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  "docSlug": "0cee9cc55960",
  "documentTitle": "Generac Holdings, Inc. (GNRC)",
  "authorId": "54_Spruce_Point_Capital",
  "authorName": "Ben Axler",
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  "presentationDate": "2022-06-22 00:00:00",
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  "notes": "The slide highlights a discrepancy between the CFO's claims of margin growth and the actual downward trend in EBITDA margins.",
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      "kind": "callout",
      "text": "Generac hasn't given explicit margin guidance but was asked twice. Based on the CFO's response, it appears he materially pushed back EBITDA margin expansion expectations.",
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      "text": "EBITDA margin: 17.7%",
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      "text": "Residential is growing, and within that is the fast growing clean energy business. Generac hasn't given explicit margin guidance but was asked twice. Based on the CFO's response, it appears he materially pushed back EBITDA margin expansion expectations. We believe poor margins on the clean energy business, increased overhead from utilized capacity expansion, and core pressures in home standby generators are all pressuring margins.",
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      "kind": "quote",
      "text": "And then can you talk a little bit more about the profitability in your clean energy business and with PWRcell? ... And just how should we think of it more on like a 2 to 3-year basis as you continue to ramp?",
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      "kind": "quote",
      "text": "Today, clean energy, just thinking storage, that is a profitable business today. ... So we've got a road map and a path to get there.",
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      "text": "Yes. Ross, it's York. ... So expecting EBITDA margins to grow throughout the year as well, along with gross margins, maybe hitting double digits there by the end of the year for EBITDA margins.",
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      "text": "And then can you talk a little bit more about the profitability in your clean energy business and with PWRcell? I mean you mentioned that you were profitable. I think that was an EBITDA comment, but I want to clarify that. And can you talk at all about the gross margins for your clean energy business? Where roughly will they be by the end of 2021 in comparison to your overall gross margin? And just how should we think of it more on like a 2 to 3-year basis as you continue to ramp? — Roth Analyst. Yes. Ross, it's York. So yes, making very good progress on gross margin optimization, a lot of focus on the bill of material, a lot of focus on supply chain. And you're right. Leaving the year here in 2020, in Q4, we were profitable. That was a nice landmark or a milestone for the start-up business being profitable in Q4. But throughout 2021, yes, we do expect to ramp up our gross margins to somewhere in the mid-30% range. So that's relative what we do, almost 40%, I guess, high 30s here, gross margin for 2020. So close to the company average by the end of 2020 is the plan. And then obviously, we're going to be ramping up our operating expenses to really go fast after this market. So expecting EBITDA margins to grow throughout the year as well, along with gross margins, maybe hitting double digits there by the end of the year for EBITDA margins. — CFO York, Q4 2020. Today, clean energy, just thinking storage, that is a profitable business today. We haven't quoted exactly what margin profile is. It's profitable today. But over time, over the next call it, few years, that will also grow into that mid- to high teens EBITDA margins as well. So we've got a road map and a path to get there. — CFO York, Q3 2021",
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      "text": "Table showing Residential, Commercial, Other sales mix and Domestic EBITDA/margin from 2020 Q1 to 2022 Q1.",
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      "kind": "title",
      "text": "Mix Shift And Domestic EBITDA Collapse",
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