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false 0001474735 0001474735 2023-11-01 2023-11-01

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 

 

Date of Report (Date of earliest event reported): November 1, 2023

 

Generac Holdings Inc.

(Exact name of registrant as specified in its charter)

 

Delaware		001-34627		20-5654756
(State or other jurisdiction		(Commission		(IRS Employer
of incorporation)		File Number)		Identification No.)

 

S45 W29290 Hwy 59
Waukesha, Wisconsin		53189
(Address of principal executive offices)		(Zip Code)

 

(262) 544-4811

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	GNRC	New York Stock Exchange

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

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Item 2.02

Results of Operations and Financial Condition

 

On November 1, 2023, Generac Holdings Inc. (the “Company,” “we,” “us” or “our”) issued a press release (the “Press Release”) announcing its financial results for the third quarter ended September 30, 2023. A copy of the Press Release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

 

The information contained in this Current Report on Form 8-K (including the exhibits) is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section. The information contained in this Current Report on Form 8-K shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in any such filing.

 

Discussion of Non-GAAP Financial Measures

 

In the Press Release, we present certain financial information, specifically Adjusted EBITDA, Adjusted Net Income, Free Cash Flow, and Core Sales, which are not in accordance with generally accepted accounting principles (“U.S. GAAP”). We present Adjusted EBITDA, Adjusted Net Income, Free Cash Flow, and Core Sales in the Press Release because these metrics assist us in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. Our management uses Adjusted EBITDA, Adjusted Net Income, Free Cash Flow, and Core Sales:

 

●

for planning purposes, including the preparation of our annual operating budget and developing and refining our internal projections for future periods;

 

●

to evaluate the effectiveness of our business strategies and as a supplemental tool in evaluating our performance against our budget for each period;

 

●

in communications with our board of directors and investors concerning our financial performance;

 

●

to evaluate prior acquisitions in relation to the existing business; and

 

●

to evaluate comparative net sales performance in prior and future periods.

 

We also use Adjusted EBITDA as a benchmark for the determination of the bonus component of compensation for our senior executives under our management incentive plans.

 

We believe that the disclosure of Adjusted EBITDA, Adjusted Net Income, Free Cash Flow, and Core Sales offers additional financial metrics which, when coupled with U.S. GAAP results and the reconciliation to U.S. GAAP results, provide a more complete understanding of our results of operations and the factors and trends affecting our business for securities analysts, investors and other interested parties in the evaluation of our company. We believe Adjusted EBITDA, Adjusted Net Income, Free Cash Flow, and Core Sales are useful to investors for the following reasons:

 

●

Adjusted EBITDA, Adjusted Net Income, Free Cash Flow, Core Sales, and similar non-GAAP measures are widely used by investors to measure a company’s operating performance without regard to items that can vary substantially from company to company depending upon financing and accounting methods, book values of assets, tax jurisdictions, capital structures and the methods by which assets were acquired; and

 

●

by comparing our Adjusted EBITDA, Adjusted Net Income, Free Cash Flow, and Core Sales in different historical periods, our investors can evaluate our operating performance excluding the impact of certain items.

 

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Item 9.01

Financial Statements and Exhibits

 

(d) Exhibits

 

Exhibit No.		Description
99.1		Press Release, dated November 1, 2023.
104		Cover Page Interactive Data File (embedded within the inline XBRL document)

3

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

	GENERAC HOLDINGS INC.
	Name:	Raj Kanuru
Date: November 1, 2023	Title:	EVP, General Counsel & Secretary

 

 

4

Exhibit 99.1

Generac Reports Third Quarter 2023 Results

Return to margin expansion and strong free cash flow generation; maintaining overall net sales and adjusted EBITDA outlook for full-year 2023

WAUKESHA, WISCONSIN (November 1, 2023) – 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, 2023 and provided an update on its outlook for the full year 2023.

