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Generac Reports Second Quarter 2023 Results

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Generac Holdings Inc. reports Q2 2023 financial results, with net sales decreasing 23% to $1.00 billion. Residential product sales declined 44% while Commercial & Industrial product sales increased 24%. Net income was $45 million compared to $156 million in 2022. The company expects lower residential product sales in H2 2023 and revised its full-year outlook to a decline of -10 to -12% in net sales.
Positive
  • Generac reports Q2 2023 net sales of $1.00 billion, a decrease of 23% compared to the prior year.
  • Commercial & Industrial product sales increased 24% to $384 million in Q2 2023.
  • The company expects C&I product sales to grow at a mid-teens rate in 2023.
  • Generac revised its full-year 2023 net sales outlook to a decline of -10 to -12% compared to the prior year.
Negative
  • Residential product sales declined 44% to $499 million in Q2 2023.
  • Net income decreased from $156 million in 2022 to $45 million in Q2 2023.
  • Generac expects lower residential product sales in H2 2023.

WAUKESHA, Wis., Aug. 02, 2023 (GLOBE NEWSWIRE) -- Generac Holdings Inc. (NYSE: GNRC) (“Generac” or the “Company”), a leading global designer and manufacturer of energy technology solutions and other power products, today reported financial results for its second quarter ended June 30, 2023 and provided an update on its outlook for the full year 2023.

Second Quarter 2023 Highlights

  • Net sales decreased 23% to $1.00 billion during the second quarter of 2023 as compared to $1.29 billion in the prior-year second quarter. Core sales growth, which excludes both the impact of acquisitions and foreign currency, decreased approximately 26%.
    • Residential product sales declined 44% to $499 million as compared to $896 million last year.
    • Commercial & Industrial (“C&I”) product sales increased 24% to $384 million as compared to $309 million in the prior year.
  • Net income attributable to the Company during the second quarter was $45 million, or $0.70 per share, as compared to $156 million, or $2.21 per share, for the same period of 2022.
  • Adjusted net income attributable to the Company, as defined in the accompanying reconciliation schedules, was $68 million, or $1.08 per share, as compared to $185 million, or $2.86 per share, in the second quarter of 2022.
  • Adjusted EBITDA before deducting for noncontrolling interests, as defined in the accompanying reconciliation schedules, was $137 million, or 13.6% of net sales, as compared to $271 million, or 21.0% of net sales, in the prior year.   
  • Cash flow from operations was $83 million during the second quarter, as compared to $24 million in the prior year. Free cash flow, as defined in the accompanying reconciliation schedules, was $54 million as compared to $6 million in the second quarter of 2022. The increase in free cash flow was due to significantly lower working capital investment in the current year quarter, partially offset by lower operating earnings, higher interest payments, and higher capital expenditures.

“As expected, overall second quarter sales declined from a strong prior year comparable period that included the significant benefit of excess backlog reduction for home standby generators,” said Aaron Jagdfeld, President and Chief Executive Officer. “While leading indicators of end market demand remain strong and we continue to make progress in reducing field inventory levels, residential product sales were modestly lower than our expectations in the quarter as a softer consumer environment for home improvement impacted shipments of home standby generators and chore products. However, global C&I product shipments remained strong at all-time record levels and were better than expected with broad-based growth across nearly all regions and channels.”

Jagdfeld continued, “While our expectations for the consumer environment are now softer than previously projected, we believe the long-term mega-trends that are driving awareness for backup power solutions are as compelling as ever. Homeowners and businesses are increasingly sensitive to the growing energy supply-demand imbalances and intensifying impacts of extreme weather, and to address these opportunities, we are further investing in the build out of our suite of products and solutions to position ourselves as a leader in energy technology.”

Additional Second Quarter 2023 Consolidated Highlights

Gross profit margin was 32.8% as compared to 35.4% in the prior-year second quarter. This decline in margin was primarily due to the significant impact of unfavorable sales mix, partially offset by higher pricing and lower input costs.

Operating expenses increased $2.3 million, or 1.0%, as compared to the second quarter of 2022. The increase was primarily driven by increased employee and marketing costs and the impact of recurring operating expenses from recent acquisitions, mostly offset by lower variable operating expenses.

