Vertiv Holdings Co Q1 FY2025 earnings call

• Dave Cote highlighted satisfaction with 2025 start, strong execution, and market position, emphasizing R&D investments and capacity paying off. - Giordano Albertazzi noted strong Q1 performance, including EPS up 49% to $0.64, organic net sales up 25%, and backlog expansion to $7.9 billion. - Discussed Vertiv Operating System (VOS) driving manufacturing productivity and efficiency. - Outlined tariff mitigation strategy, including local capacity expansion in the US, progress in Mexico for USMCA qualification, and deployment of lower tariff alternatives for Chinese-sourced demand. - Highlighted partnership with NVIDIA on a prefabricated AI factory project, leveraging Vertiv's infrastructure solutions.

In the first quarter, Americas and APAC showed strong top-line growth, including China. EMEA's growth lagged other regions primarily due to slower AI infrastructure build, but its orders pipeline continued to expand. Adjusted operating margin increased across all regions compared to the prior year's first quarter, with operational leverage as the primary driver.

• Raised full-year sales growth guidance to 18%, with organic sales growth expected at 18% midpoint. - Maintained EPS guidance midpoint at $3.55 but expanded the range. - Adjusted operating profit guidance midpoint at $1.935 billion, but adjusted operating margin guidance reduced to 20.5% midpoint due to tariff impact. - Illustrated adjusted operating profit under various scenarios, including upside and downside scenarios based on sales and tariff uncertainties.

• Tariff situation remains fluid, creating uncertainty. The impact of tariffs on adjusted operating margin, especially in the second quarter, is a key risk. The company is working on supply chain and commercial countermeasures but there is still uncertainty regarding the full effect of tariffs.

Q: How do you see the mitigation efforts for tariffs phasing in through 2025?

A: The impact of countermeasures will compound as the year progresses. It involves a combination of price actions on new contracts and supply chain reconfiguration, with the net impact of tariffs expected to sequentially decline as the year progresses.

Q: What's driving the strength and durability of orders growth?

A: Pipelines are growing sequentially, with pipeline velocity stable. The long-term trajectory aligns with the five-year model shared, and demand is spread across various segments beyond just hyperscalers.

Q: Can you talk about the balance sheet and share repurchases?

A: Having a strong balance sheet is important in uncertain times. There is an active M&A pipeline, and share repurchases are opportunistic, considering market fluidity and blackout periods.

Q: How do you manage production slots given market dynamics with hyperscalers?

A: There is demand to cover capacity, with increased capacity and sales growth in Q1 indicating that demand is spry and spread across various segments, not solely dependent on individual customers.

Q: How to track liquid cooling demand?

A: Blackwell shipments are a good proxy, but liquid cooling demand also relates to other chips and silicon, with deployment often preceding chip shipments by a few months.