Generac Holdings Stock

Generac Holdings Inc. (Generac) operates as an energy technology solutions company.

The company provides backup and prime power generation products for residential and commercial & industrial (C&I) applications, solar + battery storage systems, energy monitoring & management devices and services, and engine- & battery-powered tools and equipment.

The company provides power generation products across a variety of applications, and the company maintains one of the leading market positions in the power equipment markets in North America and an expanding presence internationally. The company has one of the widest ranges of products in the power generation marketplace, including residential, commercial, and industrial standby generators, as well as portable and mobile generators used in a variety of applications. In recent years, the company has been evolving its product portfolio by building out ecosystems of energy technology products, solutions, and services for homes and businesses. As part of this evolution, the company has made significant investments into growing markets, such as residential and C&I energy storage, solar module-level power electronics (MLPE), energy monitoring & management devices, and electric vehicle (EV) charging. Central to these ecosystems are the company’s next-generation connectivity devices, controls capabilities, and software platforms that facilitate the integration of the company’s products and support the growing utilization of such distributed energy resources (DERs) in grid services programs. In addition, the company has been leveraging its leading position in the growing market for natural gas fueled generators, which represents a cleaner transition fuel compared to diesel, to expand into applications beyond standby power, allowing the company to participate in Energy-as-a-Service and microgrid projects for C&I customers. As the traditional centralized utility model evolves over time, a more decarbonized, digitized, and decentralized grid infrastructure will develop, and Generac’s energy technology solutions are uniquely and strategically positioned to participate in this next-generation grid referred to as ‘Grid 2.0’.

In December 2023, Generac made a minority investment in Wallbox N.V. (Wallbox), a global leader in smart EV charging and energy management solutions. Along with the investment, Generac and Wallbox are expected to collaborate to provide Wallbox’s full suite of EV charging solutions to Generac’s customers and distribution partners. Also in 2023, the company opened a dedicated engineering center of excellence in Reno, Nevada that will house the development and testing of batteries, switches, power electronics, and other clean energy solutions.

Generac’s efforts in expanding its energy technology solutions cover C&I and international markets as well. In June 2021, the company acquired Deep Sea Electronics Limited, a U.K.-based designer and manufacturer of advanced controls for a range of power generation and other applications used around the world. In September 2021, Generac acquired Off Grid Energy Ltd., a designer and manufacturer of industrial-grade mobile energy storage systems serving predominantly rental markets. The company advanced its C&I connectivity strategy with the October 2022 acquisition of Blue Pillar, an industrial internet of things (IoT) platform developer that designs, deploys, and manages industrial IoT solutions. Blue Pillar provides a foundation to build out a connectivity solution for the company’s C&I products to further enable their use in grid services programs. In February 2023, Generac acquired REFU Storage Systems GmbH (REFU), a developer and supplier of battery storage and inverter hardware products, advanced software, and platform services for the commercial and industrial markets. REFU’s energy storage systems will complement and enhance the company’s global product offerings and is expected to further accelerate the company’s development of new technologies as the company continues to provide its commercial and industrial consumers with leading solutions for their adoption of renewable energy. Additionally, in 2023 Generac launched a series of stationary battery energy storage systems for commercial and industrial applications in the North American market that will help the company advance its capabilities in microgrid projects. These acquisitions and related organic initiatives will collectively help lay the groundwork to further advance the company’s energy technology strategies across C&I markets around the world.

Products and Solutions

The company designs, manufactures, and distributes a broad range of energy technology products and solutions. The company designs and manufactures stationary, portable, and mobile power generators with single-engine outputs ranging between 800W and 3,250kW. The company has developed a line of energy storage systems for use in residential solar-plus-storage applications. The company also has a line of stationary and mobile energy storage systems that serve global commercial and industrial markets. The company has a growing selection of energy monitoring and management devices and solutions that the company expects to serve as the central hub or controls platform for the company’s residential and C&I energy ecosystems. The company participates in the market for grid services by providing distributed energy optimization and control software. The company designs and manufactures other power products, including light towers and a broad line of outdoor power equipment that the company refers to as ‘chore products’, which includes a variety of property maintenance equipment powered by both engines and batteries. The company classifies its products into three categories based on similar ranges of power output geared for varying end customer uses: Residential products, C&I products, and ‘Other products and services’. The following summary outlines these categories, including their key attributes and customer applications.