Provision for income taxes for the current year quarter was $15.9 million, or an effective tax rate of 25.9%, as compared to $45.8 million, or a 22.5% effective tax rate, for the prior year. The increase in the effective tax rate was primarily due to a lower benefit from equity compensation in the current year quarter as compared to the prior year.

Business Segment Results

Domestic Segment

Domestic segment total sales (including inter-segment sales) decreased 28% to $815.3 million as compared to $1.13 billion in the prior year quarter, with the impact of acquisitions contributing approximately 3% revenue growth for the quarter. The decline in core sales was driven by lower residential product shipments, primarily due to a decline in home standby and clean energy shipments, partially offset by growth in smart thermostat sales. The overall weakness in residential products was partially offset by continued strength in C&I products, highlighted by an increase in shipments to direct customers for “beyond standby” applications, industrial distributors, and the national rental equipment channel.

Adjusted EBITDA for the segment was $103.2 million, or 12.7% of total sales, as compared to $241.9 million in the prior year, or 21.5% of total sales. This margin decline was primarily driven by the significant impact of unfavorable sales mix and reduced operating leverage on lower shipments. The impact of acquisitions and continued investments for future growth also negatively affected margins during the quarter. These headwinds were partially offset by favorable price and cost benefits.

International Segment

International segment total sales (including inter-segment sales) increased 10% to $223.7 million as compared to $203.3 million in the prior year quarter, with the net impact of acquisitions and foreign currency contributing approximately 4% revenue growth for the quarter. The core sales growth for the segment was highlighted by strength in nearly all regions around the world.

Adjusted EBITDA for the segment, before deducting for noncontrolling interests, was $33.3 million, or 14.9% of total sales, as compared to $29.5 million, or 14.5% of total sales, in the prior year. This stronger margin performance was primarily driven by favorable price and cost benefits.

2023 Outlook Update

As a result of the softer-than-expected consumer environment, the Company now anticipates lower residential product sales during the second half relative to prior expectations. Partially offsetting this lower outlook, C&I product sales are now expected to grow at a mid-teens rate during 2023 compared to the previous guidance of a mid to high-single digit increase. Accordingly, the Company now anticipates its full-year 2023 net sales to decline between -10 to -12% as compared to the prior year, which includes approximately 2% of net favorable impact from acquisitions and foreign currency. This compares to the previous guidance range of a decline between -6 to -10%.

Additionally, due to the revised sales outlook, the Company now expects net income margin, before deducting for non-controlling interests, to be approximately 6.0 to 7.0% for the full-year 2023 compared to the previous guidance range of 7.5 to 8.5%. The corresponding EBITDA margin is now expected to be approximately 15.5 to 16.5% compared to the previous guidance range of 17.0 to 18.0%.

Operating and free cash flow generation are still expected to return to strong levels for the full year, with conversion of adjusted net income to free cash flow expected to be well over 100%.

Conference Call and Webcast

Generac management will hold a conference call at 10:00 a.m. EDT on Wednesday, August 2, 2023 to discuss second quarter 2023 operating results. The conference call can be accessed at the following link: https://register.vevent.com/register/BI782af2dcf8804d9491b4bc440ee60103. Individuals who wish to listen via telephone will be given dial-in information.

The conference call will also be webcast simultaneously on Generac's website (http://www.generac.com), accessed under the Investor Relations link. The webcast link will be made available on the Company’s website prior to the start of the call within the Events section of the Investor Relations website.

Following the live webcast, a replay will be available on the Company’s website for 12 months.

About Generac

Generac is a leading energy technology company that provides backup and prime power systems for home and industrial applications, solar + battery storage solutions, smart home energy management devices and energy services, advanced power grid software platforms and engine- & battery-powered tools and equipment. Founded in 1959, Generac introduced the first affordable backup generator and later created the category of automatic home standby generator. The Company is committed to sustainable, cleaner energy products poised to revolutionize the 21st century electrical grid.  

Forward-looking Information

Certain statements contained in this news release, as well as other information provided from time to time by Generac Holdings Inc. or its employees, may contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Forward-looking statements give Generac's current expectations and projections relating to the Company's financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "anticipate," "estimate," "expect," "forecast," "project," "plan," "intend," "believe," "confident," "may," "should," "can have," "likely," "future," “optimistic” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events.

