Generac (GNRC) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Highlights Generac's Q2 2025 performance exceeded expectations with strong sales and profitability across segments, alongside strategic market entries Overall Performance and Operational Highlights Generac exceeded Q2 2025 expectations with strong Residential and C&I sales, driven by energy storage, home energy management, and data center market entry - Generac's Q2 2025 results exceeded expectations with strong performance in Residential and C&I product sales, driven by energy storage systems, home energy management solutions, and portable generator market share gains. The company also successfully entered the data center market[3] Key Financial Metrics Generac reported increased net sales, net income, and Adjusted EBITDA in Q2 2025, while cash flow from operations and free cash flow decreased Q2 2025 Key Financial Metrics (YoY Comparison) | Metric | Q2 2025 | Q2 2024 | Change (%) | | :--------------------------------- | :---------- | :---------- | :--------- | | Net Sales | $1,061 million | $998 million | 6% | | Residential Product Sales | $574 million | $538 million | 7% | | C&I Product Sales | $362 million | $344 million | 5% | | Net Income Attributable to Company | $74 million | $59 million | 25.4% | | EPS (Diluted) | $1.25 | $0.97 | 28.9% | | Adjusted Net Income Attributable to Company | $97 million | $82 million | 18.3% | | Adjusted EPS (Diluted) | $1.65 | $1.35 | 22.2% | | Adjusted EBITDA | $188 million | $165 million | 13.9% | | Adjusted EBITDA Margin | 17.7% | 16.5% | 1.2 pp | | Cash Flow from Operations | $72 million | $78 million | -7.7% | | Free Cash Flow | $14 million | $50 million | -72.0% | - The company repurchased 392,521 shares of its common stock for approximately $50 million during Q2 2025, with $200 million remaining under the current repurchase program[4] Consolidated Financial Performance Generac's Q2 2025 saw improved gross profit margin and effective tax rate, but increased operating expenses and decreased cash flow from operations Profitability and Expenses Gross profit margin improved to 39.3% in Q2 2025 due to pricing and lower costs, despite a 12.0% increase in operating expenses Q2 2025 Gross Profit Margin | Metric | Q2 2025 | Q2 2024 | Change (pp) | | :----------------- | :------ | :------ | :---------- | | Gross Profit Margin | 39.3% | 37.6% | 1.7 | - Operating expenses increased by $32.6 million, or 12.0%, primarily due to higher variable costs from increased shipment volumes, increased employee costs to support future growth, and ongoing expenses from recent acquisitions[6] Q2 2025 Provision for Income Taxes | Metric | Q2 2025 | Q2 2024 | Change (pp) | | :----------------- | :------ | :------ | :---------- | | Effective Tax Rate | 17.2% | 25.0% | -7.8 | Cash Flow and Debt Management Cash flow from operations and free cash flow decreased in Q2 2025 due to working capital and capital expenditures, while debt facilities were extended Q2 2025 Cash Flow Summary | Metric | Q2 2025 | Q2 2024 | Change ($M) | | :-------------------------- | :------ | :------ | :---------- | | Cash Flow from Operations | $72.2M | $77.7M | -$5.5M | | Free Cash Flow | $14.5M | $49.7M | -$35.2M | - Generac amended and extended its existing term loan A and revolving credit facility, setting a new maturity date of July 1, 2030. The term loan A balance is now $700 million, and the revolving facility borrowing capacity is reduced to $1.0 billion[9] Business Segment Performance Both Domestic and International segments reported strong sales growth and improved Adjusted EBITDA margins in Q2 2025 Domestic Segment Domestic segment sales increased 7% to $884.5 million, driven by residential energy tech and C&I products, with improved Adjusted EBITDA margin Domestic Segment Performance (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change (%) | | :-------------------- | :---------- | :---------- | :--------- | | Total Sales | $884.5 million | $827.1 million | 7% | | Adjusted EBITDA | $158.1 million | $139.7 million | 13.2% | | Adjusted EBITDA Margin | 17.9% | 16.9% | 1.0 pp | - Growth was primarily driven by residential energy technology solutions, portable generators, and C&I products to industrial distributors and national telecom customers, partially offset by softness in C&I product shipments to national rental accounts[10] International Segment International segment sales grew 7% to $197.2 million, boosted by inter-segment sales and European C&I products, with an improved Adjusted EBITDA margin International Segment Performance (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change (%) | | :-------------------- | :---------- | :---------- | :--------- | | Total Sales | $197.2 million | $184.5 million | 7% | | Adjusted EBITDA | $29.5 million | $25.0 million | 18.0% | | Adjusted EBITDA Margin | 15.0% | 13.6% | 1.4 pp | - Core sales growth was primarily driven by higher inter-segment sales