Yahoo Finance

York Ragen

Thanks, Aaron. Looking at first quarter 2025 results in more detail. Net sales during the quarter increased 6% to $942 million as compared to $889 million in the prior year first quarter. The net effect of acquisitions and foreign currency had a slight favorable impact on revenue growth during the quarter.
Briefly looking at consolidated net sales for the first quarter by product class. Residential products failed to increase 15% to $494 million as compared to $429 million in the prior year. As discussed, growth in residential product sales was driven by a strong increase in shipments of home standby generators, as we executed on the continued higher demand created by above-average power outage activity in the second half of 2024.
In addition, growth and shipments of both PWRcell energy storage systems and ecobee products contributed to this strong year over year growth. Commercial and industrial product sales for the first quarter of 2025 declined 5% to $337 million as compared to $354 million in the prior year. Modest contributions from acquisitions were offset by an unfavorable impact from foreign currency, resulting in a net neutral impact on sales growth during the quarter.
The core sales decline was driven by softness in certain international and markets, as well as a decrease in sales to national rental accounts and other direct customers for beyond standby applications, partially offset by growth in shipments to domestic telecom and industrial distributor customers.
Net sales to the other products and services category increased approximately 4% to $111 million as compared to $106 million in the first quarter of 2024. Core sales increased approximately 1%, primarily due to growth in aftermarket service parts, connectivity subscription sales, and international services revenue.
Gross profit margin was strong at 39.5% compared to 35.6% in the prior year first quarter as a result of favorable sales mix, given the relative strength of home standby sales and the realization of lower input costs. Operating expenses increased $39 million or 16% as compared to the first quarter of 2024.
This increase was primarily driven by increased employee costs to support future growth across the business, additional marketing spend to drive incremental product awareness, and ongoing operating expenses related to recent acquisitions.
But just the EBITDA, before deducting for non-controlling interests, as defined in our earnings release, was $150 million or 15.9% of net sales in the first quarter, as compared to $127 million or 14.3% of net sales in the prior year. I will now briefly discuss financial results for our two reporting segments.
Domestic segment total sales, including inter-segment sales, increased 9% to $782 million in the quarter as compared to $720 million in the prior year, including approximately 2% sales growth contribution from acquisitions. Adjusted EBITDA for the segment was $123 million, representing 15.7% of total sales as compared to the $99 million in the prior year or 13.8%.
International segment total sales, including inter-segment sales, decreased slightly to $186 million in the quarter. That's compared to $187 million in the prior quarter, including an approximate 5% sales growth headwind from foreign currency, resulting in approximately +5% core total sales growth.
Adjusted EBITDA for the segment before deducting for non-controlling interest was $27 million or 14.6% of total sales as compared to $28 million or 15% in the prior year. Now switching back to our financial performance for the first quarter of 2025 on a consolidated basis.
As disclosed in our earnings release, GAAP net income for the company in the quarter was $44 million as compared to $26 million for the first quarter of 2024. Our interest expense declined from $23.6 million in the first quarter of 2024 to $17.1 million in the current year period as a result of lower outstanding borrowings and lower interest rates relative to prior year.
GAAP income taxes during the current year fourth quarter were $14.2 million or an effective tax rate of 24.3% as compared to $12 million or an effective tax rate of 31.2% for the prior year. The decrease in an effective tax rate was primarily driven by certain unfavorable discrete tax items in the prior year period that did not repeat in the current year.
Diluted net income per share for the company on a GAAP basis was $0.73 in the first quarter of 2025 compared to $0.39 in the prior year. Adjusted net income for the company, as defined in our earnings release, was $75 million in the current year quarter or $1.26 per share. This compares to adjusted net income of $53 million in the prior year or $0.88 per share.
Cash flow from operations was $58 million as compared to $112 million in the prior year first quarter, and free cash flow, as defined in our earnings release was $27 million, as compared to $85 million in the same quarter last year.
The change of free cash flow was primarily driven by an increase in working capital during the current year quarter which included the replenishment of home standby and portable generator finished good inventories, partially offset by higher operating earnings.
Total debt outstanding at the end of the quarter was $1.3 billion, resulting in a gross debt leverage ratio at the end of the first quarter of 1.6 times on an as reported basis which is within our targeted gross debt leverage range of one to two times adjusted EBITDA. Additionally, we opportunistically repurchased approximately 717,000 shares of our common stock during the quarter for $97 million.
There's still $250 million remaining on our current share repurchase authorization as of the end of the first quarter. Moving forward, we will continue to operate within our disciplined and balanced capital allocation framework as we evaluate future shareholder value enhancing opportunities over the long term.
