EnerSys (ENS) Earnings Call Transcript & Summary

Hi. Welcome to EnerSys Second Tech Talk. My name is Lisa Hartman. I'm the Vice President of Investor Relations. Thank you, everyone, for joining us today. On our call, we have Joern Tinnemeyer, EnerSys' Senior Vice President and Chief Technology Officer; Shawn O'Connell, EnerSys' President of Motive Power Global; Grant Clark, EnerSys' Vice President, Product Management, Energy Systems Global; Mark Matthews, EnerSys' Senior Vice President of Specialty; and Andrea Funk, EnerSys' Executive Vice President and Chief Financial Officer. We may be making forward-looking statements on today's call that are subject to uncertainties and changes in circumstances. Our actual results may differ materially from these forward-looking statements for a number of reasons. Our forward-looking statements are made as of the date of this presentation. 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. Following our prepared remarks, we will be opening the session for questions from the audience. [Operator Instructions] The slides for this presentation are currently available in the Events section of our IR website. As a reminder, this is a Tech Talk, and we will not be taking financial questions or providing updated views on the supply chain or current market conditions as they are outside the scope of this call. I'll now turn the call over to Joern.

Hello, and thank you, Lisa. So let me start with some takeaways at the start of this presentation. So first of all, EnerSys is an industrial technology company that encompasses a number of markets ranging from material handling, telecom, broadband, renewables to over-road trucking. Our broad set of product offerings offers us to address mega trends such as 5G with our energy platforms, power conversion and enclosure systems. Further, we are able to address brand new mega trends such as electrification of vehicles with our DC fast charge initiative. All of this grants us high business resilience and excellent room for growth for the future. At the core of this is a very simple concept called Baukasten. Baukasten is -- comes from a German word, meaning construction kit. It is a philosophy that's used by many automotive OEMs out in Europe, and quite simply, it is relying on a number of set building pieces to develop much more complex systems. At EnerSys, we have 3 foundational platforms. One is an energy platform, a power conversion platform and a software platform. If we look at, say, for instance, the energy platform and how we can use that, for instance, in the Motive Power arena, we use one type of lithium cell. That lithium cell is then spanned across a number of our different market segments. This allows us to grant leverage to our supply chain and simplifies our overall supply chain. When we start to grow a particular segment on a platform, we can immediately scale that also to other platforms, again using that same process of using that same piece or that same building block over and over again. This also enhances time to market. We can permute these components of these platforms to create brand-new products relatively quickly. The DC fast charge, for example, is an example of this. Finally, it leads to reliability because we can now produce these building blocks at very high volume and spread them across our enterprise. It enhances reliability due to automation. And considering that a lot of our products have or relate to critical energy storage, reliability is obviously key to our customers. So if we look into these platforms in a little bit more detail, let's start with the energy storage platform. Part of that is our lithium-ion component. Lithium-ion batteries, obviously are -- provide a maintenance-free solution. They allow a very high degree of cycling, have excellent charge acceptance and also discharge performance. At EnerSys, we do this a little bit differently. We use an NMC or Nickel Manganese Cobalt oxide technology and a very high nickel content of this type of family. This allows for high energy density systems. Because of this, we need to work on -- we create a uniqueness in terms of the safety topologies we use. We use this both in our control side using ISO 26262. We're one of the first industrial companies to actually apply this very stringent safety topology to our lithium-ion systems. Secondly, we have significant -- we have developed significant IP around fire propagation, mitigation methods. This type of chemistry is ideally used for areas which require a lot of energy content in small spaces or where heavy-duty applications, heavy cycling is necessary. Our TPPL, or Thin Plate Pure Lead, side is another subcomponent of the energy platform, which we will be focusing on today. Just like lithium, it is a maintenance-free or virtually maintenance-free technology. It is also -- usually these type of application spaces we place this in is either through backup systems or also light-to-medium applications or applications that require high power draw. For instance, starting, lighting and ignition batteries or within UPS-style systems. Finally, the flooded system. This type of lead acid battery has been around for 130 years. It's an extraordinarily robust technology and ideal for harsh industrial environments. Just as an aside, if we look at the efficiencies and charging efficiencies of these technologies, TPPL is approximately 20% more efficient in charging compared to our flooded systems. And lithium again is another 10% more efficient than TPPL. This has clear benefits for carbon reduction in areas where the grid is potentially coal-fired or gas-fired. If we look at the software platform, and this is our newest platform that we're developing over at EnerSys, one part of this is developing edge computing capabilities. Rather than just bringing voltage and temperature data into the cloud, we actually place a significant level of the computation and decision-making very locally directly at the instrument or asset level. This allows us to take only key pieces of information and then later on be used for assessment like health or even for much more advanced features, for instance, predictive prognostics to see failures and start to understand failures before they even happen at the customer side. Another piece of software that we've already developed is our asset management software. This looks at particular outside plants, for instance, where we are able to provide an inventory of the type of assets