GNRC 10-K & 10-Q changes, risk factors and insider trading

We depend upon a small number of outside contract manufacturers and component suppliers, as well as other single-source suppliers, for certain products and components, and our business and operations could be disrupted if we encounter problems with these parties.

For certain products we rely upon contractoutside manufacturers to build these products or supply these components, including but not limited to certain clean energy products or components.components and large engines used in data center backup applications. The timing of purchases in future periods could differ materially from our estimates due to fluctuations in demand requirements related to varying sales levels as well as changes in economic conditions. Further, the revenues that our contract manufacturerssuppliers generate from our orders may represent a relatively small percentage of their overall revenues. While we seek to negotiate supply agreements with all of our vendors, we may purchase some products or components on a purchase order basis. As a result, fulfilling our orders may not be considered a priority to these suppliers in the event of constrained ability to fulfill all of their customer obligations in a timely manner. If any of these contract manufacturers or component suppliers were unable or unwilling to manufacture or produce our products in required volumes and at high quality levels or renew existing terms under supply agreements, we would have to identify, qualify and select acceptable alternative contract manufacturers,suppliers, which may not be available to us on favorable terms, if at all. Our reliance on such contract manufacturerssuppliers makes us vulnerable to possible capacity constraints and reduced control over component availability, delivery schedules, quality issues, manufacturing yields and costs. Moreover, we single-source certain types of parts in our product designs. Delays in our suppliers' deliveries have sometimes impaired, and may continue to impair, our ability to deliver products to our customers. A wide variety of factors could cause such delays including, but not limited to, lack of capacity, economic downturns, availability of credit, logistical challenges, labor or material shortages, trade restrictions, weather events, political instability, geopolitical conflicts (such as conflicts in the Ukraine or the Middle East), terrorism, civil unrest, disease or natural disasters. If any of these suppliers reduce or eliminate the supply of the components to us in the future, our revenues, business, financial condition and results of operations would be adversely impacted. Although we have ongoing contractual disputes with certain such suppliers, such disputes have not to date had any significant adverse impact on our business, financial condition or results of operation.

We face a risk from current and future product liability claims alleging to arise from the use of our products and that may purportedly result in injury or other damage. Although we currently maintain product liability insurance coverage, in certain cases such insurance coverage has not and may continue to not be sufficient to cover claims or damage awards or we may not be able to obtain such insurance on acceptable terms in the future, if at all, or obtain insurance that will provide adequate coverage against potential claims. Product liability claims can be expensive to defend and can divert the attention of management and other personnel for long periods of time, regardless of the ultimate outcome. A significant unsuccessful product liability defense could have a material adverse effect on our financial condition and results of operations. In addition, we believe our business depends on the strong brand reputation we have developed. If our reputation is damaged due to product liability or warranty claims, or recalls, we may face difficulty in maintaining our market share and pricing with respect to some of our products, which could reduce our sales and profitability. We have and may continue to experience product liability, product quality or reliability claims, or warranty claims with respect to certain clean energy, generator, and/or chore products, including being subject to certain consumer product class action lawsuits or other governmental fines or penalties in relation to such products. In the event such product or warranty related claims continue or are significantly higher in the future, or we incur losses or other damages associated with current or future product liability lawsuits or product related claims, this may continue to adversely affect our reputation or brand quality in relation to such products, subject us to significantly increased costs or penalties, and otherwise materially harm our results of operations, financial condition and our business. Even in litigation where we believe the likelihood of liability is remote, there is a risk that a negative finding or decision in a matter involving multiple plaintiffs or a purported class action could have a material adverse effect on our competitive position, results of operations or financial condition. In fact, in order to avoid the uncertainty of a potential negative jury trial outcome on a products liability injury case, we have agreed to settle at least one such case, which we previously disclosed, in an amount which exceeded our insurance coverage, but which will not have a material adverse impact on our business, results of operations or financial condition.

Difficulties or delays in research, development or production of new or enhanced products or failure to gain market acceptance of new or enhanced products and technologies may reduce future sales and adversely affect our competitive position. We continue to invest in the development and marketing of new or enhanced products. There can be no assurance that we will have sufficient resources to make such investments, that we will be able to make the technological advances necessary to maintain competitive advantages or that we can recover major research and development expenses. If we do not continue to strategically advance our product portfolio to maintain our technology leadership, our competitive position could be adversely affected. Certain of our products benefit from government incentive or tax credit programs and we cannot be assured that these incentive or tax credit programs will be maintained and for how long. On July 4, 2025, the United States enacted the OBBBA, which introduced substantial tax law changes, eliminates or reduces several tax credits and incentives applicable to energy related technologies, which has and may continue to negatively impact our business in the short term. For example, in July 2024, we received a grant from the U.S. Department of Energy (DOE) to facilitate the installation of residential solar and battery storage systems for disadvantaged Puerto Rican residents that,that ifthe fullyDOE realizedhas and not terminated early, would provide upelected to $120stop millionfunding going forward in funds over the duration of the five-year award agreement.2026. If we fail to make innovations, experience unexpected delays and/or quality problems in launching products, or the market does not accept our new products, our financial condition, results of operations, cash flows and liquidity could be adversely affected. In addition, as new or enhanced products are introduced, we must successfully manage the transition from older products to minimize disruption in customers’ ordering patterns, avoid excessive levels of older or obsolete product inventories and ensure that we can deliver sufficient supplies of new products to meet customers’ demands.

