Generac Annual Report 2023

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FY2023 Annual Report · Generac

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A N N U A L R E P O R T

ABOUT GENERAC

• Founded in 1959

• A leading energy technology company that provides backup and prime

power products and energy storage systems for home and commercial

& industrial applications, energy monitoring & management devices and

services, and other engine & battery powered tools and equipment.

• Powering A Smarter World enterprise strategy is focused on improving

energy resilience and independence, optimizing energy efficiency and

consumption, and protecting and building critical infrastructure

• 2023 Net Sales $4.0 Billion – 51% Residential, 37% Commercial &

Industrial, 12% Other

• Approximately 8,600 employees as of 12/31/2023

• Doing business in over 150 countries

• Approximately 1,100 engineers worldwide

• Omni Channel Distribution approach with thousands of dealers,

wholesalers, retailers and e-commerce partners

Dear Shareholders,

2023 was a year of mixed results for Generac as high field inventory levels of home standby
generators created headwinds for that part of our business. This was offset by a record year
for global shipments of our commercial and industrial (C&I) products in 2023 as sales of these
products reached approximately $1.5 billion, reflecting a nearly 30% compound annual growth
rate over the last three years. Our International segment, which is largely made up of C&I
product offerings, also delivered record net sales and adjusted EBITDA performance during the
year. While our shipments of residential products were impacted by elevated field inventory
levels, leading indicators of end market demand for home standby generators remained
healthy during the year as a higher baseline of consumer awareness for the category has been
established after several years of robust growth.

Additionally, our return to year-over-year margin improvement in the second half of the year
together with a reduction in inventory levels helped drive cash flow from operations to an all-
time record of $522 million in 2023. This robust cash flow generation provided additional capital
deployment optionality as we repurchased nearly 2.2 million shares during the second half of
2023, returning approximately $252 million of cash to shareholders while also continuing to
invest in advancing our products and solutions roadmaps. Moving forward, we will continue
to operate within our disciplined and balanced capital allocation framework as we execute
our ‘Powering A Smarter World’ enterprise strategy and other shareholder-value enhancing
opportunities.

Key Strategic Accomplishments

2023 was a year of meaningful progress in executing our strategic initiatives. We continued
to make significant investments in our engineering and manufacturing capabilities as we
opened an engineering center of excellence in Reno, Nevada, and broke ground on a new
manufacturing facility in Wisconsin to increase capacity for C&I stationary products. We also
launched compelling new products during the year, including the introduction of stationary C&I
energy storage solutions for the domestic market to help decentralize, digitize, and decarbonize
the future electrical grid. We also made important progress toward our vision of building a
common platform and user interface using ecobee as the central hub to manage our suite of
residential solutions with the integration of our home standby generators and propane tank
monitoring devices.

We made further strategic investments in 2023 that help to accelerate our enterprise strategy
as we acquired REFU Storage Systems, a provider of stationary C&I energy storage solutions
for European markets, and made a minority investment in Wallbox, a leading provider of EV
charging solutions for both residential and commercial applications. We’re excited to partner
with an innovative technology leader in the EV charging industry and look forward to integrating
Wallbox’s solutions with our broader energy technology portfolio to further expand the value
proposition of the energy ecosystems we are building for homes and businesses.

Power Reliability Challenges Reinforce Our Strategy

Throughout 2023, the mega-trends that we believe will help drive our long-term growth were
on display as increasingly severe weather coupled with the continued evolution of the electrical
grid in the US highlight the importance of our products and solutions.

Although the US did not experience any major power outage events during 2023, there were
numerous, smaller scale severe weather events throughout the year across North America.
In addition to the increasing frequency and magnitude of weather-related power disruptions,
legislative and regulatory reactions to climate change are also impacting the power grid. On
the supply side, utility scale solar and wind power are being incentivized relative to traditional
baseload thermal sources but are intermittent in nature and face siting and permitting
challenges. At the same time, demand is increasing as electrification trends are accelerating,
power-hungry data centers and telecom infrastructure are being rapidly built, and investment
in domestic manufacturing hits multi-decade highs. These changes will continue to create
significant challenges for utilities, and grid operators are struggling to reliably match supply and
demand, particularly during periods of extreme heat during the summer and cold during the
winter.

In Closing

The important progress we made in advancing our strategic initiatives during 2023 provides
further conviction in Generac’s evolution to an energy technology solutions company. The
foundational work that was completed during 2023 sets the stage for our upcoming residential
energy technology product launches and the accelerated momentum in C&I energy technology
solutions that we expect to drive in the years ahead.

These emerging energy technology solutions combined with our long track record of excellence
in providing backup power generation products have Generac uniquely positioned to create
value in the transition to the next generation electrical grid. Bringing these products and
services together in connected and intelligent energy ecosystems for homes and businesses
is central to our ‘Powering A Smarter World’ enterprise strategy, and the breadth of our
capabilities across power generation, energy storage, and energy monitoring and management
is unmatched. Our ability to unlock incremental value from these solutions for asset owners and
grid operators provides further differentiation, and our persistent focus on quality across our
portfolio provides additional confidence in our ability to execute our strategic vision. As a result,
I am confident in our team’s ability to drive innovation and lead the evolution to more resilient,
efficient, and sustainable energy solutions.

On behalf of the entire Generac team, I would like to thank our shareholders for your ongoing
confidence and support as we look forward to our continued success in the future.

Sincerely,

Aaron P. Jagdfeld
President and Chief Executive Officer
Generac Holdings Inc.

K FORM 10-K [ 2023 ]

[ THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY. ]

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2023
Or

For the transition period from

Commission File Number 001-34627

GENERAC HOLDINGS INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)

S45 W29290 Hwy 59, Waukesha, WI
(Address of principal executive offices)

20-5654756
(IRS Employer Identification No.)

53189
(Zip Code)

(262) 544-4811
(Registrant’s telephone number, including area code)

Title of each class

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

GNRC

New York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act

of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company
or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth
company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒
Non-accelerated filer ☐
Emerging growth company ☐

Accelerated filer ☐
Smaller reporting company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with

any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm
that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant

included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation

received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting common equity held by non-affiliates of the registrant on June 30, 2023, the last business day of the

registrant’s most recently completed second fiscal quarter, was approximately $9.0 billion based on the closing price reported for such date on the
New York Stock Exchange.

As of February 16, 2024, 60,269,310 shares of the registrant’s common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Annual Report to Stockholders for the year ended December 31, 2023 furnished to the Securities and Exchange
Commission are incorporated by reference into Part II of this Form 10-K. Portions of the registrant’s Proxy Statement for the 2024 Annual Meeting of
Stockholders (the “2024 Proxy Statement”), which will be filed by the registrant on or prior to 120 days following the end of the registrant’s fiscal
year ended December 31, 2023, are incorporated by reference into Part III of this Form 10-K.

2023 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

PART I

Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 1C. Cybersecurity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 2.

Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer

Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 6.

[Removed and Reserved]

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of

Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . .

Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial

Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections . . . . . . . . . . . . . . . .

PART III

Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . .

Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related

Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . .

Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART IV

Page

Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 16. Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

100
105

Forward-Looking Statements

This annual report contains forward-looking statements that are subject to risks and uncertainties.
Forward-looking statements give our current expectations and projections relating to our financial condition,
results of operations, plans, objectives, future performance and business. You can identify forward-looking
statements by the fact that they do not relate strictly to historical or current facts. These statements may
include words such as “anticipate,” “estimate,” “expect,” “forecast,” “project,” “plan,” “intend,” “believe,”
“confident,” “may,” “should,” “can have,” “likely,” “future,” “optimistic” and other words and terms of
similar meaning in connection with any discussion of the timing or nature of future operating or financial
performance or other events.

The forward-looking statements contained in this annual report are based on assumptions that we have

made in light of our industry experience and on our perceptions of historical trends, current conditions,
expected future developments and other factors we believe are appropriate under the circumstances. As you
read and consider this report, you should understand that these statements are not guarantees of
performance or results. They involve risks, uncertainties (some of which are beyond our control) and
assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions,
you should be aware that many factors could affect our actual financial results and cause them to differ
materially from those anticipated in the forward-looking statements. The forward-looking statements
contained in this annual report include estimates regarding:

• our business, financial and operating results, and future economic performance;

• proposed new product and service offerings; and

• management’s goals, expectations and objectives and other similar expressions concerning matters

that are not historical facts.

Factors that could affect our actual financial results and cause them to differ materially from those

anticipated in the forward-looking statements include:

• fluctuations in cost, availability, and quality of raw materials, key components and labor required to

manufacture our products;

• our dependence on a small number of contract manufacturers and component suppliers, including

single-source suppliers;

• our ability to protect our intellectual property rights or successfully defend against third party

infringement claims;

• increase in product and other liability claims, warranty costs, recalls, or other claims;

• significant legal proceedings, claims, fines, penalties, tax assessments, lawsuits or government

investigations;

• our ability to consummate our share repurchase programs;

• our failure or inability to adapt to, or comply with, current or future changes in applicable laws and

regulations;

• scrutiny regarding our ESG practices;

• our ability to develop and enhance products and gain customer acceptance for our products;

• frequency and duration of power outages impacting demand for our products;

• changes in durable goods spending by consumers and businesses or other macroeconomic conditions,

impacting demand for our products;

• our ability to accurately forecast demand for our products and effectively manage inventory

levels relative to such forecast;

• our ability to remain competitive;

• our dependence on our dealer and distribution network;

• market reaction to changes in selling prices or mix of products;

• loss of our key management and employees;

• disruptions from labor disputes or organized labor activities;

• our ability to attract and retain employees;

• disruptions in our manufacturing operations;

• changes in U.S. trade policy;

• the possibility that the expected synergies, efficiencies and cost savings of our acquisitions, divestitures,
restructurings, or realignments will not be realized, or will not be realized within the expected time
period;

• risks related to sourcing components in foreign countries;

• compliance with environmental, health and safety laws and regulations;

• government regulation of our products;

• failures or security breaches of our networks, information technology systems, or connected

products;

• our ability to make payments on our indebtedness;

• terms of our credit facilities that may restrict our operations;

• our potential need for additional capital to finance our growth or refinancing our existing credit

facilities;

• risks of impairment of the value of our goodwill and other indefinite-lived assets;

• volatility of our stock price; and

• potential tax liabilities.

Should one or more of these risks or uncertainties materialize, or should any of these assumptions

prove incorrect, our actual results may vary in material respects from those projected in any forward-
looking statements. A detailed discussion of these and other factors that may affect future results is contained
in Item 1A of this Annual Report on Form 10-K. Stockholders, potential investors and other readers
should consider these factors carefully in evaluating the forward-looking statements.

Any forward-looking statement made by us in this report speaks only as of the date on which it is
made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is
not possible for us to predict all of them. We undertake no obligation to update any forward-looking
statement, whether as a result of new information, future developments or otherwise, except as may be
required by law.

PART I

Item 1. Business

Overview

Generac is a leading energy technology solutions company that 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. As an energy technology solutions company that is “Powering a Smarter World”, our corporate
purpose is to lead the evolution to more resilient, efficient, and sustainable energy solutions around the world.

We have a long history of providing power generation products across a variety of applications, and we

maintain one of the leading market positions in the power equipment markets in North America and 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. 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, we have 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 our products and support the growing utilization of such distributed energy
resources (DERs) in grid services programs. In addition, we have been leveraging our leading position in
the growing market for natural gas fueled generators, which we believe represents a cleaner transition fuel
compared to diesel, to expand into applications beyond standby power, allowing us to participate in Energy-
as-a-Service and 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 Generac’s energy technology solutions are uniquely and strategically positioned to participate in this
next-generation grid referred to as “Grid 2.0”.

As our traditional power generation markets continue to grow due to multiple mega-trends that are

driving increased penetration of our products, we believe we are in an excellent position to execute on this
opportunity given our competitive strengths. In addition, our focus on more resilient, efficient and sustainable
energy solutions has dramatically increased our served addressable market, and as a result, we believe that
Generac is well positioned for success over the long term.

Company History

Generac was founded in 1959 to commercialize a line of affordable portable generators that offered
superior performance and features. The Company’s success through the years has been built upon engineering
expertise, manufacturing excellence and our innovative approaches to the market. This has driven our
growth into becoming a leading provider of power equipment for a variety of applications within residential,
commercial, and industrial markets.

In 1980, we expanded beyond portable generators into the industrial power generation market with the
introduction of our first stationary generators that provided up to 200kW of power output. We introduced
our first residential standby generator in 1989 and expanded our industrial product offering and global
distribution system in the 1990s, forming a series of alliances that rapidly increased our sales. Our growth
accelerated in the 2000s as we expanded our purpose-built line of residential and commercial automatic
standby generators and implemented our multi-layered, omni-channel distribution philosophy. Throughout
the 2000s, a number of high-profile power outage events also helped to increase the awareness and need
for backup power and home standby generators. In 2006, the founder of Generac sold the company to
affiliates of CCMP Capital Advisors, LLC, together with certain other investors and members of our
management. In February 2010, we completed our initial public offering (IPO) of the Company’s common
stock. Since then, we have scaled our sales & marketing capabilities and systems, while also building the
Generac brand into one of the leading names in backup power around the nation.

Soon after going public, we implemented our “Powering Ahead” enterprise strategy. This strategic plan
accelerated the Company’s transition from primarily a North America focused, emergency backup generator
company into a more diversified industrial technology company with the addition of new and adjacent
product categories and an expanded global presence, primarily through a series of acquisitions. In 2018, we
transitioned to a new enterprise strategy called “Powering Our Future”, which drove further share gains
in new and existing markets, capitalized on Generac’s leadership in natural gas gensets, established our
connectivity strategy, and provided the foundation for the Company’s evolution into an energy technology
solutions company, including our initial acquisitions within the residential clean energy space. This ultimately
led to the introduction of our “Powering A Smarter World” enterprise strategy in 2021. Our current
strategic plan continues the evolution of Generac’s business model that pairs traditional and emerging
power generation, conversion, and storage technologies with new monitoring, management and grid services
capabilities to provide solutions for the dynamic challenges presented by today’s energy landscape.

Significant Investments in Energy Technology Solutions

We’ve been providing power generation and resiliency solutions for homes and businesses for decades.
Leveraging that expertise in power generation, Generac has made significant investments in recent years to
expand its capabilities into energy technology solutions, beginning with the March 2019 acquisition of Neurio
Technology Inc., a leading energy data company focused on monitoring technology and sophisticated
analytics to optimize energy use within a home or business. This was followed by the April 2019 acquisition
of Pika Energy Inc. (Pika Energy), a designer and manufacturer of battery storage technologies that
capture and store solar or other power sources for homeowners and businesses. In October 2020, the
Company acquired Enbala Power Networks Inc., one of the leading providers of distributed energy
optimization and control software that helps support the operational stability of the world’s power grids. In
July 2021, Generac added to its residential clean energy portfolio with the acquisition of Chilicon
Power LLC (Chilicon), a designer and provider of grid-interactive rooftop power inversion devices and
monitoring solutions for the solar market. With these acquisitions, Generac has established a presence in
the rapidly developing residential clean energy market, focused on solar and battery storage solutions, as well
as grid services platforms that can leverage any of our product offerings that are capable of being grid-
connected.

In December 2021, Generac acquired ecobee Inc. (ecobee), a leader in sustainable home technology

solutions. In addition to smart home thermostatic controls and other smart home devices, ecobee offers its
customers the ability to participate in energy services programs, which allow homeowners to reduce energy
consumption and utility bills via intelligent HVAC controls. The acquisition represents a major step
forward in the Company’s efforts to provide an integrated residential energy ecosystem that includes a
sophisticated user interface platform to allow homeowners to take charge of their energy generation, storage,
consumption, and management. We believe ecobee’s solutions, serving as the central hub of our residential
energy ecosystem, together with its product and software development expertise will prove to be a differentiator
for Generac when combined with our growing suite of energy technology solutions.

In December 2023, Generac made a minority investment in Wallbox N.V. (Wallbox) (NYSE: WBX), 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, we 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.

As we look to the future, we expect to make continued investment in the people, processes, and
capabilities involved in the development of these residential energy technologies, as we work to further
broaden our product offering and distribution network. Additionally, the favorable policy backdrop for these
markets, underscored by the Inflation Reduction Act and other state regulations, provides the necessary
visibility to drive potential long-term, value-creating investments. With this opportunity in front of us, we
plan to build out our residential energy technology capabilities and our suite of products and solutions as we
expect to play an important role in the transition to a cleaner, more sustainable, and more reliable electric
grid.

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 UK-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 our 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 our current global product offerings and is expected to further accelerate our development of new
technologies as we continue to provide our 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 us advance our capabilities in microgrid projects. These acquisitions and related organic initiatives will
collectively help lay the groundwork to further advance our energy technology strategies across C&I markets
around the world.

For a complete summary of recent acquisitions, please see Note 1, “Description of Business,” to the

consolidated financial statements in Item 8 of this Annual Report on Form 10-K.

Products and Solutions

We design, manufacture, and distribute a broad range of energy technology products and solutions. We
design and manufacture stationary, portable, and mobile power generators with single-engine outputs ranging
between 800W and 3,250kW. We have developed a line of energy storage systems for use in residential solar-
plus-storage applications. We also have a line of stationary and mobile energy storage systems that serve
global commercial and industrial markets. We have a growing selection of energy monitoring and management
devices and solutions that we expect to serve as the central hub or controls platform for our residential and
C&I energy ecosystems. We participate in the market for grid services by providing distributed energy
optimization and control software. We design and manufacture other power products including light towers
and a broad line of outdoor power equipment that we refer to as “chore products”, which includes a
variety of property maintenance equipment powered by both engines and batteries. We classify our 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

Our 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 we also manufacture. 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, we believe we have the broadest line of home standby generators in the

marketplace. Every home standby generator that we offer is equipped with Mobile Link™. This remote
monitoring capability is a standard, WiFi-enabled feature that allows our 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 us
to better understand our installed base of products, while optimizing both product quality and customer
satisfaction. In 2021, we expanded our 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 our dealers and peace of mind to owners of our home standby generators that use
propane as a fuel source.

Leveraging the technologies acquired in the 2019 acquisition of Pika Energy, we have 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,
we launched PWRmanager, the second generation of our 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, we 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 our existing Mobile Link
remote monitoring system, provide the foundation for Generac’s residential connectivity strategy, which will
be integral in the continued development of our smart home energy ecosystem.

Importantly, we are leveraging ecobee’s technologies and software development expertise to develop a
user interface platform at the center of our 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, we took our first steps
towards this goal by successfully integrating our home standby generators and propane tank monitors
with the ecobee platform. We believe the integration of our 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 our grid services distributed energy resource

management software (DERMS) called Concerto. All of our 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.

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

We also provide 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. Our 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 our inverter generator products, which are quieter than traditional
portable generators. In addition, we offer manual transfer switches to supplement our portable generator
product offering.

We provide 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. We also offer
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 our 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.

Residential products comprised 51.3%, 63.8% and 65.8%, respectively, of total net sales in 2023, 2022

and 2021.

Commercial & Industrial Products

We offer a full line of C&I generators that are sold around the world. We are a leader in cleaner-

burning natural gas fueled generators, and also have a full offering of C&I generators that are fueled by
diesel and Bi-FuelTM. We believe we have 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, we have expanded our
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. Our natural gas C&I stationary
generators have grid-connection capabilities, enabling our 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.

Our 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. Our light-commercial generators predominantly
run on natural gas and liquid propane.

We design and manufacture a broad product line of modularized and configured stationary generators
and related transfer switches for various industrial standby, continuous-duty, and prime rated applications.
Our single-engine industrial generators range in output from 10kW up to 3,250kW, include stationary and
containerized packages, and can include our Modular Power Systems (MPS) technology that extends our
product range up to much larger multi-megawatt systems through an integrated paralleling configuration.
Over the past several years, we have introduced larger and higher-powered gaseous-fueled generators, with the
highest output of 1,000kW for a single-engine set. Our 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, we’ve focused our efforts to utilize
our gaseous-fueled generators in “beyond standby” applications including distributed generation and
microgrid projects and have developed purpose-built products for these applications that have grid-
connected capability. This grid-connected functionality and the significant expansion of our in-house
advanced controls capabilities further enhances the potential utilization of our generators in these applications.

Our MPS technology combines the power of several smaller generators to produce the output of a

larger generator, providing our customers with redundancy and scalability in a cost-effective manner. For
larger industrial applications, our 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.

We also offer 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, we have
significantly increased and upgraded our industrial transfer switch product offering, which we believe will
help to enhance our attachment rate and related market share for these products. Generac’s innovative feature
set and flexible platforms offer a variety of switching configurations to meet almost any project needs.

We also design and manufacture 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). We also offer
commercial mobile pumps, heaters, and dust-suppression equipment for a wide variety of applications. All
of our mobile products are typically sold to national and regional rental companies who then rent the
equipment to the end user.

We have continued to expand our portfolio of energy technology solutions for C&I applications. In

2021, we acquired Off Grid Energy, a European based manufacturer of mobile energy storage systems
predominantly used in the rental markets. In 2023, we acquired REFU, a European based provider of
stationary energy storage systems and related inverter products. We also organically introduced a line of larger
stationary battery energy storage systems for C&I applications in the North American market. We believe
these collective product offerings will enable us to capture market share of the rapidly expanding Battery
Energy Storage System (or BESS) market in the future. Our BESS solutions are primarily targeted at “behind-
the-meter” applications for on-site energy storage. We expect to leverage our 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. We also continue 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, we
continue to provide various gaseous-engine control systems and accessories, which are used in our natural gas
generators, as well as sold to other gas-engine manufacturers and aftermarket customers.

C&I products comprised 37.2%, 27.6% and 26.7%, respectively, of total net sales in 2023, 2022 and

2021.

Other Products and Services

Our “Other products and services” category primarily consists of aftermarket service parts and
product accessories sold to our customers, installation and maintenance services, extended warranty
revenue, grid services revenue, remote monitoring subscription revenue, and other service offerings provided
by our owned industrial distributors.

Included in this “Other products and services” category are energy services revenues that are generated

by ecobee, Blue Pillar, and our 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 our efforts in grid services. In addition to their product
sales, ecobee also 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 our C&I connectivity capabilities and provided a
standard protocol for all of our C&I products to be connected to our 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, our Mobile Link platform provides remote monitoring services for our residential home
standby customers and “Fleet” services for our residential home standby dealers, whereby we collect
subscription revenue for these services on a recurring basis.

“Other products and services” comprised 11.5%, 8.6% and 7.5%, respectively, of total net sales in 2023,

2022 and 2021.

Mega-Trends, Strategic Growth Themes, and Additional Business Drivers

In 2021, we unveiled our “Powering A Smarter World” strategic plan, which serves as the framework
for the significant investments we have made and will continue to make to capitalize on the long-term growth
prospects of Generac. Our enterprise strategy is based on the combination of several key mega-trends that
we believe will drive several significant strategic growth themes for our business.

Key Mega-Trends:

• “Grid 2.0”: which is the evolution of the traditional electrical utility model as the increasing reliance
on intermittent renewable generation sources and the electrification of everything are leading to
supply/demand imbalances and rising electricity costs, driving the migration towards distributed
energy resources and decarbonization, digitization, and decentralization of the grid.

• Impact of climate change: which includes the expectation of more severe and volatile weather driving

increased power outage activity, and more global regulation accelerating renewable investments.

• Home as a Sanctuary: which includes the trend of the increasing importance of the home — including
more people working from home and aging in place — is leading to increasing sensitivity to power
outages and need for peace of mind, combined with the more intelligent and connected home and
desire for improved energy resiliency and efficiency.

• Emergence of cleaner alternative fuels: natural gas, and other alternative fuels, are important

elements in the transition to a lower-carbon global energy supply.

• Growing investment in global infrastructure creating new opportunities: Upgrading of aging and

underinvested legacy systems including transportation, power, healthcare and elderly care; along
with expanding investment for increasingly critical technology infrastructure including data centers,
telecom and EV charging.

Strategic Growth Themes:

Power quality issues continue to increase. Power disruptions are an important driver of consumer
awareness for back-up power and have historically influenced demand for generators both in the United
States and internationally. Increased frequency and duration of major power outage events, that have a
broader impact beyond a localized level, increases product awareness and may drive consumers to accelerate
their purchase of a standby or portable generator during the immediate and subsequent period, which we
believe may last for six to twelve months following a major outage event. Energy storage systems offer similar
resiliency advantages to consumers and can benefit from these same awareness drivers, at least for short
duration power outages. The optional standby market for C&I power generation is also driven by power
quality issues and the related need for backup power. Attitudes around climate change have shifted and
undergone increased global focus in recent years, and an aging and underinvested electrical grid infrastructure
remains highly vulnerable to the expectation of more severe and volatile weather. Additionally, rapid
growth in renewable power sources such as solar and wind is resulting in increased intermittency of supply,
further impairing the reliable supply of electricity at a time when demand is starting to increase meaningfully
with the electrification of a wide range of consumer and commercial products, including transportation,
HVAC systems, and other major appliances. These developments are causing a growing supply/demand
imbalance for grid operators across North America, which has led to high-profile examples of rolling blackouts
and calls for utility customers to reduce consumption to maintain grid integrity. In fact, the North American
Electric Reliability Corporation has labeled significant portions of the United States and Canada as
being at high risk of resource adequacy shortfalls during normal seasonal peak conditions in the 2024 – 2028
period due in part to these supply/demand dynamics. We are seeing increasing evidence that warnings of
potential resource inadequacies are driving incremental consumer awareness of the need for backup power
solutions. We believe utility supply shortfalls and related warnings may continue in the future, further
expanding awareness of deteriorating power quality in North America. Taken together, we expect these
factors to continue driving increased awareness of the need for backup power and demand for Generac’s
products within multiple categories.

Home standby penetration opportunity is significant. Many potential customers are still not aware of

the costs and benefits of automatic backup power solutions. With only approximately 6.25% penetration of
the addressable market of homes in the United States (which we define as single-family detached, owner-
occupied households with a home value of over $150,000, as defined by the U.S. Census Bureau’s 2021
American Housing Survey for the United States), we believe there are significant opportunities to further
penetrate the residential standby generator market both domestically and internationally. We believe by
expanding our distribution network, continuing to develop our product lines, and targeting our marketing
efforts, we can continue to build awareness and increase penetration for our home standby generators.

Solar, storage, and energy management markets are developing quickly. We believe the electric utility

landscape will undergo significant changes in the decade ahead due to rising utility rates, grid instability
and power quality issues, environmental concerns, and the continuing performance and cost improvements
in renewable energy and energy storage technologies. On-site power generation from renewable sources and
cleaner-burning natural gas generators are projected to become more prevalent as will the need to monitor,
manage, and store this power — potentially developing into a significant market opportunity. Additionally,
these markets are receiving an increasing level of regulatory and legislative support, most notably from the
Inflation Reduction Act that was passed in 2022. This legislation includes significant subsidies and investment
tax credits for consumers and businesses over the coming decade, as well as production tax credits for
businesses that meet certain domestic manufacturing requirements in the production of renewable energy
products. We believe this legislative support will provide necessary opportunity for long-term, value-creating
investments for market participants in this space. We expect to further advance our capabilities in energy
technology by increasing our product development, sourcing, distribution, and marketing efforts. In addition,
we should be able to leverage our significant competencies in the residential standby generator market to
build our market position in the emerging residential solar, storage, and energy management markets.

Energy-as-a-Service models, “beyond standby” applications, and energy services open new market
opportunities. We expect the evolution of the traditional electrical utility model toward decarbonized,
digitized, and decentralized solutions will continue to drive the need for grid operators to access and control
DERs. This will require highly intelligent software platforms that are able to optimize an increasingly
complex supply and demand equation, such as our Concerto DERMS software platform. Additionally,
growing interest in our C&I products across a variety of “beyond standby” applications is driving an increase
in demand for subscription-like models for end customers, in which Generac will partner with third parties
to deliver resiliency solutions that are also able to contribute to grid stability with minimal upfront capital
outlays. We also believe that we can gain share in the C&I “behind the meter” energy storage market,
including microgrid applications that require advanced system-level controls. The significant advancements
made in recent years in the connectivity of our products are core to these newer capabilities, which play a
key role in the evolution of Generac into an energy technology solutions company.

Natural gas generators, a continuing growth opportunity. We believe natural gas will continue to be an
important and cleaner transition fuel of the future, in comparison to diesel, as the world continues to shift
towards lower emission power generation sources. Demand for natural gas generators continues to represent
an increasing portion of the overall C&I market, which we believe will continue to grow at a faster rate
than traditional diesel fueled generators. We also continue to explore and expand our capabilities within new
gaseous generator market opportunities, including continuous-duty, prime rated, distributed generation,
demand response, microgrids, and overall use as a distributed energy resource in areas where grid stability is
needed. Many of these applications are made possible by our natural gas generators having the capability
to participate in available grid services programs, helping to offset the purchase price of the equipment over
the product’s lifespan. Expanding our natural gas product offering into larger power nodes is also a
part of this growth theme in taking advantage of the continuing shift from diesel to natural gas generators.

Increasingly critical nature and growing power consumption of digital infrastructure. As the number of

“connected” devices continues to rapidly increase and wireless networks are considered critical infrastructure
in the United States, network reliability and up-time are necessary for our increasingly connected society.
This will require highly resilient cell tower sites across the network, and therefore necessitates the need for
backup power sources on site at these cell towers. Generac is the leading supplier of backup power to the
telecommunications market in the United States, where approximately half of all existing tower sites have
yet to be hardened with backup power. As more mission-critical data is transmitted over wireless networks,
we believe this penetration rate must increase considerably to maintain a higher level of reliability across the
network. We have relationships with key Tier 1 carriers and tower companies globally, in addition to
having the distribution partners to provide service support to the global market. We believe these factors
coupled with Generac’s ability to customize solutions to each customer’s needs help us to maintain our
strength within the global telecommunications market.

Additionally, the rapid increase in data centers is driving increased demand for backup power solutions,

given the critical nature of this infrastructure. AI requirements, hyperscalers, and the expansion of edge
computing and “connected devices” are expected to double data center power consumption from 2022 to 2030.

We believe this significant growth in power consumption, as well as the increasing dependency of society on
this next-generation digital infrastructure, will drive demand for backup power and intelligent energy
management solutions, both at the individual site level and for the broader electrical grid.

Other Business Drivers

Impact of residential investment cycle. The market for a number of 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, energy storage
systems, and energy management devices. Trends in 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, which have become even more prevalent with the passing of the Inflation
Reduction Act, can also have an impact on the demand for solar and energy storage systems.

Impact of business capital investment and other economic cycles. The global market for our C&I
products is affected by different capital investment cycles, which can vary widely across the different regions
and markets that we serve. These cycles include non-residential building construction, durable goods and
infrastructure spending, as well as investments in the exploration and production of oil & gas, as businesses
or organizations either add new locations or make investments to upgrade existing locations or equipment.
These trends and market conditions can have a material impact on demand for our products. The capital
investment cycle may differ for the various C&I end markets that we serve, including light commercial,
retail, office, telecommunications, rental, industrial, data centers, healthcare, construction, oil & gas and
municipal infrastructure, among others. The market for these products is also affected by general economic
conditions, fluctuations in interest rates, and geopolitical matters in the various countries where we serve, as
well as credit availability in those regions.

Enterprise Strategy

The mega-trends and strategic growth themes that we have identified support our enterprise strategy,
“Powering A Smarter World,” and our purpose statement, “To lead the evolution to more resilient, efficient,
and sustainable energy solutions.” As we continue to execute our strategic plan into the future, we are
focused on three key objectives: (i) improve energy resilience and independence, (ii) optimize energy efficiency
and consumption, and (iii) protect and build critical infrastructure. These objectives are further explained
as follows:

Improve energy resilience and independence.

Increase power reliability through onsite generation and

storage solutions that provide resiliency for homes, businesses and communities.

Homes, businesses, and communities are experiencing a deterioration in the reliable supply of electricity
due to a number of factors including: climate change impacts driving more severe and volatile weather leading
to increased power outages; a capacity constrained legacy power infrastructure that’s still predominantly a
one-way system and remains heavily reliant on fossil fuels; the power infrastructure being impaired by
underinvestment making it more susceptible to power outages; and regulatory and legislative actions
implementing penalties for carbon intensity coupled with incentives for adoption of more intermittent
renewable power sources. Our residential and C&I product offering begins with power generation and storage
products including home standby generators, energy storage systems, and C&I generators. These onsite
generation and storage solutions provide peace of mind and protection against rising power quality issues
by delivering energy resilience and independence for end users and their communities. Many of these onsite
solutions are capable of being connected to the grid and can help support overall grid reliability, resiliency
and sustainability.

Optimize energy efficiency and consumption. Enable sustainable and more efficient power generation

and consumption through monitoring, management and lower-carbon solutions.

The “electrification of everything” is expected to drive increasing demand for electricity over the next

several years; including the electrification of transportation, via both electric vehicle adoption and expanding

charging infrastructure; the electrification of the home, including HVAC systems and other appliances; and
the electrification of commercial and industrial systems. These global electrification trends will require
utilities and energy retailers to meaningfully increase the supply and reliability of electricity, while at the
same time working to achieve carbon-reduction goals, which is expected to further contribute to a supply/
demand imbalance and additional power quality issues. As part of our expanding ecosystems of energy
technology solutions, we continue to build out our residential monitoring and management capabilities, which
improve energy efficiency and optimize consumption by end users. This includes ecobee’s smart home
energy management devices, Tank Utility’s propane tank monitoring solutions, and PWRmanager, our
second-generation load control device. We expect to further simplify and integrate our residential product
offering into a single ecosystem, leveraging our software development capabilities brought by the ecobee
acquisition. This singular system-level platform is intended to serve as the central hub and user interface for
consumers to monitor and manage all their DERs, thereby empowering the user to optimize energy
efficiency and consumption. Within our global C&I products, we are developing a similar ecosystem of
controls that are building off Deep Sea’s system-level controls and Blue Pillar’s industrial IoT network
solutions, helping businesses to better optimize their energy efficiency and consumption. These enhanced
connectivity capabilities provide the foundation for the continued build out of a centralized system-
level platform for our C&I customers to monitor and control all their DERs, including non-Generac assets.

Protect and build critical infrastructure. Offering innovative solutions that enable and protect next-

generation power, communications, transportation, and other critical infrastructure.

The critical power infrastructure around the world is becoming more sensitive to the growing electricity

supply/demand imbalance. Generac’s suite of products can be connected and synchronized within the
Concerto distributed energy resource management system, providing utilities and grid operators the flexibility
to access and control these DERs in real-time to better manage the escalating complexities of their electrical
grids. When utilized in these applications, our residential and C&I products essentially provide power
capacity to utilities and grid operators in the form of a virtual power plant. We believe the next generation
of critical power infrastructure will be more decarbonized, digitized and decentralized, and we view the
aggregation and management of distributed energy resources as an important aspect in creating the
future “Grid 2.0”.

Additionally, the growing power demands and increasingly critical nature of data centers and 5G telecom

networks globally makes backup power solutions essential elements for creating resilient next-generation
infrastructure. Finally, our broad offering of C&I mobile products (including mobile light towers, mobile
power generators, mobile energy storage systems and hybrid generators) play a key role in the completion of
infrastructure construction projects, such as roads, highways, bridges, and airports.

See “Item 7, Management’s Discussion and Analysis of Financial Condition and Results of

Operations — Business Drivers and Operational Factors” for additional drivers that influence demand for
our products and other factors affecting the markets that we serve.

Distribution Channels and Customers

We distribute our products through a variety of different distribution channels to increase awareness of
our product categories and brands, and to ensure our 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. We also sell direct to certain national
and regional account customers, as well as to individual consumers or businesses who are the end users of
our products.

We believe our global distribution network is a competitive advantage that has strengthened over
the years as a result of adding, expanding and developing the various distribution channels through which
we sell our products. We offer a broad set of tools, programs, factory support, and sales leads to help our
distribution partners be successful. Our network is well balanced with no single customer providing more
than 4% of our sales in 2023.

