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Note 7 - Segment Reporting
 9 Months Ended
Sep. 30, 2025
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 and solutions, production processes, classes of customers and markets served, 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 Reportable Segment

 
  

Three Months Ended September 30, 2025

 

Product Classes

 

Domestic

  

International

  

Total

 

Residential products

 $605,444  $21,262  $626,706 

Commercial & industrial products

  212,875   145,398   358,273 

Other

  115,327   14,047   129,374 

Total net sales

 $933,646  $180,707  $1,114,353 

 

  

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

 
  

Nine Months Ended September 30, 2025

 

Product Classes

 

Domestic

  

International

  

Total

 

Residential products

 $1,632,048  $62,998  $1,695,046 

Commercial & industrial products

  635,356   422,493   1,057,849 

Other

  319,115   45,633   364,748 

Total net sales

 $2,586,519  $531,124  $3,117,643 

 

  

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 

 

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, sometimes 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 recorded at a point in time when control is transferred to the customer.

 

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, sometimes 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 recorded at a point in time when control is transferred to the customer.

 

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 when control is transferred to the customer, while the extended warranty and subscription revenues 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 tool in evaluating the Company's performance against the Company's budget for each period; and
 ●in communications with the Company's Board of Directors and investors concerning the Company's financial performance.

 

The table below presents sales (external and intersegment), significant segment expenses, other segment items, and Adjusted EBITDA by reportable segment, reconciled to consolidated income before provision for income taxes. 

 

  

Three Months Ended September 30, 2025

  

Three Months Ended September 30, 2024

 
  

Domestic

  

International

  

Total

  

Domestic

  

International

  

Total

 

External net sales

 $933,646  $180,707  $1,114,353  $1,011,347  $162,216  $1,173,563 

Intersegment sales

  4,494   4,784   9,278   8,853   4,485   13,338 

Total sales

  938,140   185,491   1,123,631   1,020,200   166,701   1,186,901 

Elimination of intersegment sales

          (9,278)          (13,338)

Costs of goods sold

  562,434   134,275   696,709   589,694   124,938   714,632 

Elimination of intersegment cost of goods sold

          (9,278)          (13,338)

Operating expenses

  287,901   35,942   323,843   270,194   33,451   303,645 

Other segment items (1)

  (78,022)  (12,114)  (90,136)  (51,255)  (11,986)  (63,241)

Adjusted EBITDA by reportable segment

 $165,827  $27,388  $193,215  $211,567  $20,298  $231,865 

Interest expense

          (18,461)          (22,910)

Depreciation and amortization

          (49,211)          (43,152)

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

          (2,831)          (468)

Non-cash share-based compensation expense (3)

          (12,751)          (13,115)

Transaction costs and credit facility fees (4)

          (827)          (1,337)

Business optimization and other charges (5)

          (368)          (1,564)

Provision for legal, regulatory, and other costs (6)

          (23,208)          (2,382)

Change in fair value of investment (7)

          (5,667)          5,198 

Loss on refinancing of debt (8)

          (1,225)          (4,861)

Other

          (328)          (43)

Income before provision for income taxes

         $78,338          $147,231 

 

  

Nine Months Ended September 30, 2025

  

Nine Months Ended September 30, 2024

 
  

Domestic

  

International

  

Total

  

Domestic

  

International

  

Total

 

External net sales

 $2,586,519  $531,124  $3,117,643  $2,541,242  $519,791  $3,061,033 

Intersegment sales

  18,418   37,113   55,531   26,571   18,127   44,698 

Total sales

  2,604,937   568,237   3,173,174   2,567,813   537,918   3,105,731 

Elimination of intersegment sales

          (55,531)          (44,698)

Costs of goods sold

  1,543,601   413,916   1,957,517   1,543,911   397,611   1,941,522 

Elimination of intersegment cost of goods sold

          (55,531)          (44,698)

Operating expenses

  809,056   108,095   917,151   722,082   103,399   825,481 

Other segment items (1)

  (194,176)  (37,708)  (231,884)  (148,596)  (36,463)  (185,059)

