EX-99.1 2 ex_738669.htm EXHIBIT 99.1 ex_738669.htm

Exhibit 99.1

 

Generac Reports Third Quarter 2024 Results

 

Return to robust overall sales growth with continued margin expansion; increasing 2024 outlook due to recent major outage events

 

WAUKESHA, WISCONSIN (October 31, 2024) – 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 third quarter ended September 30, 2024, and provided an update on its outlook for the full-year 2024.

 

Third Quarter 2024 Highlights

 

Net sales were $1.17 billion during the third quarter of 2024 as compared to $1.07 billion in the prior-year third quarter, an increase of approximately 10%. Core sales, which excludes both the impact of acquisitions and foreign currency, increased approximately 9% from the prior year period.

 

 

-

Residential product sales increased approximately 28% to $723 million as compared to $565 million last year.

 

 

-

Commercial & Industrial (“C&I”) product sales decreased approximately 15% to $328 million as compared to $385 million in the prior year.

 

Net income attributable to the Company during the third quarter was $114 million, or $1.89 per share, as compared to $60 million, or $0.97 per share, for the same period of 2023.

 

Adjusted net income attributable to the Company, as defined in the accompanying reconciliation schedules, was $136 million, or $2.25 per share, as compared to $102 million, or $1.64 per share, in the third quarter of 2023.

 

Adjusted EBITDA before deducting for noncontrolling interests, as defined in the accompanying reconciliation schedules, was $232 million, or 19.8% of net sales, as compared to $189 million, or 17.6% of net sales, in the prior year.

 

Cash flow from operations was $212 million during the third quarter, as compared to $140 million in the prior year. Free cash flow, as defined in the accompanying reconciliation schedules, was $184 million as compared to $117 million in the third quarter of 2023.

 

The Company repurchased 690,711 shares of its common stock during the third quarter for approximately $102 million. There is approximately $347 million remaining under the current repurchase program as of September 30, 2024.

 

The Company is updating its overall net sales growth guidance for the full-year 2024 to be 5 to 9% compared to the prior year on an as-reported basis, an increase from the previous guidance range of 4 to 8%. Adjusted EBITDA margin, before deducting for non-controlling interests, is now expected to be 17.5 to 18.5% as compared to the previous expectation of 17.0 to 18.0%.

 

“Our third quarter results outperformed our expectations as elevated power outage activity drove increased shipments of our residential products and strong execution helped to deliver significant margin expansion,” said Aaron Jagdfeld, President and Chief Executive Officer. “Shipments of home standby and portable generators increased at a very strong rate from the prior year period, more than offsetting expected softness in C&I product sales. As a result, we are updating our full year 2024 guidance to include higher residential product sales with further improvements in adjusted EBITDA margins.”

 

Jagdfeld continued, “The vulnerability of our nation’s electrical grid has never been more evident with the U.S. experiencing the highest level of power outage hours through the first nine months of the year since we began tracking outage data in 2010. In addition to more volatile weather, the rapid adoption of renewable, intermittent power generation sources and accelerating demand for electricity will likely lead to additional stresses on our aging grid. The elevated outage activity and growing grid related supply-demand imbalances are expected to drive both continued near-term demand as well as long-term awareness of the growing need for backup power products.”

 

Additional Third Quarter 2024 Consolidated Highlights

 

Gross profit margin was 40.2% as compared to 35.1% in the prior-year third quarter. The increase in gross margin was primarily driven by favorable sales mix and lower input costs.

 

Operating expenses increased $32.6 million, or 12.0%, as compared to the third quarter of 2023. The growth in operating expenses was primarily driven by increased employee costs to support future growth, additional marketing spend to drive incremental awareness for our products, and higher variable expenses and incentive compensation given higher shipment volumes and profitability. This was partially offset by a $22.1 million provision for certain legal matters that was recorded in the prior year which did not repeat in the current year period.

 

Provision for income taxes for the current year quarter was $33.5 million, or an effective tax rate of 22.7%, as compared to $19.4 million, or a 24.3% effective tax rate, for the prior year. The decrease in effective tax rate was primarily driven by certain unfavorable discrete tax items in the prior year quarter that did not repeat in the current year.

 

Cash flow from operations was $212.3 million during the third quarter, as compared to $140.1 million in the prior year. Free cash flow, as defined in the accompanying reconciliation schedules, was $183.7 million as compared to $117.4 million in the third quarter of 2023. The increase was primarily due to higher operating earnings and a greater reduction in primary working capital as compared to the prior year.

