GNRC - Earnings call transcript Q3 2019

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Third Quarter 2019 Generac Holdings Incorporation's Earnings Call. [Operator Instructions]

I would now like to hand the call over to Mr. York Ragen, Chief Financial Officer. Sir, the floor is yours.

York Ragen

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

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

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

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

the to will back I call turn now over Aaron.

Aaron Jagdfeld

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

regulatory X% we industrial year. Our XX% net domestic again third our year had of represent with to markets residential first a a in sales we've have continuation quarter tariffs. power was been the we EBITDA as the to driven strong during quarter of increasing X.X% mitigating the stationary and results growth and Strong margins the impact company. numbers best experienced generation remained as the ever quarterly at this approximately sales half are by start compared prior overall strong successful largely the

the than home backup shipments the California during continue to natural quarter. continued as C&I telecom-related and offset as of the of mobile defer our significantly for in products threat activity generators customers drove demand power of year-over-year outage with were stationary over in gas fleet certain potential rental number a gains also power purchases. softer last larger several generators Shipments of in higher together years products Increases penetration outages standby more

quarter. last for standby we refine Activations were generators proposal all-time during which higher as remained at robust our and years with rates, for very the close and the consultations again several strong to sales trending demand marketing processes. again, home continue Once highs in-home been have

approximately added stayed new the sales, this further bandwidth for the to needed developing focused channel important installation we quarter intensely expand the on penetration as increase and we Additionally, during category. XXX service dealers to rates

of and plenty the Over estimate is $X of room create the $X standby overall of generator more the have that annually invested the to X.X%, the to as every We than deploy distribution, processes growth increased selling last market today billion single-family and our unattached of two with there category. prices. at we decades, market opportunity market at additional targeted only create penetration dramatically heavily the have develop marketing retail efforts market in-home to remains and awareness grow. in billion Recall this penetration X% of for rates represents U.S. homes home

and the more left unpredictable driven have in patterns a Power XX has vulnerable in last being severe primarily and the are over weather grid due duration outages increased by which the to more to in under-investment it frequency steadily climate. electrical years, that increasingly change

catastrophic companies wildfires in addition backup outages, of higher shutdown intentions equipment power of the to as cause have effects their from severe huge a an In impacts the their much to indirect that their conditions causing fire. of interest increase weather direct portions announced level to potentially the areas from cause in creating service that power, prevent is utility a

continue other of market. of to indicators this in-home of consultations leading rates generators penetration expansion stand the that where to we X%, than at California dramatic home increase in standby less have the a and point In seen rapid number

to mitigate of impacting shut-offs Over have they wildfires. seek utilities local millions customers weeks, the the numerous risk triggered three as last of

public in shut-offs events power change and as the massive are These continue impact the grid under-investment result, ahead part this of to awareness projected have years category. promote generators of working drive a the power of we're climate situation through been to where home California's and standby have to takes quality.As to over the a Northern create multi-day the safety television advertising precedence and in country, in combined digital

underdeveloped we qualify, increase partners have across we and previously we region, the in on-board train satisfy near ability new the demand noted, which as could this in As relatively to work have to distribution our limit the channel state. in term

This local utilities product expanding with category that with of to of is future is working outages. and As and distribution residents increase to events, the deal extended around we regulators, are California solutions quicken necessary of have gas markets the assist pace, incredible urgency growth. bandwidth power outage are working future an in and infrastructure region this for the as they their improving typical for developing, look sense major critical providing and to to case together for people inspectors the most the team of with and

original date, shut-offs of impact on the current which in base, the $XX of experienced the sales is of scale of we more these relatively million the Based small than events estimate roughly double to projection. power could year add our off

the in total a if in power for market annually safety we believe and ahead. continue distribution million backup could concern as be we public the develop the to As years shut-offs remain the as $XXX state high in for potentially awareness region and Californians,

nascent, we acquisitions performance the in this will power part energy monitoring, a stability growing to in believe that entered opportunity the Technologies. Neurio potentially solar, landscape the rising undergo will Pika of On-site fast Energy helpful of as in and as prevalent also for result market dollar of will batteries. issues, multi-billion manage, annually. developing and Our geothermal continuing gas monitor environmental this into from energy management cost market efforts a and in natural this with store utility will improvements generators this become We Recall decade be need energy power, changes the the significant and our more renewable and storage. rates, and but generation developing country grid the ahead market wind, earlier year, concerns and

The an alongside us Pika's combination Neurio's technologies exciting software key for position and monitoring will Generac's software allow participant. intelligent bring this solution and energy and to management hardware and market battery electronics proprietary efficient power management should of to solidify as a and new saving inverter energy

the backup market market decades. extended Although very home power storage did serve we past energy emergency develop different today, similarly two will believe as from standby the we the space over the

have critical CE for role proprietary distribution, for lead with content a markets. flagship well standby City. an overall as Solar Power in marketing develop equally they omni-channel for consumer-based system sales the project generators at storage a grow our Salt a PowerPlay we tool market and be software creating tool announced by management as PowerPlay creation product CE, first efforts branded in the lead installers storage Show to Lake as the complete new company Generac Our management, targeted installers We is launched energy capabilities system called our and fully proposal work industry's of International in September, intend elements tools we design and solar home recently used to important array Canadian believe proprietary as minority the industry. focused on management. and Solargraf in-home PowerPlay developing played to sale The solar management the Sofdesk, for energy investment and all-in-one tools company's sales storage these sales and to acceleration well intelligent plus create as dealers. we We software In solar integrate PWRcell permitting will and

into anticipated. we been we materialize Our could this believe clean incredibly well entry originally market much received to energy date, has our had efforts quickly than more and

year, aggressively intent result, as chain to hours as our expand capacity year well early to storage projection working this initial we ship excess second the are of more than supply of our XXX for a doubling business. As in next megawatt with

to again secular by their to business themes, power critical with to our for impending and a our faster telecom of the need of out grew networks industrial driven the speeds addition develop. supply deployment bandwidth XG The impactful and built commercial further hardened the quarter increased as strong to higher for in wireless Shipments prepare the mission crucial existing future. customers a continue side of our also during of enable quarter, as In will generators were even a generator sites of quarter, carriers wireless number third as continuous efforts which they another expand to technology. more will technologies again and become number of in important the business residential

