David M. Shaffer - Director, President and Chief Executive Officer Michael J.

Schmidtlein - Chief Financial Officer & Executive Vice President-Finance

Ben Hearnsberger - Stephens, Inc. Michael W.

Gallo - C.L. King & Associates, Inc.

John E. Franzreb - Sidoti & Co.

LLC William Bremer - Maxim Group LLC Brian P. Drab - William Blair & Co.

LLC

Thanks, Michelle. Good morning, and thank you for joining us.

On the call with me this morning is Mike Schmidtlein, our Chief Financial Officer. Last evening, we posted on our website slides we will be referencing during the call this morning.

If you didn't get a chance to see this information, you may want to go to our Webcast tab in the Investors section of our website at www.enersys.com. I'm going to ask Mike Schmidtlein to cover information regarding forward-looking statements.

Thank you, Dave, and good morning to everyone. As a reminder, we will be presenting certain forward-looking statements on this call that are based on management's current expectations and are subject to uncertainties and changes in circumstances.

Our actual results may differ materially from the forward-looking statements for a number of reasons. Our forward-looking statements are based on management's current views regarding future events and operating performance and are applicable only as of the dates of such statements.

For a list of factors, which could affect our future results, including our earnings estimates, see forward-looking statements included in Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, set forth in our Quarterly Report on Form 10-Q for the fiscal quarter ended July 3, 2016, which was filed with the U.S.

Securities and Exchange Commission. In addition, we will also be presenting certain non-GAAP financial measures.

For an explanation of the differences between the comparable GAAP financial information and the non-GAAP information, please see our company's Form 8-K, which includes press release dated August 10, 2016, which is located web site at www.enersys.com. Now, let me turn it back to you, Dave.

Thanks, Mike. On Wednesday, we announced our first quarter results of a $1.14 per share, which was above our guidance range of $1.08 to $1.12.

You'll notice on slide three, we had a very good quarter punctuated with an all-time record for gross profit of 27.7%. We also had first quarter records for as adjusted operating earnings dollars and percentage, as well as earnings per share of a $1.14.

We experienced organic growth in all regions and lines of business, although our first quarter of fiscal year 2017 had four more working days than the first quarter of 2016. On a per working day basis, sales were mildly higher.

The increased year-over-year profitability was due primarily to the lower commodity cost, higher volume, positive mix, and lower shares outstanding. Please turn to slide four.

I now want to focus on our current business activities and second quarter guidance. During our first quarter, the global motive power business continued to experience positive organic volumes in all regions and our premium products continue to resonate with our customers.

Global orders for motive power batteries continue their slow growth pattern. Asia continues to be our highest growth area benefiting from the conversion to internal combustion for trucks to electric.

In the other regions, our Convert to Electric, or what we call C2E, market development efforts also continued sustained growth. Please turn to slide five.

Moving to reserve power, in the Americas, during the first quarter, we experienced positive year-over-year organic volume and that growth continues in our recent order trend. These increases continue to be driven by our thin plate pure lead batteries for uninterrupted power supply or UPS, cable TV and our A&D business.

Telecommunications orders remained flat. During the first quarter, we did not see much volume for batteries for the over-the-road trucks due to our new fleet customer working off existing battery inventory.

We anticipate that these sales will begin during our second quarter and increase in earnest during the fall and winter. As I stated on our last investor call, we believe batteries for the U.S.

fleet trucks engine start and auxiliary power needs will be a nice growth market for EnerSys. In our EMEA region, reserve power sales and orders in the first quarter versus last year's first quarter were flat.

Telecommunications orders were down year-over-year, primarily due to reduced sales to the emerging markets as we near the tail end of 4G installations in Western Europe. UPS orders continue to do well and benefit from the recent European Union decision on Safe Harbor personal data privacy and storage.

Given the sluggish reserve power business in the EMEA region, we remain focused on completing our SG&A restructuring programs to reduce reserve power costs. In our Asia region, we were able to increase our first quarter profitability to near 6% operating earnings.

There were several catalysts for this first quarter improvement. In India, our results were closer to breakeven versus being a drag in previous quarters and the 4G build-out of the Chinese telecommunications industry continued.

Looking forward, our ICS enclosure and service business in Australia recently received some nice orders that were due to our continued efforts to combine our ICS and EnerSys teams. Based on the above trends and information, our earnings per share guidance for our second quarter is between $1.06 and a $1.10.

