Generac Holdlings Inc.

Thank you for standing by, and welcome to Generac Holdings, Inc.' 's third quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again. I would now like to hand the call over to Director Corporate Finance and Investor Relations. Chris Roseman, please go ahead.

Good morning and welcome to our third quarter 2025 earnings call. I'd like to thank everyone for joining us this morning. With me today is Aaron Yagfeld, President and Chief Executive Officer and York Reagan, Chief Financial Officer. We will begin our call today by commenting on forward-looking statements. Certain statements made during this presentation as well as other information provided from time to time by Generac or its employees may contain forward-looking statements and involve risks and uncertainties that could cause actual results to differ materially from those in these forward-looking statements. Please see our earnings release or SEC filings for a list of words or expressions that identify such statements and the associated risk factors. In addition, we will make reference to certain non-GAAP measures during today's call. Additional information regarding these measures, including reconciliation to comparable U.S. GAAP measures, is available in our earnings release and SEC filings. I will now turn the call over to Aaron.

Thanks, Chris. Good morning, everyone, and thank you for joining us today. Home standby and portable generator shipments grew sequentially in the quarter, but were below seasonal expectations as a result of a power outage environment that was significantly below our long-term baseline average and the lowest third quarter of total outage hours that we've experienced since 2015. On a year-over-year basis, overall net sales decreased 5% to $1.11 billion, Residential net sales declined 13% as compared to the prior year quarter, with softness in home standby and portable generators partially offset by strong growth in sales of residential energy technology solutions. Global CNI product sales also increased 9% during the quarter, led by growth in the domestic telecom and industrial distributor channels, as well as international markets, which included the first shipments of our large megawatt generators to data center customers. Our significant momentum in the data center market has continued, with our backlog for these products now doubling to over $300 million over the last 90 days, with even greater opportunities developing in our growing sales pipeline. Now discussing our third quarter results in more detail. Third quarter home standby shipments and activations increased sequentially from the second quarter, but shipments decreased at a mid-teens rate on a year-over-year basis as a result of the significantly weaker outage environment in the current year period, as well as the strong prior year period that included the benefit of multiple landed hurricanes. The historically low outage activity in the quarter was broad-based, with all regions declining as compared to the prior year, and resulted in portable generator sales also declining on a year-over-year basis. Home consultations for home standby generators also increased sequentially from the second quarter, but declined year-over-year during the third quarter. Although the seasonally higher levels of IHCs that we would have normally seen did not materialize this year, home consultations held a solid baseline level with a ratio of home consultations to outage hours at the highest level since we began tracking these metrics more than a decade ago. We view the relative resilience of the home standby category as further evidence of the continued growing awareness for these products and the underlying demand we continue to see as representative of a new and higher baseline level following the elevated outage environment of 2024, despite the very low level of outages seasonally in the third quarter. Our expanded investments in our marketing and lead generation capabilities as well as our solid execution and optimization of promotional campaigns, also provided important support for the home standby demand during the quarter. Importantly, close rates improved substantially on a sequential basis and came in better than expected during the quarter, with strong momentum continuing here in the month of October. We remain focused on initiatives to support ongoing improvements in close rates, such as further increased awareness of financing alternatives and optimized sales tools and training for our partners. We also attribute the recent improvement in close rates to a significant change in our approach to distributing leads to our dealers through the implementation of an enhanced data-driven process that allows our dealers to select or pull which leads they prefer to pursue as opposed to the previous push approach, which distributed leads directly to specific dealers based on certain criteria. The new lead process allows a wider pool of dealers with higher close rates the ability to select which leads they believe they have capacity to address. We believe the resulting improvement in close rates will further optimize our customer acquisition costs and lead to a broader distribution of sales leads across our residential dealer base. Our residential dealer network continued to expand during the quarter as our dealer count reached nearly 9,400, an increase of approximately 100 from the prior quarter and an increase of nearly 300 dealers over the prior year. We view this continued strength in contractor interest in the product category as evidence of the growing underlying demand for backup power solutions despite the software outage environment. In addition, our aligned contractor program, which targets contractors that purchase our products through wholesale distribution, has also continued to grow and provides for incremental engagement, training, and installation bandwidth through this important distribution channel. Also during the third quarter, we began the initial shipments of our next generation home standby generator product line, which represents the most comprehensive platform update for the category in more than a decade. The new product rollout will continue in the fourth quarter with our first shipments of the higher end of the product range, including the market's first 28-kilowatt air-cooled home standby generator. This new product line features the lowest total cost of ownership available, driven by reduced installation and maintenance costs, as well as introducing industry-leading sound levels and the best fuel efficiency of any residential generator on the market today. The next generation platform, together with our new FieldPro application, also offers a number of important benefits for our channel partners. including significantly lower commissioning times and improved remote diagnostics, enabling operational efficiencies for their businesses and greater uptime and cost savings for their customers. Moving to residential energy technology solutions, sales of these products and services outperformed our expectations once again and grew at a significant rate during the quarter, led by shipments of energy storage systems in Puerto Rico. Our team continues to execute extremely well alongside our partners on this energy grant-related program, which is expected to drive continued strong residential energy technology sales growth into the fourth quarter. Our Ecobee team continued to drive that business forward and delivered another profitable quarter with significant gross margin improvement and operating leverage as a result of continued strong sales growth and disciplined cost control. Additionally, Ecobee's installed base grew to approximately 4.75 million connected homes with increased energy services and subscription sales supporting a growing high margin recurring revenue stream. We expect Ecobee to deliver positive EBITDA contribution for the full year, a