to the prior year, all lines of business posted significant revenue growth, driven by higher volumes and substantial price mix improvements, which were partially offset by $45 million of foreign exchange headwind. The favorable impact of volume and price mix improvements on operating earnings was offset by higher costs and $5 million of unfavorable FX year-on-year. As a result, Motive Power and Specialty posted slight OE declines. However, Energy Systems almost doubled their quarterly operating earnings versus prior year, with significant price mix catch-up combined with higher volumes driving strong bottom-line momentum. More detailed sequential and geographic results can be found in our press release and in the supplemental slides. Please turn to slide 14. On a sequential basis, we realized $0.60 per share of improvement in price mix in one quarter. This easily dwarfed the $0.23 per share of volume-adjusted incremental costs incurred during the quarter, which, while still significant, were half of the sequential cost increases we incurred in the first quarter, illustrating the long-anticipated catch-up on price cost recapture with our most substantial net quarterly price cost recapture gain by far. Cost increases in the second quarter were driven by ongoing inflation and energy rates, particularly in Europe, as well as some productivity challenges in our Missouri plants while we train and develop our new team members. It is important to remember that there is a delay in realizing product costs in our P&L until the related inventory is sold. This accounting treatment, coupled with lagging price cost adjustments, should provide margin tailwinds if and when inflation turns to deflation and costs stabilize. Expanding on Dave's comments about the extent of inflation we've endured over the past two years, we have incurred aggregate cost increases in Q2 2023 versus Q2 2021 of over $2 per share or $8 per share on an annualized basis. We have offset $1.85 per share of these costs with price mix improvements, leaving approximately $0.15 per share of quarterly price cost recapture opportunity. I would like to highlight that this understates our true margin expansion potential. Price mix gains should not just catch up, but rather should surpass cost increases over time due to the savings realization from our EOS accomplishments, including the Hagen and Ottawa plant closures, as well as mix improvements from supply chains loosening and the margin benefit of maintenance-free conversions, all of which should drop to our bottom line. As Dave mentioned, supply chains are starting to stabilize. Availability of key inputs such as chips, resins, and other raw materials is beginning to improve and become more reliable. Indices indicate that inflation is beginning to level off, giving us guarded optimism that our margins have reached an inflection point. Indeed, after six consecutive quarters of gross margin erosion from steeply escalating costs, our gross margin improved by 120 basis points in Q2 2023 as our aggressive price mix improvements began to catch up with the unprecedented inflation we've endured over the past year and a half. However, we continue to keep a close eye on developments in global economies, particularly the energy situation in Europe and its ensuing impact on our business. Please turn to slide 15. Looking at our quarterly sequential adjusted EPS bridge. As mentioned, Q2 2023 adjusted EPS came in $0.01 higher than the midpoint of our guidance at $1.11 per diluted share. The net sequential price cost recovery positively impacted earnings by $0.37 per share, demonstrating our earnings growth opportunity as price catches up to cost. This was offset by $0.09 per share of pressure from our seasonally lower volumes, $0.24 per share of incremental OpEx from higher personnel and travel costs, and $0.08 per share of net pressure from FX and interest rates. Similar to last quarter, we have been increasingly impacted by significant foreign exchange movements. In Q2 2023 versus prior year, operating earnings were reduced by approximately $0.10 per share from the weak euro. This was partially offset by an $0.08 per share favorable other income and expense change, largely due to FX revaluation from the declining euro. We anticipate that we will continue to experience operating earnings pressure from the strong dollar, but the favorable FX revaluation in other income and expense will not repeat in future quarters if the euro-dollar exchange remains at current levels. Sequentially, FX created $0.03 of incremental drag on both OE and EPS in the second quarter of fiscal 2023 versus the first quarter. Please turn to slide 16. Our balance sheet remains strong and positions us well to navigate both the current economic environment as well as a potential downturn. At the end of Q2 2023, we had almost $300 million of cash on hand. Our credit agreement leverage ratio was at 2.9x EBITDA, which was at the high end of our target range, but slightly lower than the first quarter of fiscal 2023. In Q2, we invested an additional $41 million in primary working capital to support our strong revenue growth. We had increased inventory over $170 million in the past fiscal year, $34 million of which came in the second quarter due to our higher revenue, but even more so as a result of our intentional decision to create targeted inventory buffers against potential supply chain disruptions, as well as the impact on inventory from longer lead times and higher raw material, manufacturing, and freight costs. That said, as Dave