Combined backup backup in Americas, a X as we of power, the in is the globally Generac supplier key Tier single become of in power Latin Pramac market leading a with systems America. years the our the in in leader power U.S. to ahead. believe largest similar telecom telecom the every to backup we position the Europe, carrier extended can we another and have in efforts at built for investment begins is cycle vertical this also key provider

applications. a We diesel that growth cleaner years alternative. as an used of that have low environmental and systems driven powered emergency has natural the natural with its the market We many power power the have traditionally concerns, additional these of refueling also worked diesel combined gas prices around when supply, XX benefits and power believe alternative environmental as are benefits, higher of sets been abundant promote better have twice in logistical driven for diesel backup has gas generation with inherent emergency used that gas Increased for backup of hard developed generators last fuel systems natural the in over generate to to advantages the gas emissions when superior years. diesel opportunity generators regulation and generators for an for the which drawback rates characteristics over price, and

used demand. local end be used power natural We applications to using emergency by natural response genset low. programs, and as of could but power such also years, recent not export balance power asset. as become are or developing a demand A a beyond user, The generator remain for new the better traditional utilities support rates is and gas prices certain opportunity of for deployed for to generation grid a concept, or in and gas engine-driven the power gas the generators which local have utility purpose consumption reciprocating utility as managed a third-party be to the in standby help more for attractive with economics a decentralized limited aggregator gas natural supply backup in see grid rise used fashion this the of onsite for production

new generator are adding applications we globally. to we and and of these effectively tailoring expanding focused management and In projects and product response, sales, our are offering resources gas on participate these engineering types develop for in project

domestic mobile Although, we solid products products, lower of C&I mainly capital due again were the reduction by during customers. continue see national shipments to quarter for for demand certain spending rental continuing account to third stationary the

Partially of will for increased projects from translate lower on ahead. is shipments were businesses. these demand in offsetting independent in years remains in longer-term In theme for into the the our need the an the purchases intact. customers the view, rental and mobile specialty equipment for And that U.S. we increased this quarter infrastructure products important greater levels spending believe

increased as operating Internationally, regions conflicts as a International margins result unfavorable lower EBITDA other year-over-year expenses, the segment and softened pressures were higher of margins and mix, year-over-year trade risks, Adjusted our business quarter the flat impacted a market, in uncertainties. demand slowing product as roughly was for due economic to for negatively in has geopolitical competitive the certain segment.

world. be that in home as term, standby we believe we for generators challenging important experiencing global for International environment our and to traction will Although our presence in around industrial new the markets and continues applications interest use gain gas longer many business, a are commercial

provide In we will an avenue clean energy as growth basis. the addition, we believe for our important international a enter global space on footprint

path to this of double-digit segment. we committed for low profitability and long-term our Overall, have improved margins to targets EBITDA a we remain

third over quarter provide to I'd our York? like details to turn the results. York further call now to on

York Ragen

Aaron. Thanks,

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

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

still currency, Excluding X%. the negative impact and foreign contribution million Neurio quarter was core $X the from during and Captiva, of the growth from rate almost acquisitions, $X.X million Pika the approximately

third at consolidated Neurio the X.X% from to Looking growth prior-year in increased our million core when and as unfavorable residential sales product class, currency. the excluding with sales the and to the product by slightly million quarter during foreign Pika net being X% M&A compared $XXX.X $XXX contributions impact from approximately quarter,

standby for sales close mentioned, as of generators category. in California. generator our increase rates we home we home to ramped-up continue high, and and drive the products rise efforts focus Aaron product to distribution significant particular in growth outages As year-over-year with the have With all-time standby experienced power on interest at an these penetration awareness,

year. impact the landfall significant impact into of period this generator shipments of region. Dorian addition, prior that were made the in the generators aided brief early Hurricane which U.S. Hurricane which by also to in impacted of of shipments In portable the Recall Florence, resulted prior-year September included a similar portable year

contribution the commercial the M&A quarter, our to being X% the as million to $XXX.X to invested networks. at industrial million increased excluding they and for we in unfavorable reliability with $XXX.X the the prior-year cell currency. backup compared products, Looking from growth XXXX as net continue their in core the quarter and from when impact X.X% improve of of power approximately sales third telecom strong our foreign for from growth Captiva to Domestically, towers customers see

during to year our drive as national mobile across C&I account gains quarter. growth, strong, we products customers our to product domestic Partially our CapEx year-over-year of portfolio. share very offsetting In as spending this distributors addition, continue the to remain also shipments continue shipments declined current industrial rental defer

products C&I core prior our with basis. were Internationally, approximately year flat on a

executed products number penetration initiatives of of to our on We the a sales globe. drive across have

growth geopolitical initiatives were in year largely the resulting these in softness headwinds certain during various current by around However, quarter. world strategic regions offset economic the

$XX.X category, Products up of Other year. parts extended million our of service to to the for in of third and levels XX.X% and the drove XXXX. million sales larger base this warranty $XX.X prior sales Net warranty extended primarily products of A compared increase made higher revenue increased quarter installed as versus

Gross profit was compared year in XX.X% margin XX.X% third the quarter. prior to

currency sales tariffs We have pricing mix commodity successfully offset with margins we higher input gross as actions, lower our grown and regulatory more realized than favorable and costs.

XX.X% as to Operating expenses quarter XXXX. increased the $XX.X third million or compared of

we opportunities of percentage amortization expenses sales, future intangible to XXX operating versus As the focus the increased growth approximately net points a excluding company. basis prior continue for year on as

Specifically, invest we gas employee to opportunities additional lead resources continue around globally. connectivity and to growth strategic in drive

content, an home promotions awareness added California generator are in the We and focus of marketing with standby investing in market. drive to product category the campaigns

important management to these of drivers Neurio expenses operating us from recent and and be storage Additionally, a acquisitions the energy given Pika growth. will of We energy R&D incremental the capabilities the have believe way. investments markets the enter meaningful in future

release, as of in deducting $XXX the interests, last year. period defined the XX% to year. third and compared XXXX the the in The before This corresponding driven non-controlling discussed. prior earnings expense previously million EBITDA in our $XXX.X margin as by quarter same adjusted was in was decline million for as Adjusted the compared was increased XX.X% to EBITDA investment operating primarily margin quarter, in

$XXX was XX million. months, Over adjusted EBITDA the last

acquisitions. sales from will which I million our $X.X X.X% the compared results $XXX.X contribution now financial $XXX.X as recent quarter, Domestic briefly prior-year million two million includes increased segments. for segment reporting discuss of in to to

generator strong previously generators. reflects tough standby C&I conditions and Portable despite end this approximately comparison. year-over-year a shipments were home As prior-year flat stationary market discussed, our increase for

in offset Adjusted sales mobile by was partially or XX.X% million products. compared year sales. growth EBITDA quarter was C&I during the segment shipments net for of lower net million segment Domestic of prior to $XXX.X as the The or of the XX.X% $XXX.X

were quarter. approximately and segment the to year acquisition. International India compared foreign Core unfavorable the exclude as prior X.X% sales you impact sales of decreased the $XXX.X prior-year in million the of million Captiva impact $XXX flat when currency versus to

softness headwinds, offset caused certain fully geopolitical share regions As economic which market were the of world. previously mentioned, by gains in

before the $X.X was the to of in EBITDA net sales quarter, segment as or percent incremental net year. Unfavorable compared contributed non-controlling investment X.X% X.X% $X.X Adjusted for to and of deducting the sales prior decline. margin for operating during mix sales or interests, million million expense this