that might be present at that site. And finally, we're also working with smart battery systems, taking our TPPL technology and adding Bluetooth-connected devices. This allows us to use a simple app and be able to ascertain the health of battery systems, say, for instance, in over-road trucking. The final platform that we have is a power electronics platform. Here, we use very advanced technologies, for instance, silicon carbide, high efficient switching technologies for our power conversion. This may be used, say, for instance, in our charger technology area for Motive Power applications. We're also developing high-power transfers for line communications for 5G cells. So these were powered 5G radios. This type of technology allows us to transport over 1,500 watts using very thin gauge cables that you would find in your home, for instance, for telephone or land cell systems. It's a very unique technology to EnerSys. We're also developing wireless power transfer technology with the trends that we're seeing in the Motive Power world with automatic guided vehicles. Clearly, you have removed the driver, you also want to make sure from a charging perspective that this can also happen autonomously, and that's where this wireless charging technology becomes vital. Finally, we can combine all of these 3 platforms together in our fast charging for electric vehicle applications, which is a new initiative that we're starting out at EnerSys. If we look at the end markets on the right-hand side of this slide, we see a number of or variety of different market spaces. One may look at EnerSys as a very complicated company that looks at this vast array. In fact, this creates a degree of resilience, obviously, to our business. Well, what about from the product side? It looks really complicated from our product side. However, if we bring this back down to those 3 platform technologies, it actually simplifies very nicely between that energy storage platform, a power conversion platform and a software platform that we then uniquely permute together in order to create a variety of products that we have. Now let's talk a little bit about our Thin Plate Pure Lead technology. And if we start right out with the unique attributes, we only need to look in the name of this technology, Thin Plate Pure Lead, and that's exactly how this technology is created. The lead plates on this are about 0.7 millimeter sets, about a 10-fold less of standard lead acid batteries. And knowing that lead is also a very malleable metal, it's a very soft metal. In order to build these batteries at scale that use a multitude of these plates, there's a significant degree of proprietary manufacturing know-how in order to do this with a high degree of quality that EnerSys customers expect of us. Another aspect of using this thin plate technology, it provides access to a significant level of what we call active mass. This means that we can use much more of that lead content in our battery systems to provide the energy and power necessary for our customer needs. For instance, by used -- by having all of the thin plate for that surface area, we provide excellent starting characteristics for our over-road trucking, though that same low resistance also provides enhanced power capabilities for UPS systems for data centers. A large part that we're also adding to this, and there's -- in Thin Plate Pure Lead, there is still room for growth even in development is that we've recently added carbon technology. That carbon technology, when the battery is placed within a particular state of charge window, we can triple the energy throughput of that system compared to lead acid batteries without this carbon attribute, again driving this battery into new application spaces that we didn't have before. If we now look at Thin Plate Pure Lead specifically for Motive Power, in this graph, you'll see the 3 different types of assortment of blocks that are commonly used for these applications. These same blocks, however, can also be used in, say, for instance, telecom applications, UPS applications. And by changing the mechanical design of this, we can also use these for starting, lighting and ignition application for over-road trucking. So it's the same basic chemistry that we're applying across all of our entire enterprise. The middle shows devices that monitor voltage and temperature. From this, we can see where the state of charge of that battery is to provide some preliminary feedback to the customer again. Finally, to the right, we also designed the chargers for this. And we use proprietary charging algorithms that we have IP, that we've patents around to optimize Thin Plate Pure Lead charging characteristics. This provides the fastest degree of charging for this lead-style system out of any -- for a large part of the lead family. It also provides a system sale by combining our chargers with our Thin Plate Pure Lead technology, we create a system application that's optimized for that user experience. Thinking about user experience, if we now go to our -- we can see here our next-generation system design. What we did here is, we took something out of our lithium playbook. Lithium, you have to have a battery management system, and you have to have a lot more control. We've applied this now to our Thin Plate Pure Lead battery packs. This battery pack that you see here actually has a battery management system that's associated with it. It's able to locally calculate the state of charge, the state of health and provide that information right back to the vehicle, again, via [ canvas ] networks exactly the way the lithium systems also work. What's more is able to facilitate cooling of the battery by the fans that you have. This again enhances charge acceptance of that system and provides more energy throughput on a daily level, allowing this type of system to be used in medium application spaces and strong medium application spaces. In fact, the user experience for this next-gen system is very much the same as a lithium-ion experience. It has the same communication protocol advantages. It has the same output. It is the same maintenance-free solution for that customer. This just gives us another quiver to access to provide to the customer a full set portfolio, everything from a flooded system to maintenance-free technology, be they Thin Plate Pure Lead or for robust applications that they need lithium systems. Talking about markets, I'll let Shawn speak to the rest of this.