mentioned, we've now shifted our focus to reducing inventory where prudent, with teams in place to execute on inventory reduction targets that we expect should begin to generate positive free cash flow by the end of fiscal 2023 and minimize the potential risk of obsolescence if demand softens in more exposed areas of our business. We anticipate our leverage ratio will improve and trend towards the midpoint of our target range of 2-3x EBITDA in the second half of fiscal 2023 from this shift in focus to more efficient working capital levels, combined with the numerator and denominator benefit from improved earnings as our prices continue to catch up with costs, and we realize a richer mix of sales from improving supply chains. Capital expenditures were roughly $17 million in fiscal Q2 2023. We remain confident in our multiyear planned TPPL capacity targets, building off our capacity expansion success in fiscal 2022. Our capital allocation strategy is unchanged, with our focus on three key priorities in this order, investing in organic growth, strategic M&A, and returning excess cash to shareholders through consistent dividends and opportunistic share buybacks. In Q2 2023, we did not repurchase any shares in order to maintain our liquidity position in an uncertain macro environment. We are committed to our capital allocation strategy and expect to buy back shares once our leverage returns to the midpoint of our target range. We currently have $185 million authorized in our share buyback program. Please turn to slide 17. While we've not seen signs of a slowdown in our business, factors such as the Fed tightening and the ongoing war in Ukraine are raising increased concerns of a global recession. As a reminder, we have a strong balance sheet, conservative capital structure, and a number of structural advantages that have mitigated the financial impact to us in past economic downturns and position us even better at this time. These include over 60% of our business follows GDP-independent cycles that are fueled by large mega trends, including 5G, that are expected to continue regardless of the macro environment. We have a near record backlog and strong orders in all of our lines of business. Stable costs should drive further price recovery catch-up improvements, with potentially lower costs creating tailwinds from lagging price cost dynamics. The continued easing of supply chain disruptions should help drive profits through volume and mix benefits. Finally, because primary working capital historically has been a significant cash generator in slowdowns, it should serve as a very effective natural hedge on our balance sheet, and even more so now due to our current elevated levels. Please turn to slide 18. Our fiscal third quarter 2023 guidance range is $1.20-$1.30 adjusted EPS, a significant increase to the $1 share we reported in Q3 2022. Our guidance reflects our expectation of continued sequential volume and price mix improvements, partially offset by ongoing FX headwinds and higher interest rates. We expect our gross margin to be in the range of 21%-23%. Our CapEx expectation for the full fiscal 2023 remains at approximately $100 million, reflecting investments in new products, including lithium production lines, continued expansion of our TPPL capacity, and cost improvement and automation initiatives. We are cautiously optimistic that the true profitability of our business and the advancements we have made against our strategic plan are beginning to be visible in the trajectory of our earnings, even in the face of ongoing macroeconomic challenges. We look forward to providing you an overview of our refreshed five-year model at our Investor Day in June. This concludes our prepared remarks. Operator, you may now open the call for questions. As a reminder, to ask a question, you will need to press star one one on your telephone. Again, that's star one one on your telephone to ask a question. Please stand by while we compile the Q&A roster. Our first question comes from the line of Noah Kaye of Oppenheimer. Please go ahead. Good morning. Thanks for taking the questions. Nice to see a number of items inflecting positively here. I'd like to start with supply chain. You obviously mentioned a number of considerations during prepared remarks, but can you talk about your visibility into supplier allocations and how we should think about the cadence of the backlog conversion this quarter and, you know, possibly, you know, looking at the fourth quarter as well? Yeah, Noah. I would say the key change in, you know, quarter to quarter has been the semiconductor. That market has loosened up considerably. I've seen improved forecasts for certain product segments, that, as noted, and it, you know, the electronics tend to be higher margin products, so it's accretive to mix. Just as a reference point, as one of the, Products was as low as 8,000 a quarter. Forecast going forward is that could be as high as 25,000 a quarter. It's just, it gives you a sense of how much loosening is occurring. That's gonna help, you know, drag some of the backlog down. It's gonna help drag some margin out of the backlog. That's been the biggest change of late. In terms of the other supply chain issues, they've been a little quieter. Nothing. I don't wanna give the sense we're completely out of the woods. There's certainly still surprises that happen frequently. It has improved. I think the biggest opportunity for me, I'm excited about the two things. Commodities have come down. I don't know anyother if they're not all the way back, you