GNRC - Earnings call transcript Q1 2018

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Operator

Good day, ladies and gentlemen, and welcome to the First Quarter 2018 Generac Holdings Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time.

As a reminder, this conference is being recorded. I would like to introduce your host for today's conference, Mr. of President Vice Harris, Finance. Mike ahead. Sir, please go

Michael W. Harris

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

statements forward-looking may by as involve could actual in statements such filings We or see other well release that cause and will materially on words results from information begin identify SEC contain these our and Generac made to those the statements provided or today call for differ of that Certain Please our a time-to-time associated or list forward-looking as employees its risk during forward-looking commenting statements. expressions from uncertainties and by statements. this risks presentation, earnings factors.

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

regarding Additional call our including GAAP in comparable to available will information turn is I and these measures measures, filings. to Aaron. now release U.S. earnings reconciliation SEC over the

Aaron P. Jagdfeld

Thanks in everyone, sales a today. provided you first thank XXXX, Overall, cash morning, and strong and for results us start to improvements robust leading joining year-over-year quarter growth to with organic margins flow. great Good Mike.

an year, drove increased which (XX:XX:XX) overall in elevated strong compared sales This impact benefiting XXX favorable net quarter XX% standby EBITDA ongoing Sales within in demand and point overall of contributed free in fundamental a in once domestic the International industrial and segment, profit residential Specifically, by in-home year. when the of for cash again also growth quarter resulted sales to end-user to basis with the activations. gross to XX% from significant compared adjusted replacement significant for continued margin, both as mainly which growth commercial prior expand, power generators and prior portable core excluding consultations the improvement to approximately margins well. products in currency. of the environment XXX experienced during improvement point as growth operating organically grew the home cycle from sales flow and Shipments improvement growth year-over-year basis another a driven in and margin, The improvement mobile outages, foreign products.

the million Additionally, Generac end we under several with of investing trends of quarter demand were $XX buyback markets, current improving during in our our buyers the shares opportunistic program.

product elevated experienced results shipments the quarter standby the benefit from significantly the increased during quarter the activity First year. increased standby afterglow generated the prior active generators the to compared to baseline prior category, outage awareness the year. from first and during season continue hurricane of demand home by Accordingly, primarily home XXXX of

the of In the power. peak and that power during region addition, quarter of of outage million strong customers northeast baseline first series impacted a X nearly storms activity from a to led utility XXXX remained without

significant outage progress rates PowerPlay higher the in leading close of the the in we all-time future count consultations new a quarter, as make standby drove leads, sales residential increases in-home overall Increased dealers. allowing selling our quarters recent home them, IHCs, of And an high also good quarter. indicator or dealers the saw during of we call demand. at the in-home is to solution generate environment improve engaging marketing and with more and Importantly, to optimizing awareness targeted us further of end

experienced levels. Shipments very standby outage resulting during from in strong the retail of In activity quarter end compared channel prior from substantially growing year grew and year benefited markets, elevated also to continued of environment a due substantially a expected significant XXXX rental than domestic were user generators for Demand severe this shipments. the year storm growth with we northeast during XXXX to after strong of southeast to experienced activity, and and the Recall quarters. XXXX, prior and higher to that recovery. in with year-over-year activations rebound and northeast replenishment recent generators last portable to the for serving the cyclical compared started in additionally this the remained beginning mobile market experience the addition, in home strong the (XX:XX:XX) downturn primarily see the regions first continued products, quarter during

rebound products the optimism with the Additionally, fleet prospects new and cycle, of gas further quarter reform orders for all an increased demand. impacts, contributing refresh a to continued market these during and around tax oil the accelerated

the gas believe equipment early continue the of rental capital overall of replacement oil to stages We still fleet existing current by spending the recovery. and being related with age driven primarily is cycle in

us in oil of the use product with categories recovery prices room future. were we believe category that further energy for mobile in confidence meaningful have and the for products products sector mobile during grow quarter begin of traction. America of rates trend C&I first the to gas a gives months, which equipment slightly the to as in further compared year. to gain to the hardest Also, prior However, may several rising stationary in continue could the North domestic downturn purchase utilization up oil recent during the (XX:XX:XX) in Shipments favorably, the hit

passed of temperatures the businesses, customers the project their have more catalyst account and in awareness wireless of during we outage for begun the interest importance order activity national protecting signs outage. the of months, year-over-year a XXXX. in legislation power other events strong requiring telecom homes uptime and critical improving Also, and market state to environmental of experienced our networks. growth the Florida utility to periods facilities minimum first having the see living quarter, In following on placing near-term of However, far the baseline backup levels assisted maintain elevated a are trends several number as days we domestic for a trends quotation safe the certain so power in been infrastructure. of nursing resuming (XX:XX:XX) C&I products early sufficient major Historically, expect have past for institutions increasing backup and have by given

well of engaged pipeline working dealers care long-term We other are opportunities with as the national our wholesale of directly with a as providers a account partners customers state. currently with developing distributors, channel in on several on projects and number

are potential While new stages, still business the we a for incremental regulation. this about in coming the the in of optimistic early quarters as result

