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Generac Power Systems is on the move. The company joined the S&P 500 this year and is on pace to generate revenues of more than $3 billion in 2021.
During Generac’s first quarter, sales for its residential products – including standby generators – surged 110% over a year ago. Now the company plans to add capacity at its plant in Jefferson and open its new manufacturing facility in South Carolina sooner than expected.
Home standby generator demand was already on the rise because of the “home as a sanctuary” trend, a term Generac coined to describe the growing work-from-home population. However, Generac also benefited from major power outages in Texas caused by winter storms earlier this year.
What Texas experienced during the power outages only highlights the importance of power security in the home and workplace, Generac president and chief executive officer Aaron Jagdfeld recently told analysts in a first quarter earnings call.
The company estimates that 4.5 million utility customers were left without power for several days, making it the fifth largest event recorded since Generac began tracking outages more than a decade ago.
“This was a very unique winter event with unusually cold weather in a state that represents our second largest addressable market opportunity for home standby generators,” Jagdfeld told analysts.
Generac doubled its capacity at Wisconsin plants compared to levels from 12 to 18 months ago, and now the company plans to double capacity for standby residential generators. The new 421,000-square-foot manufacturing and distrubtion facility in Trenton, South Carolina is part of Generac’s strategy to boost production, Jagdfeld said.
“That second line we’re adding in Wisconsin, the quicker ramp of South Carolina and then bringing on more equipment early next year is what gets us to doubling where we’re at today,” Jagdfeld said. “So, if we do get an active hurricane season, we feel like we would be ready for that.”
Generac’s first quarter was its highest-ever quarterly revenue, increasing from $475.9 million to $807.4 million, or a 70% increase compared to last year. Net income also jumped to $149 million, or $2.33 per share, compared to $44 million, or 68 cents per share, for the same quarter in 2020.
The manufacturer experienced broad-based growth across its entire business during the first quarter, prompting the company to adjust its guidance to about 40% to 45% growth compared to a previously reported range of 25% to 30%.
If Generac, which crossed $2 billion in sales in 2018, were to hit its guidance, the company would have more than doubled its revenue since 2016 and quadrupled its revenue from 2011, which was $792 million.
A digital mindset
Generac is in the midst of a digital transformation that is not only driving growth now, but also laying the foundation for the company’s future. It’s a melding of manufacturing and technology; leading that cultural shift is Tim Dickson, Generac’s first chief information officer.
Dickson’s role at Generac is to scale the company’s global IT architecture and capabilities, which involves digitizing the customer experience, developing digital strategies and improving supply chain and logistics.
The La Crosse native has never been a CIO himself, but has held IT positions with HP, IBM, Dell Inc. and Motorola Services and more recently, Laureate International Universities.
Before hiring Dickson in 2020, the manufacturer didn’t have a CIO position. But as Generac acquired a series of clean energy and renewable energy companies, information technology became a focal point for the manufacturer’s evolving strategy, Dickson said.
“It was really a huge paradigm shift for the company, the board and Aaron to now view IT as a strategic enabler for growing the business and to capture the growth that we’re experiencing right now,” Dickson said.
Generac began looking at its services and products through a more digital and data-driven lens, using mobile applications, recommendations, predictions and notifications to transform how customers and dealers experience products.
Dickson says it was a transformation the company needed to make both internally and externally to compete in the clean energy and renewable energy market.
“That’s just the way that this space operates and that’s just a little different than what the company experienced in the past 60 years,” Dickson said.
As part of Generac’s digital transformation, the company also hired more software engineers and upskilled IT employees. Dickson also held the company’s first “hackathon,” which provided employees with an avenue to share pent-up ideation.
Some employees offered ideas for growth and new business opportunities while others developed methods of automating processes that had been manual for years. Generac has since implemented nearly half of the ideas generated through the hackathon.
“At the end of the day, it was a culture shift,” Dickson said. “A culture shift for not only my team, but also the other teams that participated. Now we have a model to quickly turn those ideas into real production of products and services and technology.”
Another daunting initiative was to consolidate datasets across the entire enterprise, not only between business units, but also data generated by its products through Internet of Things technology.
With an enterprise-wide data set integrated into one platform, Generac can use machine-learning algorithms and artificial intelligence to create valuable insights about its customers, products and business units, Dickson said.
Building consumer profiles and understanding where to apply investment funds for promotions and campaigns are a couple of ways Generac is leveraging data. But the company can also use data to generate power scores, which highlight parts of the country that are most receptive to products in times of need and outages, Dickson said.
In fact, Generac has more than one million backup generators on the marketplace, which emit data used to create 360-degree profiles of customers and to track how products are functioning.
“IoT has always been a part of Generac, but leveraging that data in the mode of AI, in predicting, recommending and things of that nature I don’t think were part of the past,” Dickson said. “Those are some of the things I’ve brought into the culture.”