10-QPeriod: Q1 FY2023

Vertiv Holdings Co Quarterly Report for Q1 Ended Mar 31, 2023

Filed April 28, 2023For Securities:VRT

Summary

Vertiv Holdings Co (VRT) reported a significant turnaround in its financial performance for the first quarter of 2023 compared to the same period in the prior year. The company achieved substantial revenue growth, driven by increased sales volumes and effective price realization, particularly in the Americas and Europe, Middle East & Africa regions. This top-line expansion, coupled with improved gross margins, translated into a strong rebound in profitability, with net income rising dramatically year-over-year. Despite ongoing supply chain challenges and inflationary pressures, Vertiv demonstrated resilience by navigating these headwinds. The company's strategic pricing actions and operational efficiencies contributed to a healthier gross profit margin, even as cost of sales increased. While SG&A expenses saw a modest rise, they decreased as a percentage of sales, indicating improved operating leverage. The company also saw a significant reduction in losses related to the change in fair value of warrant liabilities, further bolstering its net income. Vertiv's improved cash flow from operations highlights progress in its working capital initiatives and operational execution.

Financial Highlights

51 data points
Beta

Revenue

$1.52B

32.6% Gross Margin

Net Income

$50.30M

3.3% Net Margin

EPS (Diluted)

$0.12

Total Assets

$7.26B

Cash & Equivalents

$280.80M

Free Cash Flow

$14.20M

Financial Statements
Beta
Revenue$1.52B
Cost of Revenue$1.03B
Gross Profit$495.50M
SG&A Expenses$308.70M
Operating Income$130.30M
Interest Expense$46.80M
Net Income$50.30M
EPS (Basic)$0.13
EPS (Diluted)$0.12
Shares Outstanding (Basic)378.13M
Shares Outstanding (Diluted)381.68M

Key Highlights

  • 1Net sales increased by 31.5% to $1,521.1 million in Q1 2023 from $1,156.4 million in Q1 2022, driven by higher volumes and price realization.
  • 2Gross profit margin improved to 32.6% in Q1 2023 from 26.3% in Q1 2022, reflecting successful pricing strategies and operational improvements.
  • 3Net income surged to $50.3 million ($0.12 per diluted share) in Q1 2023, a substantial increase from a net loss of ($0.23) per diluted share in Q1 2022, largely due to revenue growth and a favorable change in warrant liabilities.
  • 4Operating profit improved significantly to $130.3 million in Q1 2023, a stark contrast to an operating loss of $45.2 million in Q1 2022.
  • 5The Americas segment showed exceptional growth, with net sales up 61.1% and operating profit increasing by 229.2%.
  • 6Net cash provided by operating activities improved to $42.0 million in Q1 2023, a significant turnaround from a use of $132.2 million in Q1 2022.
  • 7The company ended the quarter with a stronger balance sheet, including increased cash and cash equivalents and a reduction in accumulated deficit.

Frequently Asked Questions

The substantial increase in net sales of 31.5% was primarily driven by higher sales volumes and effective price realization, totaling $105.0 million in the first quarter of 2023 compared to the prior year. Although foreign currency fluctuations had a negative impact of $42.7 million, the overall volume and pricing gains more than offset this.

Vertiv observed reduced reliance on costly spot buys and premium freight in Q1 2023 compared to 2022. While inflation in materials and logistics persists, the company has implemented pricing actions to reflect anticipated cost increases and has seen logistical challenges abate. These measures, along with ongoing working capital initiatives to optimize inventory, are helping to mitigate these pressures.

The change in fair value of warrant liabilities represents mark-to-market adjustments. In Q1 2023, this resulted in a gain of $4.2 million, a significant improvement from a gain of $94.9 million in Q1 2022. This favorable swing greatly contributed to the company's net income increase. The gain in Q1 2023 was influenced by the exercise of private placement warrants by GS Sponsor LLC.

Vertiv expects capital expenditures of approximately $150 million for the full year 2023. The company believes its current cash reserves, combined with availability under its ABL Revolving Credit Facility, provide sufficient liquidity for the next 12 months, supporting both ongoing operations and growth investments. Access to capital markets remains a focus, though subject to various market factors.