remain quarters. businesses, broad-based sales core year the past again in margin by improvement our to to financial of as strong over the the have our prior approximately several and points domestic demonstrated a first of quarter. which addition the (XX:XX:XX) In of attractive basis (XX:XX:XX) once We International segment compared market, ongoing international sales X% encouraged solid XX growth performance organic growth expansion experienced

is the to in International year-over-year the designer most Recall Mexico margins Importantly, of variety past gaseous the the segment purchase and that margin operating profile quarters the due telecom, City, manufacturing on expanded from basis and notably improved American has ranging X.XX factors, fixed mix fit kilowatts mission of XXXX acquire these and standby headquartered three Latin a of a generators and data critical We sales Founded to and of applications, also of excellent a sales Selmec in agreement in from within where expenses Selmec's an a leverage continue around in well the in focus believe favorable these operate we market signing as other believe performance to on leading trends February share XXXX volumes. specifically higher we further throughout the in megawatts. is we center as the financial energy We optimizing regions of Generac's and Selmec. manufacturer experience XX complementary as industrial world for will on strategy. businesses. diesel each gaining fuel solutions, announced

addition, broader to businesses that margins. and together well-developed still the us quarter is of Selmec offers our offer this Ottomotores provide and of products footprints operational date during specific business, portfolio a for for approval, and higher distribution to occur regulatory the the remote leading In pending American transaction leveraging XXXX. Acquiring likely should engineering but closing integration, market allow specialized services market with Latin of management The dynamically both is service solutions. the project and monitoring undetermined Selmec second to combined a scale platform existing capabilities

once only over segment's accretive results. the Importantly, And our turn which a first consolidated to basis. in we is to closed, details expected provide to quarter and on like York? to guidance, International York the call include dilutive Selmec I'd our will slightly on margins now, to be further

York A. Ragen

Thanks, Aaron.

required Before X, January to discussing I'd quarter are results first XXXX, follow. Generac like revenue recognition effective detail, new more out in that to companies all that the accounting standard adopted point

that retrospective morning all accordingly. presented, periods comparability the method XXXX have application requires prior-year quarter of discussing the restated this to we full purposes, was which are standard, under first For and this been results elected

statements. financial the impact did not However, of material our standard have on a the adoption

increased looking quarter $XXX.X of in sales which the currency, the sales Now XX% for impact organically XXXX. at to also quarter million growth, first detail, first $XXX.X million, compared our foreign prior to approximately over the excludes as more XX.X% Core in year. results was of net the quarter

product our $XXX.X quarter. as the first by residential product year Looking XX.X% sales sales the million million class, $XXX.X increased during at to to net quarter consolidated compared in prior

portable shipments Aaron elevated home outage robust As standby as to products these the strong end of market growth quarter a both generators power in continues saw for result and demand environment. of the mentioned, be as

fleet account core growth primarily million quarter industrial] for the (XX:XX:XX) to products compared as by our continued domestic first rental $XXX.X shipments increased in prior generated at (XX:XX:XX) very customers. sales $XXX.X replacement driven [commercial sales Looking (sic) of growth strong XX%. core approximately the and commercial from quarter, industrial cycle our mobile being [ph] to was This XXXX products, with by XX.X% net million the of

result manufacturing to margin $XX.X This Motortech prior quarter driven costs fixed is points the offset sales to versus margins to grow. (XX:XX:XX) sales million, being growth the improved quarters year more growth base to costs mix by more In other Pramac, from $XX increased basis power million to to during the predominantly of commodity was parts, X.X%, by first primarily favorable attractive demand of million was growth recent Gross activity This levels, service compared to Operating in organic addition, as in due to neutral our year. prior relative leverage of gross expanded the margin resulting $X.X a pricing mostly XXX prior largely favorable as year. The quarter. higher year. a compared volumes compared higher increased the and significantly made replacement were for XX.X% businesses. a and expenses category, profit organic XX.X% International our strong elevated primarily or up outage experienced prior the environment our in of XX.X% of nice benefited as Net as which products of level products related, sales parts, Ottomotores installed C&I from XXXX. the increased first and continues to segment, for

of operating in organic on basis As volumes. declined primarily prior of excluding from prior our were $XX.X environment, a These first lower recorded to higher a earnings quarter amortization net Adjusted expenses the to partially year million as million year. expenses growth same the the compared prior compared quarter due percentage in in in to to as mentioned was point as operating from segment prior increase costs quarter to gross was sales XXX XX.X% the will that operating due last was year lower offset incentive The segments. the sales outage including in The executed activity. results generated by we million year. the in the amortization This year previously XX.X% Adjusted demand compared in our sales. operating year the to improvement now margin, of improved quarter organic by margin the EBITDA on and sales current million increase an impact EBITDA higher intangible intangible in employee strong leverage as basis power before briefly as interests, the XXX the as residential and as non-controlling the versus the increase of XX.X% was points for reporting $XX.X financial prior in defined products dollars to year increases on year. attributable the euro shipments I in expense two profit period company, in by expense. stronger the increase the over increased the during largely compared reflected $XXX.X benefiting outage to $XXX.X deducting compared driven quarter. prior first increased results XXXX for compensation leverage as was well discuss strong Domestic release, costs higher promotional improved to fixed

