Generac (GNRC) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Presents Generac's unaudited condensed consolidated financial statements, detailing increased assets, equity, net income, and EPS Condensed Consolidated Balance Sheets Summarizes Generac's financial position, showing assets, liabilities, and equity at specific dates | Metric (U.S. Dollars in Thousands) | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $223,531 | $281,277 | | Accounts receivable, net | $648,736 | $612,107 | | Inventories | $1,254,133 | $1,031,647 | | Total current assets | $2,245,689 | $2,032,170 | | Total assets | $5,388,801 | $5,109,331 | | Total current liabilities | $1,121,280 | $1,033,152 | | Total liabilities | $2,813,610 | $2,611,888 | | Total stockholders' equity | $2,575,191 | $2,497,443 | - Total assets increased by $279.5 million (5.5%) from December 31, 2024, to June 30, 2025, primarily driven by increases in inventories and property and equipment, net[11] - Total stockholders' equity increased by $77.7 million (3.1%) from December 31, 2024, to June 30, 2025, mainly due to retained earnings growth and accumulated other comprehensive income[11] Condensed Consolidated Statements of Comprehensive Income Presents Generac's financial performance, including net sales, gross profit, and net income for specified periods | Metric (U.S. Dollars in Thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $1,061,169 | $998,197 | $2,003,290 | $1,887,470 | | Gross profit | $416,749 | $375,561 | $788,735 | $691,940 | | Income from operations | $111,789 | $103,235 | $195,427 | $170,104 | | Net income attributable to Generac Holdings Inc. | $74,016 | $59,115 | $117,856 | $85,347 | | Basic EPS | $1.27 | $0.99 | $2.01 | $1.38 | | Diluted EPS | $1.25 | $0.97 | $1.98 | $1.36 | - Net sales increased by 6.3% for Q2 2025 and 6.1% for YTD 2025 compared to the prior year periods[14] - Net income attributable to Generac Holdings Inc. grew by 25.2% for Q2 2025 and 38.1% for YTD 2025, with diluted EPS increasing from $0.97 to $1.25 (QoQ) and $1.36 to $1.98 (YoY)[14] Condensed Consolidated Statements of Stockholders' Equity Details changes in Generac's equity, including common stock, retained earnings, and comprehensive income | Metric (U.S. Dollars in Thousands) | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Common Stock (Amount) | $740 | $738 | | Additional Paid-In Capital | $1,161,153 | $1,133,756 | | Treasury Stock (Amount) | $(1,354,218) | $(1,196,997) | | Retained Earnings | $2,961,859 | $2,844,296 | | Accumulated Other Comprehensive Income (Loss) | $3,105 | $(85,399) | | Total Stockholders' Equity | $2,575,191 | $2,497,443 | - Retained earnings increased by $117.5 million from December 31, 2024, to June 30, 2025, reflecting net income generation[16][17] - Accumulated other comprehensive income (loss) shifted from a loss of $(85.4) million at December 31, 2024, to a gain of $3.1 million at June 30, 2025, primarily due to favorable foreign currency translation adjustments[16][17][55] Condensed Consolidated Statements of Cash Flows Outlines Generac's cash inflows and outflows from operating, investing, and financing activities | Metric (U.S. Dollars in Thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $130,341 | $189,562 | | Net cash used in investing activities | $(93,308) | $(74,024) | | Net cash used in financing activities | $(101,318) | $(96,509) | | Net (decrease) increase in cash and cash equivalents | $(57,746) | $17,323 | | Cash and cash equivalents at end of period | $223,531 | $218,317 | - Net cash provided by operating activities decreased by 31.2% to $130.3 million for the six months ended June 30, 2025, primarily due to an increase in working capital, particularly inventory replenishment[20][176] - Net cash used in investing activities increased by 26.1% to $93.3 million, mainly driven by higher capital expenditures for property and equipment[20][177] - Net cash used in financing activities increased by 5.0% to $101.3 million, primarily due to increased stock repurchases and debt repayments, partially offset by proceeds from borrowings[20][179] Notes to Condensed Consolidated Financial Statements Provides detailed explanations and disclosures supporting the condensed consolidated financial statements Note 1. Description of Business and Basis of Presentation - Generac Holdings Inc. is a leading global designer and manufacturer of energy technology solutions, including power generation equipment, energy storage systems, and energy management devices for residential, light commercial, and industrial markets[22] - The company completed several acquisitions in 2024, including Wolverine Power Systems (generator distributor), Ageto, LLC (microgrid control solutions), SunGrid Solutions Inc.'s C&I BESS product offering, and Huntington Power Equipment, Inc. (generator distributor)[26] - The 