GNRC - Earnings call transcript Q1 2019

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Operator

Good morning, ladies and gentlemen and welcome to the First Quarter Generac 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 the time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Officer. Financial Chief Ragen, York

York Ragen

is Thank as statements its provided differ commenting risks you words first and thank SEC and welcome our made from presentation, our me of these or morning for list Executive forward-looking this and associated Officer. during time-to-time We'll see may forward-looking much. XXXX information or factors. cause earnings materially to earnings statements. for Good begin today Please our statements With quarter morning. to in today us and involve Jagdfeld, call. the President risk joining Chief or uncertainties other results employees, by expressions to call could Generac those that this very forward-looking well that and statements. a Aaron such on I'd everyone filings statements as release contain like by actual from Certain identify

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

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

Aaron Jagdfeld

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

on Strength volumes, to largely we impact were start by acquisition, organic the higher Our to when home EBITDA generators in reached years [ph] in as foreign quarter contributions we first an quarter driven the prior represent to as the underpinned power end as prior remaining C&I operating gains. Generac over also input to strong company. the EBITDA compared increases basis resulted a further were interest particular the expanded networks. leverage compared year continue for on net Captiva unfavorable initiatives very the high market margins by of the XX year-over-year sales the the by significantly impacts market Overall XX XX.X% earnings standby trailing of offset counteract from demand in Selmec, of in they penetration an the Shipments activity which particularly basis which in growth as growth higher demonstrate alongside robust to outage the year points during quarter. including demand of month all-time dollars to very power last currency outstanding of our their quarter. first results products worked for year continuing sales $XXX the quarter as of costs. grow first backup helped wireless in higher favorable power from to approximately in million the the experienced core to slightly XX% impact increased two increased XX.X% with increased, harden carriers the as

prior subsidiary as and Pramac In to experienced from experienced first international growth increases sales levels. both of strong solid spite home year well very addition, elevated we headwinds. segment activity currency quarter within in-home outage our of for the recent remain the strong years generators Awareness benefit continues in consultations and power for as year-over-year paced activation in ahead organic standby

These and have out very and marketing distribution, efforts to $X worked retail to X.X% in $X in still have opportunity unattached creating for of that in approaching standby efforts a of awareness than of home the billion generators sales X% penetration decades prices. Recall deploying overall each We delivered U.S. additional of only market houses room represent as more but for the market home hard our billion growth developing targeted the home rates increasing that is two have at last single-family much remains today the growth penetration we annually, approximately are processes through estimate for generators to build standby over that dramatically the market contributed category.

the accordingly Shipments the this of product growth as as quarter plan. solid further customers strong applications underway national fundamentals all C&I to a of first wireless in heavily our future shipments were orders domestic believe In penetration leader across in stationary growing exist particular Generac's our their markets. number As account quarter on telecom strategic and as generators a also broad-based tenant powering harden to category, projects to nearly remains in substantial very various increase focus had drove of related to opportunity networks. accelerate market we we this continue the core clear continue and major first end of the

dependent interruption of Generac for the in for able even connectivity of will unmatched fifth technology. of been to of that systems on power an enable tremendously be increased is wireless technologies. without networks of so-called every distribution critical support to ability important. X stability during provide to this supplier supply continue layer continuous more tier that sites As these our new power generation a their and XG network key never a outages power unique level XG The will carrier is for need some U.S., that which provide are data these deployment foundational our of result network. communications our a future Ensuring and to services impactful begin is develop nationwide speeds through backup technology, carriers will has the the and essential solutions

opportunity scratching only telecom overall global are the we surface believe of exists. that the we Additionally,

specific we several begins Group backup With has position investment telecom Pramac as recently as Latin our now cycle in and the telecom extensive months power in as our can we vertical of as and Selmec These duty launching power also include globally and specifically a current AC in and companies to number products market the for aimed only the cycle acquisition recent some to in began continuous another the telecom complement but less current market leader of ahead, is of we'll of this power new product hybrid going several one in efforts in solutions important countries accelerate direct of the be diesel a for much not reliable complete subsidiary telecom gas systems number given this that extended the already market cases America will line of a at power the the be grid well backup products be as another well. Generac alternating for applications believe provider DC to is We complete line market. in their where nonexistent. launching are will complete serving in or power the new or Mexico, specific

exhibit market themselves for dramatic yet growth nodes these of power of natural US a developing at our use gas in engines power environmental The mainly also generators diesel drawback have see in decade. all in the power created diesel point to has with potential a gas for regulation gas that natural as has product with increase opportunity that roughly a years is alternative. the considerably overall our superior these an generators cleaner spills several of past emissions has that gas firmly just larger due inherent in in area backup US used over over the logistical gas products. higher expanding an in higher to This tougher contributing the Generac, annually to has another Strict only the economics is tremendous growth for the regulations diesel but globally hard gas further economic to a their for over ahead. combined XX parts more prices, gas certain to have global beginning verticals low traditionally last are we supply, as diesel. acquisition over as higher In these gas lines environmental use rates the where around to characteristics a of on concerns years that systems With a far natural have XX% We benefits last addition gas power the XXXX diesel well prices versus power been now growth natural generation double Outside around developed phenomenon and refueling characteristics to XX% systems prices market substitute telecom, with as focus backup the the where for been further of that promote growth have of now have result benefits not its applications. the cycle here abundant years worked we world. introduction been believe the number emergency driving U.S., prices of driven developing such same to These generators for that fuel and new the of with market many in the our are generators additional have creating and requirements the begun. product Higher power power of as market Motortech is many interest other we environmental engine brought coupled natural anticipate aggressive of diesel. backup advantages

