Group 1 - The year 2025 is anticipated to present significant challenges related to climate and trade issues, which could create a sense of urgency and concern in various sectors [1] - The author has extensive experience in foreign policy research and investment analysis, focusing on deep-discount value plays and underappreciated companies [1] - The investment philosophy is influenced by contrarian strategies, particularly those of David Dreman, emphasizing the importance of returning value to investors [1]

Business Expansion and Market Position - The company has established the largest network of factory direct independent generator dealers in North America, with significant investments made to grow this dealer network [85]. - The company has expanded its solar contractor base to sell and service PWRcell energy storage systems, aiming to increase market share in the clean energy sector [86]. - The company has made numerous acquisitions of industrial distributors since 2020 to enhance its coverage and market share in the C&I product sales [87]. - The retail distribution channel includes thousands of locations globally, driving significant brand awareness for residential standby and portable generators [88]. - The company’s competitive advantages include a broad product offering, diverse omni-channel distribution model, and strong factory support [106]. Research and Development - Approximately 1,250 engineers are focused on research and development, driving innovation in energy technology products and solutions [93]. - The company is focused on developing alternative technologies such as fuel cells and hydrogen to maintain its leadership position in energy technology solutions [95]. - Research and development expenses increased to $219,600, up 26.6% from $173,443 in 2023, indicating a focus on innovation [339]. Financial Performance - Net sales for 2024 reached $4,295,834, an increase of 6.8% compared to $4,022,667 in 2023 [339]. - Net income attributable to Generac Holdings Inc. for 2024 was $316,315,000, an increase from $214,606,000 in 2023 [292]. - Adjusted EBITDA for 2024 reached $789,101,000, compared to $637,859,000 in 2023, reflecting a growth of approximately 23.6% [292]. - Total current assets increased to $2,032,170, up from $1,997,692 in 2023, marking a growth of 1.7% [337]. - Total liabilities decreased to $2,611,888, down from $2,743,693 in 2023, a reduction of 4.8% [337]. Employee and Management Focus - The company emphasizes employee health and safety as its top priority, supported by a total rewards program focused on balance, security, well-being, and community [117]. - The company plans to continue focusing on employee engagement initiatives with targeted action plans measured by global surveys [118]. - The company is committed to attracting and retaining skilled employees, but faces challenges such as higher turnover rates and competitive compensation pressures [156]. Regulatory and Compliance Challenges - The company’s products are subject to stringent regulations from the U.S. Environmental Protection Agency (EPA) and other regulatory bodies, impacting emissions standards [113]. - Increased scrutiny regarding sustainability practices could impact the company's reputation and financial results [152]. - Regulatory requirements around sustainability-related disclosures may impose additional costs and resources [153]. - Environmental, health, and safety regulations could result in substantial costs and liabilities for non-compliance [176]. Supply Chain and Operational Risks - The company has diversified its global supply chain to mitigate the impact of trade tariffs, continuously evaluating supplier quality and cost structures [102]. - The company relies on a small number of outside contract manufacturers and single-source suppliers, which poses risks to its operations [132]. - The company has faced challenges in obtaining adequate, cost-efficient, and timely deliveries of raw materials and components, impacting its ability to manufacture products [131]. - Manufacturing disruptions could prevent the company from meeting customer demand, negatively impacting sales and financial results [158]. Financial Management and Capital Structure - As of December 31, 2024, total indebtedness was $1,334.2 million, with $498.8 million under the Tranche B Term Loan Facility and $712.5 million under the Tranche A Term Loan Facility [187][259]. - Total liquidity as of December 31, 2024, was $1,530.5 million, consisting of $281.3 million in cash and cash equivalents and $1,249.2 million available under the Revolving Facility [261]. - The company repurchased 1,046,351 shares of common stock for $152.7 million in 2024 and 2,188,475 shares for $251.5 million in 2023 [263]. - The company anticipates requiring additional capital to fund shareholder value-enhancing activities as it continues to expand its business [266]. Legal and Intellectual Property Issues - The company considers its intellectual property rights important assets and seeks to protect them through various legal means [133]. - The company has been subject to third-party intellectual property infringement claims, which could be costly and time-consuming to defend [134]. - Legal and regulatory proceedings may divert management attention and incur significant expenses, potentially affecting financial performance [170]. Market and Economic Conditions - Demand for products is significantly affected by unpredictable power outage activity, impacting financial results [143]. - Economic conditions, including prolonged downturns in residential investment and rising interest rates, could negatively impact product demand [145]. - Changes in U.S. trade policy, including tariffs, could adversely affect sales, gross margins, and profitability across segments [159]. Risk Management - Cybersecurity risks remain a concern, with potential impacts on sales and reputation due to data breaches or attacks on IT systems [185]. - The company engages in commodity risk management activities to mitigate the impact of price fluctuations on financial results [312]. - The company is exposed to floating interest rate risk on all outstanding debt under its Term Loans and Revolving Facility as of December 31, 2024 [313].