'One Big Beautiful Bill Act' (OBBBA) was signed into law on July 4, 2025, making 100% bonus depreciation and domestic research cost expensing permanent, while accelerating the phase-out of solar market incentives. The company is evaluating its impact[27] - New accounting pronouncements include ASU 2024-03 (Expense Disaggregation Disclosures, effective FY2026), ASU 2023-09 (Improvements to Income Tax Disclosures, effective FY2024), and ASU 2023-07 (Improving Reportable Segment Disclosures, effective FY2024 for annual, FY2025 for interim)[29][30][31] Note 2. Acquisitions - In fiscal 2024, Generac acquired Wolverine Power Systems (November), Ageto, LLC (August), SunGrid Solutions Inc.'s C&I BESS product offering (June), and Huntington Power Equipment, Inc. (April)[33][34] - The combined preliminary purchase price for these acquisitions was $46.3 million, net of cash acquired. Purchase accounting for C&I BESS and Huntington was finalized in Q2 2025, with no material adjustments[35] - The results of these acquisitions are included in the condensed consolidated financial statements from their respective acquisition dates, but their effects are not material to the Company's results of operations or financial position[36] Note 3. Derivative Instruments and Hedging Activities - Generac uses interest rate swap agreements as cash flow hedges, with effective portions of gains/losses reported in accumulated other comprehensive income (loss)[40] | Metric (U.S. Dollars in Thousands) | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :----------------------------- | :------------------------------- | :----------------------------- | | After-tax unrealized (losses) gains on interest rate swaps | $(3,090) | $(7,403) | $(1,730) | $252 | - The company holds stock warrants in Wallbox N.V., which are adjusted to market value quarterly, with losses recognized in other expense, net. The loss attributable to stock warrants was $1.2 million (Q2 2025) and $4.6 million (YTD 2025)[42][43] | Derivative (U.S. Dollars in Thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------- | :------------ | :---------------- | | Interest rate swaps | $18,528 | $28,367 | | Stock warrants | $3,347 | $7,919 | Note 4. Fair Value Measurements - Fair value measurements are categorized into a three-tier hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)[46] - Interest rate swaps and commodity/foreign currency derivative contracts are classified as Level 2, while Wallbox stock warrants and contingent consideration are classified as Level 3[48][49][51] | Financial Instrument (U.S. Dollars in Thousands) | June 30, 2025 | December 31, 2024 | | :----------------------------------------------- | :------------ | :---------------- | | Tranche A Term Loan Facility (Fair Value) | $686,813 | N/A | | Term Loan B Facility (Fair Value) | $495,009 | N/A | | Wallbox Shares (Fair Value) | $12,191 | $19,075 | | Contingent Consideration (Fair Value) | $34,937 | $34,114 | - The fair value of Wallbox Shares, classified as Level 1, decreased from $19.1 million to $12.2 million, resulting in a loss of $6.9 million for the six months ended June 30, 2025[50] Note 5. Accumulated Other Comprehensive Income (Loss) | Component (U.S. Dollars in Thousands) | Beginning Balance – Jan 1, 2025 | Other Comprehensive Income (Loss) | Ending Balance – June 30, 2025 | | :------------------------------------ | :------------------------------ | :-------------------------------- | :----------------------------- | | Foreign Currency Translation Adjustments | $(106,166) | $95,907 | $(10,259) | | Unrealized Gain (Loss) on Cash Flow Hedges | $20,767 | $(7,403) | $13,364 | | Total | $(85,399) | $88,504 | $3,105 | - Accumulated Other Comprehensive Income (Loss) shifted from a loss of $85.4 million at January 1, 2025, to a gain of $3.1 million at June 30, 2025, primarily due to a favorable impact from the weakening of the U.S. dollar against foreign currencies, particularly the Euro and British Pound[55] - Unrealized losses on interest rate swaps, net of tax, were $(7.4) million for the six months ended June 30, 2025, compared to a gain of $252 thousand for the same period in 2024[55][57] Note 6. Segment Reporting - Generac operates with two reportable segments: Domestic (U.S. and Canada) and International (outside U.S. and Canada), both designing and manufacturing energy technology solutions[58] | Metric (U.S. Dollars in Thousands) | Domestic (Q2 2025) | International (Q2 2025) | Total (Q2 2025) | Domestic (Q2 2024) | International (Q2 2024) | Total (Q2 2024) | | :--------------------------------- | :----------------- | :---------------------- | :-------------- | :----------------- | :---------------------- | :-------------- | | External Net Sales | $878,231 | $182,938 | $1,061,169 | $817,558 | $180,639 | $998,197 | | Adjusted EBITDA | $158,117 | $29,512 | $187,629 | $139,674 | $25,015 | $164,689 | | Assets (June 30, 2025) | $3,970,400 | $1,418,401 | $5,388,801 | N/A | N/A | N/A | | Capital Expenditures (Q2 2025) | $47,743 | $9,973 | $57,716 | $24,101 | $3,851 | $27,952 | - Domestic segment external net sales increased by 7.4% in Q2 2025, driven by residential energy technology solutions, portable generators, and C&I products, while International segment external net sales increased by 1.3%[144] - Domestic Adjusted EBITDA margin improved to 17.9% (Q2 2025) from 16.9% (Q2 2024), and International Adjusted EBITDA margin improved to 15.0% (Q2 2025) from 13.6% (Q2 2024), both driven by favorable pricing and lower input costs[152][153] - Capital expenditures for the Domestic segment increased significantly from $24.1 million in Q2 2024 to $47.7 million in Q2 2025, and for the International segment from $3.9 million to $10.0 million[71] Note 7. Balance Sheet Details | Inventory Component (U.S. Dollars in Thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------------------------- | :------------ | :---------------- | | Raw material | $675,553 | $611,735 | | Work-in-process | $10,877 | $6,814 | | Finished goods | $567,703 | $413,098 | | Total Inventories | $1,254,133 | $1,031,647 | - Total inventories increased by $222.5 million (21.6%) from December 31, 2024, to June 30, 2025, primarily driven by increases in raw materials and finished goods[74] | Property and Equipment Component (U.S. Dollars in Thousands) | June 30, 2025 | December 31, 2024 | | :----------------------------------------------------------- | :------------ | :---------------- | | Buildings and improvements | $466,930 | $358,055 | | Machinery and equipment | $317,296 | $296,409 | | Construction in progress | $71,708 | $110,651 | | Total Property and equipment, net | $766,745 | $690,023 | - Net property and equipment increased by $76.7 million (11.1%) from December 31, 2024, to June 30, 2025, with significant increases in buildings and improvements, and machinery and equipment[74] Note 8. Product Warranty Obligations | Standard Product Warranty (U.S. Dollars in Thousands) | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :---------------------------------------------------- | :------------------------------- | :----------------------------- | | Balance at beginning of period | $110,717 | $110,987 | | Payments | $(18,868) | $(39,755) | | Provision for warranty issued | $25,826 | $43,944 | | Changes in estimates for pre-existing warranties | $2,269 | $4,768 | | Balance at end of period | $119,944 | $119,944 | - The standard product warranty liability increased to $119.9 million at June 30, 2025, from $111.0 million at December 31, 2024, reflecting higher provisions for new warranties issued[76] | Extended Warranty Deferred Revenue (U.S. Dollars in Thousands) | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :------------------------------------------------------------- | :------------------------------- | :----------------------------- | | Balance at beginning of period | $194,403 | $186,922 | | Deferred revenue contracts issued | $16,915 | $32,733 | | Amortization of deferred revenue contracts | $(8,668) | $(17,005) | | Balance at end of period | $202,650 | $202,650 | - Deferred revenue related to extended warranties increased to $202.7 million at June 30, 2025, from $186.9 million at December 31, 2024, indicating continued sales of extended warranty coverage[76] Note 9. Contract Balances | Contract Balance (U.S. Dollars in Thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------------- | :------------ | :---------------- | | Customer deposits | $23,779 | $26,858 | - Customer deposits, representing prepayments for goods, decreased slightly from $26.9 million at December 31, 2024, to $23.8 million at June 30, 2025[77] - During the six months ended June 30, 2025, Generac recognized $17.4 million in revenue from amounts included in the December 31, 2024, customer deposit balance[78] Note 10. Credit Agreements | Borrowing Type (U.S. Dollars in Thousands) | June 30, 2025 | December 31, 2024 | | :----------------------------------------- | :------------ | :---------------- | | Short-term borrowings | $54,264 | $55,848 | | Tranche A Term Loan Facility | $693,750 | $712,500 | | Term Loan B Facility | $496,250 | $498,750 | | Revolving Facility | $90,000 | $- | | Total long-term borrowings and finance lease obligations | $1,292,813 | $1,210,776 | - The company extinguished its original $530 million Term Loan B Facility in July 2024, replacing it with a new $500 million Term Loan B Facility maturing July 3, 2031, bearing interest at SOFR + 1.75% (6.07% as of June 30, 2025)[81] - As of June 30, 2025, the company was in compliance with all financial covenants, with a net secured leverage ratio of 1.37 to 1.00 and a total leverage ratio of 1.44 to 