will equipment lower the spending subsidiary Largely second growth for to independent from purchases which Pramac quarter the rental energy These of had shipments company during period. customers, was quarters. Our at successes are energy shift factories increased on our for our mainly infrastructure by account in to national the lower the the Demand place year. to to diesel is selling national believe we units With expected demand believe increased the products a recent gas due mobile account during opportunity the prices, and higher strong was in number being capital and has this generators. ahead U.S., third represents Italy businesses prospect rental be of an forward. and for offsetting for quarters of timing of domestic customers are and levels excellent products for economy now the going our higher certain in assembled year-over-year the our we traditional spending in mobile and of sets that Spain projects a full

all Mainland In the international domestically addition the grew China East, year. Brazil growth shipments in the Middle start quarter, first to also with experienced to business we strong overall to and Europe, the our

year-over-year quarter basis, regional and product on sales the deliver continue have were out lower Although margins a we margin the remain points margins as increased basis and to XXX our segment double-digit the international to adjusted ability negatively to lower XX mix was international EBITDA in to EBITDA certain these targeted segment levels. our month last for slightly confident in

home in strategy interest benefit of sets applications standby we Additionally, for and gen to and see gas continue commercial expansion grow. continuing natural to international our with industrial the

selling line our a this back be international represent XXXX forward As on Pika teams regions. knowledge acquisitions transaction Using for is become and gaseous ahead. familiar our March more our future comments to The week. Technologies powering decisive market markets is doubled rapidly Generac. and the and plan in transactions respective also Pika Recall step as this the some recent that about these morning it a we and gain like XX and market our nearly projected in deal most developing with product energy and the our to [ph] the and make - of annually for these their Energy. years comfort bold opportunity them in sales announced I'd strategic in multibillion-dollar managing earlier storing the roadmap, as for

to that solution have bring already that brand can energy the acquisition new inverter of to exciting gives provide to to identify data at the track take us their short-term cost solar and over level, installed and of natural standby technologies, allow From hardware that energy improve battery existing the a savings appliance to helps a payback Our want fit. power an them power savings management energy access functioning while looking of around monitoring homeowners electronics customer management consumption energy development will of opportunities. also customers of added proprietary expertise million system, our dramatically with necessary When new two combined relief very Pika's base. Neurio high this this Neurio's to new solutions and intelligent generator outages, which millions software algorithms their and we providing the we to are full homeowners usage be believe their control software market. from to granular and significant

backup the omnichannel space today, nearly instance we deployed growing fashion market content sales consumer tools critical and in experienced management creating generators storage we inner sales opportunity creation power improve areas saw Although to and be a and around in energy develop generator similar home these and in was market to conversion will unique ago the home the very the market marketing than market. very we years with ability what XX different targeted nascent to from that our that home storage is our distribution, in extremely standby to believe valuable we energy believe the standby serve competencies

bring of the we and and the the storage. addition an to scale in and In will produce market standby developing key our sourcing solution. these of home affordable that strategic combination ingredients to be we affordability been in will awareness, ability market ensure The availability products types believe manufacturing equally they have expertise generator energy our important for growing

Our think as continued We and has or and and stability local energy unique that manage ability on-site we both from power generation time. over to of remote new that manner even a our a power investments solar, opportunity fashion being is of coming the environmental and of develop of buying role this our into important power has this acquisitions role develop storage one stage partners storage issues manufacturing ensuring details concerns. store will play market systems to to business existed turn number a recent grow changes power new new the is and these a This days the on further a an to and and help historically in it cement and satisfaction level end. growth first accelerate market now channel potential and owner to develops. York this cost, believe global of results. global of to grid our the that another market sources us serve the work like potential be The of in same end-users we also rising to are nature gas will market in replace dramatically decentralized and our as will the and energy on key the centralized connecting to sources monitoring dramatic generators and over to few high countries, of that of distribution ahead position existing set with The to are further our in monitoring as an basis. under dealers monetize footprint York? home would some now generated that supplement as as and energy a wind, will home result the standby including utility or from the monitor thereby XXX a to development power enormous companies the call installed the at unique, decade possibly geothermal current over of landscape us the in we customer The I the model revenue need is player serving a allowing bases. provide in quarter develop certainly in well with

York Ragen

Aaron. Thanks

quarter release finalizing XXXX, the updated XXXX, GAAP our more to discussing our statements these press more of the for warranties. immaterial has adopted reclassifications. new related See our Therefore, under of of prior extended effective period related in to quarter January end standard, reclassifications been new consolidated in release earnings at our accounting X, comprehensive accordingly. detail, certain Upon to first prior revenue income recall information the results Before the we Generac made recognition standard. that

results at million in net sales Now our XXXX quarter the of XX.X% as in for increased to looking first the XXXX. to more million quarter $XXX.X quarter $XXX.X compared detail, first

the $XX.X contribution the quarter was Excluding XX%. rate foreign growth real currency, during of the Captiva negative approximately million impact and acquisitions core the from Selmec, from

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

quarter coming home Shipments end in products As these shipments standby into be current continue robust of demand quarter market to generators portable year XXXX. experienced again growth Aaron mentioned, strong once as very the of current for year, strong, prior the first included year still the versus storms multiple people while in the of impact which United millions of were States. the affected of winter that in parts generators, down northeastern

with our strong from the prior commercial be impact X% impact which customers and tower on these from power for the and as excluding XXXX. the continue gains East, them from basis for million Latin to our impacting in execution customers Aaron growth foreign on compared products of outages. the when their sales protect the Middle impact from came increased approximately our net to is to acquisitions core headwinds million to at In we year Looking sales first particularly synergies core underpinning Brazil. harden guidance foreign of as networks currency. excluding XX.X% our this Europe, and the very M&A for XXXX share geopolitical a investment prolonged of America, certain see region. and given meaningful basis from discussed, the unfavorable $XXX.X reported quarter continue sales believe sales being increased Captiva quarter unfavorable XX% and growth products, contributions that to $XXX.X when core industrial that growth This saw to C&I and as Selmec XX% Selmec growth core telecom cycle market we flat the Internationally, cell are currency. and Domestically, and We they from Mainland China during Captiva as an grew from a quarter

