• Net Sales: Increased 16% year-over-year to $1.23 billion in Q4 2024.
• Residential Product Sales: Grew 28% to $743 million in Q4 2024.
• Commercial and Industrial Product Sales: Approximately flat at $363 million in Q4 2024.
• Gross Profit Margin: Improved to 40.6% from 36.5% in the prior year Q4.
• Adjusted EBITDA: Reached a record $265 million, or 21.5% of net sales, in Q4 2024.
• GAAP Net Income: $117 million in Q4 2024, up from $97 million in Q4 2023.
• Diluted Net Income Per Share (GAAP): $2.15 in Q4 2024, compared to $1.50 in Q4 2023.
• Adjusted Net Income: $168 million, or $2.80 per share, in Q4 2024.
• Free Cash Flow: Record $286 million in Q4 2024.
• Total Debt Outstanding: $1.33 billion at the end of Q4 2024.
• Full Year 2024 Free Cash Flow: Record $605 million.
• 2025 Net Sales Guidance: Expected to increase 3% to 7% year-over-year.
• 2025 Adjusted EBITDA Margin Guidance: Expected to be approximately 18% to 19% for the full year.

• Warning! GuruFocus has detected 7 Warning Signs with GNRC.

Release Date: February 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Generac Holdings Inc (NYSE:GNRC) reported a 16% year-over-year increase in net sales for the fourth quarter, reaching $1.23 billion.
• Residential product sales grew by 28%, driven by strong demand for home standby and portable generators.
• The company achieved record free cash flow generation of $605 million for the year, surpassing previous records.
• Generac Holdings Inc (NYSE:GNRC) expanded its residential dealer network to an all-time high of approximately 9,200 dealers.
• The company introduced a next-generation lineup of home standby generators, featuring advanced technologies and improved connectivity.

Negative Points

• Commercial and industrial (C&I) product sales were flat year-over-year, with weakness in certain end markets offsetting growth in others.
• The rental equipment market continued to decline, impacting sales in this segment.
• International sales decreased by 13% for the full year, with softness in Europe contributing to the decline.
• The company faces potential impacts from new tariff-related actions, which could affect costs and pricing strategies.
• Close rates for home standby generators moderated due to the rapid increase in demand, impacting sales conversion.

Q & A Highlights

Q: Can you provide more context on the new and larger C&I products aimed at the data center market? How much of the total addressable market does this unlock for Generac? A: Aaron Jagdfeld, CEO: We are excited about the new product offerings for the data center market, which include larger C&I products. Our international team has been engaging with data center partners, and we are now introducing a US-certified version. While it's difficult to provide a specific market size, the current lead times for these products are very long, indicating significant demand. We believe there's ample room for us to participate and succeed, given our brand and ability to serve customers on a national and global basis.

Q: You mentioned that ecobee would turn profitable in 2025. How much margin dilution will the total energy tech business have on Generac, and do you still expect it to break even by 2026? A: York Ragen, CFO: Ecobee delivered above breakeven results in Q4, and we expect profitability to continue in 2025. The overall energy technology business diluted our EBITDA margins by about 3.5% to 4% in 2024, which will improve to around 3% to 3.5% in 2025. We anticipate further improvement over the next couple of years.

Q: Can you discuss the residential growth expectations for the first quarter and how the new facility in the Southeast is managing lead times? A: York Ragen, CFO: We expect strong double-digit growth for residential products in Q1, partially offset by a high single-digit decline in C&I products. Aaron Jagdfeld, CEO: The new facility and increased automation have significantly improved our capacity, allowing us to respond rapidly to demand surges. This has helped maintain normal lead times and prevent emotional ordering from dealers.

Q: What feedback are you getting from contractors on the impact of the three major storms, and how does this compare to past similar events? A: Aaron Jagdfeld, CEO: The storms were regionally concentrated, and our dealer base was inundated with inquiries. We are seeing activations now, and the impact of these storms will be felt in 2025. The storms have increased demand in affected areas, while other regions were quieter last year. Our large dealer network helps us respond to these localized outages effectively.

Q: Can you expand on the telecom market's improvement and what can get the rental market going again? A: Aaron Jagdfeld, CEO: The telecom market bottomed in Q2/Q3, and we saw improvement in Q4 due to high-profile outage events prompting network hardening. The market is about 50% penetrated with backup power, offering significant opportunities. For the rental market, we expect a moderate decline in 2025, but the aging fleet and potential policy changes could create tailwinds for growth.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.