Vertiv Delivers Strong Fourth Quarter and Full Year 2020 Operating Performance

Vertiv Delivers Strong Fourth Quarter and Full Year 2020 Operating Performance

Fourth quarter net sales growth of 11.4% versus prior year fourth quarter with continuing strength in cloud, colocation and telecommunication end markets, organic sales up 9.5%. Orders up 9% compared to prior year fourth quarter.

Fourth quarter net income of $75 million and adjusted EBITDA of $187 million, with adjusted EBITDA margin percentage increasing 160 basis points to 14.3% from prior year’s fourth quarter.

Quarter-end liquidity of $964 million includes benefit from public warrant redemption, which bolstered liquidity and reduced net leverage to 2.8x.

Full year 2021 guidance includes net sales in the range of $4,750 million to $4,800 million, organic net sales growth of 6.5% to 7.5% and adjusted diluted earnings per share of $1.01 to $1.06. Adjusted operating profit guidance of $565 million to $585 million, up 68% at the mid-point of guidance compared to full year 2020.

COLUMBUS, Ohio–(BUSINESS WIRE)–Vertiv Holdings Co (NYSE: VRT), a global provider of critical digital infrastructure and continuity solutions, today reported strong operating and financial results for its fourth quarter and full year 2020.

Vertiv reported fourth quarter net sales of $1,306 million, 11.4% higher than the prior year quarter, and 9.5% higher on an organic basis when adjusted for foreign currency exchange rates. EMEA net sales increased 24.6% (19.2% organic) driven by colocation and cloud data center projects, services and telecom. APAC net sales increased 18.8% (14.8% organic) led by strength in data centers, telecom and wind power. Americas net sales growth of 0.6% (1.7% organic) was led by strength in telecom markets offset by lower services sales due to site access challenges. Backlog was $1.85 billion at the end of 2020, up approximately $450 million, or 32%, from year-end 2019. Net income of $75 million increased $109 million from the fourth quarter prior year driven by $51 million lower interest expense, $40 million higher gross profit driven by higher sales, and $26 million lower selling, general and administrative expenses. Fourth quarter adjusted EBITDA of $187 million increased 25.7% from the prior year quarter and adjusted EBITDA margin improved 160 basis points to 14.3%, benefiting from favorable volume impact and holding fixed costs relatively flat.

“We are pleased to report that Vertiv performed well in 2020,” said Rob Johnson, Vertiv’s Chief Executive Officer. “Our performance confirmed that our near and long-term business plans are sound; that Vertiv is positioned to create and deliver shareholder value; and that we have a clear path to accelerated growth. Not to be overlooked, we also demonstrated that the people of Vertiv around the world are extraordinary employees who blend talent with experience, focus with perseverance, and commitment with agility, all the while achieving business success even in the most challenging of times. We are so proud of the global Vertiv team.”

Johnson continued, “Our business success was shaped by and accomplished in the face of strong economic headwinds due to the continuing global pandemic, which pressured economies worldwide. It was a year that tested our business model and our ability to serve customers in an ever-changing and quickly growing digital marketplace. The Vertiv approach to business worked. We continued to deploy the Vertiv Operating System (VOS), we’ve increased velocity of our Vertiv Product Development (VPD) technology programs, all while keeping a sharp focus on costs. We are a company with solid organic growth, and we have made good progress in achieving significant margin expansion and healthy cash flow. We will remember 2020 for all the right reasons. We enabled people and businesses around the world to engage, communicate and share information. We were there to connect businesses, consumers and e-commerce, doctors and patients, families and loved ones. We will continue to be at the intersection of business, commerce and society for years to come. It’s what we do.”

Dave Cote, Vertiv’s Executive Chairman, added, “It was only about one year ago when Vertiv first appeared on the New York Stock Exchange as a listed company, positioned as a publicly traded, global leader and provider of critical digital infrastructure and continuity solutions. During the past year, our business culture strengthened and business metrics improved, marked by achievement-oriented people and teams, innovative thinking, sharp customer focus and a commitment to value creation for our shareholders.”

Free Cash Flow and Liquidity

Net cash flow from operations in the fourth quarter was $195 million. Free cash flow was $175 million, an increase of $86 million from last year’s fourth quarter, primarily driven by $38 million higher adjusted EBITDA, $33 million lower cash interest and $29 million lower transformation-related spending, partially offset by $15 million in higher trade working capital cash usage. Liquidity at the end of the fourth quarter was $964 million, an increase of $311 million from the end of third quarter 2020, which included $157 million in cash proceeds received in the fourth quarter from the public redemption of outstanding warrants. The outstanding balance on our asset-based lending (ABL) facility was zero at the end of 2020, as a result of $100 million pay down in the fourth quarter.