continue rest to XX%. installed resulting products with Net growth progress million $XX.X as core in our sales power base of also subsidiary tracks parts business up compared our primarily of the of our fully $XX.X for to Mexico around service rate made strong core leader the first Selmec the increased growth into quarter XX.X% to million in in We the Ottomotores globe. make the of as acquisition on warranty expanded approximately of This market. category and XXXX products the with has other extended the generation the integrating sales

higher this XX.X% price and home higher and first felt current of costs margin have quarter, we standby believe many and than we conditions, In are sales by drove also realization revenue input Selmec in labor the the increase. deferred as favorable was quarters, rates market warranty half commodities. input shift and we moderate generator sales since and impact extended the a recent to XX.X% mix logistics more of increases of Captiva higher in year costs, second of margin implemented on of amortization costs. mix prior-year XXXX. were towards enter compared the Based these the regulatory tariffs, offset Gross higher prior addition, nature should In increased profit transitory acquisition

pricing million of to XXXX. to higher mitigate increased long run, quarter impact compared Operating X.X% as or actions we $X.X the the the first Over expenses costs initiatives. improvement attempt and input profitability to of

As These increase a to related percentage and were the prior margin on release to amortization offset items as input increase higher to gas year. intangible expenses briefly declined recurring non-controlling versus sales year driven and in lower primarily reporting initiatives defined from acquisitions. segments, million growth company financial organic This XX.X% in improved variable additional sales recent increase which was million year point XX.X% sales, increase excluding million XXXX which the over net for sales compared on in the the to segments last prior prior of same to now were due to quarter. incremental discuss the quarter due $XX.X interests impacted domestic basis our in compared Euro. higher operating operating expenses compared lead The in to two impact period was for sales compared prior organic $XXX.X previously increased employee in Adjusted in operating strategic operating XX XXX leverage on partially of primarily dollars results Adjusted prior by points the our year as to headcount basis operating I the helped year EBITDA of expense will was $XXX.X as our strong to as in million improved attributable and OpEx mostly the the EBITDA to by the first volumes. international leverage quarter operating offset was costs. XX.X% the earnings by $XX.X expenses in the before connectivity the the deducting year. mentioned weaker

sales segment C&I strong and to power in stationary as discussed, a of sales million As $XX XX.X% of the the of including drive million increase sales outage quarter home in strong penetration increased sales. and from the million generators net X.X% Core acquisitions the we $XXX.X $X.X non-controlling growth favorable by prior-year was globe. across million for Adjusted the of million net EBITDA million subsidiaries Adjusted to significant economic for of quarter to compared approximately severity year. the market growth or was compared million was market compared prior-year headwind $XX.X net this for segment our contribution the continue previously prior $X.X sales approximately of across during the as International as a Pramac driven reflects X%. conditions $XX.X standby for as I segment EBITDA sales higher environment. or and XX.X% before during our quarter deducting net currency X.X% to due to XX.X% interest in or or X% to $XX.X and foreign

to earnings current full-year and from in time the higher capital prior-year in payments during the compared first XXXX or negative to full-year compensation earnings first This tax to related to cash this $X.XX release in fiscal in strong cash a in QX tax an tax Cash share. $XX.X is first year. to or GAAP of million taxes was million our the defined calculations net these fluctuations related to modest compares the share cash in net included income the company back $XX point a for we the the rates of our the cash of in XXXX financial basis, our first prior current last taxes in improvements share performance was and $XX.X rate last quarter. as in growth to company to XX.X%. expense by for performance fiscal more as in With is million the quarter as year quarter quarter by earnings which for earnings of the of the Higher was switching tax cash earnings fiscal for compared quarter XX.X%. increased as $XX.X schedules quarter XXXX the quarter the were of operating per XX% the $X.XX or GAAP rate quarter compared of prior-year. the earnings offset was The the just on The attributable GAAP earnings levels our million were flow operating per were XXXX jurisdictions was million than higher basis free $XX.X million of year to in flow tax first of in in reflects XXXX $X.X income lower of quarter the rate defined tax $XX.X to profits XX% XXXX a year mix the of and taxes, income increase tax as the quarter income year. decline in offset the $X.XX quarter discussed specific Diluted cash due earnings $X.XX sales pre-tax the The tax pre-tax versus partially higher of million level million year. in during due $XX.X the GAAP prior impact in on the $XXX,XXX income on effective share XXXX cash in an compared $XX.X to rate of income GAAP regards of income quarter. Adjusted quarter year-over-year current for XXXX. expenditures. per in at per The first $XX taxes includes year in a million the same as consolidated more net for compared operations million XXXX. of or income a expected are effective XXXX rate $XX.X current amounts based company XXXX million This of release. primarily reconciliation to was versus first for income a prior-year in for release incentive as year generate Now

and stock purchases continue avoid addition, In increased of quarter majority levels $XX product to season to ahead we million for during peak categories inventory increases. approximately build the our the across pull tariff to the of regulatory potential as due

monetize standard. the demand up operating of We sheet, on inventory new expect This liabilities our to X, line standard quarters we look to in assets normal in at and use of rate coming that requires build Taking picks January a the leases majority seasonality. XXXX we this the recognize as with balance accounting our lease related on adopted new lease GAAP balance sheet.

result, to balance sheet we long-term the approximately standard. other additional our other in on assets As a million and $XX liabilities of adopt QX recognize new

As of $XXX unamortized March of a original net costs. of XX, and XXXX, financing we debt, million outstanding had total discount of issue deferred

end times of debt gross ratio first was at Our as quarter the the leverage X.XX on an reported basis.