In our second quarter, we expect the normal seasonal vacation trends in Europe and the U.S. will cause our sales volume to be sequentially lower.

On Wednesday, we announced that our Board of Directors approved the quarterly dividend of $17.5 per share, payable on September 30. Please turn to slide six.

We have hired Jörn Tinnemeyer as our Chief Technical Officer. Jörn's experience in advanced storage, energy solution in lithium-ion at the Teco Group, ATL and Cadex, will be invaluable in evaluating new battery technologies help drive innovation and improved productivity.

Jörn excels engaging competitive technology and chemistry threats and developing the right competitive product responses. I'm really excited to have Jörn onboard.

Please turn to slide seven. We will hold another Investor Day on Tuesday, February 28, 2017 at the New York Stock Exchange.

By that time, I will have been the CEO of EnerSys for almost a year and will be able, along with the rest of the management team, to provide a thorough update on the company's business, its forward-leaning strategies, new products and technologies. It will also give us an opportunity to update our stakeholders on our progress of reducing our cost of goods sold by a minimum of 2%.

Mark your calendars and I look forward to seeing you on February 28. In closing, I am very pleased with the first quarter performance.

It was our global EnerSys team that contributed to these record results. Even though we are at record levels of profitability, I know we can achieve higher levels of execution, and that is the message I have sent to our management teams around the world.

There are opportunities for additional cost reductions, new premium product offerings in TPPL, nickel, zinc and lithium as well as new markets to enter. I remain excited about EnerSys' future and the short-term and long-term opportunities we are pursuing.

And now, I'll ask Mike Schmidtlein to provide further information on our results and guidance.

Thanks, Dave. For those of you following along on our webcast, I am starting with slide eight.

Our first quarter net sales increased 7% over the prior year to $601 million due to 6% increases in volume and 3% from acquisitions offset by a 2% decrease from currency translation. On a regional basis, our first quarter net sales in the Americas were up 4% to $330 million, while Europe's were flat at $197 million and Asia increased 52% in the first quarter to $74 million.

In the Americas, a 5% increase in organic volume and 1% from acquisitions offset a 2% currency decline. Europe had a 3% increase in volume, but a 1% decline in price and 2% in currency.

In Asia, volume increased 33% and the recent ICS acquisition contributed 23% growth while pricing increased 2% offset by a 6% decline in currency translation. On a product line basis, net sales for motive power were up 2% to $305 million, while reserve power increased 12% to $296 million.

Despite the 2% currency headwind, motive power enjoyed a 3% volume gain and 1% price improvement, while reserve power enjoyed a 10% volume increase and 5% from the ICS acquisition offset by a 3% negative currency translation. Please now refer to slide nine.

On a sequential quarterly basis, first quarter net sales were down 2% from the fourth quarter to the first quarter on a fewer working days with 3% less organic volume, net of 1% currency improvement. The Americas region was flat while Europe and Asia were down 4% each.

On a product-line basis motive power was down 3% and reserve power was down 1%. Now, a few comments about our adjusted consolidated earnings performance.

As you know, we utilized certain non-GAAP measures in analyzing our company's operating performance, specifically excluding highlighted items. Accordingly, my following comments concerning operating earnings and my later comments concerning diluted earnings per share exclude all highlighted items.

Please refer to our company's Form 8-K, which includes our press release dated August 10, 2016 for details concerning these highlighted items. Please now turn to slide 10.

On a year-over-year quarterly basis, adjusted consolidated operating earnings increased approximately $8 million to $74.7 million with the operating margin up 50 basis points. On a sequential basis, our first quarter operating earnings dollars were up $4 million on lower manufacturing and warranty cost with the operating margin up 90 basis points.

The increase in operating earnings from the prior year reflects primarily higher volume and lower commodity costs. Operating expenses, when excluding highlighted charges, were at 14.9% of sales for the first quarter compared to 14.5% in the prior year.

The full year's operating expenses for fiscal 2017 should be comparable to fiscal 2016 at approximately 14.5%. Excluded from operating expenses recorded on a GAAP basis is a charge of $7.3 million, related to the ERP system implementation in our Americas region, including a $6.3 million write-off of previously capitalized costs.

We determined that previously capitalized costs associated with the implementation should be written off after reassessing our software designs subsequent to encountering difficulty in our rollout at our pilot location. Excluding those charges, our Americas business segment achieved an operating earnings percentage of 15.4% versus 14.6% in the first quarter of last year, primarily from the impact of higher sales and lower commodity costs.

