Release Date: October 23, 2024
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 third quarter with organic sales up 19% and double-digit growth across all regions.
- The company achieved a significant milestone with an adjusted operating margin surpassing 20% for the first time.
- Vertiv Holdings Co (VRT) raised its full-year guidance across all financial metrics, expecting organic growth of 14% and adjusted operating profit of $1.485 billion.
- The company is experiencing robust demand in the data center market, driven by AI and cloud computing, with a strong pipeline and backlog supporting future growth.
- Vertiv Holdings Co (VRT) is rapidly gaining market share in liquid cooling, with growth in this segment exceeding market growth.
Negative Points
- The company acknowledged that continued 60% order increases are unlikely, indicating potential moderation in order growth.
- There is competition in the liquid cooling market, and Vertiv Holdings Co (VRT) does not expect to win 100% of all orders.
- The company is not providing a view on Q4 orders due to the difficulty in forecasting, which may create uncertainty for investors.
- APAC adjusted operating margin declined 260 basis points from the previous year, primarily due to unfavorable mix and a favorable discrete item in last year's third quarter.
- The company faces challenges with inflation and supply chain resilience, which it incorporates into its commercial excellence programs.
Q & A Highlights
Q: As hyperscalers are starting to build out multi-location campuses, how does the order timing for you work out? Do you receive an order for all the buildings at the campus at a single point in time?
A: We see large campuses and data center deployments happening at a large scale. Generally, we get good visibility on the entire program, but the exact way POs are placed is specific to the individual hyperscaler. Typically, POs are placed for buildings being deployed at that time, providing us with longer visibility on the PO we receive.
Q: Regarding the outperformance in Q3 orders, was there anything that pushed out on you in the quarter? Did you hit most of what you expected to hit from an orders perspective around timing?
A: We exceeded our guidance and expectations for Q3 orders. The market dynamics remain unchanged, and we have a strong pipeline going forward. We are happy with the way the pipeline is unfolding into orders, and we have experienced consistent pipeline growth over several quarters.
Q: As you think about calendar '25 revenue acceleration, how do you expect backlog to trend in that framework? Is the acceleration coming from backlog normalizing, or is there enough demand for backlog growth?
A: It's a bit premature to elaborate too much on '25 revenue acceleration. However, we are operating in a favorable market, winning in this market, and seeing strong pipelines. We are optimistic about the landscape and will provide more details in our upcoming investor event.
Q: Are you still getting the same win rate or even a higher win rate as the market moves further into liquid cooling?
A: We are happy with the trajectory of our win rates, which are consistent with our market share ambitions, including for liquid cooling. We are still in transition, but signals point towards the additional $0.5 million TAM per megawatt we indicated last year.
Q: How do you feel about current capacity and the need for further expansion based on pipeline growth?
A: Our capacity situation is not dramatically different from before. We have the ability to accelerate in the short term if needed, and capacity is constantly expanding. Our Vertiv operating system and lean activities continue to liberate capacity, supporting our growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
