01—Abstract
Summary
Summary of the 10-K filed February 27, 2023. Cited figures are marked; the original filing is the authoritative source.
Vertiv Holdings Co. reported a strong revenue increase of 13.9% in 2022, reaching $5.7 billiona, 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 billionb 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.
02—Key points
Key Highlights
- Revenue increased by 13.9% to $5.7 billion in 2022, primarily due to higher sales volumes and the acquisition of E&I.
- Operating 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.
- Order backlog significantly increased by 48.9% to $4.75 billion as of December 31, 2022, driven by strong demand and supply chain lead times.
- Gross profit margin decreased from 30.5% in 2021 to 28.4% in 2022, reflecting higher commodity, logistic, and labor costs.
- The company's operations were impacted by foreign currency fluctuations, resulting in a negative impact of $251.8 million on net sales.
- Vertiv opened a new thermal plant in Monterrey, Mexico, to support increased demand and backlog in its thermal business.
- Despite operational challenges, the company implemented price realization actions totaling $365.0 million in 2022.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, Vertiv Holdings Co kept $0.01.
- Revenue$5.69B100.0%
- Cost of revenue−$4.08B71.6%
- Gross profit$1.62B28.4%
- Operating costs−$1.39B24.5%
- Operating income$223.4M3.9%
- Interest, other & tax−$146.8M2.6%
- Net income$76.6M1.3%
Where FY2022 revenue went
$5.69B- Cost of revenue: $4.08B, 72% of revenue
- SG&A: $1.18B, 21% of revenue
- Net income: $76.6M, 1.3% of revenue
- R&D: $282.0M, 5.0% of revenue
- Interest, other & tax: $146.8M, 2.6% of revenue
Kept 1.3% as net incomeNet income $76.6M · 1.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 27, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $5.69B$5.00B | +13.9% |
| Cost of Revenue | $4.08B$3.48B | +17.3% |
| Gross Profit | $1.62B$1.52B | +6.1% |
| R&D Expenses | $282.00M$266.40M | +5.9% |
| SG&A Expenses | $1.18B$1.11B | +6.2% |
| Operating Income | $223.40M$259.90M | −14.0% |
| Interest Expense | $147.30M$90.60M | +62.6% |
| Net Income | $76.60M$119.60M | −36.0% |
| EPS (Basic) | $0.20$0.34 | −41.2% |
| EPS (Diluted) | $-0.04$0.33 | −112.1% |
| Shares Outstanding (Basic) | 376.73M355.54M | +6.0% |
| Shares Outstanding (Diluted) | 378.22M360.14M | +5.0% |
05—Questions
Frequently Asked Questions
What are the main factors driving Vertiv's revenue growth and profitability changes in 2022?
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.
How is Vertiv managing its substantial backlog amidst ongoing supply chain challenges?
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.
What are the key risks and challenges highlighted in Vertiv's 10-K filing?
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.
What is Vertiv's outlook for 2023 regarding costs and demand?
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.
06—Continue