1.00[82][85] - On July 1, 2025, the Tranche A Term Loan Facility and Revolving Facility were amended, extending maturities to July 1, 2030, revising the Tranche A principal to $700 million, and reducing Revolving Facility capacity to $1 billion[89] Note 11. Stock Repurchase Program - A new $500 million stock repurchase program was approved on February 12, 2024, replacing the prior program and allowing repurchases over 24 months[90] | Period | Shares Repurchased | Value (U.S. Dollars in Thousands) | | :---------------------- | :----------------- | :-------------------------------- | | Q2 2025 | 392,521 | $50,463 | | YTD June 30, 2025 | 1,109,206 | $147,917 | | Q2 2024 | 355,640 | $50,609 | - As of June 30, 2025, $199.3 million remained available for repurchase under the current program[170] Note 12. Earnings Per Share | EPS Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic EPS | $1.27 | $0.99 | $2.01 | $1.38 | | Diluted EPS | $1.25 | $0.97 | $1.98 | $1.36 | | Weighted average common shares outstanding - diluted | 59,017,823 | 60,641,740 | 59,385,907 | 60,559,904 | - Diluted EPS increased by 28.9% for Q2 2025 and 45.6% for YTD 2025, reflecting higher net income and a lower weighted average number of diluted shares outstanding[93] Note 13. Income Taxes | Period | Effective Income Tax Rate | | :---------------------- | :------------------------ | | Six Months Ended June 30, 2025 | 20.0% | | Six Months Ended June 30, 2024 | 27.0% | - The decrease in the effective tax rate for the six months ended June 30, 2025, was primarily due to a discrete tax benefit related to a business disposition[94] - The 'One Big Beautiful Bill Act' (OBBBA), signed July 4, 2025, makes 100% bonus depreciation and domestic research cost expensing permanent, but accelerates the phase-out of solar market incentives. The company is evaluating its impact on deferred tax balances[143] - The company is implementing OECD Pillar Two rules but does not expect a material impact on its effective tax rate for the remainder of 2025[141][142] Note 14. Commitments and Contingencies - Generac has a floor plan financing arrangement for dealers, with $167.2 million outstanding as of June 30, 2025[95] - The company is involved in several legal proceedings, including class action lawsuits related to clean energy products (Haak, Oakland County, Walling), shareholder derivative actions, patent infringement lawsuits (Ollnova, Champion), and government inquiries (DOJ, EPA, CARB, CPSC) regarding emissions and product recalls[96][97][98][99][100][101][102][103][104][106][107][108][109] - While it is unlikely that current legal proceedings will have a material adverse effect on financial condition, actual losses could exceed reserves due to the inherent difficulty in estimating outcomes[110] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's perspective on Generac's financial performance, strategic direction, and factors influencing results Forward-Looking Statements Highlights inherent uncertainties and risks associated with future financial projections and business outcomes - The report contains forward-looking statements based on current expectations and projections, subject to risks and uncertainties that could cause actual results to differ materially[112][113] - Key factors that could affect financial results include fluctuations in raw material costs, dependence on suppliers, changes in trade policies, intellectual property protection, consumer spending, governmental policies (tax incentives), product liability claims, legal proceedings, and the ability to manage growth and competition[114] Recent Developments Discusses recent governmental tariffs and the 'One Big Beautiful Bill Act' impacting Generac's operations - The U.S. government enacted additional tariffs on goods from various countries (China, Vietnam, Mexico) in Q1 2025, which may negatively impact demand and margins despite price increases and supply chain initiatives[117][118] - The 'One Big Beautiful Bill Act' (OBBBA), signed July 4, 2025, makes 100% bonus depreciation and domestic research cost expensing permanent but accelerates the phase-out of solar market incentives. The company is evaluating its business and financial statement impact[119] Overview Describes Generac's business as a global energy technology solutions provider and its strategic expansion - Generac is a leading global provider of energy technology solutions, including power generation, energy storage, and energy management, serving residential, light commercial, and industrial markets[120] - The company is expanding its product portfolio into energy technology ecosystems for homes and businesses, focusing on residential and C&I energy storage, solar inverters, energy monitoring, and EV charging, integrated with advanced connectivity and software platforms[121] - Generac aims to