Vertiv(US:VRT)2021-07-28 22:56Financial Data and Key Metrics Changes - In Q2 2021, sales increased by 25% year-over-year, with orders up over 24%, demonstrating strong demand for Vertiv's products and services [12][13] - Adjusted operating profit rose to $134 million, a 30% increase from the previous year, leading to an adjusted operating margin expansion of 40 basis points [14][33] - Year-to-date free cash flow reached $84 million, an improvement of over $225 million compared to the first half of 2020 [14][36] - The company raised its 2021 guidance by $100 million in sales and $5 million in adjusted operating profit, reflecting confidence in end markets [16][47] Business Line Data and Key Metrics Changes - The Americas saw net sales increase by $80 million (16.5%), driven by strong growth across all product segments [37] - APAC net sales rose by $75 million (23%), with growth across most sub-regions and product segments [37] - EMEA experienced a significant net sales increase of $99 million (50%), primarily in critical infrastructure and solutions products [38] Market Data and Key Metrics Changes - The cloud and hyperscale markets remain strong, with continued demand for digital applications driving growth [18][22] - The enterprise small and medium business market is recovering from the pandemic, with an increase in pipeline and orders [19] - The communication network market remains stable, with ongoing 5G deployments providing future growth opportunities [20] Company Strategy and Development Direction - Vertiv is focused on customer satisfaction as a long-term strategy, investing in product development and operational improvements [8][9] - The company is enhancing its IT channel business and product development initiatives to drive growth [24][28] - Pricing actions are being implemented to offset inflationary costs, with expectations of full recovery by Q4 2021 [29][31] Management's Comments on Operating Environment and Future Outlook - Management acknowledged supply chain challenges and inflation but expressed confidence in the company's ability to navigate these issues [15][30] - The outlook for 2022 is positive, with expectations of continued demand and pricing benefits from recent actions [60][61] - Management emphasized the importance of maintaining customer relationships through strategic investments [50][52] Other Important Information - The company ended Q2 with a record liquidity of $1.1 billion and a low net debt leverage ratio of 2.2 times [42] - Adjusted EPS increased to $0.31, reflecting higher operating profit and lower interest and tax expenses [36] Q&A Session Summary Question: Pricing actions and their impact - Management confirmed that pricing actions were initiated in Q2 and are expected to be effective in Q3 and Q4, with a majority of pricing benefits in the Americas [64][66][70] Question: Impact of deflation on pricing - Management indicated that pricing actions are generally sticky, and any deflation would take time to reflect in pricing adjustments [75][78] Question: Supply chain issues and shipment delays - Management acknowledged that supply chain constraints could impact growth by 200 to 300 basis points in the second half of the year [86][88] Question: Order growth dynamics - Management noted that order growth is driven by market demand, share gain, and customers placing orders earlier due to supply chain challenges [122][124] Question: Future supply chain cost outlook - Management expects supply chain costs to stabilize as additional capacity comes online in late 2021 and 2022 [120][121]