Summary
Vertiv Holdings Co reported strong top-line growth in the second quarter and first half of 2021, with net sales increasing by 25.3% and 23.9% respectively, year-over-year. This growth was driven by broad demand across its product and service offerings, favorable foreign currency movements, and a recovery from the COVID-19 pandemic. Despite increased sales, gross profit margins saw a slight decrease due to rising commodity and logistic costs. The company also experienced an increase in SG&A expenses, partly due to the lapsing of COVID-19 related cost-saving measures from the prior year. Operationally, the company returned to profitability in the second quarter of 2021, reporting a net income of $9.7 million, a significant improvement from a net loss of $56.0 million in the same period last year, and a net income of $41.4 million for the first half of 2021 compared to a loss of $264.3 million in the prior year. The company also showed improved cash flow from operations. Vertiv is actively managing its debt, having amended its Term Loan Credit Agreement to reduce interest rate margins. The company's liquidity appears solid, with significant cash on hand and availability under its ABL Revolving Credit Facility. However, investors should note the disclosure of material weaknesses in internal control over financial reporting, though remediation plans are in place.
Financial Highlights
50 data points| Revenue | $1.26B |
| Cost of Revenue | $851.00M |
| Gross Profit | $409.30M |
| SG&A Expenses | $271.70M |
| Operating Income | $102.20M |
| Interest Expense | $20.00M |
| Net Income | $9.70M |
| EPS (Basic) | $0.03 |
| EPS (Diluted) | $0.03 |
| Shares Outstanding (Basic) | 352.20M |
| Shares Outstanding (Diluted) | 356.65M |
Key Highlights
- 1Significant Net Sales Growth: Net sales increased by 25.3% to $1,260.3 million for Q2 2021 and by 23.9% to $2,358.7 million for the first half of 2021 compared to the prior year periods.
- 2Return to Profitability: Vertiv reported a net income of $9.7 million for Q2 2021, a substantial turnaround from a net loss of $56.0 million in Q2 2020. First half net income was $41.4 million, compared to a loss of $264.3 million.
- 3Improved Operating Cash Flow: Cash flow from operating activities significantly improved, turning positive to $120.0 million in the first half of 2021 from a negative $121.7 million in the same period last year.
- 4Gross Profit Margin Pressure: While sales grew, gross profit margin slightly decreased from 34.4% in Q2 2020 to 32.5% in Q2 2021 due to increased commodity and logistic costs.
- 5SG&A Increase: Selling, General, and Administrative expenses rose by 20.1% year-over-year in Q2 2021, partly due to the reversal of prior year cost-saving measures.
- 6Debt Management: Interest expense decreased significantly due to debt refinancing and reduced interest rates, including an amendment to the Term Loan Credit Agreement in March 2021.
- 7Material Weaknesses Identified: The company disclosed material weaknesses in its internal control over financial reporting related to IT general controls and aggregation of open control deficiencies, with remediation plans in progress.