Generac (GNRC) 1 May 242024 Q1 Earnings call transcript

Thank you for standing by, and welcome to the Generac Holdings First Quarter 2024 Earnings Call. [Operator Instructions] As a reminder, today's program is being recorded.

And now I'd like to introduce your host for today's program, Kris Rosemann, your Manager, Corporate Development and Investor Relations. Please go ahead.

Good morning, and welcome to our first quarter 2024 earnings call. everyone us thank morning. to like for this joining I'd and Aaron Officer; Officer. With is President Chief Financial me today Chief Jagdfeld, Executive Ragen, and York

those will differ its other and cause information these forward-looking from commenting involve in time during today risks by our uncertainties materially contain provided presentation Certain actual Generac forward-looking time or and this as statements could made may statements. results We on well as from to begin employees to call that forward-looking statements. by statements

our earnings of risk see and identify release Please for or associated a words such SEC list factors. the that filings or expressions statements

In addition, certain measures we during to non-GAAP today's call. make will reference

and to U.S. including Additional information is measures, regarding GAAP comparable these filings. SEC earnings available reconciliation release measures, in our

turn Aaron. I the to call over will now

everyone, Thanks, thank Kris. joining you us morning, and Good today. for

first expectations results costs strong prior operational Our execution. favorable due to ahead our input were C&I shipments, and quarter of higher-than-expected

net XXXX discuss We EBITDA more overall will slightly call. are later free reiterating in York margin Year-over-year, our morning detail outlook million. sales in sales, flow which to increased net and the adjusted cash conversion, overall for $XXX this

continue in initiatives. in distributor flow invest markets. strategic increased helped to year disciplined from as generator sales. industrial strong year management free Global the in growth decreased from as offset product sales our quarter working X% domestic decline telecom and standby X% improvement while period our offset prior a Significant increase a shipments year, generation to prior shipments expansion in and other prior home by partially in cash residential substantial robust we product the drive customers Residential strong was as a margin to mostly sales weakness certain compared in C&I a the year-over-year rental capital product

excess a field a increasing prior Home standby from the expectations meaningful that year inventory period included line from at were with in softer prior rate headwind mid-teens quarter, our during shipments levels. the

more Shipments The field expected, of aligned support generator is excess were quarters. growth standby first the signaling normalized to home in levels. and the quarter, headwind that exiting in coming reaching removal the expected inventory year-over-year strong activations As are levels inventory sales field

during softer approximately with in of are Power baseline the in installs, quarter January outage of modestly which resulting from prior the February as in offset first the outage line U.S. a XXXX. Activations, quarter higher the average proxy activity was months the in last were longer-term quarters the weaker by March. lower and the activity the in for outage fourth over specifically performance, year consultation period, declined and several environment reflecting outages home

did the but consultations increase sequentially year-over-year very declined basis prior year on from quarter period. first Home a during a strong

XXXX X.Xx For first than of than historical perspective, than consultations the higher quarter modestly but first the more the quarter first higher were were home quarter in and of XXXX.

nurturing moderate continue lead close tool year, in will experienced as lead the improvement practices. initiatives further this rates during we optimization sequential Additionally, including believe we enhancements and to quarter execute drive beyond data-driven sales that practices, improved increases first we

increase the at the awareness We funnel sales in the period. during category home also a and customers investments count new XXX generators. are for to dealer with X,XXX, ongoing standby broader approximately expand overall categories of bringing our of making We end to dealers our quarter demographic engaging and ended with residential net the first

purchase allowing contractor with helps been preferred effort in program, we our bandwidth steady traction through nondealer products also installation better strengthen improve our aligned their of that experiencing contractors have in good have We these seen channel. number an the increases as us while relationships installers to contractors and

as the tools the in both tools and well view as well dealers including our nondealer to which a partners, optimize our as installers teams invest advantage we key installers to as competitive teams growing as these continue for and of business. support in and will -- We distribution network and

to also experienced facilities. for recent momentum incremental expansion have contributed production teams that growth margin continued future Our to make this the in profitability. our home quarters, operational and within we bodes improvements These improvements well and standby

We recent are on improved field emerging believe as and continued quality inventory a competitive from execution challenges we the with focus an well as position.

the the market our market. profile rates sourcing, category, manufacturing, industry-leading leverage close strength and our expand portfolio to to our the processes financial drive home continue in years in tools will and distribution and sales number as of growth to ahead we the strong product distribution in expand grow broadest consumers higher customized drive and engaging omnichannel network, standby We the unparalleled invest in marketing, the in in scale

and challenges While pandemic-related global with product continued home EV overall were market to well for energy as prior quarter, line during the our products. in core storage weaker shipments generator as post softness in and portable with were however, sales our expectations expected first than markets domestic standby continued lower the shipments residential due

for sales We conditions shipments product specific year generator unchanged to relative are market end our these prior category, residential expect home full XXXX, impact guidance. growth standby our the overall our but softer to expectations for

drive Ecobee's performance Technology year-over-year to strong. in homes retail contractors and growth quarter. challenging connected with first services of a the attached and momentum during also quarter number as professional continued environment remain moving Now Residential Solutions, our experienced our positive sales Ecobee despite rate Energy Products team the to

and margin on primarily component chains electronic due a XXXX. first reduction Ecobee's to quarter year-over-year initiatives supply basis, relative improved to the cost Importantly, meaningfully improvement in gross of

our and the has to key on after of product energy completing substantially with upgrade program Within additionally, in our objectives. base health fleet on products warranty materially our progress and installed XXXX make laser these continued residential improved continue quality development focus product of solutions. And clean a we suite, improving

which grid energy via multiple systems integrate our also ability to in support our for technologies are partnership resilience our our value demonstrates in also the to providing to Puerto while partnerships storage energy residential generation the needs participation grid and in homes through to Energy of Massachusetts, we program our work innovation power We bring operators. additional Department with resiliency as forward moving and clean and Rico

remain we we EV shipments with our best-in-class the solutions charging excited quarter. Finally, Wallbox during will begin of the company's second as about collaboration

We continue technology to develop will residential generate the making the we're that investments attractive energy expect to come. in solutions to years returns

the Our solutions teams building and can acquired value of have integration believe our focus deep we where are the on focused we on consumer. the platforms while create products for high-quality tightening most we

that distribution, over continue time and we competitive of core future. to the the competencies by smart support become as and our around lead energy and With and believe will sourcing, develop improved evident focus we marketing, execution can create generation, advantages customer global leveraging sales home we