With that, I will now provide further comments on our updated outlook for 2025. As disclosed in our press release this morning, we're updating our outlook to reflect a broader range of potential outcomes for our business, resulting from higher tariff levels, uncertain government policy actions, and their related impact on the markets that we serve.
While we are maintaining the high end of our guidance ranges for net sales growth and adjusted EBITDA margin, we are reducing the lower end of these ranges to consider the potential impact of a softer economic environment. This guidance includes the following important assumptions.
We are assuming that current tariff levels that are in effect today stay in place for the remainder of the year. This includes 145% tariff levels for China, 10% reciprocal tariffs for all of the countries, and the USMCA still qualifies. In addition, we're assuming that government policy around clean energy remains materially intact during the year.
This would include sustaining the investment tax credit as part of the Inflation Reduction Act as well as continued federal support of our Department of Energy program in Puerto Rico. We're also assuming interest rates continue to remain at elevated levels, resulting in more cautious consumer spending trends through the year, but not falling into recessionary conditions during 2025.
Finally, consistent with our historical approach, this outlook assumes a level of power outage activity during the year in line with the longer-term baseline average and does not assume the benefit of a major power outage event during the year, such as a major landed hurricane or major winter storm.
Considering these factors, we are now, we now expect to consolidate net sales for the full year to increase between 0% to 7% compared to the prior year, which includes an approximate 1% favorable impact from the combination of foreign currency and acquisitions. This compares to our previous guidance of 3% to 7% net sales growth over the prior year, as we expect tariff-related price increases to potentially be more than offset by lower shipment volumes.
Specifically for the second quarter, we project net sales growth in the low single digit range driven by modest year over year growth in residential product sales and approximately flat CNI product sales as compared to the prior year. This results in the second half sales waiting of nearly 56% of full-year sales and is expected to be more level loaded throughout the third and fourth quarters.
Looking at our updated gross margin expectations for the full year 2025. We now expect gross margin percent to be approximately flat with full year 2024 levels in the 39% range. This is only a slight decline from our prior expectation for gross margin percentage to approach 40% for the full year 2025.
Given the incremental macroeconomic uncertainty, we are also proactively addressing potentially lower shipment volumes with targeted operating expense reductions relative to our prior forecasts. These broad-based actions are expected to hold our full year 2025 operating expenses as a percentage of net sales, approximately in line with previous expectations.
Turning to our adjusted margin expectations for the full year 2025, we've widened our guidance range to approximately 17% to 19% compared to our previous guidance range of 18% to 19%. Primarily due to the unfavorable impact of reduced operating leverage on potentially lower shipment volumes. Importantly, the estimated impact of higher tariffs is expected to be fully offset by pricing actions and supply chain initiatives.
Specifically for the second quarter, we expect adjusted EBITDA margins to decline slightly compared to the first quarter of 2025 run rate before sequentially improving to nearly 20% for the second half of the year, given the projected significant operating expense leverage on seasonally higher sales volumes.
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. 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 our expected effective tax rate.
For 2025, our GAAP effective tax rate is now expected to be between 24.5% to 25%, a slight increase from our prior guidance of 24% to 24.5%. We continue to expect interest expense to be approximately $74 million to $78 million for the full year 2025, assuming no additional term loan principal prepayments during the year.
This is a significant decline from 2024 levels due to a decrease in outstanding borrowings and the fuller impact of lower sulfur interest rates. Our capital expenditures are still projected to be approximately 3% of our forecasted net sales for the year. In line with our historical levels as we continue to invest in incremental capacity and execute other projects to support future growth expectations.
Depreciation expense is now forecast to be approximately $90 million in 2025, and intangible amortization expense in 2025 is now expected to be approximately $100 million during the year. Stock compensation expense is still expected to be between $30 --$53 million to $57 million for the year.
Operating a free cash flow generation is expected to be disproportionately waited for the second half of the year in 2025, as we expect to replenish home standby importable finished good inventory levels during the first half of 2025. As a result, for the full year, we expect free cash flow conversion from adjusted net income to be between 70% to 90%.
This is a wider range compared to our previous guidance of 80% to 90% due to a projected larger use of cash for inventory as a result of higher tariffs during the year. As a result of our first quarter share repurchases, our full year weighted average diluted share count is now expected to decrease modestly to approximately $59.5 million shares as compared to $60.3 million shares in 2024.
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.