On a sequential basis, Americas first quarter increased 30 basis points from the 15.1% margin posted in the fourth quarter due to lower warranty costs. Europe's operating earnings percentage of 10.1% was down slightly from last year's and last quarter's 10.5%.

The operating earnings percentage in our Asia business unit in the first quarter of this year improved to 5.7% from a 0.9% loss in the fourth quarter of last year and breakeven income in the first quarter of last year. Asia's sequential operating improvement reflects better volume and lower warranty cost.

Please move to slide 11. As previously reflected on slide 10, our first quarter adjusted consolidated operating earnings was $74.7 million, was an increase of 12% in comparison to the prior year, with the operating margin increasing 50 basis points to 12.4%.

Excluded from our adjusted net earnings for the first quarter was approximately $5 million of highlighted charges, the largest being the SAP write-off of $4 million net of tax, which I previously mentioned. Please see our press release issued yesterday for details of those items.

Our adjusted consolidated net earnings of $50.1 million increased 7% from the prior year or $3 million, and remained steady at 8.3% of sales. The $3 million increase reflects the $8 million higher operating earnings, a higher tax rate, and a $1 million negative currency headwind.

Our adjusted effective income tax rate of 26% for the first quarter was comparable to the prior quarter, but higher than the prior year's first quarter rate of 23% due to discrete items. We believe our tax rate for the second quarter of fiscal 2017 will be between 25% and 27% and for the full year, we expect the 25% rate on our adjusted earnings.

However, this assumption anticipates no significant changes in tax rates or legislation in the countries we operate in. EPS increased 14% to a $1.14 on higher net earnings with 2.9 million fewer shares outstanding.

The lower average diluted shares resulted primarily from share buybacks last fiscal year. We expect our second fiscal quarter of 2017 to have approximately 43.9 million of weighted average shares outstanding.

Please now turn to slide 12. Now, some brief comments about our financial position and cash flow results.

Our balance sheet remains very strong. We now have $414 million on hand in cash in short-term investments as of July 3, 2016 with over $483 million undrawn from our credit lines around the world.

We generated $68 million in cash from operations in our first fiscal quarter of 2017. Our bank credit agreement leverage ratio remains at 1.5 times and will likely drop below 1.0 times by the end of the year barring any significant acquisitions.

Capital expenditures were $7 million in the first fiscal quarter of 2017 compared to $20 million in fiscal 2016. We expect to generate adjusted diluted net earnings per share between the $1.06 and a $1.10 in our second quarter of fiscal 2017, which excludes an expected net charge of $0.04 per share from our restructuring and acquisition activities.

We anticipate our gross profit rate in our second fiscal quarter to be comparable to our first quarter and our interest expense to be approximately $5.8 million. In conclusion, we believe we remain well positioned to take advantage of future opportunities.

Now, let me turn the call back to Dave.

Thanks, Mike. Michelle, we will now open the line for questions.

Hey, thanks for taking my question. Dave, I'm curious with the hiring of a CTO.

Are you going to be more focused on R&D going forward?

Certainly what we're focused in is making sure that we have a product roadmap that's lined up with the future needs in the energy storage areas. Historically, we've put more of our emphasis on development or really application-specific product development as opposed to pure R&D.

So I don't anticipate any major change in that strategy. We do want to broaden the playbook a little bit, and again, we want to make sure that we're looking down the pipe and that's the key reason to bring Jörn onboard is sometimes you can get a little myopic just doing the same thing.

So, we want to have a fresh set of eyes and we're trying to develop the right roadmap and we'll talk a lot about that at the Investor Day in February.

Okay. And then kind of getting into inter-quarter trends, can you touch on what you're hearing from your large Americas telco customers?

Yeah. It's quite.

I think what I had mentioned on the last calls is pertinent again. We're in the cycle of relatively stable comps mostly related to the replacement interval.

So, we are out there replacing batteries and the guys get their annual budgets for maintenance and they are replacing batteries. There is not a lot of new network construction going on that we know of right now.

And so the replacement is sustaining us. This is specifically in the U.S.

And we certainly have our ear to the ground. I think what's really relevant, Ben, and this is what the guys are talking to me a lot about, and I think this Yahoo-Verizon tie-up is a good example of it.

