Good day, ladies and gentlemen, and welcome to the Generac Holdings, Inc. Second Quarter 2015 Earnings Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, York Ragen, Chief Financial Officer. Sir, you may begin. York A. Ragen - Chief Financial Officer & Head-Investor Relations: Thank you. Good morning and welcome to our second quarter earnings call. I'd like to thank everyone for joining us this morning. With me today is Aaron Jagdfeld, our President and Chief Executive 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 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 our 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. GAAP measures, is available in our earnings release and SEC filings. I will now turn the call over to Aaron. Aaron P. Jagdfeld - President, Chief Executive Officer & Director: Thanks, York. Good morning, everyone, and thank you for joining us today. Net sales in the second quarter of 2015 were $288 million as compared to $363 million in the prior year, primarily due to a decline in shipments of both residential and commercial and industrial products. Residential products were impacted primarily due to…

Thank you. Our first question comes from Jeff Hammond of KeyBanc Capital Markets. Your line is open.

Hey. Good morning, guys. Aaron P. Jagdfeld - President, Chief Executive Officer & Director: Good morning, Jeff. York A. Ragen - Chief Financial Officer & Head-Investor Relations: Good morning, Jeff.

So just to understand a little bit better, I think you had said last quarter that if you kept this low level of storms, you thought sales would be down 2% to 4%. Now you're kind of saying 10%. So what's changed in your thinking there over the last quarter? York A. Ragen - Chief Financial Officer & Head-Investor Relations: Yeah, I think the – so that 2% to 4%, when we rolled that 2% to 4% up, we were looking at prior year sort of as a baseline. Last year we talked a lot about how prior year was below normal. So, when we rolled up our 2% to 4% for 2015, we were assuming a below-normal outage scenario, similar to prior year, and rolled up our residential results given those assumptions, using sort of prior year as a baseline. What we're finding, Jeff, as you see from our second quarter, the first quarter outage environment was record low, as we talked about; April, May continued to be low; July continued to be low. So, really the difference between last quarter's 2% to 4% down and our guidance that we're really issuing today really assumes that record low outage level from the first half continues in the second half, which is really a lower assumption than what we thought when we rolled out that 2% to 4%. Aaron P. Jagdfeld - President, Chief Executive Officer & Director: The outage environment just – it's been a lot lower than even we were thinking – and so I think that prior 2% to 4% guidance that we issued, 2% to 4% down, was kind of predicated on what we were seeing. And actually, as the first half kind of finished out, it came in a lot lower than even we were expecting for a low environment. So it's just been very quiet in terms of outages. York A. Ragen - Chief Financial Officer & Head-Investor Relations: We felt it prudent to run rate that record low outage from the first half into the second half as an assumption. And then I guess the other piece of that is – a smaller piece – that's the main driver, Jeff, and then a smaller piece of that is just looking at oil and gas and really taking a hard look at what the second half of the year looks like and bringing that down a bit. And then telecom, we had it weak in our guidance from last quarter, but we thought we saw some level of pickup in the second half, which really as we go into the third quarter here, we're not seeing that. So a small piece of the change is telecom as well. So it's mainly the resi side is the main driver with a small piece of oil and gas and telecom.

Okay. And then – okay – so inventories are up about $100 million year-on-year, $30 million sequentially, and I know you talked about kind of a de-stock. So can you maybe talk about, one, where are channel inventories? Two, what do you think is the right inventory level by year-end versus the $385 million you came out of 2Q? And then of that $100 million year-on-year, how much is kind of acquired inventories versus a core increase? Aaron P. Jagdfeld - President, Chief Executive Officer & Director: Yes. So, Jeff, I'll speak to the field inventory piece. Field inventories, and again part of that revised guidance downward was the fact that the field inventories with that record low outage environment just have not drained as quickly as we anticipated them to do in the second quarter – and that actually led to a chunk of the mix in the second quarter on the top line was related to excess inventory. Right now, channel inventories as we go into third quarter here, actually year-on-year are, in just kind of gross numbers, are actually about where they were a year ago. So, now, the problem with that is the backdrop it's still a weak power outage environment, so on a kind of a turns basis at retail, if you will, they're not turning as quickly. So arguably, our guidance includes the assumption that there's a little bit more de-stocking to occur here in the third quarter as a result. We didn't kind of get through it all in the second quarter as we had originally anticipated, and that's going to continue on. As far as the $100 million of inventory that (32:55) balance sheet... York A. Ragen - Chief Financial Officer & Head-Investor Relations: You mentioned $385 million of inventory of as June 30. The way we've modeled in our planning is probably about a 10% reduction from there. As we talked in the prepared comments, we're going to monetize a portion of that buildup into the second half. And that typically happens, it's just that the run up in the first half was more than expected given the lower-than-expected demand. But we anticipate monetizing a portion of that here in the second half.

