GENERAC HOLDINGS INC. Revenue Disclosure

Revenue Recognition

 

The Company recognizes revenue as products are transferred to, or services are performed for, customers in an amount reflecting the consideration which we expect to receive in return for those products and services. 

 

The Company’s revenues primarily consist of product sales including residential and commercial & industrial generators, energy storage systems, smart thermostats and home monitoring products, and other power products including light towers and a broad line of outdoor power equipment.

 

The Company also offers various services and solutions, including extended warranties, remote monitoring offered through SaaS arrangements, installation, maintenance, data center and telecom design and build, and customer support and software maintenance.

 

We use executed sales agreements and purchase orders to determine the existence of a customer contract.

 

For each customer contract, we determine if the products and services promised to the customer are distinct performance obligations.  A product or service is distinct if both the following criteria are met at contract inception: (1) The customer can benefit from the product or service on its own or with other readily available resources, and (2) our promise to transfer the product or perform the service is separately identifiable from other promises in the contract. 

 

For each performance obligation in a contract, we first determine whether the performance obligation is satisfied over time.  A performance obligation is satisfied over time if it meets any of the following criteria:

 

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The customer simultaneously receives and consumes the benefits provided by our performance as we perform;

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Our performance creates or enhances an asset that the customer controls as the asset is created or enhanced;

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Our performance does not create an asset for which we have an alternative use and we have an enforceable right to payment for performance completed to date.

 

If one or more of these criteria are met, then we recognize revenue over time using a method that reflects performance under the contract.  If none of these criteria are met, then we recognize revenue at a point in time, when control transfers to the customer.

 

For the majority of our product sales, the Company considers the commitment to transfer products, each of which is distinct, to be the identified performance obligations. Revenue generally reflects 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 predominantly 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 typically recognized 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.  

 

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 in Item 8 of this Annual Report on Form 10-K for further information regarding the Company’s standard warranties.

 

For services and solutions, the Company recognizes revenue at a point in time or over the period the related services are performed. 

 

The Company’s services relate mainly to extended warranty coverage for certain products, which are accounted 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 prepaid expenses and other assets when cost will be recognized in less than twelve months, and operating lease and other assets when cost will be recognized in more than twelve months, in the consolidated balance sheets. The deferred contract costs are amortized to cost of goods sold in the consolidated statements of comprehensive income over the same period that the underlying deferred revenue is recognized. Refer to Note 11, “Product Warranty Obligations,” to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for further information regarding the Company’s extended warranties. 

 

Revenue from the Company’s SaaS arrangements, such as remote monitoring services which allow our customers to use hosted software over a contract period without taking possession of the software, are recognized over time during the period the customer is provided access to the software.

 

Lifetime customer support and software maintenance (support and maintenance) are provided primarily in conjunction with the Company’s sale of its smart thermostats.  The company allocates revenue to support and maintenance based on estimated stand-alone selling prices and recognizes the revenue over the estimated life of the thermostat.

 

The Company also provides back-up power solutions for data centers, including the product, enclosure packaging, project management and oversight of product delivery, installation, commissioning, and training. Revenue for the products sold under these contracts are typically recognized when the control of the underlying goods and services is transferred to the customer. In making this evaluation, the Company considers contractual terms and whether there is an alternative use for the good or service. Through this process, the Company has concluded that substantially all of the performance obligations under these contracts transfer control to the customer over time as a result of enforceable payment rights and the customized nature of its goods and services, which create assets without an alternative use. Revenue is recognized on performance obligations that are satisfied overtime by measuring progress using the cost-to-cost method of percentage-of-completion because it best depicts the transfer of control to the customer. Under this method, the Company measures progress based on the ratio of costs incurred to date to total estimated costs for the performance obligations. Each contract is evaluated at contract inception to identify risks and estimate revenue and costs. If a loss is expected on a contract, the complete estimated loss is recorded in the period in which the loss is identified. The Company recognizes changes in estimated sales or costs and the resulting profit or loss on a cumulative basis in the period when the estimate changes.

 

Total service revenues accounted for approximately 4% of net sales during the years ended December 31, 2025, 2024 and 2023. 

 

Contract Liabilities 

 

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 or services; in other cases, after appropriate credit evaluation, an open credit line is granted and payment is due in arrears after shipment of the product to the customer or performance of the service. 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 of performance are recognized as deferred revenue and recorded in other accrued liabilities (for the portion expected to be recognized within twelve months) or deferred revenue (for the portion not expected to be recognized within twelve months) in the consolidated balance sheets, until revenue is recognized.

 

Below is a summary of our short-term and long-term contract liabilities balance, excluding the extended warranty deferred revenue balance disclosed in Note 11:

 

	December 31, 2025	December 31, 2024
Balance as of beginning of year	$97,821	$19,173
Balance as of end of period	$151,257	$26,858

 

During the year ended December 31, 2025, the Company recognized revenue of $61,299 related to amounts included in the December 31, 2024 deferred revenue balance.  During the year ended December 31, 2024, the Company recognized revenue of $19,173 related to amounts included in the December 31, 2023 deferred revenue balance. As of December 31, 2025, the aggregate amount of revenue that the Company expects to recognize on remaining performance obligations (excluding extended warranty) was $378,782, of which 100% is expected to be recognized as revenue over the next two years.  We have applied the practical expedient to exclude the value of remaining performance obligations for contracts with an original term of one year or less.

 

Refer to Note 7, “Segment Reporting,” to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for the Company’s disaggregated revenue disclosure. The information discussed above is applicable to each of the Company’s product classes.