Financial Data and Key Metrics Changes - Overall net sales decreased 5% year-over-year to $1.11 billion from $1.17 billion [5][25] - Residential net sales declined 13% to $627 million compared to $723 million in the prior year [25] - Commercial and industrial (C&I) product sales increased 9% to $358 million from $328 million in the prior year [25] - Adjusted EBITDA margin decreased to 17.3% from 19.8% in the prior year [28] - GAAP net income was $66 million, down from $114 million in the prior year [30] - Diluted net income per share decreased to $1.12 from $1.89 in the prior year [32] Business Line Data and Key Metrics Changes - Home standby and portable generator shipments grew sequentially but were below seasonal expectations, with a mid-teens decline year-over-year [5][6] - Sales of residential energy technology solutions grew significantly, driven by energy storage systems in Puerto Rico [13] - C&I product sales growth was led by domestic telecom and industrial distributor channels, with international sales increasing 11% [19][26] Market Data and Key Metrics Changes - The power outage environment was significantly below long-term averages, resulting in lower demand for home standby and portable generators [5][6] - International sales benefited from favorable foreign currency impacts, contributing to an 11% increase in total international sales [19][30] Company Strategy and Development Direction - The company is focused on expanding its presence in the data center market, with a backlog for large megawatt generators doubling to over $300 million [6][20] - New product rollouts include next-generation home standby generators and energy storage systems, aimed at enhancing market share and sales growth [12][15] - The company plans to recalibrate investment levels in response to a contracting market environment expected in 2026 due to reduced federal incentives [16][34] Management's Comments on Operating Environment and Future Outlook - Management noted that the low outage environment is temporary and expects a return to normal conditions, which will support growth in residential products [53][54] - The company anticipates a contraction in the solar and storage market in 2026 but remains optimistic about long-term growth driven by rising electricity prices and declining technology costs [16][56] - Management emphasized the importance of aggressive capacity expansion and investment in the C&I business to capitalize on unique market opportunities [24][76] Other Important Information - The company expects free cash flow for fiscal 2025 to be approximately $300 million, providing flexibility for future investments [36] - Total debt outstanding at the end of the quarter was $1.4 billion, with a gross debt leverage ratio of 1.8 times [33] Q&A Session Summary Question: What have you learned about the data center market opportunity? - Management highlighted a structural deficit in backup power supply for data centers and ongoing productive conversations with hyperscalers, indicating optimism for future orders [43][45] Question: How should we think about 2026 with the current moving parts? - Management acknowledged the weak outage environment but expressed confidence in a return to growth in residential products, supported by an expanding dealer network and improved close rates [51][54] Question: What are the biggest challenges in adding capacity quickly? - Management noted successful rapid product line integration in Wisconsin and ongoing upgrades to facilities to support increased capacity, emphasizing a strong financial position to support these efforts [79][81]

