Vertiv Holdings Co Q3 FY2025 earnings call

• Q3 performance demonstrated the strength of the strategy and execution, with adjusted diluted EPS up 63% year over year.
• Organic sales grew 28%, with Americas up 43% and APAC up 21%, while EMEA declined 4%.
• 1.4 times book-to-bill ratio in Q3, and trailing twelve-month organic orders growth of about 21%.
• Adjusted operating profit reached $596 million, up 43% year on year with a 22.3% margin, exceeding guidance.
• Adjusted free cash flow was $462 million, up 38%.
• Sales grew 29% in the quarter, building an additional $1 billion in backlog from Q2, with total backlog at $9.5 billion.
• Services capabilities are fundamental to the competitive position, combining advanced technology, global reach, and growing capability, with the WeiLay acquisition accelerating this advantage.
• Engineering and R&D spending continues to accelerate to strengthen industry leadership.

In the third quarter, Americas had organic sales growth of 43%, APAC had 21% organic growth, and EMEA saw a 4% decline in organic sales. Adjusted diluted EPS was $1.24, up about 63% year over year. Adjusted operating profit was $596 million, up 43% year on year with a 22.3% margin. Americas' organic top-line growth was driven by accelerated AI demand across product lines and customer segments, with margin expanding 400 basis points despite tariff headwinds. APAC saw 21% organic growth as AI infrastructure continued to drive growth. EMEA's organic sales were down 4% due to industry challenges, but sales were higher than expected heading into the quarter, with expectations of reacceleration in the back half of 2026.

• Raising full-year guidance for adjusted EPS, net sales, adjusted operating profit, and adjusted free cash flow.
• Fourth quarter guidance: Expect adjusted diluted EPS of $1.26, net sales at $2.85 billion with organic growth of approximately 20%, adjusted operating profit expected to be $639 million with adjusted operating margin of 22.4%.
• Full-year guidance: Raising projection for adjusted diluted EPS to 4.10, net sales to $10.2 billion with 27% organic growth, adjusted operating profit to $2.602 billion, and adjusted free cash flow to $1.5 billion.

• Tariffs remain a risk, with the situation fluid and needing comprehensive mitigation actions. The impact of tariffs was partially offsetting operating profit, but mitigation strategies are progressing to materially offset their impact as we exit Q1 2026.
• Geopolitical shifts and regulatory challenges in EMEA could impact sales and margins.

Q: Impressive set of results here despite the stock reaction today. Do have hoping you could just maybe help us understand the order of that you're seeing that you're talking about today up 60%. What is driving this And really the part I would love to understand is, when you see Oracle reported $300 billion plus RPO number or OpenAI announced a 10 gigawatt deal with NVIDIA, what's the cadence for these big announcements to flow into orders and revenues for Vertiv?

A: The drivers are a combination of a very good market, technology evolution in the market going in our direction, and an industry that trusts Vertiv's scale. On big announcements like Oracle and OpenAI, the dynamics of orders to Vertiv relative to the backlog of customers can be different, but there is a build-out happening.

Q: Gio, since you emphasized it on Slide five, kind of the services opportunity here, could you give us a little bit more color on perhaps the margin structure of services versus equipment, the growth rate? Is it outgrowing equipment? Or since we're in such a hyper-growth period for equipment, perhaps it's not, but it comes in later.

A: We love our service business, it's a unique competitive advantage. The service business is accretive and generates recurring revenue. In times when the product system side is growing fast, the service business typically lags but is a strong flywheel catching up speed. The type of equipment being deployed and data center density is conducive to more business service penetration.