Vertiv Holdings

Vice President of Investor Relations. Great. Thank you, Nadia. Good morning and welcome to Virta's fourth quarter and full year 2024 earnings conference call. Joining me today are Virta's Executive Chairman, Dave Cody, Chief Executive Officer, Gio Albertazzi, and Chief Financial Officer, Dave Fountain. We have one hour for the call today. During the Q&A portion of the call, please be mindful of others in the queue and limit yourself to one question. And if you have a follow-up question, please rejoin the queue. Before we begin, I would like to point out that during the course of this call, we will make forward-looking statements regarding future events, including the future financial and operating performance averted. These forward-looking statements are subject to material risk and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. We refer you to the cautionary language included in today's earnings release, and you can learn more about these risks in our annual and quarterly reports and other filings made with the SEC. Any forward-looking statements that we make today are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of new information or future events. During this call, we will also present both GAAP and non-GAAP financial measures. Our GAAP results and GAAP to non-GAAP reconciliations can be found in our earnings press release and in the investor slide deck found on our website at investors.vertiv.com. With that, I'll turn the call over to Executive Chairman Dave Cody.

I'd say we executed the fourth quarter in a quite convincing way, beating our sales guidance significantly and seeing that growth translate very nicely into EPS and cash flow. This is a strong reflection of the continuing transformation underway at Vertiv, and it's building a very nice track record of consistently delivering outperformance. I'd have to say over the last two or three months, I've been actually quite surprised to see the overreactions to any kind of news in our stock, whether it was the Stargate up, the deep seek, big crush downward, which made no sense given that the news implying lower cost to compute, meaning more data, meaning more data centers, meaning more verdict was actually good, not negative. Robert Forrant, And today, seeing the reaction to these from analyst reports is our reaction to orders. Robert Forrant, Again orders are quite strong for us, and if you take a look at orders historically they're always lumpy they're just the way it is it just the lumpy quarter water. Robert Forrant, And it seems to be masking the really good news we had in the fourth quarter regarding america's orders, especially as you look at. hyper and colo, which is a focus for everyone, extraordinarily strong. And that all seems to be getting masked. There's nothing I can do and nothing Gio and his team can do about what it means to those kind of overreactions. What we can manage is continued outperformance of the company when it comes to sales, earnings, and cash flows. We delivered another great year in 24. That set a firm foundation for outperformance in 2025 and beyond. And I continue to believe that the best is still ahead. We have just an absolutely terrific position in a very good industry that's going to go on for a long time, given the digital age is a long way to go, and there's nothing that replaces data centers at this point, or anything even on the horizon that says it can replace it. So I expect our continued outperformance to, well, continue for a long time. Our confidence is born not just from being in great end markets, but from the benefits we're seeing from our seed planting in R&D, customer relationships, and CapEx. I'm more convinced sitting here today, you know, I should add, in a damn good management team. I'm quite impressed with Gio and his team. I'm more convinced sitting here today that Ferdinand is well-positioned to keep