Financial Data and Key Metrics Changes - Overall net sales decreased 5% year-over-year to $1.11 billion from $1.17 billion [5][25] - Residential net sales declined 13% to $627 million compared to $723 million in the prior year [25] - Commercial and industrial (C&I) product sales increased 9% to $358 million from $328 million in the prior year [26] - Adjusted EBITDA decreased to $193 million, representing 17.3% of net sales, down from $232 million or 19.8% in the prior year [28] - GAAP net income was $66 million compared to $114 million in the prior year [31] - Diluted net income per share was $1.12, down from $1.89 in the prior year [32] Business Line Data and Key Metrics Changes - Home standby and portable generator shipments grew sequentially but were below seasonal expectations, with a mid-teens decline year-over-year [5][6] - Sales of residential energy technology solutions grew significantly, driven by energy storage systems in Puerto Rico [13] - C&I product sales growth was driven by domestic telecom customers and initial shipments of large megawatt generators to data center customers [26][19] Market Data and Key Metrics Changes - International sales increased 11% to $185 million, benefiting from favorable foreign currency impacts [30] - The backlog for large megawatt generators doubled to over $300 million in the last 90 days, indicating strong demand in the data center market [20][6] Company Strategy and Development Direction - The company is focused on expanding its presence in the data center market, with plans for capacity expansion and investments to support growth [22][23] - New product rollouts, including next-generation home standby generators, are expected to drive future sales growth [12][14] - The company plans to recalibrate investment levels in response to a contracting market environment in 2026 due to reduced federal incentives [16][34] Management's Comments on Operating Environment and Future Outlook - Management noted that the low outage environment has negatively impacted demand for home standby and portable generators, but structural trends indicate future growth potential [23][53] - The company anticipates a contraction in the solar and storage market in 2026 but remains optimistic about long-term opportunities due to rising electricity prices and declining technology costs [16][56] - Management expressed confidence in the company's ability to capitalize on the growing data center market and improve operational efficiencies [22][76] Other Important Information - The company expects free cash flow of approximately $300 million for fiscal 2025, providing flexibility for future investments [36] - Adjusted EBITDA margin expectations for the full year 2025 have been reduced to approximately 17% due to unfavorable sales mix and operating expense deleverage [35] Q&A Session Summary Question: What have you learned about the data center market opportunity? - Management highlighted a structural deficit in backup power supply for data centers and ongoing productive conversations with hyperscalers, indicating optimism for future orders [43][45] Question: How should we think about 2026 with the current moving parts? - Management noted that while the residential product category faced challenges due to low outage activity, they expect growth in 2026 with improved close rates and a return to normal outage levels [51][54] Question: What are the biggest challenges in adding capacity quickly? - Management acknowledged the challenges in supply chain and manufacturing operations but expressed confidence in their ability to bring new products online effectively [79][81]

Financial Data and Key Metrics Changes - Overall net sales decreased 5% year-over-year to $1.11 billion from $1.17 billion [4][24] - Residential net sales declined 13% to $627 million compared to $723 million in the prior year [24] - Commercial and industrial (C&I) product sales increased 9% to $358 million from $328 million in the prior year [25] - Gross profit margin was 38.3%, down from 40.2% in the prior year [26] - Adjusted EBITDA was $193 million, representing 17.3% of net sales, compared to $232 million or 19.8% in the prior year [27] - GAAP net income was $66 million, down from $114 million in the prior year [28] - Diluted net income per share was $1.12, compared to $1.89 in the prior year [31] Business Line Data and Key Metrics Changes - Home standby and portable generator shipments grew sequentially but were below seasonal expectations due to a low power outage environment [4][5] - Global C&I product sales increased 9%, driven by domestic telecom and industrial distributor channels [4] - Sales of residential energy technology solutions grew significantly, led by energy storage systems in Puerto Rico [12] Market Data and Key Metrics Changes - International sales increased 11%, benefiting from strong C&I product shipments in Europe and initial shipments to data center customers in Australia [17] - The backlog for large megawatt generators doubled to over $300 million in the last 90 days, indicating strong demand in the data center market [5][18] Company Strategy and Development Direction - The company is focused on leveraging new products and marketing capabilities to drive market share gains and significant sales growth [14] - Plans to recalibrate investment levels in response to a contracting market environment expected in 2026 due to reduced federal incentives [14] - The company aims to expand capacity and capabilities for C&I products, particularly in the data center market, with expectations of doubling C&I product sales over the next three to five years [20][21] Management's Comments on Operating Environment and Future Outlook - Management noted that the low outage environment has negatively impacted demand for home standby and portable generators, but structural trends indicate ongoing challenges with power reliability [21][22] - The company anticipates a contraction in the solar and storage market in 2026 but remains optimistic about long-term growth due to rising electricity prices and declining component costs [14][59] - Management expressed confidence in the data center market's growth potential, with significant backlog and ongoing discussions with hyperscalers [19][46] Other Important Information - The company expects consolidated net sales for the full year 2025 to be approximately flat compared to the prior year, with a shift in sales mix impacting gross and adjusted EBITDA margins [32][33] - Free cash flow is projected to be approximately $300 million for fiscal 2025, providing flexibility for future investments [35] Q&A Session Summary Question: What have you learned about the data center market opportunity? - The company sees a unique opportunity in the data center market due to supply constraints and ongoing demand for backup power solutions [44][45] - Conversations with hyperscalers are productive, and the company is optimistic about becoming an approved supplier [46] Question: How should we think about 2026 with the current moving parts? - Management indicated that the weak outage environment is temporary and expects a return to growth in residential products if outages normalize [53][55] - The company anticipates a contraction in the solar and storage market but remains confident in long-term growth potential [59][60] Question: What are the biggest challenges in adding capacity quickly? - The company is confident in its ability to bring new products online and has made significant upgrades to its facilities to support this [87] - Supply chain constraints are not expected to be a major issue, as the engine partner has ample capacity [88]