Thank you, Joern. As Joern mentioned, we have some very unique things happening in the material handling market space that we would like to inform on and how we deploy these technologies in that space. First, I'd just like to touch on a couple of our key trends that are driving some lift for us and some very positive activity in Motive Power. The first trend that I'd like to touch on is electrification. And I don't want to talk about this as a new trend. Material handling applications have been electrified at a steady clip over time for many decades. What's different now is that we have this global energy transition where we're getting away from fossil fuels, and we're seeing much of the same thinking that's being applied to passenger vehicles is being applied to forklift trucks. In fact, if you look at places like California with the Title XIII activity or the California Resources Board, you're seeing that the same thinking of putting wearout dates in internal combustion for forklift trucks is entering into the thinking just like it is for passenger vehicle. So this is a nice trend for us. You'll also see that it's hard to open a publication and see -- not see a retailer or somebody that's trying to offset their fleets, both forklift and short haul and long haul, with some sort of carbon offset. We all know the SEC proposed changes for environmental impact. So companies are looking for ways to mitigate this environmental impact, and electrification is a way to do it. And then finally, technology. A few years back even, the technology of a battery was limited in how much lift it can produce. So very specifically, I've mentioned a CAGR on this slide for material handling equipment, and I've given a range. And the reason that we've done that is, some classes will do better because of this trend than other classes. And I want to highlight Class 1. Class 1 is a sit-down counterbalance warehouse truck cushion tire, meant for the inside. And previously, it had a lift limitation of about 12,000 pounds. The reason for this is the battery was limited. The battery could only -- the battery only had so much density, and it had -- only had so much recharge capability. So to go above that, you had to go to a Class 4 truck, which is a very similar truck except internal combustion. And it could go up and exceed that 12,000-pound lift capability. Now what's happening with lithium and these denser technologies coming in that accept the charge, charge more efficiently, you're seeing a greater trend in Class 1 over the long-term trend is approaching a double-digit CAGR. Whereas you see Class 4 going in the other direction for this very reason. So a couple of good points there. The other thing I'd like to speak to is, why is maintenance-free entering the lexicon so clearly now. A couple of reasons. One, before we even discuss automation, if you look at labor challenges in the marketplace and our customers are fighting for the same labor that we see many industries fighting for. If you have labor at a premium, the last thing you want to do is dedicate these labor resources to maintenance activities or nonrevenue-producing activities. When we start talking about automation, automation is [ supposed to ] address these labor challenges, so I mentioned just getting labor. If you think about material handling, you're talking about lift. You're talking about, in the case of battery-operated material handling, electrical circuits. So you have this training issue and component. And if the labor force is transient, it's very difficult to maintain and train people. So one of the things that you can do is eliminate the operator. This leads into efficiency in cost. Burden labor rates have gone up particularly recently. And there's all of the other considerations with acquisition costs, fringes and these types of things that an automated system can address. And then finally, automated systems lend themselves very well in scalability, and in many cases, make better use of the full cubic format of the warehouse. And the automotive -- the autonomous area, Joern mentioned it, it's a very nice CAGR. It's robust. A lot of late market entrants into this space and a lot of activity and something that's very exciting for us. A final one on this slide I'd just like to touch on is floor here. The CAGR doesn't seem so ebullient, but we are deploying TPPL into this market space. The traditional lead acid 12-volt flooded monoblock was the battery of choice in this area, and we have one customer that was getting about 8 months of use in this application. We can come in at straight-line math. We put a TPPL battery in its place, fits the format. They get 36 months, no leakage on the floor. So for us -- even though the market CAGR is low, for us, there's more strength in the number. What I thought we would do now is look at how -- we have this great technology Joern outlined, but there's a way that we're able to exploit the benefits of this technology for our customer that's really unique. And I want to touch on that. We have these 3 chemistries in the