and strength in C&I product shipments in Europe, partially offset by softer shipments in other regions[12] Full-Year 2025 Outlook Generac updated its full-year 2025 guidance, narrowing sales growth and raising profitability and free cash flow conversion targets Sales Guidance Generac narrowed its full-year 2025 net sales growth guidance to 2% to 5%, reflecting Q2 outperformance and revised tariff assumptions Full-Year 2025 Net Sales Growth Guidance Update | Metric | Previous Guidance | Updated Guidance | | :---------------------- | :---------------- | :--------------- | | Net Sales Growth (YoY) | 0% to 7% | 2% to 5% | Profitability Guidance The company raised its full-year 2025 net income margin to 7.5%-8.5% and Adjusted EBITDA margin to 18.0%-19.0% Full-Year 2025 Profitability Guidance Update | Metric | Previous Guidance | Updated Guidance | | :--------------------------------- | :---------------- | :--------------- | | Net Income Margin | 6.5% to 8.5% | 7.5% to 8.5% | | Adjusted EBITDA Margin | 17.0% to 19.0% | 18.0% to 19.0% | Cash Flow Guidance Generac increased its full-year 2025 free cash flow conversion guidance to 90%-100%, driven by the One Big Beautiful Bill Act Full-Year 2025 Free Cash Flow Conversion Guidance Update | Metric | Previous Guidance | Updated Guidance | | :------------------------------------ | :---------------- | :--------------- | | Free Cash Flow Conversion from Adj. Net Income | 70% to 90% | 90% to 100% | Company Information This section provides an overview of Generac, its forward-looking statements, associated risks, and definitions of non-GAAP financial measures About Generac Generac is a global leader in energy technology solutions, providing power generation, storage, and management for diverse markets - Generac is a global leader in energy technology solutions, offering power generation, energy storage, and energy management products for residential, commercial, and industrial markets, aiming for resilient, efficient, and sustainable energy[19] Forward-Looking Statements and Risk Factors This section cautions that forward-looking statements are subject to risks, including raw material costs, supplier dependence, and trade policy changes - Forward-looking statements in this release are not guarantees of performance and involve risks and uncertainties that could cause actual results to differ materially[20][21] - Key risk factors include fluctuations in cost, availability, and quality of raw materials and components; dependence on a small number of suppliers; changes and volatility in trade policies (tariffs); and changes in durable goods spending by consumers and businesses[21][24] Non-GAAP Financial Measures Definitions Generac defines Core Sales, Adjusted EBITDA, Adjusted Net Income, and Free Cash Flow as key non-GAAP financial metrics - Core Sales excludes the impact of acquisitions and foreign currency translation, facilitating easier comparison of net sales performance[25] - Adjusted EBITDA is defined as net income before noncontrolling interests adjusted for interest, depreciation, amortization, income tax, and various non-cash and non-recurring items[26] - Adjusted Net Income is net income before noncontrolling interests adjusted for amortization of intangible assets, deferred financing costs, transaction costs, business optimization expenses, and certain legal/regulatory charges[27] - 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[28] Condensed Consolidated Financial Statements This section presents Generac's balance sheets, comprehensive income statements, and cash flow statements for Q2 2025 and year-to-date Condensed Consolidated Balance Sheets Total assets increased to $5,388.8 million as of June 30, 2025, driven by inventories and property, with corresponding increases in liabilities and equity Condensed Consolidated Balance Sheet Summary (June 30, 2025 vs Dec 31, 2024) | Metric | June 30, 2025 ($ Thousands) | Dec 31, 2024 ($ Thousands) | Change ($ Thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :------------------- | | Total Current Assets | 2,245,689 | 2,032,170 | 213,519 | | Total Assets | 5,388,801 | 5,109,331 | 279,470 | | Total Current Liabilities | 1,121,280 | 1,033,152 | 88,128 | | Total Liabilities | 2,813,610 | 2,611,888 | 201,722 | | Total Stockholders' Equity | 2,575,191 | 2,497,443 | 77,748 | Condensed Consolidated Statements of Comprehensive Income Q2 2025 net sales rose to $1,061.2 million, with net income attributable to Generac increasing to $74.0 million, or $1.25 per diluted share Condensed Consolidated Statements of Comprehensive Income (Three Months Ended June 30) | Metric | 2025 ($ Thousands) | 2024 ($ Thousands) | Change ($ Thousands) | Change (%) | | :--------------------------------------- | :----------------- | :----------------- | :------------------- | :--------- | | Net sales | 1,061,169 | 998,197 | 62,972 | 6.3% | | Gross profit | 416,749 | 375,561 | 41,188 | 11.0% | | Income