Our business benefits from free trade agreements, and efforts to withdraw from, or substantially modify such agreements, in addition to the implementation of more restrictive trade policies, such as more detailed inspections, higher tariffs, import or export licensing requirements, exchange controls or new barriers to entry, could have a material adverse effect on our results of operations, financial condition or cash flows. The U.S. government has made changes in U.S. trade policy over the past several years. These changes include renegotiating and terminating certain existing bilateral or multi-lateral trade agreements, such as the U.S.-Mexico-Canada Agreement, and initiating tariffs on certain foreign goods from a variety of countries and regions, most notably China.China, India, or the EU. These changes in U.S. trade policy have resulted in, and may continue to result in, one or more foreign governments adopting responsive trade policies that make it more difficult or costly for us to do business in or import our products or components from those countries. In particular, during 2025, the U.S. imposed new or increased tariffs and other countries, resulting in the imposition of retaliatory tariffs on the U.S., which increased costs in our supply chain. The sales, gross margins, and profitability for each of our segments could be directly impacted by changes in tariffs and trade agreements.

Moreover, any insurance or indemnification rights that we may have may be insufficient or unavailable to protect us against such losses. In addition, developments in proceedings in any given period have and may continue to require us to adjust the loss contingency estimates that we have recorded in our financial statements, record estimates for liabilities or assets previously not susceptible to reasonable estimates or pay cash settlements or judgments. Any of these developments could adversely affect our financial statements in any particular period. We cannot assure our liabilities in connection with litigation and other legal and regulatory proceedings will not exceed our estimates or adversely affect our financial statements and reputation.

While we maintain insurance coverage in amounts that we believe are reasonable, we cannot assure we will be able to maintain this insurance on acceptable terms or that this insurance will provide sufficient coverage against potential liabilities that have or may arise. Any product liability claim may also include the imposition of punitive damages, the award of which may not be covered by insurance. Any claims brought against us, with or without merit, may have an adverse effect on our business and results of operations as a result of potential adverse outcomes, the expenses associated with defending such claims, the diversion of our management’s resources and time and the potential adverse effect to our business reputation.

We rely heavily on information technology (IT) both in our products and services for customers and in our IT systems used to run our business. Further, we collect and store sensitive information in cloud-based data centers and on our networks. Government agencies and security experts have warned about growing risks of hackers, cyber-criminals, malicious insiders and other actors targeting confidential information and all types of IT systems. These actors may engage in fraudulent activities, theft of confidential or proprietary information and sabotage or ransomware.

We may experience interruptions, delays and outages in service and availability from time to time, including infrastructure changes, human or software errors, upgrade disruptions and capacity constraints. Our IT systems, our connected products, and our confidential information may be vulnerable to damage or intrusion from a variety of attacks including computer viruses, worms or other malicious software programs. The risk of such attacks may increase as we integrate newly acquired companies or develop new connected products and related software. These attacks pose a risk to the security of our products, private data, systems and networks and those of our customers, suppliers and third-party service providers, as well as to the confidentiality of our information and the integrity and availability of our data.data and related systems. Use of artificial intelligence software may also create risks from the unintentional disclosure of proprietary, confidential, personal or otherwise sensitive information. While we attempt to mitigate these risks through board oversight, hiring additional internal cyber-security professionals to manage theserisk risks,mitigations, enhancing controls, due diligence, employee training and communication, third party intrusion testing, system hardening, email and web filters, regular patching, multi-factor authentication, surveillance, encryption, and other measures, we remain vulnerable to inherent risks associated with information security threats.

We monitor certain cyber security threats and vulnerabilities in our systems, and we have experienced viruses and attacks targeting our IT systems and networks. Such prior events, to date, have not had a material impact on our financial condition, results of operations or liquidity. Despite the precautions we take, we have had, and could have again, an intrusion or infection of our systems or connected products. An attack on our IT systems or connected products could result in theft or disclosure of trade secrets or other intellectual property, a breach of confidential customer or employee information, or product failure or misuse. Any such events could have an adverse impact on sales, harm our reputation and cause us to incur legal liability and increased costs to address such events and related security concerns. As the threats evolve and become more potent, we may incur additional costs to secure the products that we sell, as well as our data and infrastructure of networks and devices.

As of December 31, 2024,2025, we had total indebtedness of $1,334.2$1,333.1 million. Our level of indebtedness increases the possibility that we may be unable to generate sufficient cash to pay, when due, the principal of, interest on or other amounts due in respect of our indebtedness. While we maintain interest rate swaps covering a portion of our outstanding debt, our interest expense could increase if interest rates increase because debt under our credit facilities bears interest at a variable rate based on Secured Overnight Financing Rate (SOFR) or other base rate. If we do not have sufficient earnings to service our debt, we may be required to refinance all or part of our existing debt, sell assets, borrow more money or sell securities, none of which we can guarantee we can accomplish. Our Tranche B Term Loan Facility matures on July 3, 2031, and our Tranche A Term Loan Facility as well as our Revolving Facility mature on JuneJuly 29,1, 2027.2030.

For further information, see Note, “18. Commitments and Contingencies” and our discussion of "Non-GAAP measures - Adjusted EBITDA" in Item 78 of this Annual Report on Form 10-K.

The following discussion and analysis of our financial condition and results of operations should be read together with “Item 1 – Business,” the consolidated financial statements, and the related notes thereto in Item 8 of this Annual Report on Form 10-K. This discussion contains forward-looking statements,statements that involve risks and uncertainties. These forward-looking statements refer to future events and our future financial performance, and are based on our expectations at the time of filing this Annual Report on Form 10-K and related to future events and our future financial performance, that involve risks and uncertainties.10-K. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Item 1A. - Risk Factors.” of this Annual Report on Form 10-K.

