Vertiv Holdings Co

Previous wording

•Artificial Intelligence ("AI"): Increased maturity and adoption of AI and high-performance compute is currently impacting the data center industry driving technology innovation and could lead to increased demand. The Company has invested in developing new product, services, and solutions to serve this industry trend, is increasing capacity to support additional demand for AI infrastructure as necessary and we will continue to invest to support additional growth driven by AI.

Current wording

•Artificial Intelligence ("AI"): Increased maturity and adoption of AI and high-performance compute is currently impacting the data center industry driving technology innovation which has led to increased demand. The Company has invested in developing new product, services, and solutions to serve this industry trend, is increasing capacity to support additional demand for AI infrastructure as necessary and we will continue to invest to support additional growth driven by AI.

Previous wording

Excluding intercompany sales, net sales were $925.0 in the Americas, $332.3 in Asia Pacific and $381.8 in Europe, Middle East & Africa. Movements in net sales by segment and offering are each detailed in the “Business Segments” section below.

Current wording

Excluding intercompany sales, net sales were $1,121.1 in the Americas, $409.1 in Asia Pacific and $422.6 in Europe, Middle East & Africa. Movements in net sales by segment and offering are each detailed in the Business Segments section below.

Previous wording

Net sales were $1,639.1 in the first three months of 2024, an increase of $118.0, or 7.8%, compared with $1,521.1 in the first three months of 2023. The increase in sales was primarily driven by higher sales volumes, partially offset by the negative impacts from foreign currency of $5.6. Product sales increased $86.9, which included negative impacts from foreign currency of $1.8. Services & spares sales increased $31.1, which included negative impacts from foreign currency of $3.8.

Current wording

Net sales were $3,591.9 in the first six months of 2024, an increase of $336.7, or 10.3%, compared with $3,255.2 in the first six months of 2023. The increase in sales was primarily driven by higher sales volumes, partially offset by the negative impacts from foreign currency of $25.3. Product sales increased $274.3, which included negative impacts from foreign currency of $18.5. Services & spares sales increased $62.4, which included negative impacts from foreign currency of $6.8.

Previous wording

Cost of sales were $1,072.7 in the first three months of 2024, an increase of $47.1, or 4.6%, compared to the first three months of 2023. The increase in cost of sales was primarily driven by the impact of higher volumes and increased material, labor and logistics costs. Gross profit was $566.4 in the first three months of 2024, or 34.6% of sales, compared to $495.5, or 32.6% of sales, in the first three months of 2023. Margin increased primarily due to higher sales volumes and pricing actions exceeding inflationary costs.

Current wording

Cost of sales were $2,284.3 in the first six months of 2024, an increase of $118.6, or 5.5%, compared to the first six months of 2023. The increase in cost of sales was primarily driven by the impact of higher sales volumes. Gross profit was $1,307.6 in the first six months of 2024, or 36.4% of sales, compared to $1,089.5, or 33.5% of sales, in the first six months of 2023. Margin increased primarily driven by higher sales volumes and improved price realization.

Previous wording

SG&A expenses were $314.0 in the first three months of 2024, an increase of $5.3 compared to the first three months of 2023. The increase in SG&A was primarily driven by increased compensation costs and professional service fees. SG&A as a percentage of sales was 19.2% for the three months ended March 31, 2024 compared with 20.3% in the three months ended March 31, 2023.

Current wording

SG&A expenses were $677.8 in the first six months of 2024, an increase of $41.5 compared to the first six months of 2023. The increase in SG&A was primarily driven by increased compensation costs, a one-time supplier expense, increased IT and research and development expense, and professional service fees. SG&A as a percentage of sales was 18.9% for the six months ended June 30, 2024 compared with 19.5% in the six months ended June 30, 2023.

Previous wording

The remaining other operating expenses include amortization of intangibles, restructuring costs, foreign currency (gain) loss, asset impairments, and other operating expense (income). These remaining other expenses were $49.8 for the first three months of 2024, which was a $6.7 decrease from the first three months of 2023. The decrease was primarily due to a $12.8 decrease in restructuring costs, offset by operating (income) from a one-time tax indemnification release in 2023.

Current wording

The remaining other operating expenses include amortization of intangibles, restructuring costs, foreign currency (gain) loss, asset impairments, and other operating expense (income). These remaining other expenses were $91.2 for the first six months of 2024, which was a $25.9 decrease from the first six months of 2023. The decrease was primarily due to a $24.4 decrease in restructuring costs and a $7.2 decrease in foreign currency loss, partially offset by a one-time tax indemnification release in 2023.

