10-QPeriod: Q1 FY2020

Vertiv Holdings Co Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 7, 2020For Securities:VRT

Summary

Vertiv Holdings Co reported a net loss of $268.9 million for the first quarter of 2020, a significant increase from the $74.3 million net loss in the prior year period. This widened loss was largely driven by a substantial $174.0 million loss on the extinguishment of debt related to a comprehensive debt refinancing completed in March 2020. Net sales also decreased by 14.9% to $897.3 million, impacted by approximately $80 million due to the COVID-19 pandemic, alongside project timing and foreign currency headwinds. Despite the top-line decline and net loss, the company completed a significant business combination in February 2020, transforming its capital structure and operational framework. Management highlighted the ongoing impact of the COVID-19 pandemic, which is expected to continue affecting results throughout 2020. The company is focusing on its global leadership in mission-critical infrastructure for data centers and communication networks. Key financial activities in the quarter included a major debt refinancing and the completion of the business combination, which has reshaped the balance sheet. Investors should monitor the ongoing impact of the pandemic and the company's ability to manage its debt and operational efficiency in a challenging economic environment.

Financial Statements
Beta

Key Highlights

  • 1Reported a net loss of $268.9 million for Q1 2020, compared to a $74.3 million loss in Q1 2019, significantly impacted by a $174.0 million loss on debt extinguishment.
  • 2Net sales decreased by 14.9% to $897.3 million in Q1 2020, with approximately $80 million attributed to the COVID-19 pandemic.
  • 3Completed a significant business combination in February 2020, transitioning from GS Acquisition Holdings Corp to Vertiv Holdings Co.
  • 4Executed a comprehensive debt refinancing on March 2, 2020, including a new $2.2 billion term loan and an amended ABL revolving credit facility, aimed at reducing debt service and extending maturities.
  • 5Selling, general, and administrative (SG&A) expenses decreased by 7.5% to $264.8 million, though as a percentage of sales, SG&A increased due to lower sales volume.
  • 6The company continues to monitor the adverse impacts of the COVID-19 pandemic, which is expected to affect results through at least the remainder of 2020.
  • 7Identified material weaknesses in internal control over financial reporting related to IT general controls and aggregation of deficiencies, with remediation plans in progress.

Frequently Asked Questions

The primary driver for the increased net loss of $268.9 million in Q1 2020, compared to $74.3 million in Q1 2019, was a $174.0 million loss incurred on the extinguishment of debt. This loss resulted from refinancing existing debt obligations, including redemption premiums and write-offs of deferred financing fees.

The COVID-19 pandemic had a direct negative impact on net sales, accounting for approximately $80 million of the $157.5 million decrease in Q1 2020. The company anticipates that the pandemic will continue to adversely affect its business, results of operations, financial condition, cash flows, and liquidity for at least the remainder of 2020.

The most significant event was the completion of the business combination on February 7, 2020, which resulted in GS Acquisition Holdings Corp becoming Vertiv Holdings Co and listing on the NYSE. Additionally, the company completed a major debt refinancing on March 2, 2020, issuing new debt and amending existing credit facilities to improve its capital structure.

The company identified material weaknesses related to (1) the design and implementation of IT general controls for systems supporting internal control processes, specifically concerning user access and program change management, and (2) the aggregation of open control deficiencies due to incomplete design and operation of controls. Remediation plans are being implemented.