Generac Holdings (GNRC) Warns for Q3, FY

Generac Holdings Inc. (NYSE: GNRC) 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. (*** consensus is $1.33 billion)
• 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.

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