Q3 2025 Generac Holdings Inc Earnings Call
Speaker #1: Thank you for standing by and welcome to Generac Holdings , Inc. . Third Quarter 2020 Earnings Conference Call . At this time , all participants are in a listen only mode .
Operator: 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 *11 on your telephone to remove yourself from the queue. You may press *11 again. Now I'd like to hand the call over to Director of Corporate Finance and Investor Relations Chris Rosemann. Please go ahead.
Speaker #1: 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 one one on your telephone to remove yourself from the queue .
Speaker #1: You may press Star 1. Again, I would now like to hand the call over to the Director of Corporate Finance and Investor Relations, Kris Rosemann.
Speaker #1: Please go ahead .
Speaker #2: Good morning and welcome to our third quarter 2020 earnings call . I'd like to thank everyone for joining us this morning . With me today is Aaron Jagdfeld President and Chief Executive Officer and York Ragen Chief Financial Officer .
Chris Rosemann: 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 Jagdfeld, President and Chief Executive Officer, and York Ragen, 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 Holdings Inc. 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.
Speaker #2: 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 .
Speaker #2: Please see our earnings release or SEC filings for a list of words or expressions that identify such statements and the associated risk factors .
Speaker #2: In addition , we will make reference to certain non-GAAP measures during today's call . Additional information regarding these measures , including reconciliation to comparable US GAAP measures , is available in our earnings release and SEC filings .
Chris Rosemann: GAAP measures, is available in our earnings release and SEC filings. I will now turn the call over to Aaron.
Speaker #2: I will now turn the call over to Aaron .
Speaker #3: 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 .
Aaron Jagdfeld: 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 C&I 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.
Speaker #3: 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 .
Speaker #3: 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 .
Speaker #3: 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 .
Speaker #3: 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 .
Aaron Jagdfeld: 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.
Speaker #3: Over the last 90 days, we have seen even greater opportunities developing in our growing sales pipeline. Now, let's discuss our third quarter results in more detail.
Speaker #3: 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 .
Speaker #3: 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.
Speaker #3: 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 .
Speaker #3: Home consultations for home standby generators also increased sequentially from the second quarter , but declined year over year . During the third quarter .
Aaron Jagdfeld: 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 the 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.
Speaker #3: Although the seasonally high higher levels of Eics that we would have normally seen did not materialize . This year . Home consultations held a solid baseline level , with the ratio of home consultations to outage hours at the highest level since we began tracking these metrics more than a decade ago .
Speaker #3: 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 .
Speaker #3: We continue to see as representative of a new and higher baseline level following the outage environment of 2020 . For . 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 .
Aaron Jagdfeld: 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, financing alternatives, and optimized sales tools and training for our partners.
Speaker #3: 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.
Speaker #3: We remain focused on initiatives to support ongoing improvements in close rates , such as further increased awareness of financing , financing alternatives and optimized sales tools and training for our partners .
Speaker #3: 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 .
Aaron Jagdfeld: 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.
Speaker #3: The new lead process allows a wider pool of dealers with higher close rates. The ability to select which leads they believe they have the capacity to address.
Speaker #3: 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 .
Speaker #3: Our residential dealer network continued to expand during the quarter as our dealer count reached nearly 9400 , an increase of approximately 100 from the prior quarter and an increase of nearly 300 dealers over the prior year .
Aaron Jagdfeld: 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 softer 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.
Speaker #3: 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 softer outage environment.
Speaker #3: 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 .
Speaker #3: 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 .
Speaker #3: 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 .
Aaron Jagdfeld: 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 28kW 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 Field Pro 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.
Speaker #3: 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 .
Speaker #3: The next generation platform , together with our new Field Pro 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 .
Speaker #3: 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 .
Aaron Jagdfeld: 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.
Speaker #3: 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 .
Speaker #3: 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.
Speaker #3: 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.
Speaker #3: 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 as we begin launching new energy storage , microinverter and home standby products that are integrated with Ecobee platform during the second half of this year .
Aaron Jagdfeld: 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 PowerCell 2, our next generation energy storage system, and introduced Power Micro, our solar microinverter that will begin shipping by the end of this year.
Speaker #3: 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.
Speaker #3: We also made significant progress in our solar and storage product development efforts during the third quarter . As we began shipping power Cell to our next generation energy storage system and introduced Power Micro , our solar microinverter that will begin shipping by the end of this year .
Speaker #3: As we close out 2025 , we are focused on leveraging these new products as well as our distribution and marketing . Marketing capabilities to drive market share gains and significant sales growth in the future .
Aaron Jagdfeld: 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.
Speaker #3: 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 .
Speaker #3: 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 .
Speaker #3: 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 .
Aaron Jagdfeld: 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.
Speaker #3: 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 CNI products.
Speaker #3: 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 .
Speaker #3: 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 .
Speaker #3: In addition to the growth in our industrial distribution distribution channel , shipments to National telecom customers also grew at a robust rate in the third quarter compared to the prior year .
Aaron Jagdfeld: 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 in sales of C&I 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.
Speaker #3: As part of the ongoing recovery for this important channel during 2025 , we continue to expect the growing dependence on wireless communications and additional infrastructure required enhanced reliability to provide a solid backdrop for secular growth in sales of CNI products to our telecom customers into the future .
Speaker #3: 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 .
Speaker #3: 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 .
Aaron Jagdfeld: 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 megatrend 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 C&I 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.
Speaker #3: Given the megatrend around the infrastructure related investments needed , both domestically and internationally , that leverage our global portfolio of mobile products internationally .
Speaker #3: 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.
Speaker #3: International sales continued 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 .
Speaker #3: 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.
Aaron Jagdfeld: 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 C&I 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 C&I product in 2027 and beyond.
Speaker #3: 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 .
Speaker #3: 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 .
Speaker #3: Importantly , we continue to develop a robust pipeline of new opportunities within the data center market that represents significant upside for our CNI products in 2027 and beyond .
Speaker #3: Data center power demand is forecasted to grow at a significant rate for the foreseeable future , and the high uptime requirements of these facilities drives backup power needs in excess of sites .
Aaron Jagdfeld: Data center power demand is forecasted to grow at a significant rate for the foreseeable future, and the high uptime requirements of these facilities drives backup power needs in excess of site 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 C&I backup power generator market, large megawatt generators represent a massive opportunity for Generac.
Speaker #3: Electricity consumption . Third party estimates suggest that global data center power demand will cumulatively grow by more than 100GW over the next five years , with the potential for incremental annual capacity additions to double by the end of this decade .
Speaker #3: 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 .
Speaker #3: 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 long standing , well known participant in the CNI backup power markets .
Aaron Jagdfeld: As a long-standing, well-known participant in the C&I 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.
Speaker #3: 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 .
Speaker #3: 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 .
Speaker #3: 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 CNI product sales over the next 3 to 5 years .
Aaron Jagdfeld: 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 and 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. 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.
Speaker #3: In closing , this morning , our third quarter results and 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 .
Speaker #3: And at the same time , the massive increase in data center power , data center power demand is expected to further stress the already fragile power grid by amplifying the growing electricity supply demand imbalance .
Speaker #3: 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 .
Aaron Jagdfeld: Additionally, we're entering a period of unprecedented growth for our C&I 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.
Speaker #3: 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 .
Speaker #3: 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 .
Speaker #3: York .
York Ragen: York, thanks Aaron. Looking at third quarter 2025 results in more detail, net sales during the quarter decreased 5% to $1.11 billion as compared to $1.17 billion in the prior year. Third quarter, the combined effect of acquisitions and foreign currency had an approximate 1% favorable impact on revenue growth during the quarter. Looking at consolidated net sales for the third quarter by product class, residential product sales decreased 13% to $627 million as compared to $723 million in the prior year. As Aaron discussed in detail, a significantly lower power outage environment as compared to the prior year resulted in a decline in home standby and portable generator shipments. This is partially offset by robust year-over-year growth in sales of energy storage systems and ecobee home energy management solutions.
Speaker #4: Thanks , Aaron . Looking at third quarter 2020 results in more detail . Net sales during the quarter decreased 5% to 1.11 billion , as compared to 1.17 billion in the prior year .
Speaker #4: Third quarter . The combined effect of acquisitions and foreign currency had an approximate 1% favorable impact on revenue growth during the quarter . Briefly looking at consolidated net sales for the third quarter by product class , residential product sales decreased 13% to 627 million as to 723 million in the prior year .
Speaker #4: As This was partially offset by robust year over year growth in sales of energy storage systems and Ecobee . Home Energy management Solutions and industrial product sales for the third quarter increased 9% to 358 million , as compared to 328 million in the prior year .
Speaker #4: Aaron discussed in detail , a significantly lower power outage environment as compared to the prior year resulted in a decline in home standby and portable generator shipments .
York Ragen: Portable and industrial product sales for the third quarter increased 9% to $358 million as compared to $328 million in the prior year. Core sales growth of approximately 6% was driven by an increase in shipments to our domestic telecom customers, together with strong growth in Europe and initial shipments of our new large megawatt generators to a data center customer in Australia, partially offset by continued weakness in shipments to national rental accounts. Net sales for the other products and services category increased approximately 5% to $129 million as compared to $123 million in the third quarter of 2024. Core sales increased approximately 3%, primarily due to growth in ecobee and remote monitoring, subscription sales, and other installation and maintenance services revenue, partially offset by a reduction in parts and accessories shipments.
Speaker #4: Core sales growth of approximately 6% was driven by an increase in shipments to our domestic telecom customers , together with strong growth in Europe and initial shipments of our new large megawatt generators to a data center customer in Australia , partially offset by continued weakness in shipments to national rental accounts .
Speaker #4: Net sales for the other products and services category increased approximately 5% to 129 million , as compared to 123 million in the third quarter of 2020 .
Speaker #4: For core sales increased approximately 3% . Primarily due to growth in ecobee and remote monitoring subscription sales and other installation and maintenance services .
Speaker #4: Revenue , partially offset by a reduction in parts and accessories shipments . Given the lower outage environment . Gross profit margin was 38.3% compared to 40.2% in the prior year .
York Ragen: Given the lower outage environment, gross profit margin was 38.3% compared to 40.2% in the prior year third quarter, primarily due to unfavorable sales mix together with the impact of higher tariffs and manufacturing under-absorption, partially offset by increased price realization as a result of price increases implemented earlier in the year. To address the impact of incremental tariffs, operating expenses increased $20.2 million or 6.7% as compared to the third quarter of 2024 as a result of certain legal and regulatory charges in the current year, as disclosed in the accompanying reconciliation schedules. Excluding these items, which are not indicative of our ongoing operations, operating expenses decreased $0.6 million or 0.2% from the prior year.
