GENERAC HOLDINGS INC.

Previous wording

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 our expectations at the time of filing this Annual Report on Form 10-K and related to future events and our future financial performance, that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Item 1A. - Risk Factors.” of this Annual Report on Form 10-K.

Current wording

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 that involve risks and uncertainties. These forward-looking statements refer to future events and our future financial performance, and are based on our expectations at the time of filing this Annual Report on Form 10-K. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Item 1A. - Risk Factors.” of this Annual Report on Form 10-K.

Previous wording

Generac is a total energy solutions company that empowers people to use energy on their own terms. Founded in 1959, Generac is a leading global designer, manufacturer, and provider of a wide range of energy technology solutions. The Company provides power generation equipment, energy storage systems, energy management devices & solutions, and other power products serving the residential, light commercial, and industrial markets. The Company continues to expand its energy technology offerings for homes and businesses in its mission to Power a Smarter World and lead the evolution to more resilient, efficient, and sustainable energy solutions.

Current wording

Founded in 1959, Generac is a leading global designer, manufacturer, and provider of a wide range of energy technology solutions. Generac provides power generation equipment, energy storage systems, energy management devices & solutions, and other power products and services serving the residential, commercial, data center, telecom, rental, and industrial markets. The Company’s broad portfolio of energy technology offerings for homes and businesses enables its mission to Power a Smarter World and lead the evolution to more resilient, efficient, and innovative energy solutions.

Previous wording

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

Current wording

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

Previous wording

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:

Current wording

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

Previous wording

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.

Current wording

*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 that can fluctuate in terms of pricing and availability. Our international operations, along with our existing global supply chain, expose us to fluctuations in foreign currency exchange rates and regulatory tariffs that can also have a material impact on our results of operations.

Previous wording

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.

Current wording

*Seasonality.Although there is demand for our products throughout the year, in each of the past five years, approximately 20% to 25% of our net sales *occurred in the first quarter, 23% to 28% in the second quarter, 24% to 27% in the third quarter, and 23% to 29% in the fourth quarter, with different seasonality depending primarily on the occurrence, timing and severity of power outage activity in each year. Major outage activity is unpredictable by nature and, as a result, our sales levels and profitability may fluctuate from period to period. The seasonality experienced during a major power outage, and for the subsequent quarters following the event, will vary relative to other periods where no major outage events occurred. The second half of 2025 represented a very low level of baseline power outage activity, impacting demand for our residential products and resulting in quarterly net sales being more level-loaded as compared to our historical averages.

Previous wording

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

Current wording

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. Refer to Note 12, “Credit Agreements,” to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information. The decrease in interest expense in the current year was primarily driven by lower borrowings, lower SOFR interest rates, and lower interest rate spreads during the year.

Previous wording

The effective income tax rates for the years ended December 31, 2024 and 2023 were 22.6% and 25.2%, respectively. The decrease in our 2024 effective tax rate was primarily due to unfavorable discrete tax items in the prior year that did not repeat in the current year, as well as favorable earnings mix with higher earnings in lower tax jurisdictions in the current year.

Current wording

The effective income tax rates for the years ended December 31, 2025 and 2024 were 18.9% and 22.6%, respectively. The lower 2025 effective tax rate was driven primarily by the impact of certain favorable discrete tax items and their impact on a lower pre-tax income in the current year.

Previous wording

In 2021, the Organization for Economic Cooperation and Development (OECD) released Pillar Two Global Anti-Base Erosion model rules, designed to ensure large corporations are taxed at a minimum rate of 15% in all countries of operation. The OECD continues to release guidance and countries are implementing legislation to adopt the rules, some of which became effective on January 1, 2024. 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. There was no impact to the financial results of the year ended December 31, 2024, and we do not expect the rules to have a material impact on our effective tax rate for the following year. We will update our future tax provisions based on new regulations or guidance accordingly.