Global now industrial decrease to I year, telecom C&I commentary markets. industrial sales and from by gears, in on offset North the prior growth domestic distributor rental international C&I in product prior our channel by some or provide was Switching and products. declined certain sales customers, continued which driven ahead partially a of X% want to American expectations, our our

quarter, product quarter. of As lineup. C&I continue the of Shipments to Quoting we through gains expectations a for grew the significantly drive the resilient product first market within American XXXX our first in North again now result strong share full distributor and activity remained higher. channel in quarter are generators our our core sales C&I outperformance, year

the quarter. operational lead times reduce our during helped execution addition, In to

in quarter Consistent to the believe year prior customers shipments with national expectations, rental expected, markets telecom we these our As the from the strong end declined soft quarters. remain and in prior period. will coming

future end projects market infrastructure believe leverage this cyclical the our channel, we rental the has the weakness in for to runway continue despite products. However, need given future for growth critical substantial that

of Additionally, require of around in services communications network global leveraging the critical the capture nature secular trend and our significantly greater telecom serving of increasing reliability. tower our to and future growth the confident power XX counts wireless experience the market, are years hub we that and potential increasingly ability

Shipments used important end standby during applications term, time Longer applications trend environment energy interest project in ROIs prices an volatility as we the projects quarter, view and of customers and as higher. as natural impacted lines. all opportunity operators higher generators concerns for our declined Generac, rate moderately beyond grid market these the and reliability gas traditional

our projects systems. both and pipeline C&I storage Additionally, multi-asset introduced build generators energy we our utilize of recently a will continue to gas natural that

seek opportunity, leveraging drive market to are early our storage as to rate of to we opportunities the customers in energy generator generators years in outages C&I energy resiliency in gains our a behind-the-meter offerings arbitrage innings also solution. growth intend leverage duration while short complete we in our grid the While share for gas leading natural coming for and variable the traditional utilize position service storage

comprehensive deliver invest on and to we are solutions market teams, market uniquely technology C&I and to to the continue believe necessary solutions energy bring processes to We these in the for resilience efficiency. focused positioned and

were the telecom disciplined sales quarter primarily decreased to prior at year-over-year period first end offset certain to of with eased by XXXX. lower the Strong in held operating actions relative intercompany market U.S. as notably markets volumes. softness. the EBITDA related International declines leverage the American consistent lower as Internationally, energy as well for to most operations European in shipments portable Internationally, in lower our shipments markets, as generators security to concerns Mexican total and price on partially growth XX% shipments year in Latin this offset were shipment cost adjusted from margins

in our by customers flow our allows executing capital the profile, first in other further of industrial operational strengthens cash The business. margin for smarter results ongoing products as performance morning, home our strong to reflected this enterprise encouraged In allocation world a C&I in quarter softness and offset closing generation robust end strategy. powering standby areas execution in in to confidence return we our market year-over-year improvement and increased gross shipments optionality our generators of are and our historically additional distributor

in further underscores the Additionally, artificial electricity activity, by construction on of the supply/demand and intelligence, emergence our have imbalances underpin directly in enterprise mega industry-wide of relevance part will of has pressure increase also acceleration but the centers power, data growing looming the the raise grid constraints. backup recent public strategy. large driven awareness for center trends to supply that served not demand electrical the Data only increased

Accelerating centers power electrification baseload driving of and which retire generation generation and consumption continue artificial extensive as forecasted. America, to At the siting growing demand is permitting join facing the forecasts for operators same power data equipment also higher of grid and deployment of energy-intensive shortages. previously while critical intelligence well thermal as intermittent add than North the sources meaningfully and the challenges reindustrialization time, trends

creating electrical satisfy long-term frequent needed before even the is After these additional for of the of converging the consumption little grid. power trajectory increasingly weather of the considering electrical demand on is are electrical clearly future multiple stress very in in grid the this to U.S. And decades events aging power -- not trends. growth prepared that severe trend nation's

particular, increasingly and Generac's provide well power with to resilience and portfolio, electrified backup is the in in they world. positioned continuity home an business demand owners

product cost. energy will across on value comfort helping next-generation residential our proposition categories both technology addition, In and our optimize solutions further resiliency for consumption, efficiency, C&I by expand and

believe uniquely are helping solve broad of capable the resulting solutions business our from and this and owners energy products in challenges We transition. offering home accelerating

first I'll York over our to further the to for and quarter results outlook turn updated call now our York? provide details XXXX. on

Thanks, Aaron.

X% compared Looking the in had growth acquisitions million quarter Net from XXXX from year first prior $XXX as and impact during approximate quarter. sales $XXX increased contributions XXXX currency quarter. the million favorable to the foreign The of revenue combination during first an impact in first on quarter at to detail. more positive results of the

in net looking given product the sales by sales compared was product quarter $XXX at residential mid-teens sales a Residential as prior million increase million for the $XXX to product increased in class. consolidated primarily Growth first to driven X% home by partially year. shipments Briefly in a year standby in and core domestic prior solar comparison, softness plus portable generators. Europe U.S. a product offset and in of in was This market lower the large decrease ongoing sales. by storage the strong shipments generator

to for $XXX quarter X% $XXX the as XXXX year in the first of Commercial and compared decreased product industrial to prior million million quarter. sales

certain quarter. increase the and our to was robust in domestic markets, product This the growth in America. X% sales core through performance in largely due was equipment rental sales customers. our approximately decline a industrial and expected growth weakness shipments including Latin channel, distributor contributed national The acquisitions and C&I in currency telecom domestic international offset Foreign to by

improved and currency. products Gross other for $XXX contribution was production first sales Net prior XX.X% in slightly shipments, favorable the to foreign from X% home to to services costs prior quarter the approximately including higher compared margin input lower year increased due XX.X% to sales favorable million, mix, and stronger year. pricing standby efficiencies, profit given a compared as

input operational gross expectations cost execution. quarter of realization a strong result better-than-expected First our and as prior exceeded margins

to X% as in research higher approximately company. $XX quarter line Operating awareness investment This development expenses spend was to to More XXXX. expenses the expectations that Operating incremental rate our our our to increase to strategic of initiatives million the solutions long-term specifically, double ongoing growth. grew expenses, first execute increased at and drive or to operating compared prior in and growth. overall create due a future ongoing products. for marketing primarily evolution we quarter technology as were our with an energy for highlighting our expenses of drive teams