Previous wording

Change in fair value of warrant liabilities represents the mark-to-market fair value adjustments to the outstanding private placement warrants. The change in fair value of the outstanding warrant liability during the first three months of 2024 and 2023 resulted in a loss of $176.6 and a gain of $4.2, respectively. The change in fair value of these private warrants was the result of changes in market prices of our common stock and other observable inputs deriving the value of the financial instruments and the exercise of 5,266,666 of the private placement warrants in February 2023 by GS Sponsor LLC. As of both March 31, 2024 and 2023, there were 5,266,667 private placement warrants that remained outstanding.

Current wording

Change in fair value of warrant liabilities represents the mark-to-market fair value adjustments to the outstanding Private Placement Warrants. The change in fair value of the outstanding warrant liability during the first six months of 2024 and 2023 resulted in a loss of $202.0 and a loss of $41.8, respectively. The change in fair value of these Private Placement Warrants was the result of changes in market prices of our common stock and other observable inputs deriving the value of the financial instruments and the exercise of 5,266,666 of the private placement warrants in February 2023 by GS Sponsor LLC. As of both June 30, 2024 and 2023, there were 5,266,667 private placement warrants that remained outstanding.

Previous wording

Interest expense, net, was $39.0 in the first three months of 2024 compared to $46.8 in the first three months of 2023. The $7.8 decrease is primarily due to a $4.2 decrease related to the ABL Revolving Credit Facility, due 2029, attributable to lower borrowings in 2024 and a $2.6 decrease due to net settlement payments on our interest rate swaps as described in “Note 9 — Financial Instruments and Risk Management” to the Unaudited Condensed Consolidated Financial Statements. To the extent interest rates continue to fluctuate our interest expense will change, although we expect increases to be mitigated by our interest rate swaps.

Current wording

Interest expense, net, was $83.8 in the first six months of 2024 compared to $93.7 in the first six months of 2023. The $9.9 decrease is primarily driven by lower ABL Revolving Credit Facility borrowings during the period.To the extent interest rates continue to fluctuate our interest expense will change, although we expect these changes to be mitigated by our interest rate swaps.

Previous wording

Income tax expense (benefit) was $(7.1) in the first three months of 2024 compared to $37.4 in the first three months of 2023. The $44.5 decrease is primarily due to the change in the fair value of warrant liabilities between the periods and increased tax benefits due to stock compensation activity. The effective rate in the first three months of 2024 was primarily influenced by the negative impacts of non-deductible changes in fair value of the warrant liabilities, discrete tax benefits related to stock compensation and the mix of income between our U.S. and non-U.S. operations. In the first three months of 2023, income tax expense was primarily influenced by the mix of income between our U.S. and non-U.S. operations, net of changes in valuation allowances, which is offset by the positive impact of non-taxable changes in fair value of the warrant liabilities.

Current wording

Income tax expense (benefit) was $79.5 in the first six months of 2024 compared to $67.1 in the first six months of 2023. The $12.4 increase is primarily due to increased business results between the periods as well as the change in the fair value of warrant liabilities between the periods and increased tax benefits due to stock compensation activity. The effective rate in the first six months of 2024 was primarily influenced by the negative impacts of non-deductible changes in fair value of the warrant liabilities and discrete tax benefits related to stock compensation. In the first six months of 2023, income tax expense was primarily influenced by the mix of income between our U.S. and non-U.S. operations, net of changes in valuation allowances and the negative impacts of non-deductible changes in fair value of the warrant liabilities and changes to our indefinite reinvestment liability.

Previous wording

Americas net sales of $925.0 in the first three months of 2024 increased $62.7, or 7.3%, from the first three months of 2023. The increase in sales was primarily driven by higher sales volumes in Colocation and Hyperscale markets compared to prior year. Net sales increased in products by $42.2 and service & spares increased by $20.5 due to improved customer site availability. Americas net sales were positively impacted by foreign currency of approximately $1.5.

Current wording

Americas net sales were $2,046.1 in the first six months of 2024, an increase of $224.4, or 12.3%, from the first six months of 2023. The increase in sales was primarily driven by higher sales volumes in Colocation and Hyperscale markets compared to prior year. Net sales of products increased by $182.8 and service & spares increased by $41.6. Americas net sales were negatively impacted by foreign currency of approximately $1.7.

Previous wording

Operating profit (loss) in the first three months of 2024 was $187.8, an increase of $42.0 compared with the first three months of 2023. Margin increased primarily due to higher sales volumes and improved price realization exceeding inflationary costs.

Current wording

Operating profit (loss) in the first six months of 2024 was $472.9, an increase of $135.4 compared with the first six months of 2023. Margin increased primarily due to higher sales volumes and improved price realization.