know, copper and steel and maybe, but I think especially not all the way back, but certainly they're on their way back to sort of these pre-inflationary periods. That's helping. Certainly freight has come down considerably. That's helping. Then semiconductors, those are the big pieces. Yeah, I think those are the major supply chain you know, from a H2 versus H1 perspective are. Mm. Are improving, but I don't wanna, certainly don't wanna say we're completely out of the woods. Yeah. Do you think is some of that improving allocation in any way related to the consumer electronics demand getting softer? Or are these really industrial chips, right? The analog and RF and mixed signal, and you're just seeing improving flow, you know, on that side? Well, I think the teams have done a lot of work on redesign. A big part of this is we probably pulled 20% of our engineering, and you know, reassigned them from new products onto redesigning products around more readily available chips. That's been a huge part of it. Most of the chipsets, Noah, that we use, especially on the microprocessor side, are the ones more automotive. I think that you know, those are the types of chips that we use, these lower cost micros. It's just gotten better. Okay. Very helpful. You mentioned, you know, capture some margin with that backlog conversion. I guess, can you help us think about quantitatively the margin uplift or the margin profile of what's in backlog? You talked earlier about that kind of price recapture opportunity. How much of that is just in the backlog conversion already? Yeah. Again, it'll come down to execution in terms of how many of these units we get out the door. What you should see as we go forward is a steady improvement in the performance, and this is principally gonna be viewed in our energy systems business. You should start to see a better mix coming out of that group. I'm a little hesitant to mention too much, but I would tell you that the electronics mix tends to be very accretive. It is a nice opportunity for us. If you do look at the magnitude of the ES backlogs relative to historic norms, you know, it came down a little bit of backlog. It's still very, very high, and a lot of what's in that backlog is electronics. We're optimistic as the allocations improve from our chip suppliers, things should steadily get better. Yeah. I'll take the rest of my questions offline, but, nice quarter. Good to see you. Thank you. Thank you. Appreciate it. Thank you. Our next question comes from the line of John Franzreb of Sidoti & Company. Please go ahead. Good morning, everyone, and thanks for taking the questions. I'm curious what your thoughts are on the e-commerce market after a number of the larger players, Amazon and Walmart, had decided to cancel new construction of some warehousing facilities. Have you seen that, any impact of that? Or you expect to see that maybe in the motive side of the business? Can you kind of talk about what you're hearing there? Yeah. I would say Motive is where we're most tuned into, recession monitoring and slowdown monitoring. In terms of a lot of, if you remember, a lot of those big mega distribution centers were using fuel cells. I don't know that we're seeing the direct impact of yet. Our order rates tend to be good. Then the other, the key driver, I ran into Chad down in the cafeteria a couple days ago, and he runs Motive Power sales in North America. He was very clear the biggest issue that we're having in Motive is still it's just adapting to the very long lead times for the forklift trucks. They're ordering the batteries much sooner than they did in the past, and that's been the biggest adaptation. He didn't seem to have any concerns about a slowdown per se. I think that's more for Vincent. Vincent's got our European business. He seems a little more concerned about the macro situation, I think mostly around these energy and potential energy impacts on the European economy. I would say that we aren't seeing or feeling any direct impact from these big e-commerce announcements. We have seen those for sure. We're continuing to monitor. What we're trying to do, John, is really make sure, and this is what I've asked the teams to do, is recognize that through this period of, you know, COVID shutdowns and then the snapbacks and the recoveries, there's a lot of noise from a volume perspective. In addition, the inflation and pricing recapture, and then now the FX, there's just a tremendous amount of noise in the revenue. What I try to get the team to focus on is isolating the volume and comparing it to what sort of a normalized trajectory would be from a volume perspective, kind of pre-COVID, and to see how we're tracking relative to those historical norms. I would say the best data I have for you right now is that things are really starting to normalize onto, from a volume perspective, back to where they would have been. Think of a big drop and then a big spike and things seem to be coming back down to, from a Motive Power. We're watching very carefully, but haven't seen any direct impacts on the e-commerce side yet. Over. Thanks. Thanks, Dave. That's helpful. Just on the backlog, you know, historically it wasn't something we ever talked about, but it's gotten so large that we can't ignore it. I'm just kind of curious, you know, how firm is the backlog? You know, what's the cancellation risks? Is it different between each segment? You know, just maybe some context there, what your thoughts about it. You seem to be buying in advance. Are others, you know, they have to take delivery? That