$XXX first sales in EBITDA our or was of net before defined earnings the factors, million as million year. XX.X% release, compared net these the to or sales prior As for in in result of adjusted $XXX a as deducting interest, quarter XX.X% noncontrolling of

I $XX reporting total the the quarter quarter. for segments. million segment sales, representing total including to including prior $XXX intersegment the compared increased to Adjusted our sales, quarter. results $XXX segment EBITDA in in was sales. in of will X.X% Domestic now compared XX% decreased as total segment year to intersegment briefly slightly X $XXX as XX.X% in million margin for $XX International or sales, sales, million prior discuss million, a year million to the financial the

as portable in for shipments for Adjusted to to $XX declines million quarter. Foreign for domestic deducting EBITDA growth market our as total in the driven from sales, generators. most compared $XX segment currency before core interest approximately and approximate as was XX% in acquisitions X% markets, certain segment for Mexican or intercompany million notably European of telecom decline operations lower sales the prior XX% was total primarily year. contributed shipments well the or sales noncontrolling the XX% by the sales of in The total

financial Now consolidated basis. back switching our to on the a first quarter for performance of 'XX

XXXX. quarter net in in disclosed release, million million company first was $XX income million our XXXX. current we GAAP the The investment period in of the made securities equity As warrants Wallbox, to that compared earnings reflects in the $X minority fair of $XX quarter includes a a expense year the our for change as for in and noncash value the of QX

the Diluted redemption million prior the GAAP the year value to on the a that $X.XX a year. rate included prior million of a or an The GAAP effective as pretax adjustment. the company million or in of year. income during compared $X.X book income $X effective year. taxes earnings tax XXXX were per for prior $X year quarter rate the period the first of income was net impacted period compared an the share The value quarter redemption current share, in while current discrete included certain adjustment $X.XX decrease current our for basis per to first $XX XX.X% million was tax tax XX.X% in items tax that primarily of year impact higher reduced effective rate driven by in

company, in negative year. first in quarter year the $XX defined And Adjusted positive in This million release, as compared current release, $XX the $XX flow net in cash operations $X.XX earnings positive year the quarter. was the share. to net million flow, free earnings as quarter prior adjusted Cash $XXX per negative million prior or from million in to per same as the and income our or million million year was first as to the defined of was quarter $XX compares quarter income the for share. current in last in $X.XX compared a year $XX our

of as-reported the higher reduction primarily reduction in a working a at to end from primary due X.XXx resulting XXXX. not first improvement did the earnings at operating outstanding end of year the a onetime significant was billion, $X.XX of the basis, quarter flow was ratio quarter period, X.Xx debt an continued leverage in capital the end in the at prior a large the debt on of free repeat. year the in gross and in current quarter Total cash payment The which cash tax

With that, for comments provide now I updated on our will XXXX. further outlook

in our and full release sales morning, for disclosed are we outlook this adjusted year XXXX. maintaining net press EBITDA the margin As overall for our

top outlook, which expect approximately X%, from our to X% line year-over-year overall includes growth sales For currency. slight still be we impact favorable foreign and to a acquisitions

products However, we mix mix of our and now C&I expect a previous compared a expectations. of slightly lower higher residential slightly products to

we are changing our outlook full for shipments mentioned, home Aaron the As previously standby not generator year. for

we increase for market, generator and home expect normalizes end year-over-year a As we line generators to home shipments. the field continue inventory with start standby in shipping standby in significant

other conditions end products than previously residential market are However, facing softer anticipated.

of full for for portable markets storage in be previously residential softness now and to sales rate As expectations energy in compared the double-digit short weakness product year product generator a lower low mid-teens rate shipments, sales, range. global EV domestic result we as the and in projected. continued growth to the growth expect

incremental this in primarily to to expected Offsetting year we residential higher-than-expected the driven our first prior XX% as is our quarter. decrease previously a mid- versus outlook be now decline. This for domestic markets, by softness in in product than improved shipments guidance to an high the end compared approximate C&I single-digit industrial prior sales customers higher resulting distributor anticipate to rate

flat rates second year. Specifically to sales anticipated compared quarter, net to prior growth the of for accelerate period, to half as the in the year overall the be second we nearly with expect

additional does add not in $XX event the activity a is of average. outage during which Importantly, power the this that $XXX assume to shipments major historical with could million year. with of outlook the million baseline the longer-term this guidance benefit assumes a the year level Consistent outage of in remainder line power approach, during our

XXX full throughout over for gross margin XXXX margins, margins are points the now now higher price expected. basis expect cost year to with the now to over point than growing gross and approximately full by margins XXXX XXX the XXX projected approximately to expectations sequentially first modestly are favorable outperformance. margins increase mix, given an XXXX guidance XXX improvement year increase from given previous gross second basis the QX half Our impacts. the half XXXX, gross We improve the Gross points by previously basis year

to XX.X% previously expected will margins gross to initiatives. before are EBITDA mostly to for XX.X% guidance the approximately offset deducting the support discussed margins assumes This full higher-than-expected strategic Adjusted that better-than-expected enterprise-wide by still interests noncontrolling expenses be be operating year. modestly for help

a EBITDA As half basis second sales volumes second the and operating higher expect now higher half result, we to half the of half to nearly of XXX margin to half margins, basis the the year. previous on EBITDA combination margin second points adjusted be the EBITDA driven by margins in improvement leverage gross of first This compares of the the points from than XXX expectation of year. expansion first approximately

our is for flow also share we guidance updated and details per will providing are full cash normal with As XXXX. to the -- free adjusted earnings modeling assist practice, also we year

the the This tax the full of For be result the tax a year. effective XX% approximately GAAP in compared quarters of rate each effective year, rate is XXXX. XX.X% to remaining in tax expected year GAAP full as XX% is still XX% our X of approximately to expected GAAP to for rate to

add-back estimates should at items effective reflected adjusted net tax rate. arrive using per earnings be income adjusted net to our appropriate Importantly, expected of share, tax for and

of expectations an is term loan $XX now prior year. approximately prepayments in to the due the as million revolver million $XX Interest principal to of the be assumes rate to additional remainder or million for This compared guidance no to to interest $XX million guidance increase year. during expense $XX approximately expected