And how much of that inventory increase is acquired inventory versus your base? York A. Ragen - Chief Financial Officer & Head-Investor Relations: Yeah, well, that $385 million, when you say – I guess the $40 million was exclusive of any – there might have been $10 million of acquired inventory – but that $40 million that I spoke of in terms of reduction wouldn't include any acquired inventory.

Okay. Thanks, guys. I'll get back in queue.

Thank you. Our next question comes from Mike Halloran of Baird. Your line is open. Michael P. Halloran - Robert W. Baird & Co., Inc. (Broker): Hey. Good morning, guys. York A. Ragen - Chief Financial Officer & Head-Investor Relations: Hey. Morning. Aaron P. Jagdfeld - President, Chief Executive Officer & Director: Good morning. Michael P. Halloran - Robert W. Baird & Co., Inc. (Broker): So just staying on that then, it sounds like at the current revenue run rate, even in the weak environment, the hope is that the de-stocking can be worked through by the time you get to the third quarter, and that maybe by the fourth quarter you get more normalized pull through. Is that the thought process, then? Aaron P. Jagdfeld - President, Chief Executive Officer & Director: I think that's probably a proper way to state it, Mike, is that third quarter's still going to be somewhat impacted by the de-stocking, so fourth quarter should be clean relative to not having that. That's the plan at this point. Michael P. Halloran - Robert W. Baird & Co., Inc. (Broker): Okay. Thanks for that. And then on the buyback side, could you just help me in two respects? First, maybe just talk a little bit about what the buyback signals from your perspective, from a long-term opportunity perspective and what it means for your capital deployment plans in the near-term? And related, how quickly do you guys plan on executing on that buyback? Aaron P. Jagdfeld - President, Chief Executive Officer & Director: Yeah, so I think from an execution standpoint, I'll deal with that first, we're going to begin looking at that right away. I mean, the intent was to get the program authorized and then get it up and running. In terms... York…

Thank you. Our next question comes from Jerry Revich of Goldman Sachs. Your line is open. Jerry D. Revich - Goldman Sachs & Co.: Hi. Good morning. Aaron P. Jagdfeld - President, Chief Executive Officer & Director: Morning, Jerry. York A. Ragen - Chief Financial Officer & Head-Investor Relations: Morning, Jerry. Jerry D. Revich - Goldman Sachs & Co.: Aaron, I'm wondering if you could just talk about the impact of your dealer inventory reductions on your sales this quarter. Clearly, you under-shipped on demand. Can you just give us an order of magnitude? I appreciate some of that is your own inventory, but just in terms of what impacted your top line, what was the magnitude of that headwind? Aaron P. Jagdfeld - President, Chief Executive Officer & Director: Yeah, I think, Jerry, I mean it certainly had an impact. We didn't quantify it. It's a little hard to kind of get our arms around completely but it's certainly has had – it had a larger impact, put it that way, than we anticipated because – and really primarily driven by the fact this ultra-low power outage environment is just not creating the pull-through. And really that had a pretty significant impact. And normally Q2 is a robust quarter for us ahead of the season. The effectiveness of our kind of promotions and marketing and our normal sales programs, our normal pre-season stuff that we do every year just didn't have the kind of effectiveness this year as a result of higher inventory levels which were the result of the low power outage environment. But it had a significant impact on the Q2 home standby business in particular. Jerry D. Revich - Goldman Sachs & Co.: Okay. And then, can you just help us understand the revenue guidance back…

Our next question comes from Christopher Glynn of Oppenheimer. Your line is open. Christopher D. Glynn - Oppenheimer & Co., Inc. (Broker): Thank you. Good morning. Aaron P. Jagdfeld - President, Chief Executive Officer & Director: Hey, Chris. Christopher D. Glynn - Oppenheimer & Co., Inc. (Broker): Hey. York, Aaron, good morning. The $40 million inventory reduction, that's what we view as higher levels than you've been at historically, even acquisition adjusted, I would guess. Is that just being appropriate stewards of margins or would it make sense to get it down more and just sacrifice some near-term margin? Aaron P. Jagdfeld - President, Chief Executive Officer & Director: So the way I think of that, Chris, is in particular, when you look at where a good chunk of that inventory is on the finished goods side, I mean that's all dry powder for a season. Now if we get through the season and we don't see anything happen – and our assumptions are that we're not going to see power outages in the second half – we may have to take a more aggressive position on that. Right now, the assumptions, the reduction that York spoke to that we're anticipating in the back half is kind of baked in with that ultra-low power outage assumption. So, could it be greater than that, I guess would be the question you're asking, if we would get a more aggressive position on it. But the fact of the matter is you don't want to start discounting that ahead of the season or before the season's done because you're leaving money on the table in our viewpoint. So in particular, I think it's just prudent to wait out the season and see kind of where things end up. York A. Ragen - Chief…

