WAUKESHA, Wis. — Generac Holdings Inc. (NYSE: GNRC) (“Generac” or the “Company”), a leading global designer and manufacturer of energy technology solutions and other power products, today reported financial results for its fourth quarter and full-year ended December 31, 2021 and initiated its outlook for the full year 2022.

Fourth Quarter 2021 Highlights

  • Net sales increased 40% to a record $1.07 billion during the fourth quarter of 2021 as compared to $761 million in the prior-year fourth quarter. Core sales growth, which excludes both the impact of acquisitions and foreign currency, increased approximately 35%.
    • Residential product sales grew 42% to $706 million as compared to $499 million last year.
    • Commercial & Industrial (“C&I”) product sales increased 43% to $284 million as compared to $199 million in the prior year.
  • Net income attributable to the Company during the fourth quarter was $143 million, or $2.04 per share, as compared to $125 million, or $1.97 per share, for the same period of 2020.
  • Adjusted net income attributable to the Company, as defined in the accompanying reconciliation schedules, was a record $162 million, or $2.51 per share, as compared to $136 million, or $2.12 per share, in the fourth quarter of 2020.
  • Adjusted EBITDA before deducting for noncontrolling interests, as defined in the accompanying reconciliation schedules, was a record $220 million, or 20.7% of net sales, as compared to $196 million, or 25.7% of net sales, in the prior year.
  • As previously disclosed, on October 1st, the Company closed on the acquisition of Tank Utility, a provider of IoT propane tank monitoring solutions that enable the optimization of propane fuel logistics, headquartered in Boston, Massachusetts.
  • As previously disclosed, on December 1st, the Company closed on the acquisition of ecobee, a leader in sustainable home technology solutions including smart home energy devices that deliver significant energy savings, security and peace of mind, headquartered in Toronto, Canada.
  • The Company is initiating its full-year 2022 net sales growth guidance to be approximately 32 to 36% compared to the prior year on an as-reported basis, which includes approximately 5 to 7% of net impact from acquisitions and foreign currency.   Adjusted EBITDA margin, before deducting for non-controlling interests, is expected to be approximately 22.0 to 23.0%.

Full-Year 2021 Highlights

  • Net sales increased 50% to a record $3.74 billion during 2021 as compared to $2.49 billion in 2020. Core sales growth, which excludes both the impact of acquisitions and foreign currency, increased approximately 46%.
    • Residential product sales increased 58% to $2.46 billion as compared to $1.56 billion last year.
    • C&I product sales grew 42% to $1.0 billion as compared to $702 million in the prior year.
  • Net income attributable to the Company during 2021 was a record $550 million, or $8.30 per share, as compared to $351 million, or $5.48 per share for 2020.  
  • Adjusted net income attributable to the Company was a record $619 million, or $9.63 per share, as compared to $412 million, or $6.47 per share, in 2020.
  • Adjusted EBITDA before deducting for non-controlling interests for 2021 was a record $861 million, or 23.1% of net sales, as compared to $584 million, or 23.5% of net sales, last year.
  • Cash flow from operations was $411 million as compared to $487 million in the prior year. Free cash flow was $306 million as compared to $427 million in 2020.

“We continued to experience exceptional demand during the fourth quarter and achieved record quarterly shipments and production levels as we exited 2021,” said Aaron Jagdfeld, President and Chief Executive Officer. “We’re proud of our execution during the quarter as the continued progress on our capacity expansion helped drive top line results ahead of our expectations despite ongoing supply chain challenges. We enter 2022 with considerable visibility and momentum given ongoing robust home standby demand, an expanding Energy Technology solutions portfolio, and strong global demand for our C&I products.”