income million XX.X%. incremental basis, in both to tax Now, XXXX quarter attributable to million The rate of rate year switching GAAP rate rate $XX.X from lower back QX the performance offset This the U.S. lower million quarter obligations. third prior GAAP OpEx consistent for earnings our mostly overall for compares tax year tax to discussed. related investment third effective taxes effective financial help tax tax XXXX. to $XX.X tax certain by an sales net to the GAAP to reform relatively $XX.X as on a years planning additional taxes $XX.X of in of and current included was in versus consolidated Company the top as deductions million XXXX the the was effective statutory tax of of XX.X%. the income result growth tax our during were our an line quarter The for discrete of a quarter also income compared federal reflected previously

of $X.XX $X.XX specific earnings net million $X.X acquisition, third a adjustment in resulting the for Diluted $X.XX current earnings the release. on reconciliation redeemable share. GAAP share to of of of a the a per increase these for calculation quarter share of GAAP in earnings prior schedules in our earnings compared the amounts per interest Pramac year calculations value reduction in in the quarter non-controlling a year. per XXXX Company impact The are included basis the income share for was The the to the per includes $X.XX

similar per reduction earnings resulting million in calculation in $X.XX quarter prior-year share GAAP of The $X.XX includes a $X.X per share. of adjustment earnings

income Company, million $X.XX year as net current quarter in share for prior the the per or versus or $XX.X share. $XX release, our in in was Adjusted defined per year a million earnings $X.XX the

full-year With to tax impact quarter. cash included expense quarter an cash the XX% income the tax to cash of prior-year quarter reflects full-year of for This of due of the expected as XXXX. tax cash XXXX in on was level rate XX% a rate year prior-year third million the in taxes, in the is XXXX, the compared XXXX. earnings while current regards based expected income of of $XX.X tax The rate million an $XX.X third increase income a cash pre-tax fiscal expected versus to XXXX fiscal for higher

pre-tax dollar earnings over million at our that Recall taxed beyond tax shield XX%. the $XX every is GAAP of now expected of approximately rate tax and

million from quarter, the flow year. was as $XXX.X operations compared in and million in million earnings year $XX.X Cash flow free $XX same to as the defined quarter in as to million prior cash $XXX.X our was last third compared release

discussed significant a normal to portion working capital seasonality. monetize in of half our primary in As last of XXXX we with we expected quarter, second line the

year primary year. million capital end, versus prior higher cash in the current source working of $XX third that To flow a quarter was

of loan in did $X contribution our and of In interest addition, million included current the additional not interest year repeat as $X term timing which the we both million of the changed prior year. payments, pension a

January liabilities on XXXX, GAAP the requires sheet. new operating lease that adopted on assets Taking recognize X, at we we and our balance lease to our new standard. balance a leases related This accounting right-of-use look standard sheet,

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

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

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

Both the and year we available $XXX facilities of on mature there hand approximately and facility. million was at Additionally, loan our $XXX the cash ABL third quarter, XXXX. revolving end million in had the of our credit term ABL on

comments turn like now over on I'd back updated to With that, XXXX. to call the provide for our outlook to Aaron

Aaron Jagdfeld

York. Thanks,

discussed strong businesses products our activity. gains residential for than elevated of expected, Conversely, power C&I recent we months, products end mobile recent with As and better products. have residential our have International market the a outage partially our softened conditions remains and in we're offsetting as seeing result

based growth for our revenue strength XXXX. residential raising the However, for we're products, on of guidance full-year

the previous growth. now overall year, These be which of approximately X% X% expect previous net now X% of activity remainder a growth to year. versus which prior X% core sales to improve for rates outage sales we of to As the X% basis, to net approximately XXXX the X%. to baseline guidance growth full-year the On expected X%, is assume guidance compares normal compares to to power

As mix Net for interests of to versus compared more our corresponding XXXX. XX.X% full-year leverage compared the for be the we guidance. XX% income previous guidance, to result deducting margin expected XX.X% as also margins improved a be a guidance non-controlling to raising are expectations are are previous XX%. operating previous and approximately sales favorable for now now year, margins adjusted The of the expected EBITDA to approximately before

and as the to adjusted be earnings working we free are remaining work quarter. Operating full-year flow cash anticipated to expected flow calls change. fourth XXXX provided approximately items monetize the in The with expected our conversion to to in remain is XX%, capital net to previous of cash the income guidance for generation strong further free not

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

Operator

Northcoast Thank [Operator you, questions. from time, of first line Tom Hayes Instructions] like we to of Our would this sir. At question Research. the comes take any

Your line is open.

Tom Hayes

morning, Good guys.

York Ragen

Good morning, Tom.

Tom Hayes

now? out was backlog there, able and of out right you network that the growth you the any with are facing demand to I as the wondering, maybe of are consultations up keep for activity kind build just in-home currently kind your guys California in with you in

Aaron Jagdfeld

So it's a great question, Tom.

now the but XXX% our base are -- prior fairly So the obviously year. year, from XXX%, California. out off charts last up numbers small things of over are incredibly IHC off its IHC in of kind busy

for is major demand So that's tremendous we we event, indicator quarter to that us rates and one look of see, not quarters. in think other a a close you and going that next the our kind cases to a -- we we're seeing some -- look to leading at several events even be strong This tail be the going well really is at that and and to over we translates multi-year that in this multi-quarter. would event, long a generally opposed tail -- see as to similar is

So that's kind of how up. things are shaping

able and answer we're no, actually the of distribution, is short whether now California, about which our added dealer we on in the started are answer with leads just state, a of To XXX, in we're time. channel our simply now, growing actual of period because them we counts, a question we're on-boarding takes up, inundated sharing But dealers California traditional things the are doing State at unique channel of very to dealers other those it we're about at pretty the partners XXX in year right in outside number dealer the adding fair developing around dealers time. keep those yet, some so we've

products. we to to about these wait we're leads so have things people other talk we that doing so take leads those don't and had to those somebody obviously And want with to to

get you're that doesn't couple We it a weeks. on is in down in, a of hope zip-code, it in, cases, depending a some which could region longer of be than to which zip-code there backlog you're level actually So that. backlog the it's

focused We around very as that's maintain know on need of incredibly quality the that quickly stay IHCs we well, IHCs and also the to turning important.

rate our deals. that those closing So success with goes in hand-in-hand

parts unlike when it's outages, what things of there. are So -- it's but see right particularly California we get we now, but U.S. is challenge underdeveloped we're in relatively a because the acute other not particularly

Tom Hayes

appreciate I California. more color. could Maybe one related ask just the if I to

how because think residential in looking well? the in you're opportunity you're stores, the application the that and on you year you everything, called if light $XX at $XXX primarily million that kind Is commercial almost contribution to this about saying expect I maybe near you're know I commercial about news as that [indiscernible] also of and growing maybe applications out focusing talk future. million out, in grocery

Aaron Jagdfeld

-- are opportunities million would It does the not backup spoken Tom, the of representative commercial that be to. residential both we've We and include clean power. $XXX energy

that story well. So -- I is think a as that's that largely be will important California

is a the to a really for state market we few In us. next it's years, California be anticipate us. in totality, important So, for going

a we mixed C&I is we as But million interesting be back of million well, chunk going very obviously still from positive. power C&I penetration a to rates the larger going think in for to will the just, feel backup be that good on side the perspective low, the your and -- $XXX to both question, for anticipate side we obviously the margin is be opportunity I that $XXX but going relatively But state. come -- is through residential residential the are which to channel, residential us,

the side. C&I On

and based the my may seeing think kind past. is premonition actually year I see this on of experience we or next this our in