 

1

 

Business Segment Results

 

Domestic Segment

 

Domestic segment total sales (including inter-segment sales) increased 14% to $1.02 billion as compared to $894.0 million in the prior year, including a slight benefit from acquisitions. This was primarily driven by strong shipments of home standby and portable generators, as well as continued growth in C&I product sales to industrial distributors, partially offset by lower C&I product shipments for telecom, rental, and “beyond standby” applications.

 

Adjusted EBITDA for the segment was $211.6 million, or 20.7% of domestic segment total sales, as compared to $160.3 million, or 17.9% of total sales, in the prior year. This margin improvement was primarily due to favorable sales mix and lower input costs, partially offset by higher operating expense investments to support future growth initiatives.

 

International Segment

 

International segment total sales (including inter-segment sales) decreased 20% to $166.7 million as compared to $207.6 million in the prior year quarter, including a slight unfavorable impact from foreign currency. The core total sales decline was primarily due to lower inter-segment sales related to softness in the telecom market and a decline in shipments of portable generators and C&I products in Europe due to weaker market conditions.

 

Adjusted EBITDA for the segment, before deducting for noncontrolling interests, was $20.3 million, or 12.2% of international segment total sales, as compared to $28.3 million, or 13.6% of total sales, in the prior year. This margin decline was primarily due to reduced operating leverage on lower shipments during the quarter.

 

2024 Outlook
 
As a result of higher than previously expected power outage activity, including the impact of Hurricane Helene and Hurricane Milton, the Company is increasing its full-year 2024 net sales guidance. The Company now expects full-year 2024 net sales growth between 5 to 9% as compared to the prior year, an increase from the previous outlook of 4 to 8%. By product class, this updated net sales guidance considers an outsized increase in Residential product sales, partially offset by softer market conditions for C&I and Other product sales in certain end markets and geographies.

 

Additionally, the Company now expects net income margin, before deducting for non-controlling interests, to be approximately 7.0 to 8.0% for the full-year 2024 as compared to the prior expectation of 6.5 to 7.5%. The corresponding adjusted EBITDA margin is now expected to be approximately 17.5 to 18.5% as compared to the previous guidance range of 17.0 to 18.0%.

 

The Company continues to expect strong operating and free cash flow generation for the full year, with free cash flow conversion from adjusted net income well above 100%.

 

Conference Call and Webcast
 
Generac management will hold a conference call at 10:00 a.m. EDT on Thursday, October 31, 2024 to discuss third quarter 2024 operating results. The conference call can be accessed at the following link: https://register.vevent.com/register/BIabec574e36cc43abb7ea58d0150702c4. 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
 
Founded in 1959, Generac is a leading global designer, manufacturer, and provider of a wide range of energy technology solutions. The Company provides power generation equipment, energy storage systems, energy management devices & solutions, and other power products serving the residential, light commercial, and industrial markets. Generac introduced the first affordable backup generator and later created the automatic home standby generator category. The Company has continued to expand its energy technology offerings in its mission to lead the evolution to more resilient, efficient, and sustainable energy solutions.
 
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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:

 

fluctuations in cost, availability, and quality of raw materials, key components and labor required to manufacture our products;

our dependence on a small number of contract manufacturers and component suppliers, including single-source suppliers;

our ability to protect our intellectual property rights or successfully defend against third party infringement claims;

increase in product and other liability claims, warranty costs, recalls, or other claims;

significant legal proceedings, claims, fines, penalties, tax assessments, lawsuits or government investigations;

our ability to consummate our share repurchase programs;

our failure or inability to adapt to, or comply with, current or future changes in applicable laws and regulations;

scrutiny regarding our ESG practices;

our ability to develop and enhance products and gain customer acceptance for our products;

frequency and duration of power outages impacting demand for our products;

changes in durable goods spending by consumers and businesses or other macroeconomic conditions, impacting demand for our products;

our ability to accurately forecast demand for our products and effectively manage inventory levels relative to such forecast;

our ability to remain competitive;

our dependence on our dealer and distribution network;

market reaction to changes in selling prices or mix of products;

loss of our key management and employees;

disruptions from labor disputes or organized labor activities;

our ability to attract and retain employees;

disruptions in our manufacturing operations;

changes in U.S. trade policy;

the possibility that the expected synergies, efficiencies and cost savings of our acquisitions, divestitures, restructurings, or realignments will not be realized, or will not be realized within the expected time period;

risks related to sourcing components in foreign countries;

compliance with environmental, health and safety laws and regulations;

government regulation of our products;

failures or security breaches of our networks, information technology systems, or connected products;

our ability to make payments on our indebtedness;

terms of our credit facilities that may restrict our operations;

our potential need for additional capital to finance our growth or refinancing our existing credit facilities; 

risks of impairment of the value of our goodwill and other indefinite-lived assets;

volatility of our stock price; and

potential tax liabilities.