Our the for are be projected X% forecasted year. of capital approximately our expenditures still to net sales

weighted Our the generation being historical flow cash the generation to of toward unchanged. cash guidance of year half follow flow remains expected second and overall seasonality still in XXXX. disproportionately Operating free is

prior net continue quarter's intangible expect expense the approximately capital adjusted flow with to cash as count consistent guidance. Depreciation XXX% amortization continue compensation expense, last working expense, be we to at stock to years. remain full For monetize to we and GAAP conversion share strong year, income of diluted build expectations free also

repurchases reflect XXXX not value. this drive outlook potential acquisitions shareholder Finally, does or could additional incremental that share

questions. our remarks. to concludes like This prepared we'd time, open this the At up for call

Moll [Operator Tommy from first question And of Stephens Inc. our comes line the Instructions] from

off if could Aaron, standby see you home starting to us. on reconcile Wanted for

down the year-over-year. I think up understand say help mid-teens in Can context? heard are I you just of shipments are you those year-over-year, two us activations

Yes.

I been last quarters, relative at look So to would been year activations I years. the this little last, a has couple that outage couple it's of have over mean the the than -- recently a the environment kind question, great Tommy. environment of outage if most say, slower a in you of trend weaker

So look QX since the it quiet relatively trend-wise, been was outages. tracking in line long-term of kind average you with quarters. But actually quiet we've again, a was

slowed relative You a in as historical February quarter January, light really And trends. really March. past and then of down previously, we kind discussed get to things QX, was

So...

year? the last QX

last 'XX Yes, strong really for was QX QX. was -- year

a that way. kind So tough of comp

So March and the other. little shipments run each headwind we bit inventory But are kind up So is were rates, really in activations because, were and now, the of February, activations quarter yes, field right? gone again, with exited shipments line largely down. a

primary kind which really that headwind inventories So in think with terms to of we them sign point of here. has of at a been stasis a good the that's normal, field we're returning

abates, most think, that been on has result, I comping the of bit as a us more helps but in the little terms recent periods. as yet softer of shipments, So outage that strongly activation a

and quarter, the increase allowed The bigger year this in year-over-year drag field for a shipments. inventory it drag was last that year's than was

Exactly.

not it if one, but a I'm helpful. for limited turn I'll sure That's back.

George from from question And line Canaccord our of Genuity. the Gianarikas comes next

discuss your impacts incremental directly And demand power you wondering, data in needs any of surge data tangential you've you from maybe the a more seen about talked little AI center direct I the and bit the strategy could centers? was detail if demand. I there? of wondering was

George. Thanks, Yes.

underneath used market. purely the that range for typically So our is of very market -- range product a backup of products large and that manufacturers are power, blocks that's use for for data And out the a being they data they and engine that's by basis in handful direct them there. all that sell on dominated on diesel major centers a direct the world, the There's basis. a are of large the center

like used don't have like product and are to engine don't any in range. get develop boats and engines and we trains So have we tug that things a that, Those plans an mine haul and trucks that.

much than just outside you'd of see So power generation. applications what different

That relative data the where also not have said, some we power opportunities of And natural seen the do across backup we serve edge backup. some centers for great. gas needs to as come are

today, are again, these diesel, permitting data large seeing players. large diesel issues backup by So and we is entirely driven engine engines. for of generator centers market around siting almost diesel But the certain with concentrations

the been has There's in to diesel permitting obtain raw and where as areas for engines to operate of high-profile -- of some have example. to cited for permitted an So challenging kinds backup. numbers that be Virginia, the

center So potential turned gas have natural these to EPCs owners and some data as option. a of

of a profile cleaner, blocks the as in because gas the Now in natural bit products. diesel are But are emissions fuel. the emissions nonetheless, energy, density quite power see of have of doesn't those smaller you terms the

So be that a opportunity. could potential

products. those to gas continue natural output grow of generator in our We for terms total line

smaller there they're to centers. but data could opportunities, edge primarily be we think going think we So be

X at The coming of indirectly, data from here to the between drawn opportunity, households triple XXXX, the will from get centers today. that XX online George, like if that that that you right? X, XXXX, data equivalent the amount adding if those is the equivalent of power it's bigger grid. that are current and to years. it, be It's now step if so call the we of almost will we're estimated Probably to million the be centers It's amount levels going back, and happens,

of raw very of second. that's come process of short mean, in terms number demand in the So data we increase a for just -- I period from that centers raw the a these time. going just in to

you for of to around quickly operators And and for, right, or time, because regulatory course, what plants the at going really it's scale. then, to to approval be new again, that to a likely it's It's process of generating any industry length citing right? wind through what and the of react those going are -- add? be or industry to for utility grid is challenging of the there's capacity have a been energy the utility permitting going who different you utilities And you even intermittent, bodies. process for you're involved, Most solar today, know going

You But those do of intermittent nameplate that are to cost effectively rating to the plant. sources. get can a thermal unfortunately,

a have need how to strategy to you XX/X So different going with a you're operate on basis.

there approach, and might assets payers be supply during or that sort, other times to which available help peak offload on bit a demand to obviously, to during power virtual have passed more would rate So plants, got grid services to come and out you up of grid. times the distributed you've be programs those peak obviously augment with is either different need to a that expensive, type some quite storage add to with or along

interest grid up and and processes many complicated We're again, conversations definitely to and seeing these programs running. these They're much greater in there's bespoke. But types times, and programs. to get highly customized they're with get operators utilities of

opportunity AI very operators is not just too And quickly. centers The the to wait. to it's great, And -- with so time. it's and are data us center and going going far take data very, it's just coming at

going I of that quality clear to power. in to of happen -- to shortages. weather-driven here future the be outages, is we because grid on going the in in basis that inkling just X a to quality. power happen that's the to continue is what not even next years what And power a reduced those see critical me remote going structurally, degradation result to a weather. that have to don't will what's XX It's think terms although susceptible we of we're of So and is over These are think net just

going the But that's continue supply-demand it's to to really grow. imbalance

supply assets the gas, we're solar. on centers. As this intermittent to with everything, of load adding racing additional side, side, XX/X replacing like thermal with and electrify assets we're wind like traditional we're coal and dealing from and on all data then profile the demand And

just the a for great setup it's in ahead. not quality So power years

our the question Mike And line Halloran from comes next Baird. from of

Maybe things outlook thinking to X So side the like on deeper confidence similar here. you're in sounds the the C&I the One, run sustainability the just channels. how improved? It things. businesses the where digging then in of about seasonality has outlook for pretty a a talk And little the of areas telecom rate. also the for and rental the

