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Note 7 - Segment Reporting | 9 Months Ended
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Sep. 30, 2024
Notes to Financial Statements |
Segment Reporting Disclosure [Text Block] | 7. Segment Reporting The Company has two reportable segments for financial reporting purposes – domestic and international. The domestic segment includes the legacy Generac business and all historical acquisitions based in the U.S. and Canada, all of which have revenues substantially derived from the U.S. and Canada. The international segment includes all historical acquisitions not based in the U.S and Canada, all of which have revenues substantially derived from outside the U.S and Canada. Both reportable segments design and manufacture a wide range of energy technology solutions and other power products. The Company has multiple operating segments, which it aggregates into the two reportable segments, based on materially similar economic characteristics, products, production processes, classes of customers, distribution methods, organizational structure, and regional considerations. The Company's product offerings consist primarily of power generation equipment, energy storage systems, energy management devices & solutions, and other power products geared for varying end customer uses. While Residential products and Commercial & Industrial ("C&I") products include similar products, they differ based on power output and end customer. The composition of net sales between residential, C&I, and other products & services by reportable segment is as follows:
|  | Net Sales by Reportable Segment |
|  | Three Months Ended September 30, 2024 |
Product Classes |  | Domestic |  |  | International |  |  | Total |
Residential products |  | $ | 701,781 |  |  | $ | 21,006 |  |  | $ | 722,787 |
Commercial & industrial products |  |  | 199,339 |  |  |  | 128,617 |  |  |  | 327,956 |
Other |  |  | 110,227 |  |  |  | 12,593 |  |  |  | 122,820 |
Total net sales |  | $ | 1,011,347 |  |  | $ | 162,216 |  |  | $ | 1,173,563 |
|  | Net Sales by Reportable Segment |
|  | Three Months Ended September 30, 2023 |
Product Classes |  | Domestic |  |  | International |  |  | Total |
Residential products |  | $ | 539,775 |  |  | $ | 25,312 |  |  | $ | 565,087 |
Commercial & industrial products |  |  | 238,212 |  |  |  | 146,321 |  |  |  | 384,533 |
Other |  |  | 108,378 |  |  |  | 12,669 |  |  |  | 121,047 |
Total net sales |  | $ | 886,365 |  |  | $ | 184,302 |  |  | $ | 1,070,667 |
|  | Net Sales by Reportable Segment |
|  | Nine Months Ended September 30, 2024 |
Product Classes |  | Domestic |  |  | International |  |  | Total |
Residential products |  | $ | 1,629,100 |  |  | $ | 61,036 |  |  | $ | 1,690,136 |
Commercial & industrial products |  |  | 606,147 |  |  |  | 419,948 |  |  |  | 1,026,095 |
Other |  |  | 305,995 |  |  |  | 38,807 |  |  |  | 344,802 |
Total net sales |  | $ | 2,541,242 |  |  | $ | 519,791 |  |  | $ | 3,061,033 |
|  | Net Sales by Reportable Segment |
|  | Nine Months Ended September 30, 2023 |
Product Classes |  | Domestic |  |  | International |  |  | Total |
Residential products |  | $ | 1,389,112 |  |  | $ | 93,426 |  |  | $ | 1,482,538 |
Commercial & industrial products |  |  | 700,941 |  |  |  | 430,935 |  |  |  | 1,131,876 |
Other |  |  | 305,239 |  |  |  | 39,344 |  |  |  | 344,583 |
Total net sales |  | $ | 2,395,292 |  |  | $ | 563,705 |  |  | $ | 2,958,997 |