Third Quarter 2023 Highlights

“Our results in the third quarter reflect improving operating performance and validate the longer-term focus on our Powering A Smarter World strategic plan,” said Aaron Jagdfeld, President and Chief Executive Office. “We experienced a strong sequential increase in shipments of home standby generators during the quarter as higher activations are driving field inventories towards more sustainable levels. In addition, in home consultations for these products also remained strong during the quarter as category awareness continues to increase on the back of well-publicized grid stability concerns. Additionally, C&I product sales continued to experience significant growth over the prior year that once again exceeded our expectations. We also saw margins expand year-over-year and generated substantial free cash flow during the quarter, both of which are expected to continue into the fourth quarter.”

Additional Third Quarter 2023 Consolidated Highlights

Gross profit margin was 35.1% as compared to 33.2% in the prior-year third quarter. The increase in gross margin was primarily driven by lower raw material and logistics costs and production efficiencies. These margin benefits were partially offset by the impact of unfavorable sales mix.

Operating expenses decreased by $2.6 million, or 0.9%, as compared to the third quarter of 2022. Excluding certain items for legal, regulatory, and clean energy product charges in the current and prior year, as disclosed in the accompanying reconciliation schedules, operating expenses increased by $30.6 million, or 14.0%, from the prior year primarily driven by increased employee and marketing costs in the current year and a favorable contingent consideration adjustment in the prior year.

Provision for income taxes for the current year quarter was $19.4 million, or an effective tax rate of 24.3%, as compared to $11.6 million, or a 16.1% effective tax rate, for the prior year. The increase in the effective tax rate was primarily due to the prior year quarter including certain favorable discrete tax items and a larger benefit from equity compensation as compared to the current year quarter.

Cash flow from operations was $140.1 million during the third quarter, as compared to $(56.0) million in the prior year. Free cash flow, as defined in the accompanying reconciliation schedules, was $117.4 million as compared to $(73.5) million in the third quarter of 2022. The increase in free cash flow was primarily due to a significant use of cash for working capital in the prior year that did not repeat in the current year quarter, partially offset by higher interest payments and capital expenditures.

Business Segment Results

Domestic Segment

Domestic segment total sales (including inter-segment sales) decreased 6% to $894.0 million as compared to $946.6 million in the prior year quarter, with minimal favorable impact from acquisitions. The decline was driven by lower residential product sales primarily due to lower home standby and portable generator shipments as compared to the prior year. This was partially offset by growth in C&I product sales, highlighted by strong shipments to industrial distributors and direct customers for “beyond standby” applications.

Adjusted EBITDA for the segment was $160.3 million, or 17.9% of domestic segment total sales, as compared to $159.8 million in the prior year, or 16.9% of total sales. This margin improvement was primarily driven by favorable price and cost benefits, partially offset by unfavorable sales mix and higher employee and marketing expenses.

International Segment

International segment total sales (including inter-segment sales) increased 14% to $207.6 million as compared to $182.5 million in the prior year quarter, with acquisitions and foreign currency providing an approximate 11% favorable impact to revenue growth for the quarter. The 3% core total sales growth for the segment was driven by varying levels of C&I product growth in most regions, partially offset by weaker portable generator sales in Europe.

Adjusted EBITDA for the segment, before deducting for noncontrolling interests, was $28.3 million, or 13.6% of international segment total sales, as compared to $24.0 million, or 13.2% of total sales, in the prior year. This modest margin improvement was primarily driven by favorable price, cost and mix benefits.

2023 Outlook Update

The Company is maintaining its overall full-year 2023 net sales guidance for a decline of approximately -10 to -12% as compared to the prior year, which includes approximately 2% of net favorable impact from acquisitions and foreign currency.

Additionally, the Company now expects net income margin, before deducting for non-controlling interests, to be approximately 5.0 to 6.0% for the full-year 2023 compared to the prior guidance range of 6.0 to 7.0%. The corresponding adjusted EBITDA margin is still expected to be approximately 15.5% to 16.5%, in line with the previous guidance.

Operating and free cash flow generation are 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, November 1, 2023 to discuss third quarter 2023 operating results. The conference call can be accessed at the following link: https://register.vevent.com/register/BIa6e8539444e2408eb5d52b8ff3526ea5. 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:

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

Net income to Adjusted EBITDA reconciliation

 Net income to Adjusted net income reconciliation

 Free Cash Flow Reconciliation