Core Insights - Generac Holdings Inc. (GNRC) reported better-than-expected fourth-quarter 2024 results, with adjusted EPS of $2.80 and net sales of $1.23 billion, surpassing Zacks Consensus Estimates by 12% and 0.1% respectively [1][2] - Year-over-year, net sales increased by 16% and adjusted EPS surged by 35.3%, driven primarily by strong Residential product sales [2][3] Financial Performance - Residential product revenues surged 28% year-over-year to $743 million, although it fell short of the Zacks Consensus Estimate of $771 million [3][4] - Gross profit reached $501.4 million, up from $388.7 million in the prior-year quarter, with gross profit margins improving to 40.6% from 36.5% [10] - Operating income increased by 31.2% year-over-year to $198 million, while adjusted EBITDA rose to $265 million from $213 million a year ago [10] Market Dynamics - The company is focusing on expanding its residential dealer network, which grew to 9,200 dealers by the end of 2024, an increase of 500 from the end of 2023 [5] - New product launches and significant investments in manufacturing capacity are expected to drive future revenues [6] Future Outlook - For 2025, Residential Product sales are projected to grow in the mid-to-high single-digit range, with revenues from residential energy technology solutions expected to be between $300 million to $400 million [7] - Generac anticipates maintaining margin expansion, projecting a 100-basis-point increase in gross margins due to lower input costs [11] Segment Performance - The Commercial & Industrial (C&I) segment showed weakness, with revenues remaining flat at $363 million year-over-year, and expectations for flat sales in 2025 [12] - Management noted that growth in telecom C&I BESS and data center opportunities may be offset by declines in other C&I markets [12] Cash Flow and Share Buyback - In the fourth quarter, the company generated $339 million in net cash from operating activities, with free cash flow totaling $286 million [13] - Generac approved a new share buyback authorization of up to $500 million over the next 24 months, replacing the previous program [14]

Financial Data and Key Metrics Changes - For Q4 2024, overall net sales increased 16% to $1.23 billion compared to $1.06 billion in Q4 2023 [45] - Adjusted EBITDA reached a record $265 million, or 21.5% of net sales, up from $213 million, or 20% of net sales, in the prior year [49] - Full year 2024 adjusted EBITDA was $789 million, or 18.4% of net sales, compared to $638 million, or 15.9% in 2023 [49][51] Business Line Data and Key Metrics Changes - Residential product sales grew 28% to $743 million in Q4 2024, driven by increased shipments of home standby and portable generators [46] - C&I product sales were approximately flat at $363 million, with strong domestic growth offset by declines in rental and beyond standby applications [47] - Other products and services saw a 6% increase to $128 million, primarily due to growth in aftermarket service parts and connectivity subscription sales [48] Market Data and Key Metrics Changes - The U.S. experienced nearly 1.5 billion hours lost due to power outages in 2024, marking the most active year since 2010 [13] - International sales, excluding currency impacts, increased modestly, with strength in Latin America offset by softness in Europe [41] - The North American Electricity Reliability Corporation warned of risks of power outages due to supply shortfalls over the next five years [15] Company Strategy and Development Direction - The company is focused on its "Powering a Smarter World" strategy, developing energy ecosystems to help customers manage power costs and improve resiliency [16][18] - Significant investments have been made in manufacturing capacity and strategic acquisitions to expand the total addressable market [18][57] - The introduction of next-generation home standby generators aims to enhance market position and meet growing demand [24][25] Management's Comments on Operating Environment and Future Outlook - Management highlighted the increasing demand for backup power solutions due to severe weather patterns and aging power infrastructure [14][15] - The outlook for 2025 anticipates continued net sales growth of 3% to 7%, with residential product sales expected to increase at a mid to high single-digit rate [59][60] - Management expressed confidence in the company's ability to navigate potential tariff impacts through cost reductions and price increases [10][64] Other Important Information - Free cash flow reached an all-time quarterly record of $286 million in Q4 2024, driven by strong operating earnings and working capital reduction [55] - The company repurchased approximately 1.05 million shares for $153 million during the year, with $347 million remaining on the current share repurchase authorization [58] - Capital expenditures for 2024 totaled $137 million, focusing on organic investments for production capacity [57] Q&A Session Summary Question: Can you provide context on the new C&I products and their market potential? - Management expressed excitement about the new C&I products for data centers, highlighting the tight supply chain and long lead times from existing suppliers, indicating ample opportunity for market participation [75][76] Question: What is the expected margin impact from the energy tech business? - Management noted that Ecobee achieved profitability in Q4 2024 and expects overall energy tech business dilution to improve to around 3% to 3.5% in 2025 [82][83] Question: What are the residential growth expectations for Q1? - Management indicated strong double-digit growth for residential products in Q1, partially offset by a high single-digit decline in C&I products [95]