Residential products consist primarily of automatic home standby generators ranging in output from 7.5kW to 150kW, portable generators, residential energy storage systems, energy management devices & solutions, and other outdoor power equipment. These products are predominantly sold through independent residential dealers, national and regional retailers, e-commerce merchants, electrical/HVAC/solar wholesalers, solar installers, and outdoor power equipment dealers. The residential products revenue consists of the sale of the product to the Company's distribution partners, who in turn sell the product to the end consumer, including installation and maintenance services. In some cases, residential products are sold directly to the end consumer. Substantially all of the residential products' revenues are transferred to the customer at a point in time. C&I products consist of larger output stationary generators used in C&I applications, with power outputs up to 3,250kW. Also included in C&I products are mobile generators, light towers, C&I battery energy storage systems, mobile heaters, mobile pumps, and related controls for power generation equipment. These products are sold globally through industrial distributors and dealers, Engineering, Procurement, and Construction ("EPC") companies, equipment rental companies, and equipment distributors. The C&I products revenue consists of the sale of the product to the Company's distribution partners, who in turn sell the product to the end customer, including installation and maintenance services. In some cases, C&I products are sold directly to the end customer. Substantially all of the C&I products' revenues are transferred to the customer at a point in time. Other consists primarily of aftermarket service parts and product accessories sold to the Company's distribution partners, the amortization of extended warranty deferred revenue, remote monitoring and grid services subscription revenue, as well as certain installation and maintenance service revenue. The aftermarket service parts and product accessories are generally transferred to the customer at a point in time, while the extended warranty and subscription revenue are recognized over the life of the contract. Other service revenue is recognized when the service is performed. The following table sets forth total sales by reportable segment and is inclusive of intersegment sales:
|  | Three Months Ended September 30, 2024 |  |  | Three Months Ended September 30, 2023 |
|  | Domestic |  |  | International |  |  | Eliminations |  |  | Total |  |  | Domestic |  |  | International |  |  | Eliminations |  |  | Total |
External net sales |  | $ | 1,011,347 |  |  | $ | 162,216 |  |  | $ | - |  |  | $ | 1,173,563 |  |  | $ | 886,365 |  |  | $ | 184,302 |  |  | $ | - |  |  | $ | 1,070,667 |
Intersegment sales |  |  | 8,853 |  |  |  | 4,485 |  |  |  | (13,338 | ) |  |  | - |  |  |  | 7,640 |  |  |  | 23,293 |  |  |  | (30,933 | ) |  |  | - |
Total sales |  | $ | 1,020,200 |  |  | $ | 166,701 |  |  | $ | (13,338 | ) |  | $ | 1,173,563 |  |  | $ | 894,005 |  |  | $ | 207,595 |  |  | $ | (30,933 | ) |  | $ | 1,070,667 |
|  | Nine Months Ended September 30, 2024 |  |  | Nine Months Ended September 30, 2023 |
|  | Domestic |  |  | International |  |  | Eliminations |  |  | Total |  |  | Domestic |  |  | International |  |  | Eliminations |  |  | Total |
External net sales |  | $ | 2,541,242 |  |  | $ | 519,791 |  |  | $ | - |  |  | $ | 3,061,033 |  |  | $ | 2,395,292 |  |  | $ | 563,705 |  |  | $ | - |  |  | $ | 2,958,997 |
Intersegment sales |  |  | 26,571 |  |  |  | 18,127 |  |  |  | (44,698 | ) |  |  | - |  |  |  | 33,960 |  |  |  | 84,078 |  |  |  | (118,038 | ) |  |  | - |
Total sales |  | $ | 2,567,813 |  |  | $ | 537,918 |  |  | $ | (44,698 | ) |  | $ | 3,061,033 |  |  | $ | 2,429,252 |  |  | $ | 647,783 |  |  | $ | (118,038 | ) |  | $ | 2,958,997 |
Management evaluates the performance of its segments based primarily on Adjusted EBITDA, which is reconciled to Income before provision for income taxes below. The computation of Adjusted EBITDA is based primarily on the definition that is contained in the Company’s credit agreements.