Thank you. Our next question comes from Brian Drab of William Blair. Your line is open. Brian P. Drab - William Blair & Co. LLC: Good morning. Thanks for taking my questions. I was wondering... York A. Ragen - Chief Financial Officer & Head-Investor Relations: Hi, Brian. Brian P. Drab - William Blair & Co. LLC: Hi. First, I don't know, York, if you could be a little more specific on the Country Home acquisition in terms of revenue? Is this closer to a Magnum size level of revenue? Or any more specifics there? Aaron P. Jagdfeld - President, Chief Executive Officer & Director: No, it's really – Brian, it's – this is Aaron. It's a little – it's closer to some of the more recent transactions that we've done in terms of size. We're not disclosing it because the seller requested that we not do that. So, we're not giving the specifics, but again, it's about 200 people and the transaction – the sales revenue for that business is – it's more like the companies we've bought recently. So it is seasonal as well. It's a seasonal business, so you can imagine their products tend to be more second quarter oriented and into the third quarter here. Brian P. Drab - William Blair & Co. LLC: Okay, that's helpful. And then I asked a similar question on the last call, I think, but as I'm looking at the slide that you showed at the Analyst Day, slide 10 where you showed your outage data over the last five years, at this point, I'm wondering, Aaron, if your philosophy or your thoughts around where is that real normal baseline level of outage activity over a much broader timeframe, if that's changing? But when we get to 2020 and we're on…

Thank you. Our next question comes from Stanley Elliott of Stifel. Your line is open. Stanley S. Elliott - Stifel, Nicolaus & Co., Inc.: Hey, guys. Good morning. Thank you for taking my questions. York A. Ragen - Chief Financial Officer & Head-Investor Relations: Good morning, Stanley. Stanley S. Elliott - Stifel, Nicolaus & Co., Inc.: Quick question. This is kind of a refresher. How much of the product is sold through the rental channel? Is that kind of a 15% to 20% sort of a number? Aaron P. Jagdfeld - President, Chief Executive Officer & Director: Yeah, we haven't disclosed sales by channel, but it's an important part of the mobile business, and the mobile business represents roughly – it's not quite half of our industrial business. It's a little less than half of the industrial business, but it's a – within that mobile business – a good portion of that mobile business is transacted through rental, both specialty rental and then of course, the large national rental. I think it's probably appropriate to say that exposure could be somewhere in the mid-teens in terms of total revenue impact through rental, if you want to think about it that way. York A. Ragen - Chief Financial Officer & Head-Investor Relations: Yeah. Stanley S. Elliott - Stifel, Nicolaus & Co., Inc.: That's great. And kind of switching gears, but kind of staying on the C&I business, can you guys talk about what you're doing to help improve the close rate on the C&I products, more on the commercial side, now that you have such a wider, more expansive product portfolio? Thanks. Aaron P. Jagdfeld - President, Chief Executive Officer & Director: Yeah. Great question, Stanley. We've – kind of buried in all of this bad news today was the fact…

Thank you. Our next question comes from Ross Gilardi, of Bank of America. Your line is open.

Good morning. Thanks, guys. Aaron P. Jagdfeld - President, Chief Executive Officer & Director: Hey, Ross. York A. Ragen - Chief Financial Officer & Head-Investor Relations: Hey, Ross.

I'm still – York, I'm still trying to understand the sizable EBITDA implied ramp in the second half. You went through the revenue drivers and that was helpful. But I'm still trying to get that in the context of what you're saying. You're assuming a continued soft power outage environment. But just given where you're inventories are and the demand environment, I mean, I think your guidance implied like a 50% increase in EBITDA in the second half of the year, and I would think that some of the Country Home would be probably a little bit lower on the margin side, as well as MAC. I don't know if that's necessarily right. But can you run us through the EBITDA ramp a little but more? York A. Ragen - Chief Financial Officer & Head-Investor Relations: Absolutely. Looking at like I did talking about Q2 to Q3 on the top line, on the bottom line EBITDA margin, you should see a favorable mix impact. In particular, on the mix side, we will sell more home standby, which is our best margin products. The MAC heat products actually are very good margins, so as I mentioned, seasonally, Q3 is a strong quarter for that business. And that, from a mix standpoint, should improve. Seasonally, power washers, going into the second half of the year, that volume declines. Those are lower margin products. So just from a mix standpoint alone, we should see a couple hundred basis point improvement in mix, just from the second quarter to the third quarter. So then you get to price/cost, price is probably a small impact, a favorable impact on price. We did roll out some pricing, really in the first quarter that got phased in the second quarter, so assuming a small impact on price, not a lot. But then on the cost side, that's where, actually, where we should see some improvement from first half to second half, maybe 100 bps. Commodity levels and currencies are at lows, at significant lows, so favorable PPV will be coming through. Some of the transitory costs that were in the first quarter that leaked into the second quarter, we don't expect those to occur. So those are the things that we'd see costs improving in. And then just normal, normal just, engineered and our strategic global sourcing team working on initiatives to bring costs down. Those are all things that will improve costs from first half to second half, maybe 100 BPs. And then on the higher volume that I noted in my bridge on the topline, that will just, that will just leverage our fixed cost infrastructure on the SG&A line, and that'll be about 150 bps so that's – you add all that up, it's about 500 basis points from the first half to the second half to get to you the 21% overall for the year.