INVESTOR PRESENTATION INVESTOR RELATIONS Aaron Jagdfeld PRESIDENT & CEO YorkRagen CHIEF FINANCIAL OFFICER Kris Rosemann DIRECTOR CORPORATE DEVELOPMENT & INVESTOR RELATIONS (262)506 -6064 InvestorRelations@generac.com 2 Forward Looking Statements Certain statements contained in this presentation, 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 diffe ...

Core Insights - Generac Holdings (GNRC) reported quarterly earnings of $2.80 per share, exceeding the Zacks Consensus Estimate of $2.50 per share, and up from $2.07 per share a year ago, representing an earnings surprise of 12% [1] - The company achieved revenues of $1.23 billion for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 0.06% and increasing from $1.06 billion year-over-year [2] - Generac Holdings has outperformed consensus EPS estimates in all four of the last quarters and has topped consensus revenue estimates three times during the same period [2] Earnings Outlook - The sustainability of the stock's price movement will largely depend on management's commentary during the earnings call [3] - The current consensus EPS estimate for the upcoming quarter is $1.56 on revenues of $1.03 billion, and for the current fiscal year, it is $8.16 on revenues of $4.63 billion [7] Industry Context - The Manufacturing - General Industrial industry, to which Generac Holdings belongs, is currently ranked in the bottom 37% of over 250 Zacks industries, indicating potential challenges for stock performance [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact investor sentiment [5]

Financial Performance - Fourth quarter net sales increased 16% to $1.23 billion compared to $1.06 billion in the prior-year quarter[4] - Full-year 2024 net sales increased 7% to $4.30 billion, with core sales growing approximately 6%[4] - Net sales for Q4 2024 reached $1,234,801, a 16.1% increase from $1,063,670 in Q4 2023[33] - Total net sales for the year ended December 31, 2024, reached $4,295,834, an increase of 6.8% compared to $4,022,667 in 2023[38] - Domestic net sales for the year ended December 31, 2024, were $3,635,081, up from $3,320,261 in 2023, reflecting a growth of 9.5%[38] - International net sales for the year ended December 31, 2024, decreased to $725,385 from $837,895 in 2023, a decline of 13.4%[38] Profitability Metrics - Adjusted EBITDA reached a record $265 million, representing 21.5% of net sales, up from 20.0% in the prior year[4] - Adjusted EBITDA for the year ended December 31, 2024, was $789,101, compared to $637,859 in 2023, representing an increase of 23.6%[40] - Operating income for the year increased to $536,742, representing a 39.0% rise compared to $386,199 in 2023[33] - Net income attributable to Generac Holdings Inc. for the year was $316,315, a 47.4% increase from $214,606 in 2023[33] Cash Flow and Assets - Cash flow from operations reached a record $741 million for the full year, compared to $522 million in the prior year[4] - Free cash flow for the year ended December 31, 2024, was $741,301, compared to $521,670 in 2023[35] - Free cash flow for the year ended December 31, 2024, was $604,568, compared to $395,904 in 2023, an increase of 52.7%[45] - Total current assets increased to $2,032,170 as of December 31, 2024, from $1,997,692 in 2023[31] - Cash and cash equivalents at the end of the period were $281,277, up from $200,994 in 2023[35] Sales Breakdown - Residential product sales rose 28% to $743 million, while Commercial & Industrial product sales were approximately flat at $363 million[4] - Residential products sales for the three months ended December 31, 2024, were $743,336, up from $580,391 in 2023, a growth of 28.1%[38] - Commercial & industrial products sales for the three months ended December 31, 2024, were $363,376, slightly up from $362,923 in 2023[38] Expenses and Liabilities - Research and development expenses for the year were $219,600, an increase of 26.7% from $173,443 in 2023[33] - Total liabilities decreased to $2,611,888 in 2024, down from $2,743,693 in 2023[31] Shareholder Actions - The company repurchased approximately 1.05 million shares for $153 million during 2024, with $347 million remaining under the current repurchase program[4] Legal and Regulatory Matters - The company incurred $5.4 million in legal expenses related to patent lawsuits in the fourth quarter of 2024[46] - The company reported a provision of $5.8 million for civil fines related to a matter with the Consumer Product Safety Commission for the full year 2023[46]