Any such forward-looking statements are not guarantees of performance or results, and involve risks, uncertainties (some of which are beyond the Company's control) and assumptions. Although Generac believes any forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect Generac's actual financial results and cause them to differ materially from those anticipated in any forward-looking statements, including:

  • frequency and duration of power outages impacting demand for our products;
  • fluctuations in cost and quality of raw materials required to manufacture our products;
  • availability of both labor and key components from our manufacturing operations and global supply chain, including single-sourced components and contract manufacturers, needed in producing our products;
  • the possibility that the expected synergies, efficiencies and cost savings of our acquisitions will not be realized, or will not be realized within the expected time period;
  • the risk that our acquisitions will not be integrated successfully;
  • the impact on our results of possible fluctuations in interest rates, foreign currency exchange rates, commodities, product mix, logistics costs and regulatory tariffs;
  • difficulties we may encounter as our business expands globally or into new markets;
  • our dependence on our distribution network;
  • our ability to remain competitive by investing in, developing or adapting to changing technologies and manufacturing techniques, as well as protecting our intellectual property rights;
  • loss of our key management and employees;
  • increase in product and other liability claims or recalls;
  • failures or security breaches of our networks, information technology systems, or connected products;
  • changes in laws and regulations regarding environmental, health and safety, product compliance, or international trade that affect our products, operations, or customer demand;
  • significant legal proceedings, claims, lawsuits or government investigations; and
  • changes in durable goods spending by consumers and businesses or other macroeconomic conditions, impacting demand for our products.

Should one or more of these risks or uncertainties materialize, Generac's actual results may vary in material respects from those projected in any forward-looking statements. In the current environment, some of the above factors have materialized and may cause actual results to vary from these forward-looking statements. A detailed discussion of these and other factors that may affect future results is contained in Generac's filings with the U.S. Securities and Exchange Commission (“SEC”), particularly in the Risk Factors section of the 2022 Annual Report on Form 10-K and in its periodic reports on Form 10-Q. Stockholders, potential investors and other readers should consider these factors carefully in evaluating the forward-looking statements.

Any forward-looking statement made by Generac in this press release speaks only as of the date on which it is made.  Generac undertakes no obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

Non-GAAP Financial Metrics

Core Sales

The Company references core sales to further supplement Generac's condensed consolidated financial statements presented in accordance with U.S. GAAP. Core sales excludes the impact of acquisitions and fluctuations in foreign currency translation. Management believes that core sales facilitates easier and more meaningful comparison of net sales performance with prior and future periods.

Adjusted EBITDA

To supplement our condensed consolidated financial statements presented in accordance with U.S. GAAP, the Company provides the computation of Adjusted EBITDA attributable to the Company, which is defined as net income before noncontrolling interest adjusted for the following items: interest expense, depreciation expense, amortization of intangible assets, income tax expense, certain non-cash gains and losses including purchase accounting and contingent consideration adjustments, share-based compensation expense, losses on extinguishment of debt, certain transaction costs and credit facility fees, business optimization expenses, certain specific provisions, and adjusted EBITDA attributable to noncontrolling interests, as set forth in the reconciliation table below.  

Adjusted Net Income

To further supplement Generac's condensed consolidated financial statements presented in accordance with U.S. GAAP, the Company provides a summary to show the computation of adjusted net income attributable to the Company. Adjusted net income attributable to the Company is defined as net income before noncontrolling interests adjusted for the following items: amortization of intangible assets, amortization of deferred financing costs and original issue discount related to the Company's debt, intangible impairment charges, certain transaction costs and other purchase accounting adjustments, losses on extinguishment of debt, business optimization and other charges, certain specific provisions, certain other non-cash gains and losses, and adjusted net income attributable to non-controlling interests.

Free Cash Flow

In addition, we reference free cash flow to further supplement Generac's condensed consolidated financial statements presented in accordance with U.S. GAAP. Free cash flow is defined as net cash provided by operating activities, plus proceeds from beneficial interests in securitization transactions, less expenditures for property and equipment, and is intended to be a measure of operational cash flow taking into account additional capital expenditure investment into the business.