Speaker #4: Third quarter , primarily due to unfavorable sales . Mix . Together with the impact of higher tariffs and manufacturing under absorption , partially offset by increased price realization as a result of price increases implemented earlier in the year .
Speaker #4: To address the impact of incremental tariffs , operating expenses increased 20.2 million , or 6.7% , as compared to the third quarter of 2024 .
Speaker #4: As a result of certain legal and regulatory charges in the current year . As disclosed in the accompanying reconciliation schedules . Excluding these items , which are not indicative of our ongoing operations .
Speaker #4: Operating expenses decreased 0.6 million , or 0.2% , from the prior year . Adjusted EBITDA before deducting for non-controlling interests as defined in our earnings release , was 193 million , 17.3% of net sales in the third quarter .
York Ragen: Adjusted EBITDA before deducting for non-controlling interest as defined in our earnings release was $193 million, 17.3% of net sales in the third quarter, as compared to $232 million or 19.8% of net sales in the prior year. This margin decline was primarily driven by the previously mentioned unfavorable sales mix and the operating expense deleverage on the lower sales volumes. I will now briefly discuss financial results for our two reporting segments. Domestic segment total sales, including intersegment sales, decreased 8% to $938 million in the quarter as compared to $1.02 billion in the prior year, including approximately 1% sales growth contribution from acquisitions. Adjusted EBITDA for the segment was $166 million, representing 17.7% of total sales, as compared to $212 million in the prior year or 20.7%.
Speaker #4: As compared to $232 million, or 19.8% of net sales in the prior year. This margin decline was primarily driven by the previously mentioned unfavorable sales mix and the operating expense deleverage on lower sales volumes.
Speaker #4: I will now briefly discuss financial results for our two reporting segments . Domestic segment . Total sales , including Intersegment sales , decreased 8% to 938 million in the quarter as compared to 1.2 billion in the prior year , including approximately 1% sales growth .
Speaker #4: Contribution from acquisitions . Adjusted EBITDA for the segment was 166 million , representing 17.7% of total sales , as compared to 212 million in the prior year , or 20.7% .
Speaker #4: International segment . Total sales , including Intersegment sales , increased approximately 11% , 185 million in the quarter as compared to 167 million in the prior year quarter , including an approximately 3% benefit from foreign currency adjusted EBITDA for the segment before deducting for non-controlling interests was 27 million , or 14.8% of total sales , as compared to 20 million , or 12.2% , in the prior year .
York Ragen: International segment total sales, including intersegment sales, increased approximately 11% to $185 million in the quarter as compared to $167 million in the prior year quarter, including an approximate 3% benefit from foreign currency. Adjusted EBITDA for the segment before deducting for non-controlling interest was $27 million or 14.8% of total sales as compared to $20 million or 12.2% in the prior year. Now switching back to our financial performance for the third quarter of 2025 on a consolidated basis, as disclosed in our earnings release, GAAP net income for the company in the quarter was $66 million as compared to $114 million for the third quarter of 2024.
Speaker #4: Now, switching back to our financial performance for the third quarter of 2025 on a consolidated basis, as disclosed in our earnings release.
Speaker #4: GAAP net income for the company in the quarter was 66 million , as compared to 114 million for the third quarter of 2020 .
Speaker #4: For the current year , quarter included an unfavorable Wallbox fair market value mark to market adjustment of 5.7 million and a loss on refinancing of debt of 1.2 million related to our term loan A and revolver amended extend transaction that closed in July 2025 .
York Ragen: The current year quarter included an unfavorable Wallbox fair market value mark-to-market adjustment of $5.7 million and a loss on refinancing of debt of $1.2 million related to our Term Loan A and Revolver amend and extend transaction that closed in July 2025. Our interest expense declined from $22.9 million in the third quarter of last year to $18.5 million in the current year period as a result of lower borrowings and lower interest rates relative to prior year. GAAP income taxes during the current year third quarter were $11.8 million or an effective tax rate of 15% as compared to $33.5 million or an effective tax rate of 22.7% for the prior year. The decrease in effective tax rate was primarily driven by favorable discrete tax items in the current year quarter related to certain return to provision adjustments that did not occur in the prior year.
Speaker #4: Our interest expense declined from $22.9 million in the third quarter of last year to $18.5 million in the current year period, as a result of lower borrowings and lower interest rates relative to the prior year. GAAP income taxes during the current year third quarter were $11.8 million, or an effective tax rate of 15%, as compared to $33.5 million, or an effective tax rate of 22.7%, for the prior year.
Speaker #4: The decrease in effective tax rate was primarily driven by favorable discrete tax items . In the current year quarter . Related to certain return to return to provision adjustments that did not occur in the prior year .
Speaker #4: Diluted net income per share for the company on a GAAP basis was $1.12 in the third quarter of 2025, compared to $1.89 in the prior year.
York Ragen: Diluted net income per share for the company on a GAAP basis was $1.12 in the third quarter of 2025 compared to $1.89 in the prior year. Adjusted net income for the company as defined in our earnings release was $108 million in the current year quarter or $1.83 per share. This compares to adjusted net income of $136 million in the prior year or $2.25 per share. Cash flow from operations was $118 million as compared to $212 million in the prior year third quarter, and free cash flow as defined in our earnings release was $96 million as compared to $184 million in the same quarter last year. The change in free cash flow was primarily driven by an increase in inventory levels during the current year quarter and lower operating income, which was compounded by a decline in inventory levels during the prior year quarter.
Speaker #4: Adjusted net income for the company , as defined in our earnings release , was 108 million in the current year quarter , or $1.83 per share .
Speaker #4: This compares to adjusted net income of $136 million in the prior year, or $2.25 per share. Cash flow from operations was $118 million, as compared to $212 million in the prior year.
Speaker #4: Third quarter , and free cash flow as defined in our earnings release , was 96 million as compared to 184 million in the same quarter last year .
Speaker #4: The change in free cash flow was primarily driven by an increase in inventory levels during the current year quarter , and lower operating income , which was compounded by a decline in inventory levels during the prior year quarter .
Speaker #4: Total debt outstanding at the end of the quarter was 1.4 billion , resulting in a gross debt leverage ratio of 1.8 times on an as reported basis .
York Ragen: Total debt outstanding at the end of the quarter was $1.4 billion, resulting in a gross debt leverage ratio of 1.8 times on an annual reported basis. With that, I will now provide comments on our updated outlook for 2025. As discussed in detail by Aaron Jagdfeld, the extremely low outage environment in recent months has resulted in lower demand for home standby and portable generators and a reduction in our full year 2025 outlook for overall net sales growth. We now expect consolidated net sales for the full year to be approximately flat compared to the prior year, which includes an approximate 1% favorable impact from the combination of foreign currency and acquisitions. This updated outlook compares to our previous guidance of plus 2% to 5% net sales growth over the prior year.
Speaker #4: With that , I will now provide comments on our updated outlook for 2025 . As discussed by as discussed in detail by Aaron , the extremely low outage environment in recent months has resulted in lower demand for home standby and portable generators , and a reduction in our full year 2025 outlook for overall net sales growth .
Speaker #4: We now expect consolidated net sales for the full year to be approximately flat compared to the prior year , which includes an approximate 1% favorable impact from the combination of foreign currency and acquisitions .
Speaker #4: This updated outlook compares to our previous guidance of plus 2 to 5% net sales growth over the prior year . Looking at product classes , we now project full year 2025 residential product sales to decline as compared to the prior year in the mid-single digit percent range .
York Ragen: Looking at product classes, we now project full year 2025 residential product sales to decline as compared to the prior year in the mid single digit % range, while C&I product sales are expected to increase as compared to the prior year, also in the mid single digit % range. The resulting sales mix shift is projected to have an unfavorable impact on gross and adjusted EBITDA margins for the year as compared to our prior guidance. Specifically, we now expect gross margin % for full year 2025 to be approximately flat to slightly down compared to the full year 2024 levels.
Speaker #4: While CNI product sales are expected to increase as compared to the prior year . Also in the mid-single digit percent range . The resulting sales mix shift is projected to have an unfavorable impact on gross and adjusted EBITDA margins for the year as compared to our prior guidance .
Speaker #4: Specifically , we now expect gross margin percent for full year 2025 to be approximately flat to slightly down compared to the full year 2020 .
Speaker #4: Four levels . This represents a nearly 1% decrease from our prior expectation of approximately 39.5% . As a result of the previously previously mentioned unfavorable sales mix and lower manufacturing absorption .
York Ragen: This represents a nearly 1% decrease from our prior expectation of approximately 39.5% as a result of the previously mentioned unfavorable sales mix and lower manufacturing absorption given the lower residential production volumes together with incremental new product transition and C&I plant startup costs that are transitory in nature. Additionally, this gross margin guidance assumes that current tariff levels that are in effect today stay in place for the remainder of the year. Looking at our adjusted EBITDA margin expectations for the full year 2025, given the factors impacting our gross margins together with additional operating expense deleverage on the lower sales volumes, we are reducing our guidance for adjusted EBITDA % to approximately 17%. This is compared to our previous guidance range of 18% to 19%.
Speaker #4: Given the lower residential production volumes, together with incremental new product transition and CNI plant startup costs that are transitory in nature.
Speaker #4: Additionally , this gross margin guidance assumes that current tariff levels that are in effect today stay in place for the remainder of the year .
Speaker #4: Looking at our adjusted EBITDA margin expectations for the full year 2025 , given the factors impacting our gross margins , together with additional operating expense deleverage on the lower sales volumes , we are reducing our guidance for adjusted EBITDA percent to approximately 17% .
Speaker #4: This is compared to our previous guidance range of 18 to 19% . Additionally , as a result of higher use of cash for working capital and capital expenditures , free cash flow conversion from adjusted net income is now expected to be approximately 80% for the full year 2025 , as compared to the previous guidance range of 90 to 100% .
York Ragen: Additionally, as a result of higher use of cash for primary working capital and capital expenditures, free cash flow conversion from adjusted net income is now expected to be approximately 80% for the full year 2025 as compared to the previous guidance range of 90% to 100%. This would still result in approximately $300 million of free cash flow in fiscal 2025, which provides for near term optionality to allow for additional investments to drive future growth as part of our discipline and balanced capital allocation framework. As is our normal practice, we're also providing additional guidance details to assist with modeling adjusted earnings per share and free cash flow for the full year 2025.
Speaker #4: This would still result in approximately 300 million of free cash flow in fiscal 2025 , which provides for near-term optionality to allow for additional investments to drive future growth .
