Generac CEO Aaron Jagdfeld on powering data centers and size of the market

A BIG STEP UP FOR HER. AND OF COURSE, A BIG PIVOT FOR THE WHITE HOUSE. >> CERTAINLY WILL BE SOME BREAKING NEWS THERE OUT OF D.C. BY EAMON JAVERS. EAMON, WE APPRECIATE IT. THANK YOU. ALL RIGHT. SO LET'S GET BACK NOW SORT OF TO TO WEATHER AND POWER AND MORE. AND WE'LL CALL THIS PART OF OUR POWER INSIDER FRANCHISE HURRICANE ISAIAS POSING ANOTHER RISK OF POWER OUTAGES. ENERGY DEMAND HAS BEEN GROWING NOT JUST AT YOUR HOUSE, BUT ALSO FOR DATA CENTERS. THE POWER ALWAYS HAS TO BE ON HELPING COMPANIES DO THAT IS GENERAC AND THE CEO, AARON JACK, THE CEO OF GENERAC. JOINING US NOW FOR A LOT. LISTEN FOR THE HOUSE. AARON, WELCOME BY THE WAY. IT'S GREAT TO HAVE IT RIGHT WHERE WE ARE IN NEW JERSEY NOW. IT'S ALMOST A MUST HAVE TO HAVE BECAUSE WE'VE HAD SO MANY MASSIVE STORMS IN THE LAST 15 YEARS. BUT SUPER CRITICAL FOR DATA CENTERS, FOR REFINERIES. THE POWER CAN'T GO OUT. HOW ARE YOU? HOW ARE YOU GUYS HELPING? >> YEAH. THANKS FOR HAVING ME ON, BRIAN. YOU'RE SPOT ON. I MEAN, IT'S NOT JUST NEW JERSEY, BY THE WAY. I'M VAST SWATHS OF THE U.S. WHERE POWER QUALITY IS AN ISSUE. AND IT'S NOT ONLY AN ISSUE FOR HOMEOWNERS, WHICH HAS BEEN OUR CORE BUSINESS FOR A LONG TIME, BUT IT'S A GROWING ISSUE FOR BUSINESSES, RIGHT. AND FOR, YOU KNOW, GOVERNMENT AGENCIES. I MEAN, EVERYTHING FROM WASTEWATER TREATMENT, CRITICAL INFRASTRUCTURE, YOU KNOW, TELECOMMUNICATIONS ALL THE WAY THROUGH TO MANUFACTURING PLANTS. AND AS YOU INDICATED, NOW, DATA CENTERS OBVIOUSLY ARE A HUGE, YOU KNOW, BOTH I FOR US, A DIRECT PLAY, RIGHT, IN TERMS OF BEING ABLE TO SUPPLY BACKUP PRODUCT FOR THESE TYPES OF CAMPUSES, BUT THEN ALSO THE INDIRECT IMPLICATIONS OF THE AMOUNT OF POWER THE DATA CENTERS USE, AND ACTUALLY THAT POTENTIALLY CONTRIBUTING TO POWER QUALITY ISSUES THAT MAY INFLUENCE OTHER PARTS OF OUR BUSINESS. >> YEAH. AND, YOU KNOW, I DON'T KNOW IF IN THE PREVIOUS HOUR YOU'RE BUSY KIND OF RUNNING A COMPANY. AARON. SO WE HAD AN ANALYST ON PIPER SANDLER WHO LOVES YOUR COMPANY, LOVES THE STOCK, BY THE WAY, TALKED ABOUT THE TOTAL ADDRESSABLE MARKET. I KNOW YOU GOT EARNINGS SOON. SO WE'RE NOT GOING TO GET INTO SPECIFIC EARNINGS STUFF. BUT SOME PEOPLE SHE THOUGHT MIGHT BE UNDERESTIMATING THE SIZE AND LENGTH OF YOUR ADDRESSABLE MARKET. LONGER TERM. HOW BIG IS THE MARKET FOR GENERAC? >> YEAH, IT'S A GREAT QUESTION. AND YOU KNOW DIMPLE JUST PICKED UP COVERAGE I THINK THIS WEEK. SO WELCOME HER TO OUR, OUR OUR CADRE OF ANALYSTS THAT COVER THE COMPANY. BUT YOU KNOW, I THINK YOU'RE RIGHT. I THINK A LOT OF PEOPLE HAVE UNDERSIZED THE MARKET, INCLUDING US. I MEAN, WE DID OUR CAPITAL MARKETS DAY, OUR INVESTOR DAY IN NEW YORK IN MARCH. AND, YOU KNOW, WE KIND OF SIZED THE GLOBAL MARKET FOR DATA CENTERS FOR BACKUP POWER AT 14 TO $17 BILLION. I