The presentation of this additional information is not meant to be considered in isolation of, or as a substitute for, results prepared in accordance with U.S. GAAP.  Please see the accompanying Reconciliation Schedules and our SEC filings for additional discussion of the basis for Generac's reporting of Non-GAAP financial measures, which includes why the Company believes these measures provide useful information to investors and the additional purposes for which management uses the non-GAAP financial information.

SOURCE: Generac Holdings Inc.

CONTACT:
Michael W. Harris
Senior Vice President – Corporate Development & Investor Relations
(262) 506-6064
InvestorRelations@generac.com


Generac Holdings Inc.
Condensed Consolidated Statements of Comprehensive Income
(U.S. Dollars in Thousands, Except Share and Per Share Data)
(Unaudited)
      
 Three Months Ended June 30, Six Months Ended June 30,
  2023   2022   2023   2022 
        
Net sales$1,000,420  $1,291,391  $1,888,330  $2,427,247 
Costs of goods sold 671,999   834,406   1,287,410   1,609,514 
Gross profit 328,421   456,985   600,920   817,733 
        
Operating expenses:       
Selling and service 115,743   120,066   216,431   218,309 
Research and development 43,942   41,599   85,762   81,343 
General and administrative 56,371   52,600   116,056   94,572 
Amortization of intangibles 26,393   25,876   52,216   51,930 
Total operating expenses 242,449   240,141   470,465   446,154 
Income from operations 85,972   216,844   130,455   371,579 
        
Other (expense) income:       
Interest expense (25,160)  (10,235)  (48,155)  (19,789)
Investment income 941   92   1,629   169 
Loss on extinguishment of debt -   (3,743)  -   (3,743)
Other, net (331)  505   (497)  751 
Total other expense, net (24,550)  (13,381)  (47,023)  (22,612)
        
Income before provision for income taxes 61,422   203,463   83,432   348,967 
Provision for income taxes 15,907   45,826   23,756   74,434 
Net income 45,515   157,637   59,676   274,533 
Net income (loss) attributable to noncontrolling interests 317   1,278   2,048   4,316 
Net income attributable to Generac Holdings Inc.$45,198  $156,359  $57,628  $270,217 
        
Net income attributable to common shareholders per common share - basic:$0.70  $2.24  $0.76  $3.85 
Weighted average common shares outstanding - basic: 61,721,614   63,662,510   61,645,341   63,607,711 
        
Net income attributable to common shareholders per common share - diluted:$0.70  $2.21  $0.75  $3.78 
Weighted average common shares outstanding - diluted: 62,348,184   64,713,748   62,429,911   64,799,002 
        
Comprehensive income attributable to Generac Holdings Inc.$69,060  $120,864  $104,422  $243,229 
        



Generac Holdings Inc.
Condensed Consolidated Balance Sheets
(U.S. Dollars in Thousands, Except Share and Per Share Data)
(Unaudited)
    
 June 30, December 31,
  2023   2022 
Assets   
Current assets:   
Cash and cash equivalents$192,768  $132,723 
Accounts receivable, less allowance for credit losses of $29,610 and $27,664 at June 30, 2023 and December 31, 2022, respectively 540,332   522,458 
Inventories 1,436,619   1,405,384 
Prepaid expenses and other current assets 103,334   121,783 
Total current assets 2,273,053   2,182,348 
    
Property and equipment, net 505,026   467,604 
    
Customer lists, net 200,478   206,987 
Patents and technology, net 438,148   454,757 
Other intangible assets, net 34,515   41,719 
Tradenames, net 223,229   227,251 
Goodwill 1,430,283   1,400,880 
Deferred income taxes 13,953   12,746 
Operating lease and other non-current assets 203,286   175,170 
Total assets$5,321,971  $5,169,462 
    
Liabilities and stockholders’ equity   
Current liabilities:   
Short-term borrowings$77,889  $48,990 
Accounts payable 454,727   446,050 
Accrued wages and employee benefits 53,417   45,741 
Accrued product warranty 74,025   89,141 
Other accrued liabilities 254,700   349,389 
Current portion of long-term borrowings and finance lease obligations 22,069   12,733 
Total current liabilities 936,827   992,044 
    