The lines are starting to get blurred somewhat between what we considered are traditional data IT customer set and our telecommunications customers, even the cable television as well. It's getting harder and harder for us to see the hard lines of differentiation between these folks.

The one thing I think we all remain confident about is that the amount of data, the amount of servers, how much the Internet of Things is going to enter all of our lives, it's simply explosive and will continue to be so. And we're in the backup power business.

And I think we've seen recently how critical backup power systems can be to sustaining these data driven business models. But getting back on a pure kind of wireless telecom infrastructure that we've seen, we don't have any sort of updated timetable for you on 5G or anything like that.

But business is certainly stable and the replacement intervals are sustaining us today.

Okay. And looking at the fleet truck opportunity, can you give us a sense for how much revenue that can contribute this year?

And then should we expect more announcements with other potential customers in that market?

Yeah. That's a good question.

We've been at this for a while in the smaller scales. This opportunity that we've introduced here is probably the most significant scale customer and the first one for sure.

I think dimensionally, we could say year one, which is off to a slow start, as I said in the prepared remarks, maybe $5 million to $7 million incremental, and year two maybe $10 million to $15 million would be some good dimensioning on this. And again, the benefits of this technology, the life, the vibration resistance, the heat tolerance, the additional capacity, it's not just relevant to one fleet customer, it's relevant to all of them.

So we want to build from this new base. We're excited about it, and it's off to a little slower start than we wanted, as I said.

The customer had some inventory to work down before we get started in earnest. This will really be an H2 story the way it's shaping up.

Okay. Thanks for taking my questions.

Sure. Good to hear your voice.

Hi. Good morning.

Congratulations on the solid results.

Thanks.

Just a couple of questions Dave. Europe, I think you mentioned being at sort of the tail end on 4G roll out in Western Europe.

Do you expect that to start to fall off in the second quarter or in the second half, or was it still pretty good in the current quarter. I mean, I was wondering if you could put some context around what you should expect in European reserve?

Thanks.

Yeah. I would say, Mike, we've got a – and I'm looking across the table at Todd to see if he disagrees with this at all, but it feels like we're pretty near the bottom.

And, again, similar to the U.S., we rely heavily in telecom on the replacement intervals. There is one thing, I don't know, Mike, that we've talked about a lot in the past but several of the largest OEM telecommunications customers are European based.

And often times, we would sell them batteries in Europe and it would be recognized in our EMEA results but that doesn't mean the ultimate home for those batteries was in Europe. And so, some of the slowdown also is a reflection of a general malaise and in telecom spending globally.

So, we feel it in Europe because that's where a couple of our big customers are domiciled but it's not necessarily all a European story. And, as you know, a lot of the telecommunications development historically in the last decade has been in the developing world, places like Africa and South Asia and Southeast Asia.

And, as you know, given the current economic climate, things are slower than they were over the last decade. So it's a cycle.

But, I just wanted to make sure that we pointed out that some of what we see is just the impact of the global spending of telecom given where those OEMs are domiciled.

Just a follow-up on that, Dave, I mean, any thoughts or any initial comments about what you see going on in the UK with Brexit. I mean, has it sort of frozen our budgets?

I mean, do you expect to see some impact there, or is it pretty much business as usual?

We think we have seen some impact there. I think that mostly a top line story.

I can say today, the UK sales are roughly 10% of our European number. It's been higher than that in the past.

So, we're already seeing some impact from that. The guys had to do some price increases, which you don't want to do, but it's necessary given the change in the pound.

And just as a reminder, we have a lead acid battery factory in the UK. So, it's not all bad news because from a – relative to the U.S.

dollar, some of our conversion cost on that particular facility are improving. But, in general, the biggest impact of Brexit for us is going to be how well that UK sales team can deliver as the British folks work their way through this uncertainty period.

Okay. Great.

And then just a question on the motive market, Dave. I know you've talked in prior quarters about some shift towards the cheaper, lower end or private label batteries.

I know, one of your customers recently alluded to some mix shift towards lower end fork trucks, in terms of the overall numbers. And I was wondering if you can give us an update on what you see kind of broadly in motive by geography.

Obviously, it's had a great run of growth over the last six years or seven years but what do you see from how that market is kind of shifting now? Thank you.

We're not seeing still our top-line numbers in motive, Asia is okay. Asia is growing at a pretty good clip but in the U.S.

and Europe, we've been in a fairly steady environment, and I don't see any major change from that. We've been very focused on mix in both regions that's really critical to our performance is our ability to sell to customers better value products.