THINK, YOU KNOW, IN RETROSPECT, AS WE LOOK AT IT AND JUST THE SPEED AND THE BREADTH OF THE SCALE UP HERE OF THE BUILD OUT, YOU KNOW, WE PROBABLY UNDERSHOT IT BY A FACTOR OF TWO, MAYBE, MAYBE EVEN THREE TIMES. THE US MARKET ALONE IS PROBABLY CLOSER TO 15 TO 20 BILLION. THE WAY WE'RE LOOKING AT IT MORE RECENTLY, YOU KNOW, AND EVEN FOR US, YOU KNOW, WE INDICATED AT THE CAPITAL MARKETS DAY THAT BY 2028, WE THOUGHT WE WOULD DO $1 BILLION OF SALES FOR DATA CENTERS IN 28. RIGHT NOW. RIGHT NOW WE'RE LOOKING AT MAYBE 2 BILLION NEXT YEAR IN 2027. SO THIS IS MOVING A LOT FASTER THAN WE CERTAINLY THOUGHT. AND I THINK IT'S GOING TO BE A LOT BIGGER. AND I THINK MAYBE TO JUST COVER THAT OFF, IT'S GOING TO LAST A LOT LONGER. EVERYBODY WE'VE TALKED TO HERE IN THIS INDUSTRY THAT THE HYPERSCALERS, THE CO LOCATORS WHO ARE BUILDING OUT, THEY SAY, LOOK, THIS BUILD OUT IS MASSIVE. AND IN TERMS OF JUST THE LENGTH OF TIME IT'S GOING TO TAKE, THE PHYSICAL AMOUNT OF TIME IT'S GOING TO TAKE TO DO CONSTRUCTION TO BUILD OUT THIS, YOU KNOW, THIS DATA CENTER NEED IS, IS GOING TO TAKE, YOU KNOW, IT COULD BE 5 TO 10 YEARS. >> YEAH. AND THE IDEA AND DIMPLE AND I WERE TALKING ABOUT THIS OFF CAMERA THAT THE, THE SPEND ON POWER AND WHERE COMPANIES MIGHT SPEND WITH YOU IS ACTUALLY KIND OF A SMALL PERCENTAGE OF THE DATA CENTER. SO IT'S NOT A BARRIER TO ENTRY. AND IT ANSWERS THIS. AARON, IS IT A MUST HAVE? LIKE IF, IF I'M BUILDING A DATA CENTER TOMORROW, DO I HAVE TO HAVE YOUR POWER SYSTEMS ON THE BUILDING? OR IS IT JUST LIKE I WANT TO, BUT I DON'T HAVE TO? >> YEAH, I'M GOING TO SIT HERE AND TELL YOU, YES, THEY HAVE TO HAVE OUR SYSTEMS BECAUSE THAT'S, YOU KNOW, I JUST. >> I REALIZE WHEN I ASK YOU WHAT A DUMB QUESTION IT WAS LIKE, OF COURSE YOU'RE GOING TO SAY YES. BUT I MEAN, LIKE ENGINEERING WISE. >> ENGINEERING WISE, 100% OF DATA CENTER INSTALLATIONS NEED TO HAVE A BACKUP STRATEGY. NOW, THERE ARE DIFFERENT TECHNOLOGIES TO COVER THAT. BUT THE MOST PREVALENT TECHNOLOGY IS THE BACKUP POWER KIND OF GENERATORS THAT WE MANUFACTURE. RIGHT? IT'S GOT A DIESEL ENGINE. YOU KNOW, THIS IS A TURNING A SET OF COPPER WINDINGS. WE'RE NOT MAKING POWER REALLY MUCH DIFFERENTLY THAN, THAN, THAN, YOU KNOW, WHEN POWER WAS FIRST BEING MADE 120 YEARS AGO. BUT AT THE END OF THE DAY, IF YOU'RE RUNNING A DATA CENTER, IF YOU OWN AND OPERATE A DATA CENTER, THE PROBLEM IS IF YOU HAVE EVEN, YOU KNOW, A MINUTE OF DOWNTIME IN THAT DATA CENTER, YOU'RE ON THE HOOK. OFTENTIMES, YOU KNOW, YOU HAVE SERVICE LEVEL AGREEMENTS THAT YOU'VE GOT WITH YOUR CUSTOMERS THAT GUARANTEE UPTIME. AND THERE ARE ACTUAL PENALTIES, FINANCIAL PENALTIES TO NOT PROVIDING THAT UPTIME. AND SO, YOU KNOW, THE LOSS TO ECONOMICS OF NOT HAVING POWER IS ONE THING, BUT THE PENALTIES ARE ANOTHER. YOU PUT ALL THAT TOGETHER AND DIMPLE'S. RIGHT. I MEAN, THE