And you sustainability some areas? any of of you that point of distribution kind nice thinking And legs side, other to to back? evidence have might were the think for some would piece why more the of couple the so what here relative and you months a

Yes. Mike. Thanks,

the about that other like basis. before, centers, even very applications, school serving the for telecom noted again, plants distribution plants, manufacturing the types guidance that business as rental some rental perform is, cyclical markets care, of So health which they're change a you applications, telecom to our now, year. of as and the in our direct slowdown channel, largely come and again, serving data districts experiencing treatment strict we're Really, data quite well infrastructure -- of water we've been of outside unchanged we in businesses. as wide industrial telco are has and lease oftentimes noting talk the time from telecom quite well markets, and the range which, mentioned and as the the for face C&I market continued as for on They're the I slowdown, has a

But along that answer. been us. for industrial has in growing owned has to kind And of we it. if markets some is of really from with us distributor of the able channel that channel quite you for we've out out where felt were greater last pick share we that standpoint a market distribution, that We've playbook U.S. invested been infilled the around has attack the heavily the for flat done the we've will. We've worked been We've really underrepresented way decade. to well some -- And able the up share where part acquisitions a

necessarily So very there. the it's seen right? in coming We breakdown stronger. resilient, been It's haven't

about or just the power, I with I businesses, the some mean we've just been I broader on and also within right? you're having -- just without can't Whether prattle and you have demand supply for deeper businesses about the here electrification quality discussions that you continued that the think imbalance had supply representative of that's power right? reliable today time, just operate. talking challenges

they certain And every say rely we used to for would markets power. power. certain were on or to would today business I critically say almost continuous point applications of that "critical backup source a

manifest America. itself or whether whether North seeing in just that, it's over to revenues, penetration and market rate backup have spoilage that's of when C&I think inventory buildings that a I been outages power you're without an exist these on represent So rise. that the in for time outages, in interruption And their businesses you significant these broader disruption the get

the been there. very we've resiliency pleased with And

And largely are pretty conversion ] hey, the there. distributor things what the I in we And think in continued for we telecom. to hang look, for we broader were continue up that [ And process are that's to helping trends line has continue in industrial we're other all be them in those rental really of weakness offsetting us here it. cyclical like you hanging offset so saying, And invest the those weakness the when weakness channel and solid, there the markets. to quote-to-sale -- that quotes forecasting

Capital comes KeyBanc the from Hammond line next Jeff our Markets. of from question And

think back IHC just on speak pretty were kind residential just activation whether to weak. and you destocking done, maybe One, left? not how it's And still like seems then of it just So if much trends

unchanged want know And view but back gives ramp confidence, the an seasonality? of kind quarter, half to in so I of what come the kind like, to was into I and second of just just in outside you it the line

Jeff. Yes. Yes. Thanks,

destocking a the exited perspective, again, quarter, line. much and were activations and from yes, February in we pretty So shipments March,

all we of been XXXX, destocking on period we're that. finally So have again, quarter we on third extended data since that of based experiencing feel the and -- based here and like we really we've the like the felt through

And behind, line post I largely the to mentioned that is of year-over-year as think, the with prior we kind again, And expectations. ability our in I so -- -- that's as increases in mid-teens previously, those standby home shipments.

have headwind that's So that inventory primarily we field gone. that don't now

but the pace. off not a weaker were we of bit trends what terms In little maybe activations the dramatically anticipating, here, underneath and recently

solid outages, pretty was not seasonally January a So we -- feel with and February March, good. so about good frankly, month

February April, on -- were were came hand, they other strong. March back the and fact, really In quiet.

of upticks leading would so And see you metrics seasonal and seeing products, types of get into to indicators. here. frame in you we that and we're the of that key both time these expect for the these kind track, lagging kinds

for feel hanging about that and pretty that good the So to guide guide year. on we

typical older. response, traditionally these intact. we've of -- see lot just it's an with sensitive and you again, demographic that, that of they mean the different -- buying it's outages other -- to the types I I very much a that Power discretionary in trends These category the are in their a aging create, we've category categories. consumer about interest older call times. think think, said this the are that's Also products. they skew talked different homeowners It's Americans things emotional itself right? movements previously elicit place I you some might of that what less is a might rate

market think that edges around see It And decreases, I rates. the I just interest of last movements that isn't think are half rates we that mean And sensitive for It's doesn't won't these out in not to back -- interest demand a homeowners have that's are high mean less year. in this a largely been I played phenomenon. now while. here the new decreases.

on point. whatever interest that's rates this had So in the at the that think on of have we baked impact I may largely edges higher the market, margins, think

ever. again, just University to also State it it the just forward, that, think out point I'll hurricane active, thinking I that most the do I was -- forecast the think balance forecast was what York, of was, Colorado the year,

can longer-term of I is El be you next at But how that going the what So me around we I Nino what events. me if to put tell in in Saturday, forecasts stock preseason the trends those we're a of relaxing it's air lot we don't believing -- a temperatures, to think temperatures, going Personally, because they the forecast. again, be have mean weather water don't you tell to I can't September. -- hard tend time looking

I are those bigger think think to important are things like how the about that cycles forecasters things the around long-term hurricanes.