Question and Answer Session

Operator

(Operator Instructions)
Tommy Moll, Stephens Inc.

Tommy Moll

Good morning and thanks for taking my questions. Aaron, I wanted to ask about the new product launches in CNI for the data center and market. You put out a press release earlier this month with a lot of product details. So my question is really in two parts. One, just if there's anything on the product design, you want to make sure to highlight for us.
And then relatedly, you mentioned the ability to service this installed base one day with the nationwide service network. I just want to make sure the go to market here is perhaps similar to your [telco] sales. So a direct sale but then leveraging the service and aftermarket through your dealers/ If that's an incorrect understanding, please let me know.

Aaron Jagdfeld

Thank you. Thanks, Tommy. So yeah, super excited about our data center product line, our large megawatt diesel lineup, data centers obviously are our prime target. Also, though our existing customers as we've talked before. And the existing markets we serve from municipalities to manufacturing, distribution, healthcare, they all require larger blocks of backup power as well.
So we feel like that's a part of the market that we haven't served historically. So, we're going to be able to do that. As it relates to data centers, to take the second question first, Tommy, with data centers, the comment about the nationwide service network, your assumption is exactly correct. We're going to ride on the back of what we've built for direct sales to our telecommunications customers primarily.
That's the network we've built over the last 40 years. It's a combination of technicians with our industrial distributor customers as well as our own IDCs, our own company stores. And so with that asset we're going to be able to leverage that to serve on a coast to coast basis the direct sales of data center products.
Now outside of that, for other applications outside of data centers for those larger products, we'll service those products and in a similar fashion to the way we take care of products that we sell through those other applications, which is primarily through our industrial distributor channel. They generally do that. We will occasionally jump in if we need to.
It's not unusual for us too. We’ve got great resources here even in Waukesha, Wisconsin. We can put somebody on a plane and they can be anywhere, in the US in less than four hours and be on the ground. A to get something, up and running if there's a problem or to assist a customer or an end operator or a distributor with that.
As far as the product itself is concerned, I think what I would call out we made a little bit of a reference to it in our prepared remarks, but one of the hallmarks that we have as a company here in our CNI product space is our ability to customize. That is something that we've brought to the market and really differentiates Generac. I think there's in our business; there's a couple of different models that are deployed.
We are a true genset manufacturer here. Others might just be assemblers and even others might be building a base product and then sending it out to distribution partners or third parties to do that customization. We prefer to do a lot of that customization in-house both to control the quality and the cost and to control the lead times that are associated with that.
And that's one of the things, we think is an important differentiator here is that we're going to take that business model as we've deployed it on our broad CNI product line, we're going to extend that into these new products and offer these customers customizations that are done at the factory.
From an engineering perspective and from a manufacturing perspective, sourcing perspective, obviously, there are still pieces of this that will have to be done by third parties. Sometimes that can be a specific type of canopy or enclosure that's on the unit.
Those could be still done by third parties, but we're going to try and capture much more of that than the market currently serves today, and we think that'll help differentiate us coupled with the lower lead times, the shorter lead times as we've talked in the past.

Operator

George Gianarikas, Canaccord Genuity.

George Gianarikas

Hi, good morning, everyone. Thank you for taking my question. I can appreciate the widening of the range and guidance given the macro uncertainty you have. I'm just curious if you can share any anecdotes, any data as to what you may be seeing on the ground today that may lead you to believe that we're going to see a softening in business. Thank you.