Speaker #4: As part of our disciplined and balanced capital . Capital allocation framework . As is our normal practice , we're also providing additional guidance details to assist with modeling adjusted earnings per share and free cash flow for the full year 2025 .
Speaker #4: For the full year 2025, our GAAP effective tax rate is now expected to be between 20% and 20.5%, down from our prior guidance of 23% to 23.5% due to the lower realized third-quarter tax rate.
York Ragen: For full year 2025, our GAAP effective tax rate is now expected to be between 20% to 20.5%, down from our prior guidance of 23% to 23.5% due to the lower realized third quarter tax rate. Specifically for the fourth quarter 2025, our GAAP effective tax rate is expected to be approximately 25%. Importantly, to arrive at appropriate estimates for adjusted net income and adjusted earnings per share, add back items should be reflected net of tax using this 25% effective tax rate.
Speaker #4: Specifically , for the fourth quarter 2025 , our GAAP effective tax rate is expected to be approximately 25% . Importantly , to arrive at appropriate estimates for adjusted net income and adjusted earnings per share , add back items should be reflected , net of tax .
Speaker #4: Using this 25% effective tax rate . We now expect interest expense to be approximately 70 to 74 million for the full year 2025 , assuming no additional term .
Aaron Jagdfeld: We.
York Ragen: Now expect interest expense to be approximately $70 to $74 million for the full year 2025, assuming no additional term loan principal prepayments during the year. This compares to our previous guidance of $74 to $78 million and contemplates lower interest rates and outstanding borrowings than previously assumed. Our capital expenditures are now projected to be approximately 3.5% of forecasted net sales for the full year 2025, a 0.5% increase from prior guidance as a result of incremental CapEx investment for data center capacity expansion expected in the fourth quarter of 2025. Depreciation expense, GAAP intangible amortization expense, and stock compensation expense are expected to remain consistent with last quarter's guidance. Our full year weighted average diluted share count is expected to be approximately 59.4 to 59.5 million shares, as compared to 60.3 million shares in 2024.
Speaker #4: Loan principal prepayments during the year . This compares to our previous guidance of 74 to 78 million and contemplates lower interest rates and outstanding borrowings than previously assumed .
Speaker #4: Our capital expenditures are now projected to be approximately 3.5% of forecasted net sales for the full year 2025 , a 0.5% increase from prior guidance .
Speaker #4: As a result of incremental CapEx investment for data center capacity expansion expected in the fourth quarter of 2025 . Appreciation expense , GAAP , intangible amortization expense , and stock compensation expense are expected to remain consistent with last quarter's guidance .
Speaker #4: Our full year weighted average diluted share count is expected to be approximately 59.4 to 59.5 million shares as compared to 60.3 million shares in 2024 .
Speaker #4: Finally , this 2025 outlook does not reflect potential additional acquisitions or share repurchases that could drive incremental shareholder value during the year . This concludes our prepared remarks .
York Ragen: Finally, this 2025 outlook does not reflect potential additional acquisitions or share repurchases that could drive incremental shareholder value during the year. This concludes our prepared remarks. At this time, we'd like to open up the call for questions.
Speaker #4: At this time , we'd like to open up the call for questions .
Speaker #1: Thank you . As a reminder to ask a question , you will need to press star one one on your telephone . To remove yourself from the queue , you may press star one one again .
Aaron Jagdfeld: Thank you.
Operator: As a reminder to ask a question, you will need to press Star 1-1 on your telephone to remove yourself from the queue. You may press Star 1-1 again. You will be limited to one question to allow everyone the opportunity to participate. Please stand by while we compile the Q&A roster. Our first question comes from the line of Tommy Moll of Stephens. Your line is open.
Speaker #1: You will be limited to one question to allow everyone the opportunity to participate. Please stand by while we compile the Q&A roster.
Speaker #1: Our first question comes from the line of Tommy Moe of Stephens . Your line is open . Tommy .
York Ragen: Tommy, good morning and thank you for taking my questions.
Speaker #5: Good morning and thank you for taking my questions.
Speaker #3: Hey , Tommy .
Aaron Jagdfeld: Hey, Tommy, I want to start on.
Speaker #5: I want to start on the data center market opportunity . Aaron , what all have you learned thus far in terms of the competitive dynamics there ?
York Ragen: The data center market opportunity. Aaron, what all have you learned thus far in terms of the competitive dynamics there, the size of the opportunity? I think last quarter you framed it at about $5 billion. The deficit next year, and then just in terms of the types of customers where you're seeing some traction, what's the nature of the conversation with hyperscale at this point and any orders there and the backlog number that you gave us. Thank you.
Speaker #5: The size of the opportunity ? I think last quarter , you framed it at about 5 billion . The deficit next year . And then just in terms of the types of customers where you're seeing some traction .
Speaker #5: What's the nature of the conversation with hyperscale at this point ? And any orders there in the backlog number that you gave us ?
Speaker #5: Thank you .
Speaker #3: Yeah . Thanks , Tommy . So I mean , obviously , this is , you know , an just a really unique opportunity for us .
Aaron Jagdfeld: Yeah, thanks, Tommy. This is just a really unique opportunity for us. The structural deficit of the supply side of backup power for this particular market is, as you would imagine with the foot race that's ongoing here to put these data center facilities in the ground. Every single conversation we have with a developer, with a hyperscaler, an EDGE data center provider, all of those conversations are almost the same in terms of just the difficulties in bringing these facilities online because of some of the constraints. The constraints being in the electrical side of the buildings, transformers, switch gear, generators, all of those components are in heavy demand, as you would expect. I think just from a structural standpoint, it feels like this is going to continue for some time. We don't have in our backlog today any orders reflected from any hyperscalers.
Speaker #3: You know , the the structural deficit of the supply side of backup power for this particular market is , you know , as you would imagine , with , with the foot race , that's , that's ongoing here to put , you know , these data center facilities in the , in the ground , you know , every single conversation we have with a developer , with a , you know , hyperscaler and edge data center provider , all of those conversations are almost the same in terms of just the difficulties in , you know , bringing these facilities online because of some of the constraints , the constraints being in the electrical side of the buildings .
Speaker #3: You know , transformers , switchgear , generators , all of those components are in heavy demand , as you would expect . And , you know , this is you know , I think just from a structural standpoint , it feels like this is going to continue for some time .
Speaker #3: We don't have in our backlog today any orders reflected from any hyperscalers , but we continue to have very productive conversations . There .
Aaron Jagdfeld: We continue to have very productive conversations there. We're very optimistic as we work to get added to the approved vendor lists for these hyperscalers. They are very eager to have additional supply coming to the market. They're very eager to have us be a supplier to the market again. I think our brand, we're a trusted brand. We've been in the C&I backup power market for over 50 years. Our expansion into this product line is kind of a natural evolution. It's not some fly by night supplier coming into the market. It's somebody who's well known, well capitalized, and somebody who is going to be very aggressive. As I said on the call in the prepared remarks, we see a unique opportunity here for us to do something that is kind of generational with the company and with this part of our business.
Speaker #3: And we're very optimistic as we work to get added to the approved vendor lists for these hyperscalers . They are very eager to have additional supply come into the market .
Speaker #3: They're very eager to have us be a supplier to the market . Again , I think our brand , we're a trusted brand .
Speaker #3: We've been in the CNI backup power market for over 50 years , and so our expansion into this product line is kind of a it's a natural evolution .
Speaker #3: And , you know , it's not some fly by night , you know , supplier coming into the market . It's somebody who's well known .
Speaker #3: Well capitalized and somebody who is going to be very aggressive . As I said on the call , in the prepared remarks , we see a unique opportunity here for us to do something that is kind of generational with with the company and with this part of our business .
Speaker #3: And as I said in the prepared remarks , we will have , you know , we've got a number of balls in the air here that like Q4 here in Q4 , we're going to have to pull the trigger on a number of things .
Aaron Jagdfeld: As I said in the prepared remarks, we've got a number of kind of balls in the air here that like Q4, here in Q4, we're going to have to pull the trigger on a number of things. We've taken up our CapEx guide range slightly. That's part of the front end of this. That's everything from facilities to equipment. Our M&A funnel has also expanded where we think we could add capabilities and additional capacity through acquisitions. We're looking at basically, we're not leaving any stone uncovered here, Tommy. It's a. We have to be aggressive, we have to lean forward and we will capitalize on this in a way that, you know, I think the market certainly wants us to succeed. Every conversation we've had is to that effect and we will succeed. This is going to be an area, it's right in our wheelhouse.
Speaker #3: We've taken up our CapEx guide range slightly . That's part of the front end of this . You know , that's everything from facilities to equipment .
Speaker #3: Our M&A funnel has also expanded where we think we could add capabilities and additional capacity through through acquisitions . So we're looking at basically we're not leaving any stone uncovered here .
Speaker #3: Tommy . It's a again , we have to be we have to be aggressive . We have to lean forward . And we will capitalize on this in a way that , you know , I think , you know , the market certainly wants us to succeed .
Speaker #3: Every conversation we've had is to that effect , and we will succeed . This is going to be an area that's right in our wheelhouse .
Speaker #3: I feel very comfortable , comfortable and very confident that we can execute on this . Our first shipments . I watched them go out of our factory in Oshkosh , Wisconsin last week , week and a half ago .
Aaron Jagdfeld: I feel very comfortable and very confident that we can execute on this. Our first shipments, I watched them go out of our factory in Oshkosh, Wisconsin last week, a week and a half ago. Our first shipments went out internationally to a customer here earlier in the month and things are rolling. We've got products online and we are looking at how we can aggressively expand our capacity by leaning forward with investment in this area of our business.
Speaker #3: Our first shipments went out internationally to a customer here earlier in the month , and things are rolling . We've got products online and we're looking at , you know , how can we aggressively expand our capacity with , you know , by leaning forward with investment in this area of our business ?
Speaker #1: Thank you . Our next question comes from the line of George Generic of Canaccord Genuity . Please go ahead . George .
Operator: Thank you. Our next question comes from the line of George Gianarikas, Canaccord Genuity. Please go ahead, George.
Speaker #6: Hi. Good morning, everyone, and thank you for taking my questions.
Aaron Jagdfeld: Hi, good morning, everyone, and thank you for taking my questions. Hey, George.
Speaker #3: Hey .
Speaker #7: George . Good morning .
York Ragen: Morning.
Speaker #6: Now , I know you're not talking about 2026 just yet , but if you could just sort of help us work through all the moving parts here , clearly outages have been weaker .
