Generac Holdings Inc., a global designer and manufacturer of power generation equipment and other power products, reported a 17.6% increase in net sales in its first quarter ended March 31, 2019.
First Quarter 2019 Highlights
- Net sales increased 17.6% to $470.4 million during the first quarter of 2019 as compared to $400.1 million in the prior-year first quarter. Core sales growth, which excludes both the impact of acquisitions and foreign currency, was approximately 15%.
- Residential product sales increased 14.4% to $217.8 million as compared to $190.5 million last year.
- Commercial & Industrial (“C&I”) product sales increased 19.4% to $209.1 million as compared to $175.1 million in the prior year, with core sales growth of approximately 17%.
- Net income attributable to the Company during the first quarter was $44.9 million, or $0.76 per share, as compared to $33.6 million, or $0.42 per share, for the same period of 2018.
- Adjusted net income attributable to the Company, as defined in the accompanying reconciliation schedules, was $56.5 million, or $0.91 per share, as compared to $46.1 million, or $0.74 per share, in the first quarter of 2018.
- Adjusted EBITDA before deducting for noncontrolling interests, as defined in the accompanying reconciliation schedules, was $87.1 million, or 18.5% of net sales, as compared to $71.8 million, or 17.9% of net sales, in the prior year.
- Cash flow from operations was $14.6 million as compared to $29.0 million in the prior year quarter. Free cash flow, as defined in the accompanying reconciliation schedules, was $(0.6) million as compared to $23.3 million in the first quarter of 2018. Higher operating earnings in the current year quarter were more than offset by increased incentive compensation payments related to fiscal 2018 performance and higher levels of capital expenditures.
- As previously announced on March 13, 2019, the Company closed on the acquisition of Neurio Technology. Founded in 2005 and headquartered in Vancouver, British Columbia, Neurio is a leading energy data company focused on monitoring technology and sophisticated analytics to optimize energy use within a home or business. Neurio’s hardware and software solutions equip users with the intelligence to manage and control electrical loads, solar systems and batteries to optimize energy consumption and increase savings.
- Also, as previously announced on April 29, 2019, the Company closed on the acquisition of Pika Energy. Founded in 2010 and located near Portland, Maine, Pika Energy develops and manufactures advanced power electronics, software and controls for smart energy storage and management. Pika’s innovative home energy storage solutions make them one of the leaders in the rapidly growing market for energy storage technology.
“Our outstanding first quarter results reflect continued end market strength as we entered 2019,” said Aaron Jagdfeld, President and Chief Executive Officer. “Both residential and C&I generator activity remained strong during the quarter with spending on backup power for telecom applications in particular coming in ahead of expectations as wireless carriers continue to invest in hardening their networks.”
Jagdfeld continued, “In addition to our impressive start to the year, with our recent acquisitions of Neurio and Pika, we have accelerated our entry into the global market for energy management and storage, which we believe to be a multi-billion dollar opportunity as this market matures. By combining Generac’s strong distribution, brand, and market creation capabilities with Neurio’s valuable energy monitoring technologies and Pika’s expertise in energy storage, we believe we are well positioned to offer a new, differentiated line of products and solutions to help homeowners and business owners reduce their overall energy costs.”
Additional First Quarter 2019 Consolidated Highlights
Gross profit margin was 34.5% compared to 35.5% in the prior-year first quarter. Favorable sales mix and pricing actions were more than offset by realization of higher input costs, including regulatory tariffs, logistics and labor costs, as well as unfavorable commodity fluctuations. Operating expenses increased $5.4 million, or 6.3%, as compared to the first quarter of 2018. The increase was primarily driven by higher variable costs given the strong core sales volumes, an increase in employee headcount related to strategic initiatives, and recurring operating expenses from recent acquisitions.
Provision for income taxes for the current year quarter was $15.0 million, or an effective tax rate of 24.7%, as compared to $11.4 million, or a 25.3% effective tax rate, for the prior year.
On January 1, 2019, the Company adopted Accounting Standards Update 2016-02, Leases. As a result of this new lease accounting standard, the Company was required to recognize approximately $40 million of right-of-use assets and lease liabilities related to operating leases on the condensed consolidated balance sheet.