marketplace. And some of our market actors, some of our competitors, they may have 1 chemistry or 2 of those, but nobody is uniquely positioned in the same way that EnerSys is with all 3. So we've not only have taken a different approach with technology, we've developed world-class sales tools, and we've developed a new sales process where we get to go in and be consultative with the customer. We're not doing the traditional pitch of show up and throw up and try to extol the benefits of one technology. And we know that there's no one perfect fit for all scenarios. There's no panacea for all issues. So how does this process work? We go in, in consultation with the customer. We sit down, and we profile their goals. What do they want to achieve? Do they want to save space? Is total cost of ownership their issue? Is it this labor issue? Is it their maintenance costs? Then we sit with them in consultation, oftentimes not just the operations people, but the procurement people, and we talk to them about their specific burden labor costs, their cost of real estate. And we get all of their operational data. Are they having failures? Where are they struggling with maintenance? We plug that into a really great software system that we call EnSite, and here's where we really differentiate. We do an actual power study on the users' devices. If it's a greenfield site, they don't have the devices, we can model this based on what they say their use case is going to be. But in many cases, we're actually -- Joern talked about our embedded monitoring capabilities. We have an outbound version of this. We put them on their devices -- these monitoring devices. We put them on their material handling equipment, and we model their peak time. Think of this as like when the solar companies sit down and model for customers, their electric bills, their peak usage and come up with a financial feasibility. So this is our version of a feasibility study. We pass that all into the software, and then we're able to model based on their specific parameters and use case, exactly how each of the 3 technologies would perform in the application. Would they suffice, would they not suffice? And then we're able to use the users' information to recommend a solution. This is where the aha moment comes in. Many of our users have heard of lithium-ion as a maintenance-free or virtually maintenance-free solution. A lot of them we find they haven't heard of TPPL, and they're quite delighted to find that there's a go-between option. And so we oftentimes can deploy TPPL in this case. We don't just stop there. Once the users selected this option, we're finding we can do some very unique things in the deployment stage. Joern talked about the monitoring, the information that's coming back. So not only is it talking about battery usage and power usage, we're informing the user on operator behavior. And oftentimes, our solution prescribes just slight changes in operator behavior that enable these technologies and makes our operation more efficient. So it really resonates with our users. And just to bring it home into a specific example, we have a robust library of case studies that we've compiled based on our customers. This is a more recent, one of the North America-based third-party logistics provider, and we applied this process with them. They maintain about 40 sites around the country. Each of their sites look very similar. They run a -- their operational data is that they run 3 shifts a day, 6 days a week. They're off Sundays. They set up their truck leases around -- when I say truck, forklift truck around 3,500 hours. And their goals are very clear. They're dedicating today 4,000 square foot of real estate, which could be revenue-producing real estate space, to battery change and maintenance. So they don't like that. They were changing batteries so they would buy one battery per shift, so 3 batteries per truck. And then they were dedicating a total labor resource each shift just to maintenance and charging. So we did the power study. We modeled their site. We knew exactly how they were using their power. And in this specific case, with their goals and their usage, we identified that the optimum solution would be our Thin Plate Pure Lead NexSys PURE solution with the charging system, monitoring system. And we demonstrated that they could get 26% TCO savings. It was about $133,000 a year or $535,000 per site over 4 years. And we've actually -- we're now in the second site with this customer, and exactly as I've indicated, we're helping them monitor through our devices, how the devices are being used and making sure that the operators are modifying that behavior. And when I say modify behavior, sort of charging at the end of the shift, the charging on breaks, lunchtime, shift change. And it's enough for this technology, and it's going extremely well. Customer is, to say the least, delighted. And this is a good illustration of how we exploit that 3 technology or chemistry-agnostic technology advantage. With that, I think it's time to open it up for questions.

