Generac reports third quarter results
By Mike Brezonick02 November 2022
Generac Holdings Inc., a global designer and manufacturer of energy technology solutions and other power products, reported financial results for its third quarter ended Sept. 30, and provided its outlook for the full year 2022. And it was a good news-bad news message, as net sales rose but net income was less than half of the total from the same period last year.
Net sales increased 15% to $1.09 billion during the third quarter of 2022 as compared to $943 million in the prior-year third quarter. Core sales growth, which excludes both the impact of acquisitions and foreign currency, increased approximately 10%.
Residential product sales grew 9% to $664 million as compared to $609 million last year, while Commercial & Industrial (C&I) product sales increased 20% to $311 million as compared to $258 million in the prior year.
Net income for the third quarter was $58 million compared to $132 million for the same period of 2021. The net income results include pre-tax charges totaling $55.3 million, including $17.9 million of bad debt expense related to a clean energy product customer that filed for bankruptcy and $37.3 million of clean energy product warranty-related matters. Adjusted net income was $112 million as compared to $151 million in Q3 2021.
“As disclosed in our preliminary announcement, despite net sales growing at a strong mid-teens rate, third quarter results fell short of our prior expectations,” said Aaron Jagdfeld, president and chief executive officer. “Commercial & Industrial product sales continued to experience strong growth during the quarter, but Residential product sales began to slow as installation capacity constraints in our distribution network led to higher field inventory levels for home standby generators. This has resulted in lower orders than expected from our channel partners even as we’ve seen sequential improvements in several key metrics for the home standby category. Additionally in the quarter, shipments of clean energy products were negatively impacted by a large clean energy product customer which ceased operations during the quarter.”
Domestic segment total sales (including inter-segment sales) increased 18% to $946.6 million as compared to $802.2 million in the prior year quarter, with the impact of acquisitions contributing approximately 8% of the revenue growth for the quarter. Core sales growth was led by C&I product shipments experiencing strong growth across all channels, highlighted by national rental equipment, telecom and industrial distributor customers, with home standby generators also experiencing year-over-year growth in the quarter. This growth was partially offset by lower clean energy product sales.
International segment total sales (including inter-segment sales) increased 14% to $182.5 million as compared to $159.8 million in the prior year quarter, with the impact of acquisitions and foreign currency providing an approximately 8% net headwind to revenue growth for the quarter. The 22% core total sales growth for the segment was driven by strong growth across all major regions as compared to the prior year, most notably in Europe.
2022 Outlook Update
Generac said it expects its full-year 2022 net sales growth to be approximately 22% to 24% compared to the prior year, which includes approximately 5% to 7% net impact from acquisitions and foreign currency.
“While home standby order headwinds from our channel partners are expected to persist through the first half of 2023, the secular growth themes and mega-trends supporting the Company’s ‘Powering A Smarter World’ enterprise strategy are still very much intact,” said Jagdfeld. “As reliance on electricity grows and supply & demand imbalances increase further, Generac will continue to invest in technologies and solutions to lead the evolution to the next generation grid.”