 

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. 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 2023 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.

 

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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 Generac’s 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 interests adjusted for the following items: interest expense, depreciation expense, amortization of intangible assets, income tax expense, certain non-cash gains and losses including certain purchase accounting adjustments and contingent consideration adjustments, share-based compensation expense, certain transaction costs and credit facility fees, business optimization expenses, provision for certain legal and regulatory charges, certain specific provisions, mark-to-market gains and losses on a minority investment, and Adjusted EBITDA attributable to noncontrolling interests, as set forth in the reconciliation table below. The computation of Adjusted EBITDA is based primarily on the definition included in our Credit Agreement.

 

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, business optimization expenses, provision for certain legal and regulatory charges, certain specific provisions, mark-to-market gains and losses on a minority investment, other non-cash gains and losses, and adjusted net income attributable to non-controlling interests.

 

Free Cash Flow

 

In addition, the Company references 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:

 

Kris Rosemann

Director – Corporate Development & Investor Relations
(262) 506-6064
InvestorRelations@generac.com

 

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Generac Holdings Inc.

Condensed Consolidated Balance Sheets

(U.S. Dollars in Thousands, Except Share and Per Share Data)

(Unaudited)

 

   

September 30,

   

December 31,

 
   

2024

   

2023

 

Assets

               

Current assets:

               

Cash and cash equivalents

  $ 214,177     $ 200,994  

Accounts receivable, less allowance for credit losses of $34,489 and $33,925 at September 30, 2024 and December 31, 2023, respectively

    658,649       537,316  

Inventories

    1,095,758       1,167,484  

Prepaid expenses and other current assets

    104,791       91,898  

Total current assets

    2,073,375       1,997,692  
                 

Property and equipment, net

    639,733       598,577  
                 

Customer lists, net

    166,016       184,513  

Patents and technology, net

    391,841       417,441  

Other intangible assets, net

    21,419       27,127  

Tradenames, net

    210,308       216,995  

Goodwill

    1,454,172       1,432,384  

Deferred income taxes

    12,179       15,532  

Operating lease and other assets

    217,896       203,051  

Total assets

  $ 5,186,939     $ 5,093,312  
                 

Liabilities and stockholders equity

               

Current liabilities:

               

Short-term borrowings

  $ 65,540     $ 81,769  

Accounts payable

    424,812       340,719  

Accrued wages and employee benefits

    78,209       54,970  

Accrued product warranty

    60,377       65,298  

Other accrued liabilities

    291,360       292,120  

Current portion of long-term borrowings and finance lease obligations

    99,176       45,895  

Total current liabilities

    1,019,474       880,771  
                 

Long-term borrowings and finance lease obligations

    1,360,637       1,447,553  

Deferred income taxes

    62,260       90,012  

Deferred revenue

    186,465       167,008  

Operating lease and other long-term liabilities

    145,641       158,349  

Total liabilities

    2,774,477       2,743,693  
                 

Redeemable noncontrolling interest

    -       6,549  
                 

Stockholders’ equity:

               

Common stock, par value $0.01, 500,000,000 shares authorized, 73,646,420 and 73,195,055 shares issued at September 30, 2024 and December 31, 2023, respectively

    736       733  

Additional paid-in capital

    1,115,525       1,070,386  

Treasury stock, at cost, 14,149,513 and 13,057,298 shares at September 30, 2024 and December 31, 2023, respectively

    (1,192,435 )     (1,032,921 )

Excess purchase price over predecessor basis

    (202,116 )     (202,116 )

Retained earnings

    2,715,716       2,519,313  

Accumulated other comprehensive loss

    (27,987 )     (15,143 )

Stockholders’ equity attributable to Generac Holdings Inc.

    2,409,439       2,340,252  

Noncontrolling interests

    3,023       2,818  

Total stockholders’ equity

    2,412,462       2,343,070  

Total liabilities and stockholders’ equity

  $ 5,186,939     $ 5,093,312  

 

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Generac Holdings Inc.