Residential Products

The company’s residential automatic standby generators range in output from 7.5kW to 150kW, which predominantly operate on natural gas and liquid propane, and are permanently installed with an automatic transfer switch, which the company also manufactures. Air-cooled engine residential standby generators range in outputs from 7.5kW to 26kW and serve as an emergency backup for small to medium-sized homes. Liquid-cooled engine generators serve as emergency backup for larger homes and small businesses and range in output from 22kW to 150kW.

As the product category leader, the company has the broadest line of home standby generators in the marketplace. Every home standby generator that the company offers is equipped with Mobile Link. This remote monitoring capability is a standard, WiFi-enabled feature that allows the company’s customers to check the status of their generator remotely from their smart phone or tablet, and also provides the capability to similarly receive maintenance and service alerts. The data that is provided by this remote monitoring functionality allows the company to better understand its installed base of products, while optimizing both product quality and customer satisfaction. In 2021, the company expanded its residential connectivity strategy with the acquisition of Tank Utility Inc. (Tank Utility), an IoT propane tank monitoring solutions company. This addition provides incremental value to the company’s dealers and peace of mind to owners of the company’s home standby generators that use propane as a fuel source.

Leveraging the technologies acquired in the 2019 acquisition of Pika Energy, the company has developed a line of clean energy products marketed under the Generac brand and using the PWRcell brand name. This residential storage solution consists of a system of batteries, an inverter, photovoltaic (PV) optimizers, power electronic controls, and other components. This system captures and stores electricity from solar panels or other power sources and helps reduce home energy costs while also protecting homes from shorter duration power outages. PWRcell systems can range in size from 9kWh up to 36kWh of storage capacity. In 2022, the company launched PWRmanager, the second generation of the company’s load management controls, allowing customers to program and remotely control certain loads in a home and thereby manage battery run times from their smart phones or tablets.

In 2021, the company acquired ecobee, a leader in sustainable smart home solutions, such as smart thermostats and a suite of home monitoring products, all designed with a focus on energy conservation, convenience, peace of mind and comfort. ecobee’s smart home energy management devices and complementary sensors intelligently optimize heating and cooling systems, often the largest energy consuming system within a home, to deliver significant energy savings for homeowners. In 2023, ecobee launched a line of smart doorbell cameras, which integrates with ecobee’s products and helps to drive increased consumer engagement with their platform. The capabilities acquired via ecobee and Tank Utility, paired with the company’s existing Mobile Link remote monitoring system, provide the foundation for Generac’s residential connectivity strategy, which will be integral in the continued development of the company’s smart home energy ecosystem.

Importantly, the company is leveraging ecobee’s technologies and software development expertise to develop a user interface platform at the center of the company’s home energy ecosystem that will allow homeowners to monitor and control Generac’s entire suite of products using a ‘single pane of glass’. In 2023, the company took its first steps towards this goal by successfully integrating its home standby generators and propane tank monitors with the ecobee platform. The integration of the company’s products and solutions in a single cohesive ecosystem will drive additional peace of mind and energy efficiency benefits for homeowners.

This functionality will also help enable connection to the company’s grid services distributed energy resource management software (DERMS) called Concerto. All of the company’s residential energy technology products and home standby generators come with grid-connection capabilities, enabling consumers to connect and enroll their distributed energy resources in available grid services programs. These solutions can provide material value to homeowners in the form of lower utility costs, while also helping grid operators retain capacity to address supply/demand imbalances on the grid.

The company continues to develop new Generac-branded energy technology products that the company expects to bring to market as the company builds out a broader energy management ecosystem, giving the company’s distributors access to a more diverse line-up of products that can serve a variety of applications. For example, the company’s recent investment in Wallbox is expected to allow the company to participate in the rapidly developing home EV charging market by offering co-branded EV charging technologies through the company’s expansive distribution network.

The company also provides a broad product line of portable and inverter generators that range in size from 800W to 18kW, as well as multiple portable battery solutions that provide clean, emission-free power at the push of a button. These products can help serve as an emergency home backup source of electricity and are also used for construction and recreational purposes. The company’s portable generators are targeted at homeowners, with price points ranging between the consumer value end of the market through the premium homeowner market; at professional contractors, starting at the value end through the premium contractor segment; and at the recreational market with the company’s inverter generator products, which are quieter than traditional portable generators. In addition, the company offers manual transfer switches to supplement the company’s portable generator product offering.