Aaron Jagdfeld

Yeah, thanks, George. Great question. I -- there's a lot of Different ways that different companies are approaching guidance, right? I mean, I think you guys have all seen a wide range of outcomes here with people. Some companies preferring not to give guidance, others, maybe giving multiple scenarios, look, multiple scenarios, we're not that smart, so we just decided.
Look, we have our guidance, we know our, we know what our business does when the economy slows down, and we know the impacts that can occur, from, as an example, higher prices, right? There are some elasticity of demand that we are aware of in different categories based on history. So we tried to apply all of that, put our best foot forward with guidance.
We didn't think that pulling guidance was the right approach either. So we felt like giving, just basically sharing everything we know. And so, to your question, George, what we know is that higher prices tend to dampen demand. Overcoming that, though, we also know that outages matter more than anything in our business.
So, as we've said historically here, I think we hesitate to use terms like decouple or, we're countercyclical when it comes to the economy, but when the power goes out, people reprioritize their spending, and we tend to see generator sales be very resilient in the face of any economic condition, good or bad, frankly.
And so our assumptions that I think that the big assumption that we've made here and make every time we do guidance is that the outage environment is going to be in line with the long-term average. Should the outage environment be lighter than that, we could underperform.
Should it be greater than that, we could outperform, and maybe that's at the low end of the range or the higher end of the range. I think we chose to take the low end of the range down because primarily where we do see pricing and have history with elasticity of demand impact is in the consumer market.
So even though, even if we were to maintain outages or hit that that outage number in the long term average, there are going to be some buyers who may fall out of the funnel if prices go up, and we just know that, and we try to reflect that, I think, in our guidance to the best of our ability.
But time will tell. I mean, there's a tremendous amount of uncertainty right now around the overall economic environment, the consumer in particular, but I think what we've seen on the ground and what you're hearing from others is the consumer is kind of hanging in there. I think these are reported this morning, I think you're seeing consumer flows in terms of spending habits and things haven't really changed dramatically yet.
But again this is, there's a lot of uncertainty and we have to see what the next kind of 60 to 90 days brings. I think that will tell us a lot, both in kind of the statistics that we all watch, but also, kind of what happens with the current administration with some of the current trade policy efforts and the negotiations that are ongoing. So, we're all waiting eagerly to hear what's going to happen next.
I think the good news is we're used to having to pivot, we called out our core, one of our core values here at the company, which is agility. We're very proud of that agility. I think it underpins what we do here being able to react to external stimuli that happen in demand as well as, that things can happen on the supply side, and that's what we're reacting to today.

Operator

Mike Halloran, Robert W. Baird

Mike Halloran

Hey, good morning, everyone. So just kind of a follow up on that, Aaron. I certainly understand the logic behind the broading out of the range. Just want to understand the moving pieces. At the lower end of the range, it sounds like that is driven almost exclusively by demand generation, demand degradation, and you still feel relatively comfortable having on an EBITDA dollar basis neutral from all the tariff impacts.
Is that true or false? Am I interpreting that correctly and then secondarily? Can you just give some sort of framework for how much of your COGS are exposed, and any kind of regional sourcing, dynamics you might have? Thank you, guys.

Aaron Jagdfeld

Yeah, thanks Mike. So yeah, the low end of the range, I mean what we want to do there, it's to reflect the potential impacts, by the way, to the consumer, right? So, I mean, obviously if you look at the midpoint of the guide, it does come down 150 basis points from the previous guidance, and that is, to your point, reflective of in our assumption is reflective of a softer consumer environment.
That demand destruction, if you want to call it that, being offset by pricing as well, higher pricing, and all of that going, to offset on a dollar for dollar basis those pricing impacts to offset the tariff impacts. And to give you just, I mean, a little bit of color, we call that $125 million of potential impact here in the second half, given no mitigation efforts and the tariffs being exactly where they are today.
That's what the second half would bring us $125 million. From, just from a supply chain standpoint, we source, about, so roughly 70% to 80% of our COGS is materials. We source about 50% of those materials are sourced in the US or in North America. The other 50% outside of North America, and outside, when you look at kind of as a percentage of our total material purchases, this, it's really spread out.
I mean it's an incredibly global supply chain. We buy a lot from Europe, we buy a lot obviously from Asia, as do a lot of other companies, the China exposure specifically is less than 10% of our material purchases on an annual basis. And frankly that's been cut half from where it was five years ago when we went through COVID and the first round of tariffs.
We've been working very hard to further diversify our supply chain. In fact, with our new product offering and home standby, we're kind of taking the next leg of diversification of the supply chain, moving away from, some of those countries that have higher tariffs and really we're on our roadmap to move away from anyway.
So they'll come down even further, we think that that could be half again, that less than 10% could be something, even half again from that number in the next 12 to 18 months as we launch our new products and we get the supply chain oriented around, further diversification. So, we feel like we're in a good position here, we just have to be very blunt, 145% is a big number for tariffs, right?
And so absorbing that is really difficult, and we have to pass that along in price. Now if that doesn't persist here, if something changes in the next 30 to 60 days, we can still react to that. Because we have a new product line coming, we're going to reset pricing anyway on that new product line in the second half of the year. So we've got some time.
And if you look at our balance sheet right now, you see a little bit more inventory on our balance sheet at the end of Q1 because we're building ahead of that transition. So, sometimes it's better to be lucky than smart, right? I mean, we were building because of this transition, but in fact, a lot of that inventory is not at these tariff levels.
So, and also, as we called out just as another note to that, in our clean energy business with storage, we have a lot of inventory left over in that market as well. So we don't believe we're going to have any tariff impact to those products in 2025. It's really on the consumer side and then on the CNI side, and that's what we're focused on mitigating that and we're peddling hard to do that.