from operations | 111,789 | 103,235 | 8,554 | 8.3% | | Net income attributable to Generac Holdings Inc. | 74,016 | 59,115 | 14,901 | 25.2% | | Diluted EPS | $1.25 | $0.97 | $0.28 | 28.9% | Condensed Consolidated Statements of Comprehensive Income (Six Months Ended June 30) | Metric | 2025 ($ Thousands) | 2024 ($ Thousands) | Change ($ Thousands) | Change (%) | | :--------------------------------------- | :----------------- | :----------------- | :------------------- | :--------- | | Net sales | 2,003,290 | 1,887,470 | 115,820 | 6.1% | | Gross profit | 788,735 | 691,940 | 96,795 | 14.0% | | Income from operations | 195,427 | 170,104 | 25,323 | 14.9% | | Net income attributable to Generac Holdings Inc. | 117,856 | 85,347 | 32,509 | 38.1% | | Diluted EPS | $1.98 | $1.36 | $0.62 | 45.6% | Condensed Consolidated Statements of Cash Flows Net cash from operating activities decreased to $130.3 million for the six months ended June 30, 2025, primarily due to increased inventories Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30) | Metric | 2025 ($ Thousands) | 2024 ($ Thousands) | Change ($ Thousands) | | :------------------------------------ | :----------------- | :----------------- | :------------------- | | Net cash provided by operating activities | 130,341 | 189,562 | (59,221) | | Net cash used in investing activities | (93,308) | (74,024) | (19,284) | | Net cash used in financing activities | (101,318) | (96,509) | (4,809) | | Net (decrease) increase in cash and cash equivalents | (57,746) | 17,323 | (75,069) | - The decrease in net cash from operating activities was significantly impacted by a $199.3 million increase in inventories in 2025, compared to a $12.2 million increase in 2024[36] Supplemental Financial Information This section details segment and product class performance, along with reconciliations for non-GAAP financial measures Segment and Product Class Performance Both Domestic and International segments reported 7% sales growth in Q2 2025, with residential products leading external net sales increases Total Sales by Reportable Segment (Three Months Ended June 30) | Segment | 2025 ($ Thousands) | 2024 ($ Thousands) | Change ($ Thousands) | Change (%) | | :---------- | :----------------- | :----------------- | :------------------- | :--------- | | Domestic | 884,462 | 827,139 | 57,323 | 6.9% | | International | 197,204 | 184,508 | 12,696 | 6.9% | External Net Sales by Product Class (Three Months Ended June 30) | Product Class | 2025 ($ Thousands) | 2024 ($ Thousands) | Change ($ Thousands) | Change (%) | | :------------------------ | :----------------- | :----------------- | :------------------- | :--------- | | Residential products | 574,189 | 538,399 | 35,790 | 6.6% | | Commercial & industrial products | 362,203 | 344,169 | 18,034 | 5.2% | | Other | 124,777 | 115,629 | 9,148 | 7.9% | Adjusted EBITDA by Reportable Segment (Three Months Ended June 30) | Segment | 2025 ($ Thousands) | 2024 ($ Thousands) | Change ($ Thousands) | Change (%) | | :---------- | :----------------- | :----------------- | :------------------- | :--------- | | Domestic | 158,117 | 139,674 | 18,443 | 13.2% | | International | 29,512 | 25,015 | 4,497 | 18.0% | | Total Adjusted EBITDA | 187,629 | 164,689 | 22,940 | 13.9% | Non-GAAP Reconciliation Schedules Detailed reconciliations are provided for Adjusted EBITDA, Adjusted Net Income, and Free Cash Flow, outlining specific adjustments from GAAP net income Net Income to Adjusted EBITDA Reconciliation (Three Months Ended June 30) | Adjustment Item | 2025 ($ Thousands) | 2024 ($ Thousands) | | :------------------------------------ | :----------------- | :----------------- | | Net income attributable to Generac Holdings Inc. | 74,016 | 59,115 | | Interest expense | 18,242 | 23,318 | | Depreciation and amortization | 48,321 | 42,880 | | Provision for income taxes | 15,422 | 19,638 | | Non-cash share-based compensation expense | 14,752 | 12,715 | | Adjusted EBITDA | 187,629 | 164,689 | Net Income to Adjusted Net Income Reconciliation (Three Months Ended June 30) | Adjustment Item | 2025 ($ Thousands) | 2024 ($ Thousands) | | :------------------------------------ | :----------------- | :----------------- | | Net income attributable to Generac Holdings Inc. | 74,016 | 59,115 | | Amortization of intangible assets | 25,681 | 24,791 | | Business optimization and other charges | 3,442 | 1,140 | | Provision for legal, regulatory and other costs | 4,911 | 363 | | Tax effect of add backs | (17,138) | (7,520) | | Adjusted net income attributable to Generac Holdings Inc. | 97,328 | 81,690 | Free Cash Flow Reconciliation (Three Months Ended June 30) | Metric | 2025 ($ Thousands) | 2024 ($ Thousands) | | :------------------------------------ | :----------------- | :----------------- | | Net cash provided by operating activities | 72,189 | 77,664 | | Expenditures for property and equipment | (57,716) | (27,952) | | Free cash flow | 14,473 | 49,712 |