Core Insights - Generac Holdings reported revenue of $1.11 billion for the quarter ended September 2025, reflecting a year-over-year decline of 5.1% and an EPS of $1.83, down from $2.25 a year ago [1] - The revenue fell short of the Zacks Consensus Estimate of $1.2 billion by 7.44%, and the EPS also missed the consensus estimate of $2.25 by 18.67% [1] Revenue Breakdown - Revenue from Residential products was $626.71 million, significantly below the average estimate of $714.3 million, marking a year-over-year decline of 13.3% [4] - Revenue from Other products was $129.37 million, slightly above the average estimate of $127.9 million, showing a year-over-year increase of 5.3% [4] - Revenue from Commercial & Industrial products reached $358.27 million, exceeding the average estimate of $352.7 million, with a year-over-year increase of 9.2% [4] Stock Performance - Over the past month, shares of Generac Holdings have returned +13.6%, outperforming the Zacks S&P 500 composite's +3.8% change [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]

Core Insights - Generac Holdings reported quarterly earnings of $1.83 per share, missing the Zacks Consensus Estimate of $2.25 per share, representing an earnings surprise of -18.67% [1] - The company posted revenues of $1.11 billion for the quarter ended September 2025, missing the Zacks Consensus Estimate by 7.44% [2] - Generac Holdings has outperformed the S&P 500 with a 22.6% gain since the beginning of the year compared to the S&P 500's 17.2% gain [3] Earnings Performance - The company has surpassed consensus EPS estimates three times over the last four quarters [2] - The current consensus EPS estimate for the coming quarter is $2.50 on $1.24 billion in revenues, and for the current fiscal year, it is $7.56 on $4.44 billion in revenues [7] Market Outlook - The estimate revisions trend for Generac Holdings was unfavorable ahead of the earnings release, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [6] - The outlook for the Manufacturing - General Industrial industry, to which Generac belongs, is currently in the bottom 37% of over 250 Zacks industries, which may impact stock performance [8]

Core Insights - Premarket trading is showing notable activity with significant price movements indicating potential trading opportunities before the market opens [1] Premarket Gainers - Cambium Networks Corporation (CMBM) has seen a remarkable increase of 306%, trading at $2.51 [3] - Teradyne, Inc. (TER) is up 21%, currently priced at $176.00 [3] - Bloom Energy Corporation (BE) has risen by 18%, trading at $134.50 [3] - Jamf Holding Corp. (JAMF) is up 15%, with a price of $12.85 [3] - CSG Systems International, Inc. (CSGS) has increased by 14%, trading at $79.00 [3] - Olympic Steel, Inc. (ZEUS) is also up 14%, currently priced at $34.20 [3] - Beta Bionics, Inc. (BBNX) has risen by 12%, trading at $27.20 [3] - Sonim Technologies, Inc. (SONM) is up 10%, currently priced at $12.49 [3] - Canadian Solar Inc. (CSIQ) has increased by 9%, trading at $16.67 [3] - Interlink Electronics, Inc. (LINK) is also up 9%, currently priced at $6.85 [3] Premarket Losers - Stride, Inc. (LRN) has experienced a significant decline of 41%, trading at $89.44 [4] - Varonis Systems, Inc. (VRNS) is down 29%, currently priced at $44.71 [4] - Akebia Therapeutics, Inc. (AKBA) has decreased by 26%, trading at $2.26 [4] - Avantor, Inc. (AVTR) is down 17%, currently priced at $12.40 [4] - GlucoTrack, Inc. (GCTK) has seen a decline of 13%, trading at $6.29 [4] - Tigo Energy, Inc. (TYGO) is down 13%, currently priced at $2.20 [4] - Generac Holdings Inc. (GNRC) has decreased by 9%, trading at $172.00 [4] - Polar Power, Inc. (POLA) is down 8%, currently priced at $3.71 [4] - Caesars Entertainment, Inc. (CZR) has seen a decline of 7%, trading at $20.50 [4] - Anteris Technologies Global Corp. (AVR) is also down 7%, currently priced at $4.46 [4]