lead the evolution to more resilient, efficient, and sustainable energy solutions, capitalizing on growing demand for backup power due to deteriorating power quality and expanding into multi-purpose microgrid projects with natural gas fueled generators[120][121][122] Mega-Trends, Strategic Growth Themes, and Additional Business Drivers Identifies key market trends and strategic initiatives driving Generac's growth and business development - Key mega-trends driving Generac's 'Powering A Smarter World' strategy include lower power quality, higher power prices, accelerating AI adoption, growing demand for cleaner fuels, required investment in global infrastructure, and the 'Home as a Sanctuary' trend[123][124][125] - Strategic growth themes include capitalizing on increasing power quality issues, significant home standby penetration opportunities (currently ~6.5% in the U.S.), expanding into solar, storage, and energy management markets, and leveraging natural gas generators as a cleaner transition fuel[126][127][128][129] - The company sees substantial investment in new data centers and accelerating AI adoption as a significant incremental opportunity for large backup power generators, where Generac aims to take market share with its high output diesel offerings and robust service network[131] - Other business drivers include the residential investment cycle (consumer confidence, interest rates, housing starts), business capital investment cycles (non-residential construction, data centers), and global economic conditions[133][134] Factors Affecting Results of Operations Discusses external and internal factors influencing Generac's financial performance, such as costs, seasonality, and tax rates - Results are affected by commodity, currency, and component price fluctuations, which Generac mitigates through product design, sourcing, manufacturing efficiencies, price increases, and hedging[135][136] - Seasonality impacts sales, with Q2 historically accounting for 22-28% of net sales, but this can vary significantly based on the unpredictable occurrence and severity of major power outage activity[137] - Interest expense decreased year-over-year due to lower borrowings and interest rates, while the effective tax rate decreased primarily due to a discrete tax benefit from a business disposition[139][140] Results of Operations - Three months ended June 30, 2025, compared to the three months ended June 30, 2024 Compares Generac's financial performance for Q2 2025 against Q2 2024, highlighting key changes in sales and profitability | Metric (U.S. Dollars in Thousands) | Q2 2025 | Q2 2024 | $ Change | % 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% | | Adjusted EBITDA | $187,629 | $164,689 | $22,940 | 13.9% | - Domestic segment total sales increased by 7% (6% core growth) driven by residential energy technology solutions, portable generators, and C&I products, partially offset by softness in national rental accounts[145] - International segment total sales increased by 7% (6% core growth) with a 1% favorable foreign currency impact, driven by higher inter-segment sales and C&I product strength in Europe[146] - Gross profit margin improved to 39.3% from 37.6%, primarily due to favorable pricing and lower input costs, partially offset by unfavorable sales mix[147] - Operating expenses increased by 12.0% due to higher variable costs from increased shipment volumes, employee costs for future growth, and expenses from recent acquisitions[148] - The effective tax rate decreased to 17.2% from 25.0% due to a favorable discrete tax benefit from the sale of the Tank Utility fleet business[150] Results of Operations - Six months ended June 30, 2025, compared to the six months ended June 30, 2024 Compares Generac's financial performance for YTD June 30, 2025, against the prior year, detailing sales and profitability trends | Metric (U.S. Dollars in Thousands) | YTD June 30, 2025 | YTD June 30, 2024 | $ Change | % 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% | | Adjusted EBITDA | $337,175 | $291,922 | $45,253 | 15.5% | - Domestic segment total sales increased by 8% (7% core growth) driven by home standby generators, portable generators, energy technology solutions, and C&I products, partially offset by lower C&I sales to national rental accounts[156] - International segment total sales increased by 3.1% (5.1% core growth, offset by 2% unfavorable foreign currency) due to higher inter-segment sales and stronger product sales in Europe[157] - Gross profit margin improved to 39.4% from 36.7%, primarily due to favorable price realization and lower input costs[158] - Operating expenses increased by 13.7% due to higher variable costs from increased shipment volumes, employee costs, marketing spend, and expenses from recent acquisitions[159] - The effective tax rate decreased to 