Vertiv Holdings Co

Previous wording

Unless the context otherwise indicates or requires, references to (1) “the Company,” “Vertiv,” “we,” “us” and “our” refer to Vertiv Holdings Co, a Delaware corporation, and its consolidated subsidiaries; and (2) “GSAH” refers to GS Acquisition Holdings Corp prior to the Business Combination. In addition, dollar amounts are stated in millions, except for per share amounts. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the Consolidated Financial Statements and the notes thereto included elsewhere in this Annual Report.

Current wording

Unless the context otherwise indicates or requires, references to “the Company,” “Vertiv,” “we,” “us” and “our” refer to Vertiv Holdings Co, a Delaware corporation, and its consolidated subsidiaries; and “GSAH” refers to GS Acquisition Holdings Corp prior to the Business Combination. In addition, dollar amounts are stated in millions, except for per share amounts. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the Consolidated Financial Statements and the notes thereto included elsewhere in this Annual Report.

Previous wording

•Capacity Expansion: We have invested in capacity expansion to meet current and anticipated additional customer demand. For example, since acquiring E&I in late 2021, we have approximately doubled our manufacturing capacity for switchgear, busbar and integrated modular solutions by opening new facilities and adding production to existing facilities. We anticipate continuing to invest in having capacity in place globally with the geographic presence that our customers need, the ability to rapidly scale and to ensure resiliency.

Current wording

•Capacity Expansion: We have invested in capacity expansion to meet current and anticipated additional customer demand. For example, since acquiring E&I in late 2021, we have approximately doubled our manufacturing capacity for switchgear, busbar and integrated solutions by opening new facilities and adding production to existing facilities. Additionally, in order to support our thermal management activity, we opened a new manufacturing facility in Pune, India in 2024. We also recently opened a new facility in Pelzer, South Carolina to support the production of modular solutions, modular power systems and other infrastructure systems. We anticipate continuing to invest in capacity globally to provide the geographic presence that our customers need, and the ability to rapidly scale and to ensure resiliency.

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 and driving technology innovation, which has led to increased demand. The Company has invested in developing new product, services, and solutions to serve this growing industry, 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

Net sales were $6,863.2 in 2023, an increase of $1,171.7, or 20.6%, compared with $5,691.5 in 2022. The increase in sales is primarily due to higher sales volumes and price realization of $470 compared to the prior year, and partially offset by the negative impacts from foreign currency of $43.7. By product offering, critical infrastructure & solutions sales increased $973.8, which included negative impacts from foreign currency of $22.5. Services & spares sales increased $111.4, including the negative impacts from foreign currency of $15.1. Integrated rack solutions sales increased $86.5, including the negative impacts from foreign currency of $6.1.

Current wording

Net sales were $8,011.8 in 2024, an increase of $1,148.6, or 16.7%, compared with $6,863.2 in 2023. The increase in sales is primarily driven by higher sales volumes, partially offset by the negative impacts from foreign currency of $53.6. Product sales increased $974.0, which included negative impacts from foreign currency of $41.7. Services & spares sales increased $174.6, including the negative impacts from foreign currency of $11.9.

Previous wording

Excluding intercompany sales, net sales were $3,844.5 in the Americas, $1,527.8 in Asia Pacific and $1,490.9 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 $4,500.6 in the Americas, $1,717.8 in Asia Pacific and $1,793.4 in Europe, Middle East & Africa. Movements in net sales by segment and offering are each detailed in the Business Segments section below.

Previous wording

Cost of sales were $4,462.7 in 2023, an increase of $387.3, or 9.5% compared to 2022. The increase in cost of sales was primarily driven by the impact of higher volumes and increased commodity and logistics costs. Gross profit was $2,400.5 in 2023, or 35.0% of sales, compared to $1,616.1, or 28.4% of sales in 2022. Margin increased primarily due to higher sales volume, pricing actions more than offsetting higher commodity and logistics costs, and improved leverage of fixed costs.

Current wording

Cost of sales were $5,077.6 in 2024, an increase of $614.9, or 13.8% compared to 2023. The increase in cost of sales was primarily driven by the impact of higher volumes. Gross profit was $2,934.2 in 2024, or 36.6% of sales, compared to $2,400.5, or 35.0% of sales in 2023. Margin increased primarily due to higher sales volume and improved price realization.

