Generac Holdings Inc. (NYSE:GNRC)

The analysis of the financial data evidences notable trends in the intangible assets and goodwill over the five-year period.

Goodwill

The goodwill value increased steadily from approximately 721.5 million USD in 2017 to about 855.2 million USD in 2020, followed by a significant jump to approximately 1.41 billion USD in 2021. This abrupt increase suggests a substantial acquisition or reassessment occurring in the final year.

Tradenames

Tradenames showed moderate growth from 52.8 million USD in 2017 to 58.7 million USD in 2020, then experienced a substantial rise to 162.6 million USD in 2021, consistent with the sharp goodwill increase noted.

Customer lists

The value of customer lists demonstrated a steady upward trend from 340.1 million USD in 2017, gradually increasing each year to 370.7 million USD in 2020, followed again by a significant jump to 573.9 million USD in 2021.

Patents and technology

Patent and technology assets were relatively stable around 144 million USD in the first two years, then notably increased to 214 million USD in 2019, 233.3 million USD in 2020, and surged to 662.3 million USD in 2021, indicating increased investment or acquisition related to intellectual property.

Software

Software asset values remained constant at 1.046 million USD across all years, indicating no major changes or additions in this specific category.

Non-compete and other intangible assets

These assets exhibited gradual growth from 2.7 million USD in 2017 to 16.5 million USD in 2020, followed by a sharp escalation to 79.4 million USD in 2021, paralleling other category increases.

Finite-lived intangible assets, gross and accumulated amortization

Gross finite-lived intangible assets increased from 541.0 million USD in 2017 to approximately 680.3 million USD in 2020, then more than doubled to 1.48 billion USD in 2021. Accumulated amortization showed a corresponding steady increase in its absolute value from -433.5 million USD to -566.4 million USD, but proportionally it grew less rapidly compared to the gross assets.

Finite-lived intangible assets, net book value

The net book value of finite-lived intangible assets rose from 107.4 million USD in 2017 to 169.4 million USD in 2019, with a slight decline to 163.7 million USD in 2020, followed by a substantial increase to 912.8 million USD in 2021. The massive increase in 2021 suggests significant acquisitions or reevaluations that year.

Indefinite-lived tradenames

The indefinite-lived tradenames remained constant at approximately 128.3 million USD throughout all periods, indicating stable valuation without remeasurement or additions.

Intangible assets and total goodwill and intangible assets

Total intangible assets progressed from 235.8 million USD in 2017 to 292.0 million USD in 2020, and then surged to 1.04 billion USD in 2021. Similarly, the combined goodwill and intangible assets increased steadily from about 957.3 million USD in 2017 to 1.15 billion USD in 2020, before a remarkable increase to 2.45 billion USD in 2021.

Overall, the data reveals consistent growth in intangible asset categories over the first four years, with moderate year-over-year increases. However, the year 2021 stands out as a period of substantial escalation across almost all intangible asset categories and goodwill, likely reflective of major strategic investments, acquisitions, or revaluation activities that markedly enhanced the company’s intangible asset base.

The analysis of the financial data reveals distinct trends in both reported and goodwill-adjusted figures over the five-year period ending December 31, 2021.

Total Assets

Reported total assets show a consistent upward trend, increasing from approximately $2.02 billion in 2017 to nearly $4.88 billion in 2021. This represents a growth of more than 140% over the period, indicating significant asset accumulation or acquisition activity.

Adjusted total assets, which exclude goodwill and intangible assets, also demonstrate a steady increase from about $1.30 billion in 2017 to around $3.47 billion in 2021. This increase of approximately 167% suggests expansion in tangible and other non-goodwill assets, supporting operational growth.

Stockholders’ Equity Attributable to Generac Holdings Inc.

The reported stockholders’ equity rose significantly from roughly $560 million in 2017 to $2.21 billion in 2021, indicating an increase of nearly 295%. This growth mirrors the asset increase and suggests strong equity financing or retained earnings growth.

In contrast, the goodwill-adjusted stockholders’ equity started with a negative value in 2017 (-$162 million) and near zero in 2018 (-$4.1 million), before improving to positive figures in the following years, reaching $804 million in 2021. The initial negative adjusted equity implies that goodwill and intangible asset adjustments materially affected the equity base, but the trend toward positive adjusted equity reflects improvement in the company's tangible net asset position.

Overall, both reported and adjusted metrics suggest robust growth in assets and equity over the period. The increasing gap between reported and adjusted totals highlights the significant impact of goodwill and intangible assets on the financial structure. The movement from negative to positive adjusted equity indicates improving tangible financial health, potentially enhancing the company's balance sheet quality from a conservative valuation perspective.