Core Viewpoint - Power equipment maker Generac has lowered its full-year net sales growth forecast due to weaker demand for home standby and portable generators, attributed to a decline in power outages, resulting in a 9% drop in shares [1] Company Summary - Generac has revised its net sales growth forecast downward, indicating challenges in the market for home standby and portable generators [1] - The decline in power outages has significantly impacted demand for Generac's products, leading to the forecast adjustment [1] Industry Summary - The overall market for power equipment, particularly in the home standby and portable generator segment, is experiencing reduced demand due to fewer power outages [1]

Financial Performance - Net sales decreased 5% to $1.11 billion in Q3 2025, down from $1.17 billion in Q3 2024, with core sales down approximately 6%[5] - Adjusted EBITDA was $193 million, or 17.3% of net sales, compared to $232 million, or 19.8% of net sales, in the prior year[5] - Net income for the nine months ended September 30, 2025, was $185,288, down from $199,309 in 2024, a decrease of 7.0%[34] - Net income attributable to Generac Holdings Inc. for the three months ended September 30, 2025, was $66,161, a decrease of 41.8% from $113,742 in 2024[40] - Total adjusted EBITDA for the nine months ended September 30, 2025, was $530,390, slightly up from $523,787 in 2024[39] Sales Breakdown - Residential product sales fell approximately 13% to $627 million, while Commercial & Industrial (C&I) product sales increased approximately 9% to $358 million[5] - International segment sales increased approximately 11% to $185.5 million, driven by strength in C&I product shipments to European markets[11] - Domestic net sales for the nine months ended September 30, 2025, increased to $2,604,937, up 2.1% from $2,567,813 in 2024[37] - Residential products net sales for the three months ended September 30, 2025, were $626,706, a decrease of 13.3% from $722,787 in 2024[37] - International net sales for the nine months ended September 30, 2025, were $568,237, an increase of 9.0% from $537,918 in 2024[37] Profitability Metrics - Gross profit margin was 38.3%, down from 40.2% in the prior-year quarter, primarily due to unfavorable sales mix and higher tariffs[4] - Adjusted EBITDA margin is now expected to be approximately 17.0%, down from the previous guidance of 18.0% to 19.0%[14] - Adjusted EBITDA for the international segment was $27.4 million, or 14.8% of total sales, up from $20.3 million, or 12.2% of total sales, in the prior year[12] Cash Flow and Liquidity - Cash flow from operations was $118 million, down from $212 million in the prior year, with free cash flow at $96 million compared to $184 million in Q3 2024[5][8] - The company reported a net cash provided by operating activities of $248,719 for the nine months ended September 30, 2025, down from $401,847 in 2024, a decrease of 38.1%[34] - Free cash flow for the three months ended September 30, 2025, was $96,497, down 47.5% from $183,658 in 2024[46] Guidance and Future Outlook - The company updated its full-year 2025 net sales guidance to be approximately flat compared to the prior year, down from a previous forecast of 2% to 5% growth[13] - The backlog for large-megawatt generators in the data center market has doubled over the last 90 days, indicating strong future demand[3] Expenses - Operating expenses increased to $917,151 for the nine months ended September 30, 2025, compared to $825,481 in 2024, representing an increase of 11.1%[32] - Research and development expenses for Q3 2025 were $60,059, up from $56,936 in Q3 2024, indicating a growth of 3.9%[32] - The company incurred legal expenses related to patent lawsuits amounting to $2.7 million for the three months ended September 30, 2025[47] - The company reported a provision for a $15.0 million multi-district class action settlement related to clean energy products, totaling $17.8 million for the three months ended September 30, 2025[47] Balance Sheet Highlights - Cash and cash equivalents increased to $300,009 as of September 30, 2025, compared to $281,277 at the end of 2024, an increase of 6.1%[34] - Total assets grew to $5,598,102 as of September 30, 2025, up from $5,109,331 at the end of 2024, an increase of 9.6%[30] - Total liabilities increased to $2,948,274 as of September 30, 2025, compared to $2,611,888 at the end of 2024, an increase of 12.9%[30] - Stockholders' equity attributable to Generac Holdings Inc. increased to $2,643,748 as of September 30, 2025, compared to $2,494,278 at the end of 2024, an increase of 6.0%[30]