Got it. York A. Ragen - Chief Financial Officer & Head-Investor Relations: You bet.

Thanks, York. And then, Aaron, I'm just wondering if you could talk a little bit about your dealer network and the health of your dealer network right now, and include maybe what your dealer count was. And just wondering like if you have any sense what portion of your dealer network rely just largely on home standby generators as their primary source of revenue, and therefore is there a risk of them departing from the category just as you see this ongoing soft environment? Aaron P. Jagdfeld - President, Chief Executive Officer & Director: Yeah. That's a great question. I mean the dealer network actually has been, I think, pretty resilient. We've held kind of in that 5,200 dealer count range. We kind of ended the quarter kind of close to that. Things seem to be – the trending here over the last several months has actually been pretty positive. So we feel good about the dealer count and the fact that that's been hanging in there. Now, there is a fair amount of churn and there always has been, right? These are small electrical and HVAC contracting businesses so there's a – we have a significant effort that is constantly qualifying new contractors into that network – and then obviously as you say, if contractors leave, we talk to those contractors to understand why they're leaving. We talk to them to see if there are ways for us to improve their success rate in their markets either through improved sales tools or improved training. So we don't like to see people to leave the network because we spend a lot of time acquiring them. We spend a lot of effort once they are acquired to develop them. But as far as the percentage of those dealers that are dependent…

Thank you. Our next question comes from Jeff Hammond of KeyBanc Capital Markets. Your line is open.

Hey, guys. Just a couple of quick follow-ups. I think telecom and energy you were talking about down 20%; what's kind of the new look? And then just on telecom, as you talk to those customers, what's kind of the interest or sense of urgency, or the risk that that wanes as we kind of move away from Sandy and Irene? York A. Ragen - Chief Financial Officer & Head-Investor Relations: Yeah, Jeff. The update on the oil and gas and telecom, like you said, was we previously had been guiding down 20%. I mean, with that current view, it's the combined category, actually between the two of them even, we're looking at down 35% now, 35%. Aaron P. Jagdfeld - President, Chief Executive Officer & Director: On the telecom customers, and kind of as we talk to those customers, Jeff, clearly, in terms of sense of urgency, when you don't have a strong power outage environment, I think the sense of urgency somewhat relaxes. But I will tell you that all the major accounts that we serve there, have a deployment strategy for product now that includes, is inclusive of, generators on new-build, on new site builds. Where I think the sense of urgency plays out, or lack thereof, is on kind of retrofitting sites that don't have power generation. And that's where maybe that can slow down because you just don't have a burning platform from which to work from. In particular, as we went through Sandy and Irene, some of the events out in the Northeast, clearly there were markets there that were disproportionately impacted by sites not having back-up power. And those sites, there was an initial kind of demand curve there to satisfy some of those areas, to harden those networks first in those regions.…

Is it fair to say the retrofit market on telecom has pretty much dried up this year, so you have a – as anything kicks in there, you get a pretty easy comp? Aaron P. Jagdfeld - President, Chief Executive Officer & Director: That's our viewpoint on it and that's kind of how we modeled the back half of the year. So it's really, we're down to kind of new site builds that we have visibility to that we know of. In fact, there are some new site builds for some of these customers have been pulled back as well, so we've adjusted for that. So it's not just retrofit as it relates to the back half of the year, the guidance we've given, it's also some new site builds being pulled out.

Thank you. This concludes our question-and-answer session. I would now like to turn the call back to Aaron Jagdfeld, President and CEO, for closing remarks. Aaron P. Jagdfeld - President, Chief Executive Officer & Director: We want to thank everyone for joining us this morning and we look forward to reporting our third quarter 2015 earnings results, which we anticipate will be in late October. So with that, we'll bid you a good morning. Thank you.