Generac Holdings Inc. · NYSE:GNRC
Generac — Generac Holdlings — Q2 2023 Earnings Presentation
29 slides from Generac's earnings presentation, Aug 2, 2023
Slide 1: Investor Presentation
INVESTOR PRESENTATION August 2023 OUR PURPOSE: Lead the evolution to more resilient, efficient, and sustainable energy solutions.
Slide 2: Investor Relations
INVESTOR RELATIONS Aaron Jagdfeld PRESIDENT & CEO York Ragen CHIEF FINANCIAL OFFICER Mike Harris SENIOR VICE PRESIDENT – CORPORATE DEVELOPMENT & INVESTOR RELATIONS Kris Rosemann SENIOR MANAGER – CORPORATE DEVELOPMENT & INVESTOR RELATIONS (262) 506-6064 InvestorRelations@generac.com 2
Slide 3: Forward Looking Statements
FORWARD LOOKING STATEMENTS Certain statements contained in this presentation, as well as other • frequency and duration of power outages impacting demand for • changes in laws and regulations regarding environmental, health information provided from time to time by Generac Holdings Inc. or our produ
Slide 4: Generac at a Glance
GENERAC GENERAC’ AT A GLANCE NYSE: GNRC FOUNDED IN Saeisoo mg 1959 9,900 EMPLOYEES WORLDWIDE AS OF 12/31/2022 LTM ~1,000 a SALES ENGINEERS WORLDWIDE AS OF 12/31/2022 LTM ADJ EBITDA OMNI CHANNEL $594 MILLION Mid tne THOUSANDS OF DEALERS, WHOLESALERS. RETAILERS AND E-COMMERCE PARTNERS
Slide 5: About Generac
ABOUT GENERAC Residential LTM Net Sales Commercial & Industrial Home Standby, Clean Energy, Portables, Chore Products Domestic 80% | International 20% Stationary Gens, Telecom, Mobile & Storage Commercial & Industrial 35% Residential 54% Other 11% Other Aftermarket Parts, Product Accessories, Extend
Slide 6: Track Record of Growth
TRACK RECORD STRATEGIC GROWTH THEMES OF GROWTH • Power Quality Issues Continue to Increase $6,000 • Home Standby Penetration Opportunity is Significant $5,000 16% REVENUE CAGR • Solar, Storage, & Energy Management (2010 IPO THROUGH 2023E) $4,000 Markets Developing Quickly • Grid Services & Energy-as
Slide 7: Mega-Trends Review
MEGA-TRENDS REVIEW "Grid 2.0" - Evolution of Legacy infrastructure the traditional electrical needs major utility model investment cycle Decarbonization, digitization, and Rebuilding and upgrading of aging decentralization of the grid and networks and systems including migration towards distributed
Slide 8: Growing Electricity Supply/Demand Imbalance
GROWING ELECTRICITY SUPPLY/DEMAND IMBALANCE Supply Reliability Deteriorating • Climate change impacts – more severe and volatile weather • One-way system – capacity constrained and reliant on fossil fuels • Infrastructure underinvestment – susceptible to power outages • Penalties for carbon intensit
Slide 9: Enterprise Strategy
ENTERPRISE STRATEGY OUR PURPOSE: Lead the evolution to more resilient, efficient, and sustainable energy solutions. 9
Slide 10: Strategy Evolution Unlocks Massive & Growing SAM
STRATEGY EVOLUTION UNLOCKS MASSIVE & GROWING SAM 2025 2018 Key drivers of increase in SAM… ✓ Clean Energy – Residential and C&I storage, rooftop MLPEs, hydrogen / hybrid gens, EV chargers ✓ Connected Devices – Smart thermostats, monitoring & management devices Projected ~5X Expansion ✓ Energy as a S
Slide 11: Building Energy Ecosystems Aggregating DERs
BUILDING ENERGY ECOSYSTEMS AGGREGATING DERs TO SUPPORT NEXT-GEN GRID RESI ECOSYSTEM C&I ECOSYSTEM GENERATION & STORAGE ASSETS MONITORING & MANAGEMENT DEVICES User PLATFORM & CONTROLS System Interface Level Platform “Single Pane of Glass” Controls DISTRIBUTED ENERGY RESOURCE MANAGEMENT SYSTEM (DERMS)
Slide 12: Massive HSB Penetration Opportunity
MASSIVE HSB PENETRATION OPPORTUNITY Widespread growth potential • Total US penetration rate estimated at ~5.75% as of 2022 • Highest penetrated markets in the U.S. are at 15-20%+ and still growing Three powerful mega-trends underpin future growth: • Severe & volatile weather becoming more prominent
Slide 13: HSB Mega-Trends Drive Sustained New & Higher Baseline of Demand
HSB MEGA-TRENDS DRIVE SUSTAINED NEW & HIGHER BASELINE OF DEMAND Major Outage Events Dealers Baseline Outage Hours 2015 2016 2017 2018 2019 2020 2021 2022 2015 2016 2017 2018 2019 2020 2021 2022 In-Home Consultations (IHCs) Activations 2015 2016 2017 2018 2019 2020 2021 2022 2015 2016 2017 2018 2019
Slide 14: Broad Residential Energy Technology Product Offering
BROAD RESIDENTIAL ENERGY TECHNOLOGY PRODUCT OFFERING $10+ BILLION DOMESTIC SAM BY 2025 14
Slide 15: Commercial & Industrial Global Energy Technology Opportunities