Aaron Jagdfeld: Now, I know you're not talking about 2026 just yet, but if you could just sort of help us work through all the moving parts here. Clearly, outages have been weaker. There's a pull from data center generators and there's this, the roll off potentially of what's happened so far in Puerto Rico. How should we sort of think about 2026 broadly with all the moving pieces at play? Thank you. Yeah, George, thanks for the question. Not giving guidance here, but I think to answer your question, let's start with just from a product category standpoint, our residential products and kind of digging down a level deeper there with home standby and portables. Yeah, it was just a, it was a crappy season. I mean, let's be honest. Weather was really nice everywhere. We've been doing this a long time.
Speaker #6: There's a pull from data center generators , and there's this . The roll off potentially , of what's happened so far in Puerto Rico .
Speaker #6: So how should we sort of think about 2026 broadly with all the moving pieces at play ? Thank you .
Speaker #3: Yeah , George , thanks for the question . Yeah . Just kind of and again , not not giving guidance here . But I think to answer your question , let's start with just from a product category standpoint , our our residential products and kind of dig down a level deeper there with home standby and portables .
Speaker #3: Yeah . It was just a it was a crappy season . I mean , let's be honest , the weather was really nice .
Speaker #3: Everywhere we've been doing this a long time . We have not seen many three cues where we just didn't have outage activity . Like , you know , we planned the business around normal baseline outage and we got nowhere near normal .
Aaron Jagdfeld: We have not seen many Q3s where we just didn't have outage activity. Like, you know, we planned the business around normal baseline outage and we got nowhere near normal. I mean, we were literally 75% to 80% below normal for the quarter, just in raw outage hours. That's without, you know, obviously any major events happening either, you know, and obviously we're comping against majors last year. It looks bad, it feels bad, but it's temporary. I mean, we've been through this before. These weather patterns, you know, we don't know what happens with weather. It comes and goes. These outage, you know, structurally nothing's changed there. I mean, just you've got, in fact, I would point to all the structural things from a megatrend standpoint that we've been talking about, only continue to point to less reliability in the grid going forward.
Speaker #3: I mean , we were literally 75 to 80% below normal for the quarter , just in raw outage hours . And that's without , you know , obviously , any major , major events happening either , you know , and and obviously we're comping against majors last year .
Speaker #3: So it just you know , it looks bad . It feels bad . But it's temporary . I mean we we've been through this before the weather patterns .
Speaker #3: You know we don't know what happens with weather . It comes and goes . And these outages structurally nothing's changed there . I mean , just you've got in fact , I would I would point to all the structural things from a megatrend standpoint that we've been talking about .
Speaker #3: Only continue to point to less reliability in the grid going forward . So and what's really remarkable , I would just point this out .
Aaron Jagdfeld: What's really remarkable, I would just point this out, like, and we said this in the prepared remarks and people can call what they want, but you know, those product categories, home standby and portables were up sequentially over Q2. We're holding that baseline of growth that we achieved last year. It's amazing to me the underlying kind of, the underlying strength of that category, we just didn't see the seasonal lift that we would normally see. Fast forward to 2026 for that category. It's going to grow well. Right. I mean, if we return again the assumption there returning to baseline level of outages, now we're going to go to easy comps now. We're going to have the opportunity to grow that category. I would also point out, you know, we continued to grow dealer base, right. Our dealer count went up.
Speaker #3: Like , and we said this in the prepared remarks and people can call it what they want . But you know , those product categories home standby and portals were up sequentially over Q2 .
Speaker #3: So like we're holding that baseline of growth that we that we that we achieved last year . It's amazing to me that the underlying kind of the underlying strength of that category , we just didn't see the seasonal lift that we would normally see .
Speaker #3: So fast forward to 2026 for that category . You know it's going to grow well , right ? I mean , if we return again , the assumption they're returning to baseline level of outages .
Speaker #3: Now we're going to go to easy comps . Now you know , we're going to have the opportunity to grow that category . And I would also point out , you know , we continued to grow dealer base .
Speaker #3: Our dealer count went up . We added over 100 of the quarter , which I think is indicative of a healthy market . We continue to see lead demand , lead flow .
Aaron Jagdfeld: We added over 100 in the quarter, which I think is indicative of a healthy market. We continue to see lead demand, lead flow, our customer acquisition costs continue to improve. We've been continuing to use data to refine our lead algorithms and our processes there in a way that we believe is going to impact. We actually saw favorable impact of close rates in the quarter. We think that's going to accelerate into 2026. Improved close rates next year, broader dealer counts, a return to normal baseline outages. We also won shelf space for portable generators coming off of last season's hurricane. We've got expanded presence at retail. Those are all, that's all a really good setup for the categories, those product categories next year. I would put that in the plus column for next year. You know, it's going to grow. It's going to grow very nicely.
Speaker #3: Our customer acquisition costs continue to improve . We've been continuing to use data to refine our lead algorithms and our processes . There .
Speaker #3: In a way that we believe is going to impact . And had we actually saw a favorable impact to close rates in the quarter , and we think that's that's going to accelerate into 2026 .
Speaker #3: So improve close rates next year . Broader dealer accounts , a return to normal baseline outages . And we also want shelf space for portable generators coming off the last season's hurricanes .
Speaker #3: So we've got expanded presence at retail . Those are all that's all a really good setup for the categories . Those product categories next year .
Speaker #3: So I would put that in the plus column for next year . You know it's going to grow . It's going to grow very nicely .
Speaker #3: We also have pricing . The effect of pricing will get a full year of that next year . So all of those things are good things for our residential products .
Aaron Jagdfeld: We also have pricing, the effective pricing. We'll get a full year of that next year. All of those things are good things for our residential products. Energy technology is a subset of that. Inside of that, obviously Puerto Rico, the energy grant program there goes away after this year. We haven't heard that it's going to continue, at least at this point. There's a chance it could. We're not banking on that at all. Structurally, I think everybody knows that market is going to contract in 2026, the market for solar and storage. That's on the back of the loss of primarily the loss of the 25D tax credit incentive tax credit for homeowners. That said, when you look at longer term, look at your electricity rates and George, I know you follow this. I know a lot of folks follow this. Electricity prices are up.
Speaker #3: Energy technology is a subset of that . Inside of that . Obviously Puerto Rico , the energy grant program there goes away after this year .
Speaker #3: We haven't heard that it's going to continue , at least at this point . There's a chance it could , but you know , we're not we're not banking on that at all .
Speaker #3: And obviously structurally , I think everybody knows that market is going to contract in 2026 . The market for solar and storage . And that's on the back of the loss of primarily the loss of the 25 , you tax credit incentive tax credit for homeowners .
Speaker #3: That said , when you look at longer term , you know , look at your electricity rates . And George , I know you follow this .
Speaker #3: I know a lot of folks follow this . Electricity prices are up . They're up in many cases in many areas . They're exceeding the rates of inflation .
Aaron Jagdfeld: They're up in many cases, in many areas, they're exceeding the rates of inflation and they're only going higher. We're just getting started. That is before we see this wave of AI power demand really impact pricing for electricity rates. As rates go up, electricity prices go up as the cost of these technologies continues to come down for storage and solar. I would also say that as interest rates come down, structurally, you know, you can say, okay, the market's going to be off. The overall market is going to contract by 20 to 25% next year. I mean, I think it's conceivable that we're not going to call that back. We have growth with ecobee and I think we have these other elements that longer term are still a really good setup for solar and storage. We have a lot of new products just hitting the market.
Speaker #3: And they're only going higher . We're just getting started . That is before we see this wave of AI power demand really impact pricing for electricity rates .
Speaker #3: And as rates go up , you know , electricity prices go up as the cost of these technologies continues to come down for storage and solar .
Speaker #3: And I would also say that as interest rates come down structurally , you know , you can say , okay , the market's going to be off the overall market's going to contract by 20 to 25% next year .
Speaker #3: I mean , I think it's conceivable that we're not going to call that back . But we've got growth with Ecobee . And I think we have these other elements that longer term are still a really good setup for solar and storage .
Speaker #3: We got a lot of new products just hitting the market , so we feel good about , you know , it's not going to feel good in terms of the results next year for that segment .
Aaron Jagdfeld: We feel good about, you know, it's not going to feel good in terms of the results next year for that segment. I don't think it'll be off 20% to 25%. It'll be off something because of the loss of the DOE grant program. Again, I think long term, we feel good about where we're going with that product category, feel good about the new products, feel really good about ecobee. Ecobee has been an outstanding performer for us within that part of our business. We feel good about that. Then you move to C&I, and that is just a tremendous story in terms of, you know, we've got great visibility now. That $300 million of backlog that we've amassed, it's doubled in the last 90 days. Most of that is 2026.
Speaker #3: I don't think it'll be off 20 to 25% . It'll be off something because of the loss of the Doe grant program . But again , I think we've long term we feel good about where we're going with that product category , feel good about the new products , feel really good about Ecobee Ecobee's been an outstanding performer for us within that part of our business .
Speaker #3: We feel good about that . And then you move to CNI and that is just a tremendous story in terms of , you know , we've got great visibility now that $300 million of backlog that we've amassed , it's , you know , it's doubled in the last 90 days .
Speaker #3: Most of that is 2026 . As we said before , structurally we think we can probably go to 500 million from a capacity standpoint in 26 .
Aaron Jagdfeld: As we said before, structurally, we think we can probably go to $500 million from a capacity standpoint in 2026. We still have opportunity to take that pipeline and convert more in 2026. To the degree that we have customers who may need product and may need to get their hands on gensets next year, we think we can provide them. In fact, we think we can probably go north of $500 million to some degree by stretching capacity, by making some of the investments we're making right now. I think there's a little bit of upside there for 2026 beyond the $500 million. What we're focused on right now, George, is beyond 2026. We're focused on growing that business, growing our capacity in a way that, again, it's just, as I mentioned before on the previous question, it's just unique, it's generational.
Speaker #3: So we still have , you know , opportunity to take that pipeline and convert more in 26 to the degree that we have customers who may need product and may need to to get their hands on on Gensets next year , we think we can provide them .
Speaker #3: And in fact , we think we can probably go north of 500 million to some degree by stretching capacity , by making some of the investments we're making right now .
Speaker #3: I think there's a little bit of upside there for 26 beyond the 500 million . But what we're focused on right now , George , is beyond 2026 .
Speaker #3: You know , we're focused on on growing that business , growing our capacity in a way that , you know , again , it's just as I mentioned before on the previous question .
Speaker #3: It's just unique . It's it's generational . It's I don't think we'll ever see this opportunity again . And we've got to go after it aggressively .