20.0% from 27.0% due to a discrete tax benefit from the Tank Utility fleet business sale and the absence of unfavorable discrete tax items from the prior year[161] Liquidity and Financial Condition Assesses Generac's current financial resources, debt structure, and ability to meet short-term and long-term obligations - As of June 30, 2025, Generac had total liquidity of $1,382.8 million, comprising $223.5 million in cash and cash equivalents and $1,159.3 million in Revolving Facility availability[173] | Debt Outstanding (U.S. Dollars in Millions) | June 30, 2025 | | :------------------------------------------ | :------------ | | Term Loan B Facility | $496.3 | | Tranche A Term Loan Facility | $693.8 | | Revolving Facility | $90.0 | - The company was in compliance with all credit agreement covenants as of June 30, 2025, with a net secured leverage ratio of 1.37 to 1.00 and an interest coverage ratio of 12.34 to 1.00[168] - The stock repurchase program had $199.3 million remaining authorization as of June 30, 2025, with $147.9 million in repurchases during the six months ended June 30, 2025[170][171] - Dealer floor plan financing outstanding was $167.2 million as of June 30, 2025, accounting for approximately 13% of net sales for the six months ended June 30, 2025[174] Long-term Liquidity Evaluates Generac's long-term capital resources and capacity for sustained operations and growth investments - Generac believes its cash, cash flow from operations, and revolving credit facility provide sufficient capital for ongoing operations, debt repayments, stock buybacks, and future growth investments[175] Cash Flow Analyzes Generac's cash generation and usage across operating, investing, and financing activities | Cash Flow Category (U.S. Dollars in Thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $130,341 | $189,562 | | Net cash used in investing activities | $(93,308) | $(74,024) | | Net cash used in financing activities | $(101,318) | $(96,509) | - Operating cash flow decreased by $59.2 million, primarily due to increased working capital from residential product inventory replenishment, partially offset by higher operating earnings[176] - Investing cash flow increased by $19.3 million in usage, mainly due to higher expenditures for property and equipment ($88.7 million in 2025 vs. $54.8 million in 2024)[177][178] - Financing cash flow usage increased by $4.8 million, driven by $147.9 million in share repurchases and $59.2 million in debt repayments, partially offset by $114.5 million in new borrowings[179][180] Contractual Obligations Summarizes Generac's significant contractual commitments and their potential financial impact - There have been no material changes to contractual obligations since the December 31, 2024, Annual Report on Form 10-K, except for changes in outstanding borrowings and interest rates as detailed in Note 10[181] Critical Accounting Policies and Estimates Outlines key accounting judgments and assumptions that significantly impact Generac's financial reporting - Generac's critical accounting estimates include goodwill and other indefinite-lived intangible asset impairment assessment, and income taxes[182] - No material changes in critical accounting policies have occurred since the February 19, 2025, filing of the Annual Report on Form 10-K[183] Non-GAAP Measures Adjusted EBITDA Defines and reconciles Adjusted EBITDA, a non-GAAP measure used for performance evaluation and covenant compliance - Adjusted EBITDA is a key performance measure used by management for planning, resource allocation, compensation, and evaluating business strategies, as well as for credit agreement compliance[184][185] - Adjusted EBITDA excludes interest expense, depreciation, amortization, income tax expense, certain non-cash gains/losses, share-based compensation, transaction costs, business optimization expenses, legal/regulatory charges, and mark-to-market adjustments on minority investments[184] | Metric (U.S. Dollars in Thousands) | Q2 2025 | Q2 2024 | YTD June 30, 2025 | YTD June 30, 2024 | | :--------------------------------- | :----------- | :----------- | :---------------- | :---------------- | | Net income | $74,430 | $59,053 | $118,708 | $85,531 | | Interest expense | $18,242 | $23,318 | $35,352 | $46,923 | | Depreciation and amortization | $48,321 | $42,880 | $94,462 | $84,782 | | Provision for income taxes | $15,422 | $19,638 | $29,658 | $31,671 | | Adjusted EBITDA | $187,629 | $164,689 | $337,175 | $291,922 | - Adjusted EBITDA increased by 13.9% for Q2 2025 and 15.5% for YTD 2025, reflecting improved operating performance[190] Adjusted Net Income Defines and reconciles Adjusted Net Income, a non-GAAP measure providing insight into ongoing operational results - Adjusted Net Income is a non-GAAP measure used to provide a more complete understanding of ongoing results