The company provides a broad product line of outdoor power equipment referred to as ‘chore products’, which are used in property maintenance applications for larger-acreage residences, commercial properties, municipalities, and farms. These products include trimmers, field and brush mowers, log splitters, stump grinders, chipper shredders, lawn and leaf vacuums, pressure washers and water pumps. The company also offers commercial-grade, battery-powered turf care products through Mean Green Products, which was acquired in 2020. In addition to Generac’s efforts to expand Mean Green’s production capacity and distribution capabilities, this acquisition will help to accelerate the electrification of the company’s higher-powered lineup of chore products. Chore products are largely sold in North America through direct-to-consumer online catalogs, retail hardware stores, and outdoor power equipment dealers, primarily under the DR brand name.

Commercial & Industrial Products

The company offers a full line of C&I generators that are sold around the world. The company is a leader in cleaner-burning natural gas fueled generators, and also has a full offering of C&I generators that are fueled by diesel and Bi-Fuel. The company has one of the broadest product offerings in the industry with power outputs ranging from 10kW up to 3,250kW. Through the Deep Sea acquisition in 2021, the company has expanded its capabilities in the design and manufacture of advanced controls for a range of C&I power generation applications, such as microgrids and ‘beyond standby’ configurations. The company’s natural gas C&I stationary generators have grid-connection capabilities, enabling the company’s customers to generate an incremental return on investment by connecting and enrolling their generator as a distributed energy resource in grid services applications where available.

The company’s light-commercial standby generators and related transfer switches include a full range of affordable systems from 22kW to 150kW, providing three-phase power sufficient for most small and mid-sized businesses, such as grocery stores, convenience stores, restaurants, gas stations, pharmacies, retail banks, small health care facilities and other small-footprint retail applications. The company’s light-commercial generators predominantly run on natural gas and liquid propane.

The company designs and manufactures a broad product line of modularized and configured stationary generators and related transfer switches for various industrial standby, continuous-duty, and prime rated applications. The company’s single-engine industrial generators range in output from 10kW up to 3,250kW, include stationary and containerized packages, and can include the company’s Modular Power Systems (MPS) technology that extends the company’s product range up to much larger multi-megawatt systems through an integrated paralleling configuration. Over the past several years, the company has introduced larger and higher-powered gaseous-fueled generators, with the highest output of 1,000kW for a single-engine set. The company’s industrial standby generators are primarily used as emergency backup for larger applications (such as healthcare, telecom, datacom, commercial office, retail, municipal and manufacturing markets, to name a few). In recent years, the company has focused its efforts to utilize its gaseous-fueled generators in ‘beyond standby’ applications, including distributed generation and microgrid projects and has developed purpose-built products for these applications that have grid-connected capability. This grid-connected functionality and the significant expansion of the company’s in-house advanced controls capabilities further enhances the potential utilization of the company’s generators in these applications.

The company’s MPS technology combines the power of several smaller generators to produce the output of a larger generator, providing the company’s customers with redundancy and scalability in a cost-effective manner. For larger industrial applications, the company’s MPS products offer customers an efficient, affordable way to scale their standby power needs, while offering superior reliability given their built-in redundancy which allows individual units to be taken off-line for routine maintenance while retaining coverage for critical circuits.

The company also offers a full line of industrial transfer switches to meet varying needs from light commercial applications all the way up to the most demanding mission-critical installations. In recent years, the company has significantly increased and upgraded its industrial transfer switch product offering, which will help to enhance its attachment rate and related market share for these products. Generac’s feature set and flexible platforms offer a variety of switching configurations to meet almost any project needs.

The company also designs and manufactures a broad product line of C&I mobile products, such as light towers and mobile generators, which provide temporary lighting and power for various end markets around the world (such as road and commercial construction, energy, mining, military, and special events). The company also offers commercial mobile pumps, heaters, and dust-suppression equipment for a wide variety of applications. All of the company’s mobile products are typically sold to national and regional rental companies who then rent the equipment to the end user.

The company has continued to expand its portfolio of energy technology solutions for C&I applications. In 2021, the company acquired Off Grid Energy, a European based manufacturer of mobile energy storage systems predominantly used in the rental markets. In 2023, the company acquired REFU, a European based provider of stationary energy storage systems and related inverter products. The company also organically introduced a line of larger stationary battery energy storage systems for C&I applications in the North American market. These collective product offerings will enable the company to capture market share of the rapidly expanding Battery Energy Storage System (or BESS) market in the future. The company’s BESS solutions are primarily targeted at ‘behind-the-meter’ applications for on-site energy storage. The company expects to leverage its leading position as a provider of traditional stationary generators to gain share in the global BESS market. This expertise is particularly beneficial for multi-asset solutions that combine generators with energy storage assets, providing the many benefits of behind-the-meter storage with longer duration outage protection. The company also continues to develop other energy technology products, such as mobile battery-powered light towers, as well as hybrid mobile solutions that pair a battery with a diesel engine to reduce emissions and noise pollution. In addition, the company continues to provide various gaseous-engine control systems and accessories, which are used in the company’s natural gas generators, as well as sold to other gas-engine manufacturers and aftermarket customers.