Long-term borrowings and finance lease obligations 1,523,310   1,369,085 
Deferred income taxes 114,990   125,691 
Operating lease and other long-term liabilities 319,400   312,916 
Total liabilities 2,894,527   2,799,736 
    
Redeemable noncontrolling interest 5,688   110,471 
    
Stockholders’ equity:   
Common stock, par value $0.01, 500,000,000 shares authorized, 73,097,016 and 72,701,257   
shares issued at June 30, 2023 and December 31, 2022, respectively 732   728 
Additional paid-in capital 1,053,759   1,016,138 
Treasury stock, at cost, 10,858,348 and 11,284,350 shares at June 30, 2023 and December 31, 2022, respectively (779,892)  (808,491)
Excess purchase price over predecessor basis (202,116)  (202,116)
Retained earnings 2,363,015   2,316,224 
Accumulated other comprehensive loss (16,216)  (65,102)
Stockholders’ equity attributable to Generac Holdings Inc. 2,419,282   2,257,381 
Noncontrolling interests 2,474   1,874 
Total stockholders’ equity 2,421,756   2,259,255 
Total liabilities and stockholders’ equity$5,321,971  $5,169,462 
    



Generac Holdings Inc.
Condensed Consolidated Statements of Cash Flows
(U.S. Dollars in Thousands)
(Unaudited)
    
 Six Months Ended June 30,
  2023   2022 
Operating activities   
Net income$59,676  $274,533 
Adjustment to reconcile net income to net cash provided by operating activities:   
Depreciation 28,982   25,629 
Amortization of intangible assets 52,216   51,930 
Amortization of original issue discount and deferred financing costs 1,921   1,287 
Loss on extinguishment of debt -   3,743 
Deferred income taxes (14,152)  (61,625)
Share-based compensation expense 20,379   16,562 
Gain on disposal of assets (532)  (587)
Other noncash (gains) charges 735   (2,037)
Net changes in operating assets and liabilities, net of acquisitions:   
Accounts receivable (15,535)  (143,308)
Inventories (15,897)  (158,232)
Other assets 16,333   1,637 
Accounts payable (2,449)  (54,583)
Accrued wages and employee benefits 6,694   (11,876)
Other accrued liabilities (72,743)  86,616 
Excess tax benefits from equity awards (1,040)  (15,996)
Net cash provided by operating activities 64,588   13,693 
    
Investing activities   
Proceeds from sale of property and equipment 1,801   1,883 
Proceeds from sale of investment -   1,308 
Proceeds from beneficial interests in securitization transactions 1,472   1,843 
Contribution to equity method investment (6,627)  (10,229)
Purchase of long-term investment (2,000)  - 
Expenditures for property and equipment (53,900)  (46,503)
Acquisition of business, net of cash acquired (16,188)  (11,421)
Net cash used in investing activities (75,442)  (63,119)
    
Financing activities   
Proceeds from short-term borrowings 45,989   216,681 
Proceeds from long-term borrowings 317,975   935,000 
Repayments of short-term borrowings (21,125)  (208,244)
Repayments of long-term borrowings and finance lease obligations (160,557)  (538,401)
Payment of contingent acquisition consideration (4,979)  - 
Payment of debt issuance costs -   (10,330)
Purchase of additional ownership interest (104,844)  (375)
Taxes paid related to equity awards (9,186)  (38,347)
Proceeds from the exercise of stock options 6,223   10,383 
Net cash provided by financing activities 69,496   366,367 
    
Effect of exchange rate changes on cash and cash equivalents 1,403   2,860 
    
Net increase in cash and cash equivalents 60,045   319,801 
Cash and cash equivalents at beginning of period 132,723   147,339 
Cash and cash equivalents at end of period$192,768  $467,140 
    



Generac Holdings Inc.
Segment Reporting and Product Class Information
(U.S. Dollars in Thousands)
(Unaudited)
             