would help. Let's go through the different business segments, and then Andi can certainly dimension things for us. I would say the biggest backlog growth has been related to some big program wins in our energy systems business. Backlog growth has been a function of a lot of these mid-spectrum DC power cabinets we've been selling for 5G. That's been a big part of it. Another big part of our backlog growth has come from the CPUC project we had mentioned, and we are shipping against that. You know, of the $170 million in orders, we've shipped less than half of that so far. There's been some big program wins in our defense business. There's some program wins, so some big ones. Those are the pieces of the business that we feel good about. Nothing's recession-proof, but these businesses, ES and defense, have their own rhythm. In terms of motive, I would say principally the backlog growth today is related to what I've mentioned earlier, which has a lot to do with the truck lead time. I think that the truck lead times are getting people to order sooner, and we're still coming off a strong period of motive power demand for new trucks. I would say that we've challenged the teams. Lisa and Andi are sitting with me, and we challenge the teams regularly to look at cancellation rates to Andi, is there anything you've seen in the testing? No. I can give a little bit of dimensions to the data if it would be helpful for you, John. Mm-hmm. Energy systems, you know, our backlog is up $600 million versus two years ago. Very healthy. Mm-hmm. There's no COVID-related risk of cancellations. A lot of it is, as Dave had mentioned, program-related, 5G, CPUC, strong market. Just give you an idea, at $600 million at higher margins with a lot more electronics, less service, you know, if you assume the 25% drop there, you'd have over $100 million of OE trapped in that backlog. Big numbers. Mm-hmm. Minimal risk there. Transportation's up $30 million versus two years ago. There's a lot of pent-up demand from aging trucks, minimal risk of cancellations. I think you've seen we just had a record Class 8 order a month. Very strong there. EAS is down slightly, but that's really choppy because of projects. U.S. government replacement spend for Ukraine support isn't flowing through yet, but we expect that's gonna start coming in strong. Which leaves us with motive power, probably the area you're focused on the most. It's up $200 million backlog versus two years ago and $100 million from a year ago. We would look at that as most exposed. As Dave mentioned, we're constantly prodding at it, but we aren't seeing any cracks yet. If you look at the data, you know, our backlog there, $380 million. Our quarterly backlog coverage is over 1.1. In Q2 of 2021, to give you an idea, that was 0.6. Our book to ship ratio was just around 100%. While we have seen a softening of orders, we look at a five-year trajectory rate, and we're right in line with where we were pre-COVID. We're seeing a softening because we don't have this huge catch up from when we had the COVID decline. We're keeping our eye on it, but it still looks pretty healthy. We're not concerned yet, but I assure you, we're not taking our eye off that. Just on this topic, you said there's some concerns in Europe. Has the order trajectory changed at all with Europe, or are you just monitoring it, you know, closely 'cause of the conditions? I would say more monitoring. Excuse me. Yeah, I would say it's more just we're just nervous as everybody is. We're all watching CNN, and just lot of risk. I think we're taking a lot of proactive actions for any kind of mitigation. If there is curtailment, that would be outside of our control. Each of our plants has provided a letter to be handed out to authorities highlighting the importance of our activity if there is any kind of curtailment. We've split our EMEIA countries into three risks from low to high. Arras, which is our large TPPL plant in France is least at risk because of the excess capacity of nuclear energy in France. We have planned scenarios in place at each one of our plants, in case of restriction, including priority to single source products, custom contractual agreements, looking at different ways we can look at bottleneck saturation, reducing consumption on the supply side, alternative sources for suppliers in any high-risk countries, so not only our own exposure, but exposure of our suppliers. Finally, longer run, we've developed a plan to reduce the energy consumption by about 15% per kW h over the next 12 months, by looking at processes, reducing usage, consumption of waste, in-house production, and fully aligning that with our sustainability goals. As Dave mentioned, we've allocated about $4 million per year over the next five years to achieve our sustainability goals, and we're prioritizing that region because of exposure. I think, John, back on your first question, you know, and again, staying focused on Motive, you know, we've been through some downturns together over the years, and if I look at, you know, if we do get a downturn, what's this one gonna look like compared to ones in the past? We have two less big factories than we did before in terms of Ooltewah and Hagen, so that's gonna help the motive. I've got a leadership team in there that is 100% wholly committed to OpEx productivity, automation, and doing more with less. I'm really proud of that team and a lot of their efforts. We've expanded our product range dramatically with higher margin products, including our NexSys PURE TPPL, our NexSys iON lithium, and