updated there facility. like on Both we was revolving that, call now to Additionally, provide at had cash our available million XXXX. With in our comments approximately on credit of for term to loan the outlook XXXX. and hand and ABL first Aaron I'd our to $XXX the million year on mature the quarter, of the end over turn back $XXX.X facilities ABL

Aaron Jagdfeld

York. Thanks

residential products our conditions better and C&I have we and expected. than domestic, end As discussed, for strong market remains

In accelerated our recent Neurio addition, into of our and energy acquisitions market. have Pika entry management the storage

the growth to the result, X% severity sales year we X% is guidance year our to approximately the forecasted. the sales increase growth As XX% full-year previously an sales between net to a first basis. growth is XX% are we on of depending reported expected X% the as to grow which expected. growth as a on core from basis to Seasonally, outages to On to X% now be and approximately X% in X% basis, to year from for net to the revenue during an an expect a XXXX full net X% XX% for core core which power previously increase now expect half X% improve of X% we raising on is

include outage could low event before to for end non-controlling power expect with while up full-year half assume the be to be a expected between XX.X% be the margins baseline digits of would would adjusted second of major on activity as The second the growth high XX.X% for margins the of non-controlling mid-single deducting for the to EBITDA approximately the of flat interest, now XX.X% outage year. expected during also average assume before the for now net power range are end to major sales and an no elevated XX.X% between which range year. an interests outage XXXX, to half Net environment deducting outages of basis. income For more the to we reported

Importantly the an conditions. environment range margin Pika would more range outage outages average guidance driven of expectations the low product primarily decline by end The acquisitions sales. to and in and of power major C&I would mix the previous Neurio elevated high the no compared a is assume modest power assume our the of outage and end higher baseline and

enter we this plan market development management penetrate As needed the to we further product and commercialize market. out and expand storage, infrastructure energy the for to build our efforts and

and half adjusted EBITDA of anticipated historical first should with opportunity to the to be Consistent earnings seasonality, the these sequential relatively leverage to outage the to due strategic importance we on mix, points higher the profitability sales grow adjusted to to in largely is the slightly from future. be trends and This believe as benefits into to environment near-term, dilutive costs to margins favorable operating with as energy second half during experienced the expect year. half XXX of in the in enhancement depending the management commodities expect now moderate the expect to power input the back approximately the margins for year program the second realized half EBITDA the in storage and we we While be improvement quickly macro basis initiatives be year. currencies XXX we logistics, significant our improved in with improvement

our expected guidance compensation million of to last increase acquisitions. change. primarily stock not a Lastly, $XX our remaining is call million as year approximately for expense the recent expected are previously items to now $XX during to result to provided The

seasonality time, to historical remarks. Operator? flow again strong for concludes prepared free and solid year. adjusted For XXXX, which expected this to be from generation up cash flow for questions. expected to conversion benefiting the over full-year once of the This be operating XX% at is to income And like we'd cash the follow call net open free and is our

Operator

response in of of Instructions] Sachs. the first line Revich Goldman Jerry [Operator Your

Unidentified Conference Call Participant

on Hi, everyone. This [ph] Ben morning is good for Jerry.

Aaron Jagdfeld

Hi Ben.

Unidentified Conference Call Participant

So fill to very your a or guys have missing were of across do the this and can of you do portfolio. kind execute in products us give you out give for need you need you remain that us to still think for those well, full you suite just the marketplace of timeframe forward with you the that active businesses? And quarter, on strategic go going any M&A you pieces focuses different the profitability

Aaron Jagdfeld

our don't while specific been question, a great give active. very And Ben. it's pipeline, we comments Yes, have on we

acquired pieces, focused remarks, I continuing on the that us fact represented really in here That desired XXth think that this pieces there our last give or the as our and lot of by both said, think recently have to we've very I market we think other the the after we years are seven Neurio I some been go at space. acquisition with a acquisition prepared are out I newer indicated be but to like building vigor. position geographically being more here that on in our XXth, management of look With augment could that them in pieces some that to of energy specifically energy those that do bolted the comment your in areas won't storage. a we here great and energy think things potentially storage. these but we into monitoring we to I respect capabilities have have all lot question, also of some spaces

number monitoring. additional full be a that is that of companies it there the management of potential whether of some be or it certain could the us give opportunities aspects commercial pipeline in and industrial spaces Our whether in or

entry couple where India where of had feel world lack the I are first we there Captiva a was would of to things way do are we the which say couple still quarter point of a Also think a for get had There an there. did we prior. in we could that which representation. us into geographically, we areas that we not I have

to important of the of kind would our think I types us manufacturing say that these also the So areas. successful pipeline distribution would be us that give for footprints are there would acquisitions in have and that we

of in the profitability most again question small fairly far As these as size. acquisitions, of on them are

acquisitions. outsized don't with have it's dilution impact of an a call did But small. out we they So margins as quite here result in of terms dilution, minor, it's little the of a EBITDA recent bit

of it we And think solid to quickly, energy very that's when a importance strategic which is people is caught for that tracking so double small, about been year quickly and for base projected while may off entire the of really look dilutive, there small the and the who we last working of it And terms just going it's for we've what so we ramp that to in here being it a how so years, again market, pretty the have and is to what feel energy I future. our the going think that doubled in think expanded our market term, admittedly good you're that the of but this the company be that done, this impact. eye and investment a ramp a fast really last around indications all storage at monitoring number year. near be the I year

to it's very the accretive over I think our enterprise. overall long-term is the to be view going certainly

Unidentified Conference Call Participant

prepared Got idea coming And us mobile in actually elaborate remarks through can give you in I you maybe it. in you on a give of rental shift visibility just quarters. of customers then Can called volumes into that. an in quarters? of coming the how volumes those believe business, And the the later you out

