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GENERAC HOLDINGS INC. (GNRC)·Q1 2025 Earnings Summary

Executive Summary

  • Strong Q1: Net sales rose 6% to $0.94B, adjusted EPS of $1.26 and adjusted EBITDA margin of 15.9%, driven by 15% residential growth and gross margin expansion to 39.5% .
  • Estimates beat: Revenue $942.1M vs S&P consensus $918.8M*, and adjusted EPS $1.26 vs S&P consensus $0.97*; both beats driven by home standby shipments and Energy Technology (ecobee, storage) .
  • Guidance widened: FY25 net sales growth cut to 0–7% (from 3–7%), adjusted EBITDA margin widened to 17–19% (from 18–19%) to reflect tariff/macro uncertainty while pricing and supply chain initiatives aim to offset tariff costs dollar-for-dollar .
  • Key narrative: Tariffs (China 145%, steel/aluminum 25%, reciprocal 10%) could add ~$125M to H2 COGS before mitigations; management is raising prices ~7–8%, pursuing cost-out/automation and diversifying supply to preserve margins .
  • Potential stock catalysts: Resi demand resilience from outages, pricing power, next-gen home standby launch in H2 2025, and initial large-megawatt diesel orders targeting data centers (shorter lead times, customization) .

What Went Well and What Went Wrong

What Went Well

  • Residential outperformance: Home standby shipments rose mid-teens; residential product sales +15% to $494M, with ecobee and energy storage contributing .
  • Margin strength: Gross margin expanded ~400 bps YoY to 39.5%, driving adjusted EBITDA ahead of expectations .
  • Strategic progress: Opened orders for large megawatt diesel generators; strong early data center interest with factory customization and nationwide service network (“we’re going to ride on the back of…direct sales to our telecommunications customers…nationwide service network”) .

What Went Wrong

  • C&I softness: C&I sales -5% YoY to $337M, pressured by rental “beyond standby” and international end-market weakness (offset by telecom and industrial distributors domestically) .
  • Free cash flow compression: Free cash flow fell to $27.2M from $85.1M due to working capital build (inventory replenishment), though operating earnings improved .
  • Guidance lower bound cut: FY25 net sales growth low end reduced to 0% and EBITDA margin range widened, acknowledging softer consumer demand elasticity and tariff uncertainty .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$1,173.6 $1,234.8 $942.1
GAAP Diluted EPS ($)$1.89 $2.15 $0.73
Adjusted EPS ($)$2.25 $2.80 $1.26
Gross Margin (%)40.2% 40.6% 39.5%
Adjusted EBITDA Margin (%)19.8% 21.5% 15.9%
Q1 2025 Results vs S&P Global ConsensusConsensusActualSurprise
Revenue ($USD Millions)918.8*942.1 +23.3
Adjusted EPS ($)0.97*1.26 +0.29

Values marked with * retrieved from S&P Global.

External Net Sales by Product Class ($USD Millions)Q3 2024Q4 2024Q1 2025
Residential$722.8 $743.3 $494.2
Commercial & Industrial$328.0 $363.4 $337.4
Other$122.8 $128.1 $110.6
External Net Sales by Reportable Segment ($USD Millions)Q3 2024Q4 2024Q1 2025
Domestic$1,011.3 $1,057.9 $774.6
International$162.2 $176.9 $167.5
KPIsQ1 2025
Cash from Operations ($USD Millions)$58.2
Free Cash Flow ($USD Millions)$27.2
Effective Tax Rate (%)24.3%
Shares Repurchased (units)716,685
Repurchase Spend ($USD Millions)~$97
Total Debt Leverage (Gross, x)~1.6x
Interest Expense ($USD Millions)$17.1
Residential Dealers (count)>9,200

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales GrowthFY 20253–7% 0–7% Lowered
Adjusted EBITDA MarginFY 202518–19% 17–19% Widened lower bound
Net Income MarginFY 2025~8.0–9.0% ~6.5–8.5% Lowered
Free Cash Flow ConversionFY 202580–90% 70–90% Lowered
GAAP Effective Tax RateFY 202524.0–24.5% (prior) 24.5–25.0% Raised
Interest Expense ($M)FY 2025N/A~$74–$78 Maintained outlook given
Capex (% of Sales)FY 2025N/A~3% Maintained
Depreciation ($M)FY 2025N/A~$90 New detail
GAAP Intangible Amortization ($M)FY 2025N/A~$100 New detail
Stock Comp ($M)FY 2025N/A~$53–$57 New detail