Operator

Jeff Hammond, KeyBanc Capital Markets Inc

Aaron Jagdfeld

Hey, good morning guys.

York Ragen

Hey, Jeff.

Jeff Hammond

So, your 1Q to 2Q cadences, is a little bit different than normal. I'm just wondering what, if any, you saw of kind of pull forward, selling versus sell through, kind of getting ahead of price increases, with your channel partners and then just in general, our IHCs afterglow trending in the markets where you saw storms kind of relative to history. Thanks.

Aaron Jagdfeld

Yeah, you want to take a pacing, and then I'll (multiple speakers).

York Ragen

Yeah, no, in terms of the poll forward question, yeah, we did have a good quarter last in all of this is Q1 was a very good quarter. I would say there was only a small amount probably that was pulled forward to get ahead of the price increases that we're launching on homestand by, maybe $20 million roughly, so it's a relatively small number on the pull forward side.

Aaron Jagdfeld

Yeah, and I would just say a commentary on the IC kind of afterglow, Jeff, to your question. It's interesting. I mean, this is a business where you see outages or have seen outages, you'll see strength in a lot of the metrics and where outages haven't happened for a while, you won't.
And so if you just kind of parse apart on one IC numbers, what we outages ICs remain very strong, like in the Southeast coming out of the strong second half of last year with the outage environment and then the western regions with what we saw in California with the wildfires.
Even though in our prepared remarks we talked about that, California represents still a pretty immature market for us relative to other markets in terms of, a lot of outage hours but we get a ton of ICs. It grew dramatically, but it kind of underperformed where we would expect a mature market to perform with that many outage hours.
But that's really because it's still developing, right? We're less than 2% penetrated there. We're growing. It's double where it was, five years ago, but it still represents a great opportunity for us, but just, not the same level of intensity, if you will, of ICs per outage hour there and kind of called that out, but the trends are, and then kind of on the off side of that equation, the Northeast, Canada,
we didn't have a lot of outage events, winter outage events this year, kind of in the Q4 and Q1, and that, we have lower ICs. So I think we're seeing good afterglow in those markets that struggled with outages last year, second half of last year, as well as what we saw in Q1 and in the areas that didn't, we kind of got what we would expect there, which is lower ICs year over year.

Operator

Brian Drab, William Blair & Co.

Brian Drab

Hey, good morning. Thanks for taking my question. I was wondering if we could get, talk about the impact, more specifically of the assumption that the China tariff remains at 145%. Can you give us any, granularity on, what percentage of COGS is currently materials, so we can kinda,
I know you said, material sales materials input from China is under 10% but it still seems like that could be a really big number that I'm trying to figure out what happens to your guidance if we reverse this situation with China or mitigate it significantly.

Aaron Jagdfeld

Yeah, sure, I would say this, the $125 million, about 2/3 of that is really China related. So, I mean you can do the math on that, whatever. I don't have a calculator in front of me, but whatever that is.

York Ragen

It goes to $50.

Aaron Jagdfeld

It's $80 million whatever that is, if it goes to 50%, then, you can impute the impact that that would have not only in the second half of the year, but obviously, whatever 2026 models you might be looking at as well, Brian, but yeah, it's, I mean, look, it's again, China continues to be a smaller part of our supply chain overall, and has that's been a trend we've been on for some time now and continue to work at.
I think the decoupling of these two economies is, clearly underway, has been probably underway for some time. It's just being accelerated today with these, current, with the current set of trade policy things in force and if those change, if there's some kind of grand bargain that's struck here between the two countries, we'll watch that closely.
Because obviously, what we don't want to do and I think what other companies probably are trying to avoid as well is you don't want to, we're trying to avoid passing along the full impact of that to the market if we don't need to, right, if there's going to be some change, or certainly, trying to reflect the future changes are going to continue to happen in the supply chain, we want to reflect that in how we think about.
We want to be thoughtful and how we think about pricing to the market, right? We don't want to just because again, increasing the prices is going to put pressure on demand, even though outages ultimately are the biggest thing that matters. You still, you're still going to see people fall out of the funnel around the edges with higher price. That's just part of what the math is when you look at the US to see a demand around this category.

Operator

Jerry Revich, Goldman Sachs

Jerry Revich

Yes, hi, good morning, Aaron. Aaron, you, we, we've seen, just continued really good category interest, into April, and I'm wondering if you just talk about what kind of conversion rates you're seeing between ICs into orders of thinking of the chart you shared at the analyst day.
Are we closing back to where we were in the last cycle on that category given the high level of interest in ICs through April.