Aaron Jagdfeld: I don't think we'll ever see this opportunity again, and we've got to go after it aggressively.
Speaker #1: Thank you . Our next question comes from the line of Mike Holleran of Baird . Please go ahead . Mike .
Operator: Thank you. Our next question comes from the line of Mike Halloran of Baird. Please go ahead, Mike.
Speaker #8: , good morning everyone .
Aaron Jagdfeld: Morning, everyone. Hey, Mike. I think you mentioned it.
Speaker #7: Hey , Mike .
Speaker #8: You know , I think you mentioned it briefly in there , Aaron . But maybe just on the on the new product launches on the clean energy side , I know early days .
Chris Rosemann: Briefly in there, Aaron, but maybe just on the new product launches on the clean energy side, early days, how's that tracking? Maybe more importantly, could you just frame up what you mean or what the latest thought process is in terms of getting back to break even in those product categories and what kind of that iterative process looks like as we work through the remainder of this year. Early thoughts on 2026 as far as how much of that loss you can reclaim.
Speaker #8: How's that tracking ? And then maybe more importantly , could you just frame up what you mean or what the latest thought process is in terms of getting back to break even in those those product categories ?
Speaker #8: And what kind of that iterative process looks like as we work through the remainder of this year ? Early thoughts on 26 . As far as how much of that loss you can reclaim ?
Speaker #3: Yeah . Thanks , Mike . So again , you know , long term I feel really good about that . That set of products for us and the market opportunity there , given the the structural challenges around energy prices .
Aaron Jagdfeld: Yeah. Thanks, Mike. Again, long term, feel really good about that set of products for us and the market opportunity there, given the structural challenges around energy prices and I think continued need for resiliency with that side of the business. We're building out an energy ecosystem. 2026 is going to be tougher. We mentioned in our prepared remarks we use the word recalibrate. We're using that word a lot internally here on how to make sure that, you know, as we get to the tail end of our product introduction cycle here with those products, you know, that we can ramp down some of the R&D spend associated with that. Now that'll shift over into some, you know, there'll be some hypercare efforts. Those new products are just hitting the market now. Our first shipments of PowerCell 2 were here in Q4.
Speaker #3: And I think the , you know , and , you know , continued need for resiliency , right . With the that side of the business , we're building out an energy ecosystem .
Speaker #3: 26 is going to be tougher . We mentioned in our prepared remarks we use the word recalibrate . We're using that word a lot internally here on how to make sure that as we get to the tail end of our product introduction cycle , here , with those products , you know , we can ramp down some of the R&D spend associated with that .
Speaker #3: Now , that'll shift over into some , you know , there'll be some hypercare efforts . Those new products are are just hitting the market .
Speaker #3: Now . Our first shipments of Power Cell two , we're here in Q4 . You know , it's we're we're kind of on a limited launch schedule .
Aaron Jagdfeld: It's, we're kind of on a limited launch schedule. We're looking to expand it in 2026. Power micros will start shipping here at the end of this year. I don't have a ton of data points to offer for the market on the success or acceptance by the market of those products. I can only reiterate what we've been told over the last several years as we've been working on developing these products and that is the market feels that it needs additional suppliers. It's a bit of a duopoly right now on the inverter side and honestly it's kind of a, I want to say it's a monopoly on the storage side but obviously there's a supplier there in Tesla that provides the lion's share of the market opportunity or the market supply. We think there's great opportunities for us to be successful.
Speaker #3: We're looking to expand it in in 2026 . Power micros will start shipping here at the end of this year . So I don't have a ton of data points to offer for the market on the success or acceptance by the market of those products .
Speaker #3: I can only reiterate what we've been told over the last several years , as we've been working on developing these products , and that is the market feels that it needs additional suppliers .
Speaker #3: It's a bit of a duopoly right now on , on the on the inverter side and and honestly , it's a you know , it's kind of a there's I don't want to say it's .
Speaker #3: A monopoly on the storage side , but obviously there's a supplier there in Tesla that is has , you know , provides the lion's share of the market opportunity .
Speaker #3: Or the market supply . So we think there's opportunities for us to be successful . Our our kind of North star . There is still to be break even by 2027 .
Aaron Jagdfeld: Our kind of North Star there is still to be break even by 2027. That is our North Star. It hasn't changed. Even though the market's going to contract. That was our North Star prior to the loss of federal support 25D for these products. We believe, I think given again the high, the continued upward movement in retail electric prices, the continued downward movement in these technologies, the cost of these technologies and the potential for, you know, a pullback in interest rates, we think that's a good setup. The paybacks on these systems will improve over time. They'll take a step back here in 2026, but for us, and again we're going to recalibrate and we do.
Speaker #3: That is our North Star . It hasn't changed . Even though the market's going to contract . That was our North Star prior to the loss of federal support 25 for these products .
Speaker #3: But we believe I think given again the high the continued upward movement in retail electric prices , the continued downward movement in these technologies , the cost of these technologies and the potential for , you know , a pullback in interest rates .
Speaker #3: We think that's a good setup . The paybacks on these systems will improve over time . They'll take a step back here in 26 .
Speaker #3: But for us, and again, we're going to recalibrate. And I do, I want to say the last thing I want to say on this.
Aaron Jagdfeld: The last thing I want to say on this, we do need to see success in 2026, even if it's, you know, we need to see at least share gains for storage and inverters or we'll have to recalibrate further if we don't see that kind of success. It is not our intention to be in a money-losing business forever. We are not a startup with, you know, unlimited capital backing from, you know, from investors. We understand and believe me, we try, we treat this as our own money. We don't want to lose money on anything we do. We see this as an investment in the future, as an important market, as an important part of building out an energy ecosystem that we believe will provide a differentiated solution for us to be a market participant over the long haul.
Speaker #3: We do need to see success in 2026. Even if it's, you know, we need to see at least share gains for storage and inverters, or we'll have to recalibrate further if we don't see that kind of success.
Speaker #3: It is not our intention to be in a money losing business forever . We are not a startup with , you know , unlimited capital backing from , you know , from investors .
Speaker #3: We understand and and believe me , we trust we treat this as our own money . We don't want to lose money on anything we do .
Speaker #3: But we see this as an investment in the future as an important market , as an important part of building out an energy ecosystem that we believe will provide a differentiated solution for , for us to be a market participant over the long haul .
Speaker #3: And we think it's an important thing for us to do. We're committed to it, but we need to see success and we need to see progress. We're confident that that will happen.
Aaron Jagdfeld: We think it's an important thing for us to do. We're committed to it. We need to see success and we need to see progress and we are confident that that will happen.
Speaker #1: Thank you. Our next question comes from the line of Jeff Hammond of KeyBanc Capital Markets. Your question, please, Jeff.
Operator: Thank you. Our next question comes from the line of Jeff Hammond of KeyBanc Capital Markets. Your question please, Jeff.
Speaker #9: Hey , good morning .
Jeff Hammond: Hey, good morning.
Speaker #3: Jeff .
Aaron Jagdfeld: Hey, Jeff. Hey.
Speaker #9: Hey , just back on the the data center . I think you said , you know , you think you could do 500 or maybe better next year .
Jeff Hammond: Just back on the data center, I think you said you think you could do $500 million or maybe better next year. As you start to get orders, are all of those kind of contemplated for 2026, or are people placing those longer dated orders? In terms of this new capacity you're considering, what would that look like? Is it a new plant, is it expansion, or do we have to double this thing as soon as we can?
Speaker #9: You know , with so , you know , one just , you know , as you start to , you know , get orders or all of those kind of contemplated for 26 or are people , you know , are those longer dated orders and you know , and then just in terms of like this new capacity or considering like , what would that look like ?
Speaker #9: Is it new plant , is it expansion , is it you know , we got to double this thing . You know , as soon as we can .
Speaker #9: Thanks .
Aaron Jagdfeld: Thanks. Yeah, thanks, Jeff. Just to clarify, the $300 million we have in backlog, we've said that the majority of that, the vast majority of that, is a 2026 shipping schedule. The $500 million or north thereof, that's a capacity number. Just to be clear, we haven't subscribed that fully yet, but we have the opportunity to do that. I will say, and I think we said this on the last call, a lot of our conversations we're having today in particular with Hyperscalers is about 2027 and beyond because they've already, because of the long lead times for these products, many of them have already got their 2026 plans completed. Anything that, any incremental above the $300 million that we've talked about here for 2026, that's going to come as opportunistic things.
Speaker #3: Yeah . Thanks , Jeff . So just to clarify , so you know , the 300 million we have in backlog , we've said that the majority of that , the vast majority of that is a 2026 shipping schedule .
Speaker #3: You know , the 500 million are north thereof . That's capacity number . So just to be clear , we haven't subscribed that fully yet , but we have the opportunity to do that .
Speaker #3: I will say , and we said this on the last call , a lot of our conversations we're having today , and particularly with hyperscalers , is about 2027 and beyond , because they've already because of the long lead times for these products , many of them have already got their 2026 plans completed .
Speaker #3: So anything that any incremental above the 300 million that we've talked about here for 26 , you know , that's going to come as opportunistic things , maybe other suppliers who have delivery challenges , you know , and so somebody needs a plan B , we could be a plan B , perhaps somebody who wants to accelerate connecting a data center more quickly .
Aaron Jagdfeld: Maybe other suppliers who have delivery challenges, and so somebody needs a plan B, we could be a plan B. Perhaps somebody who wants to accelerate connecting a data center more quickly. We are having those types of conversations where they believe they'll have a facility that's ready to go sometime in 2H 2026, but they maybe weren't planned to be online until early 2027, but they want to move that up. If we can supply generators, that's obviously an important consideration for bringing any of these facilities online. In terms of just having the uptime requirements, that could be an opportunity. We're going to continue to look to how do we improve our capacity numbers, even for 2026 above the $500 million we have now.
Speaker #3: We are having those types of conversations where they believe they'll have a facility that's ready to go sometime in the second half of 2026 .
Speaker #3: But they maybe weren't planned to be online until early 27 , but they want to move that up . And if we can supply generators , that's obviously an important consideration for bringing any of these facilities online in terms of just having the uptime requirements .
Speaker #3: That could be an opportunity . So we're going to continue to look to how do we improve our capacity numbers , even for 26 above the 500 million we have now .
Speaker #3: But the substantial change kind of maybe the second half of your question , the substantial change in capacity , what we're looking at there is how do we increase our capacity , basically , how do we basically double it again ?