Previous wording

Asia Pacific net sales were $332.3 in the first three months of 2024, an increase of $19.3, or 6.2%, from the first three months of 2023. Sales increases were primarily driven by Colocation and Enterprise growth throughout the region particularly in India and Asia, partially offset by the negative impact of foreign currency of approximately $9.3. Net sales improved in products by $15.1 and in service & spares by $4.2.

Current wording

Asia Pacific net sales were $741.4 in the first six months of 2024, an increase of $32.6, or 4.6%, from the first six months of 2023. Sales increases were primarily driven by Colocation and Enterprise growth throughout the region particularly in India and Asia, partially offset by the negative impact of foreign currency of approximately $18.4. Net sales of products improved by $22.5 and in service & spares by $10.1.

Previous wording

Operating profit (loss) in the first three months of 2024 was $30.4, an increase of $13.8 compared with the first three months of 2023. Margin increased primarily due to higher sales volumes, improved price realization exceeding inflationary costs and improved leverage on fixed costs.

Current wording

Operating profit (loss) in the first six months of 2024 was $62.7, an increase of $7.9 compared with the first six months of 2023. Margin increased primarily due to higher sales volumes, improved price realization and improved leverage on fixed costs.

Previous wording

Europe, Middle East & Africa net sales were $381.8 in the first three months of 2024, an increase of $36.0, or 10.4%, from the first three months of 2023. Sales increases were driven by increased volume in the Colocation and Hyperscale markets. Net sales improved in products by $29.6 and $6.4 in service & spares and was positively impacted by foreign currency of approximately $2.2.

Current wording

Europe, Middle East & Africa net sales were $804.4 in the first six months of 2024, an increase of $79.7, or 11.0%, from the first six months of 2023. Sales increases were driven by increased volume in the Colocation and Hyperscale markets, specifically supported by Switchgear product line. Net sales of products improved by $69.0, service & spares increased by $10.7, and was negatively impacted by foreign currency of approximately $5.2.

Previous wording

Corporate and other costs include costs associated with our headquarters located in Westerville, Ohio, as well as centralized global functions including Finance, Treasury, Risk Management, Strategy & Marketing, and Legal. Corporate and other costs were $39.9 and $33.0 in the first three months of 2024 and 2023, respectively. Corporate and other costs increased $6.9 compared to the first quarter of 2023. The first three months of 2023 included a one-time $7.8 benefit from the settlement of an escrow agreement.

Current wording

Corporate and other costs include costs associated with our headquarters located in Westerville, Ohio, as well as centralized global functions including Finance, Treasury, Risk Management, Strategy & Marketing, and Legal. Corporate and other costs were $85.0 and $91.6 in the first six months of 2024 and 2023, respectively. Total corporate, other, and elimination costs decreased $6.6 compared to the second quarter of 2023 primarily due to timing of certain employee related costs and deceased foreign currency loss of $7.2. The first six months of 2023 included a one-time $7.8 benefit from the settlement of an escrow agreement.

Previous wording

Capital Expenditures: Our capital expenditures are primarily related to the maintenance of our long-term assets, as well as the investment in projects that support growth and innovation to further our enterprise strategy. Our capital expenditures (including capitalized software) were approximately $36.5 during the first three months of 2024. We expect to have capital expenditures (including capitalized software) of $175 to $200 for the full year 2024.

Current wording

Capital Expenditures: Our capital expenditures are primarily related to the maintenance of our long-term assets, as well as the investment in projects that support growth and innovation to further our enterprise strategy. Our capital expenditures (including capitalized software) were approximately $81.5 during the first six months of 2024. We expect to have capital expenditures (including capitalized software) of $175 to $200 for the full year 2024.

Previous wording

We, through our subsidiaries, are party to certain indebtedness arrangements, including the Senior Secured Notes due 2028, with an outstanding principal amount of $850.0 as of March 31, 2024 (the “Notes”), the Term Loan due 2027, with an outstanding principal amount of $2,112.8, as of March 31, 2024 (the “Term Loan”), and the ABL Revolving Credit Facility due 2029, extended earlier in 2024, providing up to $600.0 of revolving borrowings, for which none was outstanding as of March 31, 2024 (the “ABL Revolving Credit Facility” and collectively with the Term Loan, the “Senior Secured Credit Facilities”). See “Note 5 — Debt” of the Unaudited Condensed Consolidated Financial Statements for more detailed discussion of the material terms of the Notes and the Senior Secured Credit Facilities.

Current wording

We, through our subsidiaries, are party to certain indebtedness arrangements, including the Senior Secured Notes due 2028, with an outstanding principal amount of $850.0 as of June 30, 2024 (the “Notes”), the Term Loan due 2027, with an outstanding principal amount of $2,107.5, as of June 30, 2024 (the “Term Loan”), and the ABL Revolving Credit Facility due 2029, extended earlier in 2024, providing up to $600.0 of revolving borrowings, for which none was outstanding as of June 30, 2024 (the “ABL Revolving Credit Facility” and collectively with the Term Loan, the “Senior Secured Credit Facilities”). See “Note 5 — Debt” of the Unaudited Condensed Consolidated Financial Statements for more detailed discussion of the material terms of the Notes and the Senior Secured Credit Facilities.