key milestone for this strategically important part of our business. As we begin launching new energy storage, microinverter and home standby products that are integrated with the Ecobee platform during the second half of this year, we are intent on delivering a premium feature set and user experience, which we believe will be an important differentiator for our growing residential energy ecosystem. We also made significant progress in our solar and storage product development efforts during the third quarter, as we began shipping Power Cell 2, our next generation energy storage system, and introduced Power Micro, our solar microinverter that will begin shipping by the end of this year. As we close out 2025, we are focused on leveraging these new products as well as our distribution and marketing capabilities to drive market share gains and significant sales growth in the future. As appropriate, however, we intend to recalibrate our investment levels to reflect the completion of our energy grant program in Puerto Rico and to adjust for a broader market environment that is likely to contract in 2026 as a result of the substantial reduction in federal incentives for solar and storage technologies. Although we see this market contracting in the near term, we believe that the secular trends of rising power prices and declining component costs are creating a situation where the economics of residential solar and storage technologies will provide for an attractive long-term market opportunity regardless of the level of government incentives. Now let me provide some additional commentary on our commercial and industrial product categories where we continue to see year-over-year sales growth, which accelerated during the third quarter. In particular, sales to our domestic industrial distributor customers increased at a solid rate in the period as we further reduced the lead times for our C&I products. Our teams have been working hard to increase production rates over the last 18 months by bringing our new facility in Beaver Dam, Wisconsin, online earlier this year. And as a result, we have successfully brought our lead times down to more historically normal levels. In addition to our operational execution in the quarter, our efforts to further develop our distribution partners both owned and independent have helped to expand our share of the domestic backup power generation market over the last several years. In addition to the growth in our industrial distribution channel, shipments to national telecom customers also grew at a robust rate in the third quarter compared to the prior year as part of the ongoing recovery for this important channel during 2025. We continue to expect a growing dependence on Wireless communication and additional infrastructure required enhanced reliability to provide a solid backdrop for secular growth and sales of CNI products to our telecom customers into the future. Mobile product shipments to national and independent rental customers outperformed our prior expectations and increased on a sequential basis, which we view as signaling the beginning of a recovery for this market. We anticipate favorable momentum to continue building in the coming quarters for our mobile products, And we continue to believe we are well positioned for long-term growth given the mega trend around the infrastructure related investments needed both domestically and internationally that leverage our global portfolio of mobile products. Internationally, total sales increased 11% driven by continued strength in CNI product shipments in Europe and the first shipments of our large megawatt generators to a data center customer in Australia. International sales continue to benefit from the favorable impact of foreign currency, which we expect will continue in the fourth quarter. Additionally, international EBITDA margins expanded at a strong rate from the prior year due to favorable sales mix. Our initiative to penetrate the large and rapidly growing data center market continued to gain momentum, with initial shipments to international markets beginning during the third quarter, and as we saw, our global backlog of large megawatt generators for this important end market doubled to more than 300 million over the last 90 days. The first domestic shipments of these new large output generators began here in the month of October. and we are projecting strong sequential growth in sales to the data center end market during the fourth quarter. The large majority of our backlog is expected to ship in 2026, providing a meaningful tailwind for overall CNI product growth in the coming year. Importantly, we continue to develop a robust pipeline of new opportunities within the data center market that represents significant upside for our CNI product in 2027 and beyond. Data center power demand is forecasted to grow at a significant rate for the foreseeable future, and the high The uptime requirements of these facilities drives backup power needs in excess of sites' electricity consumption. Third-party estimates suggest that global data center power demand will cumulatively grow by more than 100 gigawatts over the next five years, with the potential for incremental annual capacity additions to double by the end of this decade. Additionally, further global market opportunities exist for large megawatt generators within our traditional end markets, in particular providing backup power for large manufacturers, cold chain distribution centers, healthcare facilities, and other critical infrastructure that have higher backup power requirements. Given the existing supply constraints within the high end of the CNI backup power generator market, large megawatt generators represent a massive opportunity for Generac as a longstanding, well-known participant in the CNI backup power markets. In addition to our highly competitive lead times, we believe that our strong reputation as an engineering-driven organization that is uniquely focused on backup power with a customer-centric approach and world-class service capabilities will allow us to gain share in the data center backup power market as well as our traditional end markets. Given the momentum in our sales pipeline and the significant incremental market opportunity we see in the future, we have been actively exploring further investments to aggressively expand our competitive positioning and increase our capacity and capabilities for these products. We expect to undertake several important capacity expansion related projects and investments during the fourth quarter to position Generac as a significant producer of these products well beyond 2026, and to support what we believe could be a potential doubling of our C&I product sales over the next three to five years. In closing this morning, our third quarter results in our lower residential sales outlook reflect a historically weak power outage environment. However, the megatrends that support our future growth potential remain intact, as lower power quality and higher power prices will be an ongoing challenge given the more frequent and severe weather patterns, as well as broader electrification trends. And at the same time, the massive increase in data center power demand is expected to further stress the already fragile power grid by amplifying the growing electricity supply demand imbalance. Additionally, we're entering a period of unprecedented growth for our CNI products, as the expansion of our product line to include large megawatt generators has allowed for our entry into the rapidly growing data center market. As a leading energy technology company, we believe Generac is uniquely positioned at the center of these megatrends. that have the potential to drive substantial and sustainable growth in the years ahead. I'll now turn the call over to York to provide further details on third quarter results, as well as our updated outlook for 2025. York?