10-K/APeriod: FY2020

Vertiv Holdings Co Annual Report (Amendment), Year Ended Dec 31, 2020

Filed April 30, 2021For Securities:VRT

Summary

Vertiv Holdings Co (VRT) filed an amended Annual Report on Form 10-K/A for the year ended December 31, 2020. The primary purpose of this amendment was to restate its previously issued consolidated financial statements. This restatement was necessitated by a re-evaluation of the accounting treatment for warrants, in light of guidance issued by the SEC concerning warrants issued by Special Purpose Acquisition Companies (SPACs). As a result, Vertiv reclassified its Public Warrants and Private Placement Warrants from equity to liabilities, recognizing fair value adjustments in earnings. This restatement increased the net loss for 2020 by $143.7 million and increased total liabilities by $156.2 million, with a corresponding decrease in equity. The company's core business involves designing, manufacturing, and servicing critical digital infrastructure technology for data centers, communication networks, and commercial & industrial environments globally. The report highlights the impact of the COVID-19 pandemic on 2020 net sales, which decreased by 1.4% to $4,370.6 million. Despite the sales decline, gross profit margin improved slightly due to cost control measures and operational efficiencies. The company also initiated a restructuring program aimed at achieving $85.0 million in annualized cost savings by 2023. Significant risk factors remain, including competition, long sales cycles, supply chain management, cybersecurity, and potential future net losses. The company also disclosed material weaknesses in its internal controls over financial reporting related to IT general controls and the aggregation of control deficiencies, with an ongoing remediation plan in place. The report indicates that as of December 31, 2020, the company was no longer an emerging growth company, leading to increased compliance costs.

Financial Highlights

52 data points
Beta

Revenue

$4.37B

33.7% Gross Margin

Net Income

-$327.30M

-7.5% Net Margin

EPS (Diluted)

$-1.07

Total Assets

$5.07B

Cash & Equivalents

$542.60M

Free Cash Flow

$164.50M

Financial Statements
Beta
Revenue$4.37B
Cost of Revenue$2.90B
Gross Profit$1.47B
R&D Expenses$228.60M
SG&A Expenses$1.01B
Operating Income$213.50M
Interest Expense$150.40M
Net Income-$327.30M
EPS (Basic)$-1.07
EPS (Diluted)$-1.07
Shares Outstanding (Basic)307.08M
Shares Outstanding (Diluted)307.08M

Key Highlights

  • 1Vertiv Holdings Co. restated its 2020 financial statements due to reclassifying warrants from equity to liabilities, impacting net loss and equity.
  • 2Net sales for 2020 decreased by 1.4% to $4,370.6 million, primarily due to the impact of the COVID-19 pandemic.
  • 3Gross profit margin improved slightly to 33.7% in 2020 from 32.8% in 2019, driven by cost management and operational efficiencies.
  • 4The company initiated a restructuring program targeting $85.0 million in annualized cost savings by 2023.
  • 5Material weaknesses were identified in internal controls over financial reporting, particularly related to IT general controls and aggregation of deficiencies, with remediation efforts underway.
  • 6Vertiv completed the redemption of its outstanding Public Warrants in January 2021.
  • 7The company is no longer considered an emerging growth company, leading to increased regulatory and compliance obligations.

Frequently Asked Questions

The primary reason for the amendment was to restate the company's previously issued consolidated financial statements for the year ended December 31, 2020. This restatement was due to a re-evaluation of the accounting treatment for warrants, specifically the Public Warrants and Private Placement Warrants, which are now classified as liabilities instead of equity, based on new SEC guidance.

The reclassification of warrants as liabilities resulted in an increase to the net loss for the year ended December 31, 2020, by $143.7 million. It also increased total liabilities by $156.2 million and decreased total equity by a corresponding $156.2 million as of December 31, 2020.

The COVID-19 pandemic had an adverse impact on Vertiv's operations and business results for 2020. Net sales decreased by 1.4% to $4,370.6 million compared to 2019, primarily driven by pandemic-related disruptions to sales channels, supply chains, and manufacturing operations. The company expects the pandemic to continue to have a materially adverse impact through at least 2021.

Key risks include intense competition, long sales cycles, unpredictable customer orders, supply chain disruptions, cybersecurity threats, failure to manage growing global operations effectively, economic weakness, significant indebtedness, and material weaknesses in internal controls over financial reporting. The company also faces risks related to its large stockholder, the Vertiv Stockholder, and its obligations under the Tax Receivable Agreement.

The company identified material weaknesses in its internal control over financial reporting as of December 31, 2020, related to general IT controls (user access and program change management) and the aggregation of control deficiencies. Consequently, management concluded that internal control over financial reporting remained ineffective. An expanded remediation plan is being implemented to address these weaknesses, and the company anticipates this process will continue.