Generac is a total energy solutions company that empowers people to use energy on their own terms. Founded in 1959, Generac is a leading global designer, manufacturer, and provider of a wide range of energy technology solutions. The CompanyGenerac provides power generation equipment, energy storage systems, energy management devices & solutions, and other power products and services serving the residential, lightcommercial, commercial,data center, telecom, rental, and industrial markets. The CompanyCompany’s continuesbroad toportfolio expand itsof energy technology offerings for homes and businesses inenables its mission to Power a Smarter World and lead the evolution to more resilient, efficient, and sustainableinnovative energy solutions.

“Part I, Item 1. Business” of this Annual Report on Form 10-K contains information regarding business drivers, including key mega-trends and strategic growth themes under the subheading “Mega-Trends,Key Mega-Trends and Strategic Growth Themes, and Additional Business Drivers.Themes.”

We are subject to various other business drivers and factors that can affect our results of operations, which we attempt to mitigate through factors we can control, including continued product development, expanded distribution, pricing, cost control, and hedging. Certain operational and other factors that affect our business include the following:

Effect of commodity, currency, component price fluctuations, and resource availability. Industry-wide price fluctuations of key commodities, such as steel, copper and aluminum, along with other components we use in our products, as well as changes in labor costs required to produce our products, can have a material impact on our results of operations. Acquisitions in recent years have increased our use of advanced electronic components and battery cells,cells asthat wellcan asfluctuate furtherin expandedterms ourof commercialpricing and operational presence outside of the United States.availability. Our international acquisitions,operations, along with our existing global supply chain, expose us to fluctuations in foreign currency exchange rates and regulatory tariffs that can also have a material impact on our results of operations.

Seasonality. Although there is demand for our products throughout the year, in each of the past five years, approximately 19%20% to 25% of our net sales occurred in the first quarter, 22%23% to 28% in the second quarter, 24% to 28%27% in the third quarterquarter, and 23% to 31%29% in the fourth quarter, with different seasonality depending primarily on the occurrence, timing and severity of major power outage activity in each year. Major outage activity is unpredictable by nature and, as a result, our sales levels and profitability may fluctuate from period to period. The seasonality experienced during a major power outage, and for the subsequent quarters following the event, will vary relative to other periods where no major outage events occurred. 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 level-loaded as compared to our historical averages.

Interest expense can be impacted by a variety of factors, including market fluctuations in SOFR, interest rate election periods, interest rate swap agreements, repayments or borrowings of indebtedness, and amendments to our credit agreements. In connection with our credit agreement amendment in June 2022, SOFR became the new benchmark interest rate for the new Tranche A Term Loan Facility and the Revolving Facility, and all LIBOR provisions in the existing Tranche B Term Loan Facility were replaced with SOFR provisions. Refer to Note 12, “Credit Agreements,” to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information. The decrease in interest expense in the current year was primarily driven by lower borrowings andborrowings, lower SOFR interest ratesrates, and lower interest rate spreads during the year.

The effective income tax rates for the years ended December 31, 20242025 and 20232024 were 22.6%18.9% and 25.2%,22.6%, respectively. The decreaselower in our 20242025 effective tax rate was driven primarily dueby tothe unfavorableimpact of certain favorable discrete tax items inand thetheir priorimpact yearon that did not repeat in the current year, as well as favorable earnings mix with higher earnings ina lower taxpre-tax jurisdictionsincome in the current year.

In 2021, the Organization for Economic Cooperation and Development (OECD) released Pillar Two Global Anti-Base Erosion model rules, designed to ensure large corporations are taxed at a minimum rate of 15% in all countries of operation. The OECD continues to release guidance and countries are implementing legislation to adopt the rules, some of which became effective on January 1, 2024. TheIn January 2026, the OECD released a new package of administrative guidance that effectively deems the United States hastax system as compliant with Pillar Two, which is expected to eliminate additional top-up taxes across our global operations. This updated guidance package does not yetexempt enactedthe legislationCompany implementingfrom PillarQualified Two.Domestic WeMinimum areTop-Up continuingTaxes in foreign jurisdictions. As a result, we expect our cash taxes paid to evaluateremain thesubject Pillarto Twolocal rulesminimum andtax theirregimes potentialwhere impact on future periods.applicable. There was no impact to the financial results of the year ended December 31, 2024,2025, and we do not expect the rules to have a material impact on our effective tax rate for the following year. We will update our future tax provisions based on new regulations or guidance accordingly.

Our net sales primarily consist of the sale of products to our customers. This includes sales of our power generation equipment, energy storage systems, and other power products to the residential, commercial and industrial markets, as well as service parts to our dealer network. Net sales also include shipping and handling charges billed to customers, with the related freight costs included in cost of goods sold. Additionally, we offer other services, including extended warranties, installation, maintenance, data center and telecom facility design and build, and remote monitoring, and grid services to utilities in certain circumstances.monitoring. These services accounted for less thanapproximately 4% of our net sales for the year ended December 31, 2024.2025. Refer to Note 2, “Summary of Accounting Policies - Revenue Recognition,” to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for further information on our revenue streams and related revenue recognition accounting policies.

We are not dependent on any one channel or customer for our net sales, with no single customer representing more than 5%4% of our net sales, and our top ten customers representing lessapproximately than 16%18% of our net sales in aggregate for the year ended December 31, 2024.2025.

The principal sourced raw materials used in the manufacturing process are steel, copper and aluminum. We are susceptible to fluctuations in the cost of these commodities, impacting our costs of goods sold. We seek to mitigate the impact of commodity price changes on our business through a continued focus on global sourcing, product design improvements, manufacturing efficiencies, price increases and select hedging transactions. We are also impacted by foreign currency fluctuations and global trade policies given our global supply chain. There is typically a lag between raw material price fluctuations and their effect on our costs of goods sold.