Aaron Jagdfeld

Yeah, thanks, Jerry. Actually, close rates, we kind of saw pressure in Q4 back after the last year really as, and this happens historically when you get big demand events like we saw in the second half of the year that tends to kind of swamp the boat in terms of our capacity with sales and installation bandwidth and then we fill in behind that with new distribution.
We increase awareness in markets like California, like I was speaking to that are a little bit more immature and then closed rates recover over time. So, it's a cycle that's been repeated. Yeah, you have to look at kind of the maturity of the close rate over time. Looking at it at a point in time is, I think it's only representative of maybe what you've seen, just over 90 days as opposed to looking over a longer period of time.
Some people just take longer to make that decision. And sometimes they need a promotion, or they need an extra level of engagement with our teams or our dealer teams to get them over the off the fence in terms of buying. So we saw pressure on closed rates again here in Q1.
It's moderated from the decline rate that we saw in the second half of the year, but we should start to see and have modeled a recovery of that for the balance of the year, again consistent with what we would see historically. But those rates were under pressure in the second half of the year last year and remained here in Q1. Yeah, it wasn't anything worse than expected.

Operator

Mark Strouse, J.P. Morgan

Mark Strouse

Hey, good morning, guys, thanks for taking our questions. I apologize. I'm going to ask you to go down another rabbit hole here with, kind of scenario analysis, but just thinking about the indirect impact of tariffs, in specific to steel prices, which are up, 35%-40% ish.
I'm assuming your 2025 guide is buffered somewhat by your hedges, but assuming, excuse me, assuming tariffs stay in place and steel prices remain elevated once those hedges expire. Can you just kind of talk about how we should think about that in terms of either march and impact or the pricing reaction that might be needed in order to offset it? Thank you.

Aaron Jagdfeld

Yeah, thanks, Mark. Yeah, so I mean we buy obviously our biggest inputs are steel, aluminum, and copper. Those are the three big ones and to your, I think, to the point of your question, we saw some pressure there. Even if we have metals that weren't impacted directly by tariffs, the indirect effect of tariffs is that it gives Steel producers, and the mills and other fabricators, gives them great air cover for increased pricing in some cases or just the market, just is taking those prices higher.
To your point, we have reflected that in our guidance here at the current levels. So should they go higher? Could it be a headwind? We do have some hedges and some of those metals, but not dramatically so, it's pretty small. And so, I would just say that we react to historically the way we reacted with that is more price.
But you know we do have other levers to pull. We've referred to it a few times in the past, we have an ongoing product enhancement, profitability enhancement program we call it PEP here. It's a cost out program that's kind of institutionalized in our business, and we really use that to help us offset a lot of inflationary kind of typical inflationary pressures.
I wouldn't call it tariff related things typical by any means, but I think some of the metal things, maybe you could argue they're atypical, but Then again you look historically where some of those metals prices are at, and they're not up kind of to the heights that they hit after when COVID hit.
They are elevated, but we'll watch them. I think some of that is going to be offset by I was called out, we're seeing shipping rates drop dramatically, right? So container rates, sailing rates from Asia to the US are down there in half from what they were even 30 days ago and falling hard, and I think you, everybody's seen the reports of Just the number of sailings that are, they're down 25%, 30%, 35%, over the last four to six weeks.
And that is opening up, I think some opportunities there to reduce our logistics costs. So, maybe there'll be an offset to some of that. So there's always moving pieces with those inputs, but, I would tell you that we've reflected everything in the guide today that we know and we would respond accordingly with additional cost doubts or pricing, should those inputs go even higher in the future.

Operator

Keith Housum, Northcoast Research.

Keith Housum

Good morning, guys. Hey, just trying to understand a little bit better, the impact of tariffs across the product line. Obviously, you guys got a pretty diverse line-up, focused on HSBs but others as well. Can you just give us an idea which of your products are probably most impacted by the tariffs as well as the increased cost?