Core Insights - Generac Holdings Inc. reported record fourth quarter net sales of $1.23 billion, a 16% increase from $1.06 billion in the same quarter of the previous year, driven by strong demand for residential products [4][5] - The company achieved an all-time record free cash flow of $286 million in the fourth quarter, up from $266 million in the prior year [4][9] - For the full year 2024, net sales increased by 7% to $4.30 billion compared to $4.02 billion in 2023, with residential product sales rising 18% [4][5] Fourth Quarter 2024 Highlights - Residential product sales surged 28% to $743 million, while Commercial & Industrial (C&I) product sales remained flat at $363 million [4] - Net income attributable to the company was $117 million, or $2.15 per share, compared to $97 million, or $1.57 per share, in the same period of 2023 [4] - Adjusted EBITDA reached a record $265 million, representing 21.5% of net sales, compared to $213 million, or 20.0% of net sales, in the prior year [4][6] Full-Year 2024 Highlights - The company reported a net income of $316 million, or $5.39 per share, compared to $215 million, or $3.27 per share, in 2023 [4] - Adjusted net income for 2024 was $438 million, or $7.27 per share, up from $335 million, or $5.40 per share, in 2023 [4] - Cash flow from operations for the year was a record $741 million, compared to $522 million in the previous year [4] Business Segment Results - Domestic segment sales increased 20% to $1.07 billion, driven by significant growth in home standby and portable generators [10] - Adjusted EBITDA for the domestic segment was a record $242.8 million, or 22.7% of total sales, compared to $192.2 million, or 21.6% of total sales, in the prior year [11] - International segment sales decreased 1% to $187.5 million, impacted by foreign currency fluctuations, with core growth driven by Latin America [12][13] 2025 Outlook - The company anticipates net sales growth of approximately 3% to 7% for 2025, primarily from residential product sales [15] - Adjusted EBITDA margin is expected to be around 18.0% to 19.0% for the full year [16] - The company aims to maintain strong operating and free cash flow, with free cash flow conversion from adjusted net income projected between 80% to 90% [16]

Core Viewpoint - Generac Holdings Inc (GNRC) is set to report its fourth-quarter 2024 results on February 12, with expectations of revenue and earnings growth driven by increased demand for home standby generators and portable generators due to extreme weather conditions [1][2][4]. Financial Performance Expectations - The Zacks Consensus Estimate for fourth-quarter revenues is $1.23 billion, reflecting a 15.7% increase year-over-year, while earnings are estimated at $2.50 per share, up 20.8% year-over-year [2]. - GNRC has outperformed the Zacks Consensus Estimate in three of the last four quarters, with an average earnings surprise of 10.83% [3]. Demand Drivers - The anticipated performance boost is attributed to heightened demand for home standby generators amid increased power outages from hurricanes, as well as a rise in portable generator demand due to extreme weather [4]. - GNRC is focusing on increasing production rates for home standby generators, targeting $200 million in incremental shipments in 2024 due to hurricane impacts [5]. Product Innovations and Market Position - Ecobee's growth in the smart thermostat market and the introduction of the PWRcell 2 Series are expected to contribute positively to GNRC's revenue in the upcoming quarter [6]. - The launch of a new 28kW home standby generator model enhances GNRC's product offerings, providing a comprehensive home energy solution [13]. Margin and Revenue Outlook - The gross margin for 2024 is projected to improve by 450 basis points compared to 2023, with free cash flow expected to reach $500 million [10]. - Generac has raised its revenue outlook for 2024, now expecting a 5-9% increase, with residential revenues anticipated to grow in the high-teens percentage range [8]. Challenges and Concerns - Weakness in Commercial & Industrial (C&I) sales is a concern, with expectations of C&I product sales being approximately $50 million below previous forecasts [11]. - The Zacks Consensus Estimate for Residential products' revenues is $771 million, up 32.9% year-over-year, while C&I products' revenues are expected to decline by 6.1% year-over-year [12].

Core Viewpoint - Generac Holdings Inc. is set to release its fourth quarter and full-year 2024 financial results on February 12, 2025, with a conference call scheduled to discuss the highlights [1]. Company Overview - Generac is a total energy solutions company founded in 1959, recognized as a leading global designer, manufacturer, and provider of energy technology solutions [3]. - The company offers a wide range of products including power generation equipment, energy storage systems, and energy management devices, catering to residential, light commercial, and industrial markets [3]. - Generac pioneered the affordable backup generator and established the automatic home standby generator category, continuing to expand its energy technology offerings [3]. Conference Call Details - The conference call will take place at 10:00 a.m. EST on February 12, 2025, and will be accessible via a webcast [2]. - A replay of the conference call will be available on Generac's website following the live event [2].