First Quarter and Full Year 2021 Guidance

We are transitioning our primary financial operating metric from adjusted EBITDA to adjusted operating profit. Adjusted operating profit represents operating profit excluding the impact of intangible amortization. Additional detail and information for this transition is included in the 2020 fourth quarter and year-end earnings presentation and Exhibit 99.2 in the earnings release 8-K.

Based upon our assessment of information we know today – which could be influenced by changes to our market or supply chain dynamics pursuant to COVID-19 – we provide current first quarter and full year 2021 financial guidance as follows:

 

Full Year 2021 Guidance

 

First Quarter 2021 Guidance

Net sales

$4,750 million to $4,800 million

 

$1,020 million to $1,060 million

Organic net sales growth

6.5% to 7.5%

 

11% to 15%

Adjusted operating profit

$565 million to $585 million

 

$70 million to $80 million

Adjusted operating profit margin

11.9% to 12.2%

 

6.9% to 7.5%

Adjusted EPS

$1.01 to $1.06

 

$0.09 to $0.12

Fourth Quarter and Full Year 2020 Earnings Conference Call

Vertiv’s management team will discuss the company’s results during a conference call on Wednesday, February 24, starting at 11 a.m. Eastern Time. The call will contain forward-looking statements and other material information regarding Vertiv’s financial and operating results. A webcast of the live conference call will be available for interested parties to listen to by going to the Investor Relations section of the company’s website at investors.vertiv.com. A replay of the conference call will also be available for 30 days following the webcast.

About Vertiv Holdings Co

Vertiv (NYSE: VRT) brings together hardware, software, analytics and ongoing services to ensure its customers’ vital applications run continuously, perform optimally and grow with their business needs. As Architects of Continuity™, Vertiv solves the most important challenges facing today’s data centers, communication networks and commercial and industrial facilities with a portfolio of power, cooling and IT infrastructure solutions and services that extends from the cloud to the edge of the network. Headquartered in Columbus, Ohio, Vertiv employs approximately 20,000 people and does business in more than 130 countries. For more information, and for the latest news and content from Vertiv, visit Vertiv.com.

Non-GAAP Financial Measures

Financial information included in this news release have been prepared in accordance with Generally Accepted Accounting Principles (“GAAP”). Vertiv has included certain non-GAAP financial measures in this news release, as further described below, that may not be directly comparable to other similarly titled measures used by other companies and therefore may not be comparable among companies. These non-GAAP financial measures include organic net sales growth, adjusted EBITDA, adjusted operating profit, adjusted EPS, adjusted EBITDA margin, adjusted operating profit margin and free cash flow, which management believes provides investors with useful supplemental information to evaluate the Company’s ongoing operations and to compare with past and future periods. Management also uses certain non-GAAP measures internally for forecasting, budgeting and measuring its operating performance. These measures should be viewed as supplementing, and not as an alternative or substitute for, the Company’s financial results prepared in accordance with GAAP. Pursuant to the requirements of Regulation G, Vertiv has provided reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures.

Information reconciling certain forward-looking GAAP measures to non-GAAP measures related to first quarter and full year 2021 guidance, including organic net sales growth and free cash flow, is not available without unreasonable effort due to high variability, complexity and uncertainty with respect to forecasting and quantifying certain amounts that are necessary for such reconciliations. For the same reasons, we are unable to compute the probable significance of the unavailable information, which could have a potentially unpredictable, and potentially significant, impact on our future GAAP financial results.

See “Reconciliation of GAAP and Non-GAAP Financial Measures” on Exhibits 99.1 and 99.2 of this news release for Vertiv’s reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures.

Cautionary Note Concerning Forward-Looking Statements

This news release, and other statements that Vertiv may make in connection therewith, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. This includes, without limitation, statements regarding the financial position, capital structure, indebtedness, business strategy and plans and objectives of Vertiv management for future operations, as well as statements regarding growth, anticipated demand for our products and services and our business prospects during fourth quarter 2020, as well expected cost savings associated with our restructuring program. These statements constitute projections, forecasts and forward-looking statements and are not guarantees of performance. Vertiv cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “strive,” “would” and similar expressions may identify forward-looking statements. Vertiv undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