our wireless charging, which is just getting kicked off. I think there's a lot of reason as Andi always notes that in these recessionary periods, commodities tend to fall off, which takes a little pressure off the P&L, and we tend to generate a lot of free cash flow. Our working capital needs go down. I think that, you know, relative to prior downturns, we're in better shape than we've ever been with the new product mix and the smaller factory footprint and the higher level of productivity out of our other factories. We're doing what we can do to be ready. Great. Thanks, Dave and Andi. I appreciate the detail. Okay. Thank you. Our next question comes from the line of Greg Wasikowski of Webber Research & Advisory. Please go ahead. Yeah. Hey, good morning, guys. Thanks for taking the questions. Hi, Greg. First one, just on the IRA and slide six, I know everybody needs some more further details before really figuring out your full strategy, but does the potential there kinda change how you think about your strategy for some of your products and end markets? I'm just thinking, you know, OutBack for an example, like, you know, maybe making that less of a niche-y product and trying to make it more mainstream in resi or commercial solar, or any of the other products that are listed on that slide. Yeah. I'd say on IRA, you know, there's the tax piece which is interesting. I would say the biggest issues there, and the comment period just closed, I think, last Friday, right, Lisa? Mm-hmm. Most of the comments or questions were around defining. The target was a battery that was 100 Wh per liter. We wanted clarification on what C rate to determine the watt-hours. And then on the liters, we needed some clarification on which dimensions to use, the interior cell dimensions or the exterior module dimensions and so forth. But that's. I was really, again, this is my product engineering background, but all of our lithium products will hit that 100 Wh per liter target. And then a pretty nice chunk, depending on how things shake out with the comment period and these definitions, a pretty good chunk of our TPPL business because it is. We have always targeted volumetric energy density. That's what we've always pushed, is not so much gravimetric or weight, but our focus is always on volumetric energy density. We've got quite a few products that should hit that 100 Wh per liter metric, and as such, could qualify for some material savings. We'll just have to see how those definitions work out. Look, I don't wanna dimension anything for you, but it could be real interesting. In terms of your question on the demand or market side, we just feel really good about this NEVI and some of the things in the original infrastructure law that came out. There's just a lot of positive activities within each all of this recent legislation that is right in our wheelhouse. Specifically on OutBack, I had noted earlier, we pulled about 20% of our engineers off of new products to focus on redesigns to make sure that we could ship our chargers and ship our rectifiers and UPS systems. The biggest hit for engineering resource allocation was our residential energy and some of those OutBack programs. That's kind of unfortunate. I take your point in terms of and as we get through some of these supply chain redesign issues, I take your point loud and clear. We should let some of those opportunities from these new laws shape how we prioritize and reprioritize where those engineers are allocated. It's a good suggestion. Got it. Okay. Thanks, Dave. Next one is on the EV charging product. This is tough for us from the outside looking in, but you know, it seems like the product has maybe been commercially ready for some time. You know, I know you guys have done some upgrades, but you know, maybe we could think about them as more akin to like typical you know, annual generation updates. You know, at the same time, it seems like things are pretty cooperative between you and your I'm declaring it an anchor customer, which is good. Speed to market is really important right now in EV charging. Just have you thought about getting out into the market with other customers or doing other pilot programs? Does your agreement maybe preclude you from doing so? You know, I'm just trying to understand the relative sense of urgency and desire for land grab felt around the industry versus the speed with which, you know, this product is moving. Just trying to get your thoughts there. Thanks. Yeah. I would say that the engineers have gone, and this may be the first time that the engineers are ahead of the salespeople. The engineers have done extremely well. We've got the new, I would call it production system, getting installed, near production system. I think there's a couple things that need to be tweaked. The new system is getting installed right now, next door. Just to your point, beyond our original target customer who has a use case, which is really interesting and we really like, but we've also decided that we're gonna go after some of these NEVI charging station projects that are. The RFQs are just starting to come out. I think we should see the first RFQs maybe December, but probably January. I know there's about 7 states, and they're building out these fast EV charging along major arterial routes. If you remember, this is about $5 billion worth of monies that were allocated in the infrastructure law. The states are, I think it's an 80% funding, and the states have to kick in 20% as they build out these charging stations. We are participating in those