to growth sales primarily The growth the Motortech prior in before net EBITDA to C&I mobile rental segment compared segment, addition, were million, Also grew In service for fleet sales prior X.X% the euro stronger was businesses. due from or their increases of overall contributing improved non-controlling the growth net cycle. with products million, or as favorable core sales. $XX.X parts interests, replacement to the EBITDA customers with significantly $X.X year-over-year continued Adjusted net to as compared Pramac, to growth quarter, year, the along sales. compared as the the Adjusted of for sales, net in in X%. deducting the to prior segment or $XX.X or increased year sales Ottomotores for to of approximately the to XX.X% prior-year and International $XX.X organic in $XX.X as XX.X% broad-based XX.X% sales, the sales year. million, X.X% of million impact of million million $X.X of compared was

to our XXXX a Tax Act, on $XX.X in rate the included of the XX.X% starting quarter became the reconciliation for the consolidated $XX.X the the were reduction company decline the The XXXX first GAAP quarter the just the in of together for to XX.X% per retained $X.XX earnings per these directly compared first increase. $X.X The of year operating in GAAP are million as $X.X tax any adjustments are specific GAAP the with rate increase income million was release. GAAP as the with per to The net switching rules Pramac GAAP in or the the year. in for U.S. XXXX. value year. current is to adjustment the net large Reform effective XXXX. back quarter first quarter for $X.XX acquisition, in compared prior calculations in were to of company resulting that million per income of earnings rate the basis, compared by share share to Diluted primarily of a share for financial to contributed quarter GAAP taxes Note a impacted a value of earnings. rate quarter for or increase a tax non-controlling to basis the performance tax effective the a schedules first prior which recorded due income interest $XX.X redeemable million tax lower was GAAP Now, first Under amounts earnings the enactment of of share. to XXXX on our this in discussed during income a earnings $X.XX accounting redemption million

The year full XX% income an based the pre-tax XX% first earnings rate for lower tax cash while taxes million to income the includes cash a The income approximately of With the just Adjusted year the However, year. higher quarter first year anticipated in Act, for cash tax as margins of The rate of significant calculation. quarter by sales a XXXX. cash current primary of of tax Reform the expense anticipated growth discussed were operating year million as a compared the increase. XXXX. this quarter. and the tax was the reflected redemption the partially be versus of tax on reflect from share in level million full drivers the regards XXXX to $XX.X taxes, improved to the value cash year cash $XX.X $X.X $X.X rate Tax impact in XXXX of per quarter adjustments prior-year was current full the a for the prior income million company year are in in release net the current of rate defined offset required a as result benefits earnings year for earnings effective the prior

year for $X.XX compared the million for company, earnings to driven the year. variety current of was shield in intangible than capital through (XX:XX:XX) a favorable XX% free earnings tax improvements to the a the being negative tax annual compared year Adjusted by were factors quarter GAAP reconciled our Cash partially prior amortization cash per expenditures. the $XX.X flow million in prior our by increase million share the return our was flow reminder, prior approximately including XXXX. and of for the compared flow per lower from as in $XX of rate lower the capital our to operations $X.X diluted tax a compared million to share working in income same during to current XX% net operating income cash as our quarter results last year As was as and $X.XX rate in release, quarter, for year notably million $X.X cash between tax higher quarter in The year. first usage as $XX negative in offset

was As outstanding cash consolidated equivalents debt XXXX, million. ratio on $XXX had period we to of times debt cash first end at resulting of and the in on of a X.X XXXX. debt and as times year from times XX, leverage the as-reported an decline hand, same X.X end consolidated last $XXX approximately at healthy March of of to million basis, a net net compared million the of compared and the $XXX total X.X of Out quarter

$XXX ABL quarter, the was the available on Additionally, our revolving at credit end approximately of there facility. million

Finally, program, that, to under a quarter to over for for million call comments stock provide approximately shares repurchased on improved of over period. million. the to-date, have $XXX common XXXX. our back And outlook With to like I'd share of common Aaron first stock million for million turn a total stock been a during X.X for now $XXX our repurchased (XX:XX:XX) Under the our XXX,XXX repurchase shares authorized $XX.X we the common total repurchase XX-month current was of of of program.

Aaron P. Jagdfeld

York. Thanks,

residential we the X% X% to prior full shipments from X% to X% growth active an the is for growth expect no now portable increase generator are Recall growth of our improve expected an to included outages the our year, X%, guidance to net year We guidance assumed from year strong increase that the forecasted. current This over XXXX second to prior for products. which sales in as approximately organic estimate season. for to With half both raising major X% of previously from XXXX, revenue (XX:XX:XX) elevated is guidance, and the there hurricane between growth conditions be to is primarily X%. an which X% due comparison. relative C&I this now we to between XXXX X% is end-market headwind domestic previous sales increase Core improving is

does previously Selmec and does as Importantly, mentioned, outage the from not this guidance major power the for include not of year. any acquisition include the activity impacts remainder

