Vertiv(US:VRT)2024-10-23 10:01Vertiv Q3 2024 Earnings Release Financial Highlights and Business Overview Vertiv reported strong Q3 2024 results with significant growth in sales and profit, driven by data center demand and AI infrastructure | Metric | Q3 2024 | Change vs Q3 2023 | | :--- | :--- | :--- | | Net Sales | $2,074 million | +19% | | Operating Profit | $372 million | +48% | | Adjusted Operating Profit | $417 million | +41% | | Adjusted Operating Margin | 20.1% | +310 bps | | Diluted EPS | $0.46 | - | | Adjusted Diluted EPS | $0.76 | - | - Order growth remains strong, indicating sustained demand: - Trailing twelve-month (TTM) organic orders increased by approximately 37% year-over-year - Third-quarter organic orders grew by about 17% compared to the prior year's quarter1 - Strategic drivers include a strong market position in enabling Artificial Intelligence (AI) and a focus on operational excellence, with accelerating revenue from liquid cooling technologies3 Financial Condition and Guidance The company showed strong cash generation, reduced leverage, and raised its full-year 2024 guidance based on a record backlog Cash Flow and Liquidity Vertiv generated strong operating and free cash flow in Q3 2024, improving liquidity and reducing net leverage to 1.4x | Metric | Q3 2024 | Change vs Q3 2023 | | :--- | :--- | :--- | | Operating Cash Flow | $375 million | +$126 million | | Adjusted Free Cash Flow | $336 million | +$115 million | - The company maintains strong liquidity of $1.5 billion and has reduced its net leverage to 1.4x as of the end of Q3 20246 - Capital expenditures are forecasted to be between $175 million and $200 million for 2024 to support growth, including the expansion of modular infrastructure capabilities5 Updated 2024 Guidance Vertiv raised its Q4 and full-year 2024 guidance, projecting continued growth in sales, profit, and adjusted EPS Fourth Quarter 2024 Guidance | Metric | Guidance Range | | :--- | :--- | | Net Sales | $2,115M - $2,165M | | Organic Net Sales Growth | 11% - 15% | | Adjusted Operating Profit | $427M - $447M | | Adjusted Operating Margin | 20.2% - 20.6% | | Adjusted Diluted EPS | $0.80 - $0.84 | Full Year 2024 Guidance | Metric | Guidance Range | | :--- | :--- | | Net Sales | $7,780M - $7,830M | | Organic Net Sales Growth | 13% - 15% | | Adjusted Operating Profit | $1,475M - $1,495M | | Adjusted Operating Margin | 18.9% - 19.1% | | Adjusted Diluted EPS | $2.66 - $2.70 | | Adjusted Free Cash Flow | $975M - $1,025M | Consolidated Financial Statements The statements show a 19% sales increase, asset growth to $8.9 billion, and a significant rise in operating cash flow Consolidated Statements of Operations Net sales grew 19% to $2.07 billion and operating profit rose 48% to $371.6 million in Q3 2024 year-over-year | (In millions, except per share data) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Net Sales | $2,073.5 | $1,742.6 | | Operating Profit | $371.6 | $250.9 | | Net Income | $176.6 | $94.1 | | Diluted EPS | $0.46 | $0.24 | Consolidated Balance Sheets Total assets grew to $8.89 billion by September 30, 2024, driven by increases in current assets like inventory | (In millions) | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $4,804.6 | $4,001.5 | | Total Assets | $8,891.4 | $7,998.5 | | Total Current Liabilities | $3,489.2 | $2,305.4 | | Total Liabilities | $7,077.7 | $5,983.6 | | Total Equity | $1,813.7 | $2,014.9 | Consolidated Statements of Cash Flows Net cash from operating activities for the first nine months of 2024 increased substantially to $894.1 million | (In millions) | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $894.1 | $544.3 | | Net cash used for investing activities | $(120.7) | $(71.1) | | Net cash used for financing activities | $(640.4) | $(236.7) | | Increase in cash and cash equivalents | $128.8 | $231.8 | Segment and Product Performance All regions and offerings showed strong sales growth in Q3 2024, with EMEA leading regional growth at 26.1% Regional Segment Results The Americas and EMEA drove profit growth, while APAC sales grew but saw margin compression in Q3 2024 Q3 2024 Net Sales by Region (vs. Q3 2023) | Region | Net Sales (M) | Change | Organic Change | | :--- | :--- | :--- | :--- | | Americas | $1,198.6 | +19.5% | +20.5% | | APAC | $432.4 | +11.3% | +10.4% | | EMEA | $442.5 | +26.1% | +25.2% | | Total | $2,073.5 | +19.0% | +19.2% | Q3 2024 Adjusted Operating Profit & Margin by Region | Region | Adj. Op. Profit (M) | Change | Adj. Op. Margin | Change (bps) | | :--- | :--- | :--- | :--- | :--- | | Americas | $303.4 | +46.9% | 25.3% | +470 bps | | APAC | $44.1 | -11.3% | 10.2% | -260 bps | | EMEA | $114.4 | +49.2% | 25.9% | +400 bps | Sales by Product and Service Offering Product sales grew 19.7% and services sales grew 16.4% in Q3 2024, with strong organic growth across all regions Q3 2024 Sales by Offering (vs. Q3 2023) | Offering | Net Sales (M) | Change | | :--- | :--- | :--- | | Products | $1,615.6 | +19.7% | | Services & Spares | $457.9 | +16.4% | | Total | $2,073.5 | +19.0% | Q3 2024 Organic Growth by Offering | Offering | Organic Growth % | | :--- | :--- | | Products | 19.9% | | Services & Spares | 16.9% | | Total | 19.2% | Reconciliation of GAAP to Non-GAAP Measures This section details reconciliations of GAAP figures to non-GAAP metrics like adjusted operating profit and adjusted EPS - The company uses non-GAAP measures such as adjusted operating profit, adjusted operating margin, organic net sales growth, adjusted free cash flow, and adjusted diluted EPS to provide supplemental information on ongoing operations1225 Adjusted Operating Profit and Margin Adjusted operating profit reached $416.9 million in Q3 2024, expanding the adjusted operating margin by 310 basis points | (In millions) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Operating Profit (GAAP) | $371.6 | $250.9 | | Amortization of intangibles | $45.3 | $45.5 | | Adjusted Operating Profit (Non-GAAP) | $416.9 | $296.4 | | Margin | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Operating Margin (GAAP) | 17.9% | 14.4% | | Adjusted Operating Margin (Non-GAAP) | 20.1% | 17.0% | Adjusted Free Cash Flow Adjusted free cash flow increased significantly to $335.9 million in Q3 2024 from $221.3 million in the prior year | (In millions) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $375.1 | $248.7 | | Less: Capital expenditures & software | $(39.2) | $(27.4) | | Adjusted Free Cash Flow | $335.9 | $221.3 | Adjusted Diluted EPS GAAP diluted EPS of $0.46 was adjusted to a non-GAAP figure of $0.76 for Q3 2024 after key exclusions Q3 2024 Reconciliation of Diluted EPS to Adjusted Diluted EPS | | Per Share Amount | | :--- | :--- | | GAAP Diluted EPS | $0.46 | | Amortization of intangibles | $0.12 | | Change in warrant liability | $0.18 | | Non-GAAP Adjusted Diluted EPS | $0.76 | 2024 Adjusted Guidance Reconciliation Full-year 2024 GAAP EPS guidance of $1.52 is reconciled to the non-GAAP adjusted EPS guidance of $2.68 Full Year 2024 Guidance Reconciliation (Diluted EPS) | | Per Share Amount | | :--- | :--- | | GAAP Diluted EPS | $1.52 | | Amortization of intangibles | $0.46 | | Change in warrant liability | $0.70 | | Non-GAAP Adjusted Diluted EPS | $2.68 | Supplementary Information This section provides details on the earnings call, company background, and cautionary forward-looking statements About Vertiv and Conference Call Information Vertiv, a global provider of critical digital infrastructure, will host a conference call to discuss Q3 2024 results - Vertiv provides a portfolio of power, cooling, and IT infrastructure solutions and services from the cloud to the edge of the network11 - Management will discuss Q3 2024 results on a conference call scheduled for October 23 at 11 a.m. Eastern Time10 Cautionary Note Concerning Forward-Looking Statements This legal disclaimer notes that forward-looking statements are subject to risks that could alter actual results - The report contains forward-looking statements concerning future financial performance, strategies, and expectations, including guidance for Q4 and full-year 202414 - These statements are subject to a number of risks and uncertainties, such as continued growth of customer markets, competition, supply chain management, and inflation, which could cause actual results to differ materially16