[Operator Instructions] Our first question comes from Noah Kaye with Oppenheimer & Company.

Great. So I would like to follow up on a couple of points with a few questions for Shawn and then one for Joern. Shawn, you talked about some of the technologies, and I'm really curious if you can sort of benchmark for the audience when we think about adoption rates or penetration rates for maintenance-free, whether that's lithium or TPPL, kind of where were we, say, a couple of years ago? Where are we today in terms of customers choosing maintenance-free? And where do you think this could be in the next year or 2 in terms of penetration rates?

Yes. So I think one of the things I would mention, Noah, is that what we see in terms of -- let me speak to the adoption rate first. Something that was interesting as we go through this, when we apply this whole process of the power study and go through in front to back, we don't always have the opportunity to do it because sometimes we're coming to market a step away through a distributor or perhaps the forklift manufacturer. But when the user allows us to apply this process, we have basically tripled our close ratio. When they see their actual -- their own data, and it's -- there's no sleight of hand with it. They see everything that we're modeling based on what they've used and how the calculations are made. So we see a really big lift with this. If you look at interact analysis or some of the CAGRs I've put on the board, we see maintenance-free over the long-term trend. Depending upon whose analysis you look at, we see it going as high as 50% to 60% by the end of the decade, again, depending upon who you talk to. And I won't mention any names or which analysis you look at. Some people have it a little higher. Some people have it a little lower. But I think that's reasonable, and we've seen very strong internal CAGRs every year since we've really embarked on this journey and really implicated it into our Motive Power program.

Noah, I can also give a little bit of data that I think we've given directionally in the past as well. We talk about what percentage of our battery sales are maintenance-free. And if you look at that, just as a point of reference, in fiscal '21, we were a little shy of 30%. Fiscal '21 -- fiscal '22, we were closer to 40%. '23, we might be closer -- nearing 50%. So that kind of range. We haven't given projections other than talking about constantly increasing our TPPL capacities as defined by revenue, which would also include some of our pricing growth. But we exited last year at a capacity rate of about $1.2 billion, and we're saying we're going to increase every year in the range of $200 million. I don't know if that's helpful.

That's very helpful, and that's pretty interesting year-over-year numbers. I guess the follow-up is really sometimes we call it the paradox of choice, sometimes paralysis by analysis. But you talked about how this positively benefits the close rates when you can go out and do this kind of deep analysis for the customer. What does it do in terms of actually extending, if you will, the sales cycle? I mean how much longer does it take the customer to get to this decision, if they're doing this analysis now versus back when they really only had 1 or 2 choices, right, like your conventional lead acid battery. What does the sales cycle look like now?