Our is no material year, average. to likely be a that event and could is year, macroeconomic the the environment that top-line assumes similar level baseline current guidance environment power Should major XXXX in the in the continue higher the if severity baseline we these term power longer expectations. it outage to for exceed or changes of also outage outage the remainder of there a during

seasonality, benefit major to the offset historical EBITDA higher Adjusted more to core are are extent a outage to unfavorable second guidance EBITDA XX.X%. first of to from and we adjusting number in sales growth pressures be result million on margins depending and by largely be event leverage for to variables. a in sales inflationary cost half. $XX mix. historical higher program, our additional on Consistent and margins operating a to lesser of of still with sales perspective, be relative XXXX, interests, for before expect an enhancement expected sales the both year XX% profitability between average half non-controlling the could power savings improved For additional This which full expected or from assumes year the

and expected XXXX, increase improved the entering when environment given the not sales half overall the half. in be However, to margins second pronounced compared to as are demand first

be to the of rate pacing net of half to seasonality, the the run to relative the relative the quarters more quarterly with in of the regarding remaining modestly Specifically, sales, second are year level-loaded second the year higher only normal quarter. expected

strong conversion For and expected cash free year. cash of XX% still is operating benefiting adjusted to net be be full from to XXXX, to over follow and generation historical seasonality, which the income flow, solid full for free expected year flow the is

million be other expense rising update approximately $XX environment. expense an the In for now is full year. are addition, we Stock for to is and increase to given earnings certain flows on current year help approximately rate company's share the Interest details to expected guidance per million, compensation now XXXX. the (XX:XX:XX) interest cash expected providing model to $XX

expected last items into now approximately of of a as million, translates The improved full Additionally, cash $XX.X the XX%. we to million rate be cash are are a to which taxes income year not during remaining $XX.X XXXX earnings anticipated outlook, discussed to result the guidance change. tax expected approximately call

we sales achieved year. organic of throughout Lastly, as it's to XXXX recover of worth noting areas business several growth XX% that the began our during

and discussed our further morning, As favorable attractive to performance these in positive certain achieve growth this for relative have our the to strengthened and sales top-line believe momentum key XXXX. tailwinds financial We markets business end positions initial guidance. overall continued us

clear we'll our we'd outlook provide products year the Operator? the the also environment year. prepared inflationary to This confidence it's the remarks. environment navigate and improved our demand for that business through to this we an for for us call progresses, in While time, concludes like operating at in increasing as robust the leverage open continue for up And will gives believe our questions. to have

Operator

Thank you.

Our first Brady question SunTrust. comes from Charlie with line of the

ahead. go Your line Please open. is

Charles Brady

guys. thanks. morning, right, Good All

Aaron P. Jagdfeld

Hey, good morning.

Charles Brady

to far to on you more it's by It's that a you Hey, to been be speak like you're sounds it can driven it and as the for now, pretty the with of about all (XX:XX:XX) little a really talk that equipment how expansion really long you to rental aging Can a like while replacement. continuing It's regard portable seeing kind replacement please cycle you bit yet. strong sounds going go? as not bit? in where products just the think has channel, and little see

Aaron P. Jagdfeld

– We energy ourselves I (XX:XX:XX) go we there's that sector a production teams of cycle, on The obviously, here domestic question as what because period it's it's equipment hit business referring that early year where lot and drives our were national I a a a the know we've to gauge capital that obviously lot, last trying fleet to of your great both of road where Charlie, we construction, of get the the replacement answer into directly cyclical products know our there'd cycle a commercial cycle. there age from would on say think, mobile to, keep we pause to (XX:XX:XX) everything replacement years of fleet a – spending. have called strengthen question been ask particular in (XX:XX:XX) couple kind to just and we out customers in business. and XXXX variables and our XXXX, button that account in Yeah, I –

every roughly to fifth And so, average of would (XX:XX:XX) the fleet certain But lifecycle five kind about that. that Little normal a others, the a call shorter of is customers, for tower year. something the years, the what like generator, turnover lighting generally it products, four but for deferred on every longer of fleet turnover with little did or a XX% it those would – year. we see bit

throughout snap capital was We were So demand you up here, of it's two surprised the we though kind low very quarter some this even hard pleased clearly That that last saw year and beginning go is remained. year. we've been purchases, very of just the second What enter with pretty early with innings if there. recovery. how we've years pent the really strong of back there the as been

drives gas is rental though. frankly the business They're thinking lot something kind are rental starting general is the the rates or and the we And to fully role cycle of utilization equipment a there, going still purchases goes. is to so, in recover. And And the a then you a at in we oil keep specialty in more? not it what rates asked it that, playing that refresh they utilization but that start the equipment are where channels where of question look

say on with think And to rebound, innings refresh the would as fleet the particular I middle it relates oil still So we that legs there's and probably gas. in we're cycle.