Previous wording

Selling, general and administrative expenses (or “SG&A”) were $1,312.3 in 2023, an increase of $134.0 compared to 2022. SG&A as a percentage of sales were 19.1% in 2023 compared with 20.7% in 2022. The increase in SG&A was primarily driven by $60.1 of higher commissions in the Americas reportable segment as a result of increased order volume and $41.2 of higher compensation costs due to increased bonus and long-term incentives.

Current wording

Selling, general and administrative expenses (or “SG&A”) were $1,374.0 in 2024, an increase of $61.7 compared to 2023. SG&A as a percentage of sales were 17.1% in 2024 compared with 19.1% in 2023. The increase in SG&A was primarily driven by$45.8 of higher compensation costs, professional service fees of $18.1 inclusive of a one-time supplier expense, and increased IT and research and development expense.

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 $216.0 for 2023, which was a $1.6 increase from 2022. The increase was primarily due to a $27.9 increase in restructuring costs, and a $12.3 increase in foreign currency loss, offset by decreased amortization of intangibles of $34.5.

Current wording

The remaining other operating expenses include amortization of intangibles, restructuring costs, foreign currency (gain) loss, and other operating expense (income). These remaining other expenses were $192.8 for 2024, which was a $23.2 decrease from 2023. The decrease was primarily due to a $23.3 decrease in restructuring costs and a $6.7 decrease in foreign currency loss, partially offset by increased amortization of intangibles of $2.9.

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 Private Placement Warrants during 2023 and 2022 resulted in a loss of $157.9 and a gain of $90.9, respectively. The change in fair value of these 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. As of December 31, 2023 and 2022, there were 5,266,667 and 10,533,333 Private Placement Warrants outstanding, respectively.

Current wording

Change in fair value of warrant liabilities represents the mark-to-market fair value adjustments to the then outstanding Private Placement Warrants. The change in fair value of the then outstanding Private Placement Warrants during 2024 and 2023 resulted in a loss of $449.2 and $157.9, respectively. The change in fair value of these 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 5,266,667 and 5,266,666 of the Private Placement Warrants in December 2024 and February 2023, respectively. As of December 31, 2024, there were no Private Placement Warrants outstanding.

Previous wording

Income tax expense was $73.5 in 2023 compared to $90.4 in 2022. The effective rate in 2023 was primarily influenced by the mix of income between our U.S. and non-U.S. operations, net of changes in valuation allowances and uncertain tax positions, and reflects the impact of non-deductible changes in fair value of the warrant liabilities, as well as a discrete tax adjustment related to legislative changes enacted in the period. In 2022, 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 uncertain tax positions, and reflects the impact of non-deductible changes in fair value of warrant liabilities, as well as discrete tax adjustments related to legislation changes enacted in the period.

Current wording

Income tax expense was $269.6 in 2024 compared to $73.5 in 2023. The effective rate in 2024 was primarily influenced the changes in tax incentives, offset by net changes in valuation allowance and the tax impact of non-deductible changes in fair value of the warrant liabilities. In 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 uncertain tax positions, and reflects the impact of non-deductible changes in fair value of warrant liabilities, as well as discrete tax adjustments related to legislation changes enacted in the period.

Previous wording

The tax expense in 2023 was $16.9 lower than 2022 primarily due to the change in mix of income, non-U.S. tax elections and changes in valuation allowances in the U.S. and a discrete tax adjustment related to legislative changes enacted in the period.

Current wording

Income tax expense in 2024 was $196.1 higher than 2023 primarily due to the increased financial performance, changes in non-U.S tax holidays and incentives and the change in valuation allowance.

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, IT, Legal, and global product platform development and offering management. Corporate and other costs were $533.8 and $495.9 in 2023 and 2022, respectively. Corporate and other costs increased $37.9 compared to 2022 primarily due to higher compensation costs due to bonus and long-term incentive costs of $23.2 and increased foreign currency loss of $12.3.

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, IT, Legal, and global product platform development and offering management. Corporate and other costs were $160.8 and $154.0 in 2024 and 2023, respectively. Corp orate and other costs increased $6.8 compared to 2023 primarily due to a decrease in foreign currency loss of $6.7.

