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Generac Holdings Inc.
CEO : Mr. Aaron P. Jagdfeld

Quarterly earnings growth(YoY,%)

Period	Revenue	Operating Income	EPS	Release Date
2022 Q4	-1.7% YoY	-38.1%	-59.8%	2023-02-15

Aaron Jagdfeld says,

Q4 2022 Results

• Consolidated net sales at the low end of previous guidance range due to soft residential product sales
• Overall net sales decreased 2% YoY to $1.05 billion and core sales declined 7% during the quarter
• Residential product sales decreased 19% from the prior year due to higher home standby field inventory levels and lower clean energy product shipments
• C&I product sales increased 27% YoY with robust core sales growth across all channels domestically and all regions internationally
• Adjusted EBITDA margins declined during the quarter due to unfavorable sales mix, reduced operating leverage, and increase in recurring operating expenses from recent acquisitions

Full Year 2022 Results

• Generac achieved another year of record top line growth with total net sales increasing 22% over 2021
• Residential product shipments faced headwinds in the second half of 2022 but still experienced strong YoY growth of approximately 19%
• Sales of C&I products grew 26% over the prior year resulting in $1.26 billion in annual sales with record backlog for these products
• International segment achieved all-time highs and adjusted EBITDA and adjusted EBITDA margins for the year

Energy Technology Solutions

• Company continues to make important progress in building out its portfolio of energy technology related solutions in 2022
• Assembling a deeper and more experienced leadership team focused on improving and advancing clean energy product and distribution capabilities
• Developing and investing in numerous new technologies and capabilities, including acquiring Blue Pillar, launching the single pane of glass initiative and announcing new EV charging solutions for utilities and EV owners
• The mega trends that drive the long term growth trajectory of the business became even more evident in 2022.

Residential Product Sales

• Residential product sales declined at a double digit rate as compared to the prior year due to lower home standby shipments in the quarter resulting from higher field inventory levels
• End market conditions continued to be strong during the quarter with baseline power outage activity in the US above long term average
• Home consultations or sales leads in the quarter remain strong, matching record high for fourth quarter period in the prior year and continuing early in 2023 with record levels for the month of January
• Company remain focused on expanding its distribution network and improving the installation bandwidth for home standby generators is a key initiative for the company in 2023

Guidance

• Company expects home standby sales to decline for the full year 2023 due to significant weakness in first half shipments resulting from elevated levels of field inventory with the first quarter expected to mark the trough for shipments during the current channel destocking process
• Company anticipates more normalized fuel inventory levels in the second half of the year and expects home standby sales to return to solid YoY growth in the third and fourth quarters, even when assuming no major outage events.

York Ragen says,

Net Sales

• Net sales for Q4 2022 decreased 2% to $1.05 billion compared to the prior year.
• Full-year 2022 net sales increased by 22% to $4.56 billion, an all-time record for the company.
• Residential product sales declined by 19% to $575 million in Q4 2022.
• Commercial and industrial product sales in Q4 2022 increased by 27% to $361 million.
• Net sales for other products and services increased 46% to $113 million in Q4 2022.

Gross Profit Margin and Operating Expenses

• Gross profit margin was 32.7% in Q4 2022 compared to 34% in the prior year fourth quarter.
• Operating expenses in Q4 2022 increased by $49 million or 26% compared to the same quarter in the prior year.
• Adjusted EBITDA before deducting for noncontrolling interest was $174 million or 16.6% of net sales in Q4 2022 compared to $220 million or 20.7% of net sales in the prior year.

Domestic and International Segment Sales

• Domestic segment total sales, including intersegment sales, decreased by 3% to $881 million in Q4 2022.
• International segment total sales, including intersegment sales, increased by 22% to $219 million in Q4 2022.
• Adjusted EBITDA for the international segment was $29.5 million or 13.5% of net sales in Q4 2022 compared to $23.7 million or 13.1% of net sales in the prior year.

Outlook for 2023

• Overall net sales for 2023 expected to decrease between minus 6% to minus 10% as compared to the prior year.
• C&I net sales growth expected in the mid to high single digit range for 2023.
• Gross margins for the full year 2023 expected to increase by approximately 150 basis points as compared to 2022.
• Adjusted EBITDA margins before deducting for noncontrolling interests expected to be approximately 17% to 18% for the full year 2023 compared to the 18.1% reported for the full year 2022.

Q & A sessions,

Field Inventory Destocking Process

• The company is going through a field inventory destocking process, and the field inventory levels have improved significantly.
• Raw numbers show that home standby units are about 20% off the peak, which is great for the company.
• The combination of reducing production rates and the activation rate being up in the fourth quarter is also favorable.

Dealer Count and Training

• The company added over 500 dealers on a net basis in the second half of the year, which is the strongest second half of the year they have ever had in terms of new dealer ads.
• The company is back to training face-to-face with dealers and contractors, which is super helpful in terms of engagement level with those partners.
• The company created the dealer talent network to help dealers find and hire qualified headcount to increase their installation capacity.

Longer-Term Innovations

• The company has some technical solutions to take labor out of the actual installation process.
• The company is making good progress, and they see the metrics reflecting that in a lower field inventory level.

First Half, Second Half Story

• The company has confidence in the year playing out, at least the underpinned, what’s underpinning the demand metrics that they’re seeing.
• They are seeing really strong sales lead volume, which has continued into 2023.
• The company is assuming a higher close rate because they are seeing it and coming off the lows.

Residential Energy Technology

• The company is bullish that growth may not be huge, but they see the opportunity for that business long term.
• The company is excited to launch the first generation product of EV chargers, which will separate themselves from a technical standpoint longer-term.