So that's well. as coming

doesn't baseline But our outage activity guidance any majors. assume assumes

to also important mention is seasonal. it's think the category like I

So second first half. than is the always half stronger

baseline that you to So first level outage nice from business you sequential home would our -- if half assuming a guidance. increase half to support activity, of standby you're expect second in

comes And William our line next Blair. of question from from Brian the Drab

incremental feel revenue you of from was you I what's that XXXX give between at just last $XXX about energy And investor us resi? I'm updated capturing outlook, and for if revenue? event the bridge the technology technology and about the C&I incremental energy on how XX% could here Can revenue is incremental And focus slide residential. and the an C&I update from and year and million wondering just we on the minute. in XXXX from a looking and

Thanks, Yes. Brian.

update the we're position about -- of of within So we I Obviously, storage, the ahead I and last the years. more today mean, we thinking how the pull from would interest that ] NEM in the that. obviously, higher say I specifically clearly then not Tech [ points products rates. are charging, in EV near-term talk for market a And for weaker complex. market we're some California and to are the gave just can are for Energy market fall. dynamics to solar next X.X plus off in The that market But of couple those guidance today. negative coming

I those think on the having demand markets and the impact products. that's those for that,

news. negative the that's So

I not we rates interest not on products. good the The this still market with in think remain optimistic the going into later corner are turn look, And we're to target our our launch for that plans news year. high as forever. We're XXXX, is we're new

that several X.X so that providers in, documented seems well the to of over itself experienced and think inventory the pull emptying kind today I challenges have market quarters. of that And I like channel the OEMs is that some think last finally the pretty market -- NEM of it's here that, the are

to that's think starting I abate.

to to we market, it's we the is be to start perfect the think that I be get going we the see it into by need think I so timing success. time market can where

term, not to wouldn't of year, a near near on low business term, we're differently think our in this going a range. part Again, other the our to than end of be so I right? little we're say it's So position big And a today bit probably today.

and softer in prepared talked products a move, about residential, residential small of that's remarks. that So being our other we the part the

more Some solar muted little market a short term. the probably being here of plus and is in EV in just bit that the charging demand storage terms of

for come back we X -- I going again, dramatically to think participate that the change XXXX, we're next X just through to market that's to the in we're -- a over if think going or don't in is the you're about talking But time next the position years, that. because by probably

And of our next from question line Revich Jerry Sachs. Goldman comes from the

you quarter? pleasantly can surprised. sounds better were margins comments expand well. in like than cost on you Aaron, just expected in the came your the around It gross as We

part can the continue? Can quarter So out seeing And performance in levels, what's efficiency normalization and of the magnitude gross opportunity normalization? improvement freight and margin it? going extent what to supply normal that flesh the from to of that that from you you're chain back

the input is Absolutely, that expected we the And would well expectation. that reality in versus sooner the were yes. there improve than saw we realization that costs improvement X% over did guided performance increase The XXXX. just throughout was gross No, in QX. we the we is expectation. here margin with pleased beat of reality year It

So that's great.

So the came of than that in sooner expected. ahead fact

that margin from guess got half, we assumption we half, is in gross second beat now. to half So just -- in improvement expect the does that second to we're in And first what it QX. seeing derisk that I that then

So assumption. that derisks it

the gross So beat. that's what's margin behind going on

And Stifel. Gengaro our Stephen line from of from next question the comes

way is that just home imagine And sort of this change the the answer, landscape And So I competitor a maybe margin kind of can private? margin into think been any to think is, I in one sort products my kind And given biggest standby competitive relative taken it's mix strength there question. of residential of or positive any of to been blend the for X that? question, other then I year? to parts. you the balance guess, about if that quantify has your has

residential profile Yes. offer margin very I strong case, the the the of it's greater frankly, a product margin definitely, right? product company, standby that is I for mean for in products mean, us. we is than here every the

would so that point margin the mix favorable. be And to

I mean better as mix say I'd X% mid-teens. gross QX. in a were standby year-over-year margins half up that of was grew

Yes.

So that's played out.

of the kind landscape, competitive there developments been have landscape. in yes, the couple terms In there's competitive of -- a of

private -- private mentioned, already. a haven't acquired a being company the and our by you was we're private. being one being think, taken as process, I As equity, carve-out taken equity of of but of the They yet. competitors But private debt the through are is here in bigger that private told enterprise to it believe I interesting kind a -- with of how that We plays it's see out. there. that's or closed mean, transaction closed there's would like load. don't yet haven't a been be take been --

that. privately back and high of amount it's in debt. and company We different a or with went to operate a owned a large of We from through private owned time leverage degree went XXXX frame, equity

to a So were something also period that that's It's that year-old kind takes I if an company. is a of XXX-plus time adjustment somebody's complicated through. and there, in carve-out I shoes of work think

So a complexity that well. may be as

much. landscape that know don't the will I it that impact competitive

where And with well the of quite business, there. got compete they that nice competitor think I company the good business. is -- on a C&I C&I side they've us where quite

in use we've see scale we a On this that's, over smaller. our think, I think, to And a our the there. bit last place advantage. share we've quarters. is to think said prepared side, quite here opportunities they're position this we've I I why, where residential They improved done remarks morning, our may several largely actually the But think well, as our

still for leads returns in to way to remains a So category, for sales driving provide again, heavily huge. share category, the our nice for spend awareness in really, those of investing continued on processes market that the investing continue in all our opportunity and us in and driving I the distribution, we continue things of think, gains pretty

penetration a we've think Kris. rates standby with home but only, time, this for I what, are long been still doing X.X% X.XX%,

think it's when there think for will, I if net penetration to billion think, you I and worth of are of a investor us, -- worth X% kind you here, in left being being every So it's $X runway being, of ton market a category. here, of the there's $X.X billion the opportunity, a

Schafer And Markets. our from of comes Capital Northland next the from line Donovan question

C&I know, you subsectors of, to Aaron, of want like and some quarter I get about mechanics been of distributor is positive to unpacking But of of kind a channel because origin you in bit discussion this the this or industrial development decade. last terms want story the the lot guys provided little kind for you however information of it part And the have doesn't kind like dig something offsetting it. some whatever. building a better that or kind the in good a other or of don't call was channels of I

get it'd so some significance of try want kind be good and and handle on a things. to -- And I

or buildup thing something be you a is some sense portion this time make to an that revenue, you what of portion here? going that have delivery. could you us So like issue the you shipped the So like channel there's and then user at any a stuff case what an of first also not would doesn't have that's taking is Or this can distributors can and a recognize And up? the actually where general And project be, like do distributors be give can of distributor would of C&I a work own? so that just getting that? necessarily -- revenue to a dynamics but user like end get shifts to end of

size that works how significance? and in its Just

of total Yes. our I domestic C&I a that's significant sales. mean portion

when So the close again, you I it's back, of total C&I. for kind of -- step to of XX% think domestic it's the

those and and XX%, balance XX% the again, total, are again, with mobile largely it's telecom So products down here. the being, of the products,

player equipment large rental us We're lot in So there. documented, in as we those -- They cycles. are those in CapEx disproportionately customers when big they not and markets areas. because a spending But we telecom. go supply into of those impacts that a in

would industrial some and So those grow to will, is as customers of product to if or call telecom. counterweight, has really the I channel customers been, larger important, distribution have you larger in rental it concentrations a of and

of talk Energy lot the and Tech. industrial don't inordinate the we we talking right, about You're businesses and distributor standby a about residential consumer power our time business, an mainly because spent residential amount

