GENERAC HOLDINGS INC. (GNRC)

We have also been leveraging our leading position in the growing market for natural gas fueled generators, which we believe represents a cleaner fuel compared to diesel, to develop solutions for applications beyond standby power, allowing us to participate in multi-purpose microgrid projects for C&I customers. As the traditional centralized utility model evolves over time, we believe that a more decarbonized, digitized, and decentralized grid infrastructure will develop, and our energy technology solutions are uniquely and strategically positioned to participate in this next-generation grid. Given our competitive strengths in our traditional power generation markets, we believe we are well-positioned to execute on the growing opportunity for backup power for homes and businesses, where increased penetration is being driven by multiple mega-trends that are resulting in poorer power quality for end users.

In addition, our focus on more resilient, efficient and innovative energy solutions has increased our served addressable market, and as a result, we believe we can provide products that can help offset rising energy costs as the traditional utility grid suffers from significant supply/demand imbalances over time. Company History Generac Power Systems, Inc. was founded in 1959 to commercialize a line of affordable portable generators that offered superior performance and features. Its success through the years has been built upon engineering expertise, manufacturing excellence and innovative approaches to the market. This has driven our growth into becoming a leading provider of power equipment for a variety of applications within residential, commercial, and industrial markets.

In the 1980’s, we expanded beyond portable generators into the industrial power generation market with the introduction of our first stationary generators that provided up to 200kW of power output. We introduced our first residential standby generator product line in 1989 and expanded our industrial product offering and global distribution in the 1990’s, forming a series of alliances that rapidly increased our sales. Our growth accelerated in the 2000’s as we expanded our purpose-built line of residential and commercial automatic standby generators and implemented our multi-layered, omni-channel distribution philosophy. Throughout the 2000’s, a number of high-profile power outage events also helped to increase the awareness and need for backup power and home standby generators.

In February 2010, we completed our initial public offering (IPO) of the Company’s common stock, helping to increase awareness of Generac and our products and positioning the Company for future growth. Since then, we have scaled our sales & marketing capabilities and systems, while also building the Generac brand into one of the leading names in backup power in the US. Soon after going public, we accelerated the Company’s transition from primarily a North America focused, emergency backup generator company into a more diversified industrial technology company with the addition of new and adjacent product categories and an expanded global presence, primarily through a series of acquisitions. […]

The second half of 2025 represented a very low level of baseline power outage activity, impacting demand for our residential products and resulting in quarterly net sales being more evenly distributed compared to our historical averages. 24 Acquisitions. Over the years, we have executed a number of acquisitions that support our strategic plan. A summary of the recent acquisitions can be found in Note 1, “Description of Business and Basis of Presentation,” to the condensed consolidated financial statements in Item 1 of this Quarterly Report on Form 10-Q and in Item 8 (Note 1, “Description of Business”) of the Annual Report on Form 10-K for the year ended December 31, 2025.

We finance our operations primarily from cash flow generated from operations and, if necessary, borrowings under our revolving credit facility. On July 1, 2025, we amended our Original Tranche A Term Loan Facility and Original Revolving Facility (Prior Amended Credit Agreement), extending the maturity of both to July 1, 2030, revising the Original Tranche A Term Loan Facility outstanding principal balance to $700 million (New Tranche A Term Loan Facility), reducing the Original Revolving Facility borrowing capacity to $1 billion (New Revolving Facility) (collectively the New Credit Agreements) and redefining the Term Benchmark (as defined in the Prior Amended Credit Agreement) to replace the Adjusted Term SOFR Rate (as defined in the Prior Amended Credit Agreement) with the Term SOFR Rate (as defined in the New Credit Agreements), resulting in an interest rate reduction of 0.10%.

The forward-looking statements contained in this quarterly report are based on assumptions that we have made in light of our industry experience and on our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you read and consider this report, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (some of which are beyond our control) and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results and cause them to differ materially from those anticipated in the forward-looking statements.

The forward-looking statements contained in this quarterly report include estimates and comments regarding: ● our business and markets that we serve, financial and operating results, and future economic performance; ● proposed new product and service offerings; and ● management's goals, expectations, and objectives, and other similar expressions concerning matters that are not historical facts.