Condensed Consolidated Statements of Comprehensive Income

(U.S. Dollars in Thousands, Except Share and Per Share Data)

(Unaudited)

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2024

   

2023

   

2024

   

2023

 
                                 

Net sales

  $ 1,173,563     $ 1,070,667     $ 3,061,033     $ 2,958,997  

Costs of goods sold

    701,294       694,880       1,896,824       1,982,290  

Gross profit

    472,269       375,787       1,164,209       976,707  
                                 

Operating expenses:

                               

Selling and service

    145,310       117,929       382,049       334,360  

Research and development

    56,936       43,312       160,342       129,074  

General and administrative

    77,242       83,052       209,392       199,108  

Amortization of intangibles

    24,157       26,718       73,698       78,934  

Total operating expenses

    303,645       271,011       825,481       741,476  

Income from operations

    168,624       104,776       338,728       235,231  
                                 

Other (expense) income:

                               

Interest expense

    (22,910 )     (24,707 )     (69,833 )     (72,862 )

Investment income

    1,757       1,160       5,286       2,789  

Change in fair value of investment

    5,198       -       (2,938 )     -  

Loss on extinguishment of debt

    (4,861 )     -       (4,861 )     -  

Other, net

    (577 )     (1,167 )     (1,949 )     (1,664 )

Total other expense, net

    (21,393 )     (24,714 )     (74,295 )     (71,737 )
                                 

Income before provision for income taxes

    147,231       80,062       264,433       163,494  

Provision for income taxes

    33,453       19,428       65,124       43,184  

Net income

    113,778       60,634       199,309       120,310  

Net income attributable to noncontrolling interests

    36       257       220       2,305  

Net income attributable to Generac Holdings Inc.

  $ 113,742     $ 60,377     $ 199,089     $ 118,005  
                                 

Net income attributable to common shareholders per common share - basic:

  $ 1.91     $ 0.98     $ 3.29     $ 1.74  

Weighted average common shares outstanding - basic:

    59,493,640       61,368,440       59,720,597       61,552,949  
                                 

Net income attributable to common shareholders per common share - diluted:

  $ 1.89     $ 0.97     $ 3.25     $ 1.72  

Weighted average common shares outstanding - diluted:

    60,312,393       62,091,163       60,475,478       62,362,743  
                                 

Comprehensive income attributable to Generac Holdings Inc.

  $ 129,284     $ 37,041     $ 186,245     $ 141,463  

 

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Generac Holdings Inc.

Condensed Consolidated Statements of Cash Flows

(U.S. Dollars in Thousands)

(Unaudited)

 

   

Nine Months Ended September 30,

 
   

2024

   

2023

 

Operating activities

               

Net income

  $ 199,309     $ 120,310  

Adjustments to reconcile net income to net cash provided by operating activities:

               

Depreciation

    54,236       45,215  

Amortization of intangible assets

    73,698       78,934  

Amortization of capitalized debt fees and original issue discount

    2,592       2,902  

Change in fair value of investment

    2,938       -  

Loss on extinguishment of debt

    4,861       -  

Deferred income taxes

    (23,546 )     (18,715 )

Share-based compensation expense

    38,270       30,306  

Gain on disposal of assets

    (34 )     (538 )

Other noncash charges

    2,904       380  

Excess tax benefits from equity awards

    (642 )     (920 )

Net changes in operating assets and liabilities, net of acquisitions:

               

Accounts receivable

    (120,137 )     (68,975 )

Inventories

    73,390       101,894  

Other assets

    (4,348 )     32,175  

Accounts payable

    87,343       (57,866 )

Accrued wages and employee benefits

    22,482       10,244  

Other accrued liabilities

    (11,469 )     (70,622 )

Net cash provided by operating activities

    401,847       204,724  
                 

Investing activities

               

Proceeds from sale of property and equipment

    144       1,933  

Proceeds from beneficial interests in securitization transactions

    -       2,533  

Contribution to tax equity investment

    (1,629 )     (6,627 )

Purchase of long-term investments

    (37,118 )     (2,592 )

Proceeds from sale of long-term investment

    2,000       -  

Expenditures for property and equipment

    (83,399 )     (77,718 )

Acquisition of businesses, net of cash acquired

    (21,784 )     (15,974 )

Net cash used in investing activities

    (141,786 )     (98,445 )
                 