Jagdfeld continued, “We are making important progress on Generac’s evolution into an energy technology solutions company as we completed several strategic acquisitions during the year and introduced a number of innovative technologies that will significantly expand our addressable markets. We also introduced a new enterprise strategy called ‘Powering a Smarter World’ focused on improving energy resiliency, optimizing energy efficiency, and protecting critical infrastructure. Our strong balance sheet and cash flow generation give us the confidence to make the necessary investments to further capitalize on the key mega-trends that support our long-term growth outlook.”

Additional Fourth Quarter 2021 Consolidated Highlights

Gross profit margin was 34.0% as compared to 39.4% in the prior-year fourth quarter. Gross margins continued to be pressured by a challenging supply chain and overall inflationary environment leading to higher input costs, which include increased commodity prices, logistics costs, labor and plant start-up costs. These costs were partially offset by the initial impacts of several pricing actions implemented throughout the past year, with the full impact expected to be realized throughout 2022 as the higher pricing works through backlog.

Operating expenses increased $57.9 million, or 44.8%, as compared to the fourth quarter of 2020. The increase was primarily driven by the impact of acquisitions and related transaction costs, higher employee and marketing costs, and additional variable expenses from the significant increase in sales volumes.

Provision for income taxes for the current year quarter was $20.6 million, or an effective tax rate of 12.4%, as compared to $39.0 million, or a 23.8% effective tax rate, for the prior year. The decline in effective tax rate was primarily due to certain discrete items related to acquisitions and higher stock compensation deduction.

Cash flow from operations was $62 million during the fourth quarter, as compared to $218 million in the prior year. Free cash flow, as defined in the accompanying reconciliation schedules, was $42 million as compared to $191 million in the fourth quarter of 2020. The decline in free cash flow was due to a much higher working capital investment in the current year quarter primarily due to supply chain and logistics challenges, partially offset by an increase in operating earnings and lower capital expenditures.

The Company repurchased 350,000 shares of its common stock during the fourth quarter for $126 million under its current share repurchase program. There is approximately $124 million remaining under the current share repurchase program as of December 31, 2021.

Business Segment Results

Domestic Segment

Domestic segment sales increased 39% to $896.4 million as compared to $645.1 million in the prior year quarter, with the impact of acquisitions contributing approximately 2% of the revenue growth for the quarter.   The strong core sales growth was broad based led by home standby generators and PWRcell® energy storage systems, while C&I channels experienced significant year-over-year growth in the quarter, highlighted by national telecom and rental equipment customers.

Adjusted EBITDA for the segment was $196.7 million, or 21.9% of net sales, as compared to $188.0 million in the prior year, or 29.1% of net sales. This margin performance was impacted by the previously mentioned higher input costs and the impact of acquisitions, partially offset by the early impacts of recent pricing actions.

International Segment

International segment sales increased 47% to $170.7 million as compared to $116.0 million in the prior year quarter, with the impact of acquisitions and foreign currency contributing approximately 21% of the revenue growth for the quarter.   The core sales growth for the segment was driven by broad-based strength across all regions as compared to the softer prior year impacted by COVID, with sales recovering well above 2019 levels.

Adjusted EBITDA for the segment, before deducting for noncontrolling interests, was $23.7 million, or 13.9% of net sales, as compared to $7.8 million, or 6.8% of net sales, in the prior year.   The increase in margin was primarily due to the positive impact of recent acquisitions, improved absorption and operating leverage, as well as price realization.

2022 Outlook

The Company is initiating guidance for 2022 that anticipates another year of exceptional revenue growth as compared to the prior year. This is expected to be driven primarily by ramping home standby production capacity throughout the year, significant growth in clean energy markets, strong broad-based global demand for C&I products, and recent acquisitions.   As a result, net sales are expected to increase between 32 to 36% as compared to the prior year on an as-reported basis, which includes approximately 5 to 7% of net impact from acquisitions and foreign currency.

Net income margin, before deducting for non-controlling interests, is expected to be approximately 13.0 to 14.0% for the full-year 2022, with the corresponding adjusted EBITDA margin expected to be approximately 22.0 to 23.0%.


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