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Tariffs/macroElevated outages drove guidance raise; focus on mix/margins Assumes China 145%, steel/aluminum 25%, reciprocal 10%; ~$125M H2 cost pre-mitigation; pricing/cost-out to offset Higher uncertainty; mitigation actions intensifying
Residential demand/outagesHighest U.S. outage hours; residential +28% Q3; +28% Q4 Home standby shipments mid-teens; activations up; close rates pressured but modeled to recover Sustained elevated baseline; near-term funnel friction
Data center product strategyN/AOpening orders for large MW diesel; customization, shorter lead times; nationwide service network New growth vector emerging
Energy Technology (ecobee, storage)Ecobee/clean energy contributing in Q4 Ecobee strong growth and margin; PowerCell 2 orders; DOE Puerto Rico program execution Improving momentum
Supply chain/pricingMix and lower input costs driving margins 7–8% pricing, automation, diversification; shipping rates falling aid logistics Active mitigation; logistics tailwinds
Dealer networkN/ADealer count >9,200, +400 YoY; aligned contractor program scaling Capacity expanding

Management Commentary

  • “First quarter results exceeded our expectations as a result of continued strong growth in residential product sales…continued strong gross margins led adjusted EBITDA well ahead of our prior expectations.” — Aaron Jagdfeld, CEO .
  • “At today’s tariff levels…we expect our product cost will increase in the second half of 2025 by approximately $125 million prior to any mitigation efforts.” .
  • “We have raised prices across a wide range of products, and we expect that our price actions will fully offset the cost of tariffs on dollar terms.” .
  • “We have experienced strong early indications of interest from prospective customers in the data center market…with more competitive lead times for emergency backup power gensets.” .
  • “We ended the first quarter with more than 9,200 residential dealers in our network…an increase of more than 400 dealers over the prior year.” .

Q&A Highlights

  • Tariff impact and offsets: ~$125M H2 impact, ~2/3 China-related; pricing/actions aim to hold EBITDA margin %, supply diversification underway .
  • COGS exposure: ~70–80% COGS materials; ~50% sourced in North America, China <10% of material purchases and falling .
  • Sell-in pull-forward: ~+$20M ahead of home standby price increases; IHCs strong in Southeast and West (CA under-penetrated <2%) .
  • Close rates: Pressured since late 2024 due to elevated demand vs capacity; expected to recover over next 12 months .
  • Data center go-to-market: Direct sales leveraging telecom-built network; factory customization to control quality/cost/lead times .
  • Metals/logistics: Steel/aluminum/copper pressures partly offset by falling container/sailing rates; ongoing PAP cost-out program .

Estimates Context

  • S&P Global consensus for Q1 2025: Revenue $918.8M* vs actual $942.1M (beat); Adjusted EPS $0.97* vs actual $1.26 (beat); 21 estimates for each metric* .
  • Implication: Residential strength and gross margin execution drove upside; C&I softness tempered magnitude. Near-term estimate revisions likely to reflect widened FY25 ranges and tariff assumptions while maintaining margin mitigation narrative .

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Residential momentum remains robust; elevated outages and H2 next-gen home standby launch underpin demand despite price increases .
  • Management proactively widened guidance but expects pricing and supply chain actions to offset tariffs at EBITDA level; watch policy headlines for scenario shifts .
  • Margin trajectory: Gross margin near ~39–40% FY, EBITDA margins targeted 17–19%; Q2 step-down vs Q1, improving to nearly 20% in H2 on operating leverage .
  • Cash conversion dips on inventory build (tariffs, product transition) but full-year FCF conversion still 70–90% .
  • Emerging data center opportunity with large MW diesel lineup, customization and nationwide service could add cyclical/structural growth .
  • C&I remains mixed (rental, international softness), offset by domestic telecom and industrial distributors; monitor backlog and quoting trends .
  • Capital allocation remains balanced: repurchased ~$97M in Q1 with $250M authorization remaining; leverage ~1.6x supports optionality .

Additional Q1 2025 relevant press releases: product and portfolio updates (ecobee Smart Thermostat Essential; energy portfolio additions; Data Center World expo presence) reinforce Energy Technology and data center narratives .