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 $134.6 in 2023. We expect to have capital expenditures (including capitalized software) of $175 to $200 in 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, such as capacity and facility expansion, that support growth and innovation to further our enterprise strategy. Our capital expenditures (including capitalized software) were approximately $184.1 in 2024. We expect to have capital expenditures (including capitalized software) of $250 to $300 in 2025.

Previous wording

We have additional obligations as part of our ordinary course of business, beyond those committed for capital expenditures, which consist of debt obligations, lease obligations and other financial instruments. Refer to “Note 6 — Debt”, “Note 7 — Leases”, and “Note 17 — Commitments and Contingencies” of the accompanying consolidated financial statements for more information. In addition, we have uncertain tax positions that are further discussed in “Note 9 — Income Taxes” of the consolidated financial statements. We do not have any guarantees or other off-balance sheet financing arrangements, including variable interest entities, which could materially impact our financial condition or liquidity.

Current wording

We have additional obligations as part of our ordinary course of business, beyond those committed for capital expenditures, which consist of debt obligations, lease obligations, bank guarantees, bonds and other financial instruments. Refer to “Note 6 — Debt”, “Note 7 — Leases”, and “Note 17 — Commitments and Contingencies” of the accompanying consolidated financial statements for more information. In addition, we have uncertain tax positions that are further discussed in “Note 9 — Income Taxes” of the consolidated financial statements. We do not have any guarantees or other off-balance sheet financing arrangements, including variable interest entities, which could materially impact our financial condition or liquidity.

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 December 31, 2023 (the “Notes”), the Term Loan, due 2027, with an outstanding principal amount of $2,118.1 as of December 31, 2023 (the “Term Loan”), and the ABL Revolving Credit Facility, due 2025, providing up to $570.0 of revolving borrowings, with separate sublimits for letters of credit and swingline borrowings and an uncommitted accordion of up to $30.0, for which none was outstanding as of December 31, 2023 (the “ABL Revolving Credit Facility” and collectively with the Term Loan, the “Senior Secured Credit Facilities”). See “Note 6 — Debt” of the 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 December 31, 2024 (the “Notes”), the Term Loan, due 2027, with an outstanding principal amount of $2,097.0 as of December 31, 2024 (the “Term Loan”), and the ABL Revolving Credit Facility, due 2029, with a maturity date extended through an amendment in 2024, providing up to $800.0 of revolving borrowings, with separate sublimits for letters of credit and swingline borrowings and an uncommitted accordion of up to $200.0, for which none was outstanding as of December 31, 2024 (the “ABL Revolving Credit Facility” and collectively with the Term Loan, the “Senior Secured Credit Facilities”). See “Note 6 — Debt” of the consolidated financial statements for more detailed discussion of the material terms of the Notes and the Senior Secured Credit Facilities.

Previous wording

At December 31, 2023, we had $780.4 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 December 31, 2023, Vertiv had $554.0 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 $16.0, and taking into account the borrowing base limitations set forth in the ABL Revolving Credit Facility.

Current wording

At December 31, 2024, we had $1,227.6 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 December 31, 2024, Vertiv had $784.9 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 $15.1, and taking into account the borrowing base limitations set forth in the ABL Revolving Credit Facility.

Previous wording

We believe our current cash and cash equivalent levels, augmented by the ABL Revolving Credit Facility, will provide adequate near-term liquidity for the next 12 months of independent operations, as well as the resources necessary to invest for growth in existing businesses and manage our capital structure on a short- and long-term basis. We expect to continue to opportunistically access the capital and financing markets from time to time. Access to capital and the availability of financing on acceptable terms in the future will be affected by many factors, including our credit rating, economic conditions, and the overall liquidity of capital markets. There can be no assurance that we will continue to have access to the capital and financing markets on acceptable terms.