Current wording

In 2021, the Organization for Economic Cooperation and Development (OECD) released Pillar Two Global Anti-Base Erosion model rules, designed to ensure large corporations are taxed at a minimum rate of 15% in all countries of operation. The OECD continues to release guidance and countries are implementing legislation to adopt the rules, some of which became effective on January 1, 2024. In January 2026, the OECD released a new package of administrative guidance that effectively deems the United States tax system as compliant with Pillar Two, which is expected to eliminate additional top-up taxes across our global operations. This updated guidance package does not exempt the Company from Qualified Domestic Minimum Top-Up Taxes in foreign jurisdictions. As a result, we expect our cash taxes paid to remain subject to local minimum tax regimes where applicable. There was no impact to the financial results of the year ended December 31, 2025, and we do not expect the rules to have a material impact on our effective tax rate for the following year. We will update our future tax provisions based on new regulations or guidance accordingly.

Previous wording

Our net sales primarily consist of the sale of products to our customers. This includes sales of our power generation equipment, energy storage systems, and other power products to the residential, commercial and industrial markets, as well as service parts to our dealer network. Net sales also include shipping and handling charges billed to customers, with the related freight costs included in cost of goods sold. Additionally, we offer other services, including extended warranties, installation, maintenance, data center and telecom facility design and build, 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, 2024. 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.

Current wording

Our net sales primarily consist of the sale of products to our customers. This includes sales of our power generation equipment, energy storage systems, and other power products to the residential, commercial and industrial markets, as well as service parts to our dealer network. Net sales also include shipping and handling charges billed to customers, with the related freight costs included in cost of goods sold. Additionally, we offer other services, including extended warranties, installation, maintenance, telecom facility design and build, and remote monitoring. These services accounted for approximately 4% of our net sales for the year ended December 31, 2025. Refer to Note 2, “Summary of Accounting Policies - Revenue Recognition,” to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for further information on our revenue streams and related revenue recognition accounting policies.

Previous wording

We are not dependent on any one channel or customer for our net sales, with no single customer representing more than 5% of our net sales, and our top ten customers representing less than 16% of our net sales in aggregate for the year ended December 31, 2024.

Current wording

We are not dependent on any one channel or customer for our net sales, with no single customer representing more than 4% of our net sales, and our top ten customers representing approximately 18% of our net sales in aggregate for the year ended December 31, 2025.

Previous wording

The principal elements of costs of goods sold are component parts, raw materials, inbound and outbound freight, factory overhead and labor. 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.

Current wording

The principal elements of costs of goods sold are component parts, raw materials, inbound and outbound freight, factory overhead and labor. 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 28kW, 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.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

*Net sales.*The increase in domestic segment sales for the year ended December 31, 2024, was primarily driven by an increase in residential product sales, most notably in home standby and portable generators following the elevated power outage activity in the second half of the year. This was partially offset by a decline in C&I product sales for telecom, rental, and "beyond standby" applications.

Current wording

*Net sales.*The decrease in domestic segment sales for the year ended December 31, 2025, was primarily driven by a decrease in residential product sales, most notably in home standby and portable generators as a result of the significantly lower power outage environment together with a strong prior year comparison which included multiple major landed hurricanes. This was partially offset by robust growth in residential energy technology sales, revenue from products sold to data center customers, and higher shipments of C&I products to the industrial distributor and telecom channels.

Previous wording

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

Current wording

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

Previous wording

*Gross profit.*Gross profit margin for the year ended December 31, 2024, was 38.8% compared to 33.9% for the year ended December 31, 2023. The increase in gross profit margin was primarily driven by favorable sales mix, including higher home standby generator sales, the realization of lower input costs, and plant efficiencies.

Current wording

*Gross profit.*Gross profit margin for the year ended December 31, 2025 was 38.3% compared to 38.8% for the year ended December 31, 2024. The decrease in gross profit margin was primarily driven by higher inputs costs, unfavorable sales mix, and a certain inventory provision as disclosed in the reconciliation table below. This decline was partially offset by higher price realization.

