Generac Holdings Inc. (NYSE: GNRC) (“Generac” or the “Company”), a
leading global designer and manufacturer of energy technology
solutions and other power products, today announced selected
preliminary financial results for its third quarter ended September
30, 2022 and provided an update on its outlook for the full year
2022. Generac also announced plans to release its full third
quarter 2022 financial results before the market opens on
Wednesday, November 2, 2022 and hold a conference call at 10:00
a.m. EDT on that day to discuss the Company’s operating results and
updated outlook in more detail.
Preliminary Third Quarter 2022 Results
- Preliminary net
sales increased 15% to approximately $1.09 billion during the third
quarter of 2022 as compared to $943 million in the prior-year third
quarter.
- Preliminary net
income attributable to the Company during the third quarter was
approximately $58 million, or $0.83 per share, as compared to $132
million, or $1.93 per share, for the same period of 2021. The
current year net income includes pre-tax charges totaling
approximately $55 million, including approximately $37 million of
clean energy product warranty-related matters and approximately $18
million of bad debt expense related to a clean energy product
customer that has filed for bankruptcy.
- Preliminary adjusted
net income attributable to the Company, as defined in the
accompanying reconciliation schedules, was approximately $112
million, or $1.75 per share, during the third quarter as compared
to $151 million, or $2.35 per share, for the same period of
2021.
- Preliminary adjusted
EBITDA before deducting for noncontrolling interests, as defined in
the accompanying reconciliation schedules, was approximately $184
million, or approximately 17% of net sales, during the third
quarter as compared to $209 million, or 22% of net sales, for the
same period of 2021.
“Despite reporting mid-teens net sales growth, third quarter
results fell short of our prior expectations,” said Aaron Jagdfeld,
President and Chief Executive Officer. “While shipments of
Commercial & Industrial products performed as expected,
Residential product sales were pressured during the quarter. As
discussed on our second quarter earnings call, installation
capacity for home standby generators continued to grow but still
lagged our production output during the third quarter. This has
resulted in higher field inventory levels and lower home standby
generator orders from our channel partners than previously expected
even as end customer demand continues to be strong driven by
elevated power outages, most notably from Hurricane Ian.
Additionally in the quarter, clean energy product shipments were
negatively impacted by a large customer which ceased operations and
has since filed for bankruptcy protection.”
2022 Outlook Update
Due to the items highlighted above, the Company is revising its
full-year 2022 net sales growth guidance range to 22 to 24% as
compared to the prior year, which includes approximately 5 to 7%
net impact from acquisitions and foreign currency, compared to the
previous growth guidance range of 36 to 40%. Although the Company
experienced sequential improvements in key metrics for the home
standby category with dealer count, in-home consultations, close
rates, activations, and dealer project lead times all improving
during the third quarter, home standby order headwinds are expected
to persist during the fourth quarter and through the first half of
2023 as distribution partners continue to increase installation
capacity and work down their extended backlogs and elevated field
inventories.
Additionally, the Company now expects net income margin, before
deducting for non-controlling interests, to be approximately 9.0 to
10.0% for the full-year 2022 compared to the previous guidance of
13.0 to 14.0%. This net income guidance includes the impact of the
aforementioned $55 million of third quarter pre-tax charges. The
corresponding adjusted EBITDA margin is now expected to be
approximately 18.0 to 19.0% compared to the previous guidance of
21.5 to 22.5%.
The select financial information provided in this release is
preliminary. As the Company completes its third quarter financial
close process and finalizes its outlook for the remainder of the
year, it is possible that the Company may identify items that
require it to make adjustments to the preliminary financial
information set forth above, and those adjustments could be
material. Furthermore, this update does not present all necessary
information for an understanding of the Company's financial
condition as of the date of this release, or its results of
operations for the third quarter of 2022.
Conference Call and Webcast
Generac management will provide further details regarding third
quarter financial results and updated full year 2022 outlook during
its conference call at 10:00 a.m. EDT on Wednesday, November 2,
2022.
The conference call can be accessed at the following link:
https://register.vevent.com/register/BI3d00d0fc061b4e438a6aee644a56a692.
Individuals that 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.
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- and 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:
- frequency and duration of power
outages impacting demand for our products;
- fluctuations in cost and quality of
raw materials required to manufacture our products;
- availability of both labor and key
components from our global supply chain, including single-sourced
components, needed in producing our products;
- the possibility that the expected
synergies, efficiencies and cost savings of our acquisitions will
not be realized, or will not be realized within the expected time
period;
- the risk that our acquisitions will
not be integrated successfully;
- the impact on our results of
possible fluctuations in interest rates, foreign currency exchange
rates, commodities, product mix, logistics costs and regulatory
tariffs;
- the duration and impact of the
COVID-19 pandemic;
- difficulties we may encounter as
our business expands globally or into new markets;
- our dependence on our distribution
network;
- our ability to invest in, develop
or adapt to changing technologies and manufacturing
techniques;
- loss of our key management and
employees;
- increase in product and other
liability claims or recalls;
- failures or security breaches of
our networks, information technology systems, or connected
products;
- changes in environmental, health
and safety, or product compliance laws and regulations affecting
our products, operations, or customer demand;
- significant legal proceedings,
claims, lawsuits or government investigations.
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 or
will continue to be impacted by the COVID-19 pandemic, which 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 2021 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 other non-cash gains and
losses, and adjusted net income attributable to non-controlling
interests. In addition, for periods prior to 2022, adjusted net
income reflects cash income tax expense due to the existence of the
tax shield from the amortization of tax-deductible goodwill and
intangible assets from the acquisition of the Company by CCMP
Capital Advisors, LLC in 2006. Due to the expiration of this tax
shield in the fourth quarter of 2021, there is no similar
reconciling item starting in 2022.
