Generac Holdings Inc. — Third Quarter 2026 Earnings Summary

Financial Performance:

• Net sales increased 16% year-over-year to a record $1.29 billion for the quarter, compared to $1.11 billion in the prior year period.
• Net income attributable to the Company was $109 million ($1.83 per share), up from $66 million ($1.12 per share) in the prior year.
• Adjusted net income attributable to the Company was $151 million ($2.54 per share), compared to $108 million ($1.83 per share) in the prior year.
• Adjusted EBITDA before deducting for noncontrolling interests was $256 million (19.8% of net sales), up from $193 million (17.3% of net sales) in the prior year.
• Gross profit margin was 39.9%, an increase from 38.3% in the prior year quarter.
• Operating expenses increased 10% ($31.6 million) to $355.5 million, driven by investments in C&I growth, higher marketing spend, and intangible amortization.
• Effective tax rate was 23.9% for the quarter, compared to 15.0% in the prior year.
• Cash flow from operations was $171 million, up from $118 million in the prior year.
• Free cash flow was $132 million, up from $96 million in the prior year.
• Total assets were $6.14 billion as of September 30, 2026, compared to $5.57 billion as of December 31, 2025.
• Total liabilities were $3.13 billion as of September 30, 2026, compared to $2.93 billion as of December 31, 2025.
• Cash and cash equivalents were $393.7 million as of September 30, 2026, compared to $341.4 million as of December 31, 2025.
• Accounts receivable were $846.0 million as of September 30, 2026, compared to $602.7 million as of December 31, 2025.
• Inventories were $1.29 billion as of September 30, 2026, compared to $1.25 billion as of December 31, 2025.
• Goodwill was $1.65 billion as of September 30, 2026, compared to $1.47 billion as of December 31, 2025.
• Short-term borrowings were $53.1 million as of September 30, 2026, compared to $50.6 million as of December 31, 2025.
• Long-term borrowings and finance lease obligations were $1.24 billion as of September 30, 2026, compared to $1.26 billion as of December 31, 2025.
• Deferred revenue was $238.4 million as of September 30, 2026, compared to $232.9 million as of December 31, 2025.

Guidance and Future Outlook:

• Full-year 2026 net sales growth guidance is maintained in the mid-to-high teens percent range compared to the prior year.
• Full-year 2026 adjusted EBITDA margin guidance is updated to approximately 20.5% to 21.0%, up from the previous range of 20.0% to 21.0%.
• Full-year 2026 net income margin guidance is maintained at approximately 9.0% to 10.0%.
• The Company expects to capture generational growth opportunities in the data center market through capacity expansion plans.

Business Segments and Product Lines:

• Commercial & Industrial (C&I) segment external net sales increased approximately 28% to $552 million, driven by ramping revenue from the global data center market.
• C&I segment Adjusted EBITDA was $69.3 million (12.5% of sales), up from $43.8 million (10.1% of sales) in the prior year.
• Residential segment external net sales increased approximately 9% to $743 million, driven by strong sales of home standby and portable generators.
• Residential segment Adjusted EBITDA was $200.8 million (27.0% of sales), up from $160.2 million (23.4% of sales) in the prior year.
• Residential segment growth was partially offset by lower shipments of energy storage systems.
• C&I segment growth included a 4% net favorable impact from acquisitions, divestitures, and foreign currency.
• C&I segment growth was partially offset by lower shipments to domestic industrial distributor and telecom channels.

Market and Competitive Landscape:

• The Company reports significant momentum in the C&I segment with significant additional commitments from data center customers.
• The Company positions itself as a leading provider to the large and rapidly growing data center market.
• The Company has entered into a long-term supply agreement with Amazon.com, Inc. for backup power generators for Amazon data centers.
• Initial deliveries under the Amazon agreement are expected to total a combined $2.4 billion in 2027 and 2028.
• The Company's backlog for products to be sold to the data center market has grown to approximately $4.5 billion.
• Mega-trends around lower power quality are supporting increased shipments of home standby and portable generators.

Risks and Challenges:

• Risks include frequency and duration of power outages, fluctuations in raw material costs and availability, and dependence on a small number of contract manufacturers.
• Trade policy changes, tariffs, and volatility in global macroeconomic conditions could impact demand.
• The Company faces risks related to data center market growth uncertainty, contract risk with data center customers (including cancellation rights and delivery requirements), and potential liability exposure.
• Risks also include intellectual property protection, legal proceedings, warranty costs, and the ability to accurately forecast demand and manage inventory.
• The Company notes risks related to labor disputes, employee retention, manufacturing disruptions, and geopolitical conflicts.
• Risks include the possibility that expected synergies from acquisitions or realignments will not be realized, and risks related to foreign sourcing and environmental compliance.
• The Company faces risks regarding its ability to make payments on indebtedness, terms of credit facilities, and potential need for additional capital.

Management Commentary and Tone:

• CEO Aaron Jagdfeld expressed pride in the team's efforts, noting the record net sales and tremendous momentum in the C&I segment.
• Management highlighted confidence in their position as a leading provider to the data center market following the Amazon agreement and other customer wins.
• Management noted the Residential segment returned to strong year-over-year growth supported by lower power quality mega-trends.
• Management confirmed execution on previously announced capacity expansion plans to capture generational growth opportunities.

Other Key Points:

• The Company entered into a long-term supply agreement with Amazon.com, Inc. for backup power generators for Amazon data centers.
• Initial deliveries from the Amazon agreement are expected to total $2.4 billion in 2027 and 2028.
• The Company's backlog for the data center market has grown to approximately $4.5 billion.
• The Company reported a loss on disposal of assets of $351 thousand for the nine months ended September 30, 2026.
• The Company reported a loss attributable to business dispositions of $18.7 million for the nine months ended September 30, 2026.
• The Company paid $2.7 million in contingent acquisition consideration and $0.96 million in deferred acquisition consideration during the nine months ended September 30, 2026.
• The Company received $10.5 million in proceeds from the exercise of stock options during the nine months ended September 30, 2026.
• The Company paid $39.4 million in taxes related to equity awards during the nine months ended September 30, 2026.
• The Company did not engage in stock repurchases during the nine months ended September 30, 2026.
• The Company paid $2.7 million in contingent acquisition consideration and $0.96 million in deferred acquisition consideration during the nine months ended September 30, 2026.
• The Company reported a provision for legal, regulatory, and other costs of $20.2 million for the quarter, including $14.3 million related to clean energy warranty matters.
• The Company reported a provision for legal, regulatory, and other costs of $22.4 million for the nine months ended September 30, 2026.