We have the industry’s largest network of factory direct independent generator dealers in North
America. Our residential dealer network is made up of electrical and HVAC contractors across the US and

Canada. These dealers sell, install and service our residential and light commercial generators to end users.
Over the years, we have made significant investments to grow this dealer network, and we will continue to
make those investments in the future given the importance of this channel. We continue to focus on a
variety of initiatives to more effectively market and sell our home standby products and better align our
dealer network with Generac. These initiatives have helped to improve customer lead quality and develop
our dealers, thereby increasing close rates and lowering our cost per lead over time. Over the years, we have
made significant investments in our “Power Play” guided sales process for residential dealers, making
enhancements in several areas targeted to improve the customer experience and overall close rates.
Additionally, our remote monitoring platform allows our residential generator dealers to monitor their
installed base of customers through a feature that we call “Fleet”, enabling them to offer a more proactive
experience to service a customer’s generator.

In recent years, we have been establishing our base of solar contractors that sell, install and service our

PWRcell energy storage systems. Leveraging our decades of expertise in partnering with our residential
generator dealers, we believe we can expand our solar installer network and increase mindshare for Generac’s
products, helping us to win in the clean energy market. In addition, we have been developing distribution
relationships with national solar providers to offer our equipment in their portfolio of products and services.
As we continue to roll-out new clean energy products in the future, we expect to accelerate our efforts to
expand distribution for these products.

Our industrial distribution network consists of industrial power generation distributors that cover
particular regions around the world. Over the past several years, we have been strengthening our dealer
network globally through acquisitions and organic means, to increase our C&I product sales and related
market share. Additionally, since 2020, we have acquired our industrial distributors in northern and southern
California and New England to give us direct coverage of the west coast and northeast regions of the
United States and accelerate our efforts in these markets. Industrial distributors and dealers provide C&I
end users with ongoing sales, installation, service and product support. Our industrial distributors and dealers
help maintain the local relationships with commercial electrical contractors, specifying engineers, and
national account regional buying offices. We also sell 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.

Our 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 our residential
standby, portable and light-commercial generators, as well as our outdoor power equipment and ecobee
smart home energy management devices. The placement of our products at retail locations drives significant
awareness for our brands and the automatic home standby generator product category.

Our wholesaler network distributes our 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 our dealer network.

On a selective basis, we have 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 our products.

The distribution for our 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.

We also sell direct to certain customers that are the end users of our 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 our residential products are sold direct to individual

consumers, who are the end users of the product. In the grid services space, we sell software and equipment
direct to utilities and grid operators.

Research and Development

Our focus on a broad range of energy technology products and solutions drives technological innovation,
advanced engineering capabilities, and specialized manufacturing competencies. Research and development
(R&D) has been a core competency for Generac since our inception, and today includes a staff of
over 1,000 engineers working on numerous projects at various facilities around the world, including our
technology centers located in Wisconsin, Nevada, Massachusetts, Suzhou, China, and Mexico City, Mexico.
These activities are focused on developing new technologies and product enhancements, as well as
maintaining product competitiveness by reducing manufacturing costs, improving safety characteristics,
reliability and performance, while ensuring compliance with regulatory standards. We have significant
experience using natural gas engines and have developed specific expertise with fuel systems and emissions
technology. In the residential and light commercial markets, we have developed proprietary engines, cooling
packages, controls, fuel systems and emissions systems.

We have made several acquisitions in recent years that significantly enhanced our R&D capabilities.

This includes substantial technical resources in energy storage, monitoring, and power conversion for
residential applications, as well as in the C&I energy storage and generator controls spaces. These resources
add proficiency in power electronics and battery management software, and we have also added
considerable expertise in designing and prototyping energy efficiency products. We have significantly
increased our software development capabilities across a variety of applications, including system-
level controls, remote monitoring, and distributed energy resource management systems. Combining
advanced software development with the expansion of our electrical engineering resources is expected to
accelerate our energy technology efforts.

We also have engineering and product management resources focused on evaluating and developing
alternative technologies that are emerging and could become commercially viable over the long term such as
fuel cells and hydrogen. As we continue to evaluate new technologies that are more decarbonized, digitized,
and decentralized, we believe that our expertise in energy technology solutions provides us with the capability
to develop new products and services that will allow continued diversification and differentiation in our
end markets.

Intellectual Property

We are committed to research and development, and we rely on a combination of patents and
trademarks to help establish and protect our proprietary rights. Our patents protect certain features and
technologies we have developed for use in our products including fuel systems, air flow, electronics and
controls, noise reduction, air-cooled engines, energy management, energy monitoring, energy storage, and
load management. We believe the existence of these patents and trademarks, along with our ongoing processes
to register additional patents and trademarks, help protect our intellectual property rights and enhance our
brands and competitive position. We also use proprietary manufacturing processes that require customized
equipment. With our continuous focus on research and development, we expect to develop new intellectual
property on an ongoing basis.

See “Item 1A. Risk Factors” for additional factors related to intellectual property rights that can affect

our business.

Manufacturing

We operate numerous manufacturing plants, distribution facilities and inventory warehouses located
throughout the world. We store finished goods at third-party logistics providers in the United States that
accommodate material storage and rapid response requirements of our customers. See “Item 2 — Properties”
for additional details regarding the locations and activities of our principal operations.

In recent years, we have added and continue to add manufacturing capacity through investments in

automation, improved utilization, and the expansion of our manufacturing footprint through organic

means as well as through acquisitions. In 2023, we announced plans to build a new manufacturing facility in
Beaver Dam, Wisconsin that will expand our production capacity and increase our vertical integration
capabilities for certain C&I product lines. Our ability to increase capacity has been critical to executing our
strategic growth priorities. We believe our vertical integration and scale in home standby generators provides
a material benefit in our ability to maintain industry-leading output with state-of-the-art manufacturing
processes, especially when demand for our products can increase rapidly with very short notice.

Suppliers of Raw Materials, Components and Equipment

Our primary raw material inputs are steel, copper and aluminum, all of which are purchased from third

parties and, in many cases, as part of machined or manufactured components. In certain instances, we
purchase complete equipment or systems from third-party suppliers, including from contract manufacturers.
Given our increasing focus on energy technology solutions, advanced electronic components and micro-
processors have become a larger consideration within our supply chain. Within the clean energy market,
batteries are a significant supply chain input for our energy storage systems. Over multiple decades, we have
developed an extensive network of reliable suppliers in the United States and around the world. We
continuously evaluate the quality and cost structure of our purchased components and equipment and
assess the capabilities of our supply chain. Components and equipment are sourced accordingly based on
this evaluation. For certain products, we do not have internal manufacturing capabilities and rely upon a small
number of contract manufacturers to build these products or supply these components, including but not
limited to certain energy technology products or components.

See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”

for additional information regarding the impact of other macroeconomic factors.

See “Item 1A. Risk Factors” for additional factors that can influence our supply of raw materials,

components and equipment.

Competition

The market for power generation equipment, energy storage systems, energy management solutions,
and other engine powered products is competitive. We face competition from a variety of large diversified
industrial companies as well as smaller generator manufacturers, along with mobile equipment, engine
powered tools, solar inverter, battery storage, smart thermostat, and grid services providers, both domestic
and internationally.

Specifically in the generator market, most of the traditional participants compete on a more focused

basis, targeting specific applications within their larger diversified product mix. We are the only significant
market participant with a primary focus on power equipment with a key emphasis on standby, portable and
mobile generators with broad capabilities across the residential, light-commercial and industrial markets.
We believe that our engineering capabilities and core focus on generators provide us with manufacturing
flexibility and enable us to maintain a competitive advantage for product innovation. We also believe our
broad product offering, diverse omni-channel distribution model and strong factory support provide
additional advantages as well.

The Company in recent years has been evolving its business model toward more of a focus on energy

technology solutions and services, which has introduced a new set of competitors.

A summary of the primary competitors across our 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. Also, we compete against other regional packagers that serve local markets throughout the
world.

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.

In a continuously evolving market, we believe our scale and broad capabilities make us well positioned

to remain competitive. We compete primarily based on brand reputation, quality, reliability, pricing,
innovative features, breadth of product offering, product availability and factory support.

Government Incentives and Regulation, including Environmental Matters

Generac’s growing presence in energy technology solutions has increased our 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. These incentives cover a wide range of products and solutions, including MLPE solutions, solar
plus storage systems, grid services, and grid-edge devices, and the availability, size, and outlook for such
incentives can impact the markets for these products and solutions. 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 our residential energy
technology solutions.

As a manufacturing company, our operations are subject to a variety of federal, state, local and foreign

laws and regulations covering environmental, health and safety matters. Applicable laws and
regulations include those governing, among other things, emissions to air, discharges to water, noise and
employee safety, as well as the generation, handling, storage, transportation, treatment, and disposal of waste
and other materials. In addition, our products are subject to various laws and regulations relating to,
among other things, emissions and fuel requirements, as well as labeling, storage, transport, and marketing.

Our 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 us to meet more stringent emission
standards, and all of our 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).

Similarly, other countries have varying degrees of regulation for our products, depending upon product

application and fuel types.

See “Item 1A. Risk Factors” for additional legal and regulatory factors that can affect the products we

sell and the results of our operations.

Environment, Social, and Governance Program

We continue to advance our Environmental, Social, and Governance (ESG) program and published an

expanded ESG Report in April of 2023. This report details our progress in executing the ESG goals and
initiatives that align with our “Powering a Smarter World” enterprise strategy and our purpose statement:
‘To lead the evolution to more resilient, efficient, and sustainable energy solutions.’ The ESG Report contains
an expanded list of key performance indicators and data points, and aligns with a number of voluntary
ESG frameworks such as the Sustainability Accounting Standards Board (SASB), Global Reporting Initiative
(GRI) and the United Nations Sustainable Development Goals (UN SDG). The information provided
within our ESG Report published in April of 2023, or any future ESG Report, is not part of this report and
is therefore not incorporated herein by reference. A copy of the ESG Report is available from our Investor
Relations webpage at Generac.com. We plan to publish an updated ESG Report in April of 2024 that coincides
with the filing of our annual Proxy Statement.

See “Item 1A. Risk Factors” for additional factors related to our ESG Program.

Human Capital

“Our People” is one of the foundational elements to our “Powering a Smarter World” enterprise
strategy and is a corporate value as well. We foster a culture of diversity and engagement to strengthen our
company while supporting individual achievement, equity, inclusivity and good corporate citizenship globally.
We believe our success is directly tied to our employees’ professional growth and personal well-being,
combined with strong families and communities.

Some examples of key human capital programs and initiatives that we are focused on include:

Health, wellness and safety — Employee health and safety is the Company’s top priority. Generac’s
total rewards program is based on the four pillars of balance, security, well-being and community. These
programs are designed to meet the varied and evolving needs of our diverse workforce. We maintain an
employee wellness program, incentivize healthy-living activities, and we develop and administer company-
wide policies to help ensure the safety of each employee and compliance with government agency and other
standards.

Diversity, equity and inclusion (DEI) — At Generac, people with diverse backgrounds and points of

view work together to support our customers around the globe. As an inclusive workplace, our employees
embrace diversity in all forms, celebrate differences, and treat others with equality and respect. Generac is also
focused on building understanding and awareness of DEI through education and open communication.
We sponsor a variety of employee-led Business Employee Resource Groups (BERGs) to facilitate networking
and strong connections with peers and leadership, and to increase the listening and learning opportunities
across our workforce. We continue to expand our DEI Learning Library and we partner with community job
agencies representing disabled clients and workforce release programs to provide job opportunities to
those who face barriers to employment.

Talent development & employee engagement — Our success is directly tied to our employees and what
we can accomplish together. We prioritize creating opportunities to help employees build careers and support
their growth as part of a meaningful and valuable employee experience. We hold internal career development
events as well as partner with local educational resources to offer on the job learning, collaborative work
experiences and formal learning programs on lean methodology and project management skills to support
progressions and advancement of our workforce. Further, we maintain an ongoing global employee
engagement initiative with targeted action plans by region, function, and business group. Action plans and
their progress are measured by global employee engagement surveys.

As of December 31, 2023, we had 8,600 employees (8,315 full time and 285 part-time and temporary

employees). Of those, approximately 3,500 employees were directly or indirectly involved in manufacturing
at our manufacturing facilities.

Domestically, we have had an “open shop” bargaining agreement for the past 50 years. The current
agreement, which expires October 17, 2026, covers our Eagle, Wisconsin facility. Additionally, our plants in
Mexico, Italy, Germany, and Spain are operated under various local or national union groups, or works
councils. Our other facilities are not unionized.

Available Information

The Company’s principal executive offices are located at S45 W29290 Highway 59, Waukesha,

Wisconsin, 53189 and the Company’s telephone number is (262) 544-4811. The Company’s website is
www.generac.com. The Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and amendments to those reports are available free of charge through the “Investor
Relations” portion of the Company’s web site, as soon as reasonably practicable after they are filed with the
Securities and Exchange Commission (SEC). The information provided on these websites is not part of
this report and is therefore not incorporated herein by reference.

Information About Our Executive Officers

The following table sets forth information regarding our executive officers:

Name

Aaron P. Jagdfeld

York A. Ragen

Erik Wilde

Patrick Forsythe

Raj Kanuru

Norman Taffe

Kyle Raabe

Age

Position

President, Chief Executive Officer and Chairman

Chief Financial Officer

Executive Vice President, Industrial, Americas

Chief Technical Officer

Executive Vice President, General Counsel and Secretary

President, Energy Technology

President, Consumer Power

Aaron P. Jagdfeld has served as our Chief Executive Officer since September 2008, as a director since
November 2006 and was named Chairman in February 2016. Prior to becoming Chief Executive Officer,
Mr. Jagdfeld worked for Generac for 15 years. He began his career in the finance department in 1994 and
became our Chief Financial Officer in 2002. In 2007, he was appointed President and was responsible for
sales, marketing, engineering and product development. Prior to joining Generac, Mr. Jagdfeld worked in
the audit practice of the Milwaukee, Wisconsin office of Deloitte and Touche. Mr. Jagdfeld holds a Bachelor
of Business Administration in Accounting from the University of Wisconsin-Whitewater.

York A. Ragen has served as our Chief Financial Officer since September 2008. Prior to becoming
Chief Financial Officer, Mr. Ragen held Director of Finance and Vice President of Finance positions at
Generac. Prior to joining Generac in 2005, Mr. Ragen was Vice President, Corporate Controller at APW Ltd.,
a spin-off from Applied Power Inc., now known as Enerpac Tool Group. Mr. Ragen began his career at
Arthur Andersen in the Milwaukee, Wisconsin office audit practice. Mr. Ragen holds a Bachelor of Business
Administration in Accounting from the University of Wisconsin-Whitewater.

Erik Wilde began serving as our Executive Vice President, Industrial, Americas in July 2016. Mr. Wilde
was Vice President and General Manager of the Mining Division for Komatsu America Corp., a manufacturer
of construction, mining, and compact construction equipment, from 2013 until he joined Generac. Prior
to that role, he held leadership positions as Vice President of the ICT Business Division and Product Marketing
at Komatsu America Corp. beginning in 2005. Mr. Wilde holds a Bachelor of Business Administration in
Management from Boise State University and an M.B.A. from the Keller Graduate School of Management.

Patrick Forsythe has served as our Chief Technical Officer since January 2021. He previously served as

our Executive Vice President of Global Engineering beginning in July 2015. Prior to re-joining Generac,
Mr. Forsythe was Vice President, Global Engineering & Technology of Hayward Industries from 2008 to
2015, Vice President, Global Engineering at Ingersoll Rand Company (and the acquired Doosan Infracore
International) from 2004 to 2008, and Director of Engineering at Ingersoll Rand Company from 2002 to
2004. Prior to 2002, Mr. Forsythe worked in various engineering management capacities with Generac
from 1995 to 2002. Mr. Forsythe holds a Higher National Diploma (HND) in Mechanical Engineering from
the University of Ulster (United Kingdom), a B.S. in Mechanical Engineering, and an M.S. in Manufacturing
Management & Technology from The Open University (United Kingdom).

Raj Kanuru is our Executive Vice President, General Counsel & Secretary and is the Company’s
principal legal and compliance officer, roles that he has held since joining Generac in 2013. Prior to joining
Generac, Mr. Kanuru served as in-house counsel at Caterpillar Inc. for almost 14 years within various
leadership roles, including in Caterpillar’s Securities, Regulatory and Tax group, in Caterpillar Financial,
and in Caterpillar’s Energy & Transportation group. From 2009 to 2013, Mr. Kanuru served as Vice President,
General Counsel and Secretary of Progress Rail Services Inc., and its subsidiaries (a Caterpillar company).
He began his legal career as a senior associate in the tax consulting practice of Arthur Andersen LLP.
Mr. Kanuru holds a Bachelor of Science in Finance degree from Birmingham-Southern College and received
his Juris Doctor degree from the University of Alabama.

Norman Taffe began serving as President — Energy Technology in August 2022. Prior to joining

Generac, Mr. Taffe was Executive Vice President North America Residential of SunPower Corporation

from 2018 to 2021. Prior to this, Mr. Taffe was Executive Vice President — Products and Vice President of
Power Plant Products and Solutions from 2013 to 2018. Mr. Taffe also worked in various engineering and
marketing management capacities at Cypress Semiconductor from 1989 to 2012, including Executive Vice
President — Consumer & Computation Devices from 2005 to 2012. Mr. Taffe holds a Bachelor of Science in
Electrical Engineering from the University of Michigan and an Executive MBA from Harvard Business
School.

Kyle Raabe has served as our President, Consumer Power since November 2019. Prior to rejoining
Generac, Mr. Raabe was Senior Vice President of North American Sales, Demand Planning and Sales
Operations from 2018 through 2019 and Vice President of Sales for the Commercial Security and Safety
groups from 2015 through 2018 at The Master Lock Corporation, a manufacturer of locks, combination
padlocks and other security products. Prior to working at The Master Lock Corporation, Mr. Raabe led
multiple groups at Generac Power Systems from 2007 through 2015 as Director of Wholesale and Dealer
Distribution, Vice President Wholesale Distribution Sales and Vice President, Industrial Distribution
Sales. Before joining Generac, Mr. Raabe served at Veolia North America, Environmental Services leading
Midwest Regional Service Operations. Mr. Raabe holds a BA, Biological Science from Lawrence University.

Item 1A. Risk Factors

You should carefully consider the following risks. These risks could materially affect our business,

results of operations or financial condition, cause the trading price of our common stock to decline
materially or cause our actual results to differ materially from those expected or those expressed in any forward-
looking statements made by us. These risks are not exclusive, and additional risks to which we are subject
include, but are not limited to, the factors mentioned under “Forward-Looking Statements” and the risks of
our businesses described elsewhere in this Annual Report.

Risk factors related to our business and industry

Decreases in the availability and quality, or increases in the cost, of raw materials, key components and labor
we use to make our products could materially reduce our earnings.

The principal raw materials that we use to produce our products include steel, copper and aluminum as

well as batteries and advanced electronic components. We also source a significant number of component
parts from third parties that we utilize to manufacture our products. The prices of those raw materials and
components are susceptible to significant fluctuations due to trends in supply and demand, commodity prices,
currencies, transportation costs, government regulations and tariffs, price controls, economic conditions and
other unforeseen circumstances beyond our control. In fact, we have seen such trends significantly impact
our business resulting in higher costs and shortages in materials, components and labor, and such impacts may
continue or arise again in the foreseeable future. We typically do not have long-term supply contracts in
place to ensure the raw materials and components we use are available in necessary amounts or at fixed prices.
In the short term, we have been unable to fully mitigate raw material or component price increases through
product design improvements, price increases to our customers, manufacturing productivity improvements, or
hedging transactions, and if our mitigation efforts continue to not be fully effective in the short or long
term, our profitability could be adversely affected. Also, our ability to continue to obtain quality materials
and components is subject to the continued reliability and viability of our suppliers, including in some cases,
suppliers who are the sole source of certain important components. It has been challenging to consistently
obtain adequate, cost efficient or timely deliveries of certain required raw materials and components, or
sufficient labor resources, and if this trend continues, we may be unable to manufacture sufficient quantities
of products on a timely basis. This could cause us to lose additional sales, incur additional costs, delay new
product introductions or suffer harm to our reputation.

We depend upon a small number of outside contract manufacturers and component suppliers, as well as 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 do not have internal manufacturing capabilities and rely upon a small number of

contract manufacturers to build these products or supply these components, including but not limited to

certain clean energy products or components. 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 manufacturers generate from
our orders may represent a relatively small percentage of their overall revenues. As a result, fulfilling our
orders may not be considered a priority 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, which may not be available to us on favorable terms, if at all.
Our reliance on such contract manufacturers 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 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, wars, 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.

Our business could be negatively impacted if we fail to adequately protect our intellectual property rights or if
third parties claim that we are in violation of their intellectual property rights.

We consider our intellectual property rights to be important assets and seek to protect them through a
combination of patent, trademark, copyright and trade secret laws, as well as licensing and confidentiality
agreements. These protections may not be adequate to prevent third parties from using our intellectual
property without our authorization, breaching any confidentiality agreements with us, copying or reverse
engineering our products, or developing and marketing products that are substantially equivalent to or
superior to our own. The unauthorized use of our intellectual property by others could reduce our competitive
advantage and harm our business. Not only are intellectual property-related proceedings burdensome and
costly, but they could take years to resolve, and we might not ultimately prevail. We cannot guarantee that any
patents, issued or pending, will provide us with any competitive advantage or will not be challenged by
third parties. Moreover, the expiration of our patents may lead to increased competition with respect to
certain products. If we fail to protect our intellectual property and other proprietary rights, or if such
intellectual property and proprietary rights are infringed, misappropriated or otherwise violated, our business,
results of operations or financial condition could be materially harmed.

In addition, we cannot be certain that we do not or will not infringe third parties’ intellectual property
rights. We currently are, and have previously been, subject to such third-party infringement claims, and may
continue to be in the future. Any such claim, even if it is believed to be without merit, may be expensive
and time-consuming to defend, subject us to damages, cause us to cease making, using or selling certain
products that incorporate the disputed intellectual property, require us to redesign our products, divert
management time and attention, and/or require us to enter into costly royalty or licensing arrangements.
Certain parts of our business experience significant intellectual property litigation and we have in the past and
could in the future become involved in costly and lengthy litigation involving patents or other intellectual
property rights which could adversely affect our business. We have recently been subject to adverse rulings or
have settled claims for significant amounts related to the infringement of third-party intellectual property
rights, and may continue to be subject to such claims, damage awards or settlement payments. In addition, we
may not prevail in such future proceedings. An adverse outcome of any such proceeding may reduce our
competitive advantage or otherwise harm our financial condition and our business or potentially impair our
patents and technology intangible assets which could have a material adverse effect on our financial
statements.

For further information, see Note “18. Commitments and Contingencies”.

We may incur costs and liabilities as a result of product liability, warranty claims, recalls, or other claims.

We face a risk of exposure to 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, such current insurance coverage may 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, 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 experienced, and may continue to experience, product
liability claims or other product related claims, including higher warranty costs, which may impact our
reputation and resulting sales and profitability. For example, 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.

While we do record reserves for future warranty claims, our estimated warranty accruals for previously

sold products and our warranty costs for current product sales are based on assumptions using historical
experience, and we do not have a long history with respect to certain products. As a result, these assumptions
could prove to be materially different from the actual performance of such products, causing us to incur
substantial unanticipated expenses to repair or replace defective products in the future or to compensate
customers for defective products. Our failure to accurately predict future claims could have a material adverse
effect on our business, results of operations, or financial condition.

Moreover, we have and may continue to be exposed to product recalls and adverse public relations if
our products are alleged to have defects, to cause property damage, to cause injury or illness, or if we are
alleged to have violated governmental regulations. A product recall could result in substantial and unexpected
expenditures, which would reduce operating profit and cash flow. In addition, a product recall may require
significant management attention. Product recalls may hurt the value of our brands and lead to decreased
demand for our products. Product recalls have resulted in and may continue to lead to increased scrutiny,
fines or other penalties by federal, state or international regulatory agencies on our operations or business and
increased litigation and could have a material adverse effect on our consolidated results of operations,
financial condition and cash flows.

For further information, see Note “18. Commitments and Contingencies”.

We cannot guarantee that our share repurchase programs will be fully consummated or that they will enhance
long-term stockholder value. Share repurchases could also increase the volatility of the market price of our stock
and diminish our cash reserves.

On February 12, 2024, the Company’s Board of Directors approved a new stock repurchase program

that allows for the repurchase of up to $500 million of the Company’s common stock over the next
twenty-four months. The new program replaces the prior share repurchase program, which had approximately
$26 million remaining available for repurchase when the new program was approved. Although our Board
of Directors has authorized such share repurchase program, the program does not obligate us to repurchase
any specific dollar amount or to acquire any specific number of shares. Such program could also diminish
our cash reserves. In addition, we may discontinue, modify or suspend our share repurchase program based
on several factors, including our cash balances and potential future capital requirements for strategic

transactions, including acquisitions, results of operations, financial condition and other factors that our
Board of Directors may deem relevant. Any modification, suspension, or termination of our share repurchase
program could cause our stock price to decline. We cannot guarantee that such program will be fully
consummated or that it will enhance long-term stockholder value.

The risk of non-compliance with U.S. and foreign laws and regulations applicable to our global operations
could have a significant impact on our results of operations, financial condition or strategic objectives.

Our global operations subject us to regulation by U.S. federal and state laws and multiple foreign laws,

regulations and policies. These laws and regulations are complex, change frequently, have become more
stringent over time and increase our cost of doing business. These laws and regulations include import and
export control, environmental, health and safety regulations, data privacy requirements, international labor
laws and work councils and anti- corruption and bribery laws such as the U.S. Foreign Corrupt Practices
Act, the U.K. Bribery Act, the U.N. Convention Against Bribery and local laws prohibiting corrupt payments
to government officials.

We are subject to the risk that we, our employees, our affiliated entities, contractors, agents or their
respective officers, directors, and employees may take actions determined to be in violation of any of these
laws, for which we might be held responsible, particularly as we expand our operations geographically through
organic growth and acquisitions. An actual or alleged violation could result in substantial fines, sanctions,
civil or criminal penalties, debarment from government contracts, curtailment of operations in certain
jurisdictions, competitive or reputational harm, litigation or regulatory action and other consequences that
might adversely affect our results of operations, financial condition or strategic objectives.

Increased scrutiny regarding our ESG practices could impact our reputation.

Increasing governmental and societal attention to ESG matters, including expanding mandatory and
voluntary reporting, and disclosure topics such as climate change, sustainability, natural resources, waste
reduction, energy, human capital, and risk oversight could expand the nature, scope, and complexity of
matters that we are required to control, assess, and report. We strive to deliver shared value through our
business and our diverse stakeholders expect us to make progress in certain ESG priority issue areas. It is
possible that we may be unsuccessful in the achievement of our ESG goals, on a timely basis or at all, or
that the costs to achieve those goals become prohibitively expensive. Furthermore, our stakeholders may not
be satisfied with our initiatives or efforts or the speed at which we are progressing towards any such
aspirations and goals. Additionally, organizations that inform investors on ESG matters have developed
rating systems for evaluating companies on their approach to ESG. Unfavorable ratings may lead to negative
investor sentiment, which could negatively impact our stock price. Any failure, or perceived failure, to
respond to ESG concerns could harm our business and reputation.

Our business may face increased scrutiny from the investment community, regulators, media and other
stakeholders related to our sustainability activities, including our commitments, goals, targets and objectives,
and our methodologies and timelines for pursuing them. We are subject to increasing regulatory
requirements around sustainability-related disclosures, including significant anticipated rulemaking by the
SEC or other international governmental authorities, which may continue to evolve. Complying with
regulators’ disclosure requirements may impose substantial additional costs and require additional resources,
including with respect to third-party attestation, to enable the capture, analysis and audit of appropriate
data. Any actual or alleged failure to comply with regulatory requirements could result in fines, penalties and
civil liabilities, and damage to our reputation. Furthermore, if our sustainability reporting and practices
do not meet investor, regulator or other stakeholders’ expectations, standards and requirements, our
reputation, ability to attract or retain employees, and attractiveness as an investment, business partner or
acquiror could be negatively impacted. Similarly, our failure or perceived failure to pursue or fulfill our
sustainability commitments, goals, targets, and objectives, to comply with ethical, environmental, or other
standards, regulations, or expectations, or to comply with reporting requirements and standards with
respect to these matters, within the timelines we announce, or at all, could have operational, reputational,
financial and legal impacts.

If we fail to develop new products or enhance existing products, or our customers do not accept the new or
enhanced products we develop, our revenue and profitability could be adversely impacted.

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 fail to make innovations, launch products
with quality problems 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.

Demand for the majority of our products is significantly affected by unpredictable power outage activity that
can lead to substantial variations in, and uncertainties regarding, our financial results from period to period.

Sales of our products are subject to consumer buying patterns, and demand for the majority of our
products is affected by power outage events caused by thunderstorms, hurricanes, ice storms, blackouts,
public safety power shutoffs, and other power grid reliability issues, all of which affects our ability to
accurately manage our business and forecast future results. The impact of these outage events on our sales
can vary depending on the location, frequency and severity of the outages. Sustained periods without major
power disruptions can lead, and in the past have led, to reduced consumer awareness of the benefits of
standby and portable generator products and can result and have previously resulted in reduced sales growth
rates and excess inventory. There are smaller, more localized power outages that occur frequently that drive
a baseline level of demand for back-up power solutions. The lack of major power outage events and
fluctuations to the baseline levels of power outage activity are part of managing our business, and these
fluctuations could have, and previously have had, an adverse effect on our net sales and profits. Despite their
unpredictable nature, we believe power disruptions create awareness and accelerate adoption of our home
standby products.

Demand for our products is significantly affected by durable goods spending by consumers and businesses, and
other macroeconomic conditions.

Our business is affected by general economic conditions, and uncertainty or adverse changes, such as
the prolonged downturn in U.S. residential investment and the impact of more stringent credit standards
and rising interest rates or inflation. These have previously led and could lead again to a decline in demand
for our products and pressure to reduce our prices. Our sales of light-commercial and industrial generators are
affected by conditions in the non-residential construction sector and by the capital investment trends for
small and large businesses and municipalities. If these businesses and municipalities cannot access credit
markets or do not utilize discretionary funds to purchase our products as a result of the economy or other
factors, our business could suffer and our ability to realize benefits from our strategy of increasing sales in the
light-commercial and industrial sectors could be adversely affected. In addition, consumer confidence and
home remodeling expenditures have a significant impact on sales of our residential products, and prolonged
periods of weakness in consumer durable goods spending has previously had, and could again have a
material impact on our business. We currently do not have any material contracts with our customers which
call for committed volume, and we cannot guarantee that our current customers will continue to purchase
our products at the same level, if at all. If general economic conditions or consumer confidence were to
worsen, or if the non-residential construction sector or rate of capital investments were to decline, our net
sales and profits would likely be adversely affected. Changes in government monetary or fiscal policies
may negatively impact our results, including increases in interest rates or sustained inflationary pressure
which could negatively affect overall growth and impact sales of our products. Additionally, timing of capital
spending by our national account customers can vary from quarter-to-quarter based on capital availability
and internal capital spending budgets. Also, the availability, renewal or potential loss of renewable energy
mandates and investment tax credits and other subsidies can have an impact on the demand for energy
storage systems. Our global operations are exposed to political and economic risks, commercial instability

and events beyond our control in the countries in which we operate. Such risks or events may disrupt our
supply chain and not enable us to produce products to meet customer demand.

If we do not forecast demand for our products accurately, we may experience product shortages, delays in
product shipment, excess product inventory, difficulties in planning expenses or disputes with suppliers, any of
which may adversely affect our business and financial condition.

We manufacture our products based on both actual customer orders and our estimates of customer
demand. This process requires us to make multiple forecasts and assumptions relating to the demand of our
distributors, their end customers, general market conditions, and other macroeconomic conditions. As a
result, it may be difficult to forecast future customer demand to plan our operations, which may adversely
affect our business and financial condition. If we overestimate demand for our products, we may have excess
inventory that we cannot sell. We may have to make significant provisions for inventory write-downs based
on events that are currently not known, and such provisions or any adjustments to such provisions could be
material. We may also become involved in disputes with our suppliers who may claim that we failed to
fulfill forecast or minimum purchase requirements. Conversely, if we underestimate demand, we may not
have sufficient inventory to meet end-customer demand, and we may lose market share, damage relationships
with our distributors and end customers and forgo potential revenue opportunities. Obtaining additional
supply in the face of product shortages may be costly or impossible, which could prevent us from fulfilling
orders in a timely and cost-efficient manner or at all. In addition, if we overestimate our production
requirements, our contract manufacturers may purchase excess components and build excess inventory. If
our contract manufacturers, at our request, purchase excess components that are unique to our products and
are unable to recoup the costs of such excess inventory through resale or return or build excess products,
we could be required to pay for these excess parts or products and recognize related inventory write-downs.

The industries in which we compete are highly competitive, and our failure to compete successfully could adversely
affect our results of operations and financial condition.

We operate in markets that are highly competitive. Some of our competitors have established brands
and are larger in size or are divisions of large, diversified companies which have substantially greater financial
resources than we do. Some of our competitors have and may continue to be willing to reduce prices and
accept lower margins in order to compete with us. In addition, we could face new competition from large
international or domestic companies with established brands that enter our end markets. Demand for our
products may also be affected by our ability to respond to changes in design and functionality, to respond
to downward pricing pressure, and to provide shorter lead times for our products than our competitors. If we
are unable to respond successfully to these competitive pressures, we could lose market share, which could
have an adverse impact on our results. For further information, see “Item 1 — Business — Competition”.

We rely on independent dealers and distribution partners, and the loss of these dealers and distribution partners,
or of any of our sales arrangements with significant private label, national, retail or equipment rental customers,
would adversely affect our business.

We depend on the services of independent distributors and dealers to sell and install our products and

provide service and aftermarket support to our end customers. Their capacity constraints and/or inability to
install and service our products, including their inability to hire, develop, or retain qualified technicians or
other labor, could limit our ability to maintain and grow our sales. We also rely on our distribution channels
to drive awareness for our product categories and our brands. In addition, we sell our products to end
users through private label arrangements with leading home equipment, electrical equipment and construction
machinery companies; arrangements with top retailers and equipment rental companies; and our direct
national accounts with telecommunications and other industrial customers. Our distribution agreements and
any contracts we have with large national, retail and other customers are typically not exclusive, and many
of the distributors with whom we do business also offer competitors’ products and services.

Impairment of our relationships with our distributors, dealers or large customers, loss of a substantial

number of these distributors or dealers or of one or more large customers, or an increase in our distributors’
or dealers’ sales of our competitors’ products to our customers or of our large customers’ purchases of our
competitors’ products could materially reduce our sales and profits. For example, we have had, and may

continue to have, disputes with one or more customers, distributors or dealers to whom we sell our products,
including clean energy products, and this may reduce or limit the sales growth for such products.
Additionally, our ability to successfully realize our growth strategy is dependent in part on our ability to
identify, attract and retain new distributors at all layers of our distribution platform, including increasing
the number of energy storage distributors, and we cannot be certain that we will be successful in these efforts.
For further information, see “Item 1 — Business — Distribution Channels and Customers”.

We are unable to determine the specific impact of changes in selling prices or changes in volumes or mix of our
products on our net sales.

Because of the wide range of products that we sell, the level of customization for many of our
products, the frequent rollout of new products, the different accounting systems utilized, and the fact that
we do not apply pricing changes uniformly across our entire portfolio of products, we are unable to determine
with specificity the effect of volume or mix changes or changes in selling prices on our net sales.

Risk factors related to our operations

The loss of any key members of our senior management team or key employees could disrupt our operations
and harm our business.

Our success depends, in part, on the efforts of certain key individuals, including the members of our
senior management team, who have significant experience in the energy products and solutions industry. If,
for any reason, our senior executives do not continue to be active in management, or if key employees
leave our company, our business, financial condition or results of operations could be adversely affected.
Failure to continue to attract or retain these individuals at reasonable compensation levels could have a
material adverse effect on our business, liquidity and results of operations. If we need to replace any of these
individuals in the near future, the loss of their services could disrupt our operations and have a material
adverse effect on our business if we do not have effective succession plans in place.

