Waukesha-based Generac Holdings Inc. saw sales increase 17% to $701 million during the third quarter as a number of high-profile power outage events and more people working from home drove interest in the company’s home standby generators.
The residential products business, which includes the standby generators, plus portable models, chore equipment and clean energy products, grew 37% to $459 million in revenue. The commercial and industrial business saw sales drop 18% to $176 million.
Generac also saw improved profitability in the quarter with net income rising from $75.6 million in last year’s third quarter to $115 million this year.
“Power outage activity was much higher during the quarter driven by more extreme and severe weather,” said Aaron Jagdfeld, chairman and chief executive officer of Generac. “When combined with the ‘Home as a Sanctuary’ trend that we began seeing at the onset of the COVID-19 pandemic, demand for home standby generators reached unprecedented levels during the quarter.”
The company exited the first quarter expecting its revenue to be down 5% to 10% as the economy shut down to battle the coronavirus. By the time Generac exited the second quarter, the company was forecasting its revenue would grow 5% to 8%, a $300 million swing.
Generac is now expecting revenue to grow 10% to 12% for the year, which would require a $110 million to $154 million increase in revenue in the fourth quarter, an increase of 18% to 26%.
Jagdfeld said Generac is getting 2.5-times the number of orders it did for home standby generators last year and the company’s backlog has continued to grow in the fourth quarter, even as its factories hit record output levels.
He drew comparisons to 2012, when a series of storms culminating in Superstorm Sandy drove increased interest in Generac’s products and the company exited the year with what was then a massive backlog.
“It will look small compared to wherever we land with the backlog when we end the year,” Jagdfeld said.
The increase in interest has led Generac to add capacity at its Jefferson, Wisconsin plant in addition to running overtime at the Whitewater plant where most of the home standby products are made.
Generac is also looking to open a new production facility for its generators by the middle of next year. The company is currently in a site selection process for the plant. Jagdfeld said while the company is evaluating Wisconsin possibilities for the plant, it is primarily looking from northern Texas east to the Carolinas. A lot of the increased demand the company has seen is in the southeast, south central and western portions of the country and being close to those geographies would help reduce logistics costs.
“We’re picking a site though that can move for speed,” Jagdfeld said, noting the equipment for the facility has already been ordered. “We’ve got that on order, we just don’t know where it is going to go.”
He said the company’s plans would add 70% to 80% to its existing production capacity. Those plans assume demand will return to somewhat normal levels.
“What we’re seeing right now is abnormal to anything we’ve ever seen,” Jagdfeld said, noting even with a return to normal the standby power category is reaching a tipping point where it is seen as a necessity, not just something that is nice to have.