Previous wording

*Operating expenses.*Operating expenses increased $149.7 million, or 15.3%, as compared to the prior year. The increase in operating expenses was primarily driven by higher employee and marketing costs, and increased incentive compensation and variable expenses related to higher shipment volumes and profitability. 2024 operating expenses also include $10.5 million of legal provisions and other costs related to patent and other litigation (see Note 18, “Commitments and Contingencies” to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for additional information). 2023 operating expenses included a $5.8 million provision for a regulatory matter with the CPSC, $28.3 million of legal charges related to patent and other litigation (see Note 18, “Commitments and Contingencies” for additional information), $4.4 million of additional customer support costs related to a clean energy product customer that filed for bankruptcy.

Current wording

*Operating expenses.*Operating expenses increased $193.7 million, or 17.2% as compared to the prior year. The increase in operating expenses was driven by higher employee & marketing costs along with higher warranty provision related to the Department of Energy program in Puerto Rico, partially offset by lower incentive-based compensation. 2025 operating expenses also include $142.3 million of legal provisions, settlements, patent related costs, and other costs related to certain legal matters. (see Note 18, “Commitments and Contingencies” to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for additional information). 2024 operating expenses included $10.5 million of legal provisions and other costs related to patent and other litigation (see Note 18, “Commitments and Contingencies” to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for additional information).

Previous wording

*Other expense.*The increase in other expense, net in 2024 was driven primarily by a $38.0 million expense for the change in fair value of our investment in warrants and equity securities of Wallbox N.V., and a $4.9 million loss on extinguishment of debt. This was partially offset by a $3.3 million increase in investment income driven by higher cash on hand and a $7.9 million decrease in interest expense driven by decreased borrowings and interest rates compared to the prior year comparable period.

Current wording

*Other expense.*The decrease in other expense, net in 2025 was driven primarily by a reduced loss from the change in fair value of our investment in warrants and equity securities of Wallbox N.V. and a decrease in interest expense, as compared to the prior year.

Previous wording

Provision for income taxes. The effective income tax rates for the years ended December 31, 2024 and 2023 were 22.6% and 25.2%, respectively. The decrease in the effective tax rate was primarily due to unfavorable discrete tax items in 2023 that did not repeat in the current year, as well as favorable 2024 earnings mix with higher earnings in lower tax jurisdictions.

Current wording

Provision for income taxes. The effective income tax rates for the years ended December 31, 2025 and 2024 were 18.9% and 22.6%, respectively. The decrease in the effective tax rate was driven primarily by the impact of certain discrete tax items and their impact on a lower pre-tax income in the current year.

Previous wording

Net income attributable to Generac Holdings Inc. Net income attributable to Generac Holdings Inc. was $316.3 million as compared to $214.6 million in the prior year period. The increase was primarily driven by higher sales and gross margin, as noted above.

Current wording

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

Previous wording

*Adjusted EBITDA.*Adjusted EBITDA is defined and reconciled to net income in, “Non-GAAP Measures – Adjusted EBITDA” included below in Item 7 of this Annual Report on Form 10-K. Adjusted EBITDA margins for the domestic segment for the year ended December 31, 2024, were 19.1% of domestic segment total sales compared to 15.8% for the year ended December 31, 2023. This margin improvement was primarily driven by favorable sales mix and lower input costs, partially offset by higher operating expense investments to support future growth initiatives.

Current wording

*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, 2025 were 17.1% of domestic segment total sales compared to 19.1% for the year ended December 31, 2024. This margin decline was primarily driven by unfavorable sales mix, higher input costs, and operating deleverage on lower sales volumes, partially offset by increased price cost realization.

Previous wording

Adjusted EBITDA margins for the international segment, before deducting for non-controlling interests, for the year ended December 31, 2024, were 13.2% of international segment total sales compared to 13.7% in the prior year. This margin decrease was primarily due to reduced operating leverage on lower shipments during the year.

Current wording

Adjusted EBITDA margins for the international segment, before deducting for non-controlling interests, for the year ended December 31, 2025 were 15.1% of international segment total sales compared to 13.2% in the prior year. This margin increase was primarily due to favorable sales mix and price/cost realization.

