EnerSys has delivered impressive financial performance in the first quarter of fiscal year 2027, showcasing substantial growth across several key metrics. The company's strategy, focused on leveraging its core strengths in Network & Infrastructure Solutions and Precision Power Solutions, has yielded positive outcomes. A significant highlight is the advancement of its lithium manufacturing capabilities, particularly with the U.S. Department of Energy's support for a new facility in South Carolina, underscoring a commitment to domestic production and strategic market positioning. This period also saw considerable financial health improvements, including robust operating cash flow and a reduced net leverage ratio, despite facing some volatility in the material handling sector. EnerSys's proactive approach to market diversification and technological innovation appears to be setting a strong foundation for sustained future expansion.
EnerSys's first quarter of fiscal year 2027 financial performance demonstrated notable strength, with net sales reaching $935.6 million, marking a 4.8% increase compared to the previous year. This growth was fueled by a 3% price adjustment, a 1% boost from foreign currency translation, and a 1% organic volume expansion. The company's adjusted diluted earnings per share (EPS) saw an impressive 64% surge to $3.66, up from $2.23 in the prior-year quarter. Excluding the 45X manufacturing tax credits, adjusted diluted EPS still showed a significant 92% increase to $2.41. Gross margin improved by 510 basis points to 33.5%, primarily due to favorable price-mix dynamics and the positive impact of manufacturing tax credits. Operating cash flow dramatically increased to $230.2 million, largely aided by a $115 million U.S. federal tax refund, leading to a free cash flow of $217.8 million with a conversion rate of 187%.
Strategic investments and market performance were central to EnerSys's Q1 success. The Network & Infrastructure Solutions segment recorded a 9.4% revenue increase to $428.3 million, driven by strong demand for power electronics and data center solutions. Conversely, the Industrial Mobility Solutions segment experienced a 3.2% revenue decrease to $406.8 million, primarily due to reduced material handling volumes, although partially offset by a recovery in transportation. Precision Power Solutions stood out with a 23.6% revenue jump to $100.5 million, propelled by growth in aerospace and defense applications. A significant development was the finalization of a $150 million Department of Energy grant for a new $650 million lithium cell manufacturing facility in Greenville, South Carolina. This facility is strategically focused on high-value domestic production for aerospace and defense, and is expected to yield a mid-20s internal rate of return, with construction slated to begin in the first half of fiscal 2028 and full production anticipated three years thereafter. The company also returned $60 million to shareholders through share repurchases and a 10% increase in quarterly dividends to $0.2875 per share.
Looking ahead to the second quarter of fiscal year 2027, EnerSys projects net sales to be in the range of $955 million to $995 million, with adjusted diluted EPS expected between $3.15 and $3.25. This guidance includes $42 million to $47 million from 45X manufacturing tax credits. Without these credits, adjusted diluted EPS is forecast to be $1.95 to $2.05 per share, representing a 25% year-over-year increase. The company remains confident in its ability to generate strong cash flow, invest in strategic growth areas, and continue providing returns to shareholders. The management acknowledges the choppy material handling market but foresees a recovery in the latter half of the fiscal year, supported by ongoing momentum in other key markets and new product introductions, particularly in lithium offerings for data centers and material handling.