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. HarrisSenior
Vice President – Corporate Development & Investor Relations
(262) 506-6064InvestorRelations@generac.com
Generac Holdings Inc. |
Preliminary Reconciliation Schedules |
(U.S. Dollars in Thousands, Except Share and Per Share Data) |
(Unaudited) |
|
|
|
|
|
Preliminary Net income to Adjusted EBITDA
reconciliation |
|
|
|
|
|
Three Months Ended September 30, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
Net income attributable to Generac Holdings Inc. |
$ |
58,270 |
|
|
$ |
131,570 |
|
Net income attributable to noncontrolling interests |
|
2,176 |
|
|
|
1,183 |
|
Net income |
|
|
60,446 |
|
|
|
132,753 |
|
Interest expense |
|
|
15,514 |
|
|
|
7,980 |
|
Depreciation and amortization |
|
|
39,165 |
|
|
|
23,216 |
|
Provision for income taxes |
|
|
11,594 |
|
|
|
32,611 |
|
Non-cash write-down and other adjustments (1) |
|
(6,840 |
) |
|
|
3,333 |
|
Non-cash share-based compensation expense (2) |
|
6,861 |
|
|
|
5,783 |
|
Transaction costs and credit facility fees (3) |
|
1,250 |
|
|
|
3,385 |
|
Business optimization and other charges (4) |
|
622 |
|
|
|
- |
|
Provision for clean energy product charges (5) |
|
55,265 |
|
|
|
- |
|
Other |
|
|
(61 |
) |
|
|
140 |
|
Adjusted EBITDA |
|
|
183,816 |
|
|
|
209,201 |
|
Adjusted EBITDA attributable to noncontrolling interests |
|
3,632 |
|
|
|
2,247 |
|
Adjusted EBITDA attributable to Generac Holdings Inc. |
$ |
180,184 |
|
|
$ |
206,954 |
|
|
|
|
|
|
(1) Includes gains/losses on disposals of assets and sales of
certain investments, unrealized mark-to-market adjustments on
commodity contracts, certain foreign currency related adjustments,
and certain purchase accounting and contingent consideration
adjustments. A full description of these and the other
reconciliation adjustments contained in these schedules is included
in Generac's SEC filings. |
|
|
|
|
|
(2) Represents share-based compensation expense to account for
stock options, restricted stock and other stock awards over their
respective vesting periods. |
|
|
|
|
|
(3) Represents transaction costs incurred directly in connection
with any investment, as defined in our credit agreement, equity
issuance or debt issuance or refinancing, together with certain
fees relating to our senior secured credit facilities. |
|
|
|
|
|
(4) The current year period predominantly represents severance and
other non-recurring restructuring charges. |
|
|
|
|
|
(5) Represents a specific bad debt provision of $17.9 million for a
clean energy product customer that filed for bankruptcy as well as
a warranty provision of $37.3 million to address certain clean
energy product warranty-related matters. |
|
|
|
|
|
Preliminary Net income to Adjusted net income
reconciliation |
|
|
|
|
|
Three Months Ended September 30, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
Net income attributable to Generac Holdings Inc. |
$ |
58,270 |
|
|
$ |
131,570 |
|
Net income attributable to noncontrolling interests |
|
2,176 |
|
|
|
1,183 |
|
Net income |
|
|
60,446 |
|
|
|
132,753 |
|
Provision for income taxes (7) |
|
|
- |
|
|
|
32,611 |
|
Amortization of intangible assets |
|
25,751 |
|
|
|
12,206 |
|
Amortization of deferred finance costs and original issue
discount |
|
974 |
|
|
|
646 |
|
Transaction costs and other purchase accounting adjustments
(6) |
|
(7,605 |
) |
|
|
5,487 |
|
Business optimization and other charges (4) |
|
622 |
|
|
|
- |
|
Provision for clean energy product charges (5) |
|
55,265 |
|
|
|
- |
|
Tax effect of add backs |
|
|
(21,233 |
) |
|
|
- |
|
Cash income tax expense (7) |
|
|
- |
|
|
|
(31,290 |
) |
Adjusted net income |
|
|
114,220 |
|
|
|
152,413 |
|
Adjusted net income (loss) attributable to noncontrolling
interests |
|
2,031 |
|
|
|
1,272 |
|
Adjusted net income attributable to Generac Holdings Inc. |
$ |
112,189 |
|
|
$ |
151,141 |
|
|
|
|
|
|
Adjusted net income attributable to Generac Holdings Inc. per |
|
|
|
common share - diluted: |
|
$ |
1.75 |
|
|
$ |
2.35 |
|
Weighted average common shares outstanding - diluted: |
|
64,267,638 |
|
|
|
64,208,116 |
|
|
|
|
|
|
(6) Represents transaction costs incurred directly in connection
with any investment, as defined in our credit agreement, equity
issuance or debt issuance or refinancing, and certain purchase
accounting and contingent consideration adjustments. |
|
|
|
|
|
(7) Amount for the three months ended September 30, 2021 is based
on an anticipated cash income tax rate at the time of approximately
20.0% to 20.5% for the full year ended 2021 due to the existence of
the tax shield from the amortization of tax-deductible goodwill and
intangible assets from our acquisition by CCMP Capital Advisors,
LLC in 2006. Due to the expiration of this tax shield in the fourth
quarter of 2021, there is no similar reconciling item for the
current year period. For comparative purposes to the current year,
using the GAAP tax expense for the three months ended September 30,
2021 would result in adjusted net income per diluted share of $2.33
on a pro forma basis. |
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