We've a where success capacity. importance been this business building we're it's our in but story. area -- of and really may underneath here been, well. Dam and recall, that building needed We've in may that team you announced got new some products. overall bigger covers you believe factory -- executes the because Wisconsin, a we And great nice here, products in growth and the Donovan, that has we the Beaver of those to there an think, have bigger a I we

did technical particular, Wisconsin. about our a gas is natural gas, here been in beyond of of that Waukesha, we've after pretty This investment headquarters, go in market C&I opportunities larger standby the R&D space in some kind specifically opportunities. talking in things the our massive also and natural We to with and space

Even coverage coast-to-coast that recently provide things their our unsung provide rate channel. around important. that's well of interest in demand we the distributor on, distribution in of the And markets higher of for think the success we done one large those when is that's of our the support reasons though this, with off kind industrial to can one environment, that of service kind fleets. here because really say I cycle accounts of we've a And hero of our important would kind they the particular, do and that's the cooled that, that maybe when really there telecom aspect

don't flow and us. for what is but service sales they provide the support through part Again, there, of the a

the Distributor terms requirements our and call of The highly X their products telecom Industrial -- are of kind in we same. channel, the Channel. electrical in So are terms it customized. of that very our buildings IDC IDC through interrelated go bespoke, No the X are

So of we the cycle, is the you've some to to sales and cases, can be of for it's and configure-to-order as basically and X long as an these turns business in time with quoting on short anywhere size from weeks that products as depending long XX weeks out XX the and products. type lead then order, with got into -- a a it then produce products

needed the in lot to on work influencers selecting engineers the process a of owner for specifying in from a application. solution the operators, even these everybody the that is contractors, contractors, there's that the So particular certainly, architects projects role a and electrical general the plays

down of out up distributors of last been strengthening So industrial focused chain the on building the the engaging with we've and actual and decade, there. channel value top all over on decision-makers channel, that those distributor that themselves

us a And I terms specification. important. really getting that's named in really That's quite in helped of specifically a think bit Generac

becomes If your find somebody particular even you're challenging that your distribution a not for on named, to specifically product or bid project.

think natural spreading the specifying world. advantages for and word which diesel, over I about, to like engineers largest things about. backup with those talk we're in importance advantage the we genset the particular, the provider of community power And an distribution are that those the gas that and that the there natural in So gas engaging to over others hold in we

large So now, quickly backup I market. is the qualify have data gas of overall of than part of backup center in. to more of market again, part is and that a diesel think not is power that's story -- I the play power that natural outside growing this we part

we're and beneficiary in for growth market rates distribution. the exceeding time of a our And rates. same some we diesel where and gas play, that's is we're seeing So been served so the growth that,

we're on that of the channel. play So in industrial the here all strength in you're seeing out that -- talking about that distributor

comes Harrison question our line from Piper the Sandler. Kashy And next of from

say. Or question, I should

So Aaron, indicated and down help us then What Can were in mean? And and that? I February were March. activations think also modestly you year-over-year. modestly does you indicated that aligned HSB you HSV just activations quantify shipments

York, X% in so through you up to revenues. if I And us I'm being wondering if, understand was help year. think up double the just XQ get from to just full residential could just digits being how XQ trying for low we

Yes, Kash.

have bit weaker the terms we softer in result far didn't a So the were of of lower environment, outage of in range, just again, -- modestly, the coming be in much -- to outage a which power last from frankly, it's of had an the little year-over-year. QX out mean, terms environment. kind QX, is, standpoint, it of of that of IHCs I expectations off expected we really activation of -- we not kind mid-single-digit We too a season year as our

out wasn't quarter. in back play installs of play that a might you last year-over-year -- result, So -- kind it half year in historically. fewer And as maybe have strongly here just it the as the of out as didn't see

levels significantly area. But I the again, from kind is that up those you you still And from up ranges, which good. activations look so, not think dramatically of of up XXXX where when go and is category to historically, dramatically it it's was we're I think

outage today think couple So environment it I was little from quarters. bit the the off just category then. quite in weaker term bit last than a is a bigger power the near here But of

the Yes. comment did about QX, to QX, your still as we residential we market. did from -- And then in QX paces undership like

for to tail still and down quarter part. the we're most we we again, QX, and are normal like get the end field feel bringing We of back inventory into the by

So we still did undership the market.

little by recall, we of what I was of around X/X undershipped that a the here. in say, guess, X/X less we undershipped market I you than QX million. $XXX If XXXX that would probably

So got back to we normal.

of seasonality that So the to you that picks from QX QX in up QX, undershipping. the have in won't just that then And business category.

got at like looks again, that's again, seasonality look what the in future. in -- that's So that, supports residential to the back you guide products historical for

of next from Windham the UBS. Jon our moment One comes next question question. line our from And for

as quick running a it we're bit keep I'll long.

weakness HSB around year-on-year comments deployments in some are the of sort the right deployments. really any California. strong But residential non Just of storage in markets is market. one XXX% now up Residential storage

that the I Just all insight landscape some market. to ability about to comments your that. compete competitive and in appreciate the

Yes. Thanks. Yes.

rates attach are up storage So dramatically.

solar are Solar new XX% significantly. in down California. XX%, year-over-year plus them, storage understand we projects rates, install as certainly,

historically market market that the so we've X.X you attach for are by NEM that a It's California not higher in. numbers rates that's of us, And you're of largely where been think dominated position. the seeing greater seeing attachment storage a up And that's because Tesla. absolute just I are probably rate. strong because

we're in just -- dramatically really we're So not participating that.