Disruptions caused by labor disputes or organized labor activities could harm our business.

We may from time to time experience union organizing activities in our non-union facilities. Disputes

with the current labor union or new union organizing activities could lead to work slowdowns or stoppages
and make it difficult or impossible for us to meet scheduled delivery times for product shipments to our
customers, which could result in loss of business. In addition, union activity could result in higher labor costs,
which could harm our financial condition, results of operations and competitive position. A work stoppage
or limitations on production at our facilities for any reason could have an adverse effect on our business,
results of operations and financial condition. In addition, many of our suppliers have unionized work forces.
Strikes or work stoppages experienced by our customers or suppliers could have an adverse effect on our
business, results of operations and financial condition.

Our business and operations can be adversely affected by our ability to attract, motivate, develop, and retain
our employees.

We are committed to attracting, motivating, developing, and retaining our employees to ensure we
remain an employer of choice. Despite our efforts, we have experienced, and could continue to experience,
depending upon external market conditions, higher employee turnover and absenteeism. Furthermore, the
competition for skilled personnel is often very competitive in markets where our facilities are located.
Increased turnover rates within our employee base, perceived or actual deficiencies in total compensation
paid to our employees in relation to competing employers, or as a result of general macroeconomic factors
or otherwise, could lead to increased costs, such as increased overtime to meet demand and potentially further
increase salaries and wage rates to attract and retain employees, and could negatively affect our ability to
efficiently operate our manufacturing facilities and overall business. If we are unable to hire and retain
employees capable of performing at a high level, our business, financial condition and results of operations
could be adversely affected.

We may experience material disruptions to our manufacturing operations.

While we seek to operate our facilities in compliance with applicable rules and regulations and take

measures to minimize the risks of disruption at our facilities, a material disruption at one of our
manufacturing facilities could prevent us from meeting customer demand, reduce our sales and/or negatively
impact our financial results. Any of our manufacturing facilities, or any of our equipment within an
otherwise operational facility, could cease operations unexpectedly due to a number of events, including:

• equipment or information technology infrastructure failure;

• disruptions in the transportation infrastructure including roads, bridges, railroad tracks and

container ports;

• fires, floods, tornadoes, earthquakes, disease, pandemics, acts of violence, or other catastrophes; and

• other operational problems.

In addition, a significant portion of our manufacturing and production facilities are in Wisconsin
within a 100-mile radius of each other. We could experience prolonged periods of reduced production due
to unforeseen events occurring in or around our manufacturing facilities in Wisconsin. In the event of a
business interruption at our facilities, in particular our Wisconsin facilities, we may be unable to shift
manufacturing capabilities to alternate locations, accept materials from suppliers or meet customer shipment
needs, among other severe consequences. Such an event could have a material and adverse impact on our
financial condition and results of our operations.

Changes in U.S. trade policy, including the imposition of tariffs and the resulting consequences, could have an
adverse effect on our results of operations.

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. 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. The sales,
gross margins, and profitability for each of our segments could be directly impacted by changes in tariffs
and trade agreements.

In addition, certain of our products or key components or raw materials have and may continue to be

subject to the imposition of higher duties as a result of anti-dumping and countervailing duties applied
against them. To the extent such governmental actions, duties or tariffs are applied to such products, it could
adversely affect our results of operations, financial condition and business.

We cannot predict the extent to which the U.S. or other countries will impose new or additional quotas,

duties, tariffs, duties, taxes or other similar restrictions upon the import or export of our products in the
future, nor can we predict future trade policy or the terms of any renegotiated trade agreements and their
impact on our business. The continuing adoption or expansion of trade restrictions, the occurrence of a trade
war, or other governmental action related to tariffs or trade agreements or policies has the potential to
adversely impact demand for our products, our costs, our customers, our suppliers, and the U.S. economy,
which in turn could have a material adverse effect on our business, operating results, and financial condition.

We may not realize all of the anticipated benefits of our acquisitions, divestitures, restructurings, or
realignments, or those benefits may take longer to realize than expected. We may also encounter significant
unexpected difficulties in integrating acquired businesses.

We regularly execute organizational changes such as acquisitions, divestitures, restructurings, and

realignments to support our growth and management strategies. If we are unable to successfully manage

these and other organizational changes, the ability to complete such activities and realize anticipated
synergies or cost savings, as well as our results of operations and financial condition, could be materially
adversely affected.

Our ability to realize the anticipated benefits of our acquisitions will depend, to a large extent, on our

ability to integrate the acquired businesses with our business. The integration of independent businesses is a
complex, costly and time-consuming process. Further, integrating and managing businesses with
international operations may pose challenges not previously experienced by our management. As a result,
we may be required to devote significant management attention and resources to integrating the business
practices and operations of any acquired businesses with ours. The integration process may disrupt our
business and, if implemented ineffectively, could preclude realization of the full benefits expected by us.
Our failure to meet the challenges involved in integrating an acquired business into our existing operations
or otherwise to realize the anticipated benefits of the transaction could cause an interruption of, or a loss of
momentum in, our activities and could adversely affect our results of operations.

As part of undertaking an acquisition, we may also significantly revise our capital structure or

operational budget, such as issuing common stock that would dilute the ownership percentage of our
stockholders, assuming liabilities or debt, utilizing a substantial portion of our cash resources to pay for the
acquisition or significantly increasing operating expenses. Our acquisitions have resulted and may in the
future result in charges being taken in an individual quarter as well as future periods, which results in
variability in our quarterly earnings. In addition, our effective tax rate in any particular quarter may also be
impacted by acquisitions. Following the closing of an acquisition, we may also have disputes with the
seller regarding contractual requirements and covenants, purchase price adjustments, contingent payments
or for indemnifiable losses. Any such disputes may be time consuming and distract management from other
aspects of our business. As part of the terms of an acquisition, we may commit to pay additional contingent
consideration if certain revenue or other performance milestones are achieved. We are required to evaluate the
fair value of such commitments at each reporting date and adjust the amount recorded if there are changes
to the fair value.

In addition, the overall integration of our acquired businesses may result in material unanticipated

problems, expenses, liabilities, competitive responses, loss of customer relationships, and diversion of
management’s attention, and may cause our stock price to decline. The difficulties of combining the
operations of acquired businesses with ours include, among others:

• managing a larger company;

• maintaining employee morale and retaining key management and other employees;

• complying with newly applicable domestic and foreign regulations as we enter new product and

geographic markets;

• integrating two business cultures, which may prove to be incompatible;

• the possibility of faulty assumptions underlying expectations regarding the integration process;

• retaining existing customers and attracting new customers;

• consolidating corporate and administrative infrastructures and eliminating duplicative operations;

• the diversion of management’s attention from ongoing business concerns and performance shortfalls

as a result of management’s attention to the acquisition;

• unanticipated issues in integrating information technology, communications and other systems;

• complying with, or the failure to comply with, changes in applicable, new, or existing laws and

regulations;

• managing tax costs or inefficiencies associated with integrating the operations or supply chain of the

combined company;

• unforeseen liabilities, expenses or delays associated with the acquisition;

• difficulty comparing financial reports due to differing financial and/or internal reporting systems;

and

• making any necessary modifications to internal financial control standards to comply with the

Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder.

Many of these factors may be outside of our control and any one of them could result in increased
costs, decreases in the amount of expected revenues and diversion of management’s time and energy, which
could materially impact our business, financial condition and results of operations. In addition, even if
the operations of our acquired businesses are integrated successfully with our operations, we may not realize
the full benefits of the transaction, including the synergies, cost savings or sales or growth opportunities
that we expect. These benefits may not be achieved within the anticipated time frame, or at all, and additional
unanticipated costs may be incurred in the integration or management of our businesses. All these factors
could cause dilution to our earnings per share, decrease or delay the expected accretive effect of the acquisition,
and cause a decrease in the price of our common stock. As a result, we cannot be assured that the
combination of our acquisitions with our business will result in the realization of the full benefits anticipated
from the transaction.

A significant portion of our purchased components are sourced in foreign countries, exposing us to additional
risks that may not exist in the United States.

We source a significant portion of our purchased components overseas, primarily in Asia and Europe.
Our international sourcing subjects us to a number of potential risks in addition to the risks associated with
third-party sourcing generally. Such risks include:

• inflation or changes in political and economic conditions;

• logistical challenges, including extended container port congestion, and higher logistics costs;

• unstable regulatory environments;

• changes in import and export duties;

• domestic and foreign customs and tariffs;

• currency rate fluctuations;

• trade restrictions;

• labor or civil unrest;

• disputes in our relationships with certain contract manufacturers or suppliers;

• communications challenges; and

• other restraints and burdensome taxes.

These factors have had in the past and are currently having an adverse effect on our ability to efficiently

and cost effectively source our purchased components overseas. Additionally, if the U.S. dollar were to
depreciate significantly against the currencies in which we purchase raw materials from foreign suppliers, our
cost of goods sold could increase materially, which would adversely affect our results of operations.

Risk factors related to legal and regulatory matters

We are subject to a variety of litigation and other legal and regulatory proceedings in the course of our business
that could adversely affect our business, financial statements or on our results of operations.

We are subject to a variety of litigation and other legal and regulatory proceedings incidental to our
business (or the business operations of previously owned entities), including claims for damages arising out
of the use of products or services and claims relating to product design, safety, manufacture and
performance liability, contracts, commercial disputes, competition, sales and trading practices, employment
issues, environmental matters, intellectual property rights, tax, securities, regulatory compliance, personal
injury, insurance coverage, and acquisition-related matters, as well as other legal proceedings that arise in and
outside of the ordinary course of our business. These matters may include claims for compensatory
damages, punitive and consequential damages and/or injunctive relief. The defense of these matters may

divert our management’s attention, we may incur significant expenses in defending such matters, and we
may be required to pay fines, penalties, damage awards or settlements or become subject to equitable remedies
that could adversely affect our operations and financial statements.

The industries in which we operate are also periodically reviewed or investigated by regulators, and we

are subject to and may continue to be subject to such investigations and claims, including by the U.S.
Department of Justice (DOJ), CPSC and EPA, which could lead to enforcement actions, fines and penalties
or the assertion of private litigation claims. The Company is cooperating with such governmental inquiries,
it is not possible to predict with certainty the outcome of such claims, or any other current or future claims,
investigations and lawsuits, and we could in the future incur judgments, fines or penalties or enter into
settlements of lawsuits and claims that could have an adverse effect on our reputation, business, results of
operations or financial condition in any particular period.

Additionally, the nature of our operations means that legal and compliance risks will continue to exist

and additional legal proceedings and other contingencies, the outcome of which cannot be predicted with
certainty, may arise from time to time. In addition, subsequent developments in legal proceedings or
investigations may affect our assessment and estimates of loss contingencies recorded as a reserve and
require us to make payments in excess of our reserves, which could have an adverse effect on our reputation,
business and results of operations or financial condition.

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 may 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 of 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 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.

For further information, see Note “18. Commitments and Contingencies”.

Our operations are subject to various environmental, health and safety laws and regulations, and non-compliance
with or liabilities under such laws and regulations could result in substantial costs, fines, sanctions and claims.

Our operations are subject to a variety of foreign, federal, state and local environmental, health and
safety laws and regulations including those governing, among other things, emissions to air; discharges to
water; noise; and the generation, handling, storage, transportation, treatment and disposal of waste and other
materials. In addition, under federal and state environmental laws, we could be required to investigate,
remediate and/or monitor the effects of the release or disposal of materials both at sites associated with past
and present operations and at third-party sites where wastes generated by our operations were disposed.
This liability may be imposed retroactively and whether or not we caused, or had any knowledge of, the
existence of these materials and may result in our paying more than our fair share of the related costs.
Violations of or liabilities under such laws and regulations could result in substantial costs, fines and civil or
criminal proceedings or personal injury and workers’ compensation claims.

Our products are subject to substantial government regulation.

Our products are subject to extensive statutory and regulatory requirements governing, among other

things, emissions, noise, labeling, transport, product content, product safety, and data privacy, including
standards imposed by the EPA, CARB, CPSC and other regulatory agencies around the world. Also, as we
increase our connectivity with our products and customers, we may be required to comply with additional

data privacy and cybersecurity regulations. For example, personal privacy and data security have become
significant issues in the United States, Europe, and in many other jurisdictions in which we operate. The
regulatory framework for privacy and security issues worldwide is rapidly evolving and is likely to remain
uncertain for the foreseeable future. In the United States, these include rules and regulations promulgated
or pending under the authority of federal agencies, state attorneys general, legislatures, and consumer
protection agencies. Internationally, many jurisdictions in which we operate have established their own data
security and privacy legal framework with which we, relevant suppliers, and customers must comply.
Although we have implemented certain policies, procedures, and, in other cases, contractual arrangements
designed to facilitate compliance with applicable privacy and data security laws and standards, any challenges
or perceived inability to adequately address privacy and security concerns, even if unfounded, or comply
with applicable privacy and data security laws, regulations, and policies, could result in additional fines, costs,
and liabilities to us, damage our reputation, inhibit sales, and adversely affect our business.

These laws are constantly evolving and many are becoming increasingly stringent. As a further
example, recent CARB regulations that will prohibit future sales in California of certain small off-road
engines may negatively affect the long-term sales of certain products we sell today in that state. In addition,
some cities or municipalities have imposed, or are considering, limiting natural gas connections to new
buildings or imposing additional permitting restrictions which could adversely affect the sales of certain
products we sell in such jurisdictions. Changes in applicable laws or regulations, or in the enforcement thereof,
could require us to redesign or recall our products and could adversely affect our business or financial
condition in the future. Developing and marketing products to meet such new requirements could result in
substantial additional costs that may be difficult to recover in some markets. In some cases, we may be required
to modify our products or develop new products to comply with new regulations, particularly those
relating to air emissions and carbon monoxide. Typically, additional costs associated with significant
compliance modifications are passed on to the market.

The failure to comply with existing and future regulatory standards or requirements could adversely

affect our position in the markets we serve, our reputation, business, results of operations or financial
condition in any particular period.

Risk factors related to cybersecurity

Failures or security breaches of our networks or information technology systems could have an adverse effect
on our business.

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.

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.
While we attempt to mitigate these risks through board oversight, hiring additional internal cyber-security
professionals to manage these risks, 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 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. While such

intrusions or infections to date have not resulted in the significant disruption of our business, or a loss of
proprietary or confidential information, we cannot guarantee the same for future intrusions or infections.
Similarly, 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.

See “Item 1C. Cybersecurity” for additional information related to cybersecurity risks.

Risk factors related to our capital structure

We have indebtedness which could adversely affect our cash flow and our ability to make payments on our
indebtedness.

As of December 31, 2023 we had total indebtedness of $1,575.2 million. Our level of indebtedness
increases the possibility that we may be unable to generate cash sufficient 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. 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 applicable to the existing Tranche B Term Loan Facility were replaced with
SOFR provisions. 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 will be able to do. Our Term Loan B matures on December 13, 2026, and our Term Loan A as
well as our Revolving Facility mature on June 29, 2027.

The terms of our credit facilities restrict our current and future operations, particularly our ability to respond
to changes in our business or to take certain actions.

Our credit facilities contain, and any future indebtedness of ours or our subsidiaries would likely
contain, a number of restrictive covenants that impose operating and financial restrictions on us and our
subsidiaries, including limitations on our ability to engage in acts that may be in our best long-term interests.
These restrictions set limitations on, among other things, our ability to:

• incur liens;

• incur or assume additional debt or guarantees or issue preferred stock;

• pay dividends, or make redemptions and repurchases, with respect to capital stock;

• prepay, or make redemptions and repurchases of, subordinated debt;

• make loans and investments;

• make capital expenditures;

• engage in mergers, acquisitions, asset sales, sale/leaseback transactions and transactions with

affiliates;

• change the business conducted by us or our subsidiaries; and

• amend the terms of subordinated debt.

The operating and financial restrictions in our credit facilities and any future financing agreements
may adversely affect our ability to finance future operations or capital needs or to engage in other business
activities. A breach of any of the restrictive covenants in our credit facilities would result in a default. If any
such default occurs, the lenders under our credit facilities may elect to declare all outstanding borrowings,
together with accrued interest and other fees, to be immediately due and payable, or enforce their security

interest, any of which would result in an event of default. The lenders will also have the right in these
circumstances to terminate any commitments they have to provide further borrowings.

We may need additional capital to finance our growth strategy or to refinance our existing credit facilities, and
we may not be able to obtain it on acceptable terms, or at all, which may limit our ability to grow.

We may require additional financing to expand our business. Financing may not be available to us or

may be available to us only on terms that are not favorable. The terms of our senior secured credit facilities
limit our ability to incur additional debt. In addition, economic conditions, including a downturn in the credit
markets, could impact our ability to finance our growth on acceptable terms or at all. If we are unable to
raise additional funds or obtain capital on acceptable terms, we may have to delay, modify or abandon some
or all of our growth strategies. In the future, if we are unable to refinance our credit facilities on
acceptable terms, our liquidity could be adversely affected.

Our total assets include a substantial amount of goodwill and other indefinite-lived intangibles. If we determine
these have become impaired, our net income could be materially adversely affected.

Goodwill represents the excess of cost over the fair market value of net assets acquired in business
combinations. Indefinite-lived intangibles are comprised of certain tradenames. At December 31, 2023,
goodwill and other indefinite-lived intangibles totaled $1,560.7 million. We review goodwill and other
intangibles at least annually for impairment and any excess in carrying value over the estimated fair value is
charged to the statement of comprehensive income. Future impairment may result from, among other
things, deterioration in the performance of an acquired business or product line, adverse market conditions,
a significant increase in interest rate, changes in the competitive landscape, adverse changes in applicable
laws or regulations, including changes that restrict the activities of an acquired business or product line, and
a variety of other circumstances including any of the risk factors noted above. A reduction in net income
resulting from the write-down or impairment of goodwill or indefinite-lived intangibles could have a material
adverse effect on our financial statements. Refer to the Critical Accounting Policies and Estimates in
Item 7 of this Annual Report on Form 10-K for further information regarding our process for evaluating
goodwill for impairment.

General risk factors

The market price of our common stock may be volatile or may decline regardless of our operating performance.

The market price of our common stock has been and could be subject to wide fluctuations in response
to, among other things, the other risk factors described herein, and other factors beyond our control, such
as quarterly variations in operating results, announcements of technology innovations or new products by us
or our competitors, changes in financial estimates and recommendations by securities analysts, the operating
and stock price performance of other companies that investors may deem comparable to us, and news
reports relating to trends in our markets or general economic conditions. These fluctuations often have been
unrelated or disproportionate to the operating performance of those companies. These broad market and
industry fluctuations, as well as general economic, political and market conditions, such as recessions, interest
rate changes or international currency fluctuations, may negatively affect the market price of our common
stock, regardless of our operating performance.

We have experienced and may continue to see volatility in the market price of our stock price. As a
result, we have been subject to securities class action litigation and may continue to be the target of this
type of litigation in the future. Securities litigation against us could result in substantial costs and divert our
management’s attention from other business concerns, which could seriously harm our business.

For further information, see Note “18. Commitments and Contingencies”.

Our business is subject to potential tax liabilities.

We are subject to income tax, indirect tax or other tax claims by tax agencies in jurisdictions in which
we conduct business. In the ordinary course of our business, there are many transactions and calculations
where the ultimate income tax, indirect tax, or other tax determination is uncertain. Although we believe our

tax estimates are reasonable, we cannot be certain that the final determination of our tax audits and
litigation will not be materially different from that which is reflected in historical tax provisions and accruals.
Should additional taxes be assessed as a result of an audit, assessment or litigation, there could be a
material adverse effect on our cash, tax provisions and net income in the period or periods for which that
determination is made.

Item 1B. Unresolved Staff Comments

None.

Item 1C. Cybersecurity

The Company’s management and Board recognize the importance of strong oversight of cybersecurity
risk, information security and technology in maintaining the trust and confidence of our customers, partners,
employees and stockholders. The Company maintains cybersecurity measures aligned with the National
Institute of Standards and Technology Cybersecurity Framework (Framework) which organizes cybersecurity
risks into five categories: identify, protect, detect, respond and recover. Our processes for assessing,
identifying and managing material risks from cybersecurity threats is incorporated into our Enterprise Risk
Management (ERM) program and evaluated against such Framework. Our information security and
ERM teams coordinate to regularly review and assess these risks using a wide range of tools and services.

Our cybersecurity risk is actively managed through our Cybersecurity Steering Committee, which has
established Company-wide policies and standards concerning cybersecurity matters. These policies directly
or indirectly relate to cybersecurity and include antivirus protection, remote access, multifactor authentication,
containment of confidential information and the use of the internet, email and wireless devices. The
Company’s Chief Information Security Officer (CISO) is responsible for developing and implementing our
information security program and regularly reports on cybersecurity matters to executive management and
the Board of Directors. The CISO has over 25 years of experience supporting cybersecurity and information
technology and is a board member of a local Cyber Threat Response Alliance organization. Led by our CISO,
team members who support our information security program have relevant educational and industry
experience.

The CISO and information technology security team conduct regular risk assessments to identify areas

requiring additional investment and resources. These risk assessments extend to our supply chain, where
cybersecurity health assessments are employed for our critical suppliers. The results are used to calculate a
Cybersecurity Risk Score, a key component of our Supply Chain Scorecard used to proactively identify and
manage potential risks. Additionally, we generally require those third parties that could introduce significant
cybersecurity risk to us to agree by contract to manage their cybersecurity risks in specified ways, as
appropriate. Risk assessments are also performed on new products and software and we periodically engage
third-party services for penetration testing and security evaluations. We also periodically assess our
technology infrastructure and business processes to identify and address potential security gaps and
vulnerabilities. An ISO 27001 certification is maintained within our Energy Services business.

As chair of the Cybersecurity Steering Committee, the CISO holds regular meetings to provide
strategic updates on the Company’s cybersecurity infrastructure and preparedness. These meetings,
supplemented by regular updates to the Board of Directors, are instrumental in aligning with the Company’s
strategic goals. Our Board of Directors is also provided with ongoing education including updates on
relevant legislation and regularly receives reports on cybersecurity risks, threats, incidents and other trends.
Several members of our Board’s Audit Committee have expertise and experience in cybersecurity, and one
director is the President of a major cybersecurity services provider.

In order to promote a culture of security awareness across our organization, all employees are required
to complete an annual cybersecurity awareness training and are provided with periodic information updates
on cybersecurity threats. We also maintain cyber insurance policies to help partially mitigate the financial
impact of a significant cybersecurity incident.

Despite our best efforts, we cannot guarantee that our security measures will prevent all potential
cybersecurity incidents or breaches. Our systems are continually subject to sophisticated and evolving cyber

threats, such as phishing, ransomware, social engineering, and advanced persistent threats. However, to
date, we have not been subject to any incidents or successful cyber-attacks that materially impacted our
operations or financial condition. The Company has invested in developing and acquiring cybersecurity
capabilities allowing us to monitor threats and manage incident response. We have also developed internal
policies to mitigate cybersecurity incidents, including providing clear guidelines for incident classification and
response. We recognize the importance of continued monitoring and improvement of our cybersecurity
program, and will continue to invest in our security controls, incident response capabilities, and third-party
vendor management protocols.

For additional information on the cybersecurity risks that we face, also see Item 1A. “Risk Factors”.

Item 2. Properties

We own or lease manufacturing, distribution, R&D, and office facilities globally totaling over five

million square feet. We also utilize third party inventory warehouses that accommodate material storage
and rapid response requirements of our customers. The following table provides information about our
principal owned or leased facilities exceeding 20,000 square feet:

Location
Waukesha, WI
Pewaukee, WI
Eagle, WI
Whitewater, WI
Oshkosh, WI
Berlin, WI
Fond du Lac, WI
Jefferson, WI
Janesville, WI
Richfield, WI
Trenton, SC

Stockton, CA
Corona, CA
Hamilton, OH
Maquoketa, IA
South Burlington, VT
South Portland, ME
Marlborough, MA
Reno, NV
Toronto, Canada
Mexico City, Mexico
Hidalgo, Mexico

Activities
Corporate headquarters, R&D
Sales, office

Owned/
Leased
Owned
Owned
Owned Manufacturing, office, training
Owned Manufacturing, office, distribution
Owned Manufacturing, office, warehouse, R&D
Owned Manufacturing, office, warehouse, R&D
Leased Warehouse
Owned Manufacturing, office, distribution, R&D
Leased
Leased Warehouse
Owned Manufacturing, office, warehouse,

Distribution

distribution
Sales, office, warehouse, training
Sales, office, storage
Storage
Storage, rental property
Office, sales, R&D
Sales, office, R&D
Sales, office, warehouse

Leased
Leased
Leased
Owned
Leased
Leased
Leased
Leased Warehouse, R&D
Office, sales, R&D
Leased
Owned Warehouse
Owned Manufacturing, sales, distribution,
warehouse, office, R&D

Casole d’Elsa, Italy
Balsicas, Spain
Foshan, China
Saint-Nizier-sous-Charlieu,
France
Cravinhos, Brazil
Sydney, Australia

Leased Manufacturing, office, warehouse, R&D
Leased Manufacturing, office, warehouse, R&D
Owned Manufacturing, office, warehouse, R&D
Leased

Sales, office, warehouse

Leased Manufacturing, office, warehouse
Sales, office, warehouse
Leased

Segment
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic

Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
Domestic
International
International

International
International
International
International

International
International

Location
Fellbach, Germany
Pfullingen, Germany

Suzhou, China
Rugby, United Kingdom
Celle, Germany
Charzyno, Poland
West Bengal, India
Villanova d’Ardenghi, Italy
Hunmanby, United Kingdom

Owned/
Leased
Activities
Leased
Sales, office, warehouse
Leased Manufacturing, sales, distribution,
warehouse, office, R&D
Office, R&D

Leased
Leased Manufacturing, office, warehouse, R&D
Leased Manufacturing, office, warehouse, R&D
Owned Warehouse, storage
Leased Manufacturing, warehouse
Owned Manufacturing, warehouse
Owned Manufacturing, warehouse, sales,

distribution, office, R&D

Segment
International
International

International
International
International
International
International
International
International

In addition to the countries represented above, the Company operates small facilities in the United

Arab Emirates, Romania, Bahrain, and Colombia.

As of December 31, 2023, substantially all of our domestically-owned and a portion of our
internationally-owned properties are subject to collateral provisions under our senior secured credit
facilities.

Item 3. Legal Proceedings

See Note 18, “Commitments and Contingencies,” to the consolidated financial statements in Item 8 of

this Annual Report on Form 10-K for further information on the Company’s legal proceedings.

Item 4. Mine Safety Disclosures

Not Applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of

Equity Securities

Shares of our common stock are traded on the New York Stock Exchange (NYSE) under the symbol

“GNRC.”

Purchases of Equity Securities By the Issuer and Affiliated Purchasers

The following table summarizes the stock repurchase activity for the three months ended December 31,
2023, which consisted of stock repurchases made as authorized under previously announced stock repurchase
programs, as well as the withholding of shares upon the vesting of restricted stock awards to pay related
withholding taxes on behalf of the recipient:

Total Number
of Shares
Purchased

Average Price
Paid per Share

10/01/23 – 10/31/23 . . . . . . . . . . . . . . . . . . . . .

11/01/23 – 11/30/23 . . . . . . . . . . . . . . . . . . . . .

12/01/23 – 12/31/23 . . . . . . . . . . . . . . . . . . . . .

1,261

780,232

536,368

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,317,861

$101.89

$109.96

$123.31

$115.39

Total Number
Of Shares
Purchased As
Part Of
Publicly
Announced
Plans Or
Programs

Approximate
Dollar Value Of
Shares That
May Yet Be
Purchased
Under The
Plans Or
Programs

— $177,793,103

779,895

$ 92,033,334

533,000

$ 26,297,232

1,312,895

For equity compensation plan information, refer to Note 17, “Share Plans,” to the consolidated
financial statements in Item 8 of this Annual Report on Form 10-K. For information on the Company’s
stock repurchase plans, refer to Note 13, “Stock Repurchase Programs,” to the consolidated financial
statements. Additionally, on February 12, 2024, 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
$26.3 million remaining available for repurchase when the new program was approved.

Stock Performance Graph

The line graph below compares the cumulative total stockholder return on our common stock with the

cumulative total return of the Standard & Poor’s (S&P 500) Index, the S&P MidCap 400 Index, and the
S&P 500 Industrial Index, for the five-year period ended December 31, 2023. The graph and table assume
that $100 was invested on December 31, 2018, in each of our common stock, the S&P 500 Index, the
S&P MidCap 400 Index, and the S&P 500 Industrial Index, and that all dividends were reinvested. Cumulative
total stockholder returns for our common stock, the S&P 500 Index, the S&P MidCap 400 Index, and the
S&P 500 Industrial Index, are based on our fiscal year.

COMPARISON OF CUMULATIVE TOTAL RETURN

Generac Holdings Inc.

S&P 500 Index - Total Return

S&P MidCap 400 Index

S&P 500 Industrials Index

$800

$700

$600

$500

$400

$300

$200

$100

12/31/2018

12/31/2019

12/31/2020

12/31/2021

12/31/2022

12/31/2023

ASSUMES $100 INVESTED ON DEC. 31, 2018
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 2023

Company / Market / Peer Group

12/31/2018

12/31/2019

12/31/2020

12/31/2021

12/31/2022

12/31/2023

Generac Holdings Inc.

. . . . . . . . . . .

$100.00

$202.37

$457.44

$707.81

$202.43

$259.87

S&P 500 Index – Total Returns . . . . .
S&P MidCap 400 Index . . . . . . . . . .
S&P 500 Industrials Index . . . . . . . . .

100.00
100.00
100.00

131.49
126.20
129.37

155.68
143.44
143.68

200.37
178.95
174.02

164.08
155.58
164.49

207.21
181.15
194.31

Holders

As of February 16, 2024, there were 1,138 registered holders of record of Generac’s common stock. A
substantially greater number of holders of Generac common stock are “street name” or beneficial holders,
whose shares are held of record by banks, brokers and other financial institutions.

Dividends

We do not have plans to pay dividends on our common stock in the foreseeable future. However, in the

future, subject to factors such as general economic and business conditions, our financial condition and

results of operations, our capital requirements, our future liquidity and capitalization, and other such
factors that our Board of Directors may deem relevant, we may change this policy and choose to pay
dividends. Our ability to pay dividends on our common stock is currently limited by the terms of our senior
secured credit facilities and may be further restricted by any future indebtedness we incur. Dividends from,
and cash generated by our subsidiaries will be our principal sources of cash to repay indebtedness, fund
operations, repurchase shares of common stock and pay dividends. Accordingly, our ability to pay dividends
to our stockholders is dependent on the earnings and distributions of funds from our subsidiaries.

Securities Authorized for Issuance Under Equity Compensation Plans

For information on securities authorized for issuance under our equity compensation plans, refer to

“Item 12 — Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters,” which is incorporated herein by reference.

Recent Sales of Unregistered Securities

None.

Use of Proceeds from Registered Securities

Not applicable.

Item 6.

[Reserved]

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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,
based on current expectations and related to future events and our future financial performance, that involve
risks and uncertainties. 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.”

Overview

Generac is a leading energy technology solutions company that provides backup and prime power
generation systems for residential and C&I applications, solar + battery storage solutions, smart home
energy management devices and energy services, advanced power grid software platforms, and engine- &
battery-powered tools and equipment. As an energy technology solutions company that is “Powering a
Smarter World”, our corporate purpose is to lead the evolution to more resilient, efficient, and sustainable
energy solutions around the world.

Further information regarding our business is provided in “Part I, Item 1. Business” of this Annual

Report.

Business Drivers and Operational Factors

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

Factors Affecting Results of Operations

We are subject to various 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, as well as further expanded our commercial and operational
presence outside of the United States. Our international acquisitions, 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.

We have historically attempted to mitigate the impact of any inflationary pressures through improved

product design and sourcing, manufacturing efficiencies, price increases, and select hedging transactions.
We have implemented multiple price increases over the past couple of years to help mitigate the impact of
rising costs, and we continued to realize the benefit of these pricing actions in 2023. Our results are also
influenced by changes in fuel prices in the form of freight rates, which in some cases are accepted by our
customers and in other cases are paid by us.

Seasonality. Although there is demand for our products throughout the year, in each of the past

five years, approximately 19% to 25% of our net sales occurred in the first quarter, 22% to 28% in the
second quarter, 24% to 28% in the third quarter and 23% to 31% 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.

Russia-Ukraine Conflict.

In February 2022, Russia commenced military action against Ukraine. In

response, the U.S. and certain other countries imposed significant sanctions and export controls against
Russia, Belarus and certain individuals and entities connected to Russian or Belarusian political, business,
and financial organizations. In March 2022, we announced our suspension of operations and sales in Russia.
However, the situation remains uncertain, and it is difficult to predict the impact that the conflict and
actions taken in response to the conflict will have on our business. In particular, the situation could increase
our costs, disrupt our supply chain, significantly hinder our ability to find materials or key single-sourced
components we need to make certain products, or otherwise adversely affect our business and results of
operations.

Factors influencing interest expense.

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. Interest expense increased during 2023 compared to 2022,
primarily due to increased borrowings and higher interest rates. Refer to Note 12, “Credit Agreements,” to
the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for further information.

Factors influencing provision for income taxes and cash income taxes paid. As of December 31, 2021,
the tax-deductible goodwill and intangible assets from our acquisition by CCMP Capital Advisors, LLC in
2006 were fully amortized. The expiration of this significant tax shield resulted in a higher cash income tax
obligation in 2022 and will continue to result in a higher income tax obligation on a go-forward basis.

On August 16, 2022, the U.S. government enacted the Inflation Reduction Act (the Act). The Act in

part provides funding and tax incentives for certain clean energy products and projects. While the Act did
not have a material impact on our results, we will continue to review the Act and any regulations or guidance
issued by the U.S. Treasury Department or by a state which may provide a tax benefit or expense. We will
update our future tax provisions based on new regulations or guidance accordingly.

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 are effective on January 1, 2024. The United States has not

yet enacted legislation implementing Pillar Two. We are continuing to evaluate the Pillar Two rules and their
potential impact on future periods, but we do not expect the rules to have a material impact on our effective
tax rate.

Components of Net Sales and Expenses

Net Sales

Our net sales primarily consist of product sales 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 design and build, remote monitoring, and grid services to utilities in certain circumstances. These
services accounted for less than 4% of our net sales for the year ended December 31, 2023. 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 4% of our sales, and our top ten customers representing less than 21% of our net
sales in aggregate for the year ended December 31, 2023.

Costs of Goods Sold

The principal elements of costs of goods sold are component parts, raw materials, inbound and

outbound freight, factory overhead and labor. Component parts and raw materials comprised approximately
69% of costs of goods sold for the year ended December 31, 2023. The principal component parts are
engines, alternators, batteries, electronic controls, and steel enclosures. We design and manufacture air-
cooled engines for certain of our generators up to 26kW, along with certain liquid-cooled, natural gas engines.
We source engines for certain of our smaller products and all of our diesel products. For certain natural
gas engines, we source the base engine block, and then add a significant amount of value engineering, sub-
systems and other content to the point that we are recognized as the original equipment manufacturer (OEM)
of those engines. We design and manufacture many of the alternators for our generators. We also
manufacture other generator components where we believe we have a design and cost advantage. We source
component parts from an extensive global network of reliable, high-quality suppliers. In some cases, these
relationships are proprietary. For certain energy technology products, we source these products complete from
certain contract manufacturers using our designs.

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 prices 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 given our global supply chain. There is typically a lag
between raw material price fluctuations and their effect on our costs of goods sold.

We have historically attempted to mitigate the impact of any inflationary pressures through improved

The balance of cost of goods sold include our manufacturing and warehousing facilities, factory
overhead, labor and shipping costs. Factory overhead includes utilities, insurance, support personnel,
depreciation, general supplies, and maintenance. Although we attempt to maintain a flexible manufacturing
cost structure, our margins can be impacted if we cannot timely adjust labor and manufacturing costs to
match fluctuations in net sales.