And whether it's a new charging system, whether it's a thin plate pure lead technology, whether it's our square tube that we've done so well with, and we're making some good success within Europe. That's really where our focus is, but it's not been a great new story.

Now in terms of the sustainability, I just want to take you back to things we talked about last session is, again, our business tends to be heavily on the retail industries, on the food industries, on the automotive sector. And some of these businesses are holding up in the U.S.

more so than some of the real heavy industry-type markets. So we've done well there.

And then, I think what we also discussed is that online retailing, supply chain complexity, the number of physical touches that are occurring is also a net positive for our business. So we're confident that we can sustain these steady rates where we are today.

And then, hopefully as we get through this period of political uncertainty, we get through the election season, maybe some of the more optimistic forecast we recently read about in Wall Street Journal last week, that can just – that tide can lift everybody off of these fairly steady growth rates.

Thank you.

Okay.

Dave, let's just stick with the forklift truck market for a second. The global orders have been pretty good and you just described that your volumes have been rather flattish.

Is there a market share issue going on there that we should be more cognizant of when we look at some of the global order trends relative to your volumes?

John, I think, it's more complicated than that. I think that trying to correlate the WITS statistics with battery sales is tricky.

So, we tend to be cautious about worrying about share losses associated with those figures. We do more of our share analysis based on industry trade statistics.

We base it on import/export publicly available statistics. We do the best job we can.

To try to correlate battery sales directly with the WITS statistics can be very difficult. There is a lot of competing factors in there.

I think the most significant element of that is the fleet markets, the rental fleets. I think that that's been a major trend in this era of low cheap money, low interest rates that the ratio of rental or lease fleets versus bought trucks has changed significantly.

The longevity of the trucks, the number of batteries per truck, there is a lot of variables out there. So, I really am hesitant to say that we're losing share.

I don't think we're losing share based on any of the statistics we see. I think what we have to do is just use that WITS statistics more as a barometer and just tell us where the activity levels are in those supply chain, especially in the electric forklift markets are.

But, now, any share losses we've had have been modest and probably the only area where – and this started when I was in Europe is we've intentionally given up some share on the private label business. It's just the price and the mix just didn't fit our profile.

It was just unfortunate. And so, we've walked away from business in Europe.

That's about the only place, I think, we've lost share. The final comment I'm going to make on share.

We do the best job we can on calculating market share statistics. Asia is particularly difficult because there just isn't a cohesive industry organization by which to grab any of these share statistics.

So, there is a little bit in China. We get import, export statistics but, in general, I think, it's very, very important not to try to have a one-for-one type of correlation between the WITS and the batteries.

No, understood. Just wondering.

Thank you. That was helpful.

Okay.

Just shifting gears for a second. The gross margin profile all-time record, the fleet trucks start ramping up.

Can you talk a little bit about how much of the gross margin profile benefit from the extra days, how much is sustainable from restructuring actions, and how much will benefit from mix going forward. How should we think about company's blended gross margin in coming quarters?

So, John, I'll take this, it's Mike. So, I said in my notes that we would expect our second quarter gross profit rate to be comparable to our first quarter, which was 27.7%.

So, I think you are just still going to see the upper half of the 27%. And while mix is a factor, I don't believe that the volumes we'll see in the upcoming quarter itself are going to move that needle significantly.

The days themselves have more of an impact – the working days in the quarter have more of an impact obviously on the top line. The cost of goods sold because of our FIFO methodology of how we'll hold in inventory for two to three months depending on how long it takes the region to turn their inventory so that the production going on in this calendar quarter that just ended, call it, July 3 is going to be hitting our P&L in this upcoming second quarter ended September 30 or thereabout.

So, that has a probably a bigger impact. And as you think about those seasons, some have the holidays in them, some have the summer vacation seasons in them.

The first and second quarters tend to be pretty good manufacturing or the fourth and the first quarter are pretty good of – our fourth and first fiscal quarters are good manufacturing quarters, would benefit the subsequent quarters. So, we had a steady lead cost.

That certainly is helpful because the lead – a volatile lead cost, it actually sequentially went down a couple pennies, so that was a benefit. We'll probably see that rise a penny or two in future quarters.