The forward-looking statements contained or incorporated by reference in this news release are based on current expectations and beliefs concerning future developments and their potential effects on Vertiv. There can be no assurance that future developments affecting Vertiv will be those that Vertiv has anticipated. Vertiv undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond Vertiv’s control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of the assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. Vertiv has previously disclosed risk factors in its Securities and Exchange Commission (“SEC”) reports. These risk factors and those identified elsewhere in this news release, among others, could cause actual results to differ materially from historical performance and include, but are not limited to: the future financial performance of Vertiv; the outcome of any legal proceedings that may be instituted against Vertiv or any of its directors or officers; factors relating to the business, operations and financial performance of Vertiv and its subsidiaries, including: global economic weakness and uncertainty; risks relating to the continued growth of Vertiv’s customers’ markets; failure to meet or anticipate technology changes; the unpredictability of Vertiv’s future operational results; disruption of Vertiv’s customers’ orders or Vertiv’s customers’ markets; less favorable contractual terms with large customers; risks associated with governmental contracts; failure to mitigate risks associated with long-term fixed price contracts; risks associated with information technology disruption or security; risks associated with the implementation and enhancement of information systems; failure to properly manage Vertiv’s supply chain or difficulties with third-party manufacturers; competition in the infrastructure technologies industry; failure to realize the expected benefit from any rationalization and improvement efforts; disruption of, or changes in, Vertiv’s independent sales representatives, distributors and original equipment manufacturers; failure to obtain performance and other guarantees from financial institutions; failure to realize sales expected from Vertiv’s backlog of orders and contracts; changes to tax law; ongoing tax audits; risks associated with future legislation and regulation of Vertiv’s customers’ markets both in the United States and abroad; costs or liabilities associated with product liability; Vertiv’s ability to attract, train and retain key members of its leadership team and other qualified personnel; the adequacy of Vertiv’s insurance coverage; a failure to benefit from future acquisitions; failure to realize the value of goodwill and intangible assets; the global scope of Vertiv’s operations; risks associated with Vertiv’s sales and operations in emerging markets; exposure to fluctuations in foreign currency exchange rates; Vertiv’s ability to comply with various laws and regulations and the costs associated with legal compliance; adverse outcomes to any legal claims and proceedings filed by or against us; Vertiv’s ability to protect or enforce its proprietary rights on which its business depends; third-party intellectual property infringement claims; liabilities associated with environmental, health and safety matters, including risks associated with the COVID-19 pandemic; risks associated with Vertiv’s limited history of operating as an independent company; potential net losses in future periods; our ability to realize cost savings in connection with our restructuring program; and other risks and uncertainties indicated in Vertiv’s SEC reports or documents filed or to be filed with the SEC by Vertiv.

Source: Vertiv Holdings Co

Category: Financial News

Vertiv Holdings Co

 

CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) (Unaudited)

 

(Dollars in millions except for per share data)

 

 

Three months
ended December 31,
2020

 

Three months
ended December 31,
2019

 

Year ended
December 31,
2020

 

Year ended
December 31,
2019

Net sales

 

 

 

 

 

 

 

Net sales – products

$

1,020.1

 

$

878.1

 

 

$

3,308.8

 

 

$

3,356.1

 

Net sales – services

285.4

 

293.4

 

 

1,061.8

 

 

1,075.1

 

Net sales

1,305.5

 

1,171.5

 

 

4,370.6

 

 

4,431.2

 

Costs and expenses

 

 

 

 

 

 

 

Cost of sales – products

715.1

 

607.9

 

 

2,290.5

 

 

2,349.2

 

Cost of sales – services

163.2

 

176.4

 

 

606.4

 

 

629.0

 

Cost of sales

878.3

 

784.3

 

 

2,896.9

 

 

2,978.2

 

Selling, general and administrative expenses

265.5

 

291.8

 

 

1,008.4

 

 

1,100.8

 

Loss on extinguishment of debt

 

 

 

174.0

 

 

 

Other deductions, net

41.6

 

47.5

 

 

251.8

 

 

146.1

 

Interest expense, net

25.0

 

76.2

 

 

150.4

 

 

310.4

 

Earnings (loss) before income taxes

95.1

 

(28.3

)

 

(110.9

)

 

(104.3

)

Income tax expense (benefit)

20.2

 

5.6

 

 

72.7

 

 

36.5

 

Net earnings (loss)

$

74.9

 

$

(33.9

)

 

$

(183.6

)

 

$

(140.8

)

 

 

 

 

 

 

 

 

Earnings (loss) per share:

 

 

 

 

 

 

 

Basic

$

0.23

 

$

(0.29

)

 

$

(0.60

)

 

$

(1.19

)

Diluted

$

0.22

 

$

(0.29

)

 

$

(0.60

)