Core Insights - Generac Holdings Inc. reported a decrease in net sales by 5% to $1.11 billion for Q3 2025, compared to $1.17 billion in Q3 2024, primarily due to lower demand for home standby and portable generators amid a significantly reduced power outage environment [5][12][30] - The company experienced a gross profit margin decline to 38.3% from 40.2% year-over-year, attributed to an unfavorable sales mix, higher tariffs, and lower manufacturing absorption, although partially offset by increased price realization [4][5] - Adjusted net income for Q3 2025 was $108 million, or $1.83 per share, down from $136 million, or $2.25 per share, in the same period last year [5][30] Financial Performance - Operating expenses rose by $20.2 million, or 6.7%, compared to Q3 2024, due to legal and regulatory charges [5] - Net income attributable to the company was $66 million, or $1.12 per share, compared to $114 million, or $1.89 per share, in Q3 2024 [5][30] - Adjusted EBITDA for the quarter was $193 million, representing 17.3% of net sales, down from $232 million, or 19.8% of net sales, in the prior year [5][30] Segment Performance - Domestic segment sales decreased approximately 8% to $938.1 million, driven by weaker home standby and portable generator sales, partially offset by growth in residential energy technology and C&I product sales [8][9] - International segment sales increased approximately 11% to $185.5 million, supported by strong C&I product shipments to European markets and initial shipments of large-megawatt generators to data center customers [10][11] Outlook - The company has revised its full-year 2025 net sales guidance to be approximately flat compared to the previous year, down from an earlier forecast of a 2% to 5% increase [12][13] - Adjusted EBITDA margin is now expected to be around 17.0%, lower than the previous guidance of 18.0% to 19.0% [13]

Core Viewpoint - Generac Holdings Inc (NYSE:GNRC) is highlighted as a top stock to watch, particularly in the context of an AI-led bull market and the anticipated flow of investments into small-cap stocks due to the Federal Reserve's rate cut cycle [1][2]. Group 1: Investment Potential - Chris Retzler, a portfolio manager at Needham, emphasizes the strong growth potential of small-cap stocks, with Generac being a favored choice due to its backup power generation products for various markets [2]. - Generac is noted for its data center solutions, specifically diesel backup generation, which is expected to see increased demand as the company introduces new competitive products [2]. - The Diamond Hill Small-Mid Cap Fund initiated a position in Generac Holdings during the second quarter of 2025, indicating a belief in its compelling valuation despite market volatility [3]. Group 2: Market Context - The current investment climate is characterized by a shift towards small-cap stocks, driven by the Federal Reserve's monetary policy, which is expected to enhance liquidity and investment opportunities in this segment [2]. - There is a recognition that while Generac has potential, some AI stocks may offer higher returns with lower risk, suggesting a competitive landscape for investment choices [4].