I that this the part lift pretty So is bullish think a to morning overall. we're business in products. guidance fact our mobile And of on on related

Charles Brady

in of just Thanks. And legislation, with out clear, regard strength that to or factoring your just sales That's any legislation coming yet? to be is guidance helpful. the Florida

Aaron P. Jagdfeld

actually we of a year the last kind storm. this sight line so we Yeah, had of – late after on from

end year. the We you of an at some February, now. as that actually our full did Once we point. quarters of the legislation The of frankly, other small and be we're level, But did advantage both to remarks, national year done. became a with a we have and longer the conversations. whether now on helpful engineering There we There's that And resources because will our a they there's that had lot see that electrical for the buy February facilities to it hurricane some budgeting, other They and our is in our industrial level, serious clear. fragmented don't there last partners it kind firms those residential historically we distributor. direct operate the afterwards planning, lights could – So just up in you several as sales a an we found gave C&I you of that work that said bed it's prepared dealer contractors market. typically it be get may of industrial distributors. may bodes like and to market of from smaller. are lot have small had may to of pending. They conversations was we particular also, become the there's generally business. in of at a market going a to as starting looking it are for be from for But from approach but in lot and that across facilities really well started can it our It's very work again, national clear those facilities people own guidance a and a law, but up include a we've that wholesalers buying contractor lot distribution the lot remainder engineering the I the from market. initially did, their They're our well Florida permitting, be of so legislation standpoint that product it's that connecting product. guidance, lift. of facilities, C&I mean, as electrical easily guidance a a did a who whenever needs before with smaller year, who that was to I which ours. very up get be and as have so have be broad smaller active pending not I some We an There's season We partners, think It think cycle. useful took and to providing see visceral in reaction get the channel state can in we

(XX:XX:XX) that see I that a offering channel in some the way So this puts included that's think nice product partners from we've and upward position what in morning. those opened to we lift our a us to in up guidance

Charles Brady

today? On the that it's replacement is Thanks, the out me. QX back sell or and of in just (XX:XX:XX) It's storms, still replaced? obviously from level inventory the just level being to portables one from normal where more the

Aaron P. Jagdfeld

supply quarters, portable since trying mean, hurricane generators facility our been that out I chain ramped we're getting we catch the over We've got of flat it's the and we But up it, in last of then in the in season get Jefferson, the really storm one very the constantly every up another in time market we here put to Wisconsin. our think ahead running March. hard. we're We've the in several month successive northeast of amazing. after amount

from are standpoint, own I low quantify channel inventories our in qualitative today, we say they're where warehouses. least to and kind So really of low at if in where were would a they're at

we've upcoming what in of in last of we're is good they'll replenishing we're ordering the here seen very confidence a had the season that historically happen if Now, part people, season season and they've for lot a into a where get coming QX critical year.

net good probably successful QX QX. period would pretty plus we're little and of timing that net on market a – a protracted Line it's got. up. a and back scrambling we're can coming on reviews order partners (XX:XX:XX) some It's also are level. to going in are season, to ourselves We've out On we we're after when we're guidance we wins those through reflects year. that and around and the to market as building and major stock question really back of low patterns we we're much it So right really come get or even starting we're more but so, went of get and retail placed, season portable We're placed bullish year-over-year. in our seeing and calibrate in gens a with a been But (XX:XX:XX). that kind to strong there, we now, products be they we're outages some season? of here pretty now see around this share to up this getting (XX:XX:XX) come ahead expect around into working And as of basis, the

of additional year Our to business some us this really performance winning last year. led the point

net that's positive. a So

Operator

next our line And from of you. the Jeffrey Hammond comes KeyBanc. Thank with question

open. Your Please ahead. is line go

Jeffrey D. Hammond

Hey, guys, good morning.

Aaron P. Jagdfeld

Good morning, Jeff.

York A. Ragen

Jeff. morning, Good

Jeffrey D. Hammond

hurricanes what activity visibility year, that on of over? follow Coast standby, early just carry some guess, East standby seeing Thanks. just storms? relative And feedback your on Irma in as to these you any and assess then, from last – on you so are the also some you're getting home expectations home Hey, I of through

Aaron P. Jagdfeld

really that we that's sure obviously as so would we call, active that our season the indicator here quarter certainly just the how said the I of Jeff, follow we like last in Midwest had the that remarks believe and I fourth comment, be are after levels weren't southeast I northeast the first it had on consultation of quarter saw particular, with never of us storms half through prepared – in when the really year, couple you look regions in activations conditions I'll regionally, that. we the those where for up big this and We've will we at honest. dramatically in say of a through year-over-year. obviously, the happy that There's leading Yeah, said translate first in-home weather we poor of is in And and because really a is made seen XXXX. think been what

the just particular in a have to the on made upper ago couple products Wisconsin, really weather it snow melted ground. but Midwest, difficult of I here in conditions tough think in put days the

more a pretty region that Midwest back bit were come quarter. first muted in last the even few so, But weeks in to we're aggressively. And see in starting the activations the little

remained for all to specifically quotations, I regions. your question also are the up bullish of system, of that about regional elevated we're us see test very So directly raising to gives that. effect by lot in that performance related environment. selling of only and mean, this in visibility amount kind high confidence, here PowerPlay all-time then really we the season Those continue rates dealer big again the dollars they're part of active our a been quarter. really a that rest again getting in-home impacted story XXXX systems. dealer regions good us hurricane going the going to being they've overall things of and directly a win spillover And around putting amount see through afterglow our the is of of the areas more effect and and not individual I that then, think we the the but so. But into a the drive around and guidance, we're of activity also of raw the to outage at are is higher also the performance, around I great are It's count the the consultations were end just northeast, the

it, very So bullish Jeff. on we're

Jeffrey D. Hammond

model more. mix, seem just standby revenue your EBITDA maybe And speaks great. Margins my but Okay, and with margin. to one – changing I you're that the certainly change not were noticed home better than

any the and conservatism talk Just takes in Thanks. guide or there around (XX:XX:XX) contingency puts about and that?