Financing activities

               

Proceeds from short-term borrowings

    29,219       49,078  

Proceeds from long-term borrowings

    506,465       345,384  

Repayments of short-term borrowings

    (48,868 )     (25,910 )

Repayments of long-term borrowings and finance lease obligations

    (560,644 )     (233,101 )

Stock repurchases

    (152,743 )     (100,267 )

Payment of debt issuance costs

    (3,616 )     -  

Payment of contingent acquisition consideration

    -       (4,979 )

Payment of deferred acquisition consideration

    (7,361 )     -  

Purchase of additional ownership interest

    (9,117 )     (104,844 )

Taxes paid related to equity awards

    (12,268 )     (10,068 )

Proceeds from the exercise of stock options

    12,366       7,139  

Net cash used in financing activities

    (246,567 )     (77,568 )
                 

Effect of exchange rate changes on cash and cash equivalents

    (311 )     91  
                 

Net increase in cash and cash equivalents

    13,183       28,802  

Cash and cash equivalents at beginning of period

    200,994       132,723  

Cash and cash equivalents at end of period

  $ 214,177     $ 161,525  

 

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Generac Holdings Inc.

Segment Reporting and Product Class Information

(U.S. Dollars in Thousands)

(Unaudited)

 

   

Total Sales by Reportable Segment

 
   

Three Months Ended September 30, 2024

   

Three Months Ended September 30, 2023

 
   

External Net Sales

   

Intersegment Sales

   

Total Sales

   

External Net Sales

   

Intersegment Sales

   

Total Sales

 

Domestic

  $ 1,011,347     $ 8,853     $ 1,020,200     $ 886,365     $ 7,640     $ 894,005  

International

    162,216       4,485       166,701       184,302       23,293       207,595  

Intercompany elimination

    -       (13,338 )     (13,338 )     -       (30,933 )     (30,933 )

Total net sales

  $ 1,173,563     $ -     $ 1,173,563     $ 1,070,667     $ -     $ 1,070,667  

 

   

Total Sales by Reportable Segment

 
   

Nine Months Ended September 30, 2024

   

Nine Months Ended September 30, 2023

 
   

External Net Sales

   

Intersegment Sales

   

Total Sales

   

External Net Sales

   

Intersegment Sales

   

Total Sales

 

Domestic

  $ 2,541,242     $ 26,571     $ 2,567,813     $ 2,395,292     $ 33,960     $ 2,429,252  

International

    519,791       18,127       537,918       563,705       84,078       647,783  

Intercompany elimination

    -       (44,698 )     (44,698 )     -       (118,038 )     (118,038 )

Total net sales

  $ 3,061,033     $ -     $ 3,061,033     $ 2,958,997     $ -     $ 2,958,997  

 

   

External Net Sales by Product Class

 
   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2024

   

2023

   

2024

   

2023

 

Residential products

  $ 722,787     $ 565,087     $ 1,690,136     $ 1,482,538  

Commercial & industrial products

    327,956       384,533       1,026,095       1,131,876  

Other

    122,820       121,047       344,802       344,583  

Total net sales

  $ 1,173,563     $ 1,070,667     $ 3,061,033     $ 2,958,997  

 

   

Adjusted EBITDA by Reportable Segment

 
   

Three Months Ended September 30, 2024

   

Nine Months Ended September 30,

 
   

2024

   

2023

   

2024

   

2023

 

Domestic

  $ 211,567     $ 160,270     $ 450,416     $ 331,134  

International

    20,298       28,332       73,371       94,088  

Total adjusted EBITDA (1)

  $ 231,865     $ 188,602     $ 523,787     $ 425,222  

 

(1) See reconciliation of Adjusted EBITDA to Net income attributable to Generac Holdings Inc. on the following reconciliation schedule. 

 

8

 

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 September 30,

   

Nine Months Ended September 30,

 
   

2024

   

2023

   

2024

   

2023

 
                                 

Net income attributable to Generac Holdings Inc.