 

$

(1.19

)

Weighted-average shares outstanding

 

 

 

 

 

 

 

Basic

330,335,268

 

118,261,955

 

 

307,076,397

 

 

118,261,955

 

Diluted

345,136,798

 

118,261,955

 

 

307,076,397

 

 

118,261,955

 

Vertiv Holdings Co

 

CONSOLIDATED BALANCE SHEETS (Unaudited)

 

(In millions)

 

 

December 31, 2020

 

December 31, 2019

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

534.6

 

 

$

223.5

 

Accounts receivable, less allowances of $22.3 and $19.9, respectively

1,354.4

 

 

1,212.2

 

Inventories

446.6

 

 

401.0

 

Other current assets

183.2

 

 

180.7

 

Total current assets

2,518.8

 

 

2,017.4

 

Property, plant and equipment, net

427.6

 

 

428.2

 

Other assets:

 

 

 

Goodwill

607.2

 

 

605.8

 

Other intangible assets, net

1,302.5

 

 

1,441.6

 

Deferred income taxes

20.9

 

 

9.0

 

Other

196.8

 

 

155.4

 

Total other assets

2,127.4

 

 

2,211.8

 

Total assets

$

5,073.8

 

 

$

4,657.4

 

LIABILITIES AND EQUITY

 

 

 

Current liabilities:

 

 

 

Current portion of long-term debt and short-term borrowings

$

22.0

 

 

$

 

Accounts payable

730.5

 

 

636.8

 

Accrued expenses and other liabilities

901.8

 

 

867.7

 

Income taxes

18.8

 

 

15.2

 

Total current liabilities

1,673.1

 

 

1,519.7

 

Long-term debt, net

2,130.5

 

 

3,467.3

 

Deferred income taxes

116.5

 

 

124.7

 

Other long-term liabilities

485.4

 

 

250.5

 

Total liabilities

4,405.5

 

 

5,362.2

 

Equity

 

 

 

Preferred stock, $0.0001 par value, 5,000,000 shares authorized, none issued and outstanding

 

 

 

Common stock, $0.0001 par value, 700,000,000 shares authorized, 342,024,612 and 118,261,955 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively

 

 

 

Additional paid-in capital

1,804.3

 

 

277.7

 

Accumulated deficit

(1,187.5

)

 

(1,000.6

)

Accumulated other comprehensive (loss) income

51.5

 

 

18.1

 

Total equity (deficit)

668.3

 

 

(704.8

)

Total liabilities and equity

$

5,073.8

 

 

$

4,657.4

 

Vertiv Holdings Co

 

CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)

 

(In millions)

 

 

Three months ended
December 31, 2020

 

Three months ended
December 31, 2019

 

Year ended
December 31, 2020

 

Year ended
December 31, 2019

Cash flows from operating activities:

 

 

 

 

 

 

 

Net earnings (loss)

$

74.9

 

 

$

(33.9

)

 

$

(183.6

)

 

$

(140.8

)

Adjustments to reconcile net loss to net cash used for operating activities:

 

 

 

 

 

 

 

Depreciation

17.4

 

 

14.4

 

 

60.3

 

 

57.1

 

Amortization

35.0

 

 

36.6

 

 

142.8

 

 

145.8

 

Deferred income taxes

6.3

 

 

(5.5

)

 

(1.4

)

 

(13.8

)

Amortization of debt discount and issuance costs

1.5

 

 

6.7

 

 

10.5

 

 

27.9

 

Loss on extinguishment of debt

 

 

 

 

174.0

 

 

 

Asset impairment

(0.7

)

 

 

 

21.0

 

 

 

Stock-based compensation

6.0

 

 

 

 

13.0

 

 

 

Tax receivable agreement

2.5

 

 

 

 

21.3

 

 

 

Changes in operating working capital

41.3

 

 

67.8

 

 

(60.8

)

 

(36.4

)

Other

10.3

 

 

29.5

 

 

11.8

 

 

17.7

 

Net cash provided by operating activities

194.5

 

 

115.6

 

 

208.9

 

 

57.5

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Capital expenditures

(23.1

)

 

(19.7

)

 

(44.4

)

 

(47.6

)

Investments in capitalized software

(3.4

)

 

(7.2

)

 

(8.3

)

 

(22.7

)

Proceeds from disposition of property, plant and equipment

7.0

 

 

 

 

7.0

 

 

5.0

 

Net cash used for investing activities

(19.5

)

 

(26.9

)

 

(45.7

)

 

(65.3

)

Cash flows from financing activities:

 

 

 

 

 

