XML 33 R14.htm IDEA: XBRL DOCUMENT v3.25.0.1
Note 7 - Segment Reporting
 12 Months Ended
Dec. 31, 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. Intersegment sales are at an appropriate transfer price. 

 

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 Segment

 
  

Year Ended December 31, 2024

 

Product Classes

 

Domestic

  

International

  

Total

 

Residential products

 $2,352,629  $80,845  $2,433,474 

Commercial & Industrial products

  828,586   560,883   1,389,469 

Other

  417,934   54,957   472,891 

Total net sales

 $3,599,149  $696,685  $4,295,834 

 

  

Year Ended December 31, 2023

 

Product Classes

 

Domestic

  

International

  

Total

 

Residential products

 $1,945,273  $117,656  $2,062,929 

Commercial & Industrial products

  916,118   578,681   1,494,799 

Other

  414,933   50,006   464,939 

Total net sales

 $3,276,324  $746,343  $4,022,667 

 

  

Year Ended December 31, 2022

 

Product Classes

 

Domestic

  

International

  

Total

 

Residential products

 $2,782,037  $129,834  $2,911,871 

Commercial & Industrial products

  746,172   514,565   1,260,737 

Other

  339,657   52,472   392,129 

Total net sales

 $3,867,866  $696,871  $4,564,737 

 

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 or rent 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 design, build, 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, sometimes after certain milestones are met.

 

The Company views Adjusted EBITDA as a key measure of the Company's performance. The computation of Adjusted EBITDA is based primarily on the definition that is contained in the Company’s credit agreements. The Company presents Adjusted EBITDA not only due to its importance for purposes of the Company's credit agreements, but also because it assists the Company in comparing performance across reporting periods on a consistent basis as it excludes items the Company's management does not believe are indicative of the Company's core operating performance. The Company's Chief Operating Decision Maker (CODM) is Aaron Jagdfeld, President and Chief Executive Officer (CEO). He uses Adjusted EBITDA, along with the Company's management:

 

 

●

for planning purposes, including the preparation of the Company's annual operating budget and developing and refining internal projections for future periods;

 

●

to allocate resources to enhance the financial performance of the Company's business;

 

●

as a target for the determination of the bonus component of compensation for the Company's senior executives under the Company's management incentive plan, as described further in the Company's Proxy Statement;

 

●

to evaluate the effectiveness of the Company's business strategies and as a supplemental tool in evaluating the Company's performance against the Company's budget for each period; and

 

●

in communications with the Company's Board and investors concerning the Company's financial performance.

 

See "Non-GAAP measures - Adjusted EBITDA" in Item 7 of this Annual Report on Form 10-K for more information on the Company's use of Adjusted EBITDA. The table below presents sales (external and intersegment), significant segment expenses, and Adjusted EBITDA by reportable segment, reconciled to consolidated income before provision for income taxes. 

 

  

Year Ended December 31, 2024

  

Year Ended December 31, 2023

  

Year Ended December 31, 2022

 
  

Domestic

  

International

  

Total

  

Domestic

  

International

  

Total

  

Domestic

  

International

  

Total

 

External net sales

 $3,599,149   696,685  $4,295,834  $3,276,324  $746,343  $4,022,667  $3,867,866  $696,871  $4,564,737 

Intersegment sales

  35,932   28,700   64,632   43,937   91,552   135,489   60,731   93,699   154,430 

Total sales

  3,635,081   725,385   4,360,466   3,320,261   837,895   4,158,156   3,928,597   790,570   4,719,167 

Elimination of intersegment sales

  -   -   (64,632)  -   -   (135,489)  -   -   (154,430)

Costs of goods sold

  2,155,269   539,571   2,694,840   2,168,210   624,515   2,792,725   2,604,124   593,039   3,197,163 

Elimination of intersegment cost of goods sold

  -   -   (64,632)  -   -   (135,489)  -   -   (154,430)

Operating expenses

  991,042   137,842   1,128,884   839,827   139,405   979,232   833,896   121,778   955,674 

Other segment items (1)

  (204,433)  (47,926)  (252,359)  (211,113)  (40,547)  (251,660)  (225,725)  (33,312)  (259,037)