Research and development. Our research and development expenses include mechanical engineering, electronics engineering, and software development costs and support numerous projects covering all of our product lines. They also support our connectivity, grid services, remote monitoring, and energy management initiatives. We operate engineering facilities with extensive capabilities at many locations around the world with a focus on new product development, existing product improvement and cost containment. We are committed to innovation, research and development and rely on a combination of patents and trademarks to establish and protect our proprietary rights. Our research and development costs are expensed as incurred.

General and administrative. Our general and administrative expenses include personnel costs for accounting, information technology, human resources, legal, general and administrative employees;employees, legal and professional services fees;fees, information technology costs;costs, insurance;insurance, travel and entertainment expense;expense, adjustments to contingent acquisition consideration;consideration, share-based compensation costs;costs, and other corporate expenses.

Other (expense) income includes the interest expense on our outstanding borrowings, amortization of deferred financing costs and original issue discount, credit facility commitment fees, and interest accretion on contingent acquisition consideration. Other (expense) income also includes other financial items such as losses on extinguishmentdebt of debt,refinancing, investment income earned on our cash and cash equivalents, gains/losses on the sale of certain investments, and changes in the fair value of our investment in Wallbox N.V. warrants and equity securities.

Net sales. The increasedecrease in domestic segment sales for the year ended December 31, 2024,2025, was primarily driven by ana increasedecrease in residential product sales, most notably in home standby and portable generators followingas a result of the elevatedsignificantly lower power outage activityenvironment intogether thewith seconda halfstrong ofprior theyear year.comparison which included multiple major landed hurricanes. This was partially offset by arobust declinegrowth in residential energy technology sales, revenue from products sold to data center customers, and higher shipments of C&I productproducts salesto forthe telecom,industrial rental,distributor and "beyondtelecom standby" applications.channels.

The decreaseincrease in international segment sales for the year ended December 31, 2024,2025, was primarily driven by lowerrevenue intersegmentto data center customers, an increase in global sales relatedof tocontrols softnesssolutions, inand the telecomfavorable marketimpact andof aforeign declineexchange in portable generator and C&I product sales in Europe, partially offset by growth in Latin America.rates.

In addition, total net sales from non-annualized acquisitions for the year ended December 31, 2024,2025, were $16.5$28.3 million, mostlyentirely in the domestic segment.

Gross profit. Gross profit margin for the year ended December 31, 2024,2025 was 38.8%38.3% compared to 33.9%38.8% for the year ended December 31, 2023.2024. The increasedecrease in gross profit margin was primarily driven by favorablehigher inputs costs, unfavorable sales mix, includingand a certain inventory provision as disclosed in the reconciliation table below. This decline was partially offset by higher homeprice standby generator sales, the realization of lower input costs, and plant efficiencies.realization.

Operating expenses. Operating expenses increased $149.7$193.7 million, or 15.3%,17.2% as compared to the prior year. The increase in operating expenses was primarily driven by higher employee and& marketing costs,costs andalong increasedwith incentivehigher compensationwarranty and variable expensesprovision related to higherthe shipmentDepartment volumesof andEnergy profitability.program 2024in Puerto Rico, partially offset by lower incentive-based compensation. 2025 operating expenses also include $142.3 million of legal provisions, settlements, patent related costs, and other costs related to certain legal matters. (see Note 18, “Commitments and Contingencies” to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for additional information). 2024 operating expenses included $10.5 million of legal provisions and other costs related to patent and other litigation (see Note 18, “Commitments and Contingencies” to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for additional information). 2023 operating expenses included a $5.8 million provision for a regulatory matter with the CPSC, $28.3 million of legal charges related to patent and other litigation (see Note 18, “Commitments and Contingencies” for additional information), $4.4 million of additional customer support costs related to a clean energy product customer that filed for bankruptcy.

Other expense. The increasedecrease in other expense, net in 20242025 was driven primarily by a $38.0reduced millionloss expense forfrom the change in fair value of our investment in warrants and equity securities of Wallbox N.V.,N.V. and a $4.9 million loss on extinguishment of debt. This was partially offset by a $3.3 million increase in investment income driven by higher cash on hand and a $7.9 million decrease in interest expenseexpense, driven by decreased borrowings and interest ratesas compared to the prior year comparable period.year.

Provision for income taxes. The effective income tax rates for the years ended December 31, 20242025 and 20232024 were 22.6%18.9% and 25.2%,22.6%, respectively. The decrease in the effective tax rate was driven primarily dueby tothe unfavorableimpact of certain discrete tax items inand 2023their thatimpact didon nota repeatlower pre-tax income in the current year, as well as favorable 2024 earnings mix with higher earnings in lower tax jurisdictions.year.

Net income attributable to Generac Holdings Inc. Net income attributable to Generac Holdings Inc. was $316.3$159.6 million as compared to $214.6$316.3 million in the prior year period. The increasedecrease was primarily driven by higherlower sales and gross margin, asalong with the higher 2025 operating expenses noted above.

Adjusted EBITDA. Adjusted EBITDA is defined and reconciled to net income in, “Non-GAAP Measures – Adjusted EBITDA” included below in Item 7 of this Annual Report on Form 10-K. Adjusted EBITDA margins for the domestic segment for the year ended December 31, 2024,2025 were 19.1%17.1% of domestic segment total sales compared to 15.8%19.1% for the year ended December 31, 2023.2024. This margin improvementdecline was primarily driven by favorableunfavorable sales mixmix, and lowerhigher input costs, and operating deleverage on lower sales volumes, partially offset by higherincreased operatingprice expensecost investments to support future growth initiatives.realization.

