Generac Holdings Inc. (NYSE:GNRC) Q4 2019 Earnings Conference Call - Final Transcript
Feb 13, 2020 • 09:00 am ET
Ladies and gentlemen, thank you for standing by, and welcome to the Fourth Quarter and Full Year 2019 Generac Holdings Inc. Earnings Conference Call.
We are joined today by Aaron Jagdfeld, Chief Executive Officer; and York Ragen, Chief Financial Officer. I would now like to hand the conference over to our speaker today, Mr. Mike Harris, Vice President of Corporate Development and Investor Relations. Thank you. Please go ahead, sir.
Michael W. Harris
Good morning, and welcome to our fourth quarter and full year 2019 earnings call. I'd like to thank everyone for joining us this morning. With me today is Aaron Jagdfeld, President and Chief Executive Officer; and York Ragen, Chief Financial Officer. We will begin our call today by commenting on forward-looking statements. Certain statements made during this presentation as well as other information provided from time to time by Generac or its employees may contain forward-looking statements and involve risks and uncertainties that could cause actual results to differ materially from those in these forward-looking statements. Please see our earnings release or SEC filings for a list of words or expressions that identify such statements and the associated risk factors. In addition, we will make reference to certain non-GAAP measures during today's call. Additional information regarding these measures, including reconciliation to comparable U.S. GAAP measures is available in our earnings release and SEC filings. I will now turn the call over to Aaron.
Aaron P. Jagdfeld
Thanks, Mike, and welcome back. Good morning, everyone, and thank you for joining us today. The fourth quarter was a strong finish to 2019 and capped a tremendous year for Generac. We achieved record quarterly revenue, record for revenue and all-time records for adjusted EBITDA, adjusted EPS and free cash flow. Revenue during the quarter exceeded our expectations, headlined by strong home standby demand from robust growth in California, driven by the growing threat and occurrence of public safety power shutoffs, along with the overall continuation of a favorable outage environment. The revenue outperformance during the quarter was also due to strength in shipments of domestic commercial and industrial stationery generators sold through our North American distributor channel, along with higher-than-expected sales of domestic mobile products. These areas of strength were partially offset by lower-than-expected results from the continued slowdown in international markets. On a year-over-year basis, net sales increased 5% during the fourth quarter as compared to the very strong prior year comparison, where overall revenue growth was 14% and core sales growth was approximately 12%.
Core sales growth for the fourth current year fourth quarter, which excludes both the impact of acquisitions in foreign currency was approximately 4%. Gross margin expanded 130 basis points compared to prior year and was better than our expectations. Adjusted EBITDA margin remained strong at 22% and also came in better than forecasted. We monetized a significant amount of working capital during the quarter and generated robust free cash flow of $160 million. Before discussing fourth quarter results in more detail, I want to provide some full year financial