Previous wording

At March 31, 2024, we had $275.8 in cash and cash equivalents, which includes amounts held outside of the U.S., primarily in Europe and Asia. Non-U.S. cash is generally available for repatriation without legal restrictions, subject to certain taxes, mainly withholding taxes. We are not asserting indefinite reinvestment of cash or outside basis for our non-U.S. subsidiaries due to the outstanding debt obligations in instances where alternative repatriation options, other than dividends, are not available. At March 31, 2024, Vertiv had $584.2 of availability (subject to customary borrowing base and other conditions) under the ABL Revolving Credit Facility, net of letters of credit outstanding in the aggregate principal amount of $15.8, and taking into account the borrowing base limitations set forth in the ABL Revolving Credit Facility.

Current wording

At June 30, 2024, we had $579.7 in cash and cash equivalents, which includes amounts held outside of the U.S., primarily in Europe and Asia. Non-U.S. cash is generally available for repatriation without legal restrictions, subject to certain taxes, mainly withholding taxes. We are not asserting indefinite reinvestment of cash or outside basis for our non-U.S. subsidiaries due to the outstanding debt obligations in instances where alternative repatriation options, other than dividends, are not available. At June 30, 2024, Vertiv had $585.0 of availability (subject to customary borrowing base and other conditions) under the ABL Revolving Credit Facility, net of letters of credit outstanding in the aggregate principal amount of $15.0, and taking into account the borrowing base limitations set forth in the ABL Revolving Credit Facility.

Previous wording

Net cash provided by operating activities was $137.5 in the first three months of 2024, a $95.5 increase in cash generation compared to the first three months of 2023. Net loss from operations of $(5.9) included $249.0 of net non-cash expense items, consisting of depreciation and amortization of $68.7, a loss on the change in fair value of warrant liabilities of $176.6, non-cash stock-based compensation expense of $9.2, amortization of debt discount and issuance costs of $2.1, offset by deferred taxes of $7.6. Trade working capital used $99.7 in the first three months of 2024 in comparison to $86.9 in the first three months of 2023.

Current wording

Net cash provided by operating activities was $515.9 in the first six months of 2024, a $220.3 increase in cash generation compared to the first six months of 2023. Net income from operations of $172.2 included $358.1 of net non-cash expense items, consisting of depreciation and amortization of $137.1, a loss on the change in fair value of warrant liabilities of $202.0, non-cash stock-based compensation expense of $17.7, and amortization of debt discount and issuance costs of $4.1, offset by deferred taxes of $2.8. Trade working capital used was $3.6 in the first six months of 2024 compared to $35.5 in the first six months of 2023.

Previous wording

Net cash used for investing activities was $36.5 in the first three months of 2024 compared to net cash used for investing activities of $17.4 in the first three months of 2023. The increased use of cash over the comparable period was primarily driven by decreased proceeds from the disposition of property, plant and equipment of $12.4, increased capital expenditures of $8.0, offset by a decrease in investments of capitalized software of $1.3.

Current wording

Net cash used for investing activities was $81.5 in the first six months of 2024 compared to net cash used for investing activities of $43.7 in the first six months of 2023. The increased use of cash over the comparable period was primarily driven by decreased proceeds from the disposition of property, plant and equipment of $12.4, increased capital expenditures of $16.3, and an increase in investments of capitalized software of $9.1.

Previous wording

Net cash used for financing activities was $603.1 in the first three months of 2024 compared to $18.8 provided by financing activities in the first three months of 2023. The change was primarily the result of $599.9 of share repurchases of common stock and $9.3 dividend payments, offset by year-over-year net repayments of $10.0 on the ABL Revolving Credit Facility in the first three months of 2023, $9.3 increase in net cash received associated with equity-based compensation activity, and $5.6 decrease of repayments on the Term Loan in the first three months of 2024.

Current wording

Net cash used for financing activities was $623.6 in the first six months of 2024 compared to $243.9 provided by financing activities in the first six months of 2023. The change was primarily the result of increase in 2024 of $599.9 of share repurchases related to common stock, $18.7 in dividend payments, offset by a decrease in year-over-year net repayments of $235.0 on the ABL Revolving Credit Facility in the first six months of 2023, $1.9 decrease in net cash received associated with equity-based compensation activity, and $5.8 decrease of repayments on the Term Loan in the first six months of 2024.