Adjusted EBITDA margins for the international segment, before deducting for non-controlling interests, for the year ended December 31, 2024,2025 were 13.2%15.1% of international segment total sales compared to 13.7%13.2% in the prior year. This margin decreaseincrease was primarily due to reducedfavorable operatingsales leveragemix onand lowerprice/cost shipments during the year.realization.

Adjusted net income. Adjusted Net Income is defined and reconciled to net income in, “Non-GAAP Measures – Adjusted Net Income” included below in Item 7 of this Annual Report on Form 10-K. Adjusted Net Income was $376.0 million for the year ended December 31, 2025 compared to $438.5 million for the year ended December 31, 2024, compared to $335.3 million for the year ended December 31, 2023, with the increasedecrease primarily due to higherlower net income in the current year as outlined above, together with the impact of various add-backs in the current and prior years.

InOn JulyFebruary 2022,12, 2024, our Board of Directors approved a stock repurchase program,program which commenced on August 5, 2022, andthat allowed for the repurchase of up to $500.0 million of our common stock over a 24-monthtwenty-four-month period. Additionally, on February 12,9, 2024,2026, our Board of Directors approved a new stock repurchase program that allows for the repurchase of up to $500.0 million of our common stock over the next twenty-four months. The new program replacedreplaces the prior share repurchase program, which had approximately $26.3$199.3 million remaining available for repurchase when the new program was approved. Pursuant to the approved program, we may repurchase our common stock from time to time, in amounts and at prices we deem appropriate, subject to market conditions and other considerations. The repurchases may be executed using a combination of Rule 10b5-1 trading plans, open market purchases, privately negotiated agreements, or other transactions. The actual timing, number and value of shares repurchased under the program will be determined by management at its discretion and in compliance with the terms of our credit agreements. The repurchases may be funded with cash on hand, available borrowings, or proceeds from potential debt or other capital markets sources. The stock repurchase program may be suspended or discontinued at any time without prior notice. As of December 31, 2024, the remaining unused buyback authorization was $347,257.

During the years ended December 31, 20242025, and 2023,2024, we repurchased 1,109,206 shares of our common stock for $147.9 million, and 1,046,351 shares of our common stock for $152.7 million, and 2,188,475 shares for $251.5 million, respectively. We have periodically reissued shares out of Treasury stock, including for acquisition contingent consideration payments and some equity grants.payments.

We have an arrangement with a finance company to provide floor plan financing for selectedqualifying dealers. This arrangement provides liquidity for our dealers by financing dealer purchases of Generac products with credit availability from the finance company. We receive payment from the finance company after shipment of product to the dealer, and our dealers are given a longer period of time to pay the finance company. If our dealers do not pay the finance company, we may be required to repurchase the applicable inventory held by the dealer.dealer at cost. We do not indemnify the finance company for any credit losses they may incur. Total dealer purchases financed under this arrangement accounted for approximately 13% and 12% of net sales for the years ended December 31, 20242025 and 2023, respectively.2024. The amount financed by dealers which remained outstanding was $165.4$149.7 million and $158.0$165.4 million as of December 31, 20242025 and 2023,2024, respectively.

We believe our cash and cash equivalents, cash flow from operations, and availability under our New Revolving Facility and other short-term lines of credit will provide us with sufficient capital to continue to run our operations. We may use a portion of our cash flow for debt repayments and common stock buybacks, impacting the amount available for working capital, capital expenditures, acquisitions, and other general corporate purposes. As we continue to expand our business, we may require additional capital to fund other activities that could potentially drive incremental shareholder value enhancing activities.value.

The increasedecrease in net cash provided by operating activities was primarily driven by higher operating earnings coupled with a largersignificant decreasereduction in net working capital in the currentprior year period,which did not repeat and lower operating earnings as compared to the prior year. This was partially offset by lower cash tax payments.

Our Term Loans restrict the aggregate amount of dividends and distributions that can be paid and, in certain circumstances, requires pro forma compliance with certain fixed charge coverage ratios or gross leverage ratios, as applicable, in order to pay certain dividends and distributions. Our Term Loans also contain other affirmative and negative covenants that, among other things, limit the incurrence of additional indebtedness, liens on property, sale and leaseback transactions, investments, loans and advances, mergers or consolidations, asset sales, acquisitions, transactions with affiliates, prepayments of certain other indebtedness, and modifications of our organizational documents. The New Tranche A Term Loan Facility and the New Revolving Facility contain certain financial covenants that require the Company to maintain a total leverage ratio below 3.75 to 1.00, an interest coverage ratio above 3.00 to 1.00, and may require an excess cash flow payment. As of December 31, 2024,2025, the Company’s total leverage ratio was 1.331.39 to 1.00, and the Company's interest coverage ratio was 10.0311.76 to 1.00. The Company was not required to make an excess cash flow payment as of December 31, 2024.2025. The Company was also in compliance with all other covenants of the Amended Credit Agreement as of December 31, 2024.2025.

Our operations require capital expenditures for facilities and related improvements, technology, research & development, tooling, equipment, capacity expansion, internal use software, IT systems & infrastructure, and upgrades. Capital expenditures were $136.7$169.9 million, $129.1$136.7 million, and $86.2$129.1 million in the years ended December 31, 2024,2025, 20232024 and 2022,2023, respectively, and were funded primarily throughfrom cash from operations.