Operating Expenses

Our operating expenses consist of costs incurred to support our sales, marketing, distribution, service

parts, warranty, engineering, information systems, human resources, accounting, finance, risk management,
legal and tax functions, among others. These expenses include, among others, personnel costs such as
salaries, bonuses, employee benefit costs, payroll taxes, and share-based compensation cost, and are classified
into three categories: selling and service, research and development, and general and administrative.
Additionally, the amortization expense related to our finite-lived intangible assets is included within operating
expenses.

Selling and service. Our selling and service expenses consist primarily of personnel expense, marketing
expense, standard assurance warranty expense, bad debt provisions, and other sales expenses. Our personnel
expense recorded in selling and services expenses includes the expense of our sales force and other personnel
involved in the marketing, sales and service of our products. Standard warranty expense is estimated based on
historical trends or based on specific warranty matters as they become known and reasonably estimable.
Our marketing expenses include media advertising, promotional expenses, co-op advertising costs, direct mail
costs, printed material costs, product display costs, market research expenses, and trade show expenses.
Marketing expenses are generally related to the launch of new product offerings, opportunities to create
market awareness for our products, and general brand awareness marketing efforts. Our marketing campaigns
are an important source for lead generation.

Research and development. Our research and development expenses include mechanical engineering,

electronics engineering, and software development costs and they 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
globally and employ approximately 1,100 personnel with focus on new product development, existing product
improvement and cost containment. We are committed to 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

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

Acquisition related costs. Acquisition related costs are external costs incurred in connection with a
business combination including legal fees, professional and advisory services, stamp tax, and indemnity and
warranty insurance premiums.

Amortization of intangibles. Our amortization of intangibles expense includes the straight-line

amortization of finite-lived tradenames, customer lists, patents and technology, and other intangibles assets.

Other (Expense) Income

Other (expense) income includes the interest expense on our outstanding borrowings, amortization of
debt 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 extinguishment of debt, investment income earned on our cash and cash equivalents, and gains/
losses on the sale of certain investments.

Results of Operations

A detailed discussion of the year-over-year changes from the Company’s fiscal 2021 to fiscal 2022 can

be found in the Management’s Discussion and Analysis section of the Company’s fiscal 2022 Annual Report
on Form 10-K filed February 22, 2023.

Year ended December 31, 2023 compared to year ended December 31, 2022

The following table sets forth our consolidated statement of operations data for the periods indicated:

(U.S. Dollars in thousands)

2023

2022

$ Change

% Change

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$4,022,667

$4,564,737

$(542,070)

Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,657,236

3,042,733

(385,497)

-11.9%

-12.7%

Gross profit

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,365,431

1,522,004

(156,573)

-10.3%

Year Ended December 31,

Operating expenses:

Selling and service . . . . . . . . . . . . . . . . . . . . . . . . .

Research and development

. . . . . . . . . . . . . . . . . . .

General and administrative . . . . . . . . . . . . . . . . . . .

Acquisition related costs . . . . . . . . . . . . . . . . . . . . .

Amortization of intangible assets . . . . . . . . . . . . . . .

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . .

Income from operations . . . . . . . . . . . . . . . . . . . . . . .

448,199

173,443

252,936

460

104,194

979,232

386,199

496,260

159,774

194,861

1,459

103,320

955,674

(48,061)

13,669

58,075

-9.7%

8.6%

29.8%

(999)

-68.5%

874

23,558

566,330

(180,131)

Total other expense, net

. . . . . . . . . . . . . . . . . . . . . . .

(95,899)

(57,864)

(38,035)

Income before provision for income taxes . . . . . . . . . . .

Provision for income taxes . . . . . . . . . . . . . . . . . . . . .

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income attributable to noncontrolling interests . . . .

290,300

73,180

217,120

2,514

508,466

(218,166)

99,596

(26,416)

408,870

(191,750)

9,368

(6,854)

0.8%

2.5%

-31.8%

-65.7%

-42.9%

-26.5%

-46.9%

-73.2%

Net income attributable to Generac Holdings Inc. . . . . .

$ 214,606

$ 399,502

$(184,896)

-46.3%

The following sets forth our reportable segment information for the periods indicated:

Net Sales by Reportable
Segment

Year Ended December 31,

(U.S. Dollars in thousands)

2023

2022

$ Change

% Change

Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,276,324

$3,867,866

$(591,542)

-15.3%

International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

746,343

696,871

49,472

7.1%

Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$4,022,667

$4,564,737

$(542,070)

-11.9%

Total Sales by Reportable Segment

Year Ended December 31, 2023

Year Ended December 31, 2022

External
Net Sales

$3,276,324
746,343

Intersegment
Sales

$ 43,937
91,552

Total
Sales

External
Net Sales

$3,320,261
837,895

$3,867,866
696,871

Intersegment
Sales

$ 60,731
93,699

Total
Sales

$3,928,597
790,570

— (135,489)

(135,489)

— (154,430)

(154,430)

Domestic . . . . . . . . . . . .
International . . . . . . . . . .
Intercompany

elimination . . . . . . . . .

Total net sales . . . . . . . . .

$4,022,667

— $4,022,667

$4,564,737

— $4,564,737

Adjusted EBITDA by
Reportable Segment

Year Ended December 31,

2023

2022

$ Change

% Change

Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 523,337

$ 716,302

$(192,965)

-26.9%

International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

114,522

109,065

5,457

5.0%

Total Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . .

$ 637,859

$ 825,367

$(187,508)

-22.7%

The following table sets forth our net sales by product class for the periods indicated:

Net Sales by Product Class

Year Ended December 31,

(U.S. Dollars in thousands)

2023

2022

$ Change

% Change

Residential products . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,062,929

$2,911,871

$(848,942)

-29.2%

Commercial & industrial products . . . . . . . . . . . . . . . .

1,494,799

1,260,737

234,062

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

464,939

392,129

72,810

18.6%

Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$4,022,667

$4,564,737

$(542,070)

-11.9%

Net sales. The decrease in domestic segment sales for the year ended December 31, 2023 was primarily
driven by a decline in residential product sales, most notably in home standby generator, portable generator,
and clean energy product shipments. Home standby generator sales for the year were impacted by elevated
levels of field inventory together with strong prior year comparisons. The decline in residential product sales
was partially offset by robust growth of C&I product sales for the full year, primarily driven by shipments
to industrial distributors and to certain direct customers for “beyond standby” applications.

The increase in international segment sales for the year ended December 31, 2023 was primarily driven
by C&I growth in nearly all regions around the world, partially offset by weaker portable generator sales in
Europe.

In addition, total net sales from non-annualized acquisitions for the year ended December 31, 2023
were $65.4 million, including $56.8 million for the domestic segment and $8.6 million for the international
segment.

Gross profit. Gross profit margin for the year ended December 31, 2023 was 33.9% compared to
33.3% for the year ended December 31, 2022. The gross profit margin increase was primarily driven by
favorable pricing actions and cost benefits resulting from lower raw material and logistics costs, as well as
improved production efficiencies. These benefits were partially offset by the impact of unfavorable sales mix
primarily due to lower shipments of home standby generators.

Operating expenses. Operating expenses increased $23.6 million, or 2.5%, as compared to the prior

year. The 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, and an increase in employee and marketing costs.
The operating expenses in 2022 included a $37.3 million provision for clean energy product warranty-related
matters, a $17.9 million provision for bad debt related to a clean energy product customer that filed for
bankruptcy referenced above, as well as a $10.0 million provision for a regulatory matter with the CPSC.

Other expense. The increase in other expense, net in 2023 was driven primarily by higher interest

costs due to higher borrowing levels and interest rates compared to the prior year.

Provision for income taxes. The effective income tax rates for the years ended December 31, 2023 and
2022 were 25.2% and 19.6%, respectively. The increase in the effective tax rate was primarily due to significantly
lower benefit from equity compensation in the current year, coupled with discrete tax benefits in the prior
year.

Net income attributable to Generac Holdings Inc. Net income attributable to Generac Holdings Inc.

was $214.6 million as compared to $399.5 million in the prior year period. The decrease was primarily
driven by lower net sales and other items 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, 2023 were 15.8% of domestic
segment total sales compared to 18.2% for the year ended December 31, 2022. Adjusted EBITDA margin
was lower in the year-ended December 31, 2023 primarily due to the significant impact of unfavorable sales
mix and reduced operating leverage on lower sales volumes, as well as continued operating expense
investments for future growth. These headwinds were partially offset by favorable price and cost benefits.

Adjusted EBITDA margins for the international segment, before deducting for non-controlling
interests, for the year ended December 31, 2023 were 13.7% of international segment total sales compared
to 13.8% in the prior year, primarily due to unfavorable sales mix, which was mostly offset by favorable price
and cost benefits and improved operating leverage on higher sales volumes.

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 of $335.3 million for the year ended December 31, 2023 decreased 37.8% from $538.8 million
for the year ended December 31, 2022 primarily due to the factors outlined above, together with the impact
of various add-backs in the current and prior years.

Liquidity and Financial Position

Our primary cash requirements include payment for raw materials and components, salaries and
benefits, facility and lease costs, operating expenses, interest and principal payments on debt, and capital
expenditures. We finance our operations primarily from cash flow generated from operations and, if necessary,
borrowings under our revolving credit facility.

Our credit agreements originally provided for a $1.2 billion term loan B credit facility (Tranche B Term
Loan Facility) and currently include a $300.0 million uncommitted incremental term loan facility. Additionally,
our credit agreements previously provided for a $500.0 million ABL Facility that was paid off and
terminated in June 2022.

In June 2022, we amended and restated our existing credit agreements (Amended Credit Agreement)

that resulted in a new term loan facility in an aggregate principal amount of $750 million (Tranche A Term
Loan Facility), a new $1.25 billion revolving facility (Revolving Facility), the termination of the former
ABL Facility, and replacement of all LIBOR provisions with SOFR provisions. Proceeds received from the
Tranche A Term Loan Facility were used to repay the total existing outstanding balance on our former ABL
Facility and make a $250 million voluntary prepayment on the Tranche B Term Loan Facility, with the
remaining funds used for future general corporate purposes. As a result of these prepayments, we wrote off
$3.5 million of original issue discount and capitalized debt issuance costs during the second quarter of 2022 as
a loss on extinguishment of debt. The Revolving Facility was unfunded at closing.

As of December 31, 2023, there was $530 million outstanding under the Tranche B Term Loan
Facility, $745.3 million outstanding under the Tranche A Term Loan Facility, and $150 million of funded
Revolving Facility borrowings, leaving $1,099.2 million of unused capacity, net of outstanding letters of
credit. Our Tranche B Term Loan Facility bears interest at rates based on either a base rate plus an applicable
margin of 0.75% or adjusted SOFR rate plus an applicable margin of 1.75%, subject to a SOFR floor of
0.0%. Beginning on January 1, 2023, the Tranche A Term Loan Facility and Revolving Facility bear interest
at a rate based on adjusted SOFR plus an applicable margin between 1.25% and 1.75%, based on our total
leverage ratio and subject to a SOFR floor of 0.0%. At December 31, 2023, the interest rates for the Tranche A
Term Loan Facility, Revolving Facility, and Tranche B Term Loan Facility were 6.99%, 6.94%, and 7.19%,
respectively. See Note 5, “Derivative Instruments and Hedging Activities” and Item 7A for further information
on interest rate swaps, which help to reduce our borrowing costs.

The Tranche B Term Loan Facility matures on December 13, 2026, while the Tranche A Term Loan
Facility and Revolving Facility mature on June 29, 2027. The Tranche A Term Loan Facility is repayable in

installments due at the end of each quarter commencing September 2023. Payments on the Revolving
Facility are not due until 2027. The maturity schedule on these facilities is as follows:

2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

32,813

2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

46,875

595,625

750,000

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,425,313

As of December 31, 2023, we had total liquidity of $1,193.8 million under our most restrictive debt
covenants, which consists of $201.0 million of cash and cash equivalents and $992.8 million available under
our Revolving Facility. We believe we have a strong liquidity position that allows us to execute our strategic
plan and provides the flexibility to continue to invest in future growth opportunities.

In September 2020, our Board of Directors approved a $250.0 million stock repurchase program,
which was exhausted in the third quarter of 2022. In July 2022, our Board of Directors approved another
stock repurchase program, which commenced on August 5, 2022, and allowed for the repurchase of up to
$500.0 million of our common stock over a 24-month period. Additionally, on February 12, 2024, the
Company’s Board of Directors approved a new stock repurchase program that allows for the repurchase of
up to $500.0 million of the Company’s common stock over the next twenty-four months. The new program
replaces the prior share repurchase program, which had approximately $26.3 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 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, and may be suspended or discontinued at any
time without prior notice.

During the years ended December 31, 2023 and 2022, we repurchased 2,188,475 shares of our common

stock for $251.5 million, and 2,722,007 shares for $345,840, respectively. Since the inception of all stock
repurchase programs (starting in August 2015), we have repurchased 13,937,188 shares of common stock for
$1,028.9 million (at an average cost per share of $73.82). We have periodically reissued shares out of
Treasury stock, including for earnout payments.

See Note 12, “Credit Agreements,” and Note 13, “Stock Repurchase Program,” to the consolidated

financial statements included in Item 8 of this Annual Report on Form 10-K for more information on our
credit agreements and stock repurchase programs.

We have an arrangement with a finance company to provide floor plan financing for selected 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 12% and 15% of net sales for
the years ended December 31, 2023 and 2022, respectively. The amount financed by dealers which remained
outstanding was $158.0 million and $212.2 million as of December 31, 2023 and 2022, respectively.

Long-term Liquidity

We believe our cash and cash equivalents, cash flow from operations, and availability under our
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
shareholder value enhancing activities.

Cash Flow

Year ended December 31, 2023 compared to year ended December 31, 2022

The following table summarizes our cash flows by source (use) for the periods presented:

(U.S. Dollars in thousands)

2023

2022

$ Change

% Change

Net cash provided by operating activities . . . . . . . . . . . . .

$ 521,670

$ 58,516

$ 463,154

Net cash used in investing activities . . . . . . . . . . . . . . . . .

(178,063)

(134,232)

(43,831)

791.5%

-32.7%

Net cash (used in) provided by financing activities . . . . . .

(277,137)

64,043

(341,180)

-532.7%

Year Ended December 31,

The increase in net cash provided by operating activities primarily represents a significantly lower

investment in working capital as compared to the prior year, partially offset by lower operating earnings.

Net cash used in investing activities for the year ended December 31, 2023 primarily consisted of cash

payments of $129.1 million for the purchase of property and equipment (net of $10.9 million of capital
expenditures in accounts payable at December 31, 2023), $30.0 million for a minority investment in Wallbox,
$16.0 million for the acquisition of REFU, $6.6 million for a tax equity investment, and a $2.6 million
minority investment in Rolling Energy Resources and Earth Foundry.

Net cash used in investing activities for the year ended December 31, 2022 primarily consisted of cash

payments of $86.2 million for the purchase of property and equipment (net of $7.7 million of capital
expenditures in accounts payable at December 31, 2022), $25.1 million for business acquisitions, $15.0 million
investment in WATT Fuel Cell Corporation, and $14.9 million for contributions to a tax equity investment,
which were partially offset by cash proceeds from the sale of an investment for $1.3 million.

Net cash provided by financing activities for the year ended December 31, 2023 primarily represents

proceeds of $348.8 million from long-term borrowings, $64.3 million from short-term borrowings, and
$7.8 million from the exercise of stock options. These cash proceeds were more than offset by $104.8 million
in cash payments used to purchase the remaining ownership interest in Pramac, $251.5 million used for
stock repurchases, $325.8 million of debt repayments ($37.1 million of short-term borrowings and
$288.7 million of long-term borrowings and finance lease obligations), $10.9 million of taxes paid related to
equity awards, and $5.0 million for payment of contingent acquisition consideration.

Net cash provided by financing activities for the year ended December 31, 2022 primarily includes
proceeds of $1,026.3 million from long-term borrowings, $248.2 million from short-term borrowings, and
$13.8 million from the exercise of stock options. These cash proceeds were partially offset by $810.3 million
of debt repayments ($268.1 million of short-term borrowings and $542.2 million of long-term borrowings
and finance lease obligations), $345.8 million of stock repurchases, $40.9 million of taxes paid related to
equity awards, $16.1 million of contingent acquisition consideration, and $10.3 million for debt issuance
costs.

Senior Secured Credit Facilities

Refer to Note 12, “Credit Agreements,” to the consolidated financial statements in Item 8 and the
“Liquidity and Financial Position” section included in Item 7 of this Annual Report on Form 10-K for
information on our senior secured credit facilities.

Covenant Compliance

The 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. The 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 Tranche A Term Loan Facility and
the Revolving Facility include certain financial covenants that require the Company 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 December 31,
2023, the Company’s total leverage ratio was 2.18 to 1.00, and the Company’s interest coverage ratio was
6.44 to 1.00. The Company was also in compliance with these and all other covenants of the Amended
Credit Agreement as of December 31, 2023. The Tranche B Term Loan Facility does not contain any financial
maintenance covenants.

The Term Loans contain customary events of default, including, among others, nonpayment of

principal, interest or other amounts, failure to perform covenants, inaccuracy of representations or
warranties in any material respect, cross-defaults with other material indebtedness, certain undischarged
judgments, the occurrence of certain ERISA, bankruptcy or insolvency events, or the occurrence of a change
in control (as defined in the Term Loan). A bankruptcy or insolvency event of default will cause the
obligations under the Term Loans to automatically become immediately due and payable.

The Revolving Facility also contains covenants and events of default substantially similar to those in

the Term Loans, as described above.

Contractual Obligations

The following table summarizes our expected payments for significant contractual obligations as of

December 31, 2023, using the interest rates in effect as of that date:

(U.S. Dollars in thousands)

Total

2024

2025

2026

2027

2028

After 2028

Long-term debt, including current

portion(1) . . . . . . . . . . . . . . . . . $1,434,825 $ 42,162 $ 46,958 $595,651 $750,026 $

28 $ —

Finance lease obligations, including
current portion(2) . . . . . . . . . . . .

Interest on long-term debt and
finance lease obligations

. . . . . .

71,308

3,614

44,069

2,517

2,337

2,064

16,707

329,157

104,116

101,204

92,837

23,684

1,408

5,908

Operating leases . . . . . . . . . . . . . .
Short-term borrowings(3) . . . . . . . .

85,148
81,769

32,145
81,769

18,887
—

8,278
—

7,667
—

6,157
—

12,014
—

Total contractual cash

obligations . . . . . . . . . . . . . . $2,002,207 $263,806 $211,118 $699,283 $783,714 $9,657 $34,629

(1) The Tranche B Term Loan matures on December 13, 2026. The Tranche A Term Loan and the
Revolving Facility mature on June 29, 2027. As of December 31, 2023, there was $150 million
outstanding under the Revolving Facility classified as long-term debt.

(2) Finance lease obligations, including current portion includes a payment for a purchase option reasonably

certain to be exercised in 2025.

(3) Short-term borrowings consist of borrowings by our foreign subsidiaries on local lines of credit.

Capital Expenditures

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 $129.1 million, $86.2 million, and $110.0 million in
the years ended December 31, 2023, 2022, and 2021, respectively, and were funded primarily through cash
from operations.

Critical Accounting Policies and Estimates

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, 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: business combinations and purchase accounting; 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.

Business Combinations and Purchase Accounting

We account for business combinations using the acquisition method of accounting, and accordingly,
the assets and liabilities of an acquired business are recorded at their respective fair values. The excess of the
purchase price over the estimated fair value of assets and liabilities is recorded as goodwill. Assigning fair
market values to the assets acquired and liabilities assumed at the date of an acquisition requires knowledge
of current market values, the values of assets in use, and often requires the application of judgment
regarding estimates and assumptions. While the ultimate responsibility resides with management, for
material acquisitions we retain the services of certified valuation specialists to assist with assigning estimated
values to certain acquired assets and assumed liabilities, including intangible assets, tangible long-lived
assets, and contingent consideration. Acquired intangible assets, excluding goodwill, are valued using certain
discounted cash flow methodologies based on future cash flows specific to the type of intangible asset
purchased. This methodology incorporates various estimates and assumptions, the most significant being
projected revenue growth rates, profit margins, forecasted cash flows, discount rates and terminal growth
rates. If the contingent consideration is deemed significant or absent an agreed upon payout amount, the
initial measurement of contingent consideration and the corresponding liability is evaluated using the
Monte Carlo Method. For this valuation method, management develops projections covering the contingent
consideration period utilizing various potential pay-out scenarios. Probabilities are applied to each potential
scenario and the resulting values are discounted using a rate that considers weighted average cost of
capital as well as a specific risk premium associated with the riskiness of the contingent consideration itself,
the related projections, and the overall business. Refer to Note 1, “Description of Business,” and Note 3,
“Acquisitions,” to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for
further information on the Company’s business acquisitions.

Goodwill and Other Indefinite-Lived Intangible Assets

We performed the required annual impairment tests for goodwill and other indefinite-lived intangible

assets for the fiscal years 2023, 2022 and 2021, and found no impairment.

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 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.

In the fourth quarter of 2023, we revised the operating structure within our international
reportable segment. As a result, Latin America no longer met the definition of a reporting unit. We
performed a final impairment test of the Latin America reporting unit prior to the change in operating
structure. We calculated the estimated fair value exceeded its carrying value by approximately 12% and thus
found no impairment. The carrying value of Goodwill for our Latin America reporting unit as of the
final impairment test was $52.4 million.

For all reporting units, 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:

• a rising interest rate environment;

• a prolonged global or regional economic downturn;

• a significant decrease in the demand for our products;

• the inability to develop new and enhanced products and services in a timely manner;

• a significant adverse change in legal factors or in the business climate;

• an adverse action or assessment by a regulator;

• successful efforts by our competitors to gain market share in our markets;

• disruptions to the Company’s business;

• inability to effectively integrate acquired businesses;

• loss of key management and employees

• unexpected or unplanned changes in the use of assets or entity structure; and

• business divestitures.

If management’s estimates of future operating results change or if there are changes to other
assumptions due to these factors, the estimate of the fair values may change significantly. Such change
could result in impairment charges in future periods, which could have a significant impact on our operating
results and financial condition.

Refer to Note 2, “Summary of Accounting Policies — Goodwill and Other Indefinite-Lived Intangible
Assets,” to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for further
information on the Company’s policy regarding the accounting for goodwill and other indefinite-lived
intangible assets.

Income Taxes

We account for income taxes in accordance with Accounting Standards Codification (ASC) 740,
Income Taxes. Our estimates of income taxes payable, deferred income taxes and the effective tax rate are
based on an analysis of many factors including interpretations of federal, state and international income tax
laws; the difference between tax and financial reporting bases of assets and liabilities; estimates of amounts
currently due or owed in various jurisdictions; and current accounting standards. We review and update our
estimates on a quarterly basis as facts and circumstances change and actual results are known.

In assessing the net realizable value of the deferred tax assets on our balance sheet, we consider whether
it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent on the generation of future taxable income during the years
in which those temporary differences become deductible. We consider the taxable income in prior
carryback years, scheduled reversal of deferred tax liabilities, projected future taxable income and tax
planning strategies in making this assessment.

Refer to Note 15, “Income Taxes,” to the consolidated financial statements in Item 8 of this Annual
Report on Form 10-K for further information on the Company’s income taxes and income tax positions.

New Accounting Standards

For information on new accounting pronouncements and the impact of these pronouncements on our

consolidated financial statements, refer to Note 2, “Summary of Accounting Policies — New Accounting
Pronouncements,” to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K.

Non-GAAP Measures

Adjusted EBITDA

To supplement our consolidated financial statements presented in accordance with U.S. GAAP, we
provide the computation of Adjusted EBITDA attributable to the Company, which is defined as net income
before noncontrolling interests adjusted for the following items: interest expense, depreciation expense,
amortization of intangible assets, income tax expense, certain non-cash gains and losses including certain
purchase accounting adjustments and contingent consideration adjustments, share-based compensation
expense, losses on extinguishment of debt, certain transaction costs and credit facility fees, business
optimization expenses, certain specific provisions, and adjusted EBITDA attributable to noncontrolling
interests, as set forth in the reconciliation table below. The computation of Adjusted EBITDA is based
primarily on the definition included in our Credit Agreement.

We view Adjusted EBITDA as a key measure of our performance. We present Adjusted EBITDA not

only due to its importance for purposes of our credit agreements, but also because it assists us in comparing
our performance across reporting periods on a consistent basis as it excludes items that we do not believe
are indicative of our core operating performance. Our management uses Adjusted EBITDA:

• for planning purposes, including the preparation of our annual operating budget and developing and

refining our internal projections for future periods;

• to allocate resources to enhance the financial performance of our business;

• as a benchmark for the determination of the bonus component of compensation for our senior
executives under our management incentive plan, as described further in our Proxy Statement;

• to evaluate the effectiveness of our business strategies and as a supplemental tool in evaluating our

performance against our budget for each period; and

• in communications with our Board of Directors and investors concerning our financial performance.

We believe Adjusted EBITDA is used by securities analysts, investors and other interested parties in the
evaluation of the Company. Management believes the disclosure of Adjusted EBITDA offers an additional
financial metric that, when coupled with results prepared in accordance with U.S. generally accepted
accounting principles (U.S. GAAP) and the reconciliation to U.S. GAAP results, provides a more complete
understanding of our results of operations and the factors and trends affecting our business. We believe
Adjusted EBITDA is useful to investors for the following reasons:

• Adjusted EBITDA and similar non-GAAP measures are widely used by investors to measure a

company’s operating performance without regard to items that can vary substantially from company
to company depending upon financing and accounting methods, book values of assets, tax
jurisdictions, capital structures and the methods by which assets were acquired;

• investors can use Adjusted EBITDA as a supplemental measure to evaluate the overall operating
performance of our Company, including our ability to service our debt and other cash needs; and

• by comparing our Adjusted EBITDA in different historical periods, our investors can evaluate our

operating performance excluding the impact of items described below.

The adjustments included in the reconciliation table listed below are presented to illustrate the

operating performance of our business in a manner consistent with the presentation used by our management
and Board of Directors. These adjustments eliminate the impact of a number of items that:

• we do not consider indicative of our ongoing operating performance, such as non-cash write-downs
and other charges, non-cash gains, write-offs relating to the retirement of debt, severance costs and
other restructuring-related business optimization expenses;

• we believe to be akin to, or associated with, interest expense, such as administrative agent fees,

revolving credit facility commitment fees and letter of credit fees; or

• are non-cash in nature, such as share-based compensation expense.

We explain in more detail in footnotes (a) through (f) below why we believe these adjustments are

useful in calculating Adjusted EBITDA as a measure of our operating performance.

Adjusted EBITDA does not represent, and should not be a substitute for, net income or cash flows
from operations as determined in accordance with U.S. GAAP. Adjusted EBITDA has limitations as an
analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as
reported under U.S. GAAP. Some of the limitations are:

• Adjusted EBITDA does not reflect our cash expenditures, or future requirements for capital

expenditures or contractual commitments;

• Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

• Adjusted EBITDA does not reflect the significant interest expense, or the cash requirements

necessary to service interest or principal payments on our debt;

• although depreciation and amortization are non-cash charges, the assets being depreciated and

amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any
cash requirements for such replacements;

• several of the adjustments that we use in calculating Adjusted EBITDA, such as non-cash write-

downs and other charges, while not involving cash expense, do have a negative impact on the value of
our assets as reflected in our consolidated balance sheet prepared in accordance with U.S. GAAP;
and

• other companies may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a

comparative measure.

Furthermore, as noted above, one of our uses of Adjusted EBITDA is as a benchmark for determining
elements of compensation for our senior executives. At the same time, some or all of these senior executives
have responsibility for monitoring our financial results, generally including the adjustments in calculating
Adjusted EBITDA (subject ultimately to review by our Board of Directors in the context of the Board’s
review of our financial statements). While many of the adjustments (for example, transaction costs and credit
facility fees), involve mathematical application of items reflected in our financial statements, others involve
a degree of judgment and discretion. While we believe all of these adjustments are appropriate, and while the
calculations are subject to review by our Board of Directors in the context of the Board’s review of our
financial statements, and certification by our Chief Financial Officer in a compliance certificate provided to
the lenders under our Term Loan and Revolving Facility, this discretion may be viewed as an additional
limitation on the use of Adjusted EBITDA as an analytical tool.

Because of these limitations, Adjusted EBITDA should not be considered as a measure of discretionary

cash available to us to invest in the growth of our business. We compensate for these limitations by relying
primarily on our U.S. GAAP results and using Adjusted EBITDA only supplementally.

The following table presents a reconciliation of net income to Adjusted EBITDA attributable to

Generac Holdings Inc.:

(U.S. Dollars in thousands)

Year Ended December 31,

2023

2022

2021

Net income attributable to Generac Holdings Inc. . . . . . . . . . . . . . . . .

$214,606

$399,502

$550,494

Net income attributable to noncontrolling interests . . . . . . . . . . . . . . .

2,514

9,368

6,075

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

217,120

408,870

556,569

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

97,627

54,826

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

166,602

156,141

Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash write-down and other adjustments(a) . . . . . . . . . . . . . . . . . .
Non-cash share-based compensation expense(b) . . . . . . . . . . . . . . . . . .

73,180
(5,953)
35,492

99,596
(2,091)
29,481

32,953

92,041

134,957
(3,070)
23,954

(U.S. Dollars in thousands)
Loss on extinguishment of debt(c)
Transaction costs and credit facility fees(d)
Business optimization and other charges(e)
Provision for legal, regulatory, and clean energy product charges(f)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .

. . . .

Year Ended December 31,

2023

—
4,054
10,551

38,490

696

2022

3,743
5,026
4,371

65,265

139

2021

831
22,357
33

—

800

Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

637,859

825,367

861,425

Adjusted EBITDA attributable to noncontrolling interests . . . . . . . . . .

4,687

15,087

9,351

Adjusted EBITDA attributable to Generac Holdings Inc.

. . . . . . . . . .

$633,172

$810,280

$852,074

(a) Represents the following non-cash charges, gains, and other adjustments: gains/losses on the disposition
of assets other than in the ordinary course of business, gains/losses on sales of certain investments,
unrealized mark-to-market adjustments on commodity contracts, certain foreign currency related
adjustments, and certain purchase accounting and contingent consideration adjustments. We believe that
adjusting net income for these items is useful for the following reasons:

• The gains/losses on disposition of assets other than in the ordinary course of business and sales of

certain investments result from the sale of assets that are no longer useful in our business and therefore
represent gains or losses that are not from our core operations;

• The adjustments for unrealized mark-to-market gains and losses on commodity contracts represent
non-cash items to reflect changes in the fair value of forward contracts that have not been settled or
terminated. We believe it is useful to adjust net income for these items because the charges do not
represent a cash outlay in the period in which the charge is incurred, although Adjusted EBITDA must
always be used together with our U.S. GAAP statements of comprehensive income and cash flows
to capture the full effect of these contracts on our operating performance;

• The purchase accounting adjustments represent non-cash items to reflect fair value at the date of

acquisition, and therefore do not reflect our ongoing operations. Fair value adjustments to contingent
consideration obligations related to business acquisitions are added back as they are akin to
purchase price.

(b) Represents share-based compensation expense to account for stock options, restricted stock and other

stock awards over their respective vesting period.

voluntary prepayments of debt. Refer to Note 12, “Credit Agreements,” to the consolidated financial
statements in Item 8 of this Annual Report on Form 10-K for further information on the losses on
extinguishment of debt.

(d) Represents transaction costs incurred directly in connection with any investment, as defined in our

credit agreement, equity issuance or debt issuance or refinancing, together with certain fees relating to
our senior secured credit facilities, such as administrative agent fees and credit facility commitment fees
under our Amended Credit Agreement, which we believe to be akin to, or associated with, interest
expense and whose inclusion in Adjusted EBITDA is therefore similar to the inclusion of interest expense
in that calculation.

(e) Represents severance and other restructuring charges related to the consolidation of certain operating

facilities and organizational functions.

(f) Represents the following significant and unusual charges not indicative of our ongoing operations:

• a provision for judgments and legal expenses related to certain patent and other litigation —

$28.3 million in 2023.

• a provision for a matter with the CPSC concerning the imposition of civil fines for allegedly failing

to timely submit a report under the CPSA in relation to certain portable generators that were subject
to a voluntary recall previously announced on July 29, 2021 — $5.8 million in 2023; $10.0 million
in 2022.

• a bad debt provision and additional customer support costs related to a clean energy product

customer that filed for bankruptcy in 2022 — $4.4 million additional customer support costs in
2023; $17.9 million bad debt provision in 2022.

• a warranty provision to address certain clean energy product warranty-related matters — $37.3 million

in 2022.

Adjusted Net Income

To further supplement our consolidated financial statements in accordance with U.S. GAAP, we

provide the computation of Adjusted Net Income attributable to the Company, which is defined as net
income before noncontrolling interest adjusted for the following items: amortization of intangible assets,
amortization of deferred financing costs and original issue discount related to our debt, intangible impairment
charges (if any), certain transaction costs and other purchase accounting adjustments, losses on
extinguishment of debt, business optimization expenses, certain specific provisions, other non-cash gains
and losses or charges, and adjusted net income attributable to noncontrolling interests, as set forth in the
reconciliation table below. In addition, for periods prior to 2022, adjusted net income reflects cash income tax
expense due to the existence of the tax shield from the amortization of tax-deductible goodwill and
intangible assets from our acquisition by CCMP Capital Advisors, LLC in 2006. Due to the expiration of
this tax shield in the fourth quarter of 2021, there is no similar reconciling item starting in 2022.

We believe Adjusted Net Income is used by securities analysts, investors and other interested parties in

the evaluation of our company’s operations. Management believes the disclosure of Adjusted Net Income
offers an additional financial metric that, when used in conjunction with U.S. GAAP results and the
reconciliation to U.S. GAAP results, provides a more complete understanding of our ongoing results of
operations, and the factors and trends affecting our business.

The adjustments included in the reconciliation table listed below are presented to illustrate the

operating performance of our business in a manner consistent with the presentation used by investors and
securities analysts. Similar to the Adjusted EBITDA reconciliation, these adjustments eliminate the impact of
a number of items we do not consider indicative of our ongoing operating performance or cash flows,
such as amortization costs, transaction costs and write-offs relating to the retirement of debt. Prior to the
expiration of our tax shield in the fourth quarter of 2021, we also made adjustments to present cash taxes paid
as a result of our favorable tax attributes.

Similar to Adjusted EBITDA, Adjusted Net Income does not represent, and should not be a substitute

for, net income or cash flows from operations as determined in accordance with U.S. GAAP. Adjusted Net
Income has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for
analysis of our results as reported under U.S. GAAP. Some of the limitations are:

• Adjusted Net Income does not reflect changes in, or cash requirements for, our working capital

needs;

• although amortization is a non-cash charge, the assets being amortized may have to be replaced in
the future, and Adjusted Net Income does not reflect any cash requirements for such replacements;
and

• other companies may calculate Adjusted Net Income differently than we do, limiting its usefulness as

a comparative measure.

The following table presents a reconciliation of net income to Adjusted Net Income attributable to

Generac Holdings Inc.:

(U.S. Dollars in thousands)
. . . . . . . . . . . . . . .
Net income attributable to Generac Holdings Inc.
Net income attributable to noncontrolling interests . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes(a)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred finance costs and original issue discount . . . .
Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction costs and other purchase accounting adjustments(b)
. . . . .
(Gain)/loss attributable to business or asset dispositions(c) . . . . . . . . . .
Business optimization and other charges (see above) . . . . . . . . . . . . . .
Provision for legal, regulatory, and clean energy product charges

(see above) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax effect of add backs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash income tax expense(a)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted net income attributable to noncontrolling interests . . . . . . . .
Adjusted net income attributable to Generac Holdings Inc. . . . . . . . . .