|  | Adjusted EBITDA by Reportable Segment |
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
Domestic |  | $ | 211,567 |  |  | $ | 160,270 |  |  | $ | 450,416 |  |  | $ | 331,134 |
International |  |  | 20,298 |  |  |  | 28,332 |  |  |  | 73,371 |  |  |  | 94,088 |
Total Adjusted EBITDA |  | $ | 231,865 |  |  | $ | 188,602 |  |  | $ | 523,787 |  |  | $ | 425,222 |
Interest expense |  |  | (22,910 | ) |  |  | (24,707 | ) |  |  | (69,833 | ) |  |  | (72,862 | )
Depreciation and amortization |  |  | (43,152 | ) |  |  | (42,951 | ) |  |  | (127,934 | ) |  |  | (124,149 | )
Non-cash write-down and other adjustments (1) |  |  | (468 | ) |  |  | (2,055 | ) |  |  | (2,863 | ) |  |  | 5,257 |
Non-cash share-based compensation expense (2) |  |  | (13,115 | ) |  |  | (9,927 | ) |  |  | (38,270 | ) |  |  | (30,306 | )
Transaction costs and credit facility fees (3) |  |  | (1,337 | ) |  |  | (921 | ) |  |  | (4,029 | ) |  |  | (3,161 | )
Business optimization and other charges (4) |  |  | (1,564 | ) |  |  | (5,291 | ) |  |  | (3,190 | ) |  |  | (8,151 | )
Provision for legal, regulatory, and clean energy product charges (5) |  |  | (2,382 | ) |  |  | (22,113 | ) |  |  | (5,280 | ) |  |  | (27,913 | )
Change in fair value of investment (6) |  |  | 5,198 |  |  |  | - |  |  |  | (2,938 | ) |  |  | - |
Loss on extinguishment of debt (7) |  |  | (4,861 | ) |  |  | - |  |  |  | (4,861 | ) |  |  | - |
Other |  |  | (43 | ) |  |  | (575 | ) |  |  | (156 | ) |  |  | (443 | )
Income before provision for income taxes |  | $ | 147,231 |  |  | $ | 80,062 |  |  | $ | 264,433 |  |  | $ | 163,494 |
| (1) | Includes gains/(losses) on dispositions of assets other than in the ordinary course of business, gains/(losses) on 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.
| (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 the Company's credit agreement, equity issuance or debt issuance or refinancing, together with certain fees relating to the Company's senior secured credit facilities, such as administrative agent fees and credit facility commitment fees under the Company's Amended Credit Agreement.
| (4) | Represents severance and other restructuring charges related to the consolidation of certain operating facilities and organizational functions.
| (5) | Represents the following significant and unusual charges not indicative of our ongoing operations: • A provision for judgments, settlements, and legal expenses related to certain patent and securities lawsuits - $2,382 in the third quarter of 2024; $4,915 year-to-date 2024; and $22,113 in the third quarter of 2023. • Additional customer support costs related to a clean energy product customer that filed for bankruptcy in 2022 – $365 in the first quarter of 2024. • A provision for a matter with the Consumer Product Safety Commission ("CPSC") concerning the imposition of civil fines for allegedly failing to timely submit a report under the Consumer Product Safety Act ("CPSA") in relation to certain portable generators that were subject to a voluntary recall previously announced on July 29, 2021 - $5,800 in the first quarter of 2023.
| (6) | Represents non-cash gains/(losses) from changes in the fair value of the Company's investment in Wallbox warrants and equity securities.
| (7) | Represents fees paid to creditors and the write-off of the unamortized original issue discount and deferred financing costs in connection with the refinancing of the Company's Tranche B Term Loan Facility.
The Company’s sales in the U.S. represented approximately 83% and 79% of total sales for the three months ended September 30, 2024 and 2023, respectively. The Company’s sales in the U.S. represented approximately 79% and 77% of total sales for the nine months ended September 30, 2024 and 2023, respectively. Approximately 75% and 74% of the Company’s identifiable long-lived assets were located in the U.S. on September 30, 2024, and December 31, 2023, respectively.

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/exampleRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 48 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482785/280-10-55-48 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards 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