I mean, is storage will up I year-over-year. business say, our

So But bottom are XXX%. I that's we've an as bigger it's we of we portable think other years. not it was a off residential that also as hard seeing described the over generators. last products, growth actually, but called area pretty double. the challenge actually, some out, not It's the But several in

I mentioned but of environment domestically quarters. that. last prepared about here the over ton remarks, a both several softer talked our because the haven't outage We in

a were somewhat. in was abated QX year gen in related the And lot ago portable war. the year-over-year. international to quarter Europe, of internationally, then And sales There that's hard Russia-Ukraine largely power concerns security down

European the specifically the portable which us, seen the markets we've is And come demand so hard kind gen for off of markets. international in

market core our you which don't talk if product in there's the market be the comps the all lot about ahead then there public ton, year. that's at a the that the kind buy business, the out distribution well but we see end years. that both kind space level. coming core from built a of last last can residential equipment, as of -- longer-term trends that here, into been on on level really got as really brutal And suffered suffered of little And there of we involved bit out would that forecast, a were over and we the space. are the weather that pretty And spring this X.X -- And hoping was it's a the a last that, of helpful. pandemic,

in snow we found partners a -- It spring is with season. they snow which season, high invest were was sell core snow what they through products. reticent their didn't inventories, But weak distribution to

delayed bit. So a that's been

little with positive more but here, still rough Now thankfully, near products, or more weather a it's picking been it's been is core trends a up term go. --

the really generator of have been we core energy it's about, quarter. were and for headwinds and the that that tech markets kind then talked softer portable those which us pullback in So then

our the next question line Levy comes from Jordan And of from Truist.

that over second see cost And around just last And specifics realizing part some of could on what the reductions given as X.X overall has commodity Appreciate month curious on you're on the to you give first what in were quick wanted months? all here. cost the costs the more the that prices, us side, or gross I if the input margins just question, specifically comments copper to a that of done sensitivity quarter?

seeing I steel over in come of through, really think we probably turning we've down. largest -- input come as those guess, faster I of than is -- again, No, anticipated. costs, terms term we've the have those we're and costs And a it's been a cost higher number just through our longer things bit little Yes. maybe lower our well, steel inventory, steel originally

just to those we're throughout last factor. costs, turn again, part that's lower starting inventory through logistics, we're and those important an is starting and plant steel that freight year came of improvement, the Obviously, So the of down freight while see better costs, realization to efficiencies.

seeing that there. of plant strong I think We're execution absorption. better in terms as well that's

sort would lesser In we probably I guess, better but biggest So better those I gross faster so of say say the the than or does able than.. realize anticipated. impact, it's on copper, would it an are originally to we copper, have factors were the I margin how

lags there. I mean... there's And

yes. the To steel side,

So I copper steel. that, of would But up. has lower relative terms is impact gone to say, in

next Bagri from And our of the comes from line Vikram question Citi.

dollars about Good your whether quarter. wanted -- can question In morning, R&D are are your had center you R&D being I if the market. no expense, the of answer previous ask increased in noticeably plans I target launching was wondering directly question, that to which your there to previous you mentioned everyone. that spent products share data

R&D technology. energy imagine largely being is I focused So on

compete the failure there lower next-gen a market? If is that an keep or MLPE share give are at or of in in that USPs, or features ease to storage you an we market of rates in mind the the lower new against price point you target progress competition edge installation can products, should that with

the to spending lead has And early lastly, XX% had quarter? you then today, OpEx wanted update mentioned guidance mentioned make be wasn't will the changed roughly not generation comments last quarter, spending on sure but sales of your I given on this

roughly the is This the on I bit that -- last gross the offset get those strategic did would in part we guidance. little OpEx, higher we on on OpEx prepared margin in comments, as by a QX to in again, Yes. outperformance It's early. did continue our initiatives. the invest mention --

held had the where it guide So outperformance the the with slightly offset offset basically the we by EBITDA last side. -- from quarter we margin margin OpEx

of And I R&D heavily -- dollars. the then R&D largely all energy but it's very across we're Yes. mean products, on tech the the those of our on the yes, obviously, Vikram, products. on side, a spending board lot

that products, devices rooftop storage later our that to And in solar in bringing our this invest to side We course, we we'll of continue knee-deep inverter here year. market then, the products, in. residential generation next-generation are be products power

have early those products 'XX. market to our coming of next generation in We

right So amount now. a tremendous there's of effort

been teams. We've building

Reno, in tech with center L.A., got in in got Oregon, people. Bend, opened tech in have We've may tech been We offices in offices We've We've Denver. tech a seen Nevada. got Vancouver. announcement. We've Portland, that Maine. filling in our offices You

cast very to but we've needed also a companies inverter pretty with side. level compete only talent so formidable there the the supply And some build we storage here on obviously that wide not net as really out

with So apps launches USP these even if but your system elements thermostatic to approaches all again, more X closer, in from hand. got of put all storage with an think talk management, devices, also X, -- a with these products Today, controls device the product but more we've we'll for get some of that integration you've to you we a EV together load tech want these a of the a seamlessly. of different certain with about got standpoint, longer-term X, as we that's generator there's novel charger we solar backup, believe different together

want experience that bring the We part We're they is these to and utilizing unifying unique working on that in the that the that of environment will on experience. acquisition. controls that our really and they central all Ecobee user strategy single a today the the of deploy project to marketplace. The together. AI platform, was all to really Ecobee bring technologies think And a ML we these products. high-quality thermostatic in the be It

going cost, the which in seeing the California. in particular, them we is help only it putting evidence payers drive offering look breadth creep continue single comfort upward. is is of a all our anybody electrical one and as think, on which certain it here, together the that also of we you're markets and to on across don't you market has up to platform approach think be, today, are that already but I like things utility homeowners Cost rates help to have to rates, to in When of control central going a rate resiliency, not way to

other to homes. it's they And them help them absolutely that the export and over solutions, they grid and their the own investigate power to drive that resiliency control the going solutions, homeowners that they in demand more store, to the that distributed that solutions self-generation back generate, give more information they

get to as think you're distribution term. into I in success these marketing and there sales market. and our products But that our that time, will So have the long going think with we I and over and we'll I brand the more think competencies, become see evident this our believe

further conclude to does any session of for This to program. Kris today's back like question-and-answer remarks. hand I'd the the program Rosemann

late look results discussing thank We in want second you quarter joining morning. July. you and XXXX our us this forward to for We to earnings everyone Thank again, with goodbye.

for your participation and does today's ladies conference. in you, gentlemen, This Thank conclude program. the

may Good disconnect. You day. now