GENERAC HOLDINGS INC. Q1 FY2025 earnings call

• First quarter results exceeded expectations, driven by strong shipments of home standby generators, outperformance of residential energy technology sales, and strong gross margins. • Residential product sales up 15% year-over-year due to growth in home standby generators and energy technology solutions. • C&I product sales down 5% year-over-year, with some channels up but others soft. • Favorable sales mix and lower input costs led to gross margin expansion to 39.5%, highest first quarter since 2021. • Home standby shipments up mid-teens, with California market underdeveloped but growing. • Residential energy technology solutions exceeded expectations with strong momentum at ecobee and energy storage shipments in Puerto Rico. • Commercial and industrial products sales down 5%, but some channels like domestic telecom and industrial distributors showed growth, and new large megawatt diesel generators for data centers on track.

Net sales for the first quarter increased 6% to $942 million. Residential product sales increased 15% to $494 million, accounting for approximately 52.4% of total net sales. Commercial and industrial product sales declined 5% to $337 million, making up about 35.8% of total net sales. Net sales to the other products and services category increased approximately 4% to $111 million, representing around 11.8% of total net sales. Domestic segment total sales, including intersegment sales, increased 9% to $782 million in the quarter, with adjusted EBITDA of $123 million, representing 15.7% of total sales. International segment total sales, including intersegment sales, decreased slightly to $186 million in the quarter, with adjusted EBITDA of $27 million, or 14.6% of total sales.

• Updated outlook reflects broader range of potential outcomes due to tariffs and macro uncertainty. • Consolidated net sales expected to increase 0%-7% for the full year. • Adjusted EBITDA margin expected to be 17%-19%. • Second quarter net sales expected to have low single-digit growth. • Full year operating expenses as a percentage of net sales expected to be in line with previous expectations. • Free cash flow conversion from adjusted net income expected to be 70%-90%.

• Uncertainty from tariffs and other federal policy actions impacting end markets. • Potential impact of higher metal prices and other input costs on COGS. • Softening consumer environment could lead to demand destruction.

Q: Tommy Moll asked about new product launches in C&I for the data center market, including product design highlights and go-to-market strategy.

A: Aaron Jagdfeld said the data center product line is exciting, will serve data centers and existing end markets, and the go-to-market will leverage the nationwide service network built for telecom sales, with customization and shorter lead times as differentiators.

Q: George Gianarikas asked about anecdotes or data showing softening in business due to macro uncertainty.

A: Aaron Jagdfeld said higher prices tend to dampen demand, but outages matter most, and the company is agile to react to external stimuli.

Q: Mike Halloran asked about the lower end of the guidance range and COGS regional sourcing dynamics.

A: Aaron Jagdfeld said the lower end reflects a softer consumer environment, with pricing offsetting tariff impacts, and about 70%-80% of COGS is materials, 50% sourced in US/North America, less than 10% from China currently.

Q: Jeff Hammond asked about pull forward of sales and IHC trends.

A: York Ragen said only a small amount of sales was pulled forward, and IHC trends vary by region based on outage activity.