Year Ended December 31,
2022
$399,502
9,368
408,870
—
103,320
3,234
3,743
3,588
(229)
4,371

2023
$214,606
2,514
217,120
—
104,194
3,885
—
2,089
(119)
10,551

2021
$ 550,494
6,075
556,569
134,957
49,886
2,589
831
19,655
(4,383)
33

38,490
(38,384)
—
337,826
2,514
$335,312

65,265
(43,638)

—
—
— (136,231)
623,906
4,971
$ 618,935

548,524
9,675
$538,849

(a) For the years ended December 31, 2021, the amount is based on a cash income tax rate of 19.7% due

to the existence of the tax shield from the amortization of tax-deductible goodwill and intangible assets
from our acquisition by CCMP Capital Advisors, LLC in 2006. Due to the expiration of this tax
shield in the fourth quarter of 2021, there is no similar reconciling item for the 2022 or 2023 periods.

(b) Represents transaction costs incurred directly in connection with any investment, as defined in our

credit agreement, equity issuance or debt issuance or refinancing, and certain purchase accounting and
contingent consideration adjustments.

than ordinary course, as defined in our credit agreement.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk from changes in foreign currency exchange rates, commodity prices and
interest rates. To reduce the risk from these changes, we use financial instruments from time to time. We do
not hold or issue financial instruments for trading purposes.

Foreign Currency

We are exposed to foreign currency exchange risk as a result of transactions denominated in currencies
other than the U.S. Dollar, as well as operating businesses and supply chains in foreign countries. Periodically,
we utilize foreign currency forward purchase and sales contracts to manage the volatility associated with
certain foreign currency purchases and sales in the normal course of business. Contracts typically have
maturities of twelve months or less. Realized gains and losses on transactions denominated in foreign currency
are recorded as a component of cost of goods sold in the statements of comprehensive income.

The following is a summary of the 53 foreign currency contracts outstanding as of December 31, 2023

(notional amount in thousands):

Currency Denomination
GBP . . . . . . . . . . . . . . .
AUD . . . . . . . . . . . . . . .

Trade Dates
11/21/23 – 12/18/23
11/21/23 – 12/27/23

Effective Dates
11/21/23 – 12/18/23
11/21/23 – 12/27/23

Notional Amount
$ 5,800
$15,850

Expiration Date
1/10/24 – 2/07/24
1/10/24 – 2/14/24

Commodity Prices

We are a purchaser of commodities and components manufactured from commodities including steel,

aluminum, copper and others. As a result, we are exposed to fluctuating market prices for those commodities.
While such materials are typically available from numerous suppliers, commodity raw materials are subject
to price fluctuations. We generally buy these commodities and components based on market prices that are
established with the supplier as part of the purchase process. Depending on the supplier, these market
prices may reset on a periodic basis based on negotiated lags and calculations. To the extent that commodity
prices increase and we do not have firm pricing from our suppliers, or our suppliers are not able to honor
such prices, we may experience a decline in our gross margins to the extent we are not able to increase selling
prices of our products or obtain manufacturing efficiencies or supply chain savings to offset increases in
commodity costs.

In 2021 and 2022, we experienced an increase in commodity and component costs resulting from
supply chain challenges and the overall inflationary environment. We implemented multiple price increases
to help mitigate the impact of these rising commodity costs, and the realization of these price increases in 2022
and 2023 helped to partially offset the higher commodity costs.

Periodically, we engage in certain commodity risk management activities to mitigate the impact of
potential price fluctuations on our financial results. These derivatives typically have maturities of less than
eighteen months. As of December 31, 2023, we had no commodity contracts outstanding.

Interest Rates

As of December 31, 2023, all of the outstanding debt under our Term Loans and Revolving Facility

was subject to floating interest rate risk. As of December 31, 2023, we had the following interest rate swap
contracts outstanding (notional amount in thousands of US dollars), to help minimize our borrowing costs:

Hedged Item

Interest Rate

Contract Date

Effective Date

Notional Amount

Fixed SOFR Rate

Expiration Date

March 4, 2020 May 31, 2023

March 5, 2020 May 31, 2023

March 6, 2020 May 31, 2023

$200,000

$100,000

$200,000

1.1360%

1.0700%

0.9560%

December 14, 2026

In June 2022, in conjunction with the amendments to the Company’s credit agreements discussed
further in Note 12, “Credit Agreements,” to our consolidated financial statements in Item 8 of this Annual
Report on Form 10-K, the Company amended its interest rate swaps to match that of the underlying debt and
reconfirmed hedge effectiveness. The Company formally documented all relationships between interest rate
hedging instruments and the related hedged items, as well as its risk-management objectives and strategies for
undertaking various hedge transactions. These interest rate swap agreements qualify as cash flow hedges
and therefore, the effective portions of their gains or losses are reported as a component of accumulated other
comprehensive loss (AOCL) in the consolidated balance sheets. At December 31, 2023, the fair value of
these interest rate swaps was an asset of $39.8 million, excluding the impact of credit risk. Even after giving
effect to these swaps, we are exposed to risks due to changes in interest rates with respect to the portion of
our Term Loans and Revolving Facility that is not covered by the swaps. A hypothetical change in the SOFR
interest rate of 100 basis points would have changed annual interest expense by approximately $9.5 million
(or, without the swaps in place, $14.5 million) in 2023.

For additional information on the Company’s foreign currency and commodity forward contracts and

interest rate swaps, including amounts charged to the statements of comprehensive income during 2023,
2022, and 2021, refer to Note 5, “Derivative Instruments and Hedging Activities,” and Note 6, “Accumulated
Other Comprehensive Loss,” to our consolidated financial statements in Item 8 of this Annual Report on
Form 10-K.

Item 8. Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

To the stockholders and the Board of Directors of Generac Holdings Inc.
Waukesha, WI

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Generac Holdings Inc. and
subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of
comprehensive income, stockholders’ equity, and cash flows, for each of the three years in the period ended
December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our
opinion, the financial statements present fairly, in all material respects, the financial position of the Company
as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2023, in conformity with accounting principles generally
accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight

Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31,
2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 21,
2024, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is

to express an opinion on the Company’s financial statements based on our audits. We are a public accounting
firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require

that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud. Our audits included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable
basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the

financial statements that were communicated or required to be communicated to the audit committee and
that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our
especially challenging, subjective, or complex judgments. The communication of critical audit matters does
not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by
communicating the critical audit matters below, providing separate opinions on the critical audit matters or
on the accounts or disclosures to which they relate.

Goodwill — Refer to Notes 2 and 9 to the consolidated financial statements

Critical Audit Matter Description

The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of
each reporting unit to its carrying value. The Company’s estimate for each reporting unit is based on the

present value of estimated future cash flows attributable to the respective reporting unit. This requires
management to make significant estimates and assumptions including estimates of future revenue, forecasted
operating costs, and discount rates. Changes in the assumptions could have a significant impact on the fair
value, which could result in an impairment charge. The Company evaluates goodwill for impairment annually
as of October 31 or more frequently when an event occurs or circumstances change. In the Latin America
impairment analysis, the reporting unit had an estimated fair value that exceeded the carrying value by
approximately 12%. Because the estimated fair value exceeded the carrying value, no impairment was recorded.
The carrying value of goodwill for the Company’s Latin America reporting unit as of the impairment
assessment was $52.4 million.

Key financial assumptions utilized to determine the fair value of the Latin America reporting unit

include forecasted revenue, forecasted operating costs, and the discount rate.

The principal consideration for our determination that the evaluation of the Latin America reporting

unit’s goodwill is a critical audit matter is that there is a high degree of auditor effort, judgment and
subjectivity involved in designing and performing procedures to evaluate the reasonableness of management’s
key assumptions utilized to determine the fair value of the Latin America reporting unit.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the forecasts of revenue, forecasted operating costs, and the selection

of the discount rate for the Latin America reporting unit included the following, among others:

• Evaluated the design and effectiveness of the controls over management’s goodwill impairment

evaluation, including those over the determination of the fair value of the reporting unit, such as
controls related to management’s forecast and the selection of the discount rate.

• Obtained the Company’s discounted cash flow model and evaluated the valuation analysis for

mathematical accuracy.

• Utilized fair value specialists to evaluate whether the valuation techniques applied by management

were appropriate.

• Assessed management’s historical ability to accurately forecast the reporting unit’s results of

operations.

• Assessed management’s intent and/or ability to take specific actions included in the discounted cash

flow model.

• Evaluated the reasonableness of management’s forecasts by comparing the forecasts to (1) historical

results, (2) internal communications to the Board of Directors, and (3) forecasted information included
in industry reports.

• Utilized fair value specialists to evaluate the reasonableness of the discount rate selected, including
developing a range of independent estimates and comparing it to the discount rate utilized by the
Company.

Revenue — Refer to Note 2 to the Consolidated Financial Statements

Critical Audit Matter Description

The Company has a wide range of products and services that are offered in various markets throughout

the world. The Company’s business activities are carried out by numerous individual business units, which
offer a unique set of products and services within specific geographic areas.

We identified revenue as a critical audit matter given the disaggregated nature of the Company’s
operations and business units generating revenue. This required extensive audit effort due to the volume of
the underlying transactions and distinctiveness of each individual business unit. High levels of auditor
judgment were necessary to determine the nature, timing, and extent of audit procedures.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the Company’s revenue transactions included the following, among

others:

• Evaluated the design and effectiveness of the controls within the relevant revenue business processes,

including controls over revenue recognition and operating results.

• For a sample of revenue transactions, we performed detail transaction testing by agreeing the

amounts recorded to source documents and determined that revenue was recognized appropriately.

• For the revenue populations subject to detail transaction testing, we tested the completeness of

revenue by making selections from reciprocal populations and determined whether the transaction
was recorded as a sale in the general ledger.

• For revenue transactions not subject to detail transaction testing we evaluated recorded activity

based on analytical procedures using regression analyses to develop an expectation of the revenue
balance at the product class level.

/s/ Deloitte & Touche LLP

Milwaukee, Wisconsin
February 21, 2024

We have served as the Company’s auditor since 2016.

Report of Independent Registered Public Accounting Firm

To the stockholders and the Board of Directors of Generac Holdings Inc.
Waukesha, Wisconsin

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Generac Holdings Inc. and subsidiaries

(the “Company”) as of December 31, 2023, based on criteria established in Internal Control — Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). In our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated
Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight

Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended
December 31, 2023, of the Company and our report dated February 21, 2024, expressed an unqualified
opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting, included in
the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility
is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are
a public accounting firm registered with the PCAOB and are required to be independent with respect to
the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable

assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a
material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

Milwaukee, Wisconsin
February 21, 2024

Generac Holdings Inc.
Consolidated Balance Sheets
(U.S. Dollars in Thousands, Except Share and Per Share Data)

December 31,

2023

2022

Current assets:

Assets

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accounts receivable, less allowance for credit losses of $33,925 and $27,664 at

200,994 $ 132,723

December 31, 2023 and 2022, respectively . . . . . . . . . . . . . . . . . . . . . . . .
Inventories
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

537,316
1,167,484
91,898
1,997,692

522,458
1,405,384
121,783
2,182,348

Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

598,577

467,604

Customer lists, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
206,987
Patents and technology, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
454,757
Other intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41,719
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tradenames, net
227,251
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,400,880
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,746
175,170
Operating lease and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,093,312 $5,169,462

184,513
417,441
27,127
216,995
1,432,384
15,532
203,051

Current liabilities:

Liabilities and stockholders’ equity

Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued wages and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued product warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities
Current portion of long-term borrowings and finance lease obligations . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

81,769 $
340,719
54,970
65,298
292,120
45,895
880,771

48,990
446,050
45,741
89,141
349,389
12,733
992,044

Long-term borrowings and finance lease obligations . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease and other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Redeemable noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity:

Common stock, par value $0.01, 500,000,000 shares authorized, 73,195,055

and 72,701,257 shares issued at December 31, 2023 and 2022, respectively . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Additional paid-in capital
Treasury stock, at cost, 13,057,298 and 11,284,350 shares at December 31,

1,447,553
90,012
167,008
158,349
2,743,693

1,369,085
125,691
143,726
169,190
2,799,736

6,549

110,471

733
1,070,386

728
1,016,138

2023 and 2022, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess purchase price over predecessor basis . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity attributable to Generac Holdings Inc. . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(808,491)
(202,116)
2,316,224
(65,102)
2,257,381
1,874
2,259,255
Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,093,312 $5,169,462

(1,032,921)
(202,116)
2,519,313
(15,143)
2,340,252
2,818
2,343,070

See notes to consolidated financial statements.
59

Generac Holdings Inc.
Consolidated Statements of Comprehensive Income
(U.S. Dollars in Thousands, Except Share and Per Share Data)

Year Ended December 31,

2023

2022

2021

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,022,667 $ 4,564,737 $ 3,737,184

Costs of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,657,236

3,042,733

2,377,102

Gross profit

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,365,431

1,522,004

1,360,082

Operating expenses:

Selling and service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Research and development

. . . . . . . . . . . . . . . . . . . . . . . . . .

General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . .

Acquisition related costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amortization of intangibles . . . . . . . . . . . . . . . . . . . . . . . . . .

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

448,199

173,443

252,936

460

104,194

979,232

386,199

496,260

159,774

194,861

1,459

103,320

955,674

566,330

319,020

104,303

144,272

21,465

49,886

638,946

721,136

Other (expense) income:

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(97,627)

(54,826)

(32,953)

Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . .

4,272

—

Other, net

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2,544)

1,129

(3,743)

(424)

1,415

(831)

2,759

Total other expense, net

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(95,899)

(57,864)

(29,610)

Income before provision for income taxes . . . . . . . . . . . . . . . . . .

Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income attributable to noncontrolling interests . . . . . . . . . . .

290,300

73,180

217,120

2,514

508,466

99,596

408,870

9,368

691,526

134,957

556,569

6,075

Net income attributable to Generac Holdings Inc. . . . . . . . . . . . . $

214,606 $

399,502 $

550,494

Other comprehensive income (loss):

Foreign currency translation adjustment . . . . . . . . . . . . . . . . . $

57,963 $

(48,841) $

(41,030)

Net unrealized (loss) gain on derivatives . . . . . . . . . . . . . . . . .

Other comprehensive income (loss)

. . . . . . . . . . . . . . . . . . . . . .

(8,004)

49,959

38,494

20,529

(10,347)

(20,501)

Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . .

267,079

Comprehensive income attributable to noncontrolling interests . . .

2,581

398,523

11,179

536,068

5,496

Comprehensive income attributable to Generac Holdings Inc. . . . . $

264,498 $

387,344 $

530,572

Net income attributable to Generac Holdings Inc. per common

share – basic: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

3.31 $

5.55 $

Weighted average common shares outstanding – basic: . . . . . . . . .
Net income attributable to Generac Holdings Inc. per common

61,265,060

63,117,007

8.51
62,686,001

share – diluted:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

3.27 $

5.42 $

8.30

Weighted average common shares outstanding – diluted:

. . . . . . .

62,058,387

64,681,357

64,253,408

See notes to consolidated financial statements.
60

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Generac Holdings Inc.
Consolidated Statements of Cash Flows
(U.S. Dollars in Thousands)

Year Ended December 31,
2022

2021

2023

Operating activities
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 217,120 $ 408,870 $ 556,569
Adjustments to reconcile net income to net cash provided by operating

activities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of original issue discount and deferred financing costs . .
Loss on extinguishment of debt
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on disposal of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other noncash charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net changes in operating assets and liabilities, net of acquisitions:

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
Accrued wages and employee benefits
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from equity awards . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . .
Investing activities
Proceeds from sale of property and equipment . . . . . . . . . . . . . . . . . . .
Proceeds from sale of investment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from beneficial interest in securitization transactions . . . . . . . .
Contribution to tax equity investment . . . . . . . . . . . . . . . . . . . . . . . . .
Expenditures for property and equipment . . . . . . . . . . . . . . . . . . . . . .
Purchase of long-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of businesses, net of cash acquired . . . . . . . . . . . . . . . . . .
Net cash used in investing activities
. . . . . . . . . . . . . . . . . . . . . . . . . .
Financing activities
Proceeds from short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from long-term borrowings
. . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of long-term borrowings and finance lease obligations . . . .
Stock repurchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of contingent acquisition consideration . . . . . . . . . . . . . . . . .
Payment of debt issuance costs
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of additional ownership interest . . . . . . . . . . . . . . . . . . . . . .
Cash dividends paid to noncontrolling interest of subsidiary . . . . . . . . .
Taxes paid related to equity awards . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from the exercise of stock options . . . . . . . . . . . . . . . . . . . . .
Net cash (used in) provided by financing activities . . . . . . . . . . . . . . . .

62,408
104,194
3,885
—
(34,478)
35,492
(285)
5,922

(18,272)
262,670
24,266
(120,900)
7,962
(27,337)
(977)
521,670

2,896
—
3,294
(6,627)
(129,060)
(32,592)
(15,974)
(178,063)

64,257
348,827
(37,104)
(288,699)
(251,513)
(4,979)
—
(104,844)
—
(10,897)
7,815
(277,137)

52,821
103,320
3,234
3,743
(95,465)
29,481
(592)
18,339

6,547
(319,274)
4,766
(223,031)
(27,369)
110,036
(16,910)
58,516

2,077
1,308
3,566
(14,930)
(86,188)
(15,000)
(25,065)
(134,232)

248,209
1,026,284
(268,133)
(542,191)
(345,840)
(16,135)
(10,330)
(375)
(309)
(40,923)
13,786
64,043

42,155
49,886
2,589
831
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23,954
(4,393)
206

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(470,991)
(819)
297,323
5,814
73,798
(31,809)
411,156

259
4,968
4,609
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(109,992)
—
(713,471)
(817,287)

272,818
150,088
(239,113)
(108,556)
(125,992)
(3,750)
(1,185)
(27,164)
—
(58,903)
38,787
(102,970)

Effect of exchange rate changes on cash and cash equivalents

. . . . . . . .

1,801

(2,943)

1,312

(507,789)
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . .
655,128
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . $ 200,994 $ 132,723 $ 147,339
Supplemental disclosure of cash flow information
Cash paid during the period
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 84,027 $
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

48,912 $ 27,842
156,728

(14,616)
147,339

68,271
132,723

100,082

150,893

See notes to consolidated financial statements.
63

Generac Holdings Inc.

Notes to Consolidated Financial Statements
Years Ended December 31, 2023, 2022 and 2021
(U.S. Dollars in Thousands, Except Share and Per Share Data)

1. Description of Business

Founded in 1959, Generac Holdings Inc. (the Company) is a leading global designer and manufacturer
of a wide range of energy technology solutions. The Company provides power generation equipment, energy
storage systems, energy management devices & solutions, and other power products serving the residential,
light commercial, and industrial markets. Generac’s power products and solutions are available globally
through a broad network of independent dealers, distributors, retailers, e-commerce partners, wholesalers,
and equipment rental companies, as well as sold direct to certain end user customers.

Over the years, the Company has executed a number of acquisitions that support its strategic plan
(refer to Item 1 in this Annual Report on Form 10-K for discussion of the Company’s “Powering a Smarter
World” strategic plan). A summary of acquisitions affecting the reporting periods presented include:

• In June 2021, the Company acquired Deep Sea Electronics Limited (Deep Sea), founded in 1975 and

headquartered in Hunmanby, United Kingdom. Deep Sea is an industry leading designer and
manufacturer of a diverse suite of flexible control solutions focused on the global power generation
and transfer switch markets.

• In July 2021, the Company acquired Chilicon Power LLC (Chilicon), a designer and provider of grid-

interactive microinverter and monitoring solutions for the solar market based in Los Angeles,
California.

• In September 2021, the Company acquired Apricity Code Corporation (Apricity Code), an advanced

engineering and product design company located in Bend, Oregon.

• In September 2021, the Company acquired Off Grid Energy Ltd. (Off Grid Energy), a designer and
manufacturer of industrial-grade mobile energy storage systems. Headquartered in Rugby, United
Kingdom, Off Grid Energy offers a diverse range of energy storage solutions that provide cleaner
and more flexible energy for industrial and mobile applications.

• In October 2021, the Company acquired Tank Utility Inc. (Tank Utility). Headquartered in Boston,
Massachusetts, Tank Utility is a provider of internet of things (IoT) propane tank monitoring that
enables the optimization of propane fuel logistics.

• In December 2021, the Company acquired ecobee Inc. (ecobee), founded in 2007 and headquartered
in Toronto, Canada. ecobee is a leader in sustainable home technology solutions including smart
thermostats that deliver significant energy savings, security and peace of mind.

• In June 2022, the Company acquired Electronic Environments Co. LLC and related subsidiaries

(collectively EEC). Headquartered in Marlborough, Massachusetts, EEC is an industrial generator
distributor as well as a provider of data center and telecom facility design, build, maintenance, and
repair services.

• In October 2022, the Company acquired Blue Pillar, an industrial IoT platform developer that

designs, deploys, and manages industrial IoT network solutions to enable distributed energy generation
monitoring and control.

• In February 2023, the Company acquired REFUstor, headquartered in Pfullingen, Germany.

REFUstor is a developer and supplier of battery storage hardware products, advanced software, and
platform services for the commercial and industrial energy storage market.

2. Summary of Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries that

are consolidated in conformity with U.S. GAAP. All intercompany amounts and transactions have been
eliminated in consolidation.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of

three months or less to be cash equivalents.

Concentration of Credit Risk

The Company maintains the majority of its domestic cash in a few commercial banks in multiple
operating and investment accounts. Balances on deposit are insured by the Federal Deposit Insurance
Corporation (FDIC) up to specified limits. Balances in excess of FDIC limits are uninsured.

One customer accounted for approximately 7% and 11% of accounts receivable at December 31, 2023

and 2022, respectively. No one customer accounted for greater than 4%, 4%, and 6%, of net sales during
the years ended December 31, 2023, 2022, and 2021, respectively.

Accounts Receivable and Allowance for Credit Losses

The Company’s trade and other receivables primarily arise from the sale of its products and services to
independent residential dealers, industrial distributors and dealers, national and regional retailers, electrical/
HVAC/solar wholesalers, e-commerce partners, equipment rental companies, equipment distributors,
solar installers, utilities, EPC companies, telecommunications customers, and certain end users with payment
terms generally ranging from 30 to 90 days. The Company evaluates the credit risk of a customer when
extending credit based on a combination of various financial and qualitative factors that may affect the
customers’ ability to pay. These factors include the customer’s financial condition, past payment experience,
credit bureau information, and regional considerations.

Receivables are recorded at their face value amount less an allowance for credit losses. The Company

maintains an allowance for credit losses, which represents an estimate of expected losses over the remaining
contractual life of its receivables considering current market conditions and estimates for supportable forecasts
when appropriate. The Company measures expected credit losses on its trade receivables on an entity-by-
entity basis. The estimate of expected credit losses considers a historical loss experience rate that is adjusted
for delinquency trends, collection experience, and/or economic risk where appropriate based on current
market conditions. Additionally, management develops a specific allowance for trade receivables known to
have a high risk of expected future credit loss.

The Company holds various credit insurance plans that cover the risk of loss up to specified amounts
on certain trade receivables. As of December 31, 2023, the Company had gross receivables of $571,241 and
an allowance for credit losses of $33,925.

The following is a tabular reconciliation of the Company’s allowance for credit losses:

Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Established for acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for credit losses(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended December 31,

2023

2022

$27,664
24
7,443
(1,464)
258

$12,025
498
17,966
(2,554)
(271)

Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$33,925

$27,664

(1)

Includes a specific credit loss provision of $17,926 recorded during 2022 for a clean energy product
customer that filed for bankruptcy.

Inventories

Inventories are stated at the lower of cost or market, with cost determined using the first-in, first-out

method.

Property and Equipment

Property and equipment, including internal use software and software to provide a service, is recorded
at cost and depreciated using the straight-line method over the estimated useful lives of the assets, which are
summarized below (in years). Costs of leasehold improvements are amortized over the lesser of the term
of the lease (including renewal option periods) or the estimated useful lives of the improvements. The
Company capitalizes significant software enhancements. Implementation costs incurred in cloud computing
arrangements that are service contracts are recorded in prepaid expenses and other assets and operating
lease and other assets on the Consolidated Balance Sheets and are amortized over the expected service period.
Finance lease right of use assets are included in property and equipment. Refer to Note 10, “Leases,” to
the consolidated financial statements for the Company’s lease disclosure.

Land improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8 – 20

Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10 – 40

Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Dies and tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3 – 15

3 – 10

Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3 – 6

Office & information technology equipment and internal use software . . . . . . . . . . . . .

Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3 – 15

2 – 20

Total depreciation expense was $62,408, $52,821, and $42,155 for the years ended December 31, 2023,

2022 and 2021, respectively.

Goodwill and Other Indefinite-Lived Intangible Assets

Goodwill represents the excess of the purchase price over fair value of identifiable net assets acquired
from business acquisitions. Goodwill is not amortized, but is reviewed for impairment on an annual basis
and between annual tests if indicators of impairment are present. The Company evaluates goodwill for
impairment annually as of October 31 or more frequently when an event occurs or circumstances change that
indicates the carrying value may not be recoverable. The Company has the option to assess goodwill for
impairment by performing either a qualitative assessment or quantitative test. The qualitative assessment
determines whether it is more likely than not that the fair value of a reporting unit is less than its carrying
amount. If the Company determines that it is not more likely than not that the fair value of a reporting unit
is less than its carrying amount, then the quantitative test is not required to be performed. If the Company
determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount,
the Company is required to perform the quantitative test. In the quantitative test, the calculated fair value
of the reporting unit is compared to its book value including goodwill. If the fair value of the reporting unit
is in excess of its book value, the related goodwill is not impaired. If the fair value of the reporting unit is
less than its book value, an impairment loss is recognized in an amount equal to that excess, limited to the total
amount of goodwill allocated to that reporting unit.

Other indefinite-lived intangible assets consist of certain tradenames. The Company tests the carrying

value of these tradenames annually as of October 31, or more frequently when an event occurs or
circumstances change that indicates the carrying value may not be recoverable, by comparing the assets’ fair
value to its carrying value. Fair value is measured using a relief-from-royalty approach, which assumes the
fair value of the tradename is the discounted cash flows of the amount that would be paid had the Company
not owned the tradename and instead licensed the tradename from another company.

The Company performed the required annual impairment tests for goodwill and other indefinite-lived

intangible assets for the fiscal years 2023, 2022 and 2021, and found no impairment.

Impairment of Long-Lived Assets

The Company periodically evaluates the carrying value of long-lived assets (excluding goodwill and

indefinite-lived tradenames). Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If the sum of the expected future

undiscounted cash flows is less than the carrying amount of an asset, a loss is recognized for the difference
between the fair value and carrying value of the asset.

Debt Issuance Costs

Debt discounts and direct costs incurred in connection with the issuance or amendment of long-term
debt are deferred and recorded as a reduction of outstanding debt and amortized to interest expense using
the effective interest method over the terms of the related credit agreements. $3,885, $3,234, and $2,589, of
deferred financing costs and original issue discount were amortized to interest expense during fiscal years
2023, 2022 and 2021, respectively. Excluding the impact of any future long-term debt issuances or
prepayments, estimated amortization to interest expense for the next five years is as follows: 2024-$3,923;
2025-$3,919; 2026-$3,819; 2027-$1,028; 2028-$0.

Income Taxes

The Company is a C Corporation and therefore accounts for income taxes pursuant to the liability
method. Accordingly, the current or deferred tax consequences of a transaction are measured by applying
the provision of enacted tax laws to determine the amount of taxes payable currently or in future years.
Deferred income taxes are provided for temporary differences between the income tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes. In assessing the realizability of deferred
tax assets, the Company considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the years in which those temporary differences become
deductible. The Company considers taxable income in prior carryback years, the scheduled reversal of
deferred tax liabilities, projected future taxable income and tax planning strategies, as appropriate, in making
this assessment.

Revenue Recognition

The Company’s revenues primarily consist of product sales to its customers. The Company considers
the purchase orders, which in some cases are governed by master sales agreements, to be the contracts with
the customers. For each contract, the Company considers the commitment to transfer products, each of which
is distinct, to be the identified performance obligations. Revenue is measured as the amount of consideration
the Company expects to be entitled in exchange for the transfer of product, which is generally the price
stated in the contract specific for each item sold, adjusted for the value of expected returns, discounts, rebates,
or other promotional incentives or allowances offered to our customers. Expected returns for damaged or
defective product are estimated using the expected value method based on historical product return experience.
Discounts and rebates offered to customers are typically defined in the master sales agreements with
customers and, therefore, are recorded using the most likely amount method based on the terms of the
contract. Promotional incentives are defined programs offered for short, specific periods of time and are
estimated using the expected value method based on historical experience. The Company does not expect the
transaction price for revenue recognized will be subject to a significant revenue reversal. As the Company’s
product sale contracts and standard payment terms have a duration of less than one year, it uses the practical
expedient applicable to such contracts and does not consider the time value of money. Sales, use, value
add, and other similar taxes assessed by governmental authorities and collected concurrent with revenue-
producing activities are excluded from revenue. The Company has elected to recognize the cost for freight
activities when control of the product has transferred to the customer as an expense within cost of goods sold
in the consolidated statements of comprehensive income. Product revenues are recognized at the point in
time when control of the product is transferred to the customer, which typically occurs upon shipment or
delivery to the customer. To determine when control has transferred, the Company considers if there is a
present right to payment and if legal title, physical possession, and the significant risks and rewards of
ownership of the asset has transferred to the customer. As a substantial portion of the Company’s product
revenues are recognized at a point in time, the amount of unsatisfied performance obligations at each period
end is not material. The Company’s contracts have an original expected duration of one year or less. As a
result, the Company has elected to use the practical expedient to not disclose its remaining performance
obligations.

While the Company’s standard payment terms are less than one year, the specific payment terms and
conditions in its customer contracts vary. In some cases, customers prepay for their goods; in other cases,
after appropriate credit evaluation, an open credit line is granted and payment is due in arrears. Contracts
with payment in arrears are recognized in the consolidated balance sheets as accounts receivable upon revenue
recognition, while contracts where customers pay in advance are recognized as customer deposits and
recorded in other accrued liabilities in the consolidated balance sheets until revenue is recognized. The balance
of customer deposits (contract liabilities) was $19,173 and $33,551 at December 31, 2023 and December 31,
2022, respectively. During the year ended December 31, 2023, the Company recognized revenue of $33,551
related to amounts included in the December 31, 2022 customer deposit balance. The Company typically
recognizes revenue within one year of the receipt of the customer deposit.

The Company offers standard warranty coverage on substantially all products that it sells and accounts

for this standard warranty coverage as an assurance warranty. As such, no transaction price is allocated to
the standard warranty, and the Company records a liability for product warranty obligations at the time of
sale to a customer based on historical warranty experience. Refer to Note 11, “Product Warranty
Obligations,” to the consolidated financial statements for further information regarding the Company’s
standard warranties.

The Company also sells extended warranty coverage for certain products, which it accounts for as
service warranties. In most cases, the extended warranty is sold as a separate contract. As such, extended
warranty sales are considered a separate performance obligation, and the extended warranty transaction is
separate and distinct from the product. The extended warranty transaction price is initially recorded as
deferred revenue in the consolidated balance sheets and amortized on a straight-line basis to net sales in
the consolidated statements of comprehensive income over the life of the contracts following the standard
warranty period. For extended warranty contracts that the Company sells under a third-party marketing
agreement, it is required to pay fees to the third-party service provider and classifies these fees as costs to
obtain a contract. The contract costs are deferred and recorded as other assets in the consolidated balance
sheets. The deferred contract costs are amortized to net sales in the consolidated statements of comprehensive
income consistent with how the related deferred revenue is recognized. Refer to Note 11, “Product Warranty
Obligations,” to the consolidated financial statements for further information regarding the Company’s
extended warranties.

In addition to extended warranties, the Company offers other services, including remote monitoring,
installation, maintenance, data center and telecom design and build, and grid services to utilities in certain
circumstances. Total service revenues accounted for less than 4%, 3%, and 2% of net sales during the years
ended December 31, 2023, 2022 and 2021, respectively.

Refer to Note 7, “Segment Reporting,” to the consolidated financial statements for the Company’s
disaggregated revenue disclosure. The information discussed above is applicable to each of the Company’s
product classes.

Advertising and Co-Op Advertising

Expenditures for advertising, included in selling and service expenses in the consolidated statements of
comprehensive income, are expensed as incurred. Expenditures for advertising production costs are expensed
when the related advertisement is first run. Expenditures for Co-Op advertising are expensed when claimed
by the customer. Total expenditures for advertising were $118,303, $100,589, and $66,660 for the years ended
December 31, 2023, 2022 and 2021, respectively.

Research and Development

The Company expenses research and development costs as incurred. Total expenditures incurred for
research and development were $173,443, $159,774, and $104,303 for the years ended December 31, 2023,
2022 and 2021, respectively.

Foreign Currency Translation and Transactions

Balance sheet amounts for non-U.S. Dollar functional currency subsidiaries are translated into U.S.
Dollars at the rates of exchange in effect at the end of the fiscal year. Income and expenses incurred in a

foreign currency are translated at the average rates of exchange in effect during the year. The related balance
sheet translation adjustments are made directly to accumulated other comprehensive loss, a component of
stockholders’ equity, in the consolidated balance sheets. Gains and losses from foreign currency transactions
are recognized as incurred in the consolidated statements of comprehensive income.

Fair Value of Financial Instruments

ASC 820-10, Fair Value Measurement, defines fair value, establishes a consistent framework for
measuring fair value, and expands disclosure for each major asset and liability category measured at fair
value on either a recurring basis or nonrecurring basis. ASC 820-10 clarifies that fair value is an exit price,
representing the amount that would be received in the sale of an asset or paid to transfer a liability in an
orderly transaction between market participants. As such, fair value is a market-based measurement that
should be determined based on assumptions that market participants would use in pricing an asset or
liability. As a basis for considering such assumptions, the pronouncement establishes a three-tier fair value
hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such
as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are
observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market
data, which require the reporting entity to develop its own assumptions.

The Company believes the carrying amount of its financial instruments (cash and cash equivalents,

accounts receivable, accounts payable, accrued liabilities, short-term borrowings, and revolving facility
borrowings), excluding Term Loan borrowings, approximates the fair value of these instruments based on
their short-term nature. The fair value of the Term Loan B borrowing, which has a net carrying value of
$524,946, was approximately $531,325 (Level 2) at December 31, 2023, as calculated based on independent
valuations whose inputs and significant value drivers are observable. The fair value of Term Loan A and
Revolving Facility approximates the carrying value.

For the fair value of the assets and liabilities measured on a recurring basis, excluding the contingent

consideration discussed below, refer to the fair value table in Note 5, “Derivative Instruments and Hedging
Activities,” to the consolidated financial statements. The fair value of all derivative contracts is classified as
Level 2. The valuation techniques used to measure the fair value of derivative contracts, all of which have
counterparties with high credit ratings, were based on quoted market prices or model driven valuations using
significant inputs derived from or corroborated by observable market data. The fair value of derivative
contracts considers the Company’s credit risk in accordance with ASC 820-10.

Contingent Consideration

Certain of the Company’s business combinations involve potential payment of future consideration
that is contingent upon the achievement of certain milestones. As part of purchase accounting, a liability is
recorded for the estimated fair value of the contingent consideration on the acquisition date. The fair
value of the contingent consideration is remeasured at each reporting period, and the change in fair value is
recognized within general and administrative expenses in the Company’s consolidated statements of
comprehensive income. The fair value measurement of contingent consideration is typically categorized as a
Level 3 liability, as the measurement amount is based primarily on significant inputs that are not observable
in the market.

The fair value of contingent consideration for Chilicon and Pramac as of December 31, 2023 was
$38,937, which was reported in other long-term liabilities in the consolidated balance sheet at December 31,
2023. The fair value of contingent consideration as of December 31, 2022 was $81,533, of which $49,500
was reported in other accrued liabilities and $32,033 in other long-term liabilities in the consolidated balance
sheet. The contingent consideration for Chilicon extends through December 31, 2028. The contingent
consideration for Pramac extends through December 31, 2025.