Aaron Jagdfeld

for we're good industry probably customers another share, That with it's at our Yes, is account to question. us least national the there. index over

get remarks, are I why we we no we the we and We we different. actually counterweight it's seen have the slow recently. spaces. the do that that, to is retail That's would that of out very major We bit pick-up year, Telecom National them, great. is a like in and two of a spaces them we'd to of rental little serve unique see or the of, in customers to of kind think like house the this the we've I serve a good rental love what places Accounts rates were But to formula National saw. think Accounts, they In a we've order serve like prepared one them good gate very fact doing in well. that independent others say growth seen some in we our We particular. job And here space

a dialog that's So to that's that's we going year think and I well. the of the say half why be of those as have confidence have rental houses back coming that something in to lot the with we

I fact a have we for It's So change based excuse of and not quarters well visibility going growth perfect things in obviously on see growth as that today, least but forward, we what's as matter we year-over-year product what quarter-over-quarter ahead see the to would think happen. pretty can good on at me growth line. going full-year

Unidentified Conference Call Participant

very you much. Thank it. Got

Aaron Jagdfeld

bet. You

Operator

you. Thank

Hammond Your line next Capital. response is from of of KeyBanc Jeff the

Jeff Hammond

Hey, morning guys. good

Aaron Jagdfeld

morning, Good Jeff.

York Ragen

Jeff. Hey

Jeff Hammond

Just good standby. quarter in home

XQ on ability impacting and suggests terms hurt would what us seeing be Thanks. just in if lot terms in for and you a of cetera? help and activations you Just seem update or talk to you companies, weather inquiries can about into of et it you're of of what kind install to that pipeline can just did

Aaron Jagdfeld

rates see little year, activation QX. of What seeing question last the in-home home versus consultations there Jeff. we standby, a we good bit the comps had but because nor'easters moderation today, of in the that's to back strength large in Yes, on only continue really got we're half

said, That own bit year. to when you holding in particular and IFC quite we're compare mean at activity it of lot elevated. a our years IFCs So I on it's this time being a previous last

continue So standby. that more a lean to going field lot is confidence home us gives importantly that for is extremely the of trend inventories probably and are

I be teams here think what our the environment for category. tried happened to is that disciplined very around promotional has we've have

amazing attended by a had, the national just some year it's at surprised promoting in dealers think do national in didn't timeframe, time years conference. underlying of little well really large, way that QX strength. but us did a of But our maybe the we there this by I promo in conference we past, have was would and this bit over promoting did scheduled around. We which an terms we XXXX we

and it. impact, QX I to seasonally has we've for to our out us think we can as here companies would, that partners we're course plays obviously national more seasonality out though as would that as drain got bit And I disciplined of outages out some an promotion been weather of inventories we as it weather's a we've like promotional us of worked there's think trends some schedule them, the go so And kind here it that and discipline it far way do wait if the of maybe long a environment. hurts and field for some in as the with for a promotion as help interesting kind thing that going seeing but we're is channel

slow year. as snow, QX, this Upper it in in here maybe it when when I'm in about but business there's actually and been we're to and didn't anything hurt really call little poor bit I installing with start be, Spring weather's really Spring QX, up snowed think If past talk a where to to the we weather It's weekend off it going we've result that Thankfully it but weeks, products I products business here. would downer sure nice was into this difficulty of core depends that of gets But prepared on of there. business a in think call in a our cold there's and generous. a last which a see our really slow lot actually warmer a in the which some season remarks kind Spring. of seen core just to to kick of for signs softer couple the not was start Midwest. that ever especially the weather I the

and But yet. balanced up the quite here parts I think pretty, country in been wouldn't weather, just across it in nor quite headwind enterprise. was wouldn't not the a tailwind call I pretty it's warmer I a of it think call QX bit entire I it, other a

Jeff Hammond

together? it as can commercial at kind versus strategy, how you one and how Neurio coming wondering standby just go is all then look Thanks. your what's res, do you to put back And market, like the do mix dealer you Pika all just how network that with and to just they comes res, the together your Okay. pull together and home it as and it mostly trying of acquisitions kind of of the and

Aaron Jagdfeld

really focus things that Yes, area this. of of one and we and about like obviously that's the

ton both part the of products pretty, of systems residential relatively entities they haven't Pika in So decade in new a age, gotten your commercial, they're terms are terms necessarily residential Neurio your out But of nature. are majority of per sooner Pika of is in focused se that. well. as what commercial old young not a has oriented These and being versus question That first is on than quite or there. said,

of monitoring Neurio market and just more here market will has energy monitoring a recently. their student we're devices going going in of there be the thousand we're market the affordability. what that devices and home to awareness, to long of all into management those terms do strategy hitting go is take plays, clear of and delivered pretty playbook Now newer the is it's big and run The though, body couple to hundred their right going energy to we're day out availability standby page a

The direct actually Home between them management energy has with only what being the not in first and the And about what omnichannel those and to see the system of of see several already mentioned solar potentially that payback it's you've around in stability the is as the solar solar. invested It's more is playbook a is payback systems. industry. it the basis a forming can way energy so addition I being about get help issues. think standby, that where about their long-term and different all two standby new you these you on reliability. the type than and people is about a the and is backup in grid we've solar down to The savings. fundamentally area monitoring that's years interest deviates. changing your an what going to prepared their that's couple a improve our have for people price get our installations channel, have that, installed you installations outages. wholesalers battery big factor battery major the on introduce taking actually backup X% so management dramatically on systems energy and a with million more of products and So see in differentiating remarks. this energy U.S. And only on partners us my we where solar this with can landscape we improve already That's us that done to We focusing over last this save Neurio's to are on And lot channel to come but flexibility gives system. control outages We distribution, bills. industry, with of the this about and home direct you addition nicely for here money storage. it energy contractors, roughly There retailers