In preparing the financial statements, management is required to make estimates and assumptions that have an impact on the asset, liability, revenue and expense amounts reported. These estimates can also affect our supplemental information disclosures, including information about contingencies, risk and financial condition. We believe, given current facts and circumstances, that our estimates and assumptions are reasonable, adhere to U.S. GAAP,generally accepted accounting principles (U.S. GAAP), and are consistently applied. Inherent in the nature of an estimate or assumption is the fact that actual results may differ from estimates and estimates may vary as new facts and circumstances arise. We make routine estimates and judgments in determining net realizable value of accounts receivable, inventories, property and equipment, prepaid expenses, product warranties and other reserves. Management believes our most critical accounting estimates and assumptions are in the following areas: goodwill and other indefinite-lived intangible asset impairment assessment; and income taxes. The following is a discussion of critical accounting estimates in each of these areas.

When preparing a discounted cash flow analysis for purposes of our annual impairment test, we make a number of key estimates and assumptions. We estimate the future cash flows of the business based on historical and forecasted revenues and operating costs. In addition, we apply a discount rate to the estimated future cash flows for the purpose of the valuation. This discount rate is based on the estimated weighted average cost of capital for the underlying business and may change from year to year. Weighted average cost of capital includes certain assumptions such as market capital structures, market betas, risk-free rate of return and estimated costs of borrowing.

ForAs allnoted reporting units,above, a considerable amount of management judgment and assumptions are required in performing the goodwill and indefinite-lived intangible asset impairment tests. While we believe our judgments and assumptions are reasonable, different assumptions could change the estimated fair values. A number of factors, many of which we have no ability to control, could cause actual results to differ from the estimates and assumptions we employed. These factors include:

We explain in more detail in the footnotes (a) through (g) below why we believe these adjustments are useful in calculating Adjusted EBITDA as a measure of our operating performance.

We have a long history of providing power generation products across a variety of applications, and we maintain one of the leading positions in the North American market for power equipment with an expanding presence internationally. We believe we have 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. The recent introduction of our large-megawatt diesel generator line-up has substantially increased our served addressable market, allowing us to participate in the supply-constrained data center market which is expected to grow significantly over the coming years due to the mass adoption of artificial intelligence. Over the last few years, we have also been focused on building out ecosystems of energy technology products, solutions, and services for homes and businesses, allowing us to fully integrate our product portfolios together into common platforms and user interfaces and enabling end users to better manage their energy resilience and costs. 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 multipurpose 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.

Impact of residential investment cycle. The market for our residential products is affected by the residential investment cycle and overall consumer confidence and sentiment. When homeowners are confident of their household income, the value of their home and overall net worth, they are more likely to invest in their home. These trends can have an impact on demand for residential generators, solar and energy storage systems, and energy management devices. Trends in affordability, interest rates and the new housing market, highlighted by residential housing starts, can also impact demand for these products. Demand for outdoor power equipment is also impacted by several of these factors, as well as weather patterns. The existence of renewable energy mandates, investment tax credits, and other subsidies can also have an impact on the demand for solar and energy storage systems. The “One Big Beautiful Bill Act” (OBBBA) that was enacted in the United States in July 2025 accelerated the phase out of certain investment tax credits, resulting in a negative impact to the residential solar & storage market thereafter.

Effect of commodity, currency, component price fluctuations, and resource availability. Industry-wide price fluctuations of key commodities, such as steel, copper and aluminum, along with other components we use in our products, as well as changes in labor costs required to produce our products, can have a material impact on our results of operations. Acquisitions inIn recent yearsyears, we have increased our use of advanced electronic components and battery cells that can fluctuate in terms of pricing and availability. Our international operations, along with our existing global supply chain, expose us to fluctuations in foreign currency exchange rates and regulatory tariffs that can also have a material impact on our results of operations.

The effective income tax rates for the threesix months ended MarchJune 31,30, 2026 and 2025 were 24.4%24.6% and 24.3%,20.0%, respectively. The slight increase in effective tax rate was dueprimarily primarilyrelated to certaina non-recurring favorable discrete items and their impact on higher pre-tax incomeitem in the quarter.prior year period related to a business disposition that did not repeat in the current year period.

On July 4, 2025, the United States signed the “One Big Beautiful Bill Act” (OBBBA) into law. This legislation makes permanent several key provisions of the Tax Cuts and Jobs Act, including 100% bonus depreciation and the immediate expensing of domestic research and development costs. Under ASC 740, “Income Taxes,” the effects of changes in tax laws are reflected in the Company’s financial statements in the quarter in which the legislation was passed. We continue to expect cash tax savings from the bonus depreciation and domestic research and development expensing. These changes did not have a material impact on our effective income tax rate for the firstsix quartermonths ended June 30, 2026 or the estimated annual effective income tax rate for 2026 as the changes relate to temporary differences in basis.

In January 2026, the Organization for Economic Cooperation and Development (OECD) released a new package of administrative guidance that effectively deems the United States tax system as compliant with Pillar Two, which is expected to eliminate additional top-up taxes across our global operations. This updated guidance package does not exempt us from Qualified Domestic Minimum Top-Up Taxes in foreign jurisdictions. As a result, we expect our cash taxes paid to remain subject to local minimum tax regimes where applicable. There was no impact to our financial results during the quarter,quarter as a result of this guidance, and we do not expect the rules to have a material impact on our effective income tax rate for the year. We continue to monitor OECD and foreign jurisdictions developments and will update our future tax provisions accordingly.