The following table provides a reconciliation of the activity for contingent consideration:

Beginning balance, January 1, 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 81,533

Changes in fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional contingent consideration(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of contingent consideration(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Present value interest accretion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
11,490

(53,786)

(300)

Ending balance, December 31, 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 38,937

(1) Represents $11,490 of contingent deferred consideration for the Pramac buyout. See Note 4,

“Redeemable Noncontrolling Interest”.

(2)

Includes payments of $479 in cash and $44,521 in shares for the ecobee acquisition, $4,286 in shares
for the Chilicon acquisition, and $4,500 in cash for the Mean Green acquisition. The payment of common
stock is accounted for as a non-cash item in the consolidated statement of cash flows.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the
reported amounts of revenues and expenses during the reporting period. Actual results could differ from
those estimates.

Derivative Instruments and Hedging Activities

The Company records all derivatives in accordance with ASC 815, Derivatives and Hedging, which
requires derivative instruments to be reported in the consolidated balance sheets at fair value and establishes
criteria for designation and effectiveness of hedging relationships. The Company is exposed to market risk
such as changes in commodity prices, foreign currencies and interest rates. The Company does not hold or
issue derivative financial instruments for trading purposes.

Share-Based Compensation

Share-based compensation expense, including stock options and restricted stock awards, is generally

recognized on a straight-line basis over the vesting period based on the fair value of awards which are
expected to vest. The fair value of all share-based awards is estimated on the date of grant. Refer to Note 17,
“Share Plans,” to the consolidated financial statements for further information on the Company’s share-
based compensation plans and accounting.

Acquisition related costs

Acquisition related costs are external costs the Company incurs to complete a business combination

including legal fees, professional and advisory services, transaction taxes such as stamp tax, and insurance
premiums. The Company accounts for acquisition related costs as expense in the period in which the costs are
incurred and the services are received. Total acquisition related costs were $460, $1,459, and $21,465 for
the years ended December 31, 2023, 2022 and 2021, respectively.

New Accounting Pronouncements

Changes to GAAP are established by the Financial Accounting Standards Board (FASB) in the
form of accounting standard updates (ASUs) to the FASB Accounting Standards Codification (ASC).

In December 2023, the FASB issued ASU 2023-09 Improvements to Income Tax Disclosures. The
ASU establishes new income tax disclosure requirements in addition to modifying and eliminating certain
existing requirements. Under the new guidance, the Company must consistently categorize and provide greater
disaggregation of information in the rate reconciliation. It must also further disaggregate income taxes

paid. The update is effective for fiscal years beginning after December 15, 2024, and interim periods for
fiscal years beginning after December 15, 2025. Entities may apply the amendments prospectively or may
elect retrospective application.

In November 2023, the FASB issued ASU 2023-07 Segment Reporting — Improving Reportable Segment

Disclosures (Topic 280). The update is intended to improve reportable segment disclosure requirements,
primarily through enhanced disclosures about significant expenses. The ASU requires disclosures to include
significant segment expenses that are regularly provided to the chief operating decision maker (CODM), a
description of other segment items by reportable segment, and any additional measures of a segment’s profit
or loss used by the CODM when deciding how to allocate resources. The ASU also requires all annual
disclosures currently required by Topic 280 to be included in interim periods. The update is effective for
fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after
December 15, 2024, with early adoption permitted and requires retrospective application to all prior periods
presented in the financial statements.

There have been no other recent accounting pronouncements, changes in accounting pronouncements

or recently adopted accounting guidance during 2023 that are of significance or potential significance to the
Company’s consolidated financial statements or disclosures.

3. Acquisitions

Fiscal 2023

Acquisitions

On February 1, 2023, the Company acquired REFUstor, headquartered in Pfullingen, Germany.
REFUstor is a developer and supplier of battery storage hardware products, advanced software, and
platform services for the commercial and industrial energy storage market.

The Company recorded its preliminary purchase price allocation for REFUstor during the first quarter

of 2023, based on its estimates of the fair value of the acquired assets and assumed liabilities. Purchase
accounting will be finalized prior to March 31, 2024, and there have not been any material changes to the
balances acquired as of December 31, 2023. The accompanying consolidated financial statements include the
results of REFUstor from the date of acquisition through December 31, 2023.

Fiscal 2022

Acquisitions

On June 30, 2022, the Company acquired EEC. Headquartered in Marlborough, Massachusetts, EEC
is an industrial generator distributor as well as a provider of data center and telecom facility design, build,
maintenance, and repair services.

On October 3, 2022, the Company acquired Blue Pillar, an industrial IoT platform developer that
designs, deploys, and manages industrial IoT network solutions to enable distributed energy generation
monitoring and control.

The combined purchase price for these two acquisitions was $25,654, net of cash acquired. The
Company recorded its preliminary purchase price allocation for EEC and Blue Pillar during the second
quarter and fourth quarter of 2022, respectively, based on its estimates of the fair value of the acquired assets
and assumed liabilities. Purchase accounting for EEC was finalized in the second quarter of 2023 and did
not result in material adjustments to the Company’s preliminary estimates. Purchase accounting for Blue
Pillar was finalized in the fourth quarter of 2023 and did not result in material adjustments to the Company’s
preliminary estimates. The combined purchase price for EEC and Blue Pillar has increased to $27,658 due
to working capital adjustments. The accompanying consolidated financial statements include the results of
the acquired businesses since the dates of acquisition through December 31, 2023.

Fiscal 2021

Acquisition of Deep Sea

On June 1, 2021, the Company acquired Deep Sea for a purchase price, net of cash acquired, of
$420,700. Headquartered in Hunmanby, United Kingdom, Deep Sea is a designer and manufacturer of a
diverse suite of flexible control solutions focused on the global power generation and transfer switch markets.
The acquisition purchase price was funded solely through cash on hand.

The Company finalized the Deep Sea purchase price allocation during the second quarter of 2022

based on its estimates of the fair value of the acquired assets and assumed liabilities. The finalization did
not result in material adjustments to the Company’s preliminary estimates. As a result, the Company recorded
$437,874 of intangible assets, including $263,604 of goodwill recorded in the international segment, as of
the acquisition date. The goodwill ascribed to this acquisition is not deductible for tax purposes. The
accompanying consolidated financial statements include the results of Deep Sea from the date of acquisition
through December 31, 2023.

Acquisition of Chilicon

On July 2, 2021, the Company acquired Chilicon for a purchase price, net of cash acquired, of $61,129

inclusive of estimated contingent consideration. Based in Los Angeles, California, Chilicon is a designer
and provider of grid-interactive microinverter and monitoring solutions for the solar market. Total
consideration consisted of the following:

Cash paid at closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred cash payment(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock issued at closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent consideration(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$11,821
6,000

12,000
31,308

Total purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$61,129

(1) Paid on January 4, 2024.

(2) Payable in common stock issued upon achievement of certain performance targets within 45 calendar

days following the conclusion of the contingent consideration period, December 31, 2028.

The Company finalized the Chilicon purchase price allocation during the second quarter of 2022 based
on its estimates of the fair value of the acquired assets and assumed liabilities. The finalization did not result
in material adjustments to the Company’s preliminary estimates. As a result, the Company recorded
$70,174 of intangible assets, including $36,974 of goodwill recorded in the domestic segment, as of the
acquisition date. The goodwill ascribed to the Chilicon acquisition is not deductible for tax purposes. The
accompanying consolidated financial statements include the results of Chilicon from the date of acquisition
through December 31, 2023.

Acquisition of Off Grid Energy

On September 1, 2021, the Company acquired Off Grid Energy for a purchase price of $56,949, net of
cash acquired and inclusive of the then estimated contingent consideration of $29,054 payable in cash based
on the contingent consideration period performance. The contingent consideration was paid during the
third quarter of 2022 in the amount of $16,135. Headquartered in Rugby, United Kingdom, Off Grid Energy
is a designer and manufacturer of industrial-grade mobile energy storage systems. The acquisition purchase
price was funded through cash on hand.

The Company finalized the Off Grid Energy purchase price allocation during the third quarter of 2022

based on its estimates of the fair value of the acquired assets and assumed liabilities. The finalization did
not result in material adjustments to the Company’s preliminary estimates. As a result, the Company recorded
$56,076 of intangible assets, including $21,531 of goodwill recorded in the international segment, as of the
acquisition date. The goodwill ascribed to this acquisition is not deductible for tax purposes. The

accompanying consolidated financial statements include the results of Off Grid Energy from the date of
acquisition through December 31, 2023.

Acquisition of ecobee

On December 1, 2021, the Company acquired ecobee for a purchase price, net of cash acquired, of

$735,577 inclusive of estimated contingent consideration. Headquartered in Toronto, Canada, ecobee is a
leader in sustainable home technology solutions including smart thermostats that deliver significant energy
savings, security and peace of mind. The purchase price consisted of the following:

Cash paid at closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$225,403

Common stock issued at closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent consideration(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

420,774
89,400

Total purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$735,577

(1) The contingent consideration for the period ended June 30, 2022, was paid during the fourth quarter of
2022 in the amount of $47,123 in shares of common stock, or 196,531 shares of common stock, and
$542 was paid with cash on hand. Additionally, during the fourth quarter of 2022, the Company entered
into a definitive agreement to accelerate the measurement and payment for the remaining contingent
consideration period ending June 30, 2023. The parties agreed to a final payment amount of $45,000
issued with 466,188 shares of common stock and $479 of cash. The $45,000 was paid during the first
quarter of 2023.

The Company finalized the ecobee purchase price allocation during the fourth quarter of 2022 based

on its estimates of the fair value of the acquired assets and assumed liabilities. The finalization did not
result in material adjustments to the Company’s preliminary estimates. As a result, the Company recorded
$806,131 of intangible assets, including $248,231 of goodwill recorded in the domestic segment, as of the
acquisition date. A portion of the goodwill ascribed to this acquisition is deductible for tax purposes. The
accompanying consolidated financial statements include the results of ecobee from the date of acquisition
through December 31, 2023.

Other Acquisitions

On September 1, 2021, the Company acquired Apricity Code, an advanced engineering and product

design company located in Bend, Oregon.

On October 1, 2021, the Company acquired Tank Utility, a provider of IoT propane tank monitoring

that enables the optimization of propane fuel logistics.

The combined purchase price for these two acquisitions was $29,945, net of cash acquired, and was

funded solely through cash on hand. The Company finalized its purchase price allocation during the third
quarter of 2022 based on the Company’s estimates of the fair value of the acquired assets and assumed
liabilities. The finalization did not result in material adjustments to the Company’s preliminary estimates. The
accompanying consolidated financial statements include the results of these two acquired businesses since
the dates of acquisition through December 31, 2023.

Summary Purchase Price Allocations

The fair values assigned to certain assets acquired and liabilities assumed for all acquisitions completed

during the reporting period, as of the acquisition dates, are as follows:

2023
Acquisitions

2022
Acquisitions

2021 Acquisitions

Deep Sea

ecobee

All Other

Total

Accounts receivable . . . . . . . . . . . . . . .

347

$11,965

9,574 $ 23,337 $ 13,852 $

46,763

Inventories . . . . . . . . . . . . . . . . . . . . .

1,239

2,955

9,970

7,258

7,034

24,262

Prepaid expenses and other current

assets . . . . . . . . . . . . . . . . . . . . . . .

Property and equipment

. . . . . . . . . . .

Intangible assets . . . . . . . . . . . . . . . . .

Goodwill

. . . . . . . . . . . . . . . . . . . . . .

Deferred income taxes . . . . . . . . . . . . .

Other assets . . . . . . . . . . . . . . . . . . . .

166

5,843

6,174

5,363

—

837

4,456

708

1,181

8,838

5,689

3,588

10,032

174,270

557,900

8,714

263,604

248,231

—

1,954

— 40,020

151

9,289

6,594

480

81,171

83,859

5,694

8,526

13,464

12,906

813,341

595,694

45,714

17,966

Total assets acquired . . . . . . . . . . . .

19,969

40,784

467,588

895,312

207,210

1,570,110

Accounts payable . . . . . . . . . . . . . . . .

1,278

Accrued wages and employee benefits . .

Other accrued liabilities . . . . . . . . . . . .

Short-term borrowings

. . . . . . . . . . . .

Current portion of long-term

borrowings and finance lease
obligations . . . . . . . . . . . . . . . . . . .

264

236

—

Deferred income taxes . . . . . . . . . . . . .

2,007

Other long-term liabilities

. . . . . . . . . .

Long-term debt

. . . . . . . . . . . . . . . . .

—

1,826

1,662

7,917

—

564

1,157

—

8,998

2,106

1,737

—

33,957

—

78,753

33,762

—

25,968

1,354

7,473

872

19,898

18,258

800

42,439

4,332

39,893

800

233

19,930

132,640

9,997

1,624

43,849

1,624

Net assets acquired . . . . . . . . . . . . .

$16,127

$27,658

$420,700 $735,577 $148,023 $1,304,300

The allocations of the purchase price to identifiable assets and liabilities for the 2022 and 2021
acquisitions are based on the final valuations performed to determine the fair value of the net assets as of
their respective acquisition dates.

Unaudited Pro Forma Information

The following unaudited pro forma information of the Company gives effect to all acquisitions as

though the transactions had occurred on January 1, 2021.

Year Ended December 31,

2023

2022

2021

Net Sales:

As reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pro forma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$4,022,667
4,022,826

$4,564,737
4,600,162

$3,737,184
3,933,666

Net income attributable to Generac Holdings Inc.:

As reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pro forma(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 214,606
214,343

$ 399,502
395,261

$ 550,494
461,193

Net income attributable to Generac Holdings Inc. per common

share – diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

As reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Pro forma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.27

5.42

5.36

8.30

6.91

(1)

Includes additional pro forma intangible amortization from all acquisitions as though the transactions
had occurred on January 1, 2021 of $111, $2,465, and $70,152 for the years ended December 31,
2023, 2022, and 2021, respectively.

This unaudited pro forma information is presented for informational purposes only and is not

necessarily indicative of the results of operations that actually would have been achieved had the acquisitions
been consummated on January 1, 2021.

4. Redeemable Noncontrolling Interest

On March 1, 2016, the Company acquired a 65% ownership interest in PR Industrial S.r.l. and its
subsidiaries (Pramac). The 35% noncontrolling interest in Pramac had an acquisition date fair value of
$34,253 and was recorded as a redeemable noncontrolling interest in the consolidated balance sheets, as the
noncontrolling interest holder had within its control the right to require the Company to redeem its
interest in Pramac. In May 2021, the Company exercised its call option rights and paid a purchase price of
$27,164 to purchase an additional 15% ownership interest in Pramac, bringing the Company’s total ownership
interest in Pramac to 80%. On March 8, 2023, the Company and the noncontrolling interest holder entered
into an agreement whereby the Company acquired the remaining 20% ownership interest in Pramac for a
purchase price of $116,754, which brought the Company’s total ownership interest in Pramac to 100%.
The purchase price included $105,264 of initial consideration (which included a cash payment of $104,844
and a $420 gain on a foreign currency settlement in the first quarter of 2023) and $11,490 of contingent
deferred consideration to be paid in up to 135,205 restricted shares that were issued based on the twenty
day volume weighted average price of the Company’s stock ending on December 31, 2022, and which shall
vest upon achievement of certain earnings targets at the end of the earn-out period, December 31, 2025.

On February 1, 2019, the Company acquired a 51% ownership interest in Captiva Energy Solutions
Private Limited (Captiva). The 49% noncontrolling interest in Captiva had an acquisition date fair value of
$3,165 and was recorded as a redeemable noncontrolling interest in the consolidated balance sheets, as the
noncontrolling interest holder had within its control the right to require the Company to redeem its
interest in Captiva. The noncontrolling interest holder has a put option to sell his interest to the Company
any time after five years from the date of acquisition, or earlier upon the occurrence of certain circumstances.
Further, the Company has a call option that it may redeem any time after five years from the date of
acquisition, or earlier upon the occurrence of certain circumstances. The put and call option price is based
on a multiple of earnings, subject to the terms of the acquisition agreement. In March 2022, the Company
signed an agreement to purchase an additional 15% ownership interest in Captiva for a purchase price of
$461, bringing the Company’s total ownership interest in Captiva to 66%. In May 2022, the Company signed
an amendment to the purchase agreement resulting in a revised purchase price of $375, which was paid
with cash on hand.

The redeemable noncontrolling interests are recorded at the greater of the initial fair value, increased or
decreased for the noncontrolling interests’ share of comprehensive income (loss), or the estimated redemption
value, with any adjustments to the redemption value impacting retained earnings, but not net income.
However, the redemption value adjustments are reflected in the earnings per share calculation, as detailed in
Note 14, “Earnings Per Share,” to the consolidated financial statements. The following table presents the
changes in the redeemable noncontrolling interest for both Captiva and Pramac:

Year Ended December 31,

2023

2022

2021

Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . .
Share of net income (loss) . . . . . . . . . . . . . . . . . . . . . . . .

$ 110,471
1,864

$ 58,050
7,543

$ 66,207
5,574

Foreign currency translation . . . . . . . . . . . . . . . . . . . . . .

(549)

(3,982)

(3,669)

Purchase of additional ownership interest . . . . . . . . . . . . .

(116,754)

(375)

(27,164)

Redemption value adjustment . . . . . . . . . . . . . . . . . . . . .

11,517

49,235

17,102

Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,549

$110,471

$ 58,050

5. Derivative Instruments and Hedging Activities

Commodities

The Company is exposed to price fluctuations in commodities including steel, copper and aluminum;
and periodically utilizes commodity derivatives to mitigate the impact of these potential price fluctuations
on its financial results. These derivatives typically have maturities of less than eighteen months.

Because these contracts do not qualify for hedge accounting, the related gains and losses are recorded

in cost of goods sold in the Company’s consolidated statements of comprehensive income. Net pre-tax gains
recognized were not material for the years ended December 31, 2023, 2022 and 2021, respectively. At
December 31, 2023 and 2022, the Company had no commodity contracts outstanding.

Foreign Currencies

The Company is exposed to foreign currency exchange risk as a result of transactions denominated in
currencies other than the U.S. Dollar. The Company periodically utilizes foreign currency forward purchase
and sales contracts to manage the volatility associated with certain foreign currency purchases and sales in
the normal course of business. Contracts typically have maturities of twelve months or less.

Because these contracts do not qualify for hedge accounting, the related gains and losses are recorded

in “other, net” in the Company’s consolidated statements of comprehensive income. Net pre-tax gains (losses)
recognized for the years ended December 31, 2023, 2022 and 2021 were not material. As of December 31,
2023 and 2022, the Company had 53 and 34 foreign currency contracts outstanding, respectively.

Interest Rate Swaps

In 2017, the Company entered into twenty interest rate swap agreements, the final four of which

expired in May 2023. In March 2020, the Company entered into three additional interest rate swap agreements
which were still outstanding as of December 31, 2023.

In June 2022, in conjunction with the amendments to the Company’s credit agreements discussed
further in Note 12, “Credit Agreements,” to the consolidated financial statements, the Company amended
its interest rate swaps to match the underlying debt and reconfirmed hedge effectiveness. The Company
formally documented all relationships between interest rate hedging instruments and the related hedged items,
as well as its risk-management objectives and strategies for undertaking various hedge transactions. These
interest rate swap agreements qualify as cash flow hedges and therefore, the effective portions of their gains
or losses are reported as a component of accumulated other comprehensive loss (AOCL) in the
consolidated balance sheets.

The amount of after-tax unrealized gains (losses) recognized for the years ended December 31, 2023,

2022 and 2021 were $(8,004), $38,494, and $20,529, respectively. The cash flows of the swaps are recognized
as adjustments to interest expense each period. The ineffective portions of the derivatives’ changes in fair
value, if any, are immediately recognized in earnings.

Fair Value

The following table presents the fair value of the Company’s derivatives:

December 31,

2023

2022

Foreign currency contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (147) $

Interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

38,601

49,279

The fair values of the interest rate swaps are included in operating lease and other assets in the

consolidated balance sheet as of December 31, 2023 and 2022. Excluding the impact of credit risk, the fair
value of the derivative contracts as of December 31, 2023, and December 31, 2022, is an asset of $39,796 and
$51,184, respectively, which represents the net amount the Company would receive to exit all of the
agreements on that date.

6. Accumulated Other Comprehensive Loss

The following presents a tabular disclosure of changes in AOCL during the years ended December 31,

2023 and 2022, net of tax:

Beginning Balance – January 1, 2023 . . . . . . . . . . . . . . . . . . . . . . .

Current-period comprehensive income (loss)

. . . . . . . . . . . . . . . .

Ending Balance – December 31, 2023 . . . . . . . . . . . . . . . . . . . . . . .

Foreign
Currency
Translation
Adjustments

Unrealized
Gain (Loss)
on Cash Flow
Hedges

Total

$(101,545)
57,963(1)
$ (43,582)

$36,443

(8,004)(2)

$(65,102)
49,959

$28,439

$(15,143)

Foreign
Currency
Translation
Adjustments

Unrealized
Gain (Loss)
on Cash Flow
Hedges

Total

Beginning Balance – January 1, 2022 . . . . . . . . . . . . . . . . . . . . . . .

$ (52,704)

Current-period comprehensive income (loss)

. . . . . . . . . . . . . . . .

(48,841)(3)

Ending Balance – December 31, 2022 . . . . . . . . . . . . . . . . . . . . . . .

$(101,545)

$ (2,051)
38,494(4)
$36,443

$(54,755)
(10,347)

$(65,102)

(1) Represents favorable impact from the weakening of the U.S. dollar against foreign currencies during

the year ended December 31, 2023, particularly the Euro, British Pound, and Mexican Peso.

(2) Represents unrealized losses of $10,678 on the interest rate swaps, net of tax effect of $(2,674) for the

year ended December 31, 2023.

(3) Represents unfavorable impact from the strengthening of the U.S. dollar against foreign currencies

during the year ended December 31, 2022, particularly the Euro and British Pound.

(4) Represents unrealized gains of $51,352 on the interest rate swaps, net of tax effect of $(12,858) for the

year ended December 31, 2022.

7. Segment Reporting

The Company has two reportable segments for financial reporting purposes — domestic and
international. The domestic segment includes the legacy Generac business and the acquisitions that are
based in the U.S. and Canada, all of which have revenues substantially derived from the U.S. and Canada.
The international segment includes acquisitions not based in the U.S and Canada, all of which have revenues
substantially derived from outside the U.S and Canada. Both reportable segments design and manufacture
a wide range of energy technology solutions and other power products. The Company has multiple operating
segments, which it aggregates into the two reportable segments, based on materially similar economic
characteristics, products, production processes, classes of customers, distribution methods, organizational
structure, and regional considerations.

The Company’s product offerings consist primarily of power generation equipment, energy storage
systems, energy management devices & solutions, and other power products geared for varying end customer
uses. While Residential products and Commercial & Industrial (C&I) products include similar products,
they differ based on power output and end customer. The composition of net sales between residential, C&I,
and other products & services by reportable segment is as follows:

Product Classes

Net Sales by Segment

Year Ended December 31, 2023

Domestic

International

Total

Residential products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,945,273

$117,656

$2,062,929

Commercial & industrial products . . . . . . . . . . . . . . . . . . . . . . .

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

916,118

414,933

578,681

1,494,799

50,006

464,939

Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,276,324

$746,343

$4,022,667

Product Classes

Year Ended December 31, 2022

Domestic

International

Total

Residential products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,782,037

$129,834

$2,911,871

Commercial & industrial products . . . . . . . . . . . . . . . . . . . . . . .

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

746,172

339,657

514,565

$1,260,737

52,472

$ 392,129

Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,867,866

$696,871

$4,564,737

Product Classes

Year Ended December 31, 2021

Domestic

International

Total

Residential products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,366,908

$ 89,857

$2,456,765

Commercial & industrial products . . . . . . . . . . . . . . . . . . . . . . .

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

556,520

240,622

442,478

$ 998,998

40,799

$ 281,421

Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,164,050

$573,134

$3,737,184

Residential products consist primarily of automatic home standby generators ranging in output
from 7.5kW to 150kW, portable generators, residential energy storage systems, energy management devices
& solutions, and other outdoor power equipment. These products are predominantly sold through
independent residential dealers, national and regional retailers, e-commerce merchants, electrical/HVAC/
solar wholesalers, solar installers, and outdoor power equipment dealers. The residential products revenue
consists of the sale of the product to our distribution partners, who in turn sell or rent the product to the end
consumer, including installation and maintenance services. In some cases, residential products are sold
direct to the end consumer. Substantially all of the residential products’ revenues are transferred to the
customer at a point in time.

C&I products consist of larger output stationary generators used in C&I applications, with power
outputs up to 3,250kW. Also included in C&I products are mobile generators, light towers, C&I energy
storage systems, mobile heaters, mobile pumps, and related controllers for power generation equipment.
These products are sold globally through industrial distributors and dealers, EPC companies, equipment
rental companies, and equipment distributors. The C&I products revenue consists of the sale of the product
to our distribution partners, who in turn sell or rent the product to the end customer, including installation
and maintenance services. In some cases, C&I products are sold direct to the end customer. Substantially all of
the C&I products revenues are transferred to the customer at a point in time.

Other consists primarily of aftermarket service parts and product accessories sold to our customers,

the amortization of extended warranty deferred revenue, remote monitoring and grid services subscription
revenue, as well as certain installation and maintenance service revenue. The aftermarket service parts and
product accessories are generally transferred to the customer at a point in time, while the extended warranty
and subscription revenue are recognized over the life of the contract. Other service revenue is recognized when
the service is performed, sometimes based on achievement of milestones.

The following tables sets forth total sales by reportable segment and inclusive of intersegment sales:

Year Ended December 31, 2023

Domestic

International

Eliminations

Total

External net sales . . . . . . . . . . . . . . . . . . . . . . . . . .
Intersegment sales . . . . . . . . . . . . . . . . . . . . . . . . .

$3,276,324
43,937

$746,343
91,552

— $4,022,667
—

(135,489)

Total sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,320,261

$837,895

$(135,489) $4,022,667

External net sales . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,867,866

$696,871

— $4,564,737

Intersegment sales . . . . . . . . . . . . . . . . . . . . . . . . .

60,731

93,699

(154,430)

—

Total sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,928,597

$790,570

$(154,430) $4,564,737

Year Ended December 31, 2022

Domestic

International

Eliminations

Total

Year Ended December 31, 2021

Domestic

International

Eliminations

Total

External net sales . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,164,050

$573,134

— $3,737,184

Intersegment sales . . . . . . . . . . . . . . . . . . . . . . . . .

39,339

26,123

(65,462)

—

Total sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,203,389

$599,257

$(65,462)

$3,737,184

Management evaluates the performance of its segments based primarily on Adjusted EBITDA, which
is reconciled to Income before provision for income taxes below. The computation of Adjusted EBITDA is
based primarily on the definition that is contained in the Company’s credit agreements.

Adjusted EBITDA

Year Ended December 31,

2023

2022

2021

Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 523,337

$ 716,302

$795,417

International

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

114,522

109,065

66,008

Total adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 637,859

$ 825,367

$861,425

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(97,627)

(54,826)

(32,953)

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash write-down and other adjustments(1) . . . . . . . . . . . . . . . . .
Non-cash share-based compensation expense(2)
. . . . . . . . . . . . . . . .
Loss on extinguishment of debt(3) . . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction costs and credit facility fees(4)
. . . . . . . . . . . . . . . . . . . .
Business optimization and other charges(5) . . . . . . . . . . . . . . . . . . . .
Provision for legal, regulatory, and clean energy product charges(6)
. . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(166,602)
5,953

(156,141)
2,091

(35,492)
—
(4,054)

(10,551)
(38,490)

(696)

(29,481)
(3,743)
(5,026)

(4,371)
(65,265)

(139)

(92,041)
3,070

(23,954)
(831)
(22,357)

(33)
—

(800)

Income before provision for income taxes . . . . . . . . . . . . . . . . . . . . .

$ 290,300

$ 508,466

$691,526

(1)

Includes gains/losses on dispositions of assets other than in the ordinary course of business, gains/
losses on sales of certain investments, unrealized mark-to-market adjustments on commodity contracts,
certain foreign currency related adjustments, and certain purchase accounting and contingent
consideration adjustments.

(2) Represents share-based compensation expense to account for stock options, restricted stock and other

stock awards over their respective vesting periods.

(3) Represents the non-cash write-off of original issue discount and deferred financing costs due primarily

to a voluntary prepayment of debt.

(4) Represents transaction costs incurred directly in connection with any investment, as defined in our

credit agreement, equity issuance, debt issuance, or refinancing, together with certain fees relating to
our senior secured credit facilities.

(5) Represents severance and other restructuring charges related to the consolidation of certain operating

facilities and organizational functions.

(6) Represents the following significant and unusual charges not indicative of our ongoing operations:

• a provision for judgments and legal expenses related to certain patent and other litigation — $28,340

in 2023.

• a provision for a matter with the CPSC concerning the imposition of civil fines for allegedly failing

to timely submit a report under the CPSA in relation to certain portable generators that were subject
to a voluntary recall previously announced on July 29, 2021 — $5,800 in 2023; $10,000 in 2022.

• a bad debt provision and additional customer support costs for a clean energy product customer that
filed for bankruptcy in 2022 — $4,350 additional customer support costs in 2023; $17,926 bad debt
provision in 2022.

• a warranty provision to address certain clean energy product warranty-related matters — $37,338 in

2022.

The following tables summarize additional financial information by reportable segment:

Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,770,883

$4,032,086

$3,742,101

International

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,322,429

1,137,376

1,135,679

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$5,093,312

$5,169,462

$4,877,780

Assets

December 31,

2023

2022

2021

Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$129,648

$123,768

$66,675

International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

36,954

32,373

25,366

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$166,602

$156,141

$92,041

Depreciation and Amortization

Year Ended December 31,

2023

2022

2021

Capital Expenditures

Year Ended December 31,

2023

2022

2021

Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$103,036

$69,680

$100,672

International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

26,024

16,508

9,320

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$129,060

$86,188

$109,992

The Company’s sales in the United States represent approximately 77%, 80%, and 82% of total sales for

the years ended December 31, 2023, 2022 and 2021, respectively. Approximately 74% and 77% of the
Company’s identifiable long-lived assets are located in the United States as of December 31, 2023 and 2022,
respectively.

8. Balance Sheet Details

Inventories consist of the following:

Raw material . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 677,428

$ 798,340

Work-in-process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10,877
479,179

14,899
592,145

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,167,484

$1,405,384

December 31,

2023

2022

Property and equipment consists of the following:

December 31,

2023

2022

Land and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 22,556

$ 22,589

Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Dies and tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

298,483

271,879

45,998

11,411

243,553

229,593

37,343

9,807

Office & information technology equipment and internal use software . .

185,601

148,166

Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,772

98,083

6,849

52,522

Gross property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . .

942,783

750,422

Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(344,206)

(282,818)

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 598,577

$ 467,604

Total property and equipment included finance leases of $68,079 and $24,719 at December 31, 2023

and 2022, respectively, primarily comprised of buildings and improvements. Amortization of finance lease
right of use assets is recorded within depreciation expense in the consolidated statements of comprehensive
income. The initial measurement of new finance lease right of use assets is accounted for as a non-cash
item in the consolidated statement of cash flows. Refer to Note 10, “Leases,” for further information
regarding the Company’s accounting for leases under ASC 842, Leases.

9. Goodwill and Intangible Assets

The changes in the carrying amount of goodwill by reportable segment for the years ended December 31,

2023 and 2022 are as follows:

Domestic

International

Total

Balance at December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 995,444

$414,230

$1,409,674

Acquisitions of businesses, net . . . . . . . . . . . . . . . . . . . . . . . .

22,128

437

Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . .

(915)

(30,444)

22,565

(31,359)

Balance at December 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . .

1,016,657

384,223

1,400,880

Acquisitions of businesses, net . . . . . . . . . . . . . . . . . . . . . . . .

Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . .

1,376

495

5,363

24,270

6,739

24,765

Balance at December 31, 2023 . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,018,528

$413,856

$1,432,384

Refer to Note 3, “Acquisitions,” to the consolidated financial statements for further information

regarding the Company’s acquisitions.

Goodwill applicable to each reportable segment at December 31, 2023 and 2022 is as follows:

Year Ended December 31, 2023

Year Ended December 31, 2022

Gross

Accumulated
Impairment

Net

Gross

Accumulated
Impairment

Net

Domestic . . . . . . . . . . . .

$1,521,721

$(503,193) $1,018,528

$1,519,850

$(503,193) $1,016,657

International . . . . . . . . . .

418,467

(4,611)

413,856

388,834

(4,611)

384,223

Total . . . . . . . . . . . . . .

$1,940,188

$(507,804) $1,432,384

$1,908,684

$(507,804) $1,400,880

The following table summarizes intangible assets by major category as of December 31, 2023 and 2022:

Weighted
Average
Amortization
Years

December 31, 2023

December 31, 2022

Gross

Accumulated
Amortization

Net Book
Value

Gross

Accumulated
Amortization

Net Book
Value

Finite-lived intangible assets:

. . .

Tradenames

. . . . . . . . . . . .

Customer lists . . . . . . . . . . .

Patents and technology . . . . .

Software . . . . . . . . . . . . . . .

Non-compete/other . . . . . . . .

Total finite-lived intangible

assets . . . . . . . . . . . . . .

—

$ 159,671

$ (70,997) $ 88,674 $ 157,751

$ (58,821) $ 98,930

589,318

(404,805)

184,513

577,203

(370,216)

206,987

670,099

(252,658)

417,441

665,563

(210,806)

454,757

1,046

(1,046)

—

1,046

(1,046)

—

71,570

(44,443)

27,127

70,585

(28,866)

41,719

$1,491,704

$(773,949) $717,755 $1,472,148

$(669,755) $802,393

Indefinite-lived tradenames . . .

128,321

— 128,321

128,321

— 128,321

Total intangible assets . . . . . . . .

$1,620,025

$(773,949) $846,076 $1,600,469

$(669,755) $930,714

Amortization expense of intangible assets was $104,194, $103,320, and $49,886 in 2023, 2022 and

2021, respectively. Excluding the impact of future acquisitions, the Company estimates amortization
expense for the next five years to be as follows: 2024-$96,595; 2025-$91,694; 2026-$84,833; 2027-$58,065;
2028-$52,354.

10. Leases

The Company leases certain manufacturing facilities, distribution centers, office space, warehouses,
automobiles, machinery and computer equipment globally under both finance and operating leases. The
Company’s leases have remaining lease terms of up to 18 years, of which certain leases, primarily within the
buildings and improvements asset class, include options to extend for up to 10 additional years. Further,
the Company leases certain buildings from a related party, which the Company has determined to be arm’s
length transactions.

The Company determines if an arrangement is or contains a lease at contract inception. The Company
recognizes a right of use (ROU) asset and lease liability at the lease commencement date based on the present
value of the lease payments over the lease term. As the Company’s leases generally do not provide an
implicit interest rate, the incremental borrowing rate is used to determine the present value of lease payments.
The incremental borrowing rate is a collateralized rate determined based on the lease term, the Company’s
credit rating, and other market information available at the commencement date. The ROU asset also includes
any lease payments made prior to the commencement date and is reduced by any lease incentives. The
lease term may include options to extend or terminate the lease when it is reasonably certain that the
Company will exercise that option. Lease expense for operating leases is recognized on a straight-line basis
over the lease term, while lease expense for finance leases is recognized as depreciation and interest expense
using the effective interest method. The Company’s variable lease expense generally consists of property
tax and insurance payments that are variable in nature, however, these amounts are immaterial to the
consolidated financial statements and are therefore not separately reported.

The Company has lease agreements with both lease and non-lease components, which it elected to
account for as a single lease component. However, the Company did not elect to apply the recognition
exception for short-term leases. The Company is applying these elections to all asset classes.

The Company is a lessor of certain of its C&I mobile products as part of a rental fleet, as well as two
of its buildings that it leases to third parties. The lease income related to these arrangements is not material
to the consolidated financial statements.