California I a in evaluating in deeper way. networks going much the companies are telecom to their be think

provide California going that just know again they're think rates of are a much penetration on how they for XX%. have. scrutiny I lot less We to than power telecom even backup in gensets

do So the sites more two-thirds, that in California have these backup not -- range wireless two-thirds long than of sites means power. that all

have it to well if so -- terms going people it's critical is as up. this years be backed that's of said it's the a kind problem. to situation in going those of shut-off are to And going the extend absolutely be And networks wireless

communication cut the to position of be fires the an untenable completely be out power then and just combination You can the of having is imagine, from in. standpoint these really threat to off a

And be that think the guidance And clarity are ahead. with some there so provider to companies could potential -- that going focus premonition out that could the in markets, telecommunication one vertical our to quarter California. the that. the those decent at next very State going communication year. being XXXX and would an of here be we'll heavily bring companies But that number on least We're around the within together that potential us more I upside to some decent for put is my for

Tom Hayes

the appreciate queue. I color. Thanks, I'll in get back the

Aaron Jagdfeld

Thanks.

Operator

Thank you.

Next America. of Bank question comes the Gilardi of Ross line from of

is open. line Your

Ross Gilardi

Hey, good guys. morning

Aaron Jagdfeld

Ross. Hey,

Ross Gilardi

just you're just I of material this make your California. guidance because outages, outages but fairly had no with understood base I scenario material you've sticking four wanted to case in Yes. sure

So I them if you you are know major. as -- would characterize don't all

happened including in you are the two no? outlook what's from or benefit the So revenue the in last weeks

Aaron Jagdfeld

way a comp, a had think to the to but generators. to thought coast, and it going We QX ship was thought on the in side, -- is couple we tough of have pieces Dorian, and of lot stirred were So product seaboard, -- really direct I portable of there's this, with we kind everybody port residential were storm flat QX had a going Florida up of a -- take hit. Eastern think that in about that moving we One we to a quarter able Ross, was actually a here's solid the visibility and here. coming lot really the -- [indiscernible] gens were that of

into the of put we product in lot Florida kind and a Carolinas. State the So of of

That poor. never sell-through was the materialized, so

got that in lower in probably fourth to And an so We but field worked think that in inventory quarter, we've to is, it's we've situation generator through. got portable the of will manifest shipments -- happen what inventory going QX. be kind has

got on think ahead there industrial QX the was international some pull in port QX, businesses, gens. of kind our you've businesses. and Then our So of

and And slowed That's spending. say of momentary accounts that it it CapEx it's our many as than they in out the of you've disappointing a pause business probably cutting cycles, a originally nonetheless. down. continues And on heard back rental us, component industrial is it's the national large expectations a just see slow actually, for but the in deeper we come pause projected. Specifically been pause are it's down. mobile We beyond had kind to buying their

there component. that So is

issue just I about and some we every can going you then Brexit, see on. country kind like of in the right now are at is Latin And in some things just of continue America Latin internationally, America, things geopolitical on going look there mean that to

trade You've the creating uncertainty world. also war and of stuff got the impacting tariff type around

our have so that. been businesses feeling And international

gens side California. you the port flip there some have On one is out in gens port But California that have go the to that, they of with CARB-certified. standby. be now limitations home of to that will And is

So been backup that can we for what on ship market historically power. of bit the cap a a state. puts California hasn't big into a

production forecast, were beginning kind the lighter the for CARB-certified of year of and make at gen our we portable pre-buys gens. those our So this portable our for year when

we into we've with we're and products generators in get approved a EPA with a waiver if certified communication people -- those a of get So because California waiver can and actually whether non-CARB supply are that to California on additional lot portable in a could CARB we help we lot or not temporary a got could of waiver.

some be happens, If that that haven't potential we're back yet heard there negotiating We could that. to upside that. on

standby, home it's then I going to take that just time to develop. on said, And as

think I if of in sized We're in had probably to $XX doubling shut-offs upside happen prize going originally the quarter. of Most the million that happened. fourth California $XX that's we million. to

we're and this think upsides industrial. we've and offsetting There including I guidance. there sized it are are and pieces our appropriately with potential some there some in So international

the guide. of think way kind about that's think the to I

Ross Gilardi

Okay.

end went previous but high the of like it? end portable. way the situation the to had and by and think that sounds if fair a business, two business, it the field you scenarios products about upper like Is last assumption, mobile standby the the sounds international So it's to inventory the not home standby offset quarter, home business above

Aaron Jagdfeld

Ross. that's it exactly Yes,

Ross Gilardi

double comment your annually to products Okay. points outlook, X-year XXX storage next But of coming in Pika solar basis that years. you're X of XXX your know Neurio that you for are add Or basis next initial the year at I basis projections. was year? little bit growth In saying you points you to back-end your next could etc? loaded. assume going products on least on actually actually and that based I from get that XXX mean can would And you comment, do suggested points add then had growth a these we

Aaron Jagdfeld

been, means XXX XXX-basis that saying double -- of could market. will happen get the entry quicker. shows, And in that think we XXX-basis of an but to that perfect into quicker not improvement, but Salt record, what -- Lake have wouldn't trade to which to I I we that show get XXX we're mean-I honestly the kind amazing on never and of basis No, I'm long-term target went to points I basis is point I'll was I the year. don't to I just it our more points, SPI reception next a point City and here fan this be

going receptivity concerns. most new here it a caught problem. I we your our one after this My supply concerns, I of demand say times pleased want going -- I always constraints. to us here. with That when it side by think is but I think were you to chain And much -- to market, enter surprise, entrance the of chief be kind not generally concern a demand is think caught your chief don't

to be to going installations. to distribution electronic components, battery, going around of our to around course to to be We're going have on-board produce. ability do It's it's power to be around going it's

we year happen, we We of as model what we -- through have probably lot year thought somehow the there's three in and a for get for basically be acquisitions we work together those what us year but could we're honest, the two, year than basically can and targets about the this put essentially -- we're to more I'm more -- to we if on one, out, think even if come page maybe that, doubling doubling further do we on together, to acquisition do put capacity we we a could upside. for taking could when make if two, had

is we're to comments our think be sized -- just at a today, kind more supply that I what side the innings represent will wildcard but capacity it a here. fairly than it think demand side we're we constraint, constraint with limiting early thing least the of right? because going a in be here, I this is

Operator

comes Revich of line of question Sachs. Jerry very from Next the Goldman

open. is line Your

Jerry Revich

morning Hi, everyone. good

Aaron Jagdfeld

Hey, Jerry.