  Total Sales by Reportable Segment
  Three Months Ended June 30, 2023 Three Months Ended June 30, 2022
  External Net
Sales
 Intersegment
Sales
 Total Sales External Net Sales Intersegment
Sales
 Total Sales
Domestic$804,539 $10,713  $815,252  $1,107,431 $18,987  $1,126,418 
International 195,881  27,842   223,723   183,960  19,334   203,294 
Intercompany elimination -  (38,555)  (38,555)  -  (38,321)  (38,321)
Total net sales$1,000,420 $-  $1,000,420  $1,291,391 $-  $1,291,391 
             
             
  Total Sales by Reportable Segment
  Six Months Ended June 30, 2023 Six Months Ended June 30, 2022
  External Net
Sales
 Intersegment
Sales
 Total Sales External Net Sales Intersegment
Sales
 Total Sales
Domestic$1,508,927 $26,320  $1,535,247  $2,072,105 $29,257  $2,101,362 
International 379,403  60,784   440,187   355,142  33,659   388,801 
Intercompany elimination -  (87,104)  (87,104)  -  (62,916)  (62,916)
Total net sales$1,888,330 $-  $1,888,330  $2,427,247 $-  $2,427,247 
             
             
  External Net Sales by Product Class    
  Three Months Ended June 30, Six Months Ended June 30,    
   2023  2022   2023   2022    
Residential products$498,587 $896,013  $917,450  $1,672,957    
Commercial & industrial products 384,353  309,348   747,343   588,077    
Other 117,480  86,030   223,537   166,213    
Total net sales$1,000,420 $1,291,391  $1,888,330  $2,427,247    
             
  Adjusted EBITDA    
  Three Months Ended June 30, 2023 Six Months Ended June 30,    
   2023  2022   2023   2022    
Domestic$103,202 $241,928  $170,863  $412,349    
International 33,343  29,534   65,757   55,526    
Total adjusted EBITDA (1)$136,545 $271,462  $236,620  $467,875    
             
(1) See reconciliation of Adjusted EBITDA to Net income attributable to Generac Holdings Inc. on the following reconciliation schedule.
             



Generac Holdings Inc. 
Reconciliation Schedules 
(U.S. Dollars in Thousands, Except Share and Per Share Data) 
(Unaudited) 
 
Net income to Adjusted EBITDA reconciliation        
    Three Months Ended June 30, Six Months Ended June 30, 
     2023   2022   2023   2022  
            
Net income attributable to Generac Holdings Inc.$45,198  $156,359  $57,628  $270,217  
Net income attributable to noncontrolling interests 317   1,278   2,048   4,316  
Net income    45,515   157,637   59,676   274,533  
Interest expense   25,160   10,235   48,155   19,789  
Depreciation and amortization  41,247   39,098   81,198   77,559  
Provision for income taxes  15,907   45,826   23,756   74,434  
Non-cash write-down and other adjustments (1) (4,152)  4,607   (7,312)  (3,185) 
Non-cash share-based compensation expense (2) 10,045   7,735   20,379   16,562  
Loss on extinguishment of debt (3)  -   3,743   -   3,743  
Transaction costs and credit facility fees (4) 1,149   1,592   2,240   2,581  
Business optimization and other charges (5) 1,760   1,590   2,860   2,749  
Provision for regulatory charges (6)  -   -   5,800   -  
Other    (86)  (601)  (132)  (890) 
Adjusted EBITDA   136,545   271,462   236,620   467,875  
Adjusted EBITDA attributable to noncontrolling interests 520   3,742   3,653   7,167  
Adjusted EBITDA attributable to Generac Holdings Inc.$136,025  $267,720  $232,967  $460,708  
            
(1) Includes gains/losses on the disposition of assets and sales of certain investments, unrealized mark-to-market adjustments on commodity contracts, certain foreign currency related adjustments, and certain purchase accounting and contingent consideration adjustments. A full description of these and the other reconciliation adjustments contained in these schedules is included in Generac's SEC filings. 
            
(2) Represents share-based compensation expense to account for stock options, restricted stock and other stock awards over their respective vesting periods. 
            
(3) Represents the write-off of original issue discount and capitalized debt issuance costs due to voluntary debt prepayment. 
            
(4) Represents transaction costs incurred directly in connection with any investment, as defined in our credit agreement, equity issuance or debt issuance or refinancing, together with certain fees relating to our senior secured credit facilities. 
            