York A. Ragen

this York. Jeff is Yeah,

where And in discussion are we're we about pressures margin the uncertainty with with dollar companies – XX.X% all it guide, tariffs experiencing and on range as of hold U.S. weaker that (XX:XX:XX) lot a our for in experiencing. whatever did of margins and lot wage inflationary to pressures to the there's you that steel the those can EBITDA and that imagine So going is full year. XX% the

our we've is the So incremental but we've inflationary to it guide, to X%, adding extra getting really helping by included that that we're evaluated some in roughly that. to the relative is sales pressures previous which guidance, million leverage operating offset $XX

able think that pleased pressures some the margin I despite we're of So that guidance we're hold inflationary we're to seeing.

Jeffrey D. Hammond

Okay. Thanks, guys.

Aaron P. Jagdfeld

Jeff. Thanks, Great.

Operator

And line America. from the Bank our question Gilardi you. next comes of Thank Ross of with

Your line is go open. Please ahead.

Ross Gilardi

(XX:XX:XX) morning, I can a input – – you've if call. just bit? cost, Aaron, another from C&I, this in Good standby, home environment on due your address prices apologize you raise addressed little to guys. for can in to that in this I ability (XX:XX:XX). jumped higher But you and compensate to

Aaron P. Jagdfeld

December-January. today of with market that There's the price the running year the I (XX:XX:XX) an with anybody went Yeah. of we're inflationary the of some What – costs kind suit we couple previous back a the annual out that. the continue the and industry, like players I'll that we're this in in at We rise, major the position one time value or seen these with top input with cadence It's who's of of start of minds question that want marketplace. they're the C&I, bite of think, around in same the C&I apple do points normal taking major that that some players come come in how evaluating at industry here. at company cadence to and of We've Obviously, market. to know seeing. to the in so end percentage price. year. of year kind pressures but the on, lot obviously to C&I the we've going will earlier the the on is of providers as space beginning a we followed our second we that kind we with And seen now of are at

interesting. look think we're that and up kind Residential to having something is the on would end going like I there do of are what evaluating side. to C&I

price of of that's model comes important products in One penetration home approached same rate different based net in in line every growing the things, the features the of an coming to typically don't and model these leg went a comes it you tact materials, price we about there's worked increase. That said, inflation and, things (XX:XX:XX) hard product as layer take some increases, bit we particular line product, stool of to affordability. standby. when with home now product standby. We of marketplace. to the the new as line cost. our on when way we've and the is into and Wi-Fi a talk the offset connectivity year, have the and to new a that residential the just on still cost of recalibrated It's we starting the kind straight there's importance and but wage has residential that price, standard example, for coupled we an take off for production This of being model a different and But the that get is Affordability it just that a generally a cost, there's inflationary obviously, pressures entire other with of new price. some obviously

think of quite the are valuable. that given market. going point think particular that the has So into price like still We value some we there's connectivity that of lot people a features we've and for homeowners, the a different additional in

in I get go So, new price was features. have we is, again. to in do the way was that market, What case, new is that introduce to think innovative we which your evaluate, a to question back and products

to see Now some waiting build our tariff that need comes just We I the a where on, aluminum a (XX:XX:XX) can generator. of and what's concerns, But in Everybody right? industry on of kind We may things. the of get of us are kind to one going better of going a what's sight of have go happen particular And discussion line you in other the and there. supply steel, inflation, terms we has on again. to many the with sourcing from. guess, the uses when lot copper similar of hand, everybody same chains in

price get that So able may that have there's if inflationary I second that time. we'll – address think question we'd I we what and again to look that. pressures after at then to be a boy have say, don't I rise that, fast any go to

our I cover in our got they're distribution that, that partners. seeing businesses to different customers, understand think for lot a ways. lot own talking They of we've a their of

this manifest is unfortunately the at at So I day. higher going where is end the level to the think probably street all of prices

Ross Gilardi

your but weather comments, order the I it. operating any now? counting that you're in amongst basically then, Thanks, operating book on Aaron. that margin patterns you the making assumptions year were half Got leverage materials, you saying is think, holding in can second you And right say on (XX:XX:XX) – you of your EBITDA offset or raw do some guide, the leverage other are when in

Aaron P. Jagdfeld

guide that Yeah, has upward we the so I – really the leverage as in morning. operating did we think around remarked our this comments, calibrated

guide. kind comment of that have (XX:XX:XX) your on will our baked about we into do how on much I and of that level. say this So weather

it's So of this our thing I've is of the business don't that events with an pretty always in business we element major interesting that include – any is guidance. this kind and said our

There So could top-line. additional leverage. there additional be could be

into kind event use outage top-line. important to a this, that's bit said, power below was an residential, closer also the $XX baseline calibrate QX. we the quite major As below upwards remainder we of of the the it's well to been, say level or average, of it a view picking is in long-term where more of environment, year item I'll where kind the on a add we're specifically million that which can

guidance. balance lower higher of actually translated were environment in year we're for guidance still morning the an and a our we So the for a that to guide, looking saying power this yet in increase outage our that

don't going to they upside? or impact been conservative this is they're forecast So happen the that going We just We're We've to over trying and a outages. road to before. when they're happen. where to do long-term, I don't down that business. we take happen know. do We how do know approach know they

leave additional going watch curve it in to we leverage and to and only on additional who terms to to from guys margin a others you're So a a you tailwind be say the But pick where point of company of that kind an be. would standpoint.