Current wording

We believe our current cash and cash equivalent levels, augmented by availability under the ABL Revolving Credit Facility, will provide adequate near-term liquidity for the next 12 months of independent operations, as well as the resources necessary to invest for growth in existing businesses and manage our capital structure on a short- and long-term basis. We expect to continue to opportunistically access the capital and financing markets from time to time. Access to capital and the availability of financing on acceptable terms in the future will be affected by many factors, including our credit rating, economic conditions, and the overall liquidity of capital markets. There can be no assurance that we will continue to have access to the capital and financing markets on acceptable terms

Previous wording

Net cash provided by operating activities was $900.5 in 2023, a $1,053.3 increase in cash generation compared to 2022. The change was primarily driven by the improvement in trade working capital from prior year by $515.9 due to our trade working capital initiative, an increase in net income from operations of $383.6, and the non-cash impact of the change in fair value of warrant liabilities of $248.8.

Current wording

Net cash provided by operating activities was $1,319.3 in 2024, a $418.8 increase in cash generation compared to 2023. The change was primarily driven by the improvement in trade working capital from prior year by $47.4 due to our trade working capital initiative, an increase in net income from operations of $35.6, and the non-cash impact of the change in fair value of warrant liabilities of $291.3.

Previous wording

Net cash used for investing activities was $139.1 in 2023 compared to $112.1 in 2022. The higher use of cash over the comparable period was primarily driven by the acquisition of business for $28.8, increased capital expenditures of $27.9, partially offset by increased proceeds from the disposition of property, plant, and equipment of $12.4, and proceeds from the sale of business of $11.9.

Current wording

Net cash used for investing activities was $201.7 in 2024 compared to net cash used for investing activities of $139.1 in 2023. The increased use of cash over the comparable period was primarily driven by increased capital expenditures of $39.1, decreased proceeds from disposition of property, plant and equipment of $12.4, decreased proceeds from sale of business of $11.9, and an increased investment in capitalized software of $10.4, offset by the decrease in acquisition of business of $11.2.

Previous wording

Net cash used by financing activities was $247.5 in 2023 compared to $100.2 of net cash provided by financing activities in 2022. The change was primarily the result of the year-over-year repayments of $470.0 on the ABL Revolving Credit Facility, $10.7 increase of repayments on the Term Loan in 2023, partially offset by the $100.0 payment under the Tax Receivable Agreement (as defined in “Note 1 — Description of Business and Summary of Significant Accounting Policies” of the accompanying consolidated financial statements) in 2022 which did not repeat in 2023, and a $25.3 increase in net cash received associated with equity-based compensation activity.

Current wording

Net cash used by financing activities was $652.1 in 2024 compared to $247.5 of net cash used by financing activities in 2023. The increased use of cash over the comparable period was primarily the result of $599.9 of share repurchases of common stock, $32.7 increase in dividend payments, and a $13.0 decrease in net cash received associated with equity-based compensation activity, offset by a decrease in year-over-year repayments of $235.0 on the ABL Revolving Credit Facility.

Previous wording

If a quantitative approach is required or elected, we test goodwill for impairment by comparing the estimated fair value of the reporting units to the related carrying value. The valuation methods used by us to estimate the fair value of each reporting unit include the discounted cash flow approach, the comparable public company approach and the comparable acquisition approach using a weighting of 40%, 40% and 20%, respectively. The discounted cash flow model requires several estimates and assumptions including future sales growth, earnings before interest, taxes, depreciation, and amortization (or “EBITDA”) margins, capital expenditures, a discount rate and a terminal net sales growth rate (the net sales growth rate for the period beyond the years forecasted by the reporting units) for each reporting unit. The comparable public company and comparable acquisition approaches require several assumptions, including EBITDA multiples for comparable companies and transactions that operate in the same markets as our reporting units.

Current wording

If a quantitative approach is required or elected, we test goodwill for impairment by comparing the estimated fair value of the reporting units to the related carrying value. The valuation methods used by us to estimate the fair value of each reporting unit include the discounted cash flow approach, the comparable public company approach and the comparable acquisition approach using a weighted approach of 40%, 40% and 20%, respectively. The discounted cash flow model requires several estimates and assumptions including future sales growth, earnings before interest, taxes, depreciation, and amortization (or “EBITDA”) margins, capital expenditures, a discount rate and a terminal net sales growth rate (the net sales growth rate for the period beyond the years forecasted by the reporting units) for each reporting unit. The comparable public company and comparable acquisition approaches require several assumptions, including EBITDA multiples for comparable companies and transactions that operate in the same markets as our reporting units.