(5) Represents severance and other restructuring charges. 
            
(6) The amount recorded in the first quarter 2023 represents a provision of $5.8 million for a matter with the Consumer Product Safety Commission (CPSC) concerning the imposition of civil fines for allegedly failing to timely submit a report under the Consumer Product Safety Act (CPSA) in relation to certain portable generators that were subject to a voluntary recall previously announced on July 29, 2021. On May 25, 2023, the Company and the CPSC entered into a final mutual settlement agreement resolving this matter. 
            
Net income to Adjusted net income reconciliation        
    Three Months Ended June 30, Six Months Ended June 30, 
     2023   2022   2023   2022  
            
Net income attributable to Generac Holdings Inc.$45,198  $156,359  $57,628  $270,217  
Net income attributable to noncontrolling interests 317   1,278   2,048   4,316  
Net income    45,515   157,637   59,676   274,533  
Amortization of intangible assets  26,393   25,876   52,216   51,930  
Amortization of deferred finance costs and original issue discount 967   650   1,921   1,287  
Loss on extinguishment of debt (3)  -   3,743   -   3,743  
Transaction costs and other purchase accounting adjustments (7) 669   5,710   1,387   (46) 
(Gain)/loss attributable to business or asset dispositions (8) -   -   (119)  (229) 
Business optimization and other charges (5) 1,760   1,590   2,860   2,749  
Provision for regulatory charges (6) -   -   5,800   -  
Tax effect of add backs (9)  (7,459)  (8,448)  (14,590)  (15,764) 
Adjusted net income   67,844   186,758   109,151   318,203  
Adjusted net income (loss) attributable to noncontrolling interests 317   1,678   2,048   5,168  
Adjusted net income attributable to Generac Holdings Inc.$67,527  $185,080  $107,103  $313,035  
            
Adjusted net income attributable to Generac Holdings Inc. per        
common share - diluted: $1.08  $2.86  $1.72  $4.83  
Weighted average common shares outstanding - diluted: 62,348,184   64,713,748   62,429,911   64,799,002  
            
(7) Represents transaction costs incurred directly in connection with any investment, as defined in our credit agreement, equity issuance or debt issuance or refinancing, and certain purchase accounting and contingent consideration adjustments. 
            
(8) Represents gains and losses attributable to the disposition of a business or assets occurring in other than ordinary course, as defined in our credit agreement. 
            
(9) In the third quarter of 2022, management determined that certain add-backs in 2022 should be reported net of tax. Add-backs in the second quarter of 2022 were not reported net of tax, and we reported adjusted net income attributable to Generac Holdings Inc. for the three months ended June 30, 2022 of $193,528 or $2.99 and six months ended June 30, 2022 of $328,799 or $5.07. Taking into account the tax effect on certain add-backs, the revised reported adjusted net income attributable to Generac Holdings Inc. for the three months ended June 30, 2022 is $185,080 or $2.86, and six months ended June 30, 2022 is $313,035 or $4.83. 
            
Free Cash Flow Reconciliation         
    Three Months Ended June 30, Six Months Ended June 30, 
     2023   2022   2023   2022  
            
Net cash provided by operating activities$83,147  $23,835  $64,588  $13,693  
Proceeds from beneficial interests in securitization transactions 677   270   1,472   1,843  
Expenditures for property and equipment (29,923)  (18,303)  (53,900)  (46,503) 
Free cash flow  $53,901  $5,802  $12,160  $(30,967) 
            

 

 


FAQ

What were Generac's net sales in Q2 2023?

Generac reported net sales of $1.00 billion in Q2 2023, a decrease of 23% compared to the prior year.

How did residential product sales perform in Q2 2023?

Residential product sales declined 44% to $499 million in Q2 2023.

What is Generac's revised outlook for full-year 2023 net sales?

Generac revised its full-year 2023 net sales outlook to a decline of -10 to -12% compared to the prior year.

What is the expected growth rate for C&I product sales in 2023?

Generac expects C&I product sales to grow at a mid-teens rate in 2023.

GENERAC HOLDINGS INC

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Specialty Industrial Machinery
Motors & Generators
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United States of America
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