Aaron Jagdfeld

Keith, we're not going to provide it on a product by product basis because it's just, I mean, there's so many different products even within certain product families, we've got certain, items that are more sensitive to tariffs because of where we source them from than maybe a similar product in the same lineup.
So it's just, it's not really something to that we're going to give that level of granularity around. Again, we would just point to kind of the $125 million that we've given. We continue to work that down. We believe we've got great opportunities to mitigate, and again that $125 is completely unmitigated. That assumes that, other than what we've got in flight here, it assumes that, those tariffs stay at high levels and that we don't have any other mitigation opportunities.
So, should the tariffs either come down or the mitigations grow, the opportunities to mitigate grow, that will come down as well. So, I wouldn't say that any one of our products is more sensitive or less sensitive. We have sensitivities across all products in some manner to tariffs. There are just, there are so many things in supply chain.
I just don't, I don't know if people really get this. There's just so whole industries that aren't here in the US where we can't buy things. We can't buy everything from the US. Maybe over time that could be developed, but definitely not over 30 days. That's just not how it works.
I think everybody's generally aware of that but just having more time and being thoughtful about how we deploy this would be more helpful for companies, industries, markets to absorb. I do think that some of that's already underway, has been underway for the last several years, and will now accelerate, but there are also other big challenges on the other side of that.
In terms of availability of labor, here in the US, the cost to automate, even if we automate a lot of the automation equipment or parts of the automation equipment come from high tariff countries. So, cost of automation is going to grow. So there's a lot of kind of structural issues that have to be dealt with here in order to shift the supply chains, whether it be reshoring or near shoring, decoupling from specific other economies.
It just takes time to do that and we're all working towards that goal and we're going to, continue to work towards that goal, but there's going to be no avoiding some level of tariffs. And by the way, there were already tariffs in our run rate. The $125 is incremental tariffs based on the latest changes here. So, there is a certain level of tariffs already in our run rate reflected from the previous $301 tariffs and other tariffs that were put in previous years.

Operator

Jon Windham, UBS

Jon Windham

Hi, perfect, thanks. Just a quick housekeeping question. Just looking at your global manufacturing footprint, can you remind us the activities for Mexico, India, and China, the manufacturing facilities?

Aaron Jagdfeld

Sure, I mean, we have facilities in all three of those countries, and a lot of it is around a, in-country, for country manufacturing strategy because generators are big heavy products, and they're also localized for codes and standards electrically and for a lot of tailpipe emissions that differ from one country to the next.
We do manufacture some products. As an example, in Mexico, we called out there was, the inter segment sales internationally to the US. There's a little bit there that we do manufacture, but a lot of what we do in Mexico is for Central, is for Mexico and Central America, some for South America. What we do in India is almost exclusively for India, and what we do in China is for a mix of China and Europe primarily.
So, I think those footprints are well established. I do think that it's interesting. I mean, we have some unique flexibility, I think, because of that as we examine, again, looking at mitigation strategies around tariffs, how can we utilize, best utilize our footprint, our international footprint, to help us mitigate the impact of tariffs?
Are there ways that we can shift more production to areas that, where we benefit from the USMCA agreement as an example. Today we don't do a lot of that down in Mexico, but we could maybe do more. I do think we have a lot of plants right here in the US as well.
We just opened a new plant in Wisconsin in Beaver Dam, Wisconsin, one of our biggest plants in the US, just went online April 1. And that serves mostly our CNI products here in the US and Canada for products and so pretty proud of that. We've got seven facilities, seven big manufacturing plants here in the US, been a big supporter of manufacturing here in the Upper Midwest for a long time.
It's our heritage, it's our history, and frankly, the US market still represents a great opportunity for us, and that's why we're committed to this market, but we're going to utilize our footprint in the best manner possible to help us mitigate the impact of tariffs.

Operator

Jordan Levy, Truist Securities

Jordan Levy

Good morning all. Thanks for squeezing me in. I don't know how, I didn't think I heard much on ET in the comments in the Q&A, but maybe just on the [resi] solar space. It still remains under pressure here in the near term, not a surprise.
As I know you've got some good inventory of power cells going to Puerto Rico this year to help kind of bolster that segment. I'm just wondering how you're thinking about some of the new product rollouts there and the economics around those given both the tariffs and kind of the domestic challenges to that market.