Aaron Jagdfeld: The substantial change, maybe the second half of your question, the substantial change in capacity, what we're looking at there is how do we increase our capacity, basically? How do we basically double it again? How do we increase that, 50 to 100% more than where we're at today? How do we double that for 2027 and beyond, at least 2027, certainly 2027, 2028. That's going to come through. You kind of touched on it. We're going to need hard assets like facilities, right? These are big units. They take up a lot of room. We're going to need facilities, we're going to need space. We have line of sight on a number of facilities that we are in negotiation on here in Wisconsin and in other parts of the U.S.
Speaker #3: How do we increase that ? You know , 50 to 100% more than where we're at today ? How do we double that for 2027 and beyond ?
Speaker #3: You know , at least 27 , certainly 27 , 28 . And that's going to come through . You kind of touched on it .
Speaker #3: We're going to need hard assets like facilities . Right . These are big units . They take , you know , take up a lot of room .
Speaker #3: So we're going to need facilities . We're going to need space . We have line of sight on a number of facilities that we are in negotiation on here in , in Wisconsin and in other parts of the US .
Speaker #3: You know , we haven't signed anything yet , but we are in far along in negotiation and diligence around some of those physical areas where we can expand beyond that .
Aaron Jagdfeld: You know, we haven't signed anything yet, but we are far along in negotiation and diligence around some of those physical areas where we can expand beyond that. We've got equipment ordered with some of the longer lead time elements that we know, from the testing equipment to some of the material handling equipment for products of this size. Those lead times are also extended, as you would imagine. We put those bets down here recently, and we feel like we'll be able to bring that online in time to satisfy late 2026, early 2027 type of production timelines. We also, as I mentioned in the prepared remarks, continue to look at our M&A opportunities. Are there other ways that we could accelerate even more quickly, more rapidly? Not only in terms of raw capacity production for these products, but also certain elements where we can.
Speaker #3: We've got equipment ordered with some of the longer lead time elements that we know from the testing equipment to some of the material handling equipment for products of this size , those lead times are also extended .
Speaker #3: As you would imagine , and we put those we put those bets down here recently . And so we feel like we'll be able to bring that online in time to satisfy 20 late 26 , early 27 type of production timelines .
Speaker #3: We also , as I mentioned in the prepared remarks , we continue to look at , you know , our M&A opportunities . Are there other ways that we could accelerate even more quickly , more rapidly ?
Speaker #3: Not only in terms of raw capacity , production for these products , but also certain elements where we can , you know , are there other value streams we can capture in the unit ?
Aaron Jagdfeld: Are there other value streams we can capture in the unit? We don't make the engine, so structurally we're at a bit of a disadvantage to some of our competitors who actually make the engine. Not all of them do, but some of them do. Where else can we look to add value in these products? Is that an opportunity? Are there other critical components where we've heard of shortages, and can we look to acquisitions to put us in the market to be a more fulsome supplier not only of the backup equipment, but maybe other elements around the backup systems that go into these facilities? We're looking at all those things. As you know, Jeff, you followed the company a long time. We've got a very active M&A group here, team here. Nothing's changed there. We've done a lot of M&A over the last 15 years.
Speaker #3: We don't make the engine . So structurally , we're at a bit of a disadvantage to some of our competitors who actually make the engine .
Speaker #3: Not all of them do, but some of them do. So where else can we look to add value in these products?
Speaker #3: And is that an opportunity ? Are there other critical components where we've heard of shortages and can we look to acquisitions to put us in the market to be a more a more fulsome supplier , not only of the backup equipment , but maybe other elements around the backup systems that that go into these facilities .
Speaker #3: So we're looking at all those things , you know , we've had a very as you know , Jeff , you've followed the company a long time .
Speaker #3: We've had a very active M&A , you know , group here . Team here . Nothing's changed there . We've done a lot of M&A over the last 15 years .
Speaker #3: Very comfortable doing that . We've got we've got an excellent team here that is working on a number of things that could , you know , provide us additional capacity and or capabilities more quickly as we get into 2026 .
Aaron Jagdfeld: We're very comfortable doing that. We've got an excellent team here that is working on a number of things that could provide us additional capacity and or capabilities more quickly as we get into 2026. All those things are on the table. I think the point that I want to make, I think for you and for others, is we have a fantastic position financially. A great, really strong balance sheet. We produce a ton of cash flow. We're going to put that to work. We're going to put that to work in our C&I business in a way we have not put it to work before. We're going to put it to work going after this opportunity because again, we feel this is just a unique thing.
Speaker #3: So all those things are on the table . I think , you know , the , the point that I want to make , I think for you and for others is we have a fantastic position financially , a great , really strong balance sheet .
Speaker #3: We we produce a ton of cash flow . We're going to put that to work . We're going to put that to work in our CNI business .
Speaker #3: In a way we have not put it to work before . We're going to put it to work . Going after this opportunity , because again , we feel this is a just a unique thing .
Speaker #3: And so we're going to be aggressive . There . We're going to lean in . And that's going to that's going to , you know , have a we believe a material impact potentially double this business in the next 3 to 5 years that CNI business .
Aaron Jagdfeld: We are going to be aggressive there, we are going to lean in, and that is going to have a, we believe, a material impact to potentially double this business in the next three to five years. That C&I business.
Speaker #1: Thank you . Our next question comes from the line of Brian Drab of William Blair . Your line is open . Brian .
Operator: Thank you. Our next question comes from the line of Brian Drab of William Blair. Your line is open, Brian.
Speaker #7: Thanks . This is sort of an easy segue to my question . You know , you're talking about the capacity expansion and the , you know , the idea that you don't manufacture the engine .
Aaron Jagdfeld: Thanks. This is sort of an easy segue to my question. You know, you're talking about the capacity expansion and the idea that you don't manufacture the engine. I'm just wondering, Aaron, what are the biggest challenges? What are your biggest concerns about adding this much capacity that quickly in terms of supply chain or just anything in terms of the manufacturing operation? That's going to be challenging. I think people are looking for just that confidence that this capacity can come online smoothly. Yeah, thanks, Brian. Great question. I would just point to we brought it online, brought the product line online in our Oshkosh, Wisconsin facility very quickly. We finished our development earlier this year, produced our first lines we made, by the way, within our CapEx numbers this year are a bunch of upgrades to that facility to allow for the startup of manufacturing in these products.
Speaker #7: I'm just wondering , Aaron , what are the biggest challenges ? What are your what are your biggest concerns about adding this much capacity that quickly in terms of supply chain or , you know , just anything in terms of the manufacturing operation that's going to be challenging ?
Speaker #7: I think people are looking for , you know , just that that confidence that that , that , you know , this capacity can come online smoothly .
Speaker #3: Yeah . Thanks , Brian . Great . Great question . You know , I would just point to , you know , we brought it online , brought the product line online in our Oshkosh , Wisconsin facility very quickly .
Speaker #3: You know , we finished our development earlier this year , produced our first line we made , by the way , you know , within our CapEx numbers this year are a bunch of upgrades to that facility to allow for the startup of manufacturing of these products .
Speaker #3: That was part of getting to the $500 million or slightly north of capacity that's available for us in 2026. That's in our run rate.
Aaron Jagdfeld: It was part of getting to the $500 million or slightly north of capacity that's available for us in 2026. That's in our run rate, our CapEx run rate this year. We've been working around the clock and that's no lie in terms of the test cell upgrades, the material handling upgrades, physical upgrades. We're moving walls, we're moving cranes, we're expanding, we're doing things there that are readying us for production. As I said, we rolled some of the first units down the line a couple weeks ago, got those out on trucks and shipping about 10 days ago, and we're building here in the fourth quarter. I feel very comfortable that the production side of this, we can do that. That's within our wheelhouse.
Speaker #3: Our CapEx run rate this year . You know , we've been working around the clock , and that's no lie in terms of the the test cell upgrades , the material handling upgrades , the physical upgrades .
Speaker #3: I mean , we're moving walls . We're moving cranes , we're expanding , we're doing things there that , you know , are readying us for production .
Speaker #3: And as I said , we rolled some of the first units down the line . You know , a couple of weeks ago .
Speaker #3: Got those out on trucks and shipping , you know , about ten days ago . And , and we're building here in the fourth quarter .
Speaker #3: So I feel very comfortable that like the production side of this , we can do that . That's that's within our wheelhouse . The supply chain side , our engine partner there has a ton of capacity .
Aaron Jagdfeld: The supply chain side, our engine partner there has a ton of capacity and I don't feel like that's going to be a constraint for us, which I think has, if you look at the market, the broad market today and the structural imbalance that we've talked about on this call and on the previous call, is largely around the engine supply. Coming into the market with an engine supply partnership like we have with Bowdoin, and who has made a massive investment that they've brought online in these, what they refer to as large bore diesel engines, we feel like we're in a really good position there to be able to supply the market with these types of products. Engines will not be a constraint. You move to the next large component, which is alternators. We're working with multiple alternator suppliers.
Speaker #3: And I don't feel like that's going to be a constraint for us , which I think has you know , if you look at the market , the broad market today and the structural imbalance that we've talked about on this call and on the previous call is largely around the engine supply .
Speaker #3: And so coming into the market with an engine supply partnership like we have with Bowdoin , we just , you know , who has a , you know , they've made a massive investment that they've brought online in these what they refer to as large bore diesel engines .
Speaker #3: You know , we feel like we're in a really good position there to be able to , you know , supply the market with these types of products .
Speaker #3: Engines will not be a constraint . Then you move to the next large component , which is alternators . We're working with multiple alternator suppliers .
Speaker #3: They are all suppliers we know because we buy from them today for our CNI markets . So it's not a new supply base .
Aaron Jagdfeld: They are all suppliers we know because we buy from them today for our C&I market. It's not a new supply base. This is a very similar supply base to what we see in C&I where we have great long-term relationships. We're able to leverage those relationships to work with them to grow that business and to leverage our expertise. We're known commodities. They're not selling to somebody on some fly-by-night operation or some potential customer they don't know. We are not a credit risk, we're not a risk operationally. We're a known commodity. I think those are all pluses. I think where the physical constraints are going to happen is physically, just the amount of product that we can build because these things take up space and then downstream some of the packaging constraints that could happen.
Speaker #3: You know , this is a this is a very similar supply base to what we see in CNI , where we have great long term relationships .
Speaker #3: So we're able to leverage those relationships to work with them to grow that business and to leverage , you know , again , our expertise and our , you know , again , we're a known commodity .
Speaker #3: They're not selling to somebody , you know , on some fly by night operation or some potential customer here . They don't know we are not a credit risk .
Speaker #3: We're not a risk operationally . We're a known commodity . So I think those are all pluses . I think where the physical constraints are going to happen are constraints are going to happen , is physically just the amount of product that we can build because these things take up space .
