Generac posted net sales of $475.9 million during the first quarter of 2020, compared to $470.4 million in the first quarter of 2019, a 1.2-percent increase. Core sales growth, which excludes both the impact of acquisitions and foreign currency, declined by about 3 percent. Residential product sales increased 18.3 percent to $257.6 million compared to $217.8 million in the first quarter of 2019, with core sales growth of about 9 percent when excluding the impact of the acquisitions of Neurio and Pika.
Commercial & Industrial product sales were $172.1 million compared to $209.1 million in the first quarter a year ago, a 17.7-percent decline. Core sales plunged approximately 17 percent.
Net income attributable to the company during the first quarter was $44.5 million, or $0.68 per share, compared to $44.9 million, or $0.76 per share in the year-ago quarter.
Adjusted EBITDA was $86 million, or 18.1 percent of net sales, compared to $87.1 million, or 18.5 percent of net sales in Q119.
“First quarter revenue met our expectations and EBITDA margins exceeded despite the challenges faced by the initial impact of the COVID-19 pandemic,” said Aaron Jagdfeld, president and CEO. “Home standby shipments continued the strength seen over the past several quarters, including robust demand in California. Shipments of the PWR cell energy storage system met our expectations in the first full quarter after its commercial launch in December and were well received in the marketplace.
“This strong performance was mostly offset by lower domestic C&I product shipments to telecom and rental equipment customers, and continued weakness in international markets that accelerated following the onset of the COVID-19 pandemic. More importantly in this uncertain environment, Generac is in the fortunate position of having a strong balance sheet and liquidity position, giving us the flexibility to remain focused on providing innovative products and services that are essential to the safety and security of residential homes, businesses and critical infrastructure across the globe.”
Gross profit margin improved 170 basis points to 36.2 percent compared to 34.5 percent in the prior-year first quarter as favorable sales mix was partially offset by the unfavorable mix impact from acquisitions.
Domestic segment sales increased 5.5 percent to $376.0 million as compared to $356.5 million in the prior year quarter. Core sales growth, which excludes the impact of the Neurio and Pika acquisitions, was approximately flat. The current year quarter continued to experience strong growth in shipments of home standby generators. This core growth was offset by lower shipments of C&I products to national telecom customers as compared to a strong prior-year comparison, as well as a decline in sales of mobile products primarily due to weakness caused from the onset of the COVID-19 pandemic and collapse in oil prices.
International segment sales decreased 12.3 percent to $99.9 million as compared to $113.9 million in the prior year quarter. Core sales, which excludes the unfavorable impact of currency and the impact of the Captiva acquisition, declined approximately 10 percent compared to the prior year. The decline was primarily driven by a sharp drop in demand caused by the COVID-19 pandemic and its impact on certain key regions of the world, which magnified the slower economic growth and geopolitical headwinds already being experienced.
As a result of the COVID-19 pandemic, the remainder of the year is expected to be impacted by a significant decline in economic activity across the globe with a more pronounced decline expected in the second quarter. This downturn is expected to be particularly severe within C&I products, both domestically and internationally. However, demand for residential products has historically proven to be more resilient and tends to decouple from the broader economic environment as demand is more driven by power outages. More recently, there are also considerable opportunities to grow the backup power market specifically in California as well as the attachment rates of energy storage overall. In addition, with more people working and learning from home, backup power for residential applications has now become more important than ever. These residential demand drivers are expected to mostly offset the potentially lower consumer spending environment due to COVID-19.
As a result of these factors, the company is revising its outlook for the full-year 2020, and now expects net sales to decline between approximately 5 to 10 percent. This guidance assumes a level of power outages in line with the longer-term baseline average but includes the benefit of one significant power shut-off event in California. Should there be a major event, such as a landed hurricane, along with additional public safety power shut-offs in California, Generac could expect approximately 3 to 5 percent of revenue growth in addition to the baseline guidance, resulting in an upside case as-reported sales growth of approximately flat to down 7 percent.
“Generac is built for moments like this with our long history in supporting customers through difficult times,” added Jagdfeld. “Using our strong balance sheet and liquidity, we remain well positioned to execute on our strategic plan, and following this pandemic, we believe our future growth prospects will be as compelling as ever driven by the overall mega trends and powerful macro secular drivers for our business.”