Three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025

On March 25, 2026, we announced our plan to reorganize our two reportable segments to better align the organization and our reporting with our enterprise strategy, effective March 31, 2026 (the Reorganization). Prior to the Reorganization, our reportable segments were Domestic and International. As a result of the Reorganization, our new reportable segments are Residential and C&I. The Residential segment consists of the former Domestic segment, excluding the domestic C&I operations. The C&I segment consists of the operations of the former International segment with the addition of the domestic C&I operations.

Net sales. Commercial & Industrial segment total sales increased approximately 28%29% to $510$556.5 million from $399$430.6 million in the prior year quarter, including an approximate 10%6% net favorable impact to sales growth from the combination of acquisitions, divestitures, and foreign currency. The core total sales growth for the segment was primarily driven by ramping revenue from products sold tointo the global data center customers,market. In addition, increased shipments to ourrental and telecom channel customers were more than offset by a decrease in shipments to the domestic industrial distributor and rental channels, and higher sales of our controls solutions to the global power generation market.channel.

In addition,Overall, net contribution from non-annualized acquisitions & divestitures for the firstsecond quarter of 2026 was $18.0$16.6 million, primarily in the Commercial & Industrial segment.

Gross profit. Gross profit margin was 38.7%44.5% as compared to 39.5%39.3% in the prior-yearprior firstyear second quarter. The decrease in gross marginincrease was primarily driven by tariff refunds which contributed approximately 6% to gross margin growth during the quarter. Additionally, unfavorable sales mix.mix In addition,and higher input costs, including the impact of tariffs and commodities,costs were more thanpartially offset by increasedfavorable price realization.

Operating Expenses. Operating expenses increased $4.6by $6.4 million, or 2%, as compared to the firstsecond quarter of 2025. The increase was primarily driven by increased operating expense investments to support future C&I growth and higher intangible amortization.amortization, partially offset by lower legal expenses in the current year.

Other Expense. The reduction in other expense, net was driven primarily by a decreasegain in the loss on the change in fair value of our investment in warrants and equity securities of Wallbox N.V.N.V Thisas waswell as lower interest expense and higher investment income in the current year quarter, partially offset by the netloss impactrelated ofto two immaterial business dispositions that closed in the current year quarter.dispositions.

Provision for income taxes. Provision for income taxes for the current year quarter was $23.6$46.7 million, or an effective tax rate of 24.4%,24.6%, as compared to $14.2$15.4 million, or a 24.3%17.2% effective tax rate, for the prior quarter.year. The slight increase in the effective tax rate was primarily duerelated to certaina non-recurring favorable discrete itemsitem and their impact on higher pre-tax income relative toin the prior year quarter.period related to a business disposition that did not repeat in the current year.

Net income attributable to Generac Holdings Inc. Net income attributable to the Company during the firstsecond quarter was $73$143 million, or $1.24$2.40 per share, as compared to $44$74 million, or $0.73$1.25 per share, for the same period of 2025.

Adjusted EBITDA. Adjusted EBITDA for the Commercial & Industrial segment, before deducting for noncontrolling interests, was $66.5$81.5 million, or 13.0%14.6% of C&I total sales, as compared to $45.3$53.3 million, or 11.4%12.4% of total sales, in the prior year. This margin increase was primarily driven by improvedan price/costimpact realization,from tariff refunds of approximately 2%, as well as the accretivefavorable impact of the Allmand acquisition,acquisitions/divestitures and improved operating leverageleverage, onoffset higherby shipmentan volumes.unfavorable sales mix shift and strategic operating expense investments to support future growth.

Adjusted Net Income. Adjusted net income attributable to the Company, as defined in the accompanying non-GAAP measures reconciliation schedules, was $106$174 millionmillion, inor the$2.91 currentper year first quartershare, as compared to $75$97 millionmillion, or $1.65 per share, in the prior-year.second quarter of 2025. This increase was primarily driven by higher net income in the current period as outlined above.above together with changes in certain add-back items.

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 New Tranche A Term Loan Facility is repayable in increasing quarterly installments over time, equal to 0.625% to 2.50% of the original principal amount, beginning on October 1, 2026. The New Tranche A Term Loan Facility and the New Revolving Facility bear interest at a rate based on SOFR plus an applicable margin between 1.25% and 1.75%, both based on our total leverage ratio and subject to a SOFR floor of 0.0%. As of MarchJune 31,30, 2026, the interest rate for the New Tranche A Term Loan Facility and the New Revolving Facility iswas 4.92%.4.87%.

As of MarchJune 31,30, 2026, there was $492.5$491.3 million outstanding under the Term Loan B Facility, $700 million outstanding under the New Tranche A Term Loan Facility, and no borrowings on the New Revolving Facility, leaving $999.3 million of unused capacity, net of outstanding letters of credit.

The Term Loan B Facility bears interest at the adjusted SOFR rate plus an applicable margin of 1.75%, subject to a SOFR floor of 0.0%. As of MarchJune 31,30, 2026, the interest rate for the Term Loan B Facility was 5.42%.5.37%. The Term Loan B Facility does not require an Excess Cash Flow payment (as defined in the Term Loan B Facility credit agreement) if our net secured leverage ratio is maintained below 3.75 to 1.00. As of MarchJune 31,30, 2026, our net secured leverage ratio was 1.311.15 to 1.00, and we were in compliance with all covenants of the facility. There are no financial maintenance covenants on the Term Loan B Facility. The New Tranche A Term Loan Facility and the New Revolving Facility contain certain financial covenants that require us to maintain a total leverage ratio below 3.75 to 1.00, as well as an interest coverage ratio above 3.00 to 1.00. As of March 31, 2026, our total leverage ratio was 1.37 to 1.00, and our interest coverage ratio was 12.98 to 1.00. We were also in compliance with all other covenants of the New Credit Agreements as of March 31, 2026.