The Company records its operating lease cost and amortization of finance lease ROU assets within
cost of goods sold or operating expenses in the consolidated statements of comprehensive income depending
on the cost center of the underlying asset. The Company records its finance lease interest cost within
interest expense in the consolidated statements of comprehensive income.

The components of total lease cost consist of the following:

Year Ended December 31,

2023

2022

2021

Operating lease cost

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$38,980

$36,292

$22,432

Finance lease cost:

Amortization of ROU assets . . . . . . . . . . . . . . . . . . . . . . . . .

Interest on lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,142

2,540

3,298

1,945

3,187

2,021

Total lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$45,662

$41,535

$27,640

Supplemental balance sheet information related to the Company’s leases is as follows:

Operating Leases

Operating lease ROU assets(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 70,937

$100,083

December 31,

2023

2022

Operating lease liabilities – current(2)
Operating lease liabilities – noncurrent(3)

. . . . . . . . . . . . . . . . . . . . . . . . .

$29,388

$ 30,330

. . . . . . . . . . . . . . . . . . . . . .

44,760

73,547

Total operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$74,148

$103,877

Finance Leases

Finance lease ROU assets, gross

. . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 82,744

$ 35,470

Accumulated depreciation – finance lease ROU assets . . . . . . . . . . . . .
Finance lease ROU assets, net(4) . . . . . . . . . . . . . . . . . . . . . . . . . . .

(14,665)

(10,751)

$68,079

$ 24,719

Finance lease liabilities – current(5)
. . . . . . . . . . . . . . . . . . . . . . . . . .
Finance lease liabilities – noncurrent(6) . . . . . . . . . . . . . . . . . . . . . . . .
Total finance lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 3,785
67,523

2,650
24,770

$ 71,308

$ 27,420

(1) Recorded in the operating lease and other assets line within the consolidated balance sheets
(2) Recorded in the other accrued liabilities line within the consolidated balance sheets
(3) Recorded in the operating lease and other long-term liabilities line within the consolidated balance

sheets

(4) Recorded in the property and equipment, net line within the consolidated balance sheets
(5) Recorded in the current portion of long-term borrowings and finance lease obligations line within the

consolidated balance sheets

(6) Recorded in the long-term borrowings and finance lease obligations line within the consolidated

balance sheets

Supplemental cash flow information related to the Company’s leases is as follows:

Year Ended December 31,

2023

2022

2021

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows – operating leases . . . . . . . . . . . . . . . . . . . . . . . .

$39,073

$36,020

$21,250

Operating cash flows – finance leases

. . . . . . . . . . . . . . . . . . . . . . . . .

Financing cash flows – finance leases

. . . . . . . . . . . . . . . . . . . . . . . . .

2,409

3,618

1,919

4,931

1,972

4,679

ROU assets obtained in exchange for lease liabilities

Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Finance leases

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17,830

47,715

28,766

55,057

2,874

4,026

Weighted average remaining lease term and discount rate information related to the Company’s leases

as of December 31, 2023 and 2022 is as follows:

Weighted average remaining lease term (in years)

Operating Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Finance Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Weighted average discount rate

Operating Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Finance Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,

2023

2022

4.55

5.34

4.65

11.26

4.63%

6.64%

4.82%

7.58%

The maturities of the Company’s lease liabilities as of December 31, 2023 are as follows:

2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

After 2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Finance
Leases

$ 8,043
48,297

Operating
Leases

$ 32,145
18,887

4,243

3,896

3,472

22,616

90,567

8,278

7,667

6,157

12,014

85,148

Interest component . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(19,259)

(11,000)

Present value of minimum lease payments

. . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 71,308

$ 74,148

(1)

Includes a payment for a purchase option reasonably certain to be exercised in 2025.

11. Product Warranty Obligations

The Company records a liability for standard product warranty obligations accounted for as assurance
warranties at the time of sale of the related product to a customer based on historical warranty experience.
The Company also records a liability for specific warranty matters when they become known and are
reasonably estimable. The following is a tabular reconciliation of the Company’s standard product warranty
liability accounted for as an assurance warranty:

Year Ended December 31,

2023

2022

2021

Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Product warranty reserve assumed in acquisition . . . . . . . . . . . . . . .
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for warranty issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in estimates for pre-existing warranties(1)
. . . . . . . . . . . . . .

$138,011
—
(92,200)
67,104
3,493

$ 94,213
—
(77,476)
80,340
40,934

$ 59,218
3,932
(42,682)
69,280
4,465

Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$116,408

$138,011

$ 94,213

(1)

Includes a specific warranty provision recorded during the third quarter of 2022 in the amount of
$37,338 to address certain clean energy product related matters.

The Company also sells extended warranty coverage for certain products, which it accounts for as a
service warranty. The sales of extended warranties are recorded as deferred revenue, and typically have a
duration of five to ten years. The deferred revenue related to extended warranty coverage is amortized over

the duration of the extended warranty contract period, following the standard warranty period, using the
straight-line method. The Company believes the straight-line method is appropriate because the performance
obligation is satisfied based on the passage of time. The amortization of deferred revenue is recorded to
net sales in the consolidated statements of comprehensive income. The following is a tabular reconciliation
of the deferred revenue related to extended warranty coverage:

Year Ended December 31,

2023

2022

2021

Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$132,813

$111,647

$ 89,788

Deferred revenue contracts issued . . . . . . . . . . . . . . . . . . . . . . . . .

48,107

42,869

41,560

Amortization of deferred revenue contracts

. . . . . . . . . . . . . . . . . .

(25,050)

(21,703)

(19,701)

Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$155,870

$132,813

$111,647

The timing of recognition of the Company’s deferred revenue balance related to extended warranties at

December 31, 2023 is as follows:

2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 28,203

2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

After 2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

30,088

27,407

22,069

48,103

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$155,870

The Company has a post-sale extended warranty marketing agreement with a third party, pursuant to

which the Company is required to pay fees to the third-party service provider based on the number of
extended warranty contracts that they sell, which it classifies as costs to obtain a contract. These fees are
deferred and recorded as other assets in the consolidated balance sheets, and then amortized to net sales in
the consolidated statements of comprehensive income over the same period that the underlying deferred
revenue is recognized. Deferred contract costs as of December 31, 2023 and 2022 were $10,153 and
$9,199, respectively. Amortization of deferred contract costs recorded during the years ended December 31,
2023, 2022 and 2021 was $2,306, $1,932, and $1,739, respectively.

Standard product warranty obligations and extended warranty related deferred revenues are included

in the consolidated balance sheets as follows:

December 31,

2023

2022

Product warranty liability

Current portion – Accrued product warranty . . . . . . . . . . . . . . . . . . .
Long-term portion – other long-term liabilities . . . . . . . . . . . . . . . . . .

$ 65,298
51,110

$ 89,141
48,870

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$116,408

$138,011

Deferred revenue related to extended warranties

Current portion – other accrued liabilities . . . . . . . . . . . . . . . . . . . . .
Long-term portion – Deferred revenue . . . . . . . . . . . . . . . . . . . . . . .

$ 28,203
127,667

$ 30,291
102,522

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$155,870

$132,813

12. Credit Agreements

Short-term borrowings included in the consolidated balance sheets as of December 31, 2023 and 2022
consisted of borrowings by the Company’s foreign subsidiaries on local lines of credit totaling $81,769 and
$48,990, respectively.

Long-term borrowings are included in the consolidated balance sheets as follows:

December 31,

2023

2022

Tranche A Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 745,313

$ 750,000

Tranche B Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Original issue discount and deferred financing costs

. . . . . . . . . . . . .

Revolver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Finance lease obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

530,000

(12,685)

150,000

71,308

9,512

530,000

(16,568)

90,000

27,420

966

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,493,448

1,381,818

Less: current portion of debt

. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: current portion of finance lease obligation . . . . . . . . . . . . . . . .

42,110

3,785

10,083

2,650

Total long-term borrowings and finance lease obligations . . . . . . . .

$1,447,553

$1,369,085

Maturities of long-term borrowings outstanding at December 31, 2023, excluding finance lease
obligations (as their maturities are disclosed in Note 10, “Leases,”) and before considering original issue
discount and deferred financing costs, are as follows:

Tranche A
Term Loan

Tranche B
Term Loan

Revolver

Other

Total

2024 . . . . . . . . . . . . . . . . . . . . . . . . .

$ 32,813

— $

— $9,349

42,162

2025 . . . . . . . . . . . . . . . . . . . . . . . . .

2026 . . . . . . . . . . . . . . . . . . . . . . . . .

46,875

65,625

—

530,000

—

2027 . . . . . . . . . . . . . . . . . . . . . . . . .

600,000

— 150,000

2028 . . . . . . . . . . . . . . . . . . . . . . . . .

—

46,958

595,651

750,026

Total . . . . . . . . . . . . . . . . . . . . . . .

$745,313

$530,000

$150,000

$9,512

$1,434,825

The Tranche B Term Loan Facility matures on December 13, 2026, while the Tranche A Term Loan
Facility and Revolving Facility mature on June 29, 2027. The Tranche A Term Loan Facility is repayable in
installments due at the end of each quarter commencing September 2023.

The Company’s credit agreements originally provided for a $1,200,000 Tranche B Term Loan Facility

and included a $300,000 uncommitted incremental term loan on that facility. The Tranche B Term Loan
Facility initially bore interest at rates based on either a base rate plus an applicable margin of 1.75% or
adjusted LIBOR rate plus an applicable margin of 2.75%, subject to a LIBOR floor of 0.75%. After a
number of amendments, the Tranche B Term Loan Facility currently bears interest at rates based on either a
base rate plus an applicable margin of 0.75% or adjusted SOFR rate plus an applicable margin of 1.75%,
subject to a SOFR floor of 0.00%. The interest rate for the Tranche B Term Loan Facility as of December 31,
2023, was 7.19%.

The Tranche B Term Loan Facility does not require an Excess Cash Flow payment if the Company’s
net secured leverage ratio is maintained below 3.75 to 1.00. As of December 31, 2023, the Company’s net
secured leverage ratio was 2.05 to 1.00, and the Company was in compliance with all covenants of the
Tranche B Term Loan Facility. There are no financial maintenance covenants on the Tranche B Term Loan
Facility.

The Company’s credit agreements also originally provided for a senior secured ABL revolving credit
facility (ABL Facility). ABL Facility borrowings initially bore interest at rates based on either a base rate
plus an applicable margin of 1.00% or adjusted LIBOR rate plus an applicable margin of 2.00%, in each case,
subject to adjustments based on average availability under the ABL Facility.

In May 2021, the Company amended the ABL Facility, increasing its borrowing limit from $300,000 to
$500,000, raising its incremental capacity from $100,000 to $200,000, and extending the maturity date from

June 12, 2023 to May 27, 2026 (Amended ABL Facility). In addition, the Amended ABL Facility modified
the pricing by reducing certain applicable interest rates to either a base rate plus an applicable margin of
0.00% to 0.25% or adjusted LIBOR rate plus an applicable margin of 1.00% to 1.25%, in each case, based
on average availability under the Amended ABL Facility. In connection with this amendment, the Company
capitalized $920 of new debt issuance costs as deferred financing costs on long-term borrowings in the
second quarter of 2021. At the same time, the Company also amended its Tranche B Term Loan Facility
agreement to reflect the same amendments made to the ABL Facility.

In May 2021, the Company borrowed $50,000 under the Amended ABL Facility, the proceeds of

which were used as a voluntary prepayment of the Tranche B Term Loan Facility. As a result of this
prepayment of the Tranche B Term Loan Facility, the Company wrote off $831 of original issue discount
and capitalized debt issuance costs during the second quarter of 2021 as a loss on extinguishment of debt in
the consolidated statements of comprehensive income.

In June 2022, the Company amended and restated its existing credit agreements (Amended Credit
Agreement) that resulted in a new term loan facility in an aggregate principal amount of $750,000 (Tranche A
Term Loan Facility), established a new $1,250,000 revolving facility (Revolving Facility), terminated the
former asset-based lending facility (ABL Facility), and replaced all LIBOR provisions with SOFR provisions.
Proceeds received by the Company from the Tranche A Term Loan Facility were used to repay the total
existing outstanding balance on the Company’s former ABL Facility and to make a $250,000 voluntary
prepayment on the Tranche B Term Loan Facility, with the remaining funds used for future general corporate
purposes. As a result of these prepayments, the Company wrote off $3,546 of original issue discount and
capitalized debt issuance costs during the second quarter of 2022 as a loss on extinguishment of debt.

The Tranche A Term Loan Facility and the Revolving Facility initially bore interest at a rate based on
adjusted SOFR plus an applicable margin of 1.5% through December 31, 2022, subject to a SOFR floor of
0.0%. Beginning on January 1, 2023, the Tranche A Term Loan Facility and the Revolving Facility bear
interest at a rate based on adjusted SOFR plus an applicable margin between 1.25% and 1.75%, based on
the Company’s total leverage ratio and subject to a SOFR floor of 0.0%. As of December 31, 2023, the interest
rate for the Tranche A Term Loan Facility is 6.99% and the interest rate for the Revolving Facility is
6.94%.

The Tranche A Term Loan Facility and the Revolving Facility added certain financial covenants that

require the Company 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 December 31, 2023, the Company’s total leverage ratio was 2.18 to 1.00, and
the Company’s interest coverage ratio was 6.44 to 1.00. The Company was also in compliance with all
other covenants of the Amended Credit Agreement as of December 31, 2023.

The Tranche B Term Loan Facility, Tranche A Term Loan Facility and Revolving Facility are guaranteed

by substantially all of the Company’s wholly-owned domestic restricted subsidiaries and are secured by
associated collateral agreements which pledge a first priority lien on virtually all of the Company’s assets,
including fixed assets and intangibles, cash, trade accounts receivable, inventory, and other current assets and
proceeds thereof.

In connection with the June 2022 refinancing and in accordance with ASC 470-50, the Company
capitalized $10,330 of fees paid to creditors as deferred financing costs on long-term borrowings and
expensed $800 of transaction fees. The Company evaluated on a lender-by-lender basis if the debt related to
returning lenders on the Revolving Facility was significantly modified or not, resulting in the write-off of
$197 in unamortized deferred financing costs related to the former ABL Facility as a loss on extinguishment
of debt.

As of December 31, 2023, there was $150,000 outstanding under the Revolving Facility, leaving

$1,099,203 of unused capacity, net of outstanding letters of credit. Total availability on the Revolving
Facility is reduced to $992,833 under the Company’s most restrictive debt covenants.

13. Stock Repurchase Programs

In September 2020, the Company’s Board of Directors approved a $250,000 stock repurchase program,
which was exhausted in the third quarter of 2022. In July 2022, the Company’s Board of Directors approved

another stock repurchase program, which commenced on August 5, 2022, and allowed for the repurchase of
up to $500,000 of the Company’s common stock over a 24-month period. Additionally, on February 12,
2024, the Company’s Board of Directors approved a new stock repurchase program that allows for the
repurchase of up to $500,000 of the Company’s common stock over the next twenty-four months. The new
program replaces the prior share repurchase program, which had approximately $26,297 remaining available
for repurchase when the new program was approved. Pursuant to the approved program, the Company
may repurchase its common stock from time to time, in amounts and at prices the Company deems
appropriate, subject to market conditions and other considerations. The repurchases may be executed using
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 the Company’s 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.

During the year ended December 31, 2023, the Company repurchased 2,188,475 shares of its common
stock for $251,513. During the year ended December 31, 2022, the Company repurchased 2,722,007 shares
of its common stock for $345,840. During the year ended December 31, 2021, the Company repurchased
350,000 shares of its common stock for $125,992. Since the inception of all stock repurchase programs
(starting in August 2015), the Company has repurchased 13,937,188 shares of the Company’s common stock
for $1,028,892 (at an average cost per share of $73.82). We have periodically reissued shares out of Treasury
stock, including for earnout payments.

14. Earnings Per Share

Basic earnings per share is calculated by dividing net income attributable to the common shareholders

of the Company by the weighted average number of common shares outstanding during the period, exclusive
of restricted shares. Except where the result would be anti-dilutive, diluted earnings per share is calculated
by assuming the vesting of unvested restricted stock and the exercise of stock options, as well as the satisfaction
of certain contingent acquisition consideration conditions as of the end of the period. Refer to Note 4,
“Redeemable Noncontrolling Interest,” to the consolidated financial statements for further information
regarding the accounting for redeemable noncontrolling interests within earnings per share.

The following table reconciles the numerator and the denominator used to calculate basic and diluted

earnings per share:

Numerator

Year Ended December 31,

2023

2022

2021

Net income attributable to Generac Holdings Inc.

. . . . . . . . .

214,606

399,502

550,494

Redeemable noncontrolling interest redemption value

adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(11,517)

(49,235)

(17,102)

Net income attributable to common shareholders . . . . . . . .

203,089

350,267

533,392

Denominator
Weighted average shares, basic . . . . . . . . . . . . . . . . . . . . . . .
Dilutive effect of stock compensation awards(1)
. . . . . . . . . . .
Dilutive effect of contingently issued shares . . . . . . . . . . . . . .

61,265,060
793,327

63,117,007
1,087,219

62,686,001
1,534,603

—

477,131

32,804

Diluted shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

62,058,387

64,681,357

64,253,408

Net income attributable to common shareholders per share

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.31

3.27

5.55

5.42

8.51

8.30

(1) For the years ended December 31, 2023, and December 31, 2022, excludes approximately 348,000 and

76,000 stock options and restricted stock awards, respectively, as the impact of such awards was anti-
dilutive. There were no awards with an anti-dilutive impact for the year ended December 31, 2021.

15.

Income Taxes

The Company’s provision for income taxes consists of the following:

Year Ended December 31,

2023

2022

2021

Current:

Federal

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 71,741

$118,320

$105,236

State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13,802

22,115

25,743

51,055

21,295

10,536

107,658

195,118

137,067

Deferred:

Federal

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(26,504)

(43,475)

10,518

State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5,254)

(3,218)

(10,966)

(40,109)

(34,976)

(94,550)

Change in valuation allowance . . . . . . . . . . . . . . . . . . . . . . .

498

(972)

(3,728)

(7,863)

(1,073)

(1,037)

Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . .

$ 73,180

$ 99,596

$134,957

The Company files U.S. federal, U.S. state and foreign jurisdiction tax returns which are subject to
examination up to the expiration of the statute of limitations. The Company believes the tax positions taken
on its returns would be sustained upon an exam, or where a position is uncertain, adequate reserves have
been recorded. As of December 31, 2023, the Company is no longer subject to income tax examinations for
United States federal income taxes for tax years prior to 2020. Due to the carryforward of net operating
losses and research & development credits, the Company’s Wisconsin state income tax returns for tax years
2007 through 2022 remain open. In addition, the Company is subject to audit by various foreign taxing
jurisdictions for tax years 2012 through 2023.

The Company is regularly under tax return examination by tax authorities in the various jurisdictions

in which we operate. The Company is actively managing the examinations and working to address any open
matters. While the Company does not believe any material taxes or penalties are due, there is a possibility
that the ultimate tax outcome of an examination may result in differences from what was recorded. Such
differences may affect the provision for income taxes in the period in which the determination is made and
could impact the Company’s financial results.

Significant components of deferred tax assets and liabilities are as follows:

December 31,

2023

2022

Deferred tax assets:

Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 48,758
36,927
12,549
14,143

$ 46,994
34,914
20,229
11,750

Operating loss and credit carryforwards . . . . . . . . . . . . . . . . . . . . . .

54,753

56,279

Bad debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,380

8,722

1,415

7,531

Capitalized R&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

65,523

33,738

December 31,

2023

2022

Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5,136)

(4,638)

Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

237,619

208,212

Deferred tax liabilities:

Goodwill and intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

253,342

260,745

Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

45,964

Debt refinancing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interest swap and derivative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

828

9,521

2,444

44,385

1,184

12,370

2,473

Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

312,099

321,157

Net deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (74,480) $(112,945)

As of December 31, 2023 and 2022, deferred tax assets of $15,532 and $12,746, and deferred tax

liabilities of $90,012 and $125,691, respectively, were reflected on the consolidated balance sheets.

The Company maintains a valuation allowance against the deferred tax assets when it is uncertain it
will generate sufficient taxable income to utilize the asset. During 2023, the valuation allowance increased
by $498 primarily due to the establishment of valuation allowances in certain jurisdictions where we believe
the deferred tax assets may not be able to be fully utilized.

At December 31, 2023, the Company had tax loss carryforwards of approximately $218,432, which

have varying expiration periods ranging from 2024 to indefinite. For carryforward amounts which the
Company believes the losses will expire prior to use, a valuation allowance has been established. For all other
carryforwards the Company believes it will generate sufficient taxable income in these jurisdictions to
utilize its loss carryforwards.

At December 31, 2023, the Company had state manufacturing tax credit carryforwards of approximately
$29,196, which expire between 2028 and 2038. The Company believes it will generate sufficient taxable income
in these jurisdictions to fully utilize the credits prior to their expiration.

Changes in the Company’s gross liability for unrecognized tax benefits, excluding interest and penalties,

were as follows:

December 31,

2023

2022

Unrecognized tax benefit, beginning of period . . . . . . . . . . . . . . . . . . .

$ 8,895

8,647

Increase in unrecognized tax benefit for positions taken in prior period .
Increase in unrecognized tax benefit for positions taken in current

period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Statute of limitation expirations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,081

1,122

(3,395)
—

975

(824)
—

Unrecognized tax benefit, end of period . . . . . . . . . . . . . . . . . . . . . . . .

$ 9,703

8,895

The unrecognized tax benefit as of December 31, 2023 and 2022, if recognized, would favorably

impact the effective tax rate.

As of December 31, 2023 and 2022, total accrued interest of approximately $532 and $161, respectively,

and accrued penalties of approximately $1,275 and $422, respectively, associated with net unrecognized tax
benefits are included in the consolidated balance sheets. Interest and penalties are recorded as a component of
income tax expense

The Company does not expect a significant change to the total amount of unrecognized tax benefits

during the fiscal year ending December 31, 2024.

A reconciliation of the statutory tax rate to the effective tax rate for the years ended December 31,

2023, 2022 and 2021 is as follows:

Year Ended December 31,

2023

2022

2021

U.S. statutory rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

21.0% 21.0% 21.0%

State taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

State tax rate differential

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Research and development credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

State credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Nondeductible U.S. compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Foreign tax deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Foreign deferred tax rate change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Uncertain tax positions reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Global intangible low tax income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.0

0.0

(2.4)

(0.9)

(0.4)

1.0

0.0

0.9

1.7

0.3

4.0

(0.3)

(1.1)

(1.5)

(2.7)

1.6

4.3

0.0

(1.0)

(1.1)

(3.8)

1.5

(0.4)

(1.5)

0.0

0.2

1.2

0.0

(1.2)

(1.1)

Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25.2% 19.6% 19.5%

16. Benefit Plans

Medical and Dental Plans

The Company maintains medical and dental benefit plans covering its full-time domestic employees

and their dependents. These plans are partially or fully self-funded under which participant claims are
obligations of the plan. These plans are funded through employer and employee contributions at a
level sufficient to pay for the benefits provided by the plan. The Company’s contributions to the plans were
$26,090, $31,180, and $24,189 for the years ended December 31, 2023, 2022 and 2021, respectively.

Employees of the Company’s foreign subsidiaries participate in government sponsored medical benefit

plans and other local plans. In certain cases, the Company purchases supplemental medical coverage for
certain employees at these foreign locations. The expenses related to these plans are not material to the
Company’s consolidated financial statements.

Savings Plan

The Company maintains a defined-contribution 401(k) savings plan for eligible domestic employees.

Under the plan, employees may defer receipt of a portion of their eligible compensation. The Company
may contribute a matching contribution of 50% of the first 6% of eligible compensation of employees that
is deferred. The Company may also contribute a non-elective contribution for eligible employees employed on
December 31, 2008 that were impacted by the freezing of the Company’s pension plans. The Company’s
matching contributions are subject to vesting. Forfeitures may be applied against plan expenses and Company
contributions. The Company recognized $3,735, $4,141, and $6,725 of expense related to these plans for
the years ended December 31, 2023, 2022 and 2021, respectively.

17. Share Plans

The Company adopted an equity incentive plan (the 2010 Plan) on February 10, 2010 in connection

with its initial public offering. The 2010 Plan, as amended, allowed for granting of up to 9.1 million share-
based awards to executives, directors and employees. Awards available for grant under the 2010 Plan included
stock options, stock appreciation rights, restricted stock, other share-based awards and performance-based
compensation awards. New grants under the 2010 Plan ceased in June 2019. Total share-based compensation
expense related to the 2010 Plan, net of estimated forfeitures, was $309, $2,379, and $6,249 for the years

ended December 31, 2023, 2022 and 2021, respectively, which is recorded in operating expenses in the
consolidated statements of comprehensive income.

On June 13, 2019, the stockholders of Generac Holdings Inc. approved the Company’s 2019 Equity
Incentive Plan (the 2019 Plan). The 2019 Plan allows for granting of up to 2.7 million share-based awards
to executives, directors and employees. Awards available for grant under the 2019 Plan include stock options,
stock appreciation rights, restricted stock, other share-based awards and performance-based compensation
awards. Total share-based compensation expense related to the 2019 Plan, net of estimated forfeitures, was
$35,183, $27,102, and $17,705 for the years ended December 31, 2023, 2022 and 2021, respectively, which
is recorded in operating expenses in the consolidated statements of comprehensive income.

Stock Options — Stock options granted in 2023 have an exercise price between $110.86 per share and

$119.57 per share; stock options granted in 2022 have an exercise price between $103.50 per share and $315.88
per share; and stock options granted in 2021 have an exercise price between $323.66 per share and $438.83
per share. Stock options vest in equal installments over four years, subject to the grantee’s continued
employment or service and expire ten years after the date of grant.

Stock option exercises can be net-share settled such that the Company withholds shares with value
equivalent to the exercise price of the stock option awards plus the employees’ minimum statutory obligation
for the applicable income and other employment taxes. Total shares withheld were 31,030, 17,376, and
8,608 for the years ended December 31, 2023, 2022 and 2021, respectively, and were based on the value of
the stock on the exercise dates. The net-share settlement has the effect of share repurchases by the Company
as they reduce the number of shares that would have otherwise been issued.

Employees can also utilize a cashless for cash exercise of stock options, such that all exercised shares
will be sold in the market immediately. Cash equivalent to the exercise price of the awards plus the employees’
minimum statutory tax obligations is remitted to the Company, with the remaining cash being transferred
to the employee. Total net proceeds to the Company from the cashless for cash exercise of stock options were
$7,815, $13,786, and $38,787 for the years ended December 31, 2023, 2022 and 2021, respectively, and are
reflected as a financing activity in the consolidated statements of cash flows.

Total payments made by the Company to the taxing authorities for the employees’ tax obligations
related to stock option exercises were $4,895, $14,089, and $31,680 for the years ended December 31, 2023,
2022 and 2021, respectively, and are reflected as a financing activity in the consolidated statements of cash
flows.

The grant-date fair value of each option grant is estimated using the Black-Scholes-Merton option

pricing model. The fair value is then amortized on a straight-line basis over the requisite service period of
the awards, which is generally the vesting period. Use of a valuation model requires management to make
certain assumptions with respect to selected model inputs. Expected volatility is calculated based on an analysis
of historic volatility of the Company’s stock price. The average expected life is based on the contractual
term of the option using the simplified method. The risk-free interest rate is based on U.S. Treasury
zero-coupon issues with a remaining term equal to the expected life assumed at the date of grant. The
compensation expense recognized is net of estimated forfeitures. Forfeitures are estimated based on actual
share option forfeiture history and are trued up upon vesting based on actual forfeiture activity.

The weighted-average assumptions used in the Black-Scholes-Merton option pricing model for 2023,

2022 and 2021 are as follows:

Year Ended December 31,

2023

2022

2021

Weighted average grant date fair value per share . . . . . . . . . . . . . .

$57.73

$129.38

$129.47

Assumptions:

Expected stock price volatility . . . . . . . . . . . . . . . . . . . . . . . . . .

45%

38%

37%

Risk free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.64%

1.54%

0.45%

Expected annual dividend per share . . . . . . . . . . . . . . . . . . . . . .

$ — $ — $ —

Expected life of options (years)

. . . . . . . . . . . . . . . . . . . . . . . . .

6.25

A summary of the Company’s stock option activity and related information for the years ended

December 31, 2023, 2022 and 2021 is as follows:

Weighted-
Average
Exercise
Price

Number of
Options

Weighted-
Average
Remaining
Contractual
Term (in
years)

Aggregate
Intrinsic
Value
($ in thousands)

Outstanding as of December 31, 2020 . . . . . . . . . . . . .

1,528,690

49.08

6.3

$272,553

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

70,392

335.70

Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(229,921)

Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(27,030)

Outstanding as of December 31, 2021 . . . . . . . . . . . . .

1,342,131

45.95

63.27

64.29

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

109,266

282.20

Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(137,305)

36.91

Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(45,688)

194.05

5.5

$386,069

Outstanding as of December 31, 2022 . . . . . . . . . . . . .

1,268,404

81.35

4.9

$ 47,764

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

208,392

119.31

Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(159,316)

42.46

Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(33,144)

185.81

Outstanding as of December 31, 2023 . . . . . . . . . . . . .

1,284,336

Exercisable as of December 31, 2023 . . . . . . . . . . . . . .

961,340

89.64

63.08

5.0

3.8

$ 75,587

$ 72,609

As of December 31, 2023, there was $18,109 of total unrecognized compensation cost, net of expected

forfeitures, related to unvested options. The cost is expected to be recognized over the remaining service
period, having a weighted-average period of 2.6 years. Total share-based compensation cost related to stock
options for the years ended December 31, 2023, 2022 and 2021 was $8,229, $6,911, and $6,462, respectively,
which is recorded in operating expenses in the consolidated statements of comprehensive income.

Restricted Stock — Restricted stock awards vest in equal installments over three years, subject to the
grantee’s continued employment or service. Certain restricted stock awards also include performance shares,
whereby the number of performance shares that can be earned are contingent upon Company performance
measures over a three-year period. Performance measures are based on a weighting of a number of financial
metrics, from which grantees may earn from 0% to 200% of their target performance share award. The
performance period for the 2021 awards covers the years 2021 through 2023. The performance period for
the 2022 awards covers the years 2022 through 2024. The performance period for the 2023 awards covers
the years 2023 through 2025. The Company estimates the number of performance shares that will vest based
on projected financial performance. The fair value of restricted awards is determined based on the market
value of the Company’s stock on the grant date. The fair market value of the restricted awards at the time of
the grant is amortized to expense over the period of vesting. The compensation expense recognized for
restricted share awards is net of estimated forfeitures and is trued up upon vesting based on actual forfeiture
activity.

Restricted stock vesting is net-share settled such that, upon vesting, the Company withholds shares
with value equivalent to the employees’ minimum statutory tax obligation, and then pays the cash to the
taxing authorities on behalf of the employees. In effect, the Company repurchases these shares and classifies
them as treasury stock. Total shares withheld were 50,577, 92,008, and 80,583 for the years ended
December 31, 2023, 2022 and 2021, respectively, and were based on the value of the stock on the vesting
dates. Total payments made by the Company to the taxing authorities for the employees’ tax obligations
related to restricted stock vesting were $6,002, $26,834, and $27,223 for the years ended December 31, 2023,
2022 and 2021, respectively, and are reflected as a financing activity within the consolidated statements of
cash flows.

A summary of the Company’s restricted stock activity for the years ended December 31, 2023, 2022

and 2021 is as follows:

Weighted-
Average Grant-
Date Fair Value

Non-vested as of December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . .

456,194

$ 68.42

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

126,339

Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(202,327)

Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(14,241)

Non-vested as of December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . .

365,965

223.09

58.99

138.64

124.25

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

287,821

$214.58

Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(234,284)

Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(41,204)

Non-vested as of December 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . .

378,298

83.52

263.47

203.04

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

425,099

$117.62

Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(133,222)

Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(44,789)

Non-vested as of December 31, 2023 . . . . . . . . . . . . . . . . . . . . . . . .

625,386

175.94

213.80

153.01

As of December 31, 2023, there was $53,392 of unrecognized compensation cost, net of expected

forfeitures, related to non-vested restricted stock awards. That cost is expected to be recognized over the
remaining service period, having a weighted-average period of 2.0 years. Total share-based compensation
cost related to the restricted stock for the years ended December 31, 2023, 2022 and 2021, inclusive of
performance shares, was $27,263, $22,570, and $17,492, respectively, which is recorded in operating expenses
in the consolidated statements of comprehensive income.

During 2023, 2022 and 2021, 16,174, 8,572, and 4,677 shares of stock, respectively, were granted to
certain members of the Company’s Board of Directors as a component of their compensation for their
service on the Board, all of which were fully vested at time of grant. A non-employee director can elect to
receive his or her director fees in the form of deferred stock units, which voluntarily defers the issuance of the
related shares granted until the director separates from the Company, or a triggering event occurs. 8,832,
5,008, and 3,160 of deferred stock units are included in the shares of stock granted to certain members of the
Company’s Board of Directors for the years 2023, 2022, and 2021, respectively. Total share-based
compensation cost for these share grants in 2023, 2022 and 2021 was $1,846, $1,886, and $1,579, respectively,
which is recorded in operating expenses in the consolidated statements of comprehensive income.

18. Commitments and Contingencies

The Company has an arrangement with a finance company to provide floor plan financing for certain
dealers. The Company receives payment from the finance company after shipment of product to the dealer.
The Company participates in the cost of dealer financing up to certain limits and has agreed to repurchase
products repossessed by the finance company but does not indemnify the finance company for any credit
losses they incur. The amount financed by dealers which remained outstanding under this arrangement at
December 31, 2023 and 2022 was approximately $158.0 million and $212.0 million, respectively.

On August 1, 2022, Power Home Solar, LLC d/b/a Pink Energy (PHS) filed a lawsuit in the Western

District of Virginia against Generac Power Systems, Inc., a wholly-owned subsidiary of the Company
(Generac Power). The complaint alleges breaches of warranty, product liability, and other various causes of
action against Generac Power relating to the sale and performance of certain clean energy equipment and
seeks to recover damages, including consequential damages, that PHS allegedly incurred. The Company
disputes the allegations in the complaint, including that PHS can seek consequential damages or amounts
greater than the $25.0 million liability cap set forth in the agreement between the parties. Generac Power
moved to dismiss the complaint and compel arbitration consistent with the parties’ agreement. PHS later filed

a Chapter 7 bankruptcy petition in the Western District of North Carolina that identified Generac Power as
one of its outstanding creditors. The parties agreed to toll PHS’s deadline to respond to the motion to
dismiss and all other pretrial deadlines to allow the bankruptcy trustee to evaluate the complaint. The Trustee
has not yet taken further action in this lawsuit. Generac Power intends to vigorously defend against the
claims in the complaint, in whichever forum they may proceed.

On October 28, 2022, Daniel Haak filed a putative consumer class action lawsuit against Generac
Power in the Middle District of Florida. The complaint alleges breaches of warranty, tort-based, and unjust
enrichment claims against Generac Power relating to the sale and performance of certain clean energy
products, and seeks to recover damages, including consequential damages, that the plaintiff and putative
class allegedly incurred. Additional putative class actions were filed by consumers raising similar claims and
allegations in other district court cases. These putative class actions have been consolidated into a
Multidistrict Litigation, In re: Generac Solar Power Systems Marketing, Sales Practices and Products
Liability Litigation currently pending in the Eastern District of Wisconsin, Case No. 23-md-3078. Generac
Power moved to dismiss claims in the consolidated master complaint, which is pending with the court. Generac
Power and the Company intend to vigorously defend against the consolidated master complaint.

On December 1, 2022, Oakland County Voluntary Employees’ Beneficiary Association and Oakland
County Employees’ Retirement System filed a putative securities class action lawsuit against the Company
and certain of its officers in the Eastern District of Wisconsin. The court subsequently consolidated a later
filed action and appointed a lead plaintiff. The lead plaintiff filed a consolidated complaint alleging
violation of federal securities law related to disclosures of quality issues in Generac Power’s clean energy
product, accounting for warranty reserves, reliance on channel partners, and demand for home standby
generators (the “Oakland County Lawsuit”). The Company moved to dismiss the consolidated complaint on
October 9, 2023. The Company disputes the allegations in the operative consolidated complaint and
intends to vigorously defend against the claims in the consolidated class action.