Factors that could affect our actual financial results and cause them to differ materially from those anticipated in the forward-looking statements include: ● frequency and duration of power outages impacting demand for our products; ● fluctuations in cost, availability, and quality of raw materials, key components and labor required to manufacture our products; ● our dependence on a small number of contract manufacturers and component suppliers, including single-source suppliers; ● changes and volatility with respect to the trade policies of various countries, which may result in new or increased tariffs, trade restrictions, or other unfavorable trade actions; ● our ability to protect our intellectual property rights or successfully defend against third party infringement claims; ● changes in durable goods spending by consumers and businesses or other global macroeconomic conditions, impacting demand for our products; ● changes in governmental policies, particularly with respect to tax incentives, tax credits, or grant programs, which could: (i) affect the demand for certain of our products; or (ii) result in a withdrawal or reduction of grants previously awarded to the Company; ● increase in product and other liability claims, warranty costs, recalls, or other claims; ● significant legal proceedings, claims, fines, penalties, tax assessments, lawsuits or government investigations; ● our ability to consummate our share repurchase programs; ● our failure or inability to adapt to, or comply with, current or future changes in applicable laws, regulations, and product standards; ● our ability to develop and enhance products and gain customer acceptance, including our offerings that serve the data center and energy technology markets; ● uncertainty regarding the growth of the data center market; ● increase in contract risk related to terms with certain data center customers, including cancellation rights, delivery requirements, and potential liability exposure tied to our performance obligations or other claimed damages; ● our ability to accurately forecast demand for our products and effectively manage inventory levels relative to such forecast; ● our ability to remain competitive; ● our dependence on our dealer and distribution network; ● market reaction to changes in selling prices or mix of products; ● loss of our key management and employees; ● disruptions from labor disputes or organized labor activities; ● our ability to attract and retain employees; ● disruptions in our manufacturing operations; ● the possibility that the expected synergies, efficiencies and cost savings of our acquisitions, divestitures, restructurings, or realignments will not be realized, or will not be realized within the expected time period; ● risks related to sourcing components in foreign countries; ● compliance with environmental, health and safety laws and regulations; ● scrutiny regarding our sustainability practices; ● government regulation of our products; ● failures or security breaches of our networks, information technology systems, or connected products; ● risks due to instability caused by geopolitical conflicts; […]

For our energy technology products, our engineering and technical teams are closely aligned with our contract manufacturing partners in order to leverage their expertise and capital investments involving electrical component manufacturing. Suppliers of Raw Materials, Components and Equipment Our primary raw material inputs are steel, copper and aluminum, all of which are purchased from third parties and, in many cases, are part of machined or manufactured components. We procure certain diesel engines, cooling packages, and alternators for our larger C&I products from various suppliers around the world. For our home standby generators where we have significant scale, we have a large global supply chain that manufactures certain components, and then we complete final assembly in our factories in the United States.

In certain instances, we purchase complete finished goods from third-party suppliers, including from contract manufacturers. Given our broad offering of energy technology solutions, advanced electronic components and micro-processors are now a larger supply chain consideration. In addition, batteries are a significant supply chain input for our energy storage systems for residential and C&I behind-the-meter applications. Over multiple decades, we have developed an extensive network of reliable suppliers in the United States and around the world. Our strategic global sourcing teams continuously evaluate the quality and cost structure of our purchased components & equipment, and assess the capabilities and capacity of our supply chain. We select our sourcing partners based on this evaluation.

For certain products, we do not have internal manufacturing capabilities and rely on a small number of contract manufacturers to build these products or supply these components, including but not limited to certain energy technology products and components. Similarly, we have diversified the geographic reach of our global supply chain partners. More recently, we have evolved this global supply chain in order to partially mitigate the impact of certain trade tariffs that have been assessed on imports coming into the United States. This will continue to be a focus in the future as we take actions to offset the impact of these tariffs, and we will continue to monitor ongoing developments with any new trade tariffs that may be implemented.

See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K for additional information regarding the impact of other macroeconomic factors on our results of operations. See “Item 1A. Risk Factors” of this Annual Report on Form 10-K for additional factors that can influence our supply of raw materials, components and equipment. 11 Competition In our traditional power generation markets, we face competition from a variety of large, diversified industrial companies, as well as smaller generator manufacturers or packagers around the world. The competitive landscape varies between our Residential and C&I power generation products.