On February 12, 2024, our Board of Directors approved a stock repurchase program that allowed for the repurchase of up to $500.0 million of our common stock over a twenty-four-month period. Additionally, on February 9, 2026, our Board of Directors approved a new stock repurchase program that allows for the repurchase of up to $500.0 million of our common stock over the next twenty-four months. The new program replaces the prior share repurchase program, which had approximately $199.3 million remaining available for repurchase when the new program was approved. Pursuant to the approved program, we may repurchase our common stock from time to time, in amounts and at prices we deem appropriate, subject to market conditions and other considerations. The repurchases may be executed using a combination of Rule 10b5-1 trading plans, open market purchases, privately negotiated agreements, or other transactions. The actual timing, number and value of shares repurchased under the program will be determined by management at its discretion and in compliance with the terms of our credit agreements. The repurchases may be funded with cash on hand, available borrowings, or proceeds from potential debt or other capital markets sources. The stock repurchase program may be suspended or discontinued at any time without prior notice. As of MarchJune 31,30, 2026, the remaining unused buyback authorization under the current program was $500 million.

ThereDuring the three and six months ended June 30, 2026, there were no share repurchases under the program during the first quarter of 2026.program. During the firstthree quarterand ofsix months ended June 30, 2025, w ewe repurchased 716,685392,521 and 1,109,206 shares of common stock for $97.5$50.5 million.million and $147.9 million, respectively. We have periodically reissued shares out of Treasury stock, including for acquisition contingent consideration payments.

We have an arrangement with a finance company to provide floor plan financing for qualifying dealers. This arrangement provides liquidity for our dealers by financing dealer purchases of Generac products with credit availability from the finance company. We receive payment from the finance company after shipment of product to the dealer, and our dealers are given a longer period of time to pay the finance company. If our dealers do not pay the finance company, we may be required to repurchase the applicable inventory held by the dealer. We do not indemnify the finance company for any credit losses they may incur. Total dealer purchases financed under this arrangement accounted for approximately 11%12% and 15%13% of net sales for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. The amount financed by dealers which remained outstanding under this arrangement was $162.3$179.2 million and $149.7 million as of MarchJune 31,30, 2026, and December 31, 2025, respectively.

As of MarchJune 31,30, 2026, we had total liquidity of $1,264.8$1,264.2 million which consists of $265.5$264.9 million of cash and cash equivalents and $999.3 million of availability under our New Revolving Facility.

ThreeSix months ended MarchJune 31,30, 2026, compared to the threesix months ended MarchJune 31,30, 2025

The increase in operating cash flows for the threesix months ended MarchJune 31,30, 2026 was primarily driven by higher operating earningsearnings, cash receipts from tariff refunds totaling $61 million, and lower cash tax payments in the current year period. These items were partially offset by a lowergreater use of cash for working capital as compared to the prior year.year period.

The $153.8$275.8 million net cash used in investing activities for the threesix months ended MarchJune 31,30, 2026 primarily represents cash payments of $29.4$87.7 million related to the purchase of property and equipment,equipment $122.8and $211.8 million for the acquisitionacquisitions of Allmand,businesses, andnet $1.5of cash acquired. The cash payments for investing activities were partially offset by $23.7 million relatedof toproceeds otherfrom investingsale activities.of businesses, net of cash disposed.

The $33.5$93.3 million net cash used in investing activities for the threesix months ended MarchJune 31,30, 2025 primarily representsincluded cash payments of $30.9$88.7 million related to the purchase of property and equipment, and $2.7 million for the purchase of long-term investments.investments, and $2.0 million relating to other investing activities.

The $41.4$40.8 million net cash used in financing activities for the threesix months ended MarchJune 31,30, 2026 primarily representsincluded proceeds of $14.1$22.7 million from short-term borrowings, $0.2$82.5 million from long-term borrowings, and $7.2$10.3 million from the exercise of stock options. These cash proceeds were more than offset by $27.2$118.7 million of debt repayments ($21.0$25.6 million of short-term borrowings and $6.2$93.1 million of long-term borrowings and finance lease obligations), $34.6$36.7 million for taxes paid related to equity awards, and $1.1$1.0 million for payments of deferred acquisition consideration.

The $119.7$101.3 million net cash used in financing activities for the threesix months ended MarchJune 31,30, 2025 primarily represents proceeds of $19.2$21.9 million from short-term borrowings, $0.9$92.6 million from long-term borrowings, and $0.6$1.0 million from the exercise of stock options. These cash proceeds were more than offset by $34.4$59.2 million of debt repayments ($20.0$30.2 million of short-term borrowings and $14.4$29.0 million of long-term borrowings and finance lease obligations), $97.5$147.9 million of share repurchases, and $8.6$9.4 million for taxes paid related to equity awards.

There have been no material changes to our contractual obligations between the February 18, 2026, filing of our Annual Report on Form 10-K for the year ended December 31, 2025, and MarchJune 31,30, 2026, except for the changes in outstanding borrowings and interest rates as discussed in Note 12, “Credit Agreements,” to the condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q.

(g) The current year loss relates primarily to twofour immaterial business dispositions with two closing in the first quarter and two closing in the second quarter of 2026. The prior year loss relates primarily to one immaterial business disposition that closed in the firstsecond quarter of 2026.2025.

(c) The current year loss relates primarily to twofour immaterial business dispositions with two closing in the first quarter and two closing in the second quarter of 2026. The prior year loss relates primarily to one immaterial business disposition that closed in the firstsecond quarter of 2026.2025.