The data reveals several discernible trends in both reported and goodwill adjusted financial metrics over the five-year period ending December 31, 2021.

Total Asset Turnover

The reported total asset turnover remained stable at 0.83 from 2017 through 2019 before declining to 0.77 in 2020 and maintaining that level in 2021. Conversely, the adjusted total asset turnover, which accounts for goodwill adjustments, declined steadily from 1.29 in 2017 to 1.08 in 2021, with the most notable decrease occurring between 2019 and 2020.

Financial Leverage

The reported financial leverage ratio showed a consistent downward trend, decreasing from 3.61 in 2017 to 2.20 in 2021. In contrast, the adjusted financial leverage saw a sharp peak at 8.19 in 2019, followed by a substantial decrease to 4.31 by 2021. The initial absence of data for 2017 and 2018 undermines comparability but suggests significant adjustments in leverage when goodwill is excluded.

Return on Equity (ROE)

Reported ROE peaked in 2018 at 31.33%, then declined to approximately 24.9% by 2021, indicating a reduction in equity profitability after 2018, yet maintaining relatively strong levels. Adjusted ROE, available from 2019 onwards, is substantially higher than the reported ROE, reaching a peak of 110.97% in 2019 before moderating to 68.46% in 2021, reflecting the impact of goodwill adjustments and possibly smaller equity bases after adjustments.

Return on Assets (ROA)

The reported ROA increased gradually from 7.89% in 2017 to 11.29% in 2021, demonstrating improving asset efficiency. The adjusted ROA, consistently higher in each year, trended upward from 12.28% in 2017 to 15.87% in 2021, indicating enhanced asset profitability when goodwill is excluded.

Overall, the data suggests that excluding goodwill significantly alters the financial ratios, generally portraying higher asset turnover, leverage, and profitability metrics. The declining reported asset turnover and financial leverage ratios may indicate operational or capital structure changes, while the improvement in reported ROA suggests better utilization of assets over time. The exceptionally high adjusted ROE in 2019 followed by a decrease may reflect significant fluctuations in equity measurement due to goodwill adjustments, warranting further investigation.

The analysis of the financial data over the five-year period reveals several notable trends in asset values and efficiency ratios.

Total Assets

Reported total assets exhibit consistent growth from 2,019,964 thousand USD at the end of 2017 to 4,877,780 thousand USD by the end of 2021, more than doubling during this period. This steady increase indicates significant asset accumulation by the company over the years.

Adjusted total assets, after goodwill adjustments, also rise steadily from 1,298,441 thousand USD in 2017 to 3,468,106 thousand USD in 2021. Although adjusted assets are consistently lower than reported assets, reflecting the removal of goodwill, the overall upward trend mirrors that of the reported assets.

Total Asset Turnover Ratios

The reported total asset turnover ratio remains relatively stable at 0.83 in 2017 through 2019, but then declines to 0.77 in 2020 and maintains at that level in 2021. This decline suggests a decrease in revenue generated per unit of reported assets in the latter years.

In contrast, the adjusted total asset turnover ratio starts higher at 1.29 in 2017 and gradually decreases each year to 1.08 in 2021. Despite this decline, the adjusted turnover ratio remains considerably higher than the reported turnover ratio in every year, indicating that when goodwill is excluded, the company's asset efficiency appears stronger.

Overall Insights

The increase in total assets over the analyzed period demonstrates that the company is expanding its asset base significantly. However, the declining trend in both reported and adjusted total asset turnover ratios implies that the efficiency in utilizing these assets to generate sales is diminishing, particularly after 2019. The adjusted ratios, being higher, suggest that goodwill has a substantial impact on total asset figures, and its exclusion provides a clearer view of underlying asset productivity.

The analysis of the annual financial data reveals notable trends in both reported and goodwill-adjusted figures over the five-year period ending December 31, 2021.

Total Assets

The reported total assets exhibit consistent growth, increasing from approximately US$2.02 billion in 2017 to nearly US$4.88 billion in 2021. This represents a substantial accumulation of assets over the period. The adjusted total assets, which exclude goodwill, also display a steady upward trend, rising from about US$1.30 billion to US$3.47 billion. Although the adjusted figures are consistently lower than the reported amounts, both measures show strong incremental increases year over year.

Stockholders’ Equity

The reported stockholders’ equity attributable to the company has grown markedly, more than tripling from around US$560 million in 2017 to over US$2.21 billion by 2021. This indicates a strengthening equity base and potentially improved retained earnings and capital contributions. In contrast, the adjusted stockholders’ equity started from a negative figure in 2017 (-US$162 million), reflecting significant goodwill adjustments, but gradually improved to a positive US$804 million in 2021. The improving adjusted equity suggests enhanced underlying financial strength after removing intangible asset effects.