It's a good question. But I would tell you, it really hasn't elongated the sales cycle much. If you look at the power study front to back, it's a 2- to 3-week exercise. And the neat thing is, actually, there's -- I would tell you, there's some compression in there because if we've got the user to agree to it, we try to assist not just the operations folks, but the procurement folks. We try to get as many stakeholders involved in this process as possible. And so if we do that and we've been fairly successful in doing it, then you cut down on the back end of the administrative side of the user putting in their purchase request through the system and that sort of thing. So I would tell you, there's no meaning -- no real meaningful change in the sales cycle for Motive in doing it this way.

Yes. That's helpful. And then just for Joern, you mentioned some pretty impressive benefits when you're doing doping with carbon. Can you just give us a little bit more information on what exactly the processes that you're working with there? Are you doing like carbon nanotubes as a single wall, something like that? How widely are you doing this in your own manufacturing? Is it more like at the pilot stage? Is it something that you would consider introducing more broadly in manufacturing?

Sure. Noah, thanks for the question. Yes, so we did a significant level of research in the last, I would say, 6, 7 years to come up with the exact carbon sizing that we needed for this particular application. We really ran through hundreds of different cycles. So we've introduced this technology initially into our cycling telecom application space. And we've had really enormous successes on that. And then that's where we started to see verification also from lab results and infield results of that threefold increase depending upon if we keep that battery cycling within a particular state of charge window. I think we started our initial beta trials for carbon-activated compounds in Motive Power back in the U.S., I would say, about 3, 4 years ago. And then our new gen 3 system as a full carbon system on our 2-volt systems -- sorry, our 12-volt blocks are also full carbon systems. So it's an easy additive to place into our process. It didn't require any type of significant CapEx to add this, but with very significant performance enhancements.

And our next question comes from Greg Wasikowski from Webber Research.

First one is just pretty short to the point. What's next for TPPL in terms of technological advancement? Are you guys doing anything in R&D trying to improve the product or making changes in efficiency, whatever it is? Just kind of thinking about the future for TPPL and what that may consist of for the product specifically.

Greg, great question. So we're not at the end yet of probably fine-tuning where we want to be with carbon. I think that there's still some room for growth in that particular area. We're also working -- doing significant work right now this year on creating those smart batteries, particularly for Mark's business and Specialty for overall transport. We're seeing a lot of customer benefits coming out from that. And another thing that we're doing just even on a plain operational side is reducing the amount of different types of SKUs that we have, and this will enhance our operational performance as well. So as we start to reduce the amount of changeover on our lines, we can produce much more volume out of that. We still see very good customer availability for those products even with those SKUs. It's not that we're taking away any volume, but we're, in essence, just enhancing those volumes. But those are the 3 key pieces that we're going to work on for TPPL across the next 3 years.

Great. And then for the next one, and apologies, this is maybe too earnings call-ish. But just thinking about, again, long term for TPPL, how are you guys thinking about the balance between TPPL and lithium ion for -- just thinking about the EnerSys portfolio maybe 5 or 10 years from now, how do you see that mix as lithium ion gets more and more popular?

Yes. Thanks, Greg. This is Andy again. I'll take that one. We constantly do sensitivity analysis on our mix. We do see our maintenance-free, both lithium and TPPL being our higher growth. I think one of the advantages is, as Shawn talks about, is we go in, we don't have to push one technology. So we do a lot of sensitivity analysis on which way the market and our customer preferences are going to go. But the one that really could flip either way is Motive Power. It's based on our discussions with our customers. The TCO for them is to go more for lithium. That frees up TPPL revenue that Mark would gladly take in our specialty line of business. If it ends up going a little slower, which could be cost-driven or just customer needs and informing their TCO, Motive Power may go a little more TPPL, which is higher margin product for us in addition to being a higher TCO for the customer. And then we would have more lithium to look at other areas like our fast charging storage initiative. So we've not given a definitive answer, but we do a lot of sensitivity analysis on which way the markets can go. And probably next year when we do our Investor Day update, we would be providing a little more specifics on that. Is that helpful for you?

Yes, make sense. Then last one for me, a lot of talk about recycling just across the industry, all types of verticals. So maybe if you could give us a little bit on what's the TPPL recycling or end-of-life cycle is like for that type of technology, that would be great.

