Vertiv(US:VRT)2025-10-22 16:00Financial Data and Key Metrics Changes - Adjusted diluted EPS for Q3 2025 was $1.24, up approximately 63% year over year, driven by higher adjusted operating profit [7][13] - Q3 organic sales grew 28%, with the Americas up 43% and APAC up 21%, while EMEA declined 4% [7][13] - Adjusted operating profit reached $596 million, up 43% year on year, with a margin of 22.3% [9][13] - Adjusted free cash flow was $462 million, up 38%, reflecting strong operating performance [9][16] - Total backlog increased to $9.5 billion, up about 30% year on year and 12% sequentially [10][13] Business Line Data and Key Metrics Changes - The Americas segment delivered strong organic growth of 43%, driven by accelerated AI demand across product lines [16] - APAC saw 21% organic growth, supported by AI infrastructure demand [16] - EMEA experienced a 4% decline in organic sales, but expectations for recovery are set for the second half of 2026 [17][19] Market Data and Key Metrics Changes - The overall market growth is accelerating, particularly in the colo cloud segment, which is the fastest-growing area [8] - The company reported a trailing 12-month organic orders growth of about 21%, with Q3 orders up 60% year over year [7][9] Company Strategy and Development Direction - The company is focused on maintaining technology leadership through consistent R&D investments and operational excellence [4][5] - A restructuring program is being implemented in EMEA to prepare for future growth, with an expected annualized benefit of approximately $20 million starting in 2026 [17] - The company plans to accelerate investments in supply chain and services capabilities to meet evolving customer needs [21][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in a multi-year period of significant growth and value creation, driven by digital transformation and AI demand [5][21] - The company anticipates continued organic sales growth in 2026, supported by a substantial backlog and a healthy pipeline [21][24] - Tariffs are viewed as a dynamic input cost, with mitigation strategies in place to offset their impacts [11][22] Other Important Information - The company is raising its full-year guidance for adjusted EPS, net sales, adjusted operating profit, and adjusted free cash flow [19][20] - The adjusted operating margin target for 2029 remains at 25%, with expectations for incremental margins in the 30% to 35% range [19][63] Q&A Session Summary Question: What is driving the order uptake and when will big announcements flow into orders for Vertiv? - Management indicated that order growth is driven by a strong market and technology evolution, with large players expanding their backlogs [28][30] Question: Can you provide more color on the services opportunity and its margin structure? - Management emphasized the service business as a unique competitive advantage, generating recurring revenue, and expected to accelerate as product systems grow [34][36] Question: What is the outlook for EMEA margins and the path back to mid-20s? - Management stated that a combination of sales acceleration and restructuring efforts would facilitate improved operating leverage and margins in EMEA [66] Question: How does the competitive environment affect Vertiv's market position? - Management expressed confidence in their innovation-driven approach, stating that they are at the forefront of industry advancements and maintain strong competitive advantages [82][84]