York Ragen

Jerry. morning, Good

Jerry Revich

in the like you outage tracking I well your of if halos. how seen you've prior Is California dynamic seeing about power you a talk during that that XXX in-home triangulated California out? events quarter, count outside outside the looks where numbers you right. Are nationwide your a by playing get if major could that consultations as been wondering and I'm dealer grew have of it

Aaron Jagdfeld

I to -- keep the It is, halo other us California amazing. this I at unique is outages comes very that, that looking resiliency it would in like the that I year. What just thinking a in -- of Jerry, penetration two-degree, materialize little Certainly, bubble happen category, mean the overall this I -- standby the it's more from a this think -- is. terms to or is California regions. think don't this outages, in is terms I -- period I whether strong this going bit a did outages just about is national national California maybe California terms just it's of than it little materialize people explain when in other in it little perspective but interest. a got home I but of it for of bit why a that. a I happens drove again. things than know opportunity, situation can't is They in think what's time, say upside you of have It that say here potential a for in have category category because of Dorian were strong, in the interest IHCs lot been obviously didn't it's tell home standby is I on it's more we of coverage.

of a just but much I of And it's there this of is I halo terms say -- standby would little year. mean left so that time great is in So in maybe a amazingly every IHCs is that a have strong business, and at effect, tempering business look there runway home the overall, I just now be out where for that other at capacity, we're production, to out, been bit business in at point us of -- can product our we're it's totality. kind to sites big we around expand line chains, building thinking really looking it's become with product, it this how we of build I can alternate in terms big that supply think need important point that so the that that

become, kind infrastructure think of connected. the has central something your is home going standby as I especially it's homes part become to, is I generator of category more homes going think that the become like HVAC to

out connectivity is that's our as interesting things a standby in the observation particular rate of home buy higher One seeing California really Link. people a Mobile with we're much in generators,

system, we're just like average homes but sign go the ahead connectivities system, -- our just is to going I and of and it's of number tells this of think percentage that, of seeing curve IoT is home a on connected we're which are terms things a and standby. bullish of the So monitoring where WiFi-enabled kind on our things we're over Xx California of really Xx national connected monitoring in always just kind to of generators me

Jerry Revich

just probably portables were I'm constraint with time you your there context that playing now? those into folks that was effect just first comment, put supply that down, trying please? carryover quarter. items standby, inventories a you but the in seasonally about into The Is weak home material coming last comments on out two can was comment a to

Aaron Jagdfeld

production now, our They so levels can right Jerry, home higher. are high. go relatively standby

it generator can In of making. it home fourth just Couple just very closely Again words quickly do the in how for throughout it's quarter. the them we're home watching in those first how project into just that. going reasons project. One, time. we've -- how of we're is provisions does here some take fact, underestimate home put to -- kind a higher take to them the long quarter, takes going project, under standby made higher develop. a demand and obviously, to months keep a standby -- can't improvement I It's here

any with subcontractors landscaping You other you should. think takes have is getting always a from there's proposal, you you And you and it a you home a through arrangements process a for project involved, generally -- standpoint start go process, gas find involved. dealer, have it improvement electric there longer make process. of to and out, permitting to It's than like the

time. over develop will that So

of you about something install the when things is in unique like we or is can it the Northeast generators Midwest. This California, you see down one that in around hurricanes this in things get south so California. and the do year can't And we

slowdowns the the QX in element new because through seasonal So the Northeast We standbys installation robust typically in Midwest. is fairly and slowdown home remain California quarter. the think, first should here, get of of in the a we installation because

time, same about because past realities call develop. of guidance, type of And on dynamic that high happen. we for not potentially the this making because think have So quarter if talking of it how we've a positive of things QX levels impact. home capacity could No, quickly, to are really on standby does this install terms cool us that production think might flow but represent that new and should can I decent and or QX develop maintain we a want a we're not seen at We're more that. a levels the that's the decent in in those of

Jerry Revich

just Okay. C&I please? expand you're outlook you Can moving it in of those sound your significant business the on like does pieces, within in embedding by line a And given quarter. production production then cut C&I fourth

Aaron Jagdfeld

actually Yes, been what's side there interesting stationary into. on so on backlog is, than in get the deeper a the we've normally C&I -- we

high, Our the hit pocket, of year around back we installs. the has lead in in kind telecom we hit of demand is terms telecom been times what have been extended, air year a particularly half of and

slowed T-Mobile you've with optimization You've some got networks CapEx then Tier carriers, our and the year. with X capital wireless a the spending out some things the both And that some the in couple of in there half some got acquisition the unique been marketplace on of the AT&T and down going have on around of here doing in news that things Sprint there recently. back things

the but momentary that's that just of quite -- at a if some were the QX. busy of of continues factories is the remain to year, year say to products little production busy that different will year. C&I going I And kind where would see very for that half mobile say, mobile slowdown, think purchasing so. a of I would probably bit down. of as we're those slow we busy products somewhat is absorbing factories were are our those we produce especially areas, it in in down, a be tower exit bit. pause, lighting going a which business and products mobile in tower T-Mobile of we'll slows now they're early and of the as probably They lighting generally the into is is QX season, is back just Again, to just bit slowing the half first but kind incredibly it our frankly earlier all we're slowing and that see We our and way somewhat so kind seasonal factories slow see that

Jerry Revich

you. thank Okay,

Operator

you. Thank

Next line Glynn question the Oppenheimer. comes of from Christopher of

line is open. Your

Christopher Glynn

a the Thank on you. I of questions Hey, acquisition. had couple Good morning.

how installed trends on the Neurio more curious that over home that emphasis to the versus around the combined the Pika solution to the view management on the process, the systems. is customer energy ESS in solution affordable and where relative And So cost with time? secondly,

Aaron Jagdfeld

was you're Chris Pika just or of question the it's clear to curious and -- how on your that going or question Neurio, part I'm so as combination to Yes, so your progressing of your -- first how that's

Christopher Glynn

solution. of or stand-alone couple first rate on BEMS BEM years on more pronounced run the the combined Pika HEMS where's the Just more

Aaron Jagdfeld

Got it.

end-to-end at received to by have storage on in question. since this. the I was single of my So storage idea give This to energy and and the can are is I going happen CEO, that do supplier. what's And first And views well of package I'll you, internally the one SPI. a think it's being market you an I'll some I'm give energy solution that, going view. even intelligent monitoring but really a here the different there combined single solution really kind good on management,

intelligence all provide here pieces way today the generally the at of thing, any other have together on Generac, going is most they of through. packages other market cobbled solution the bit This from to the if suppliers. the to they're end-to-end We're them,

of a the come combination, brand Technologies, Pika supported the and actually received and Neurio of Generac under Technologies the it's be the the will Generac will and of some Now Technologies show. admittedly was well one together, at together it it of brand.That really come but

Now generator here I for time future power our HEMS-only a actually start personally pretty which Today, frame, a it switch option, can backup that shipping the for think December will starting Neurio but going the quarter, can HEMS-only you you transfer home a fourth it solution, have buy be quarter, technology, our the solution with stand-alone includes so as home the cool. the to transfer in which standby, separate device, in switches technology. bundled we're fourth is in with standby install embedded could roughly which