So the TPPL system, very similar to any other type of flooded system. It has excellent recyclability. I think we're achieving better than 99% on that right now in terms of recovery of those active materials as it goes through the process. So in that sense, it just follows exactly the rest of the lead acid families that are today being recycled. So it -- practically speaking, it's an extraordinarily green technology due to the fact of how highly recyclable it is.

[Operator Instructions] And it looks like we do have a next question from Tyler Hutin from William Blair.

Can you hear me?

There you are. Yes, we can hear you now.

I had a problem with my headphones. So I just want to confirm if you guys [indiscernible] $1.2 billion capacity for TPPL and then adding $200 million annually, was that correct?

Yes. We've -- Tyler, that's correct. So we've previously said that we exited fiscal '22 with a revenue capacity of $1.2 billion, and that we expect to be adding in the vicinity of $200 million per year of revenue capacity. It's a little challenging to give a precise number because that's a revenue number, and pricing has been so dramatically affected. But that's directionally correct, yes.

All right. Makes sense. And the next question I'm going to ask [indiscernible] TPPL was a higher-margin product than lithium ion. I'm just wondering kind of the cost structure for both, how it works.

Yes. I think what we've said externally as well, and I think it's important to keep in mind, TPPL has sold pretty evenly across all 3 of our lines of businesses. And of course, the different business that it ends up in has a different margin as well, whether it would be in transportation or in Motive Power and Energy Systems. We have talked previously that within Motive Power, where we have the 3 options to be sold to our customer, our TPPL definitely has the highest margin. And -- but the lithium has the highest price tag. So while the margin would be lower, the profit per kilowatt hour would be higher than flooded, but not as high as TPPL. So I don't know if that's helpful.

No, that's...

As we -- I wouldn't say cannibalized, I'd say, as customers would upgrade because it's a higher TCO for each of them. But if they were to upgrade from flooded to TPPL, for example, our revenue and profit would get a big boost. And if they go from TPPL to lithium, again, our revenue would pick up significantly because of the higher price tag.

Got it. And last question. I guess maybe you mentioned [indiscernible] you put in a high-speed TPPL line before. Do you see yourself putting another [indiscernible] in the future?

We're having a lot of trouble hearing you, Tyler. I'm sorry. Would you mind repeating that again?

Yes. Can you hear me right now fine?

We can. We're having a little bit of echo. So I apologize.

Okay. No, that's on me. But if you can hear me clearly, you put in a high-speed TPPL line before. And I'm just wondering if you guys are considering having another one in the future.

Yes. So when we do our 5-year model, which we're actually in the process of updating right now, we do that every year, it starts all the regions and all the lines of businesses going down to major product categories and looking at adoption rates, et cetera. And it ends up being consolidated into a regional view by the different technologies that we need. And then our ops team goes through a footprint analysis to see where we want to do investment, be it in TPPL or lithium. If we have any footprint rationalization decisions to make as flooded takes a step back to these premium products that offer more value to our customers, and so that process as we work through it is what informs their growth plan. In some cases, it could be automation. I mean we are -- we talked a lot about our high-speed line, but most of our Thin Plate -- our TPPL plant have a lot of automation, not just the high-speed line. If you walk through any one of our plants, there's extensive use of robotic, et cetera, that we use. So there's different investment decisions that they could be making to increase the output that could be increased automation. It could be robotics. It could be another high-speed line, and it could just be other efficiencies of productivity improvement. So there's many different -- and what they always focus on is, what is the bottleneck and where do we need to make those investments. Does that answer your question, Tyler?

Yes. That's great. That's all I have now. I'm sorry about the audio problems.

No, no worries. We apologize that we couldn't hear you right away.

And we have no further questions at this time. I will now pass the call back to Lisa for closing remarks.

Thank you, Brendan, and thank you, everybody for joining our Tech Talk. We look forward to speaking to you again in November when we host our Q2 earnings call. And until then, everyone, be safe, and be well. Thank you.

Thank you.