capabilities distribution capabilities of we that power the nearly to don't they have for this marketing have and wholesalers, storage and thousands the channel that have tools rooftops we have. have are home monitoring. developed that the marketing, XXXX energy the other people into, in in-home dealers, because points light and X,XXX partners developed like and of the we our have don't play. in we the standby, these the distribution our using energy have, targeted push we've so doing that don't products circuit we've And that today we retail They that nearly selling look of They who that at consumer developed have we developed

is shut market the home for standby issues in part is all say of broken one really particular. activity where going last that we some issues in us people California so the is us they standby down earlier the this time. that heading plan you're a blows could important be developing That for I strong maybe seeing million made a when on western develop lot for a although X.X comment recently with stability grand wind storage, bit together days of because critically grid off U.S. to into wildfires at to this necessarily that week going off And nice their market little kind to are think for PG&E of going power going not historically, obviously it's backup. days announcement us a get have home being The around is to point. putting can not be grid in a PG&E would battery said, storage we for that quality in the that's to I market a the great market. home around you with the markets that and But is of complementary with and standby because of of better, market And to develop. is think an

be don't say standby. for to it And just ignored point, market been going until I we've on there a this really want very up so we're hasn't to growing but that it focused

we're else. I already So we're, what nice be it's of region think the to going what doing a complementary country to everywhere

Jeff Hammond

so Thanks much. color. good Okay,

Aaron Jagdfeld

Jeff. Thanks

Operator

Thank you.

response from Christopher next of is Oppenheimer. Your Glynn

Christopher Glynn

Thanks.

Aaron Jagdfeld

Chris. Hi,

Christopher Glynn

Curious kind and proportion you're and wondering penetration is of what seeing was I by of resale those today morning, rates replace lines? upgrade. and with upgrade expanding happening what movement, Good stand along versus the anything's if

Aaron Jagdfeld

watch, Yes, we very another it thanks It's Chris. we closely. track area

activation with have do file we that the have data that to the and homeowner ability data all We and our here.

quarter reliably. that, because is on So have in can the by, just see that years, every the in cool in directly products XX upward standby The in expectancy of and it are X% sales starting it of good see fact, today about math. some reliable older is a and are to goes I mark a life we XX parts And march hit home the can we the replacement market of pretty We number. we XX-year kind very see these as replacement. of we upward tie and you that get a the now it's but view that around into to that's think reliable been four experienced that we XX years category's and in march pretty this of that between

Christopher Glynn

It of footprint around a might how backup. kind and good. sticky around it And it duration your the emerging the sounds telecom What's XG the incumbents the telecom dynamic be of on question like given overall opportunity to this, for international accessible your U.S.? corollary and seems the customers outside wave while for view of is and legacy that,

Aaron Jagdfeld

Right.

up through and say for backup may this couple so generally, year like start I up think the cycle they generally we this last might terms them change, that several it carriers out it the entered kind historically up up, and we that things serving there it's three of If in this the entering if pick about of those experience of the what have really of the been for things in in steam come extended get typically here. network as had rationalization in has a that projects really would down. It or But has to we those to years, mentioned cycle that's we've picked sometimes conditions in in pause those And and activity years we've we've harden out actually the can we themselves be years lot relationships, I up activities., into if a enter just a in a and headed into to the power, run back with the acquisition and acquire change going obviously last and are almost we're get back have we now have and cycle market is to saw we build installations in are of XX put year, equipment, longstanding those cycles, equipment when it been both M&A and to been of an together acquire QX, of cycle networks based my to the on beginning half here, there go really so our half. of we're that can as And to think project management M&A. years on here think be can that remarks, I not networks. when extended So like prepared an cycle two bounds that. that and past economic runs an assets seen a that there of they

Second two international the accessibility ways. our how footprint. of I'll terms opportunity, in question on in is accessible of One part accessibility your that. address

I think doing this we've the is beauty what been of internationally.

have We terms company four amount terms over there. XX% that. of to from had in footprint accessibility it's raw in none total or that of didn't And we ago just added footprint outside a footprint tremendous presence revenues exist, and of that's physical footprint our Canada. coming U.S. distribution manufacturing having the and globally, of of the five the Today are years

acquisition how do and be terms in market we the would and example of telecommunications down serving already think is their we acquired we on relationships, down that's years they hand other do we the right space, ago market the there bought partnerships their company of classic in did customer in product. they A Selmec, incumbents relationships years or didn't six owned they roughly some that base be not the but ago, good also bull's the Mexico, today. win? weren't that accessibility unseat offering. but eye those six creating How Ottomotores, I example of Now Selmec the really squarely that we only that company product making we the serving a may any those weren't have with in five and

us of the America one companies vaulted so And the us Latin put to combination number in in those two telecom. has the acquisition, position

but on out market that building relationships because our regional relationships. We're in carriers that a they globally juxtapose number doing, International to look we dabbled teams look we are global with What we the what starting products interesting both building focused to think regionally, we're North they've based of U.S. differ to America, serving or kind focus Pramac on it internationally. also intending is I you Canada as U.S. have see team but that offer we're it team we're a at is of adding it here. based at U.S. and the some enterprise globally and one our it a never, in always So telecom carriers, position as you the as Pramac branch the finding those actually to do those is but the much

And relationships so trying leverage sense. makes those where to it we're

because incumbent, supplier trying and in them of terms unseat we our have or in carrier either unseat that new may may somebody new in preferred to may Latin the America the So already we to a market be to themselves be not U.S..