Speaker #3: And then downstream , some of the packaging constraints that could happen . You got a lot of the the industry , you know , we build the unit up to a certain level .
Aaron Jagdfeld: A lot of the industry, we build the unit up to a certain level and then the product is shipped to, in our industry, what's known as a packager. The packager then provides the outer housing, the enclosure to the end customer spec. Those are unique specifications. A lot of times they're engineered to order and they're highly configured and built to unique specifications for customers. We believe there's opportunities there for us to participate and work with some of the packagers. We've lined up a couple of partnerships there to make sure that we've got at least adequate capacity for the orders we have in house today. How do we grow beyond that? We don't want that to be a constraint in our growth as we're going forward.
Speaker #3: And then the product is shipped to in our industry , what's known as a packager , the packager then provides the outer housing , the enclosure to the end customer spec .
Speaker #3: And those are unique specifications . So they're they're really a lot of times they're engineered to order . And so they're highly configured and they're built to unique specifications for customers .
Speaker #3: We believe there's opportunities there for us to participate and work with some of the packagers . We've lined up a couple of partnerships there to make sure that we've got at least adequate capacity for the orders we have in house today , but how do we grow beyond that ?
Speaker #3: We don't want that to be a constraint in our growth going forward, so we're looking at ways to partner more deeply with those packagers.
Aaron Jagdfeld: We're looking at ways to partner more deeply with those packagers so that we can ensure that's not a constraint on our growth for this market opportunity. There are a lot of things that I just said there and there are a lot of things that we need to do execution wise. When I look at what this is, it's just not that far afield from what we do today or what we've been doing for the last 50 years in the C&I industry. I just feel like if there's a place where something is in our wheelhouse and where we have the opportunity to really have an impact, it's in this, not only the data center end of it, but as I said, the traditional market for large backup power is also a great opportunity for us.
Speaker #3: So we can ensure that that's not a constraint on our growth for this market opportunity. So there are a lot of things that I just said there.
Speaker #3: And there's a lot of things that we need to do execution wise . But again , when I look at what what this is , it's just not that far afield from what we do today .
Speaker #3: And , you know , again , or what we've been doing for the last 50 years in the CNI industry . And so I just feel like we're if there's a place where , you know , something is in our wheelhouse and where we can , you know , we have the opportunity to really have an impact .
Speaker #3: It's in this , this , you know , not only the data center end of it , but as I said , the traditional market for large , you know , large backup power is also a great opportunity for us .
Speaker #3: We've got a lot of order activity and a lot of pipeline activity that we're working through as we bring the first products to market on an order basis for that end of the market as well.
Aaron Jagdfeld: We've got a lot of order activity, a lot of pipeline activity there that we're working through as we bring the first products to market on an order basis for that end of the market as well. A lot of great things are ahead for that part of our business.
Speaker #3: So, a lot of great things ahead for that part of our business.
Speaker #1: Thank you . Our next question comes from the line of Mark Strauss of JP Morgan . Please go ahead . Mark .
Operator: Thank you. Our next question comes from the line of Mark Strouse of JPMorgan. Please go ahead. Mark.
Speaker #10: Yes . Good morning . Thanks for taking our questions . Aaron , you mentioned earlier trying to get on the the approved vendor list for some of the hyperscalers .
Aaron Jagdfeld: Yes, good morning.
York Ragen: Thanks for taking our questions. Aaron, you mentioned earlier trying to get on the approved vendor list for some of the hyperscalers.
Speaker #10: Can you just give a bit more color on what that process really looks like? And is the timeline for that kind of measured in months or quarters? Anything that you can share there would be great.
Aaron Jagdfeld: Can you just give a bit more?
York Ragen: Color on what that process really looks like, and is the timeline for that kind of more measured in months or quarters, or anything that you can share there would be great. Thank you.
Speaker #10: Thank you .
Speaker #3: Yeah . Thanks , Mark . Yeah , it's it's different for each Hyperscaler . You know , we are just I might just point out I mean , we are the preferred supplier for for two global co-location already .
Aaron Jagdfeld: Yeah, thanks. Yeah, it's different for each hyperscaler. We are the preferred supplier for two global co-locators already. In terms of what it means to be on the AVL, when we're talking about that, we're really referring to the AVL for the hyperscalers. We're making really good progress with the co-locators, and we are already listed as a preferred supplier for two of them globally. I feel really good about where we're at there. Back to the hyperscalers. If this is a baseball game, we're not playing baseball here in Milwaukee anymore, unfortunately. Dodgers swept us. For those that are fans of the game, a nine-inning game, not an 18-inning game like the other night, but a nine-inning game. I would categorize our progress there. First of all, it is measured in months, I think. The hyperscalers that we're working with are pushing us to get through their gauntlet.
Speaker #3: So in terms of like what it means to be on the AVL when we're talking about that , we're really referring to the AVL for the hyperscalers .
Speaker #3: We're making really good progress with the co-location, and we are already listed as a preferred supplier for two of them globally. So, I feel really good about where we're at.
Speaker #3: Their back to the hyperscalers , I mean , if this is a baseball game , we're not playing baseball here in Milwaukee anymore .
Speaker #3: Unfortunately , Dodgers swept us . But for those that are , you know , fans of the game , you know , nine inning game , not an 18 inning game like the other night , but a nine inning game .
Speaker #3: You know , I would categorize our progress there . First of all , it is measured in months . I think , you know , again , the hyperscalers that we're working with are pushing us to get through their gauntlet .
Speaker #3: And it is a gauntlet . It's just it's just a process . A lot of it is , you know , there's contracts , right ?
Aaron Jagdfeld: It is a gauntlet. It's just a process. A lot of it is, there's contracts, right? You've got a lot of back and forth from a legal perspective. You have certificates of insurance, you have entity discussions, like what's our org structure, entity structure. There are high-level management meetings. They want to do face to face. Every one of them has a little bit of a different approach, and there are different boxes to check for each one. We do not see any showstoppers in those processes. They just take time to get through. I would say, just a baseball game reference, we're probably something in the sixth or seventh inning with most of those hyperscalers. Maybe a little bit different one to the other, each one's a little bit different, as I said before, but good progress. We hope to have better updates as we go forward here.
Speaker #3: So you've got a lot of back and forth from from a legal perspective . You have certificates of insurance . You have entity discussions .
Speaker #3: Right . Like what's our our org structure or entity structure . There are high level management meetings . They want to do face to face .
Speaker #3: Right . Every one of them has a little bit of a different approach . And there are different boxes to check for each one .
Speaker #3: We do not see any showstoppers in those processes. They just take time to get through, I would say. So, baseball game back to that reference.
Speaker #3: We're probably something in the , you know , the sixth or seventh inning with most of those hyperscalers a little bit different one to the other from , you know , each one's a little bit different .
Speaker #3: As I said before , but good progress . We hope to have better updates as we go forward here . Yeah , I think the the greatest evidence there will be the continued growth in that backlog .
Aaron Jagdfeld: I think the greatest evidence there will be the continued growth in that backlog and actually having a hyperscaler come in and, with their trust, give us an opportunity to supply them with product, whether it be in 2026 or what is more likely, as I said before, it's 2027 and beyond.
Speaker #3: And actually having a hyperscaler come in and , you know , with their trust , you know , give us an opportunity to supply them with product , whether it be in 26 or what is more likely , as I said before , it's 2027 and beyond .
Speaker #1: Thank you . Our next question comes from the line of Christine Cho of Barclays . Please go ahead . Christine .
Operator: Thank you. Our next question comes from the line of Christine Cho of Barclays. Please go ahead.
Aaron Jagdfeld: Christine, good morning. Thank you for taking my question. Just as a follow up to Mark's question, I understand that your engines are actually coming from France, but are you finding that the Chinese ownership of the supplier is something that is brought up in your conversations with the bigger type of customers? Would you say that you need at least one hyperscaler contract in hand in order to feel comfortable in doubling the capacity? Great questions, Christine. On the supply chain side with our engine supplier, we've talked through with our customer base where we're getting our engines from. Obviously, I think if you look at the supply of any of these engines, by the way, from the competitive set, there are components that today are only available in some parts of the world, like China.
Speaker #11: Good morning . Thank you for taking my question . Just as a follow up to Mark's question , I understand that your engines are actually coming from France , but are you finding that the Chinese ownership of this supplier is something that is brought up in your conversations with the bigger type of customers ?
Speaker #11: And would you say that you need at least one hyperscaler contract in hand in order to feel comfortable in doubling the capacity ?
Speaker #3: Yeah . Great question Christine . So on the on the supply chain side with our engine supplier , you know , we've talked through with our customer base , you know , where we're getting our engines from .
Speaker #3: Obviously , I think if you look at the supply of any of these engines , by the way , from the competitive set , there are components that today are only available in some parts of the world , like China .
Speaker #3: And so , you know , our reliance on a supply chain there that's global in nature . But , you know , specific to certain areas of the world , like China , certain countries is not unique .
Aaron Jagdfeld: Our reliance on a supply chain there that's global in nature, but specific to certain areas of the world, like China, certain countries, is not unique. The ownership structure there is something we've talked about. Again, where those engines are moving, manufactured, our partner there has a global base of manufacturing that they are expanding. By the way, it's not just going to be France. They've got facilities in India, they've got facilities that they're looking at in other parts of the world. We believe that over time, if it's a concern today, that's something that we're going to be able to mitigate. There are also potential structures, ownership structures in the future that could look different. Right. Be they JVs or some other structure there, nothing's off the table. We don't want that to be a negative on our entry into this market.
Speaker #3: The ownership structure there , I mean , it's something we've talked about . But , you know , again , where those engines are manufactured that that , you know , our partner there has a global base of manufacturing that they are expanding .
Speaker #3: By the way , it's not just going to be France . You know , they've got facilities in India . They've got facilities that they're looking at in other parts of the world .
Speaker #3: So we believe that , you know , over time , you know , it's you know , it's something that will if it's a concern today , I think , you know , that's something that we're going to be able to mitigate .
Speaker #3: There are also potential structures , ownership structures in the future that could look different , right . Be they JVs or some other structure .
Speaker #3: There . You know , nothing's off the table . We don't want that to be , you know , a negative on our entry into this market .
Speaker #3: We don't think it is . And nobody has indicated that it's a showstopper at this point . But you know , something that we want to continue to stay ahead of .