We're had could a that intelligent solution, receptivity what that the solution. potentially standard think an of us that in the that's product kind a line the actually XX% that I be get being already, line, got we've no looking I HEMS-only differentiator there -- -- to I'm just combined that but but have feature do right potential that's really lot cost as down at share, to to have the that like differentiation denying as. structure we why which storage a differentiator forward. we additional do that, we of think going we But is for referring that market incredible is to potential

very and component our on on with about your time incredibly an be rate, can home focused very helpful. that a area generators this known speed think rate. then of install long the standby adoption, that this important adoption an for I experience penetration we're question where is And is costs, We've of the affordability

home so affordability half other installation. home and cost when the course, standby, look you itself of of And the is and of half massive of the the generator standby a is part at actual

others are that more the effective the it what in can single which is approach is than use Pika of installer, was Pika really are Now over quite of single and install a modules modular. still and solution, They the installation person with about not acquisition, What is why terms storage doing. cost do actual reasons do Pika that -- we battery others a this chose component. we they degree the is installation, a to it's the solution, but solution a one of can meaningful because an liked much

no there weighs component Pika So single is pounds. XX that in solution than more the

So a which that you individual lowers single affect with cost. dramatically can actually installation

you walls up or or look special the you on marketplace, of three even other If to to at two lift and solutions them mount some things areas. need other the on gear these lift people these or things

XXXX So massive improve that us think for of homes the there part being going we but focus are said, the part product itself was draw from interconnections great the the obviously of that's structure a inverters, with system in It's the even area. that that Pika, that the we the do other forward, we can to cost that of the things us a before, think can of the to -- a we electrical a going -- electronics batteries roadmap subcomponentry, a we've cost. against we to there major as we the further out installation is will to on upside That be bigger a executing front we're probably there's throughout solution. other of -- components in said have and and power take all focus roadmap and cost

Christopher Glynn

color. the for Thanks

Aaron Jagdfeld

You bet.

Operator

you. Thank

Next William Blair. from of question Aiken line the comes of Joe

line open. is Your

Joe Aiken

Hi. guys. Good I'm on today. for Brian morning Drab

York Ragen

Joe. morning Good

Joe Aiken

longer second. at in back California to since Analyst potential the your on wanted terms just a all circle Day? changed there, for I term Has the revenue work of has that

Aaron Jagdfeld

we talked we So memory be they've by Day me correct. what I home point at home large think the frequency I we I in maybe would scale here. say perhaps don't in as said time saw laid potential shut-offs -- I numerous in turned being XXXX, the together, to as out in would Analyst when that we kind say at put think out -- that is million or standby that as we talked to $XXX if serves of we only was standby to,

York Ragen

yet. started hadn't They

Aaron Jagdfeld

enthusiasm than PG&E even days we would it They red and yet, have PG&E to historical I when think after I are as that came we frame trigger so started weren't but just -- for the that how mean, in at years. flag a of CEO that tempering a there be what. think would the maybe do on? XX I as so hadn't still knew the decade our mean think We this other and go little flag reference red this bit days don't long California. will sure started and we and of darkness also looked may be about out of heard we that we -- that, differently. A this much said be kind really people I could of really likely

opportunity in it's we're And mentioned right the when call on the and a business, I internally now as out, really towers, about, can the what tell side is -- right, generators the burning across you, residential opportunity C&I it's of go we've for telecom. lights lot a just it's interesting, mobile the it's been we've dark. we lighting this There which talking with business is calories of and mobile not

opportunity. There's opportunity. So there's pump lighting water tower

We fail. power. utilities don't have water -- fail utilities Sometimes

manufacture We've to successful. to in is there our business oddly our enough, equipment. that number has of one So some is product is brush California cutting lot business, brush There opportunities. cleared business, mobile -- of chores got needs lines a be be one they chores their our

have side battery that's side we're So forestry were stump the this probably did our and to management I interesting. or on seeing math kind you and the for the kind tell storage in happen. I energy some could monitoring acquisitions of then to that earlier cutting business, We our we at not this was in this that know clean an our actually that. of and model. this -- in uptick wish grinding brush And of going did we think the which again, equipment, you've year And equipment the we looked management markets got the market smart our that and is of manufacture we really I equipment, energy in when

to regarding Day. a lot we California forward think So importance than going optimism we of business more yes, Investor the the about were your the I answer talking have probably what question during to directly,

Joe Aiken

bit of provide any really you modeling a gears And That's Okay. in switching are just able quick EBITDA guidance then color. question, versus XXXX a helpful directionally for just Thanks. in to more gross little XXXX? margin, of terms expectations

York Ragen

guess your I that's question. any XXXX we're not XXXX, guidance if giving

Aaron Jagdfeld

for unique going were company, we out that, we're where be, of -- an and AOP would Joe, or different process maybe the kind our and our we're what's mean, cycle middle the in here pretty that a to normal we'll the on I finish No, and got is we've or and year different in something. through grinding thanks obviously obviously year-end process we're of case, any always like for working and business, that, this that

season with the of could season have of next seasonal season this know But demand, fall be what we in for wildfire which or seasonal you're right? in terms a don't have we winter terms always do hurricane out year. you have a of and terms always in is early in it us in the played new dimension in to California. blackouts it's you kind or the this So do to of season, case, out calibrate -- think Nor'easters add you're a get business, strong Those trying so has if going what hurricane going you if -- to

beast. know just, an but efficient, it's seasons becomes as of the is AOP, middle not the the don't I very up York. is incredibly it's And iterative we our many end our we're -- right which in AOP, nature of times develop, those how It process it redoing always

guidance to we're we'll just regarding how recalibrating comments my give that of and so ago based do we'll thinking in we we'll call, do there here put that And and more the in particular, it's our QX, again something then a middle together about detail. all on the second XXXX for California, we're call we're you that but in that QX in

Operator

you. Thank

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

open. is line Your

Jeff Hammond

guys. Hey, good morning

Aaron Jagdfeld

Hey, Jeff.

York Ragen

Hey, Jeff.

Jeff Hammond

mean, lower home I than like wasn't margin on margins. the there mix the the portables, standby of commercial was a on better leverage. and Just yet lot

how understand the think forward? to going Just And impacted margins that how that like want to in about quarter? the investment costs and

York Ragen

Yes, gross see I mix higher. think we did are -- improvement, I mean, if margins drove you're talking, margins, gross which that we

we in were light actually pricing actions we -- increased mitigate the a enhancement done think impact tariffs. around to company I collectively that work environment. tariff that our pleased gross lot saw of of profitability the margins programs the of I with we've and know

of think that, with I that. we successfully higher to gross then able were and higher. mix, drive were So, margins to, And do on able we top the

-- overhead is overhead there. cost price the embedded improved collectively, think absorption I in

Jeff Hammond

-- No not just leverage -- think having I the leverage,

Aaron Jagdfeld

gross we OpEx margin -- talking Are or

Jeff Hammond

Op Op yes No, margins, margins. --

York Ragen

if you're gross OpEx so leverage yes, fixed side, margins, our then -- costs, there right a on margin OpEx just our fixed that's on nice at side, Operating look operating was the you obviously the costs.