Financial Leverage

The reported financial leverage ratio steadily decreased from 3.61 in 2017 to 2.20 in 2021, implying a reduction in the company’s reliance on debt financing relative to equity. A declining leverage ratio generally signals lower financial risk and a more conservative capital structure. However, the adjusted financial leverage shows a different pattern; it was significantly higher at 8.19 in 2019 and then declined to around 4.31 by 2021. Despite the decline, adjusted leverage remains elevated in comparison to the reported leverage, suggesting that once goodwill is excluded, the company carries a higher relative debt level weighted against its tangible equity.

Overall, the data indicates robust asset growth and a strengthening equity position under reported figures, alongside improving but still cautious leverage levels when adjusted for goodwill. The divergence between reported and adjusted equity and leverage highlights the impact of intangible assets on the company’s financial structure, emphasizing the importance of considering both sets of figures for a comprehensive assessment of financial health.

Stockholders’ Equity (Reported)

Over the five-year period, the reported stockholders’ equity attributable to the entity exhibited a consistent upward trend. Starting at approximately 559.6 million US dollars at the end of 2017, it rose substantially each year, reaching about 2.21 billion US dollars by the end of 2021. This represents a near fourfold increase, indicating significant growth in equity value.

Stockholders’ Equity (Adjusted)

The adjusted stockholders’ equity showed a markedly different progression. Initially, it was negative, with a value of approximately -162 million US dollars in 2017 and slightly improving to around -4.1 million US dollars in 2018. From 2019 onwards, the adjusted equity turned positive, increasing from approximately 227 million US dollars to about 804 million US dollars in 2021. This upward trajectory, especially post-2018, suggests corrective adjustments positively impacted equity valuation, narrowing the gap with reported figures.

Return on Equity (Reported)

The reported return on equity (ROE) was relatively stable over the five years, fluctuating between approximately 24.4% and 31.3%. It peaked at 31.33% in 2018, followed by a moderate decline and stabilization around 25% in the subsequent years. This indicates consistent profitability relative to reported equity, albeit with a slight downward trend after the peak year.

Return on Equity (Adjusted)

Adjusted ROE data starts from 2019, revealing unusually high values compared to the reported ROE. The adjusted ROE was 110.97% in 2019 and declined to 65.52% in 2020 and 68.46% in 2021. Despite the decline, the adjusted ROE figures remain significantly higher than the reported ROE, suggesting that when goodwill or other adjustments are considered, the company’s profitability relative to adjusted equity is substantially amplified.

Overall Insights

The disparities between reported and adjusted equity and ROE figures highlight the impact of adjustments, likely related to goodwill or other non-cash accounting factors. While reported equity and ROE demonstrate steady growth and consistent profitability, adjusted figures reveal a more volatile but generally improving equity base and markedly higher returns on that adjusted equity. This suggests that the adjustments provide a lens to view a more efficient use of equity capital or reflect intangible asset valuations that significantly affect financial performance metrics.

The data reflects the financial performance and position of the company over a five-year period ending in 2021. Two sets of figures are presented: reported and goodwill adjusted, providing insight into the company's asset base and returns both including and excluding goodwill.

Total Assets

The reported total assets demonstrate a clear upward trend, increasing from approximately US$2.02 billion in 2017 to about US$4.88 billion in 2021. This represents more than a doubling of total assets over the five years. The adjusted total assets, which exclude goodwill, also show a steady increase from roughly US$1.30 billion to about US$3.47 billion during the same period. The divergence between reported and adjusted assets highlights the growing impact of goodwill on the company's balance sheet, with goodwill accounting for an increasingly significant portion of total assets.

Return on Assets (ROA)

Both reported and adjusted ROA exhibit an improving trend over the period. The reported ROA increased from 7.89% in 2017 to 11.29% in 2021, indicating enhanced profitability relative to reported asset levels. The adjusted ROA, which excludes goodwill from asset calculations, is consistently higher than the reported ROA and also shows improvement, rising from 12.28% to 15.87%. This suggests that the company’s core operational efficiency and profitability, independent of goodwill, have improved significantly. The consistent spread between reported and adjusted ROA implies that goodwill has a dilutive effect on measured returns, making adjusted ROA a more favorable indicator of true asset productivity.

Overall, the data reveals a moderately aggressive asset growth strategy supported by improving returns on those assets. The increasing gap between reported and adjusted figures suggests expanding goodwill on the balance sheet, warranting attention to asset quality. Nevertheless, the rising trends in both reported and adjusted ROA indicate that the company has been successful in generating higher earnings from its asset base throughout the observed period.