Other Products and Services

The company’s ‘Other products and services’ category primarily consists of aftermarket service parts and product accessories sold to the company’s customers, installation and maintenance services, extended warranty revenue, grid services revenue, remote monitoring subscription revenue, and other service offerings provided by the company’s owned industrial distributors.

Included in this ‘Other products and services’ category are energy services revenues that are generated by ecobee, Blue Pillar, and the company’s Concerto software platform. The Concerto energy-balancing software platform provides a highly flexible approach for controlling and dispatching distributed energy resources from flexible loads, backup generators, energy storage systems, and other renewable energy sources, and gives utilities and grid operators the flexibility to operate virtual power plants in real-time to better manage the escalating complexities of the future electrical grid. These capabilities are broadly referred to as grid services.

The acquisition of ecobee further enhanced the company’s efforts in grid services. In addition to their product sales, ecobee recognizes service revenue in certain circumstances when a homeowner enrolls their smart thermostat in a grid services program offered by their utility. ecobee can provide utilities direct connection to a homeowner’s smart thermostat, thereby allowing control of a significant portion of the home’s electrical load. In exchange for this capability, utilities pay ecobee for that connection.

The 2022 acquisition of Blue Pillar expanded the company’s C&I connectivity capabilities and provided a standard protocol for all of the company’s C&I products to be connected to the company’s Concerto platform. In addition to connectivity device sales, Blue Pillar recognizes software subscription and support revenue resulting from the monitoring and management capabilities its platform provides customers.

Finally, the company’s Mobile Link platform provides remote monitoring services for the company’s residential home standby customers and ‘Fleet’ services for the company’s residential home standby dealers, whereby the company collects subscription revenue for these services on a recurring basis.

Strategy

In 2021, the company unveiled its ‘Powering A Smarter World’ strategic plan, which serves as the framework for the significant investments the company has made and will continue to make to capitalize on the long-term growth prospects of Generac. The company’s enterprise strategy is based on the combination of several key mega-trends that will drive several significant strategic growth themes for the company’s business.

Distribution Channels and Customers

The company distributes its products through a variety of different distribution channels to increase awareness of the company’s product categories and brands, and to ensure the company’s products reach a broad, global customer base. This omni-channel distribution network includes independent residential dealers, industrial distributors and dealers, national and regional retailers, e-commerce partners, electrical/HVAC/solar wholesalers, solar installers, catalogs, equipment rental companies, and other equipment distributors. The company also sells direct to certain national and regional account customers, as well as to individual consumers or businesses who are the end users of the company’s products.

The company offers a broad set of tools, programs, factory support, and sales leads to help the company’s distribution partners be successful.

The company has the industry's largest network of factory direct independent generator dealers in North America. The company’s residential dealer network is made up of electrical and HVAC contractors across the U.S. and Canada. These dealers sell, install and service the company’s residential and light commercial generators to end users. Over the years, the company has made significant investments to grow this dealer network, and the company will continue to make those investments in the future given the importance of this channel. The company continues to focus on a variety of initiatives to more effectively market and sell the company’s home standby products and better align the company’s dealer network with Generac. These initiatives have helped to improve customer lead quality and develop the company’s dealers, thereby increasing close rates and lowering the company’s cost per lead over time. Over the years, the company has made significant investments in the company’s ‘Power Play’ guided sales process for residential dealers, making enhancements in several areas targeted to improve the customer experience and overall close rates. Additionally, the company’s remote monitoring platform allows its residential generator dealers to monitor their installed base of customers through a feature that the company calls ‘Fleet’, enabling them to offer a more proactive experience to service a customer’s generator.

In recent years, the company has been establishing its base of solar contractors that sell, install and service the company’s PWRcell energy storage systems. Leveraging the company’s expertise in partnering with the company’s residential generator dealers, the company can expand its solar installer network and increase mindshare for Generac’s products, helping the company to win in the clean energy market. In addition, the company has been developing distribution relationships with national solar providers to offer the company’s equipment in their portfolio of products and services. As the company continues to roll-out new clean energy products in the future, the company expects to accelerate its efforts to expand distribution for these products.