RFQs. Just for some dimensioning, you know, we gave some rough targets for us, $50 million-$100 million to get started. You know, $50 million is 1% of that NEVI program. Given what we've assessed so far in terms of the specifications, we feel good. We feel good that there's a good overlap between what the states are looking for and what we've got ready. In terms of your comment earlier about commercial readiness, we really aren't commercial ready. We're just now getting the design where we want it with the DC-to-DC higher efficiency conversion architecture. That said, the engineers are doing a fantastic job. We'll just continue to report progress, and hopefully by the next time we speak, we will have seen some of these RFQs, and we can give you a sense as to you know, how from the cost targets and the specifications, how optimistic we can probably give you some, at least a level of optimism as to what we think once we've started to see the RFQs. Okay. Great context. Very helpful. Thanks, Dave. I'll pass it on. Okay. Thank you. Again, to ask a question, please press star one one on your telephone. Again, that's star one one on your telephone to ask a question. Our next question comes from Gregory Lewis of BTIG. Please go ahead. Hey, thanks, and good morning, everybody. Dave, I did wanna touch a little bit on the comments you made around inventory runoff. Realizing we're not probably gonna get too granular around that, but is there any way to kinda walk through the different business lines and maybe, you know, how you're thinking about you know, whether it's energy systems or motive or specialty, how we're thinking about rolling off that inventory. As part of that, was that an overbuilding at all, just an inventory build given supply chain issues that the industry was facing over the last, what, 18 months, or is some of that also related to conversations we're having with customers? A big chunk of it is stockpiling lithium for making sure, given the choppiness and the tight, the lithium cell market is extremely tight. A big chunk of the inventory build is related to lithium. Another part of the build is just we weren't trusting our Asian supply chain given all the choppiness with the freight and the longer lead times and the COVID shutdown. We were way overstocking relative to historic norms. A lot of the DC power systems that we're putting together that have Asia content. I would say most of it, there hasn't been a ton in motive per se, of strategic other than the chargers because the electronic supply chain. I think we stuffed a lot more chargers in inventory than we historically do. On the specialty side, it's really just been about having enough WIP and raw materials like lead, just making sure we had enough to give us a higher sense of comfort. Things are improving, and I think that the ops teams are, you know, under, you know, severe pressure from Andy, frankly, pushing hard to get back to more historical norms, and we're coming through this kinda traumatic period of supply chain disruption and insecurity. Andy, did I miss anything on that go around? Yeah, I can give you a little more color, Greg, if it would be helpful, and put a little bit of data behind it. I think Dave nailed all the points. Since Q2 of 2022, we've grown inventory by about $170 million. And if you look where that comes from, about $65 million is strategic investments, about $35 million is volume, about $55 million inflation, and $15 million supply chain. If I look at typically where I am on Q2 on an inventory turns, I usually am between 4.3 or 4.8, so call it 4.5 as an average. If I pull out my strategic builds and my supply chain headwinds, I'm around 4.2 right now. There's some opportunity to be more efficient. The other thing we like to look at where interest rates are where they are, and also with any potential exposure of a downturn, we wanna be actually better than we were before, even after taking into consideration strategic builds and supply chain headwinds. We've tasked, there's a weekly meeting that we have all of our lines of businesses represented, all of our heads of all of our different manufacturing areas represented. They've identified $150 million of reduction opportunities. They're tracking them on a weekly basis. There's actions in line. I haven't built all that into my sensitivity analysis from a working capital standpoint because I recognize there's gonna continue to be headwinds. I will say, until supply chain issues subside, we will continue to use inventory to buffer our exposure. We're not turning the corner and being penny-wise and dollar-foolish. We're fortunate enough that we have the borrowing capacity that we don't have to make decisions that are not in the best interest of our shareholders. We recognize it's gonna be a cash flow opportunity when macro environments normalize. At all of our review meetings every week, Dave would be saying price, price. Now it's price, inventory, price, inventory. There's definitely a change in focus. There is an accountability. We are measuring it, and we do believe there's opportunity to make improvements here. Okay. Super helpful. Thank you very much. Thank you. Thank you. At this time, I'd like to turn the call back over to David Shaffer for any closing remarks. Sir? Thanks, Latif. Thank you everyone for joining us today, and we look forward to providing further updates on our progress on our third quarter fiscal 2023 call in February. Have a good day, everyone. This concludes today's conference call. Thank you for participating. You may now disconnect.