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GENERAC HOLDINGS INC. (GNRC)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 was weaker than expected: net sales fell 5% to $1.11B, adjusted EPS was $1.83, and adjusted EBITDA margin dropped to 17.3%, driven by a historically low outage environment and unfavorable mix; management lowered FY25 guidance to flat sales and ~17% adjusted EBITDA margin .
  • Significant miss versus Street: Revenue $1.11B vs $1.193B consensus*, adjusted EPS $1.83 vs $2.20 consensus*, and adjusted EBITDA $193M vs $233M consensus*; the company cited tariffs, lower residential volumes, and under-absorption as key headwinds . Values retrieved from S&P Global*.
  • Offsets: Global C&I sales grew 9% YoY, international sales rose 11%, and data center large-megawatt generator backlog doubled to >$300M over 90 days, with first shipments in Q3 and more in Q4, creating a 2026 growth tailwind .
  • Guidance reset: FY25 net sales revised to ~flat (from +2–5%), adjusted EBITDA margin to ~17% (from 18–19%), net income margin to ~6% (from 7.5–8.5%), and FCF conversion to ~80% (from 90–100%); tax rate lowered (FY25 GAAP ETR now 20–20.5%) .
  • Near-term stock narrative catalyst: Residential weakness and guidance cut vs strong data center momentum and capacity expansion; watch Q4 sequential orders/shipments and hyperscaler AVL progress as potential sentiment drivers .

What Went Well and What Went Wrong

  • What Went Well

    • C&I momentum: Global C&I product sales rose 9% YoY to $358M; international segment sales +11% YoY with margin expansion on favorable mix .
    • Data center entry: Backlog for large-megawatt generators doubled to >$300M in 90 days; initial shipments in Q3 and domestic shipments in October; capacity planning underway for 2026+ .
    • Residential energy technology: Ecobee posted another profitable quarter, installed base reached ~4.75M connected homes; energy storage shipments (Puerto Rico) drove growth .
    • Quote: “We continue to rapidly develop a pipeline… with our backlog for these products doubling over the last 90 days.” – CEO Aaron Jagdfeld .

  • What Went Wrong

    • Outage-driven residential weakness: “Lowest third quarter of total outage hours since 2015” led to residential net sales -13% YoY and gross margin compression from 40.2% to 38.3% .
    • Margin headwinds: Unfavorable mix, higher tariffs, and lower manufacturing absorption reduced adjusted EBITDA margin to 17.3% (vs 19.8% LY); operating expenses +6.7% driven by legal/regulatory charges .
    • Cash flow softness YoY: CFO $118M vs $212M LY; FCF $96.5M vs $183.7M LY, primarily due to inventory build and lower operating income .
    • Analyst concern: Guidance cut to flat sales and ~17% adjusted EBITDA; FY tax rate reduced—signals lower earnings power in 2H absent outages .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$942.1 $1,061.2 $1,114.4
GAAP Diluted EPS ($)$0.73 $1.25 $1.12
Adjusted EPS ($)$1.26 $1.65 $1.83
Gross Margin (%)39.5% 39.3% 38.3%
Adjusted EBITDA ($USD Millions)$149.5 $187.6 $193.2
Adjusted EBITDA Margin (%)15.9% 17.7% 17.3%
Cash from Operations ($USD Millions)$58.2 $72.2 $118.4
Free Cash Flow ($USD Millions)$27.2 $14.5 $96.5
Consensus vs Actual (Q3 2025)Estimate*Actual
Revenue ($USD Millions)$1,193.0*$1,114.4
Primary EPS ($)$2.20*$1.83
EBITDA ($USD Millions)$233.1*$193.2
Values retrieved from S&P Global*
Product Class Sales ($USD Millions)Q3 2024Q3 2025
Residential Products$722.8 $626.7
Commercial & Industrial Products$328.0 $358.3
Other$122.8 $129.4
Total Net Sales$1,173.6 $1,114.4
Segment Sales ($USD Millions)Q3 2024Q3 2025
Domestic (External)$1,011.3 $933.6
International (External)$162.2 $180.7
Total Net Sales$1,173.6 $1,114.4
KPIsQ1 2025Q2 2025Q3 2025
Gross Margin (%)39.5% 39.3% 38.3%
Adjusted EBITDA Margin (%)15.9% 17.7% 17.3%
Free Cash Flow ($USD Millions)$27.2 $14.5 $96.5

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales GrowthFY 2025+2% to +5% ~Flat YoY Lowered
Adjusted EBITDA MarginFY 202518% to 19% ~17% Lowered
Net Income Margin (pre NCI)FY 20257.5% to 8.5% ~6.0% Lowered
Free Cash Flow ConversionFY 202590% to 100% ~80% Lowered
GAAP Effective Tax RateFY 202523% to 23.5% 20% to 20.5%; Q4 ~25% Lowered
Interest ExpenseFY 2025$74M–$78M $70M–$74M Lowered
Capital ExpenditureFY 2025~3.0% of net sales ~3.5% of net sales (data center capacity expansion) Raised
Weighted Avg Diluted SharesFY 2025~59.4–59.5M ~59.4–59.5M Maintained