Previous wording

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

Current wording

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

Previous wording

As of December 31, 2024, there was $498.8 million outstanding under the Tranche B Term Loan Facility, $712.5 million outstanding under the Tranche A Term Loan Facility, and no borrowings on the Revolving Facility, leaving $1,249.2 million of unused capacity, net of outstanding letters of credit. The Tranche B Term Loan Facility bears interest at the adjusted SOFR rate plus an applicable margin of 1.75%, subject to a SOFR floor of 0.0%. As of December 31, 2024, the interest rate for the Tranche B Term Loan Facility is 6.34%. 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, 2024, the interest rates for the Tranche A Term Loan Facility and Revolving Facility are 6.15% and 6.19%, respectively. See Note 5, "Derivative Instruments and Hedging Activities" to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K and Item 7A "Quantitative and Qualitative Disclosures About Market Risk" for further information on interest rate swaps, which help to reduce our borrowing costs.

Current wording

As of December 31, 2025, there was $494 million outstanding under the Term Loan B Facility, $700 million outstanding under the New Tranche A Term Loan Facility, and there were no borrowings on the New Revolving Facility, leaving $999.3 million of unused capacity, net of outstanding letters of credit.

Previous wording

In July 2022, our Board approved a 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, our Board 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 replaced 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 a combination of Rule 10b5-1 trading plans, open market purchases, privately negotiated agreements, or other transactions. The actual timing, number and value of shares repurchased under the program will be determined by management at its discretion and in compliance with the terms of our credit agreements. The repurchases may be funded with cash on hand, available borrowings, or proceeds from potential debt or other capital markets sources. The stock repurchase program may be suspended or discontinued at any time without prior notice. As of December 31, 2024, the remaining unused buyback authorization was $347,257.

Current wording

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

Previous wording

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

Current wording

During the years ended December 31, 2025, and 2024, we repurchased 1,109,206 shares of our common stock for $147.9 million, and 1,046,351 shares of our common stock for $152.7 million, respectively. We have periodically reissued shares out of Treasury stock, including for acquisition contingent consideration payments.

Previous wording

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 13% and 12% of net sales for the years ended December 31, 2024 and 2023, respectively. The amount financed by dealers which remained outstanding was $165.4 million and $158.0 million as of December 31, 2024 and 2023, respectively.

Current wording

We have an arrangement with a finance company to provide floor plan financing for qualifying dealers. This arrangement provides liquidity for our dealers by financing dealer purchases of Generac products with credit availability from the finance company. We receive payment from the finance company after shipment of product to the dealer, and our dealers are given a longer period of time to pay the finance company. If our dealers do not pay the finance company, we may be required to repurchase the applicable inventory held by the dealer at cost. We do not indemnify the finance company for any credit losses they may incur. Total dealer purchases financed under this arrangement accounted for approximately 13% of net sales for the years ended December 31, 2025 and 2024. The amount financed by dealers which remained outstanding was $149.7 million and $165.4 million as of December 31, 2025 and 2024, respectively.

Previous wording

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.

Current wording

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

Previous wording

The increase in net cash provided by operating activities was primarily driven by higher operating earnings coupled with a larger decrease in working capital in the current year period, as compared to the prior year.

Current wording

The decrease in net cash provided by operating activities was primarily driven by a significant reduction in net working capital in the prior year which did not repeat and lower operating earnings as compared to the prior year. This was partially offset by lower cash tax payments.

Previous wording

The $178.1 million net cash used in investing activities for the year ended December 31, 2023 primarily represents cash payments of $129.1 million for the purchase of property and equipment (net of $10.9 million of capital expenditures in accounts payable as of 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 Fund.

Current wording

The $172.9 million net cash used in investing activities for the year ended December 31, 2025 primarily represents cash payments of $169.9 million for the purchase of property and equipment (net of $12.2 million of capital expenditures in accounts payable as of December 31, 2025), $3.0 million for the purchase of long-term investments, and $3.1 million related to other investing activities. These were partially offset by $3.1 million of cash proceeds received from the sale of property and equipment.

Previous wording

The $277.1 million net cash used in financing activities for the year ended December 31, 2023 primarily consisted of $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. These uses of cash were partially offset by proceeds of $348.8 million from long-term borrowings, $64.3 million from short-term borrowings, and $7.8 million proceeds from the exercise of employee stock options.