Adjusted EBITDA by reportable segment

 $693,203  $95,898   789,101  $523,337  $114,522   637,859  $716,302  $109,065   825,367 

Interest expense

          (89,713)          (97,627)          (54,826)

Depreciation and amortization

          (171,768)          (166,602)          (156,141)

Non-cash write-down and other adjustments (2)

          (4,757)          5,953           2,091 

Non-cash share-based compensation expense (3)

          (49,248)          (35,492)          (29,481)

Transaction costs and credit facility fees (4)

          (5,097)          (4,054)          (5,026)

Business optimization and other charges (5)

          (4,752)          (10,551)          (4,371)

Provision for legal, regulatory, and clean energy product charges (6)

          (10,931)          (38,490)          (65,265)

Change in fair value of investment (7)

          (38,006)          -           - 

Loss on extinguishment of debt (8)

          (4,861)          -           (3,743)

Other

          (530)          (696)          (139)

Income before provision for income taxes

         $409,438          $290,300          $508,466 

 

 (1)Other segment items primarily represent depreciation and amortization and the following items defined below: Non-cash write-down and other adjustments; Non-cash shared-based compensation expense; Transaction costs and credit facility fees; Business optimization and other charges; Provision for legal, regulatory, and clean energy product charges. 
 

(2)

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. 

 

(3)

Represents share-based compensation expense to account for stock options, restricted stock, and other stock awards over their respective vesting periods.
 (4)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.
 

(5)

Represents severance and other restructuring charges related to the consolidation of certain operating facilities and organizational functions.
 

(6)

Represents the following litigation, regulatory, and other matters that are not indicative of our ongoing operations:

 • A provision for judgments, settlements, and legal expenses related to certain patent lawsuits - $9,299 in 2024; $27,289 in 2023. 

 • Legal expenses related to certain class action lawsuits - $1,267 in 2024; $1,051 in 2023.

 • A bad debt provision and additional customer support costs related to a clean energy product customer that filed for bankruptcy in 2022 – $365 and $4,350 additional customer support costs in 2024 and 2023, respectively; $17,926 bad debt provision in 2022. 

 • A warranty provision to address clean energy product warranty-related matters - $37,338 in 2022. 
 • A provision for a matter with the CPSC concerning the imposition of civil fines for allegedly failing to timely submit a report under the CPSA in relation to certain portable generators that were subject to a voluntary recall previously

   announced on  July 29, 2021 - $5,800 in 2023 and $10,000 in 2022. 

 (7)Represents non-cash losses from changes in the fair value of the Company's investment in Wallbox warrants and equity securities.
 

(8)

Represents fees paid to creditors and the write-off of the unamortized original issue discount and deferred financing costs in connection with the 2024 and 2022 credit agreement refinancings. Refer to Note 12, “Credit Agreements,” to the consolidated financial statements of this Annual Report on Form 10-K for further information on the losses on extinguishment of debt.

 

The following tables summarize additional financial information by reportable segment:

 

  

Assets

 
  

December 31,

 
  

2024

  

2023

  

2022

 

Domestic

 $3,873,904  $3,770,883  $4,032,086 

International

  1,235,427   1,322,429   1,137,376 

Total

 $5,109,331  $5,093,312  $5,169,462 

 

  

Depreciation and Amortization

 
  

Year Ended December 31,

 
  

2024

  

2023

  

2022

 

Domestic

 $135,434  $129,648  $123,768 

International

  36,334   36,954   32,373 

Total

 $171,768  $166,602  $156,141 

 

  

Capital Expenditures

 
  

Year Ended December 31,

 
  

2024

  

2023

  

2022

 

Domestic

 $117,836  $103,036  $69,680 

International

  18,897   26,024   16,508 

Total

 $136,733  $129,060  $86,188 

 

The Company’s sales in the United States represent approximately 79%, 77%, and 80% of total sales for the years ended December 31, 2024, 2023 and 2022, respectively. Approximately 76% and 74% of the Company’s identifiable long-lived assets are located in the United States as of December 31, 2024 and 2023, respectively.