But I still think, based on everything else, and this again is caveat for just the quarter ahead because we don't have order activity enough to see beyond that this upcoming quarter. But I think we should be in the zip code we currently are in unless something significant changes in commodities or overall volumes.

Okay. I'll get back in the queue and let somebody else ask question.

Thanks for taking my question guys.

Thank you very much, John.

Good morning, gentlemen.

Hi, Bill.

Hi, Bill.

Could I just get an update. I know you mentioned very briefly in your commentary on the enclosure business.

How is Purcell and the strategy there internationally and just expanding that out?

Purcell is largely a function today of the telecommunication spend in new equipment. And as I noted earlier that continues to be soft and, as such, the Purcell business continues to be soft.

But as we said earlier, there is tremendous opportunities in other markets beyond telecom and there is really some operational synergies as well with Purcell that we're exploring right now. So, largely there has not been much change in this business now for several quarters.

It's unfortunate but we do have fingers crossed, some opportunities out there that may materialize next quarter. But I don't want to say too much obviously until we have the fish in the boat.

But, in general, it continues to drag along, kind of bump along the bottom along with telecom infrastructure spending.

Okay. Next question, Dave.

Can you give us sort of what was your percentage this quarter in terms of premium batteries and that includes not just TPPL but also lithium?

Bill, I'll take that. We typically would say it's 25% and growing.

The lithium business, we did acquire a lithium-based cobalt disulfide business in Florida. So we continue to build in that chemistry.

So I don't think we've hit 30%, and of course the mix from quarter-to-quarter can change depending on these are typically – some of them are program-driven projects. But I think it's still safe to say that 25% to 30%.

The overall positives in that is that we are introducing our premium square tube product and our thin plate pure lead product into the European motive power marketplace and the thin plate in the U.S. motive power marketplace.

So we are looking for everywhere, including the over-the-road truck opportunity that Dave was describing earlier. So we think you will continue to see that grow.

Got you. Got you.

Last question. Any surprises in terms of your dialog with your customers in terms of their CapEx plans?

No. There's been no surprises.

I think one of the things in the telecom world what we see are some fairly steady CapEx plans from maybe a big large U.S. carrier.

But how that capital is used whether it's software upgrades or network upgrades or hardware that can change meaningfully for us depending on what particular element of their network they'll be focused on in any particular year. But with regards to surprises, I can't – I am looking around the room here.

I would say there has been no surprises.

Good to hear. Thanks, Dave.

All right.

Hi, good morning.

Good morning.

Just wanted to ask a follow-up on the lithium topic. And if we could just zoom out and talk about that from a high level for a moment.

One of the recurring questions that I'm getting from investors is, is lithium an increasing threat to lead acid? More and more applications requiring batteries to fit into smaller spaces and also that – obviously the Gigafactory gets a lot of press and the cost per kilowatt hour is coming down for lithium cells very significantly if they get that up and running.

How are you – I know that you're building your lithium portfolio but how can you compete – if the lithium threat is increasingly real, how are you able to compete in terms of cost per kilowatt hour given the scale of some of the other operations out there in the world?

Well, this is Dave. Very complex question.

Very difficult question to answer. I'll do the best I can.

With regards to the Gigafactory specifically, they are going to be manufacturing an 18650 lithium cell that they were previously purchasing from, I think, Panasonic. I think that's probably pretty well documented.

So, it's an in-sourcing exercise and how much they're going to be able to move the bill of material costs for the product, given that most of the cost is material related, I don't know that the additional scale and so forth is going to really drive a meaningful impact for the bill of material costs. Now, markup costs, logistic costs, of course, those all change as a result of the Gigafactory for Tesla.

But in terms of their ability to make the 18650 cells that much cheaper than what's currently being manufactured in Asia that's something to think about. Scarcity is becoming an issue.

We've talked about this prior that as these volumes for hybrid electric vehicles, electric cars increase, certain portions of that supply chain are going to be challenged. So whether they can stay on the same curve of reducing cost per kilowatt hour, whether they can stay on that same curve is something to think about.

I think that clearly lithium has been around a while and we have seen in our industrial markets no significant erosion of our business to-date. And my big focus for the future product roadmap, especially with Jörn isn't so much on our existing markets but it's in markets that either don't exist yet today or markets that we don't participate yet in today.

So, this is where a lot of our future focus is going to be as well and that's where we think that the lithium chemistries do have some inherent advantages and we want to participate when those markets avail themselves. So, Mike do you want to add anything?