COMMERCIAL & INDUSTRIAL GLOBAL ENERGY TECHNOLOGY OPPORTUNITIES • Beyond Standby use of natural gas generators $5+ BILLION GLOBAL SAM BY 2025 • EaaS / Multi purpose microgrids • Advanced generator & microgrid controls Key Generac proprietary fuel • C&I energy storage system & control technology • Hyb
Slide 16: Financial Summary
FINANCIAL SUMMARY ($’S IN MILLIONS) Adjusted EBITDA Adjusted EBITDA margin % Total Net Sales Gross Margin % $5,000 $1,000 50.0% $4,564.7 $861.4 $825.4 $4,025.8 55.0% $800 $4,000 $3,737.2 40.0% $583.8 $594.1 $3,000 $600 45.0% $2,204.3 $2,485.2 $454.1 30.0% $2,000 $400 38.5% 35.0% 36.4% 23.5% 23.1% 20
Slide 17: Capital Deployment Priorities
CAPITAL DEPLOYMENT PRIORITIES | Asset lite with capex only 2.5% to 3.0% of sales Organic 1 Growth | Investment in technology, innovation and R&D capabilities | Capacity expansion, global systems, high ROI automation Asset Lite | Robust M&A pipeline 2 | Demonstrated ability to execute; 28 deals since
Slide 18: 2023 Business Outlook
2023 BUSINESS OUTLOOK (AS REPORTED ON August 2, 2023) Consolidated net sales • Consolidated revenue: decrease between 10% to 12% • Residential products: decrease in the mid-20% range • C&I products: increase at mid-teens rate • 2% net impact from acquisitions and foreign currency Adjusted EBITDA mar
Slide 19: Appendix
APPENDIX ——=
Slide 20: Summary of Acquisitions - Since 2017
SUMMARY OF ACQUISITIONS - SINCE 2017 JAN. SEP. SEP. Acquisitions used to 2017 2020 2021 Gaseous-engine control systems and accessories Leading manufacturer of an innovative commercial line Advanced engineering and product design company accelerate 'Powering a sold to engine OEMs and aftermarket cust
Slide 21: HSB: A Penetration Story
HSB: A PENETRATION STORY North American Penetration Opportunity(1) 90% 88.1% 80% Aging Population Fits Demographic 70% • ~65% of buyers age 60 and older % of US Addressable Market 60% 50% • ~Median home value of approximately $525k 40% • ~80-85% retro-fit application 30% 28.0% • ~$145K median househ
Slide 22: Expanding Power Outage Severity
EXPANDING POWER OUTAGE SEVERITY (1) Total Outage Hours (Severity) Legacy Residential Organic Sales - LTM Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 (1) Represents power outa
Slide 23: PWRcell Battery Power Comparison
PWRCELL ® BATTERY POWER COMPARISON USEABLE ENERGY CONTINUOUS POWER PEAK POWER 20 15 Power/Energy (kW / kWh) +33% 10 +20% 5 +55% 0 Tesla FranklinWH SolarEdge Enphase PWRcell Powerwall+ aPower Energy Bank IQ10 PWRcell Tesla FranklinWH SolarEdge Enphase Useable Energy 18kWh 13.5kWh 13.6kWh 9.7kWh 10.1k
Slide 24: Solar Inverter Comparison for Residential Applications
SOLAR INVERTER COMPARISON FOR RESIDENTIAL APPLICATIONS DC PWRzone System AC 2:1 Microinverter with DC Sub-string Optimizers System with Module-level Microinverters Sub-string String Inverter Optimizers AC Power DC Power DC MLPE System AC Microinverter with Module-level Optimizers + Central Inverter
Slide 25: Secular Growth Trends in Telecom Are Global
SECULAR GROWTH TRENDS IN TELECOM ARE GLOBAL Wireless Networks Network Generac Uniquely Growing Global are Critical Hardening Still Positioned to Tower Count Infrastructure Underway Capture Opportunity • 2026E global tower count of • Network reliability & up-time • 50% of US sites yet to be • Global
Slide 26: Q2 2023 & LTM Financial Overview
Q2 2023 & LTM FINANCIAL OVERVIEW ($’S IN MILLIONS) Actual Y/Y % Actual Y/Y % Q2 2023 Change LTM Change (unaudited) (unaudited) Residential $ 498.6 (44.4%) 2,156.4 (27.8%) Commercial & Industrial 384.4 24.2% 1,420.0 25.6% Other 117.5 36.6% 449.4 40.9% Net Sales $ 1,000.4 (22.5%) $ 4,025.8 (9.3%) Gros
Slide 27: Adjusted EBITDA Reconciliation
ADJUSTED EBITDA RECONCILIATION ($’S IN MILLIONS) 2019 2020 2021 2022 LTM Net income $ 252.3 $ 347.2 $ 556.6 $ 408.9 $ 194.0 Interest expense 41.5 33.0 33.0 54.8 83.2 Depreciation and amortization 60.8 68.8 92.0 156.1 159.8 Income taxes provision 67.3 99.0 135.0 99.6 48.9 Non-cash write-down and othe
Slide 28: Adjusted EBITDA Reconciliation
ADJUSTED EBITDA RECONCILIATION ($’S IN MILLIONS) Three months ended Net income to Adjusted EBITDA reconciliation June 30, LTM Ended June 30, 2023 2022 2023 2022 (unaudited) (unaudited) Net income attributable to Generac Holdings. Inc. $ 45,198 $ 156,359 $ 186,913 $ 544,682 Net income attributable to
Slide 29: Adjusted Net Income and Free Cash Flow Reconciliations
ADJUSTED NET INCOME AND FREE CASH FLOW RECONCILIATIONS ($’S IN MILLIONS) Net income to Adjusted net income reconciliation Three months ended June 30, LTM Ended June 30, 2023 2022 2023 2022 (unaudited) (unaudited) Net income attributable to Generac Holdings. Inc. $ 45,198 $ 156,359 $ 186,913 $ 544,68