Adjusted EBITDA by reportable segment

 $446,456  $83,934  $530,390  $450,416  $73,371  $523,787 

Interest expense

          (53,813)          (69,833)

Depreciation and amortization

          (143,673)          (127,934)

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

          (4,973)          (2,863)

Non-cash share-based compensation expense (3)

          (39,111)          (38,270)

Transaction costs and credit facility fees (4)

          (2,591)          (4,029)

Business optimization and other charges (5)

          (5,385)          (3,190)

Provision for legal, regulatory, and other costs (6)

          (31,870)          (5,280)

Change in fair value of investments (7)

          (17,138)          (2,938)

Loss on refinancing of debt (8)

          (1,225)          (4,861)

Other (9)

          (3,907)          (156)

Income before provision for income taxes

         $226,704          $264,433 

 

 (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; and Provision for legal, regulatory, and other costs. 

 

 

(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 credit agreement.
 

(5)

Represents severance and other restructuring charges related to the consolidation of certain operating facilities and organizational functions.
 (6)Represents the following significant 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 - $2,736 and $5,923 for the three and nine months ended September 30, 2025, respectively, and $2,382 and $4,915 for the three and nine months ended September 30, 2024, respectively.
  •  A provision for a $15,000 multi-district class action settlement related to clean energy products and legal expenses related to certain class action lawsuits - $17,759 and $21,643 for the three and nine months ended September 30, 2025, respectively.  
  •  Legal expenses related to certain government inquiries and other significant matters - $2,713 and $4,304 for the three and nine months ended September 30, 2025, respectively. 
  •  Additional customer support costs related to a clean energy product customer that filed for bankruptcy in 2022 – $0 and $365 for the three and nine months ended September 30, 2024, respectively.
 (7)Represents non-cash gains (losses) primarily from changes in the fair value of the Company's investment in Wallbox warrants and equity securities.
 (8)For the three and nine months ended September 30, 2025, the loss represents third party costs and the write-off of certain deferred financing costs in connection with the refinancing of the Original Tranche A Term Loan Facility and Original Revolving Facility. For the three and nine months ended September 30, 2024, the loss represents fees paid to creditors and the write-off of the original issue discount and deferred financing costs in connection with the refinancing of the Tranche B Term Loan Facility.
 (9)The pre-tax loss in the nine months ended September 30, 2025 relates primarily to the sale of the Company's immaterial Tank Utility fleet business during the second quarter of 2025.

 

The following tables summarize additional financial information by reportable segment:

 

  

Assets by Reportable Segment

 
  

September 30, 2025

  

December 31, 2024

 

Domestic

 $4,207,328  $3,873,904 

International

  1,390,774   1,235,427 

Total

 $5,598,102  $5,109,331 

 

  

Depreciation and Amortization by Reportable Segment

 
  

Three Months Ended September 30,

 
  

2025

  

2024

 

Domestic

 $40,018  $34,122 

International

  9,193   9,030 

Total

 $49,211  $43,152 

 

  

Depreciation and Amortization by Reportable Segment

 
  

Nine Months Ended September 30,

 
  

2025

  

2024

 

Domestic

 $117,209  $100,379 

International

  26,464   27,555 

Total

 $143,673  $127,934 

 

  

Capital Expenditures by Reportable Segment

 
  

Three Months Ended September 30,

 
  

2025

  

2024

 

Domestic

 $17,007  $25,716 

International

  4,874   2,911 

Total

 $21,881  $28,627 

 

  

Capital Expenditures by Reportable Segment

 
  

Nine Months Ended September 30,

 
  

2025

  

2024

 

Domestic

 $93,048  $73,983 

International

  17,486   9,416 

Total

 $110,534  $83,399 

 

The Company’s sales in the U.S. represented approximately 80% and 83% of total sales for the three months ended September 30, 2025 and 2024, respectively, and 79% for both the nine months ended September 30, 2025 and 2024, respectively. Approximately 74% and 76% of the Company's identifiable long-lived assets were located in the U.S. as of  September 30, 2025 and December 31, 2024, respectively.