10-KPeriod: FY2021

Vertiv Holdings Co Annual Report, Year Ended Dec 31, 2021

Filed March 1, 2022For Securities:VRT

Summary

Vertiv Holdings Co. reported significant revenue growth in 2021, driven by increased demand across its data center, communication network, and commercial & industrial sectors. The company's net sales grew by 14.4% to $4.998 billion, a substantial increase from the prior year. This growth was supported by positive impacts from foreign currency, the acquisition of E&I Engineering, and a general global economic recovery. Despite the top-line growth, gross profit as a percentage of sales decreased from 33.7% in 2020 to 30.5% in 2021, primarily due to higher commodity, freight, and labor costs stemming from supply chain constraints. The company's backlog significantly increased to $3.191 billion by the end of 2021, signaling strong future demand, though it also highlights potential pricing challenges as cost increases may not be immediately reflected. Vertiv addressed its debt structure by issuing Senior Secured Notes and amending its Term Loan Credit Agreement, aiming to manage its financial position. Management expresses confidence in near-term liquidity supported by operating cash flow and debt arrangements, while acknowledging the ongoing impacts of supply chain disruptions and cost pressures expected to persist into 2022.

Financial Highlights

52 data points
Beta

Revenue

$5.00B

30.5% Gross Margin

Net Income

$119.60M

2.4% Net Margin

EPS (Diluted)

$0.33

Total Assets

$6.94B

Cash & Equivalents

$439.10M

Free Cash Flow

$137.50M

Financial Statements
Beta
Revenue$5.00B
Cost of Revenue$3.48B
Gross Profit$1.52B
R&D Expenses$266.40M
SG&A Expenses$1.11B
Operating Income$259.90M
Interest Expense$90.60M
Net Income$119.60M
EPS (Basic)$0.34
EPS (Diluted)$0.33
Shares Outstanding (Basic)355.54M
Shares Outstanding (Diluted)360.14M

Key Highlights

  • 1Net sales increased by 14.4% to $4.998 billion in 2021, driven by broad demand and the E&I acquisition.
  • 2Gross profit margin declined to 30.5% from 33.7% due to increased commodity, freight, and labor costs.
  • 3The company's order backlog significantly grew to $3.191 billion as of December 31, 2021, indicating strong future demand.
  • 4Vertiv completed the acquisition of E&I Engineering for $1.776 billion and issued $850 million in Senior Secured Notes due 2028.
  • 5Operating profit increased by 21.7% to $259.9 million, despite the compressed gross margins, due to managed SG&A expenses and lower restructuring costs.
  • 6The company has successfully remediated previously identified material weaknesses in its internal controls over financial reporting and concluded that its controls were effective as of December 31, 2021.
  • 7Significant investments in R&D were made, with $266.4 million spent in 2021 to foster new product innovation.

Frequently Asked Questions

Vertiv reported a 14.4% increase in net sales to $4.998 billion in 2021. However, the gross profit margin decreased to 30.5% due to rising costs of materials, freight, and labor, exacerbated by supply chain issues. Operating profit increased by 21.7% to $259.9 million, driven by effective management of SG&A and reduced restructuring costs.

Vertiv acknowledges significant supply chain constraints and cost increases for materials, freight, and labor, which continued through 2021 and are expected to persist into 2022. The company is actively working to forecast these inflationary headwinds, reflect anticipated cost increases in pricing, and address shortages. The substantial increase in backlog is partly a result of customers placing orders in advance due to these ongoing challenges.

Vertiv refinanced its debt by amending its Term Loan Credit Agreement to reduce interest rates and completed an offering of $850 million in Senior Secured Notes due 2028. The company also entered into an agreement to replace its remaining Tax Receivable Agreement obligations with a $100 million cash payment, structured in two installments.

Key risks include ongoing supply chain disruptions and cost inflation, long sales cycles, competitive pressures in the infrastructure technologies market, potential disruptions in customer markets, and risks associated with global operations, including currency fluctuations and geopolitical instability. The company also faces risks related to its significant level of indebtedness and its ability to manage its business as a public company.