Aaron Jagdfeld

you've OpEx clean. pretty From hope right? some to at money-losing connectivity. that so to big quicker run that pretty even are a variable those are Those business start-ups, around investments our standpoint, we now, continuing on We And said big one, We've going around for got we in to those initially we were least big go businesses made right? clean here. but investments forward, some break-even got investments, based optimism get -- on there energy through the made some

is we've our lot a initiatives lot there that's a lead That's of going gas made we because work missionary are there. too, do investments, gas into -- got our -- a big obviously global work those that place to that we that out, -- lead build to initiatives of

those right we this term is So do make business to the long for to that felt the investments. thing for

growth only side I'm that pocket pretty put the in continuing really in but to not the been have big think California. I thing would of and We're our in believer easy invest. market the spending in in heavily to a to do not business, areas. invest R&D the also

do money in dramatically spent a that like lot country probably going of parts spend that materialize market as in if know build of we just we're other it's to the maybe to in efficiency future. California, that's necessarily of the now, what building imagine develop, kind as out we're we'd running that can knowing But take there, infomercials lift. would digital so So an as got the spend running advertising to a of lot indicate how a of investment we won't and you bigger we've terms around of get to awareness

margins way you you expected. didn't those the really might see So are things on why leverage have the EBITDA

on factories, we're we've right run off year big high pretty pretty to being utilization some the and the things happy leverage investments that. that, year. been, think we're exactly do they've we've with long, tariff the York's rates think I I good next I all margin been fighting that had stuff happy pretty able but and We're the as able gross on line. just been making for side, pretty some as we've in as to mean OpEx

level fill got of on of whole that to side in and fill level be growth, as the to step achieve -- next we we the in change go infrastructure to that. For that next company, OpEx function that a to get got to able

Jeff Hammond

helpful. that's Okay,

us to Just level you if from just baseline growth set about know guidance. But energy clean -- how in If level want can you on a you to can think XXXX XXXX. -- give don't I

it mean but just got that. got you you're like feeling I think constraints. how good to sounds model reception, trying Just, I'm to very supply you

York Ragen

of megawatt our the these next well than would Yes, kind I original page more that businesses. that for on year hours a year excess of plan in think XXX storage, prepared was remark of and two of we was is what double deploy

a giving sales mean this talked bit -- the moving I number, little you there in some are stop individual about probably that. an We on so, devices. going of calibrate short I'm HEMS exact And to pieces because that around call

to of refer what are plus that, goes modules got kind XXX on But along solar hand that hours else as in We've that. that the megawatt is the not megawatt go [PV] hours the got the overall solar with you've components really rooftop, really everything the storage. that hand in obviously, we go that's So are which systems storage. XXX links of

would Investor kind Day other point we I overall to to that Jeff, just there's systems So is is at look if kind calibrating But go were out of a themselves. this, say outside you good you storage really back where of our and components there the chance. of the XXXX,

get to some supply are far today. that lot again How further. further can we there there in go going I'm by even comment the year? chain chain, upside supply think can if that's a go that tempering next about be I we're really talking could quicker, So

the a two, not even demand problem is going is lot demand is California or This side to higher. year demand. a drive one year And of there

one-way the the is of who around Investor of Day their level just situation even I from the lot interest maybe a piece, the solar got homes and systems What a rooftops, got out change solar think fed in those you California a have on that in is is that's were basically to where what they're such you've power engineered grid. storage. a people finding the It's a blackout, they're is that thought trip. back were the they structured covered out such,

So down. when down, the system grid is is the

So is backup. no there

And out. so the lights are

for of to to to that in existing solar systems. solar of there systems we those they Only very think market wide existing now to adding have do of. And think people much that's X% very they system. the than in that they out system. after go to storage lot be right go to storage, limitations U.S. And forward. systems in they not. going out be aware so the a their more have to XX% as add an going resiliency X need a I some look to And I need maybe That's were that's us their existing a storage is to do awareness a are as a solar have California, million greater us what target market And terms market add for severe

Operator

you. Thank

of of Chip question comes Moore from Canaccord. line the Next

open. line is Your

Chip Moore

much good [$XX] versus the as to regulations. could consider regulatory Yes, is of standby? go morning. Hey, just automatic Thanks. Can the portables forward, in emissions you that of anything to the on on then the given back million Wondering look guys. you about And talk side standby? some how California, we if

Aaron Jagdfeld

Resource the we so don't We and the state Midwest standard level for to what has it prepared a see have California we take as had we and amount we business because excuse really XX those huge for I from portables, a get in it's call out, product, it's Dorian that Yes, lot CARB SKU many a in would can't of we're because California special have Northeast product and portable normally Board are but winter they're that the me -- of leftover been refer the EPA kind for we Again, standby as in mix so for we of SKU, our think planned has -- but standpoint, -- because as a year season, California. higher market. fair a majority of into is generator compliant, market. a traditionally a product emissions not plan did still we're pipe the tail portable season you product products conundrum year

just cycle So a this our CARB of lot did when units. we didn't plan we planning for year,

but but legally. ship a it for we have in could end of we to Now have and but today chain have the year, product more there are and begging in that we've we we're tried more, add of we the retailers California long bringing there we can't supply toward lot put

if California with a and temporary regulators the So we're to get see working we waiver people. to can help

I is are use this their think over entire thing. limited These incredibly a critical products really lifetime.

of different of emissions, see approach a kind might never tail powered of in to engine So in terms they're going you overall piece what equipment. pipe

regulation regulations. the So these they types we the comply even nature shouldn't to beast of with products, just think the that's do, with of have deal all the but I probably and

-- products. more Going portables CARB-related forward, season. differently of going if next And going a have obviously for we we're to take plan we'll can bet we'll on forward, those bigger

to say if situation probably to develop. same want years certainly toward ahead going going be, more to have evenly balanced, we mix don't I the mix gen the portable it's in So have it's but is more

going by which think So positive home in is that way the very mix. today overall to I -- terms very it's toward heavily standby, margin just be skewed of

Chip Moore

CARB-related that's this standby helpful. Right, And to side of products? in anything consider terms on

Aaron Jagdfeld

compliant standbys home to are All as refer what our XX-state products. we of

the it's everywhere So U.S. same the product in

constraints all. no at on standby home So,

Chip Moore

that megawatts, confidence your one pressures. and any original the of some just the energy key potentially more Perfect. as components you then and price And supply plan of talk clean the XXX just can to chain side those double looking you mentioned you that on constraints, have about

Aaron Jagdfeld

think double it's that to everywhere, So we we be Pika I on mean all the appropriately on be I parties factories doing demand I -- had. here manufacturer. today, for were -- is think a constraints there Chip, third it we We're that.They're batteries, my had my we've the power comments satisfy capacity they're even they're the sized assembling constraints -- plan components for would original looking the sized going next on potential if to the at confidence some could higher. there themselves. are the have year, the not electronic and our inverters, And But is constraints today appropriately systems

by it's to basically of to that bring least can, all at that. existing capacity, bring be next the third doing capacity constraint we'll the that We're second to do so of basically end going but more So the a parties we to that if sources, year, likely they components. in-house going had help it's source along increase -- a or maybe can as we

think some here costs having on are good cost out early we of we're our the taking on success pressures, system. terms in original then And of We trajectory.