The company’s industrial distribution network consists of industrial power generation distributors that cover particular regions around the world. Over the past several years, the company has been strengthening its dealer network globally through acquisitions and organic means, to increase the company’s C&I product sales and related market share. Additionally, since 2020, the company has acquired its industrial distributors in northern and southern California and New England to give the company direct coverage of the west coast and northeast regions of the United States and accelerate the company’s efforts in these markets. Industrial distributors and dealers provide C&I end users with ongoing sales, installation, service and product support. The company’s industrial distributors and dealers help maintain the local relationships with commercial electrical contractors, specifying engineers, and national account regional buying offices. The company also sells to certain Engineering, Procurement and Construction (EPC) companies and other companies that specialize in managing more complex power generation projects, including microgrids and ‘beyond standby’ applications.

The company’s retail distribution channel includes thousands of locations across the globe and includes a variety of regional and national home improvement chains, electronics retailers, clubs, buying groups, hardware stores and farm supply stores. These physical retail locations are supplemented by a large presence of e-commerce retailers, along with a number of catalog retailers. The retail channel primarily sells the company’s residential standby, portable and light-commercial generators, as well as the company’s outdoor power equipment and ecobee smart home energy management devices. The placement of the company’s products at retail locations drives significant awareness for the company’s brands and the automatic home standby generator product category.

The company’s wholesaler network distributes its residential and light-commercial generators, energy storage systems, and smart home energy management devices. The channel consists of selling branches of both national and local distribution houses for electrical, HVAC and solar products on a wholesale basis, which in turn typically sell to electricians and HVAC/solar installers who are not in the company’s dealer network.

On a selective basis, the company has established private label and licensing arrangements with third party partners to provide residential, light-commercial and industrial generators under different brand names. These partners include leading home equipment, electrical equipment and construction machinery companies, each of which provides access to incremental channels of distribution for the company’s products.

The distribution for the company’s C&I mobile products includes international, national, regional and specialty equipment rental companies, equipment distributors, and construction companies, which primarily serve non-residential building construction, road construction, energy markets and special events.

The company also sells direct to certain customers that are the end users of the company’s products covering a number of end market verticals both domestically and around the world. This includes telecommunication, retail, banking, energy, utilities, healthcare, convenience stores, grocery stores, restaurants, governments, and other commercial applications. Additionally, certain of the company’s residential products are sold direct to individual consumers, who are the end users of the product. In the grid services space, the company sells software and equipment direct to utilities and grid operators.

Research and Development

The company expenses research and development costs as incurred. Total expenditures incurred for research and development were $173,443 for the year ended December 31, 2023.

Government Incentives and Regulation, including Environmental Matters

Generac’s growing presence in energy technology solutions has increased the company’s exposure to renewable energy mandates, investment tax credits and other demand-creation subsidies from certain existing and potential government incentives, such as incentives included in the Inflation Reduction Act that was passed in 2022. Additionally, in 2023 Generac was selected by the Department of Energy to participate in two federally backed projects in Puerto Rico and Massachusetts that are focused on improving grid resiliency and efficiency with the company’s residential energy technology solutions.

The company’s 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. These governing bodies continue to pass regulations that require the company to meet more stringent emission standards, and all of the company’s engines and engine-driven products are regulated within the United States and its territories. In addition, certain products in the United States are subject to safety standards as established by various other standards and rulemaking bodies, or state and local agencies, including the U.S. Consumer Product Safety Commission (CPSC).

Competition

A summary of the primary competitors across the company’s main product classes is as follows:

Residential Products – Kohler, Briggs & Stratton, Cummins, Honda, Champion, Techtronics International, Husqvarna, Ariens, LG Chem, Tesla, Enphase, Solar Edge, Google, Resideo, 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 – Caterpillar, Cummins, Kohler, IGSA, AKSA, MultiQuip, Wacker, Doosan, Atlas Copco, Himoinsa, FG Wilson, Woodward, Planelec, and Co-map, as well as other domestic and foreign competitors; certain of which focus on the market for diesel generators as they are also diesel engine manufacturers.

Other Products – Relative to service parts and extended warranty revenue, all of the above-named companies are primary competitors. Relative to grid services optimization software, Autogrid and Energy Hub, along with other grid service solution providers, are primary competitors.

History

Generac Holdings Inc., a Delaware corporation, was founded in 1959. The company was incorporated in 2006.