Current wording

The $212.7 million net cash used in financing activities for the year ended December 31, 2025 primarily represents proceeds of $36.4 million from short-term borrowings, $132.8 million from long-term borrowings, $1.0 million of contributions received from the noncontrolling interest holder of a subsidiary, and $4.9 million from the exercise of stock options. These cash proceeds were more than offset by $216.7 million of debt repayments ($48.2 million of short-term borrowings and $168.5 million of long-term borrowings and finance lease obligations), $147.9 million of share repurchases, $5.3 million of debt issuance costs, $2.7 million payment of contingent acquisition consideration, $14.3 million for taxes paid related to equity awards, and $0.9 million of other financing activities.

Previous wording

Our Term Loans restrict the aggregate amount of dividends and distributions that can be paid and, in certain circumstances, requires pro forma compliance with certain fixed charge coverage ratios or gross leverage ratios, as applicable, in order to pay certain dividends and distributions. Our Term Loans also contain other affirmative and negative covenants that, among other things, limit the incurrence of additional indebtedness, liens on property, sale and leaseback transactions, investments, loans and advances, mergers or consolidations, asset sales, acquisitions, transactions with affiliates, prepayments of certain other indebtedness, and modifications of our organizational documents. The Tranche A Term Loan Facility and the Revolving Facility contain certain financial covenants that require the Company to maintain a total leverage ratio below 3.75 to 1.00, an interest coverage ratio above 3.00 to 1.00, and may require an excess cash flow payment. As of December 31, 2024, the Company’s total leverage ratio was 1.33 to 1.00, and the Company's interest coverage ratio was 10.03 to 1.00. The Company was not required to make an excess cash flow payment as of December 31, 2024. The Company was also in compliance with all other covenants of the Amended Credit Agreement as of December 31, 2024.

Current wording

Our Term Loans restrict the aggregate amount of dividends and distributions that can be paid and, in certain circumstances, requires pro forma compliance with certain fixed charge coverage ratios or gross leverage ratios, as applicable, in order to pay certain dividends and distributions. Our Term Loans also contain other affirmative and negative covenants that, among other things, limit the incurrence of additional indebtedness, liens on property, sale and leaseback transactions, investments, loans and advances, mergers or consolidations, asset sales, acquisitions, transactions with affiliates, prepayments of certain other indebtedness, and modifications of our organizational documents. The New Tranche A Term Loan Facility and the New Revolving Facility contain certain financial covenants that require the Company to maintain a total leverage ratio below 3.75 to 1.00, an interest coverage ratio above 3.00 to 1.00, and may require an excess cash flow payment. As of December 31, 2025, the Company’s total leverage ratio was 1.39 to 1.00, and the Company's interest coverage ratio was 11.76 to 1.00. The Company was not required to make an excess cash flow payment as of December 31, 2025. The Company was also in compliance with all other covenants of the Amended Credit Agreement as of December 31, 2025.

Previous wording

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

Current wording

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 $169.9 million, $136.7 million, and $129.1 million in the years ended December 31, 2025, 2024 and 2023, respectively, and were funded primarily from cash from operations.

Previous wording

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: 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.

Current wording

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. generally accepted accounting principles (U.S. GAAP), and are consistently applied. Inherent in the nature of an estimate or assumption is the fact that actual results may differ from estimates and estimates may vary as new facts and circumstances arise. We make routine estimates and judgments in determining net realizable value of accounts receivable, inventories, property and equipment, prepaid expenses, product warranties and other reserves. Management believes our most critical accounting estimates and assumptions are in the following areas: goodwill and other indefinite-lived intangible asset impairment assessment; and income taxes. The following is a discussion of critical accounting estimates in each of these areas.

Previous wording

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.

Current wording

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

Previous wording

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:

Current wording

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

Previous wording

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

Current wording

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

Previous wording

• A provision for judgments, settlements, and legal expenses related to certain patent lawsuits - $9.2 million in 2024; $27.3 million in 2023.

Current wording

• Legal expenses, judgments, and settlements related to certain patent lawsuits - $7.5 million in 2025; $9.2 million in 2024; $27.3 million in 2023.