I that I So trajectory out. wouldn't has has of the quickened that quickened, tell demand you the cost trajectory -- won't

year. it's have next -- over the we going So of course happen to

and the of margins starting time are on target. margins kind to we the to out the end be grow So of hit year. our had by our be corporate side going kind lower think the kind projected as will of of -- of we next That's overall

next today, than of so be by kind that they year, we kind range. less And in are overall of hope corporate margin to the of And that. end

Chip Moore

Great, thanks lot. a

Aaron Jagdfeld

Thanks.

Operator

Thank you.

Philip of question line Shen Capital. of from ROTH Next the comes

Your open. line is

Philip Shen

the for questions. thanks guys, Hey

might may the solar the that. labor certainly a talked think in play You seeing the installation quite and lot California, I side. in about the Can is solar constraints that you address out? if and on industry others talked tight about have supply how you on any side and be installations, for storage constraints

through you kind a guys over are what lag how leads and you of with are generating address that So or contractors your to potentially time seeing as problem? is your that expect infomercials, these bottleneck you do if

Aaron Jagdfeld

-- question, great constraints. the of side is supply Phil, part that a the Yes, with chain we same -- there into run home frankly. standby But it's is we've and issue been it focused on

So have actually, to our problem at products, anytime in for we're face get constraints. how a similar standby experienced pretty on-board installation we help bandwidth. demand we're we surge we a major It's home

to it that deal we talk So that's the clean around and to I'll way general at things clean in standby to that energy specific with applies energy. we're the particular how couple then little something and with we dealing home way deal maybe a in energy, how a this and of more with clean

-- would what do So we dealers. as we normally on-board on

have contractors. X,XXX, and We today, mostly are dealers X,XXX electrical here nationwide almost those

on dealers install. year them California. Now training with of up We time very we the XXX, but spend XXX, them a training out in of we're started XXX quickly only installs to in ton on California, a we adding and have efficiency we're

bandwidth a that take if be installs ton focused, future. supply installers. mentality can that That said, to near-term of we having insulation impact crew being the that is a do, on in add We're additional of they installs going because for the on has pit to very bandwidth material we to know number without a can installation want them double they short

can space the we're the them categories of home on dealers as good be clean can So on be thing us there standby, at going bring I be across think we're with as bring dealers, we add energy engaging good will as on the constraints they about with this electrical a and very fact contractors to we unique we and across and board engaging wide is energy. clean representing range that to but Generac these what equally

an standby. home today, they we might as team, become they're who say, interesting, yes, in dealer focused have we we join home interested example, out and tell but have can in energy maybe and -- product. in they standby our dealer a today, them the and California very and I'm is up a Northern about that's clean I'm what is everybody on. Cal That's talking here They really So

As happen. shift will I is that clean that demand relaxes time, and from of that standby think energy to away for and mode it a dealer type real, bandwidth over into home will the ability installation

clean third real, have to crews The business unique installed thing this energy because the they use many partner companies, they some the own install have for of is to maybe crews, other the business CE that's going their and us we're solar or is of with or do parties. them that national

that level. soon, help installation in we're I to number that that very several today will and be national will and get think companies we those So there, negotiations announcing a bandwidth we even discussions partnerships an with of us higher believe

it's be we're the best but in that I to think to a longer the to industry position So term. term, longer the great and to be be able term, constraint going constraint to in resolve short that in think may constraint going I I resolve be a in think position

Philip Shen

Great. Aaron, that's great color. Thank you. One quick follow-up.

switching existing clean base contractor -- do Or working solar the so that to actually on clean side of just do a about realistic and able potentially certainly over kind safety it the As you're skill think to it your degree think energy relates training contractors less to to on focus roof -- talking solar, to on get how contractor install, some to roof that to your has is for skill be and storage? do developing would you and to the you on set of comfortable to in -- what those them of the energy able switch do be set a -- have be to and solar? programs over battery other

Aaron Jagdfeld

good question, another It's Phil.

actually with them in duties installation that we these X,XXX that some additional them are are panels as businesses -- distribution, is pulled contractors, our some required percentage of and electrical components are panel kind install of these a existing comfortable and today again of the there have of to them their do so solar business. And so already, right,

kind an you them solar I'll the that, itself. It the high are connecting other the because spec some labor that electronics and that to and is side add the of getting out-labor take right They to some with interested the that creating power making that some necessary of to said, may system are up can have higher percentage. in very hey, those others that on And when call with connecting a and that to choose that happen on for that's in need electrician circuits, There of of the that's the skill many partnerships -- focus interconnects there safety all making talk roofing terms have guys admit needs companies component connecting you about it they of orientation of rooftop. smaller are who that. connections, on creative or believe already sets they are with affect care labor components, rooftops. actual obviously, work those storage what I'll and a inverter, the

obviously existing manifesting up in something being safety through a those for in them it's a be rooftop, the we'll we're lot down, go distribution itself business end how that everybody. and that is requirements going new too, to are period for, have develop this absolutely to dynamic the on it's learning help you're cycles that and to time our which for what solve paramount panels I right very I about we're could think learning and of of requirements a the going of learning short think

react follow are we we we'll us, going things things as or a I really opportunities adapt up good quickly, as expect those it. things, and quickly, of and be see sense those and. new move Phil here. others, challenges to thing I opportunity to quick a urgency things kind All different. after position. see you of very This agility, And that pick no Where to develops, but think both in studies. And us this with with will be we we we're challenges, go we One you'll we're of bit, know a of we

ability to I team's execute. know our

one think things of of the execution. market the had the one hallmarks one is execution that the challenges I watched and we've of of energy develop, I think this is space as clean company

I like terms and of in think I SPI was, that's execute to excited ability bring was received, of part we market And our so hey, well into here's with So market our about pretty what this at to entry what our an I'm that. who there entrant done own I get has our have been done. say to challenges, to it's that it but not able we'll somebody chances and like and has to probably a that track when of execution record comes things being that

Philip Shen

Great, on. thanks again. it I'll pass

Aaron Jagdfeld

Phil. Thanks,

Operator

back no Thank further would over to question. for I Aaron turn closing like are you. now to call Jagdfeld the There remarks.

Aaron Jagdfeld

we point to with Halloween you We joining of for earnings to Thanks our this quarter at mid-February again this XXXX. And everybody and Morning. in goodbye. want fourth discussing morning results look us some forward thank

Operator

Ladies today’s day. and Thank great you concludes may you conference gentlemen, call. for this disconnect, participating, now have

Generac (GNRC) 1 Nov 192019 Q3 Earnings call transcript