 

 

Borrowings from ABL revolving credit facility

 

 

110.0

 

 

324.2

 

 

491.8

 

Repayments of ABL revolving credit facility

(100.0

)

 

(129.0

)

 

(470.5

)

 

(591.2

)

Proceeds from short-term borrowings

 

 

 

 

22.0

 

 

 

Repayment of short-term borrowings

(19.4

)

 

 

 

(23.2

)

 

 

Proceeds from the issuance of 10.00% Notes

 

 

 

 

 

 

114.2

 

Borrowing on Term Loan, net of discount

 

 

 

 

2,189.0

 

 

 

Repayment on Term Loan

(5.5

)

 

 

 

(16.5

)

 

 

Repayment on Prior Term Loan

 

 

 

 

(2,070.0

)

 

 

Repayment of Prior Notes

 

 

 

 

(1,370.0

)

 

 

Payment of redemption premiums

 

 

 

 

(75.0

)

 

 

Payment of debt issuance cost

 

 

 

 

(11.2

)

 

 

Proceeds from reverse recapitalization, net

 

 

 

 

1,832.5

 

 

 

Payment to Vertiv Stockholder

 

 

 

 

(341.6

)

 

 

Dividend payment

(3.3

)

 

 

 

(3.3

)

 

 

Proceeds from the exercise of warrants

156.5

 

 

 

 

156.5

 

 

 

Other financing

0.1

 

 

 

 

(2.2

)

 

 

Net cash provided by (used for) financing activities

28.4

 

 

(19.0

)

 

140.7

 

 

14.8

 

Effect of exchange rate changes on cash and cash equivalents

6.9

 

 

4.5

 

 

5.0

 

 

1.4

 

Increase (decrease) in cash, cash equivalents and restricted cash

210.3

 

 

74.2

 

 

308.9

 

 

8.4

 

Beginning cash, cash equivalents and restricted cash

332.3

 

 

159.5

 

 

233.7

 

 

225.3

 

Ending cash, cash equivalents and restricted cash

$

542.6

 

 

$

233.7

 

 

$

542.6

 

 

$

233.7

 

Changes in operating working capital

 

 

 

 

 

 

 

Accounts receivable

$

(38.3

)

 

$

(2.6

)

 

$

(114.8

)

 

$

39.8

 

Inventories

26.0

 

 

42.3

 

 

(38.5

)

 

85.5

 

Other current assets

(0.2

)

 

(9.3

)

 

7.8

 

 

(41.6

)

Accounts payable

57.4

 

 

20.6

 

 

78.2

 

 

(140.8

)

Accrued expenses and other liabilities

16.1

 

 

36.0

 

 

13.3

 

 

34.8

 

Income taxes

(19.7

)

 

(19.2

)

 

(6.8

)

 

(14.1

)

Total changes in operating working capital

$

41.3

 

 

$

67.8

 

 

$

(60.8

)

 

$

(36.4

)

Reconciliation of GAAP and non-GAAP Financial Measures

To supplement our consolidated financial statements that have been prepared in accordance with GAAP, we have included certain non-GAAP financial measures in this press release, as further defined below. Management believes these non-GAAP financial measures provide investors with additional meaningful financial information that should be considered when assessing our underlying business performance and trends. Further, management believes these non-GAAP financial measures also enhance investors’ ability to compare period-to-period financial results. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the company’s reported results prepared in accordance with GAAP. Our non-GAAP financial measures do not represent a comprehensive basis of accounting. Therefore, our non-GAAP financial measures may not be comparable to similarly titled measures reported by other companies. Reconciliations of each of these non-GAAP financial measures to GAAP information are also included. Management uses these non-GAAP financial measures in making financial, operating, compensation and planning decisions and in evaluating the company’s performance. Disclosing these non-GAAP financial measures allows investors and management to view our operating results excluding the impact of items that are not reflective of the underlying operating performance.

Vertiv’s non-GAAP financial measures include:

EBIT, which represents income (loss) from continuing operations before interest expense, income tax expense (benefit);

EBITDA, which represents income (loss) from continuing operations before interest expense, income tax expense (benefit), and depreciation and amortization;

Adjusted EBITDA, which represents EBITDA, adjusted to exclude certain unusual or non-recurring itemContacts
For investor inquiries, please contact:

Lynne Maxeiner
Vice President, Global Treasury & Investor Relations
Vertiv
T: +1 614-841-6776
E: [email protected]

For media inquiries, please contact:

Sara Steindorf
FleishmanHillard for Vertiv
T: +1 314-982-1725
E: [email protected]
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