Aaron Jagdfeld: We don't think it is, and nobody has indicated that it's a showstopper at this point. It's something that we want to continue to stay ahead of. I think as far as, to answer your question about the doubling of capacity or potential doubling of capacity, yes, I would certainly feel better if we had a hyperscale commitment there that would make me feel better about the long term usage of that. I would just say this. The way we're structuring the expansion of capacity there, I want to be clear that we feel that is something that if it needed to be repurposed for something else, we'll use it for that. That could be the next leg of growth in another part of our business. We lease quite a bit of outside storage space today that could come in house if we needed to convert some facilities.
Speaker #3: I think as far as you know , the answer your question about the doubling of capacity or potential doubling of capacity , yes .
Speaker #3: I would certainly feel better if we had , you know , a hyperscale commitment there that would make me feel better about the long term .
Speaker #3: Usage of that . But I would just say this , you know , the way we're structuring the expansion of capacity there , you know , I want to be clear that we feel that's something that if we needed to be repurposed for something else , we'll use it for .
Speaker #3: That could be the next leg of growth in another part of our business. It could be, you know, we lease quite a bit of outside storage space today that could come in-house if we needed to convert some facilities.
Speaker #3: It's not ideal , but I think , you know , the added capacity that we're leaning into , we feel and we're not getting to a point where I would say , you know , let's say that hyperscale business doesn't come to us for whatever reason .
Aaron Jagdfeld: It's not ideal, but I think the added capacity that we're leaning into, we feel we're not getting to a point where I would say, let's say that hyperscale business doesn't come to us for whatever reason. I don't think that'll be the case. I think quite honestly, it'll be the other way around. I do think we'd be able to deploy that capacity to our benefit. It would take longer to use it up, of course, and I'd feel more confident, to your point, if we had that commitment. I do think that's something that we'll be able to talk about here in the months ahead.
Speaker #3: And I don't think that'll be the case . I think , quite honestly , it will be the other way around . But I do think we'd be able to deploy that capacity to our benefit .
Speaker #3: It would take longer to use it up . Of course , and I'd feel more confident . To your point , if we had that commitment .
Speaker #3: But I do think that's something that we'll be able to talk about here . You know , in the months ahead .
Speaker #4: It'll be growth in our traditional markets .
York Ragen: There'll be growth in our traditional markets, for sure.
Speaker #3: For sure . Growth in our traditional markets that will need some of that as well .
Aaron Jagdfeld: Growth in our traditional markets, that we'll need some of that as well.
Speaker #1: Thank you. Our next question comes from the line of Keith Housum of North Research. Please go ahead, Keith.
Operator: Thank you. Our next question comes from the line of Keith Housum of North Cove Research. Please go ahead to Keith.
Speaker #12: Good morning guys . I appreciate it . I'll stay along the lines of the data centers . Aaron , perhaps you can touch on , the pricing for these these data center generators in the margin profile and kind of thinking of how that might affect the margins going forward .
Aaron Jagdfeld: Good morning, guys. I appreciate it, staying along the lines of the data centers. Aaron, perhaps you can touch on the pricing for these data center generators.
Operator: The margin profile and kind of.
York Ragen: Thinking how that might affect the margins going forward.
Speaker #3: Yeah . Thanks , Keith . Great question . You know , pricing ASP on the each unit you're talking about a 3.25MW unit or larger .
Aaron Jagdfeld: Yeah, thanks, Keith. It's a great question. You know, pricing ASP on each unit, you're talking about a 3.25 megawatt unit or larger. By the way, I would just note, today our product line, we roll out the first part of the product line up to 3.25 megawatt. The next part of the product line from 3.5 to 4 megawatts will roll out in 2026. The ASPs on these products range from, you know, depends on the content, depends on the customer, but it can be anywhere from $1.5 million to $2 million per gen set. Pricing is, and we're competitive on pricing across the market. I would say the margin profile domestically, margin profile is very similar to our C&I product set here in North America, maybe a little bit below that, but not dramatically so. Internationally, it's a little bit below that.
Speaker #3: And by the way, I mean, I would just note, I mean, today our product line, you know, we roll out the first part of the product line up to 3.25 MW.
Speaker #3: The next part of product line from three and a half to four megawatts , will roll out in 2026 . But the ASPs on these products range from , you know , depends on the content , depends on the customer .
Speaker #3: But it can be anywhere from 1.5 million to 2 million per genset . So pricing is and we're competitive on pricing across the market .
Speaker #3: I would say the margin profile domestically , margin profile is , you know , is very similar to our our CNI product set here in North America , maybe a little bit below that , but not dramatically so internationally .
Speaker #3: It's a little bit below that . You know , the international markets are always when you look at our CNI products , gross margins are are not quite as strong internationally .
Aaron Jagdfeld: The international markets are always, when you look at our C&I products, gross margins are not quite as strong internationally. That's kind of a legacy. That's just structural in terms of the international markets being, I would say, more competitive overall and us being a smaller player internationally. I think that's what kind of leads to that. We've made a lot of progress on that, by the way, in our ownership of Pramac over the last decade. They've improved their gross margins dramatically, which has been great. We're going to continue to work on that. Gross margins for those products, I would just say this. The incremental impact to EBITDA margins is fantastic for the data center market in terms of the overall impact on our C&I product margins. If you just looked at the incremental impact on EBITDA margins, it'll be positive.
Speaker #3: And that's that's kind of a legacy that just structural in terms of the international markets being , I would say , more competitive overall and us being a smaller player internationally .
Speaker #3: So I think that's what kind of leads to that . We're working . We've made a lot of progress on that , by the way , in our ownership of Pramac over the last decade , you know , they've improved their gross margins dramatically , which has been great .
Speaker #3: And we're going to continue to work on that. But gross margins for those products, you know, I would just say this.
Speaker #3: I mean, the incremental impact to EBITDA margins is fantastic for the data center market in terms of the overall impact on our CNI product margins.
Speaker #3: And if you just looked at the the incremental impact on EBITDA margins , it will be positive .
Speaker #1: Thank you . Our next question comes from the line of Sean Milligan of Needham and Company . Please go ahead . Sean .
Operator: Thank you. Our next question comes from the line of Sean Milligan of Needham and Company. Please go ahead, Sean.
Speaker #13: Hey , everyone . Thank you for taking the question . Just just curious about the margin progression . I know you don't want to really give guidance for next year , but in terms of the framework , you know , the back half EBITDA margins are kind of weaker than what we're expected .
Aaron Jagdfeld: Hey everyone, thank you for taking the question. I was just curious about the margin progression. I know you don't want to really give guidance for next year, but in terms of the framework, you know, the.
York Ragen: Back half EBITDA margins are kind of weaker than what we're expected.
Speaker #13: So, just gives and takes into next year. Like, does cause HSV get better energy tech? You have some revenue headwinds. And then the data center piece, just trying to kind of think about what that all means for margins moving forward.
Aaron Jagdfeld: Just gives and takes into next year. Like does core residential home standby get better energy tech?
York Ragen: You have some revenue headwinds, and then.
Aaron Jagdfeld: The data center piece, just trying to kind of think about what that all means for margins moving forward.
Speaker #13: On the EBITDA side .
York Ragen: On the EBITDA side, yeah, Sean, it's your work. I think if you looked at our updated guidance for 2025, we're talking more like 17%, approximately 17% EBITDA margins versus the, call it, 18% to 19% that we were previously guiding. At the midpoint of the last guide, call it a 1.5% reduction. Obviously, the unfavorable mix with selling less, bringing our home standby guidance down given the outage environment, that's our highest margin product. I'd say about a third of that 1.5% decline is mix, which to Aaron's point, if you think about 2026 and you revert back to the mean with regards to outages, that mix, we should see a nice pop in home standby that should help claw back some of that mix decline. I think on the mix side there'll be some recovery in 2026.
Speaker #4: Yeah , Sean , it's York , so yeah , I think if you looked at our updated guidance for 25 , we're talking more like 17 , approximately 17% EBITDA margins versus the call it 18 to 19 that we were previously guiding .
Speaker #4: So at the midpoint of the last guide , call it a 1.5% reduction . So maybe obviously the unfavorable mix with selling less , bringing our home standby guidance down given the outage environment , that's our highest margin product .
Speaker #4: So I'd say about a third of that at 1.5% decline . Is is is mix , which to Aaron's point , if you think about 2026 and you revert back to the mean with regards to outages , that that mix , we should see a nice a nice pop in home standby that should , should , should , should help claw back some of that mix decline .
Speaker #4: So so I think on the mix side , there'll be some recovery in 26 . Obviously the opex deleverage on the on the on the on the lower guide is probably the remainder of the 1.5% EBITDA guide .
York Ragen: Obviously, the OpEx deleverage on the lower guide is probably the remainder of the 1.5% EBITDA guide. As we are talking about a framework for 2026 and growing home standby and portables and C&I, we're going to be able to leverage our OpEx structure. We'll be able to improve our EBITDA margins from the 17% we're talking about in 2025. There's probably some small price cost impact in that 1.5% decline for 2025 that I would say is transitory in nature, which shouldn't repeat in 2026. That's a long-winded way of saying we should see some nice recovery in EBITDA margins off this 17% that we're talking in 2025, some due to mix, some due to operating leverage, some due to some of these transitory costs coming through, new product introduction costs, plant ramp-up costs, pricing. We should see a recovery in those EBITDA margins for 2026.
Speaker #4: So obviously as we are talking about a framework for 26 and and growing home standby and portables and CNI , we're going to be able to we're going to be able to leverage our OpEx structure .
Speaker #4: So we'll we'll be able to improve our EBITDA margins from the 17% we're talking about in 25 . There's probably some small price cost impact in that 1.5% decline for 25 .
Speaker #4: That I would say is transitory in nature , which shouldn't repeat in 26 . So that's a long winded , long winded way of saying we should see some nice recovery in EBITDA margins off this 17% that we're talking in 25 , some due to mix , some due to operating leverage , some due to some of these transitory costs coming through new product introduction costs , plant ramp up costs , etc.
Speaker #4: . Pricing . So should should see a recovery in those EBITDA margins for 26 .
Speaker #1: Thank you . I would now like to turn the conference back to Kris Rosemann for closing remarks . Sir .
Operator: Thank you. I would now like to turn the conference back to Chris Rosemann for closing remarks.
Aaron Jagdfeld: We want to thank everyone.
Speaker #14: We want to thank everyone for joining us this morning . We look forward to discussing our fourth quarter and full year .
Chris Rosemann: For joining us this morning. We look forward to discussing our fourth quarter and full year 2025 earnings results with you in mid-February 2026. Thank you again and goodbye.
Speaker #2: 2025 earnings results with you in mid-February 2026 . Thank you again and goodbye .
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.