10-KPeriod: FY2022

Vertiv Holdings Co Annual Report, Year Ended Dec 31, 2022

Filed February 27, 2023For Securities:VRT

Summary

Vertiv Holdings Co. reported a strong revenue increase of 13.9% in 2022, reaching $5.7 billion, driven by higher sales volumes and the inclusion of E&I sales. Despite this top-line growth, the company experienced a 14.0% decrease in operating profit and a 36.0% decline in net income compared to 2021, primarily due to a significant increase in the cost of sales (up 17.3%) and higher interest expenses. The company's backlog saw substantial growth, increasing to $4.75 billion from $3.19 billion in the prior year, indicating robust future demand. This growth is attributed to strong market demand and extended lead times from ongoing global supply chain challenges. Vertiv's strategic priorities include customer focus, operational excellence, fostering innovation, building a high-performance culture, and reinforcing financial strength. Key challenges for Vertiv include persistent supply chain constraints, material and labor cost increases, and foreign currency headwinds, which are expected to continue impacting profitability in 2023. The company is actively managing these challenges through pricing actions and supply chain enhancements. Investors should monitor the company's ability to navigate these cost pressures and effectively realize sales from its substantial backlog.

Financial Highlights

53 data points
Beta

Revenue

$5.69B

28.4% Gross Margin

Net Income

$76.60M

1.3% Net Margin

EPS (Diluted)

$-0.04

Total Assets

$7.10B

Cash & Equivalents

$260.60M

Free Cash Flow

-$252.80M

Financial Statements
Beta
Revenue$5.69B
Cost of Revenue$4.08B
Gross Profit$1.62B
R&D Expenses$282.00M
SG&A Expenses$1.18B
Operating Income$223.40M
Interest Expense$147.30M
Net Income$76.60M
EPS (Basic)$0.20
EPS (Diluted)$-0.04
Shares Outstanding (Basic)376.73M
Shares Outstanding (Diluted)378.22M

Key Highlights

  • 1Revenue increased by 13.9% to $5.7 billion in 2022, primarily due to higher sales volumes and the acquisition of E&I.
  • 2Operating profit decreased by 14.0% to $223.4 million, while net income decreased by 36.0% to $76.6 million, impacted by increased cost of sales and interest expenses.
  • 3Order backlog significantly increased by 48.9% to $4.75 billion as of December 31, 2022, driven by strong demand and supply chain lead times.
  • 4Gross profit margin decreased from 30.5% in 2021 to 28.4% in 2022, reflecting higher commodity, logistic, and labor costs.
  • 5The company's operations were impacted by foreign currency fluctuations, resulting in a negative impact of $251.8 million on net sales.
  • 6Vertiv opened a new thermal plant in Monterrey, Mexico, to support increased demand and backlog in its thermal business.
  • 7Despite operational challenges, the company implemented price realization actions totaling $365.0 million in 2022.

Frequently Asked Questions

Vertiv's revenue grew by 13.9% to $5.7 billion, driven by increased sales volumes and the integration of E&I's sales. However, profitability was impacted by a 17.3% rise in the cost of sales, including higher commodity, freight, and labor costs, and a significant increase in interest expenses. These factors led to a 14.0% decrease in operating profit and a 36.0% decrease in net income compared to 2021.

Vertiv's backlog grew substantially to $4.75 billion. The company is addressing supply chain constraints and cost increases by implementing pricing actions, enhancing its supply chain by qualifying new suppliers, and managing inventory levels to meet demand. They anticipate continued price realization in 2023 to offset inflationary pressures.

Key risks include persistent supply chain disruptions, material and labor cost inflation, foreign currency exchange rate fluctuations, competition in the infrastructure technologies industry, and potential impacts from global macroeconomic conditions. The company also faces risks associated with long-term fixed-price contracts and the integration of acquisitions.

Vertiv expects supply chain challenges and inflationary pressures on materials, freight, and labor to continue into 2023. The company anticipates continued pricing realization to mitigate these impacts. While the backlog indicates strong demand, the company is focused on optimizing inventory and managing costs to improve profitability.