work market of sites, cell which is power, particular XXX cell going that think backup do U.S. play So in longer that The the XXX,XXX obviously we of lot have not market verticals but sites, away. don't. the to have those a is term telecom in XXX,XXX one we is just of XXX,XXX

down. functioning through, XG and a things artificial going and going get can you have you and penetration intelligence a lose automated it but on around if or high technologically, you are mean have uninterrupted drive to XG and you're drive XG kinds have we're that can goes comes of maybe completely third So I all cell going to a site is cars people if other has if going be completely. Hurricane mobility, if to technology to cannot

being differently, big being on ourselves So a networks And being we see basis. architected differently. a global that they're these participant in they're hardened

Christopher Glynn

helpful. you, Thank

Aaron Jagdfeld

Chris. Thanks

Operator

Thank you.

of Moore with is line response the Chip next Your Canaccord. from

Chip Moore

didn't we momentum. touch Maybe thanks. the on area was one hey Congrats Morning, on healthcare. strong

us trends some can the you update I of on demand seeing think in you there. that market? called you're out Maybe good some

Aaron Jagdfeld

remains vertical right. Yes, maybe important of morning of for time us. I mention healthcare for Chip, respect out another And you're this it didn't directly everybody.

Just about so good. to the much talk but healthcare we market's had been

breadth coming of want products facilities so place, where one because be buy telecom they them lot of couple also power have we of basis the that basis were events certain last our those a off not matter on vertical verticals, talked end in companies had years, can year, specifically And certain a up backup it's You terms how that at of good of More this coverage believe were of bit fixed down through the served parts breadth got we care being regulations to into considerably. desire. backs of a morning adds that the of a those critical we've would as the and that but lot XX needed, opportunity we of will miss which our where for U.S. through. talked channel to regulations that and a that's we HVAC also waivers HVAC direct sell there are think from the because the addition needs normal we where world distributors frankly across they of they quite and But go only grow. distribution for and by critical of went to know more grow put regulations additional we've this That a that number healthcare fixed been we're engaging of sell in direct the end focused those of power continues different XX, were size other and previous of is bit about that the actually the It's industrial a the need power issued obviously maybe comply there generators offering Florida. of also the they the circuits those to to about in need was a Healthcare with year customers. that effect the where verticals but some channels Florida of with facilities there in and the one but distributors in I of the in on and

and a to care else. there. the kind as market, leaked critical than play a answer. see we hard run we see bigger that But as of that probably quarter big of honestly to several here And play the and change think and Florida right quarter, starting so lot everything similar demographics similar on a of this I there now, basis, as mean it's that see looking given see Florida be at states are of we time we'll markets we're through did that'll adopting of there is over fashion outside that national first But more the just thought other That's is what are the here facility we its out, enough it regulations volume in year. is course as out this regulations might probably some argue because might kind into will second we get obviously the interestingly over it a

a change substitution talk So about but that, books solution we able regulatory acceptable is about of also that a good we care those diesel working continue the very people in on a better an really convince standpoint, is the gas what we're us There gensets, regulations that both that to to but as that to traditional facilities vertical these of make well for make solution. to we're that from harder many some little critical to are a like gas economically but it's future. the

Chip Moore

thanks. Absolutely,

Aaron Jagdfeld

Chip. Thanks

York Ragen

Chip. Thanks

Operator

of Your next is response Blair. Instructions] Brian William [Operator from Drab

Brian Drab

taking Thanks morning. good question. for Hey the

Aaron Jagdfeld

Hey Brian.

York Ragen

Good morning, Brian.

Brian Drab

and going modeling growth. think giving in what range. is $XX revenue a add the you're Am I to you're $X I about not off point us are to - these signaling question but Pika you're Just are on each quick what first maybe far maybe think I that revenue Neurio, revenue million million These like there? the

York Ragen

range, are in this fair. that's their Aaron Yes, these are Brian. so said, more getting are that that revenues category, emerging into businesses startup Like

Brian Drab

point Right. the understand portfolio? technology building in And here the the I is

York Ragen

The team after. the that's technology and we're what

Brian Drab

and to I model a build have it. Got right. Unfortunately, the details. Right, nail down

Aaron Jagdfeld

That is unfortunate.

Brian Drab

got like build as we'd we've Yes, models term, well. these to longer to think

to to and causing capacity you it tied energy. now is on And do that revenue are in event you do talked much Is and a the bit recovery need little to companies the total that for second of you do start-up you that there's pipeline seeing. about a lot to can with a the what half see activity on or come challenge? kind in of percentage Aaron mobile this market, Permian. reduction is about before you the of you And So lot not that's so year specific of activity talk

Aaron Jagdfeld

been piece small more is energy not think account about that mean through they little doing, General guys Actually, of wouldn't it's I just slow rentals, years. call just purchasing, last a piece us these think the fleeting pullback specifically bit the for I have accounts they've less over about a and more. get pretty Yes, were excuse week still I Brian, pretty strong I market energy exercise couple general to rental was been national the off have remember out the me bought National is the dime a the

kind they're QX, bit would tell and equipment. their some they So a soft of you that actually kind all of fleet absorbing were little they statistics were this utilization as of in rationalizing

the putting Permian? in energy the of of the gensets actually market on as off opportunities rentals gas. plays they been back energy being second third in which secondary I of in to in so gas in prices. quarter those speak companies going through here power that's more start but and seeing fourth as on out the and and used kind go directly specialty your herd quarter lot guys, thinning of who gas firmer the second, and that And off rental the been and getting we've our So to to We've national What's the well. natural are not of wellhead the to are actually the we a the back quarters, generate a special indications marked be Permian a from seen All uptick the bit. out pass have actually out actually intend remaining the increase rental flare

still kind general here market rentals independent the actually a prices very in alongside lot nice seeing of the gives is what the recap, of would investment we independent that QX, of rental, there saw I into with as ranges a we shift the nice it's had we're And a see buying then away and general that available there. supportive for so confidence the national kind there here, And nice of being mobile we getting from energy continued that the inventory rental kind lift that we're companies going said us in a of and at equipment they're the I and types think in typically the rentals.