Earnings Call Themes & Trends

TopicQ1 2025 (Prior-2)Q2 2025 (Prior-1)Q3 2025 (Current)Trend
Data center/AI generatorsInitial formal intro; building pipeline Backlog >$150M; shipments to begin 2H; 2026 majority Backlog doubled to >$300M; initial shipments; targeting $500M+ 2026 capacity; AVL progress with hyperscalers Rapidly strengthening
Residential demand/outagesElevated 2024 outages supporting demand Holding higher baseline; HSB flat YoY; ports up; sequential close-rate improvement Lowest Q3 outages since 2015; HSB/portable below seasonal; sequential growth but YoY down mid-teens Weaker vs baseline
Tariffs/price realizationPricing actions to offset tariffs Lower-than-expected tariff impact helped margins; guidance narrowed Tariffs cited as margin headwind; FY margin cut; higher steel/copper also noted Headwind intensified
Energy technology (Ecobee/Storage)Strong growth; margin strength Ecobee profitable; Puerto Rico storage shipments ramp Ecobee profitable; installed base ~4.75M; recalibrate spend post-Puerto Rico grant/2026 solar incentive reduction Mixed: growth + recalibration
C&I channels (Telecom/Industrial)Growth in telecom and distributors Continued strength; Europe growth; rental softness Domestic industrial distributors strong; telecom robust; mobile turning positive sequentially Improving breadth
Regulatory/legalNon-GAAP add-backs include legal/regulatory provisions Ongoing legal costs in reconciliations $23.2M legal/regulatory provision in Q3; adjusted metrics exclude Elevated costs

Management Commentary

  • “Home standby and portable generator shipments grew sequentially… below expectations as a result of a power outage environment… the lowest third quarter of total outage hours since 2015.” – CEO Aaron Jagdfeld .
  • “Backlog for these [data center] products doubling over the last 90 days.” – CEO .
  • “Our backlog… now doubling to over $300 million… first domestic shipments… in October; projecting strong sequential growth in Q4.” – CEO .
  • “Ecobee… delivered another profitable quarter… installed base grew to approximately 4.75 million connected homes.” – CEO .
  • “We expect to undertake several important capacity expansion… to position Generac as a significant producer… and support what we believe could be a potential doubling of our C&I product sales over the next three to five years.” – CEO .

Q&A Highlights

  • Data center capacity and margins: Management targets 2026 capacity “$500M or north thereof”; ASP ~$1.5–$2.0M per gen set; margin profile similar to domestic C&I and accretive to EBITDA .
  • Hyperscaler AVL timeline: Progress measured in “months”; in 6th–7th inning of approvals; already preferred supplier to two global co-locators .
  • Supply chain constraints: Engine partner with ample capacity; alternators from existing suppliers; packaging (enclosure) capacity addressed via partnerships; production underway in Oshkosh .
  • Residential pricing/tariffs: Spring price increases (~7–8%) held; new next-gen HSB nodes (14kW/18kW) carry additional 5–7% pricing for features; demand impact largely as guided .
  • Clean energy recalibration: Expect residential solar/storage market contraction in 2026; recalibrate R&D/spend; North Star remains break-even by 2027; Ecobee ahead of plan .

Estimates Context

  • Q3 2025 results missed consensus: Revenue $1.114B vs $1.193B*, adjusted EPS $1.83 vs $2.20*, and adjusted EBITDA $193M vs $233M*; Street likely reduces near-term EPS and margin assumptions given outage backdrop and guidance cut . Values retrieved from S&P Global*.
  • Forward quarters: Q4 2025 EPS $1.81*, revenue $1.169B*; Q1 2026 EPS $1.39*, revenue $1.022B*; Q2 2026 EPS $1.95*, revenue $1.161B* (modeling a sequential recovery with seasonality and C&I strength). Values retrieved from S&P Global*.

Key Takeaways for Investors

  • Residential generator demand is cyclical and outage-driven; Q3’s record-low outage environment materially pressured sales and margins—watch Q4 seasonality and any major weather events for upside optionality .
  • The data center opportunity is a multi-year secular growth vector: backlog >$300M, first shipments underway, and capacity expansion plans could support $500M+ in 2026 sales, likely accretive to consolidated EBITDA margins .
  • FY25 guidance reset de-risks near-term expectations; lower sales/margin outlook and higher CapEx (3.5% of sales) reflect strategic investment in C&I/data center capacity .
  • Legal/regulatory costs ($23.2M in Q3) are significant add-backs; adjusted metrics remain the primary lens, but track ongoing litigation/regulatory developments for potential cash impacts .
  • Ecobee’s profitable scale and growing installed base (~4.75M) add recurring high-margin revenue; 2026 solar/storage recalibration should improve segment economics as incentives decline and cost curves fall .
  • Balance sheet and cash generation support growth investments and optionality; Q3 CFO/FCF improved sequentially, and FY25 FCF still ~ $300M at ~80% conversion .
  • Near-term positioning: Expect estimate cuts post-miss and guidance lower; catalysts include hyperscaler AVL wins, further backlog growth, and evidence of C&I margin accretion—key drivers of re-rating into 2026 .

Additional Press Releases (Q3 2025)

  • Earnings release date announcement (Oct 15, 2025) .
  • DR Power commercial leaf/lawn vacuum product launch (Sep 18, 2025) .
  • Second quarter results PR for context (Jul 30, 2025) .