Generac optimistic despite 12% sales dip in 2023

A 1% net sales increase to $1.06 billion in the fourth quarter of 2023 failed to lift Generac Holdings Inc.’s full-year sales results, according to financial results reported for Q4 and the full year ended December 31. However, the company anticipates a return to net sales growth in 2024, led by its Residential product portfolio.

Generac expects a return to net sales growth in 2024, led by shipments in home standby generators and residential energy technology products. (Photo: Generac)

Net sales for Residential products rose 1% to $580 million in Q4 2023, compared to $575 million for the same period the previous year. Commercial & Industrial (C&I) product sales rose slightly, from $361 million in Q4 2022 to $363 million in Q4 2023. Net income also rose to $97 million compared to $71 million the prior year. Cash flow from operations leapt to a record $317 million versus $101 million in Q4 2022.

“Our fourth quarter results demonstrate continued improvement in operating performance resulting in strong margin expansion and cash flow generation as we exited the year,” said Aaron Jagdfeld, Generac president and CEO. “Despite fewer power outages in the fourth quarter, home standby generator shipments returned to year-over-year growth, and activations reached a quarterly record. Global C&I product sales were approximately flat as compared to the prior year with telecom and rental markets experiencing cyclical declines. Additionally, we generated record cash flow in the quarter, which allowed us to enhance shareholder value through continued share repurchases and investments to accelerate our Powering A Smarter World enterprise strategy.”

The improvement in Q4 was unable to compensate for 2023’s overall decline. Net sales for the full year fell 12% to $4.02 billion from $4.56 billion in 2022. Residential product sales fell 29% from $2.91 billion to $2.06 billion, while C&I product sales grew 19% from $1.26 billion to $1.49 billion. Net income was reported at $215 million for 2023 compared to $400 million for the prior year. Cash flow from operations was reported at a record $522 million vs. $59 million in 2022.

According to a report by the Milwaukee Business Journal, lighter demand for home standby generators resulted in a slowing of production that negatively impacted staffing levels for full-year 2023. The report, based on a regulatory filing by Generac, said the company’s Genesee Depot, Wis.-based facility saw a reduction of 900 positions in 2023. However, the company did add 100 engineer positions during the year, bringing the total to 1,100.

Return to net sales growth

Generac is initiating guidance for full-year 2024 that anticipates a return to net sales growth. This growth is expected to be driven primarily by an increase in Residential product sales in the mid-teens range, led by shipments of home standby generators and residential energy technology products, the company said.

Partially offsetting this projected strength, C&I product sales are expected to decline at a rate of approximately 10%, primarily due to weakness with certain direct telecom, rental and “beyond standby” customers, Generac stated.

As a result of these factors, full-year net sales are expected to increase between 3% to 7% as compared to the prior year, with net income margin expected to be approximately 6.5% to 7.5%. The company also expects to maintain strong levels of operating and free cash flow generation.

“In 2024, we expect to return to consolidated sales growth and year-over-year margin expansion for the full year period while also continuing to invest for future growth. Importantly, the megatrends that support these expectations as well as our robust long-term growth outlook remain firmly intact,” said Jagdfeld. “As reliance on electricity continues to increase and supply-demand imbalances remain a challenge for grid operators, we will continue to execute our strategic plan to lead the evolution to more resilient, efficient and sustainable energy solutions.”