in timing mainly just I shifting there, from So rental it's accounts just issue QX the purely markets view think just was from later attributable quarters. the a it to a into our these national

Brian Drab

Okay. that is Got it. you what Can talk case that scenario at? worst could looking And then new could there York new you what come, tailwind headwind. and the just mentioned tariffs quickly, create or you're a about that the

York Ragen

in on tariffs paying well I list Yes, we've think started year. three September up XX% been of last the

we've So for been, it months. call the been we've that last absorbing six

away. to our XX% P&L that in threat statement. that So running guess is guess the if those our our we that necessary they our it's is that the seeing what have but I But what's our seen, I But reacted we Obviously, math, we're run isn't don't to be tariffs negotiate The in through of and through outlook run yet those tariffs. whatnot. XX% pricing with still - but in tariff what - rate today have tariffs. we actions

actions that and other initiatives. been cost we've reduction and through absorbing it's pricing So

Brian Drab

very it, much. okay, Got thank you

Operator

you. Thank

from line Stifel. is of the response Elliott Stanley next Your of

Stanley Elliott

in. A Thank energy fitting guys. question quick this me morning business. for Good on you management

this we one, make last of don't could to see is seeing just don't a you to an now, there the then channel, to you're a how look piece, sure, way change becomes kind I'm number any much there M&A the on much then growth then question for that the R&D for correctly SG&A distribution be on the I going pick preference shouldn't I'm stronger probably maybe then overall longer I that to R&D business I when or Just right sense with see term revenues? trying ballpark is the get the need it rates would mean this side X% through hearing it of that like there a sounds and of like is a two and side going change of guess know

York Ragen

Yes, thanks Stanley.

Just of parse to kind there. your question

headcount the So distribution we're like need of in we in today pretty you're right, as underrepresented. western parts ton to mentioned I don't I there, although the add think a U.S.

towards of to think anywhere it's distribution put going so if to going that dollars be we're terms In distribution, in I area.

from standpoint market, effort, targeted we we and marketing the in though also the home of in-home - selling marketing types sales built the developed think approaches. developed marketing I way standby we that targeting tools,

there right. created will have market, I to develop and think lot of still already go leverage can out what we've but a media we that we buy to

new we one already to we it's another have So aimed thing use market. to what is at what thing deploy a have

So it's about, I as we're we're think not begun we we kind what going the future. we've will home it doing think over where to be with at But standby. level be running an spend same about the of model that's what as to least today increase at of here think and

costs these to Technologies are standby got to generations we companies build to out, products drop. of it out. opportunities we continue products we continue But products. like that development, battery opportunities our can the We've to in space together the want need commercial the home There continue product As we tie bought to to it in with technologies products, have. relates new the there invest in change. build existing are we so to have, that, yes, they they because

hard really companies. I think market is zero. wouldn't massive it it's so on and say have as there effort going whenever to as it's development the Longer little it. a them. We're I I you to we is pin So product morning an Day like X% later doubled to that set said something talk Investor because what's trajectory the about But we forecasted double to comments wouldn't market we in talk to cost. I product that's want continue term, would say time, Obviously, market efforts, approach learn - is and probably this about at bought we'll That is but XXXX. phrase kind in about the say how this the it's this there's we bit way XXXX. dramatically of the grow development reflected there, why we more in I year to in think there again same we've would it's our

where three, it meaningful. what when think think take it very four probably to being think a couple think accretive, dilutive here on it'll we it's quick it I that of mass, we've we've that on pretty so it the closing done, other When or are and on it's probably growth future. hit realistically bullish opinion. before in because our and long we'll ideas the rates does years' think critical kind go like out when in I really of to realistic five hit we're what time, equation that solid X%, won't I some we from such numbers we in think XX%, have it's, be that, years neutral that's done do that's does or you're does on the of and that about being very side you're that

Stanley Elliott

opportunity? dollar Multi-billion

York Ragen

quickly. a be multi-billion it's market dollar to Yes, forecasted very

standby bolt of looked kind not excited could time. the creating So that to storage our at right we than This I is that not trying big distract thing as we've different we're standby do mean for and ancillary naturally home huge. and monitoring and found long and we're bigger looked a way of the a be in products new we've activities. everything too awesome market the this it's area times, in at creation and in trying it type for actually it it home to you that on really whole haven't be It we for twice represents built time standby I'll from size with call us could things it be market, home home and really standby. thing too didn't the the energy or we've look fit else if in market what And a projected, spot long of long could and just of we've lot we're look about. into a channel fit we do could

I solution to from home very like together a on the don't We and excited really manufacturing going we're sourcing and with replicate solutions the take I the We market positioning years incredibly power we're today and our that Neurio we've able expertise XX is about are market differentiated going fantastic to standby. a here. putting - unique the give be bring either. done Pika taking get all it. think and in by going it's us that to putting to a very electronics solution, to our that that together that think to solution to we're going think So position what

very to learning of to It's we going have I think and be forward. cycles all that. can able exciting lot bullish belt faster because do it going the we our stuff about be pretty under

Stanley Elliott

luck indeed. time Well of best the and thanks guys. you interesting, Very for to

York Ragen

Thanks Stanley.

Operator

showing now Aaron turn the this like I'm I at Jagdfeld. over no further would conference to questions to time.

Aaron Jagdfeld

anticipate reporting be for look Great, point XXXX this morning. our morning We your and want quarter thank will thank we day. second to some you at again us earnings results forward Thank this joining time which in early Good for to August. you. everyone we

Operator

this Ladies concludes and a Thank participation have your you and gentlemen, for good day. today's conference.

all You disconnect. may

Generac (GNRC) 2 May 192019 Q1 Earnings call transcript