winning now and winning later it's a great combination for our shareholders so that'll turn it over to geo well thank you very much dave thank you so and with that we we turn to slide three and uh as they said this was another great quarter uh clearly strong close to another year of very strong performance all together Adjusted earnings per share were $0.99. It means a 77% increase versus prior year. It's a direct reflection of the substantial increase in profitability. Q4 organic sales growth of 27%, with the sales growth of over 20% in both Americas and APAC, and over 30% in EMEA. Our trailing 12-month orders remained strong, At 30%, about 30%, we are particularly encouraged by the Americas trailing 12 months, as Dave said, which are up over 50%. And more to come on this in the next few slides. The strong flow through to profit from our large beaten sale was visible with adjusted operating profit of $504 million and adjusted operating margin of 21.5%. which expanded 380 basis points compared to the prior year. Adjusted free cash flow generation was $362 million in Q4 and over $1.1 billion for the full year. Our net leverage reduced to 1x as we finished the year. We entered 2025 with a very strong balance sheet, which gives us a lot of optionality relative to capital deployments. In 2024, we deployed $600 million of share repurchase and announced an increase in our dividend of 50%. We increased our ER&D by 50 million, doubling down on the technology and new products that continue to separate Vertiv from competition. We anticipate our adjusted EPS for 2025 to be between $3.5 and $3.6 consistent with the guidance we provided in November. We have increased our estimate 2025 sales at approximately $9.2 billion midpoint. This is about $75 million higher than our implied sales guidance in November, despite projected FX headwinds and the Q4 overdelivered. We entered 2025 stronger than we have ever been. Let's go now to slide four. As mentioned, our trailing 12-month order growth is 30%. America's TTM organic orders were up 50% in total, with, of course, particularly strong colo and hyperscale orders. This suggests a strong market, as well as a very strong vertu presence in the market. Southeast Asia and Australia, New Zealand and India trailing 12 month orders were up significantly as well. We saw weakness in EMEA and Q4 as some project activity had a shift in timing to 2025. We are quite pleased with what we are seeing and winning in the market. And it supports our revenue projection for 2025 as does our strong backlog. which is up 30% year on year despite FX headwinds. This is a backlog to sales ratio of 78%, well above the 69% we had a year ago relative to 24 actual sales. We believe our strong backlog and new product pipeline sets up very well for many years. As Dave noted in his remark, We have heard consistently also from the largest hyperscalers, the likely compute and LLM efficiency should drive more AI adoption. Most of these hyperscalers have confirmed significant increases in their cap expand to support AI. This means large investments in data center builds that need our equipment and services. That sounds like very good news indeed for Vertiv. Let's now go to slide four. We are in slide four, sorry. We go to the right side of slide four. Supply chain resilience continues to strengthen. We have matured as an organization in this area. We have been successfully working to drive geographic balance and we continue doing so. We have multiple sources of supply to deal with geographical uncertainty. We believe price cost will be positive for 2025. While questions remain relative to potential tariff impacts, we have been adding regional sourcing and manufacturing options to complement our existing global supply chain. The situation with tariffs remains very fluid, so it would be premature to discuss it in detail. At the same time, it is worth mentioning we have, of course, built scenarios and playbooks aimed at strategically mitigating some of the tariff impacts. To be clear, Although there is much uncertainty regarding the scope and breadth of tariffs, we believe we are well prepared and take strategic actions to take strategic actions to help mitigate risks. For example, in 2024, we expanded and strengthened our supply base and manufacturing footprint in the United States as part of our overall capacity strategy to grow with the customer demand we see in the U.S. Vertical operating system is truly becoming part of the culture that is translating into tangible productivity gains. It is also liberating capacity needed to support the strong demand trajectory in combination with our ongoing footprint expansion. Let's now move to slide five. I want to highlight the importance and the strength of our power portfolio. Much of the recent focus has been on thermal technology, which of course we love. There is an equally exciting story around power for virtue. Complex technology changes are happening in the data center at a speed the industry has not seen before. AI is going to drive the need for much more power and much more complexity around the distribution of that power in a data center. You have heard us say the system matters. Well, the system matters more than ever before. It is important to understand how the entire system functions together and to design infrastructure in a way that maximizes efficiency and reliability. And now more than ever, in a way that is future proof. While the increasing densification and challenges of enabling AI data centers We see more and more opportunities to further integrate power conversion, distribution, and thermal management in ways that can simplify the critical mechanical and electrical infrastructure. Let's now move to slide six. First, let's be clear. We are a market leader in power management and have the complete powertrain. This includes all the power gear listed on the left side of the slide. Power management represents approximately one-third of our total business, and we have been in this market for decades at global scale. When we engage with our customers on their system designs, our full view of the power system enables us to help them properly scope the solution and right-side each element of the infrastructure. a holistic view of the total infrastructure and have access to and engagement with customers regarding their full facility design and challenges. Our visibility into the future of the IT loads and our leading R&D allow us to partner with our customers to make their infrastructure, very importantly, future-proof. Our differentiators for power, which apply broadly across our portfolio, also includes global and leading services, scale, and well-established customer relationships. We can package different elements of the critical infrastructure together per the customer system design in a pre-engineered and validated way with invertive manufacturing facilities before being deployed to the customer side via modules or skids. This offers tremendous value and flexibility to our customers. We see high demand for these solutions, and we are well positioned to capture that growth. We now turn to slide seven. Technology is at the core of what we do, and we have unique abilities in the market. For example, Virtu's expertise and capabilities in both AC power and DC power conversion and power distribution enable us to work with customers to evaluate different system design approaches to best meet their needs. Our technology and portfolio are clear differentiators in the market. We are helping to define the roadmaps of the future. On the right side of the slide are some examples of recent innovations. Many, many of you got to see some of our innovative technologies at SC24. Very flexible solutions to give customers the ability to adapt to their infrastructure and adapting infrastructure to the changing conditions within the data center, helping them to future-proof their infrastructure. As we sit at the table with the largest customers and technology partners in the world, we have the honor and important responsibility to help them navigate increasingly technical, complex infrastructure requirements. And then we scale. Vertiv can talk technical and scale evolution with our customers at levels most cannot. Let's go to slide eight. We announced a small acquisition in December, BSE, which has high efficiency, high capacity centrifugal chiller technology and heat reuse technology. This technology is increasingly used to support high density compute applications. The approach here is quite like the one we took with Kultera a little over a year ago. These are technology-based acquisitions, early on the technology maturity curve that reinforce organic progress and can scale globally. We are very excited to add this technology to our portfolio. When we look at the right side of this slide, we have a strong balance sheet. We have ample liquidity and net leverage is at 1x. our capital deployment priorities remain consistent with what we described in November. We will focus growth, investment, organic or inorganic. We also have optionality with our share repurchase program, which has $2.4 billion remaining under the board authorization. We have optionality with our dividends. We announced a 50% increase to $0.15 annually back in November, and we expect to double that amount over the five-year planning period. We committed to achieving and maintaining investment-grade ratings and continue to make progress. With that, over to you, David. Perfect.