Ross Gilardi

Aaron. Got you, Thank it.

Operator

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

open. line is Please Your go ahead.

Unknown Speaker

Jerry. This Hi. for is (XX:XX:XX)

Aaron P. Jagdfeld

morning. Good Hi.

York A. Ragen

morning. Good

Unknown Speaker

in today lead ramp Good oil you how what's morning. Can you second gas to orders year? much production the peak? where to on the please of relative frame and And half expect genset time XXXX the the mobile the business is and

Aaron P. Jagdfeld

a not fleet and so with refresh cycle but of Yeah, gas. the kind XXXX unique year in also the questions. oil only was late innings, very good they're

serve before, and I particular, peak. in utilization we're that So in still of really oil off rates those that markets as rental specialty seen And haven't gas. mentioned we

seen hit them of their haven't yet. kind We stride

run believe and it to yet relates gas. oil we room there's So as specifically to

really back have we towers, both specific the were product for XXXX the market So categories. heaters, the the with, near to nowhere that lines lighting gas specialty product what for specialty that that those serve they come market in diesel levels, generators and and not

facility of factory constraint are times As engine what on that's I business, business capitalize up our availability. they come we're terms happen, our actually seeing the approaching a be new we're mobile – to you the products lead some there going for are is wouldn't that there. always but isn't three want capacity have there. our times a you Unfortunately, want hits said to close we're we're projects because ground, inventory – able stretch. project the far time full does street. biggest to We've is lead utilization, out But in say at pretty shifts running because when a project starting as in products, and again to

the small market also go equipment. displacement engines like products same go type the construction that diesel the diesel engines So into for into of world smaller that,

And so, right environment obviously robust skid-steers and demand that, is backhoes a and very like which things now. also

product the and And this we're some that's out there, engine putting think obviously to going factory own are But lead that. additional major shape flat can, their and early. We to and as in I engine as out. road they're we've on supply. We've cycles of trying times recalibrating make pretty we before fortunately so, taken been fix in steps this with pressure we're could happening got much down but decent but in scheduling see manufacturers we terms

Unknown Speaker

you. Thank (XX:XX:XX). Great

Operator

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

is open. Please go ahead. line Your

Brian P. Drab

Good morning. to start the a And on great year. congrats

Aaron P. Jagdfeld

Brian. Thanks,

York A. Ragen

Good Brian. morning,

Brian P. Drab

regulation? Is that the any does opportunity in way end Hey. around you carry opportunity is these the the could million there assisted $XX million living facilities? with Florida guys do Is it to into What's XXXX? that $XX becoming closer this think size it with timing or and plus the like you compliant a

Aaron P. Jagdfeld

it, the kind dollars. Is backup the if a is neighborhood happened? point. that and backup of this math information But critical some power some backup lot Yeah, the installation, a the size we lot step of great kind not. to already to in when at look there we prize have a they here a question, change including not would the of there on it's somewhere estimate million of back which power lot overall and legislation of into is is there's go of I the factors of The of hundred that. type we've strategy quantify a are there, cases size and and facilities market of try great has In existing they that what a mean, couple adequate the we (XX:XX:XX) to retail versus have? carry there probably already price facility do this, that and opportunity at done It's really that just a Brian. of

position a is that $XXX to estimate. at natural of opportunity? little switch regulation, get change at our from also you the better because rightful maybe strip probably away of generator which allowed regulations. components because when share which that. We a That's a we we then you more of million million And on bit of at breadth kind put a then, minimum is gas, levels, with should that a distribution, transfer $XXX reasonable was wholesale Now, under the have market our a there's and share and believe the previous

you that, say would size is were to if hit – it million the and that I I So somewhere you somewhere $XX between million. numbers, between $XX think

amount it's There interesting. credible and that has extension going by plan them give that something And state's X. as plan, and potential referred may (XX:XX:XX), think, the the Florida, Certainly, to the to show of they'll long then, just installed if simply show the not get of to year We AKA of could equipment as to they credible happen a the it's end can to extensions the facilities all problem regulators regulators, in as terms with In eclipse XXXX think state kind because deadline. to built equipment. that till into a trying July by is agreed state the grant it's a that the full timing, a I be this state there's of can year. get of

market cycle C&I the a get to permitting product. standby You've to and get everything It from long to takes done, comes it long is lined to got a the a time home notoriously to contractors when get get to permitting. a Florida just up work performed.

it's push of appropriately initial the that, guidance that in have already because we've could least and, horn. full at that impact, become opportunity around the our for believe of some law reflects to our positive industry. since kind and clear our we a think that it's so, raised that had guidance new that very in us year in again, it's but is And now this – this obviously, February, piece this going We a

Brian P. Drab

(XX:XX:XX) obviously calculation the wondering as mentioned really helpful. right. just I'm share, variables and you're you great. through That's going Okay,

to use used share, of your hybrid do I use at trying it out I do this, C&I like those. share and As looking I was figure a seemed you your resi's I'm or

about more you If in we're you what guess, of XX% around these talked get share the like in to be be between, some It something C&I generators sounds the like and would that XX%, obviously, use will you leaning would but share. $XX towards something midpoint million of resi I applications?