We face a different set of competitors for our mobile equipment and engine-powered tools as well. […]

Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K for additional information regarding the impact of other macroeconomic factors on our results of operations. See “Item 1A. Risk Factors” of this Annual Report on Form 10-K for additional factors that can influence our supply of raw materials, components and equipment. 11 Competition In our traditional power generation markets, we face competition from a variety of large, diversified industrial companies, as well as smaller generator manufacturers or packagers around the world. The competitive landscape varies between our Residential and C&I power generation products. We face a different set of competitors for our mobile equipment and engine-powered tools as well.

In recent years, our competitive landscape has expanded as we enter certain energy technology markets, including solar inverters, battery storage systems, smart thermostats, and grid services. In the overall generator market, many of the traditional participants compete in only certain portions of the market, targeting specific applications within their larger, diversified product mix. In addition, for certain competitors, power generation is typically a smaller piece of their business, and therefore, is less prioritized from a strategic standpoint. Generac’s primary focus is on power generation and storage equipment with a key emphasis on standby, portable and mobile products and broad capabilities across residential, light-commercial and industrial markets. We believe that our core focus on power generation and storage drives product innovation and provides us with competitive advantages to win in the marketplace.

We also believe our broad product offering, diverse omni-channel distribution model, and strong factory support provide additional advantages as well. The following is a list of competitors by product class: Residential products – Competitors include Rehlko (formerly known as Kohler Power), Briggs & Stratton, Honda, Champion, Techtronics International, Harbor Freight, Husqvarna, Ariens, Tesla, Enphase, Solar Edge, Google, Resideo, The Toro Company, EcoFlow, and Emerson, along with a number of other domestic and foreign competitors; certain of which also have broad operations in other manufacturing businesses. C&I products – Competitors include Caterpillar, Cummins, Rehlko (formerly known as Kohler Power), IGSA, MTU (Rolls Royce), AKSA, MultiQuip, Wacker, Doosan, Atlas Copco, Himoinsa, Woodward, Planelec, and Co-map, as well as other domestic and foreign competitors that package engines and alternators into power generation equipment in local markets around the world.

Other products – Relative to service parts and extended warranty revenue, all of the above-named companies are primary competitors. Overall, we compete primarily based on brand reputation, quality, reliability, pricing, innovative features, breadth of product & solution offering, product availability and factory support. In a continuously evolving market, we believe our scale and broad capabilities position us well to remain competitive. Government Incentives and Regulation, including Environmental Matters Generac’s presence in energy technology solutions has increased our exposure to renewable energy mandates and investment tax credits from certain government incentives. These incentives cover a wide range of clean energy products and solutions, including solar inverters, battery storage systems, grid services, and grid-edge devices.

They include both investment tax credits to owners of these systems and production tax credits to manufacturers of these products. The availability, size, and outlook for such incentives can impact the markets for these products and solutions. In July 2025, the United States passed the One Big Beautiful Bill Act that accelerates the phase-out of tax incentives for the solar market and includes certain domestic supply chain requirements to qualify for these incentives. While this phase-out of tax incentives will negatively impact the solar and storage markets in the near term, we believe the overall mega-trends that drive the solar, storage, and energy management markets will continue, supporting customer interest and demand for these products over the long-term as grid capacity is strained and energy costs rise.

As a manufacturing company, our operations are subject to a variety of federal, state, local and foreign laws & regulations covering environmental, health and safety matters. Applicable laws & regulations include those governing, among other things, emissions to air, discharges to water, noise, and safety, as well as the generation, handling, storage, transportation, treatment, and disposal of hazardous waste and other materials. In addition, our products are subject to various laws & regulations relating to fuel requirements, labeling, and marketing. Our products sold in the United States are regulated by the U.S. Environmental Protection Agency (EPA), California Air Resources Board (CARB) and various other state and local air quality management districts.

All of our engines and engine-driven products sold in the U.S. […]

• 8-K · Filed September 16, 2026 · View report
• 8-K · Filed July 29, 2026 · View report
• 8-K · Filed June 12, 2026 · View report