Yeah. Brian, I just wanted to you know comment that when we talk about some of the markets the Gigafactory, et cetera, these are all markets that are incremental to our industrial markets, electric vehicles, home solar-type backup energy those are all markets that don't exist today.

In the industrial market, we will continue to see opportunities perhaps to incorporate a lithium-based approach. But our customers are also very much – they value the service and somebody standing up behind the product, it's going to be there when they need them.

Sometimes, these other manufacturers are looking at big quantities and they don't look at designing solutions around smaller sized application. So, even though the – I'll say the price of lithium, I'm not sure the cost, but the prices for lithium are dropping then we think we can take advantage of that in select places.

Where you are seeing the biggest splash on lithium are in markets that traditionally have not been the industrial market core.

Yeah. I think finally the other piece, Brian, for us is to continue to advance lead acid.

And so, we've got some advanced initiatives there as well which we think is just going to continue to move the gap not on the top but also on the bottom. So we aren't ignorant.

We certainly have a forward look but I can just say to-date, lithium is available today at very low cost in certain parts of the world. To Mike's point whether or not those suppliers are making any money at those costs or those prices is a topic of debate.

But again, that threat has existed now for several years, and to-date we haven't seen any significant erosion. But don't for a second interpret that comment as being naïve or not forward-looking.

We monitor this every day.

And our new CTO's background has largely been lithium. So, we're certainly not ignoring it.

Correct.

Okay. Thanks.

That's a great discussion, great detail. Just one more follow-up on that topic.

I think you have touched on it here. But you mentioned it out of the Gigafactory, it's going to be cell, I guess, is an 18650 or something similar to that.

But regardless, they're very focused on one cell type. Is there something technical regarding that cell type that would prevent Tesla from competing in some of these niche markets that you're developing lithium technology for.

Do you have competitive advantage in terms of the type of cell or the quality of cell and customization of the cell for certain end markets that you're targeting?

Okay. Well, I can just say that the rate – debate rages even within our own organization of small format versus large format.

We make both actually on the lithium cells. And you talk to five different engineers and you'll probably get five different answers as to what is the best.

So, the team at Tesla has locked in on the 18650. It's a mass produce.

That 18 millimeter diameter, 65 millimeter length, during the heyday of the laptop, there was many hundreds of millions of those cells made because that was de facto standard 10 years ago before people moved into more of the charismatic construction. So, I can't tell you where I land in terms of believing which is the right way to go, whether you want a larger 32 amp per hour cell or ten 3.2 amp per hour cells that each has its own advantages.

I would say that in the electric vehicle market, Tesla, as far as I know is the one that's pushing that, we call it, small cell construction. I think many of the other folks have opted for the larger sizes.

In our markets, we've made similar evaluations and just say I'm agnostic as long as it makes money I'm happy. So, it's the making money piece that we're struggling with.

Okay. Again, really appreciate all the detail.

Can I totally shift topics here and ask – I know that you gave all of the disclaimers that I appreciate regarding the WITS data, but would you mind sharing the latest three-month rolling averages and WITS data that you typically do on these costs?

Sure. Mike, your eyes are better than mine, you want to go for it?

Usually when I am talking to investors I focus on the three-month average compare to the three-month average of the prior year.

Prior year. The blue column.

The blue column as it's printed on ours. So, worldwide, that's a year-over-year trailing three months, this is three months ended June, worldwide, the truck orders were up 9% with a 7% increase in the Asia region, a 14% increase in the EMEA region and a 2% increase in the Americas region.

And the U.S specifically was 3% and that 2% was for the total Americas region.

Got it. Okay, perfect.

Thank you, very much.

Okay.

Hey, thanks for taking my follow up. So, I wanted to dig into Americas telco one more time.

Can you give us the delta from the peak of the Americas telco cycle to the trough or today the delta in revenue? Just try to give us a sense for how much you backfilled already?

I don't have that. I apologize.

I don't even know that I want to wing it on that one. One of the challenges there is during that heavy investment phase when we were really cranking out the 4G cabinets and all the batteries for that that may have been a lower period of replacement spending at those customers.

So, they've since swung the budgets more on the replacement side. So, I don't even know that I could fathom how to get there.

So, I apologize for not having that one.

That's all right. Thanks for taking the follow up.

All right.

All right. Well, I just want to thank everybody for taking your time today to attend our call.

And, everyone, please have a good day.