Aaron P. Jagdfeld

use, number where (XX:XX:XX) The Brian, can the a small residential can. a very style share use bed facilities generator. is commercial we going hybrid we So of Because use larger that a certainly reflective that, industrial to we clearly of believe are facility generator.

more Our light broader therefore, a to be shares are is a But residential that's or think commercial there. akin that. we bed used. of have a much where there product then facilities lot we And share small and much transacted greater could a channel through a

the we estimating So you're right, for hybridized the of share impact. the purposes

Brian P. Drab

you last activity for trying sense that a average the far far could you really great, XX And about to helpful. I'm would would guidance this, that and you to it's be way how the in constructing think I'm be get activity, get has (XX:XX:XX) choose, if outage you're outage months helpful? above any how long-term help pretty whatever baseline quantify sure over the going get That's but dropping guidance? this then, a been, (XX:XX:XX). I'm Okay. there's How obviously sense for your period to not me

Aaron P. Jagdfeld

numbers think of higher quoted really long-term question, Yeah, it kind haven't Brian. double mean, was average. specific of average, but good it's long-term the kind we meaningfully of the a than I that, around as QX like

that more for average. dropping the we're on way balance reverting guiding we're the it to so, based the long-term (XX:XX:XX) we're of And year,

happened look long-term, major, it's bring and any year, strip as in when occurred Now of couple We of right. events and still below up year But events obviously, the happened below we out strong last quarters you a the didn't meaningfully at year. when that slightly strong QX we does QX it at average had major last meaningfully qualify the we look this, but what here. in what

predict maybe way that that. our the there's know, indicates to it's a we in because proper again think but we So don't do outages. We guidance, that sufficient feel can't you conservatism

Brian P. Drab

Absolutely.

in then one expected detail The could. I is on kind if if And so saw little far? (XX:XX:XX) number update, going more, that's Europe, Okay. kind Pramac a more the you core going of Motortech, that give as X% and of how international, I

Aaron P. Jagdfeld

for very really, has Yeah, is. us. It actually we've those rate with The done acquisitions really really international all pleased in growth well our businesses. core

Europe of the is overall. that of strength Some

true generally packagers. would products. is I that what from margins particular we to C&I and Pramac here we're packagers to say. going footprint a They're manufacturers a in open. we've like OEMs just they're power, and is that most and that specifically has And (XX:XX:XX) gas some generation a it that of doing business, growing the Generac, combined power Motortech was And our been these Pramac U.S., both integrated and of the to grower we tremendous than larger international tremendous improve companies margins. for really We or are much is Some went on we're these focused manufacturer. us, as demand are traditional which these response They're buying case an biggest (XX:XX:XX) a and we markets a market the comments, really – manufacturing not acquisition. Ottomotores, like vertically with what that standpoint. on is of like is other knew knew in OEMs faster after businesses, But a of vigor this in dilutive particular markets. are heat akin area with businesses to the in in global ourselves eyes said lot our distribution and focus of wide give And knew a OEMs be we

then and gas into is a acquisitions are so, to winding And fixed there lot from that put are all in of structure, we other do growth there's critical own engineering systems our we manufacturing take relatively own really to think the that the Everything to product. of high own and the coverage the important. and of part our components the of that because leverage streams to that The have. what is by key switches, businesses thesis operating these alternators controls, these a added to in in been has they leverage our value engines transfer designing work of

So to that make manufacturer. line countries we businesses the XX into. of structure leverage and get plus line a improvements sales Pramac expense so across improve we and vertically the has branches. bottom better then, high the at the at them can improve And margin leveraging operating integrated These making these cost by better by the they with people growing. of by are offices – gross can can that, sell to There's XXX staffed access globe we a that that

And we two want to businesses. it's get And and our nice that last it's a got quarters and so, these on plan way been double I EBITDA we the of plan we're have mean, some we've working. of and have on to very seeing we've to those the trajectory. We solid working there a show things several improvements. go. We And long been a think focused margins line have that. sight working. we've the we said We're been to

York A. Ragen

And gas work (XX:XX:XX).

Aaron P. Jagdfeld

And focused gas another It's of been well. area on positivity there. as

Operator

and conference to over I'd Officer, remarks. questions, for And Chief and Jagdfeld to I'm turn the closing Executive like Aaron no back President you. showing Thank further

Aaron P. Jagdfeld

a will we'll results, early in everyone day. forward very joining thank second to that, Thank we for quarter which reporting bid morning. us our With this XXXX to earnings good you much. And want you We August. look be we anticipate sometime

Operator

gentlemen, and for program Ladies you and thank Everyone, participating the today's disconnect. a does all conference. may day. great in have conclude This you

Generac (GNRC) 2 May 182018 Q1 Earnings call transcript