Aaron Jagdfeld

Yeah, thanks for the for the question, Jordan, and you're right, we haven't spent a ton of time on ET, but it actually had, we had a great quarter in Energy tech. A lot of that underpinned by ecobee. As we said, they continue to just knock the cover off the ball in terms of their market share, they introduced a new low cost kind of entry level.
A t-stat smart thermostat in the fourth quarter and it's been very well received and kind of going after that value portion of the of the marketplace. But even in the clean energy piece, which is the other piece of the energy technology complex for us, we also had a great quarter. Now it's off of a very small base.
And it's primarily right now, as you indicated, Jordan, we've got this nice chunk of business with the Department of Energy program in Puerto Rico. We've got inventory for that program; we've got our installs. We're ramping there, and we're starting to hit our stride in terms of install rates and things.
The economics are decent on that, but we've got our eyes on the future as we have talked about here for some time as we've been working on our next generation product lines. For storage in particular, we opened up our order books here recently for PWRcell 2, which is the next generation version of our storage system, and have had some really good dialogue with installers who are looking for alternative options.
There's been somewhat of consolidation in the storage market given the current state of the solar market in general. There's, some of the suppliers are exiting. I think you may have seen yesterday Panasonic announced that they're leaving the US market, and there have been others that have announced they're leaving the US market as well as.
And that consolidation of supply, I think opens up a couple of things for us, that could end up being positives again off of a pretty small base for us but I think you've got, we've got some pretty high hopes that, storage in particular. If you look at economics, you can take away the incentives, and even if the ITC goes to zero, or there's some, recombination there of the ITC with more domestic content requirements, whatever that may be, with less support.
The reality of it is power costs continue to rise. And that is the real kind of nugget, I think that's really important here and why things like solar and storage are going to make sense long term with or without support. Those things had to be weaned off of support at some point in the future anyway.
And so I don't think anybody saw that coming, that it might be an abrupt weaning off of the support, but that might be filled in by certain state level programs and things like that. I think the market's going to react to that. But I do think that when you look at the payback of a solar plus storage system in a high cost or a high tariff area, high electrical rate tariffed area, the payback is still going to be strong, even without incentives.
And the need for resiliency is still going to be strong because power quality is continuing to go lower. And so we just, again, maybe that has some impact on the total addressable market in the near term here over the next several years until that washes through, but our new products, they're going to be lower costs, they're going to be higher performing, you'll be kind of on level footing with the rest of the market offerings.
And then we've got some other exciting new product offerings behind that we've alluded to in the past, but you'll hear more about it (re)plus this year, that's the renewable Energy show in Las Vegas in September. So, I encourage you to come and see what we're launching there, but very encouraged by what we're seeing certainly with our smart thermostats and our ecobee business and then also the recovery that we're seeing in energy technology at this point for us.

Operator

Sean Milligan, Janney

Sean Milligan

Thank you for fitting in. Thank you for all the detail today. I guess on the $125 million impact from tariffs, can you kind of talk about how much you expect to, get back from price increases versus cost out supply chain initiatives?
And then also I don't know if you addressed it, but last quarter you talked about price increases for the new product and residential home standby. Curious if you could update us on kind of how much total price increases you expect for [resi] HSB this year now with tariffs.

York Ragen

Yeah, I think in in terms of the pricing impact to offset the tariffs, at least the $125 in the second half, the philosophy we took is we wanted to have enough mitigations to offset The impact of those at well at the EBITDA margin level, yeah, so me basically holding our EBITDA% .So basically, so, the price we're putting in the market as well as the supply chain initiatives that we're working on, at least in the short term, we should do that.
Now, having said that, next, there's a lot more work going on behind the scenes on from a supply chain and standpoint to continue to mitigate and diversify our supply chain. So, we're going to, we'll work on that and continue to update our progress on that, but the pricing that we're going out with. Is to basically hold that EBITDA margin percent at the EBITDA line.

Aaron Jagdfeld

Right. Now with the announced pricing, the 7% to 8% price increases that we that went into effect March 30. So that's what's contemplated in the guide. That's what York is referring to in terms of the offset to maintain EBITDA margins, basically in that category we're just talking about home standby now.
Because we have a new product line coming in the second half of the year, we are going to go with another price adjustment there, but that's really reflective of the additional value that we're extending to customers and channel partners with that product because there's a lot of additional features and things that are in that product, that obviously there's a little bit more cost related to those even take away the tariffs and everything else.
Yeah, in fact, I would argue the new product line actually reduces our tariff exposure because the supply chain is actually effectively more diverse. So it's, there's a combination of that. So it's a little bit, there's a lot of moving pieces underneath that but at the end of the day when look, there might be a little bit more price associated with tariffs alongside of that increase that goes out for the new product line but it won't be much.
And seven to eight is really kind of the center point of that today. And then we'll have, yeah, we'll kind of see where the tariffs line. We're again, we're trying not to get ahead of ourselves with putting too much price in the market. We will if we need to, and we kind of assumed that we, if we had to do that, we would, but, I think we're watching closely to see where these negotiations go on a country by country basis with the current administration.

Operator

Thank you. Ladies and gentlemen, due to the interest of time, I would now like to turn the call back over to Kris for closing remarks.

Kris Rosemann

We want to thank everyone for joining us this morning. We look forward to discussing our second quarter 2025 earnings results with you in late July. Thank you again and goodbye.

Operator

Ladies and gentlemen, that does concludes today's conference call. Thank you for your participation. You may now disconnect.