Release Date: April 23, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Vertiv Holdings Co (VRT, Financial) reported a strong first quarter with EPS up 49% to $0.64, driven by increased adjusted operating profit.
- Organic net sales grew by 25%, indicating that the company is outperforming market growth.
- The company achieved a book-to-bill ratio of 1.4 times, reflecting strong demand and order growth.
- Adjusted free cash flow was $265 million, up 162% year-over-year, showcasing strong cash generation.
- Vertiv Holdings Co (VRT) raised its full-year sales growth guidance to 18%, demonstrating confidence in continued market demand.
Negative Points
- The tariff situation remains fluid and poses a significant challenge, with potential negative impacts on operating margins.
- EMEA region's growth lagged behind the Americas and APAC, primarily due to slower AI infrastructure build.
- The company faces uncertainty in mitigating the impact of tariffs, which could affect profitability.
- There is a potential headwind for free cash flow in the next quarter due to accelerated collections in Q1.
- Despite strong performance, the company has not engaged in share repurchases, raising questions about capital allocation priorities.
Q & A Highlights
Q: How do you see the mitigation efforts for tariffs phasing in through 2025, and is repricing of contracts part of the strategy?
A: Giordano Albertazzi, CEO, explained that the impact of countermeasures will compound as the year progresses. The strategy includes price actions on new contracts and existing backlog where needed, as well as supply chain reconfiguration. David Fallon, CFO, added that the net impact of tariffs is expected to sequentially decline as the year progresses, with the goal of achieving tariff neutrality by year-end.
Q: What is driving the impressive order performance, and how durable is this growth?
A: Giordano Albertazzi, CEO, stated that the growth is driven by expanding pipelines, which are growing sequentially and providing more visibility into the future. The company focuses on long-term trajectory rather than short-term fluctuations, and the current pipeline velocity is stable, indicating durable growth.
Q: Can you provide more details on the gross tariff-related pressure and how you plan to counteract it?
A: David Fallon, CFO, did not disclose specific numbers but emphasized that the company is focused on reducing the gross impact through pricing and supply chain countermeasures. Both measures are expected to equally contribute to mitigating the tariff impact.
Q: How is Vertiv managing production capacity given the dynamic market environment, especially with hyperscalers?
A: Giordano Albertazzi, CEO, mentioned that while specific customer details are not disclosed, the company has increased capacity to meet demand, which is spread across hyperscalers, colocation providers, and emerging markets like sovereign and enterprise sectors. The demand is robust enough to cover any potential gaps from rephased orders.
Q: How are you handling the ability to reprice the backlog in light of tariffs, and what is the customer response?
A: Giordano Albertazzi, CEO, noted that conversations with customers are ongoing, and while contracts vary, there is a general understanding of the challenging environment. The company has assessed the risk and believes it has accurately modeled the price countermeasure in its guidance.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