On February 3, 2023, a purported Company shareholder filed a shareholder derivative action against
certain of the Company’s officers and directors in the United States District Court for the Eastern District
of Wisconsin. The complaint seeks unspecified damages on behalf of the Company and certain other relief,
such as certain reforms to corporate governance practices. The complaint (in which the Company is
named as a nominal defendant) generally alleges, among other things, breaches of fiduciary duties in
connection with the oversight of the Company’s public statements and legal compliance, and that the
Company was damaged as a result of the breaches of fiduciary duties, and the defendants were unjustly
enriched. The complaint also alleges, among other things, violations of Sections 14(a), 10(b) and 20(a) of the
Securities Exchange Act of 1934, abuse of control, gross mismanagement, and waste of corporate assets.
The Company has received several additional derivative actions filed in both state and federal courts raising
similar claims and allegations, including issues raised in the Oakland County Lawsuit. The Company
disputes the allegations in the shareholder derivative actions and intends to vigorously defend against the
claims in the complaints.

On October 28, 2022, Generac Power received a grand jury subpoena from the U.S. Attorney for the

Eastern District of Michigan, as a result of which the Company became aware of an enforcement
investigation by the U.S. DOJ. The subpoena requests similar documents and information provided by the
Company to the U.S. EPA and the CARB in response to civil document requests related to the Company’s
compliance with emissions regulations for approximately 1.85 thousand portable generators produced by
the Company in 2019 and 2020 and sold in 2020. The Company is cooperating with both the DOJ and the
EPA and CARB inquiries.

On November 30, 2022, the CPSC notified the Company of its intention to recommend the imposition
of a civil penalty for failing to timely submit a report to the CPSC in relation to certain portable generators
that were subject to a voluntary recall previously announced on July 29, 2021. On May 3, 2023, the
parties entered into a mutual settlement agreement. The agreement does not constitute an admission by
Generac or a determination by the CPSC that Generac violated the CPSA. The terms of the settlement
agreement require the Company to (i) abide by certain customary agency requirements regarding the ongoing
commitment to the Company’s internal CPSA compliance practices and program, and (ii) pay a civil fine
of $15.8 million. On July 21, 2023, Generac Power received a grand jury subpoena from the U.S. Attorney
for the Eastern District of Wisconsin, as a result of which the Company became aware of a continuing inquiry

by the DOJ related to its statutory obligations under the CPSA in connection with this matter. Additionally,
on October 23, 2023, the CPSC notified the Company that it is further investigating whether the Company
complied with the reporting requirements to the CPSC in relation to certain portable generators that were
subject to a voluntary recall previously announced on September 14, 2023. The Company is cooperating
fully with both the CPSC and DOJ investigations and, at this time, is unable to predict the eventual scope,
duration or final outcome of such investigations.

In 2019, EcoFactor, Inc. started a litigation campaign against smart thermostat manufacturers,

including ecobee, Inc., which was acquired by the Company in 2021. EcoFactor accused ecobee of infringing
its patents in three lawsuits filed in the United States District Court for the Western District of Texas and
one lawsuit in the United States District Court for the District of Delaware. On June 23, 2023, a jury issued
a verdict in a consolidated action in the Western District of Texas (Case Nos. 21-cv-00428-ADA and 20-cv-
00078-ADA) finding that ecobee infringed one of the two patents at issue and awarded a lump-sum payment
of $5.4 million for past and future damages. On December 27, 2023, the parties reached a global settlement
at an incremental cost of $4.6 million to resolve all remaining disputes between the parties, including the
two remaining lawsuits.

On March 8, 2022, Ollnova Technologies Limited, a non-practicing entity, filed a patent infringement

lawsuit against ecobee in the United States District Court for the Eastern District of Texas (Case No. 22-cv-
00072-JRG). Ollnova claimed that ecobee infringes on four of its patents. On October 5, 2023, a jury
issued a verdict finding one of Ollnova’s patents invalid and that ecobee infringed at least one of the claims
of the asserted patents and awarded a lump-sum payment of $11.5 million. ecobee intends to file motions
for judgment as a matter of law and an appeal of any adverse judgment.

On June 9, 2023, Spartronics Vietnam, Inc., a contract manufacturer of Generac Power’s clean energy

products, filed multiple lawsuits against Generac Power and sub-suppliers accusing Generac Power of fraud,
breaching its supply agreement with Spartronics, tortiously interfering with Spartronics’ relationships with
its sub-suppliers, and requesting a determination of rights under the parties’ agreements in state and federal
court. Spartronics subsequently filed additional third-party complaints against Generac Power raising
similar claims and allegations. Generac Power denies the allegations in the complaints, including that Generac
Power is responsible for Spartronics purchasing practices, and moved for dismissal of the individual cases
in favor of arbitration, and intends to pursue available claims in connection with the arbitration.

On November 21, 2023, Christopher Walling filed a putative securities class action lawsuit against the

Company and certain of its officers in the Western District of Wisconsin and was later appointed lead
plaintiff. The complaint asserts claims for alleged violation of federal securities law related to statements
concerning the Company’s financial outlook and the impact of macroeconomic trends on the demand for
its products. The plaintiff seeks to represent a class of individuals who purchased or otherwise acquired
common stock between May 3, 2023 and August 3, 2023 and seeks unspecified compensatory damages and
other relief on behalf of a purported class of purchasers of the Company’s stock (the “Walling Lawsuit”).
The lead plaintiff has not yet filed an amended complaint or designated an operative complaint. The Company
disputes the allegations in the initially-filed complaint and intends to defend itself vigorously in this
action.

On February 14, 2024, a purported Company shareholder filed a derivative action against certain of
the Company’s officers and directors in the United States District Court for the Eastern District of Wisconsin.
The complaint (in which the Company is named as a nominal defendant) generally alleges, among other
things, breaches of fiduciary duties in connection with the oversight of the Company’s public statements and
legal compliance, including as to the claims raised in the Walling Lawsuit. The complaint seeks unspecified
damages on behalf of the Company and certain other relief, including certain corporate governance reforms.
The Company disputes the allegations in the shareholder derivative action and intends to vigorously
defend against the claims in the complaint.

In the opinion of management, it is presently unlikely that any legal or regulatory proceedings pending
against or involving the Company will have a material adverse effect on the Company’s financial condition,
results of operations or cash flows. However, in many of these matters, it is inherently difficult to determine
whether a loss is probable or to estimate the size or range of the possible loss given the variety and potential
outcomes of actual and potential claims, the uncertainty of future rulings, the behavior or incentives of adverse

parties, and other factors outside the control of the Company. Accordingly, the Company’s loss reserves
may change from time to time, and actual losses could exceed the amounts reserved by an amount that could
be material to the Company’s consolidated financial position, results of operations or cash flows in any
particular reporting period.

19. Quarterly Financial Information (Unaudited)

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Generac Holdings Inc. . . . .
Net income attributable to common shareholders per

common share – basic: . . . . . . . . . . . . . . . . . . . . .

Net income attributable to common shareholders per

common share – diluted:

. . . . . . . . . . . . . . . . . . .

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Generac Holdings Inc.
. .
Net income attributable to common shareholders per
common share – basic: . . . . . . . . . . . . . . . . . . . .
Net income attributable to common shareholders per
. . . . . . . . . . . . . . . . . .

common share – diluted:

Quarters Ended 2023

Q1
$887,910
272,499
44,483
12,430

Q2
$1,000,420
328,421
85,972
45,198

Q3
$1,070,667
375,787
104,776
60,377

Q4
$1,063,670
388,724
150,968
96,601

0.06

0.05

0.70

0.98

0.97

1.59

1.57

Quarters Ended 2022

Q1
$1,135,856
360,748
154,735
113,858

Q2
$1,291,391
456,985
216,844
156,359

Q3
$1,088,258
361,104
87,523
58,270

Q4
$1,049,232
343,167
107,228
71,015

1.61

1.57

2.24

2.21

0.84

0.83

0.84

0.83

20. Valuation and Qualifying Accounts

For the years ended December 31, 2023, 2022 and 2021:

Balance at
Beginning
of Year

Additions
Charged to
Earnings

Charges to
Reserve,
Net(1)

Reserves
Established
for
Acquisitions

Balance at
End of Year

Year ended December 31, 2023

Allowance for credit losses . . . . . . . . . . . . . .
Reserves for inventory . . . . . . . . . . . . . . . . .
Valuation of deferred tax assets . . . . . . . . . .

$27,664
39,714
4,638

$ 7,443
4,621
516

$ (1,206)
(5,308)
(18)

24
—
—

Year ended December 31, 2022

Allowance for credit losses . . . . . . . . . . . . . .
Reserves for inventory . . . . . . . . . . . . . . . . .
Valuation of deferred tax assets . . . . . . . . . .

$12,025
33,537
7,874

$17,966
9,656
649

$ (2,825)
(4,737)
(1,501)

498
1,258
(2,384)

Year ended December 31, 2021

Allowance for credit losses . . . . . . . . . . . . . .
Reserves for inventory . . . . . . . . . . . . . . . . .
Valuation of deferred tax assets . . . . . . . . . .

$12,001
27,817
5,740

206
$
17,698
1,404

$ (1,640)
(15,749)
(2,441)

$ 1,458
3,771
3,171

$33,925
39,027
5,136

$27,664
39,714
4,638

$12,025
33,537
7,874

(1) Deductions from the allowance for credit losses equal accounts receivable written off against the

allowance, less recoveries, as well as foreign currency translation adjustments. Deductions from the
reserves for inventory excess and obsolete items equal inventory written off against the reserve as
items were disposed of, as well as foreign currency translation adjustments.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

There were no changes in, or disagreements with, accountants reportable herein.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that

information required to be disclosed by us in reports we file or submit under the Securities Exchange Act of
1934 (Exchange Act), is recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that such information is accumulated and
communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow for timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer and our Chief Financial
Officer, has conducted an evaluation of the design and operation of our disclosure controls and procedures
as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by
this report on Form 10-K. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures were effective in providing reasonable assurance
that the information required to be disclosed in this report on Form 10-K has been recorded, processed,
summarized and reported as of the end of the period covered by this report on Form 10-K.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over

financial reporting, as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control
over financial reporting is designed under the supervision of our Chief Executive Officer and Chief
Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of the consolidated financial statements in accordance with U.S. GAAP.

Internal control over financial reporting includes those policies and procedures that (i) pertain to the

maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of the financial statements in accordance with U.S. GAAP, and that receipts
and expenditures of the Company are being made only in accordance with authorizations of management
and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect
on the Company’s financial statements.

There are inherent limitations to the effectiveness of any internal control over financial reporting,
including the possibility of human error or the circumvention or overriding of the controls. Accordingly,
even an effective internal control over financial reporting can provide only reasonable assurance of achieving
its objective. Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate, because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial

Officer, our management conducted an assessment of the effectiveness of internal control over financial
reporting as of December 31, 2023 based on the criteria established in the 2013 Internal Control — Integrated
Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Based on this assessment, our management has concluded that our internal control over financial reporting
was effective as of December 31, 2023.

Deloitte & Touche LLP (PCAOB ID No. 34), the Company’s independent registered public accounting

firm, issued an attestation report on the effectiveness of the Company’s internal control over financial
reporting as of December 31, 2023, which is included herein.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the

three months ended December 31, 2023 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.

Item 9B. Other Information

Adoption: On November 13, 2023, Aaron Jagdfeld, Chief Executive Officer and director, adopted a
Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the
sale of up to 60,000 shares of the Company’s common stock until February 28, 2025.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

None

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information required by Item 10 not already provided herein under

“Item 1 — Business — Information About Our Executive Officers”, will be included in our 2024 Proxy
Statement and is incorporated herein by reference.

Item 11. Executive Compensation

The information required by this item will be included in our 2024 Proxy Statement and is incorporated

herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters

The information required by this item, including under the heading “Securities Authorized for Issuance
Under Equity Compensation Plans,” will be included in our 2024 Proxy Statement and is incorporated herein
by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this item will be included in our 2024 Proxy Statement and is incorporated

herein by reference.

Item 14. Principal Accountant Fees and Services

The information required by this item will be included in our 2024 Proxy Statement and is incorporated

herein by reference.

Item 15. Exhibits and Financial Statement Schedules

PART IV

(a)(1) Financial Statements

Included in Part II of this report:

Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated balance sheets as of December 31, 2023 and 2022 . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated statements of comprehensive income for years ended December 31, 2023, 2022 and

2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated statements of stockholders’ equity for years ended December 31, 2023, 2022 and

2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated statements of cash flows for the years ended December 31, 2023, 2022 and 2021 . . . .

Notes to consolidated financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

(a)(2) Financial Statement Schedules

All financial statement schedules have been omitted, since the required information is not applicable or
is not present in amounts sufficient to require submission of the schedule, or because the information required
is included in the consolidated financial statements and notes thereto.

(a)(3) Exhibits

The below exhibits index is the list of the exhibits being filed or furnished with or incorporated by

reference into this Annual Report on Form 10-K:

Exhibits
Number

2.1

2.2

2.3

3.1

3.2

4.1

4.2

Description

Arrangement Agreement dated as of November 1, 2021 by and among 13462234 Canada Inc.,
Generac Power Systems, Inc., ecobee Inc., and Shareholder Representative Services LLC
(incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed
with the SEC on November 2, 2021).

Amendment No. 1, dated as of May 31, 2022, to Arrangement Agreement dated as of
November 1, 2021, by and among 13462234 Canada Inc., Generac Power Systems, Inc., ecobee
Inc., and Shareholder Representative Services LLC (incorporated by reference to Exhibit 10.2 of
the Quarterly Report on Form 10-Q filed with the SEC on August 8, 2022).

Amendment, dated as of December 29, 2022, to Arrangement Agreement dated as of
November 1, 2021 by and among 13462234 Canada Inc., Generac Power Systems, Inc., ecobee
Inc., and Shareholder Representative Services LLC (incorporated by reference to Exhibit 2.3 of
the Annual Report on Form 10-K filed with the SEC on February 22, 2023).

Third Amended and Restated Certificate of Incorporation of Generac Holdings Inc.
(incorporated by reference to Exhibit 3.1 of the Company’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2009).
Amended and Restated Bylaws of Generac Holdings Inc. (incorporated by reference to
Exhibit 3.2 of the Company’s Current Report on Form 8-K filed with the SEC on March 10,
2023).

Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the
Registration Statement on Form S-1 filed with the SEC on January 25, 2010).

Description of Securities (incorporated by reference to Exhibit 4.2 of the Annual Report on
Form 10-K filed with the SEC on February 25, 2020).

100

Exhibits
Number

10.1

10.2

10.3

10.4

10.5

10.6

10.7

10.8

Description

Credit Agreement, Dated as of February 9, 2012, As Amended and Restated as of May 30,
2012, As Further Amended and Restated as of May 31, 2013, among Generac Power Systems,
Inc., Generac Acquisition Corp., the lenders party thereto, JPMorgan Chase Bank, N.A., as
Administrative Agent and Bank of America, N.A. and Goldman Sachs Bank USA, as
syndication agent (incorporated by reference to Exhibit 10.2 to the Company’s Current Report
on Form 8-K filed with the SEC on June 4, 2013).

First Amendment dated as of May 18, 2015, to Credit Agreement, dated as of February 9, 2012,
as amended and restated as of May 30, 2012, as further amended and restated as of May 31,
2013, among Generac Power Systems, Inc., Generac Acquisition Corp., the lenders party
thereto, JPMorgan Chase Bank, N.A. as administrative agent and Bank of America, N.A. and
Goldman Sachs Bank USA, as syndication agents and Deutsche Bank Securities Inc., Morgan
Stanley Senior Funding, Inc. and Wells Fargo Bank, N.A. as document agents (incorporated by
reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed with the SEC
on August 7, 2015).

Replacement Term Loan Amendment dated as of November 2, 2016, among Generac Power
Systems, Inc., Generac Acquisition Corp., the lenders party thereto, JPMorgan Chase Bank,
N.A., as Administrative Agent, and the other agents named therein (incorporated by reference
to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on
November 3, 2016).

2017 Replacement Term Loan Amendment dated as of May 11, 2017, among Generac Power
Systems, Inc., Generac Acquisition Corp., the lenders party thereto, JPMorgan Chase Bank,
N.A., as Administrative Agent, and the other agents named therein (incorporated by reference
to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 15,
2017).

2017-2 Replacement Term Loan Amendment dated as of December 8, 2017, among Generac
Power Systems, Inc., Generac Acquisition Corp., the lenders party thereto, JPMorgan Chase
Bank, N.A., as Administrative Agent, and the other agents named therein (incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on
December 11, 2017).

2018 Replacement Term Loan Amendment, dated as of June 8, 2018, among Generac Power
Systems, Inc., Generac Acquisition Corp., the lenders party thereto, JPMorgan Chase Bank,
N.A., as Administrative Agent, and the other agents named therein (incorporated by reference
to Exhibit 10.1 of the Current Report on Form 8-K filed with the SEC on June 14, 2018).

2019 Replacement Term Loan Amendment, dated as of December 13, 2019, among Generac
Power Systems, Inc., Generac Acquisition Corp., the lenders party thereto, JPMorgan Chase
Bank, N.A., as Administrative Agent, and the other agents named therein (incorporated by
reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the SEC on
December 16, 2019).

Second Amendment, dated as of May 27, 2021, amending that certain Credit Agreement, dated
as of February 9, 2012, as amended and restated as of May 30, 2012, as further amended and
restated as of May 31, 2013, as amended by the First Amendment, dated as of May 18, 2015, as
further amended by the Replacement Term Loan Amendment, dated as of November 2, 2016,
as further amended by the 2017 Replacement Term Loan Amendment, dated as of May 11,
2017, as further amended by the 2017-2 Replacement Term Loan Amendment, dated
December 8, 2017, as further amended by the 2018 Replacement Term Loan Amendment, dated
June 8, 2018, and as further amended by the 2019 Replacement Term Loan Amendment, dated
December 13, 2019, among Generac Power Systems, Inc., Generac Acquisition Corp., the other
Loan Parties (as defined therein) party thereto, the lenders party thereto, JPMorgan Chase
Bank, N.A., as Administrative Agent and the other agents named therein (incorporated by
reference to Exhibit 10.2 of the Current Report on Form 8-K filed with the SEC on May 28,
2021).

101

Exhibits
Number

10.9

10.10

10.11

10.12

10.13

10.14

Description

Third Amendment, dated as of June 29, 2022, amending and restating that certain Credit
Agreement, dated as of February 9, 2012, as amended and restated as of May 30, 2012, as
further amended and restated as of May 31, 2013, as amended by the First Amendment, dated
as of May 18, 2015, as further amended by the Replacement Term Loan Amendment, dated as
of November 2, 2016, as further amended by the 2017 Replacement Term Loan Amendment,
dated as of May 11, 2017, as further amended by the 2017-2 Replacement Term Loan
Amendment, dated December 8, 2017, as further amended by the 2018 Replacement Term Loan
Amendment, dated June 8, 2018, as further amended by the 2019 Replacement Term Loan
Amendment, dated December 13, 2019 and as further amended by the Second Amendment,
dated May 27, 2021, among Generac Power Systems, Inc., Generac Acquisition Corp., the other
Loan Parties (as defined therein) party thereto, the lenders party thereto, JPMorgan Chase
Bank, N.A., as Administrative Agent and the other agents named therein (incorporated by
reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the SEC on June 30,
2022.

First Amendment, dated as of January 31, 2023, to that certain Credit Agreement, dated as of
February 9, 2012, as amended and restated as of May 30, 2012, as further amended and restated
as of May 31, 2013, as amended by the First Amendment, dated as of May 18, 2015, as further
amended by the Replacement Term Loan Amendment, dated as of November 2, 2016, as
further amended by the 2017 Replacement Term Loan Amendment, dated as of May 11, 2017,
as further amended by the 2017-2 Replacement Term Loan Amendment, dated December 8,
2017, as further amended by the 2018 Replacement Term Loan Amendment, dated June 8, 2018,
as further amended by the 2019 Replacement Term Loan Amendment, dated December 13,
2019, as further amended by the Second Amendment, dated May 27, 2021, and as further
amended and restated by the Third Amendment, dated June 29, 2022, among Generac Power
Systems, Inc., Generac Acquisition Corp., the other Loan Parties (as defined therein) party
thereto, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent and
the other agents named therein (incorporated by reference to Exhibit 10.10 of the Annual
Report on Form 10-K filed with the SEC on February 22, 2023).

Restatement Agreement, dated as of May 31, 2013, to that certain Credit Agreement, dated as
of February 9, 2012, as amended and restated as of May 30, 2012, among Generac Power
Systems, Inc., Generac Acquisition Corp., the lenders party thereto, JPMorgan Chase Bank,
N.A., as Administrative Agent, and Bank of America, N.A. and Goldman Sachs Bank USA, as
syndication agents (incorporated by reference to Exhibit 10.1 to the Company’s Current Report
on Form 8-K filed with the SEC on June 4, 2013).

Guarantee and Collateral Agreement, dated as of February 9, 2012, as amended and restated as
of May 30, 2012, among Generac Holdings Inc., Generac Acquisition Corp., Generac Power
Systems, Inc., certain subsidiaries of Generac Power Systems, Inc. and JPMorgan Chase Bank,
N.A., as Administrative Agent (incorporated by reference to Exhibit 10.2 of the Company’s
Current Report on Form 8-K filed with the SEC on May 31, 2012).

First Amendment to Guarantee and Collateral Agreement dated as of May 31, 2013, among
Generac Holdings Inc., Generac Acquisition Corp., Generac Power Systems, Inc., certain
subsidiaries of Generac Power Systems, Inc. and JPMorgan Chase Bank, N.A., as
Administrative Agent (incorporated by reference to Exhibit 10.3 to the Company’s Current
Report on Form 8-K filed with the SEC on June 4, 2013).
Credit Agreement, dated as of May 30, 2012, among Generac Power Systems, Inc., its Domestic
Subsidiaries listed as Borrowers on the signature pages thereto, Generac Acquisition Corp., the
lenders party thereto, Bank of America, N.A. as Administrative Agent, JPMorgan Chase Bank,
N.A. and Goldman Sachs Bank USA, as syndication agents, and Wells Fargo Bank, National
Association, as Documentation Agent (incorporated by reference to Exhibit 10.3 of the
Company’s Current Report on Form 8-K filed with the SEC on May 31, 2012).

102

Exhibits
Number

10.15

10.16

10.17

10.18

10.19

10.20

10.21+

10.22+

10.23+

10.24

10.25+

Description

Amendment No. 1 dated as of May 31, 2013, among Generac Power Systems, Inc., its Domestic
Subsidiaries listed as Borrowers on the signature pages thereto, Generac Acquisition Corp., the
lenders party thereto, Bank of America, N.A. as Administrative Agent, JPMorgan Chase Bank,
N.A. and Goldman Sachs Bank USA, as syndication agents, and Wells Fargo Bank, National
Association, as Documentation Agent (incorporated by reference to Exhibit 10.4 to the
Company’s Current Report on Form 8-K filed with the SEC on June 4, 2013).

Amendment No. 2 dated as of May 29, 2015, among Generac Power Systems, Inc., its Domestic
Subsidiaries listed as Borrowers on the signature pages thereto, Generac Acquisition Corp., the
lenders party thereto, Bank of America, N.A. as Administrative Agent, and the other agents
named therein (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on
Form 8-K filed with the SEC on June 1, 2015).

Second Amended and Restated Credit Agreement, dated as of June 12, 2018, among Generac
Power Systems, Inc., its Subsidiaries listed as Borrowers on the signature pages thereto, Generac
Acquisition Corp., the lenders party thereto, Bank of America, N.A. as Administrative Agent,
JPMorgan Chase Bank, N.A., as Syndication Agent, and Wells Fargo Bank, National
Association, as Documentation Agent (incorporated by reference to Exhibit 10.2 of the Current
Report on Form 8-K filed with the SEC on June 14, 2018).

Third Amended and Restated Credit Agreement, dated as of May 27, 2021, among Generac
Power Systems, Inc., its Subsidiaries listed as Borrowers on the signature pages thereto, Generac
Acquisition Corp., the lenders party thereto, Bank of America, N.A. as Administrative Agent,
JPMorgan Chase Bank, N.A. as Syndication Agent, and Wells Fargo Bank, National
Association as Documentation Agent (incorporated by reference to Exhibit 10.1 of the Current
Report on Form 8-K filed with the SEC on May 28, 2021).

Guarantee and Collateral Agreement, dated as of May 30, 2012, among Generac Holdings Inc.,
Generac Acquisition Corp., Generac Power Systems, Inc., certain subsidiaries of Generac Power
Systems, Inc. and Bank of America, N.A., as Administrative Agent (incorporated by reference
to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed with the SEC on May 31,
2012).

Generac Holdings Inc. Amended and Restated 2010 Equity Incentive Plan (incorporated by
reference to Appendix A to the Definitive Proxy Statement on Schedule 14A of the Company
filed with the SEC on April 27, 2012).

Generac Holdings Inc. Annual Performance Bonus Plan (incorporated by reference to
Exhibit 10.63 of the Registration Statement on Form S-1 filed with the SEC on January 25,
2010).
Amended and Restated Employment Agreement, dated November 5, 2018, between Generac
and Aaron Jagdfeld (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly
Report on Form 10-Q filed with the SEC on November 6, 2018).
Form of Confidentiality, Non-Competition and Intellectual Property Agreement (incorporated
by reference to Exhibit 10.40 of the Registration Statement on Form S-1 filed with the SEC on
November 24, 2009).

Form of Nonqualified Stock Option Award Agreement (incorporated by reference to
Exhibit 10.45 of the Registration Statement on Form S-1 filed with the SEC on January 25,
2010).

103

Exhibits
Number

10.26+

10.27+

10.28+

10.29+

10.30

10.31

10.32+

10.33+

10.34+

10.35+

10.36+

10.37+

10.38+

Description

Amended Form of Restricted Stock Award Agreement pursuant to the 2010 Equity Incentive
Plan (incorporated by reference to Exhibit 10.3 of the Quarterly Report on Form 10-Q filed
with the SEC on May 8, 2012).

Amended Form of Nonqualified Stock Option Award Agreement pursuant to the 2010 Equity
Incentive Plan (incorporated by reference to Exhibit 10.4 of the Quarterly Report on Form 10-Q
filed with the SEC on May 8, 2012).

Amended Form of Nonqualified Stock Option Award Agreement pursuant to the 2010 Equity
Incentive Plan (incorporated by reference to Exhibit 10.24 of the Annual Report on Form 10-K
filed with the SEC on February 26, 2019).

Amended Form of Restricted Stock Award Agreement pursuant to the 2010 Equity Incentive
Plan (incorporated by reference to Exhibit 10.25 of the Annual Report on Form 10-K filed with
the SEC on February 26, 2019).

Form of Director Indemnification Agreement (incorporated by reference to Exhibit 10.51 of the
Registration Statement on Form S-1 filed with the SEC on January 11, 2010).

Form of Officer Indemnification Agreement (incorporated by reference to Exhibit 10.52 of the
Registration Statement on Form S-1 filed with the SEC on January 11, 2010).

Amended Form of Performance Share Award Agreement pursuant to the 2010 Equity Incentive
Plan (incorporated by reference to Exhibit 10.29 of the Annual Report on Form 10-K filed with
the SEC on February 26, 2019).

Generac Holdings Inc. Non-Employee Director Compensation Policy (incorporated by
reference to Exhibit 10.31 of the Annual Report on Form 10-K filed with the SEC on
February 22, 2022).

Generac Power Systems, Inc. Executive Change in Control Policy, effective November 5, 2018
(incorporated by reference to Exhibit 10.2 of the Quarterly Report on Form 10-Q filed with the
SEC on November 6, 2018).

Generac Holdings Inc. 2019 Equity Incentive Plan (incorporated by reference to Appendix A to
the Definitive Proxy Statement on Schedule 14A of the Company filed with the SEC on
April 26, 2019).

Form of Restricted Stock Award Agreement pursuant to the Generac Holdings Inc. 2019 Equity
Incentive Plan (incorporated by reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q
filed with the SEC on November 5, 2019).

Form of Nonqualified Stock Option Award Agreement pursuant to the Generac Holdings Inc.
2019 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 of the Quarterly Report
on Form 10-Q filed with the SEC on November 5, 2019).

Form of Performance Share Unit Award Agreement pursuant to the Generac Holdings Inc.
2019 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 of the Quarterly Report
on Form 10-Q filed with the SEC on November 5, 2019).

10.39+* Amended Form of Restricted Stock Award Agreement pursuant to the Generac Holdings Inc.

2019 Equity Incentive Plan

10.40+* Amended Form of Nonqualified Stock Option Award Agreement pursuant to the Generac

Holdings Inc. 2019 Equity Incentive Plan

10.41+* Amended Form of Performance Share Unit Award Agreement pursuant to the Generac

21.1*

23.1*

31.1*

Holdings Inc. 2019 Equity Incentive Plan

List of Subsidiaries of Generac Holdings Inc.

Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm.

Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)
and 15d-14(a), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

104

Exhibits
Number

31.2*

32.1**

32.2**

97*

101*

Description

Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)
and 15d-14(a), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted by
Section 906 of the Sarbanes-Oxley Act of 2002.

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted by
Section 906 of the Sarbanes-Oxley Act of 2002.

Generac Holdings, Inc. Mandatory Restatement Compensation Recovery Policy (dated
December 1, 2023)

The following financial information from the Company’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2023, filed with the SEC on February 21, 2024, formatted in
Inline eXtensible Business Reporting Language (iXBRL): (i) Consolidated Balance Sheets at
December 31, 2023 and December 31, 2022; (ii) Consolidated Statements of Comprehensive
Income for the Fiscal Years Ended December 31, 2023, December 31, 2022 and December 31,
2021; (iii) Consolidated Statements of Stockholders’ Equity for the Fiscal Years Ended
December 31, 2023, December 31, 2022 and December 31, 2021; (iv) Consolidated Statements
of Cash Flows for the Fiscal Years Ended December 31, 2023, December 31, 2022 and
December 31, 2021; (v) Notes to Consolidated Financial Statements.

104

Cover Page Interactive Data File (embedded within the Inline XBRL and contained in
Exhibit 101)

Filed herewith.

** Furnished herewith.

+ Indicates management contract or compensatory plan or arrangement.

Item 16. Form 10-K Summary

None.

105

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the

Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

SIGNATURES

GENERAC HOLDINGS INC.

By:

/s/ AARON JAGDFELD
Aaron Jagdfeld
Chairman, President and Chief Executive Officer

Dated: February 21, 2024

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons and on behalf of the Registrant in the capacities and on the dates indicated.

Signature

Title

Date

/s/ AARON JAGDFELD
Aaron Jagdfeld

/s/ YORK A. RAGEN
York A. Ragen

/s/ BENNETT MORGAN
Bennett Morgan

/s/ MARCIA J. AVEDON
Marcia J. Avedon

/s/ JOHN D. BOWLIN
John D. Bowlin

/s/ ROBERT D. DIXON
Robert D. Dixon

/s/ WILLIAM JENKINS
William Jenkins

/s/ ANDREW G. LAMPEREUR
Andrew G. Lampereur

/s/ NAM TRAN NGUYEN
Nam Tran Nguyen

/s/ DAVID A. RAMON
David A. Ramon

/s/ KATHRYN ROEDEL
Kathryn Roedel

/s/ DOMINICK ZARCONE
Dominick Zarcone

Chairman, President and Chief Executive
Officer

February 21, 2024

Chief Financial Officer and Chief
Accounting Officer

February 21, 2024

Lead Director

February 21, 2024

Director

February 21, 2024

Director

February 21, 2024

Director

February 21, 2024

Director

February 21, 2024

Director

February 21, 2024

Director

February 21, 2024

Director

February 21, 2024

Director

February 21, 2024

Director

February 21, 2024

106

GENERAC HOLDINGS INC. - BOARD OF DIRECTORS

Marcia J. Avedon, Ph.D. (2) (3)
Chief Executive Officer
Avedon Advisory, LLC
Director since 2019

William D. Jenkins, Jr. (2)
President
Palo Alto Networks
Director since 2017

John D. Bowlin (2)
Former President and Chief Executive Officer,
Miller Brewing Company
Director since 2006

Robert D. Dixon (1) (3)
Former Chairman and Chief Executive Officer,
Natural Systems Utilities LLC
Director since 2012

Aaron P. Jagdfeld (4)
President and Chief Executive Officer
Generac Holdings Inc.
Director since 2006

Andrew G. Lampereur (1)
Former Executive Vice President and Chief
Financial Officer, Enerpac Tool Group
(previously Actuant Corporation)
Director since 2014

Bennett J. Morgan (2) (3) (5)
Former President and Chief Operating Officer,
Polaris Industries Inc.
Director since 2013

Nam T. Nguyen (3)
Chief Operating Officer
Generate Capital
Director since 2022

David A. Ramon (1) (3)
Managing Partner
Vaduz Partners
Director since 2010

Kathryn V. Roedel (1) (3)
Former Executive Vice President and Chief
Services and Fulfillment Officer, Sleep Number
Corporation (previously Select Comfort Corp.)
Director since 2016

Dominick P. Zarcone (1) (2)
President and Chief Executive Officer
LKQ Corporation
Director since 2017

(1) Member of Audit Committee
(2) Member of Human Capital and
Compensation Committee
(3) Member of Nominating and Corporate
Governance Committee
(4) Executive Chairman
(5) Lead Director

EXECUTIVE OFFICERS

Aaron P. Jagdfeld – 29 years of service
President, Chief Executive Officer and Chairman

Raj Kanuru – 11 years of service
Executive Vice President, General Counsel & Secretary

York A. Ragen – 18 years of service
Chief Financial Officer

Erik Wilde – 8 years of service
Executive Vice President, Industrial, Americas

Patrick Forsythe – 16 years of service
Chief Technical Officer

Norman Taffe – 2 years of service
President, Energy Technology

Kyle Raabe – 12 years of service
President, Consumer Power

FORWARD-LOOKING
STATEMENTS

GENERAC HOLDINGS INC. -
SHAREHOLDER INFORMATION

This annual report contains
forward-looking statements
that are subject to risks and
uncertainties. For important
information about our use of
forward-looking statements and
limitations thereof, please see
Part I of our Annual Report on
Form 10-K for the year ended
December 31, 2023, which is
included with this annual report.

ANNUAL MEETING
The 2024 annual meeting of
stockholders of Generac Holdings Inc.
will be held on Thursday, June 13, 2024,
at 9:00 a.m. central time, at Generac’s
corporate office.

CORPORATE OFFICE
Generac Holdings Inc.
S45 W29290 Hwy. 59
Waukesha, WI 53189
262-544-4811
www.generac.com

TRANSFER AGENT AND REGISTRAR
Computershare, Inc.
P.O. Box 43006
Providence, RI 02940-3006
United States of America
Toll Free: 1-877-373-6374
United States: 1-800-962-4284
https://www-us.computershare.com/
investor/Contact
www.computershare.com/investor

INVESTOR RELATIONS CONTACT
Kris Rosemann
Senior Manager – Corporate Development &
Investor Relations
Generac Holdings Inc.
S45 W29290 Hwy. 59
Waukesha, WI 53189
262-506-6064
investorrelations@generac.com

INDEPENDENT AUDITORS
Deloitte & Touche LLP
555 East Wells Street, Suite 1400, Milwaukee,
WI 53202

FORM 10-K
Our annual report on Form 10-K was filed with
the Securities and Exchange Commission and
is available online, or upon written request to
Generac Holdings Inc. Investor Relations.

STOCK EXCHANGE
Generac Holdings Inc. common stock is listed
on the New York Stock Exchange under the
ticker symbol GNRC.

Generac Holdings Inc.
S45 W29290 Hwy. 59
Waukesha, WI 53189
1-888-GENERAC (1-888-436-3722)