Vertiv(VRT) - 2025 Q1 - Quarterly Report

Part I Financial Statements (Unaudited) Vertiv reported a significant Q1 2025 turnaround with $164.5 million net income on $2.04 billion net sales Condensed Consolidated Statements of Earnings (Loss) Q1 2025 net sales grew 24.2% to $2.04 billion, driving $164.5 million net income from a prior-year loss Q1 2025 vs. Q1 2024 Statement of Earnings (in millions, except per share data) | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Net sales | $2,036.0 | $1,639.1 | 24.2% | | Operating profit (loss) | $290.7 | $202.6 | 43.5% | | Net income (loss) | $164.5 | $(5.9) | N/A | | Diluted EPS | $0.42 | $(0.02) | N/A | - The significant swing from net loss to net income was partly due to the absence of a $176.6 million loss from the change in fair value of warrant liabilities, which was recorded in Q1 2024[12] Condensed Consolidated Balance Sheets As of March 31, 2025, total assets reached $9.45 billion, with cash at $1.47 billion and total equity at $2.67 billion Balance Sheet Highlights (in millions) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,467.3 | $1,227.6 | | Inventories | $1,383.5 | $1,244.4 | | Total assets | $9,451.1 | $9,132.5 | | Long-term debt, net | $2,904.1 | $2,907.2 | | Total liabilities | $6,784.7 | $6,698.2 | | Total equity | $2,666.4 | $2,434.3 | Condensed Consolidated Statements of Cash Flows Q1 2025 operating cash flow more than doubled to $303.3 million, while financing cash outflow significantly decreased Cash Flow Summary (in millions) | Activity | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $303.3 | $137.5 | | Net cash used for investing activities | $(38.8) | $(36.5) | | Net cash used for financing activities | $(24.9) | $(603.1) | - The significant decrease in cash used for financing activities is primarily due to a $599.9 million repurchase of common stock in Q1 2024 that did not recur in Q1 2025[18] Notes to Condensed Consolidated Financial Statements (Unaudited) Notes detail business segments, revenue recognition, debt, and legal contingencies, including a securities class action - The company operates in three business segments: Americas; Asia Pacific; and Europe, Middle East & Africa, providing critical digital infrastructure and services[25] - The company's effective tax rate was 38.0% for Q1 2025, influenced by a valuation allowance for legislative changes, compared to 54.6% in Q1 2024, which was impacted by non-deductible changes in warrant liabilities[40] - The company is party to a securities class action lawsuit, derivative lawsuits, and is responding to a subpoena from the SEC and a document request from the U.S Attorney's Office related to the allegations[69][70][73] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses 24.2% net sales growth driven by AI demand, 43.5% operating profit increase, and strong liquidity Outlook and Trends The company is expanding capacity and product offerings to meet AI-driven demand while enhancing supply chain resilience - Increased maturity and adoption of AI and high-performance compute is driving technology innovation and has led to increased demand for the company's products and services[93] - The company is expanding manufacturing capacity to meet customer demand, including doubling capacity for switchgear and busbar since late 2021 and opening new facilities in India and South Carolina in 2024[87][88] - Vertiv is managing geopolitical and macroeconomic uncertainties by pursuing a supply chain strategy of supplier and geographic resilience, including adding regional sourcing and manufacturing capabilities[85] Results of Operations Q1 2025 net sales grew 24.2% to $2.04 billion, leading to $164.5 million net income despite a slight gross margin decrease - Net sales increased by $396.9 million (24.2%) YoY, primarily due to higher sales volumes[90] - Gross margin slightly decreased from 34.6% to 33.7% YoY, primarily due to the mix of product and service sales and the impact of tariffs[92] - SG&A as a percentage of sales decreased from 19.2% in Q1 2024 to 17.0% in Q1 2025, indicating improved operating leverage[94] - Interest expense decreased by $13.7 million YoY due to Term Loan amendments and higher interest income[97] Business Segments All three geographic segments, Americas, Asia Pacific, and EMEA, reported strong sales and operating profit growth with improved margins Americas Segment Performance (in millions) | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $1,185.3 | $925.0 | 28.1% | | Operating profit | $259.7 | $187.8 | 38.3% | | Margin | 21.9% | 20.3% | +1.6 p.p. | Asia Pacific Segment Performance (in millions) | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $447.2 | $332.3 | 34.6% | | Operating profit | $45.7 | $30.4 | 50.3% | | Margin | 10.2% | 9.1% | +1.1 p.p. | Europe, Middle East & Africa Segment Performance (in millions) | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $403.5 | $381.8 | 5.7% | | Operating profit | $78.7 | $70.3 | 11.9% | | Margin | 19.5% | 18.4% | +1.1 p.p. | Capital Resources and Liquidity The company maintains strong liquidity with $1.47 billion cash and $784.2 million credit availability, projecting $250-300 million in 2025 capital expenditures - As of March 31, 2025, the company had $1,467.3 million in cash and cash equivalents and $784.2 million of availability under its ABL Revolving Credit Facility[111] - The company expects capital expenditures (including capitalized software) to be between $250.0 million and $300.0 million for the full year 2025[108] - Net cash from operating activities increased by 120.6% YoY to $303.3 million in Q1 2025, driven by higher net income and improved working capital[113][114] Quantitative and Qualitative Disclosures About Market Risk No material changes in quantitative and qualitative market risk disclosures were reported since the 2024 Form 10-K - There have been no material changes in market risk disclosures since the 2024 Form 10-K[118] Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2025, with no material changes - The CEO and CFO concluded that as of March 31, 2025, the Company's disclosure controls and procedures were effective[120] - No changes in internal control over financial reporting occurred during the quarter that materially affected or are reasonably likely to materially affect internal controls[121] Part II Legal Proceedings Vertiv faces a securities class action, derivative lawsuits, and government inquiries regarding alleged false statements - A putative securities class action lawsuit alleges that the company made materially false or misleading statements regarding inflationary and supply chain pressures between February 2021 and February 2022. Some claims have been dismissed, while others remain pending[123] - Shareholder derivative lawsuits have been filed and consolidated, alleging breach of fiduciary duty by certain directors and officers related to the same issues as the class action. These actions are currently stayed[124] - In November 2023, the company received a subpoena from the SEC and a parallel request for documents from the U.S Attorney's Office for the Southern District of New York related to the allegations in the lawsuits[126] Risk Factors The company's risk factors remain materially unchanged from those disclosed in its 2024 Form 10-K - The Company's risk factors have not materially changed from those described in its 2024 Form 10-K[130] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity sales or share repurchases occurred in Q1 2025, with $2.4 billion remaining under the program - The Board of Directors approved a stock repurchase program of up to $3.0 billion through December 31, 2027[133] - During the first quarter of 2025, Vertiv made no share repurchases. As of March 31, 2025, $2.4 billion was available for repurchase[134]