by excluding amortization of intangibles, deferred financing costs, transaction costs, business optimization expenses, legal/regulatory charges, and mark-to-market gains/losses on investments[197][199] | Metric (U.S. Dollars in Thousands) | Q2 2025 | Q2 2024 | YTD June 30, 2025 | YTD June 30, 2024 | | :--------------------------------- | :----------- | :----------- | :---------------- | :---------------- | | Net income attributable to Generac Holdings Inc. | $74,016 | $59,115 | $117,856 | $85,347 | | Amortization of intangible assets | $25,681 | $24,791 | $51,170 | $49,541 | | Tax effect of add backs | $(17,138) | $(7,520) | $(27,507) | $(16,445) | | Adjusted net income attributable to Generac Holdings Inc. | $97,328 | $81,690 | $172,694 | $134,641 | | Adjusted net income per common share - diluted | $1.65 | $1.35 | $2.91 | $2.22 | - Adjusted Net Income attributable to Generac Holdings Inc. increased by 19.1% for Q2 2025 and 28.3% for YTD 2025, with diluted Adjusted EPS increasing from $1.35 to $1.65 (QoQ) and $2.22 to $2.91 (YoY)[200] PART II. OTHER INFORMATION Item 3. Quantitative and Qualitative Disclosures About Market Risk Addresses Generac's exposure to market risks, including commodity prices, foreign currencies, and interest rates - The company is exposed to market risks from changes in commodity prices, foreign currencies, and interest rates[37] - No material changes in market risk have occurred since the December 31, 2024, Annual Report on Form 10-K, with further details provided in Note 3 regarding derivative instruments and hedging activities[205] Item 4. Controls and Procedures Confirms the effectiveness of Generac's disclosure controls and procedures and reports no material changes in internal control Disclosure Controls and Procedures - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[206] Changes in Internal Control Over Financial Reporting - There have been no changes in internal control over financial reporting during the three months ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[207] Item 1. Legal Proceedings Refers to detailed disclosures on Generac's ongoing legal matters and potential liabilities - Information regarding the company's legal proceedings is provided in Note 14, 'Commitments and Contingencies,' to the condensed consolidated financial statements[209] Item 1A. Risk Factors Identifies specific risks related to the data center market's growth and Generac's ability to capitalize on it - The growth of the data center market, driven by AI adoption, is difficult to project and may not be sustainable, posing risks to Generac's growth, revenue, and profitability objectives[210] - Achieving success in this market requires significant capital investment and management resources, and failure to effectively manage growth could impact business plans and competitive responses[210] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Details Generac's stock repurchase activities and the remaining authorization under its programs | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number Of Shares Purchased As Part Of Publicly Announced Plans Or Programs | Approximate Dollar Value Of Shares That May Yet Be Purchased Under The Plans Or Programs | | :---------------------- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------------- | :--------------------------------------------------------------------------------------- | | 04/01/2025 – 04/30/2025 | - | $- | - | $249,803,018 | | 05/01/2025 – 05/31/2025 | 177,531 | $134.23 | 177,531 | $225,973,103 | | 06/01/2025 – 06/30/2025 | 220,359 | $123.85 | 214,990 | $199,340,001 | | Total | 397,890 | $128.48 | 392,521 | N/A | - During Q2 2025, Generac repurchased 392,521 shares of common stock for approximately $50.5 million under its stock repurchase programs[211] Item 3. Defaults Upon Senior Securities Confirms no defaults occurred on Generac's senior debt obligations during the reporting period - There were no defaults upon senior securities[212] Item 4. Mine Safety Disclosures States that Generac has no mine safety disclosures to report - There are no mine safety disclosures[213] Item 5. Other Information Confirms no changes in Rule 10b5-1 or non-Rule 10b5-1 trading arrangements by directors or officers - No director or officer adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[214] Item 6. Exhibits Lists all supplementary documents and certifications filed with the Form 10-Q - Exhibits include CEO and CFO certifications (31.1, 31.2, 32.1, 32.2), condensed consolidated financial statements in iXBRL format (101), and the cover page in inline XBRL (104)[215] Signatures Contains the official certifications and signatures for the filed financial report - The report is duly signed by York A. Ragen, Chief Financial Officer, on behalf of Generac Holdings Inc., dated August 5, 2025[218][220]