  $ 113,742     $ 60,377     $ 199,089     $ 118,005  

Net income attributable to noncontrolling interests

    36       257       220       2,305  

Net income

    113,778       60,634       199,309       120,310  

Interest expense

    22,910       24,707       69,833       72,862  

Depreciation and amortization

    43,152       42,951       127,934       124,149  

Provision for income taxes

    33,453       19,428       65,124       43,184  

Non-cash write-down and other adjustments (1)

    468       2,055       2,863       (5,257 )

Non-cash share-based compensation expense (2)

    13,115       9,927       38,270       30,306  

Transaction costs and credit facility fees (3)

    1,337       921       4,029       3,161  

Business optimization and other charges (4)

    1,564       5,291       3,190       8,151  

Provision for legal, regulatory, and clean energy product charges (5)

    2,382       22,113       5,280       27,913  

Change in fair value of investment (6)

    (5,198 )     -       2,938       -  

Loss on extinguishment of debt (7)

    4,861       -       4,861       -  

Other

    43       575       156       443  

Adjusted EBITDA

    231,865       188,602       523,787       425,222  

Adjusted EBITDA attributable to noncontrolling interests

    81       493       521       4,146  

Adjusted EBITDA attributable to Generac Holdings Inc.

  $ 231,784     $ 188,109     $ 523,266     $ 421,076  

 

(1)

Includes (gains)/losses on the disposition of assets other than in the ordinary course of business, (gains)/losses on 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 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, such as administrative agent fees and credit facility commitment fees under our Amended Credit Agreement.

 

(4)

Represents severance and other restructuring charges related to the consolidation of certain operating facilities and organizational functions.

 

(5)

Represents the following significant and unusual charges not indicative of our ongoing operations:

 

 

A provision for judgments, settlements, and legal expenses related to certain patent and securities lawsuits - $2.4 million in the third quarter of 2024; $4.9 million year-to-date 2024; and $22.1 million in the third quarter of 2023.

 

Additional customer support costs related to a clean energy product customer that filed for bankruptcy in 2022 – $0.4 million in the first quarter of 2024.

 

A provision 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 - $5.8 million in the first quarter of 2023.

 

(6)

Represents non-cash (gains)/losses from changes in the fair value of the Company's investment in Wallbox N.V. warrants and equity securities.

 

(7)

Represents fees paid to creditors and the write-off of the unamortized original issue discount and deferred financing costs in connection with the refinancing of the Company's Tranche B Term Loan Facility.

 

9

 

Net income to Adjusted net income reconciliation

                               
   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2024

   

2023

   

2024

   

2023

 
                                 

Net income attributable to Generac Holdings Inc.

  $ 113,742     $ 60,377     $ 199,089     $ 118,005  

Net income attributable to noncontrolling interests

    36       257       220       2,305  

Net income

    113,778       60,634       199,309       120,310  

Amortization of intangible assets

    24,157       26,718       73,698       78,934  

Amortization of capitalized debt fees and original issue discount

    644       981       2,592       2,902  

Transaction costs and other purchase accounting adjustments (8)

    747       356       2,272       1,743  

Loss/(gain) attributable to business or asset dispositions (9)

    -       -       65       (119 )

Business optimization and other charges (4)

    1,564       5,291       3,190       8,151  

Provision for legal, regulatory, and clean energy product charges (5)

    2,382       22,113       5,280       27,913  

Change in fair value of investment (6)

    (5,198 )     -       2,938       -  

Loss on extinguishment of debt (7)

    4,861       -       4,861       -  

Tax effect of add backs

    (7,317 )     (13,887 )     (23,762 )     (28,476 )

Adjusted net income

    135,618       102,206       270,443       211,358  

Adjusted net income attributable to noncontrolling interests

    36       257       220       2,305  

Adjusted net income attributable to Generac Holdings Inc.

  $ 135,582     $ 101,949     $ 270,223     $ 209,053  
                                 

Adjusted net income attributable to Generac Holdings Inc. per common share - diluted:

  $ 2.25     $ 1.64     $ 4.47     $ 3.35  

Weighted average common shares outstanding - diluted:

    60,312,393       62,091,163       60,475,478       62,362,743  

 

(8)

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.

 

(9)

Represents (gains)/losses attributable to the disposition of a business or assets occurring in other than ordinary course, as defined in our credit agreement.

 

Free Cash Flow Reconciliation

                               
   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2024

   

2023

   

2024

   

2023

 
                                 

Net cash provided by operating activities

  $ 212,285     $ 140,136     $ 401,847     $ 204,724  

Proceeds from beneficial interests in securitization transactions

    -       1,061       -       2,533  

Expenditures for property and equipment

    (28,627 )     (23,818 )     (83,399 )     (77,718 )

Free cash flow

  $ 183,658     $ 117,379     $ 318,448     $ 129,539  

 

10