Vertiv, a global provider of critical digital infrastructure and continuity solutions, reported strong financial and operational performance in its third quarter 2023 earnings call. Organic sales were up 17% with the Americas region leading the growth at 40%. The company also reported strong order bookings, up 11% year-on-year. Vertiv raised its full-year guidance, expecting sales to increase by 21% organically, with adjusted operating profit between $1,020 million and $1,030 million, and adjusted free cash flow of $625 million.
Key takeaways from the call include:
- Vertiv's adjusted operating margin improved significantly, reaching 17%, 790 basis points higher than the previous year.
- The company generated $221 million in adjusted free cash flow, a year-over-year improvement of $241 million.
- Net leverage declined to 2.4 times at the end of the quarter and is expected to be approximately 2.1 times by year-end.
- The company revised its full-year guidance, with projected sales and adjusted operating profit increasing by approximately $30 million and $580 million, respectively.
- Vertiv expects more tailwinds than headwinds in 2024, with a focus on operational execution.
CEO Giordano Albertazzi discussed Vertiv's expectations for future growth, noting that the company anticipates a more normal first half/second half split in 2023, with a flat H1 and H2 due to a backlog residue from 2022. For 2024, they expect around 45% top-line growth in the first half and 55% in the second half.
Albertazzi also discussed the company's AI-related pipeline, stating that Vertiv predominantly sees new build opportunities but also has encouraging conversations about retrofitting data centers. He expressed confidence in the long-term trend of AI adoption and stated that it is just the beginning of a multi-year cycle.
The CEO further discussed the company's progress in improving its supply chain and expanding capacity to support future growth. He mentioned that Vertiv has a global capacity that can be leveraged for the US market, and they are actively working on certifications to meet different electrical standards.
Albertazzi also highlighted the company's strong order volume and the opportunities in alternative power solutions, such as dynamic power solutions and battery energy storage systems. He noted that their power management solutions would benefit from the expansion of power consumption in data centers.
Regarding service growth, Albertazzi stated that service is accelerating towards double-digit growth, particularly in the life cycle segment, and highlighted their ability to support customers in the complexity of high-density computing.
When asked about capital deployment and M&A, Albertazzi urged patience until their Investor Day on November 29th, where they will provide more details. The call concluded with a reminder about the upcoming Investor Conference in November.
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