Vertiv Holdings (NYSE:VRT) held its first-quarter earnings conference call on Wednesday. Below is the complete transcript from the call.
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The full earnings call is available at https://events.q4inc.com/attendee/927172850
Summary
Vertiv Holdings Co reported a strong first quarter, with organic sales up 23% year-over-year and adjusted diluted EPS of $1.17, an 83% increase from the prior year.
The company raised its full-year guidance, now expecting adjusted diluted EPS of $6.35, supported by a projected 53% increase in adjusted operating profit.
Strategically, the company is focusing on capacity expansion and acquisitions to enhance its competitive position, including recent acquisitions of Thermokay and BMARCA structures.
Regionally, America showed significant strength with 44% organic growth, while EMEA is expected to return to sales growth in the second half of 2026.
Management expressed confidence in handling supply chain challenges and tariff impacts, emphasizing their strategic capacity investments and supply chain resilience.
Full Transcript
OPERATOR
Good morning, my name is Jeannie and I will be your conference operator today. At this time I would like to welcome everyone to Vertiv Holdings Co’s first quarter 2026 earnings conference call. All lines have been placed on mute to prevent any background noise. Please note that this call is being recorded. I would now like to turn the program over to your host for today’s conference call, Lynn Maxiner, Vice President of Investor Relations. Great. Thank you. Jeannie. Good morning and welcome to Vertiv Holdings Co’s first quarter 2026 earnings conference call. Joining me today are Vertiv Holdings Co’s Executive Chairman Dave Cody, Chief Executive Officer Gio Albertazzi and Chief Financial Officer Craig Chamberlain. We have one hour for the call today. During the Q and 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 of Virta. 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@investors.vertivholdingsco.com with that, I’ll turn the call over to Executive Chairman Dave Cody.
Dave Cody (Executive Chairman)
I’m very pleased with how we started off the year. The momentum we’re seeing across the business is strong and it’s translating into the kind of performance that gives us confidence to raise our outlook for the full year. What we’re seeing in customer conversations is different than six months ago. The urgency has increased, the scale of deployments is larger and the technical complexity is creating opportunities for companies that can solve system level problems which is exactly where we excel. We’re seeing broad based strength and that tells you something about the depth of demand and our ability to capture it. I like what we’re seeing in the industry and the continued evolution of Vertiv Holdings Co we’re still in the early stages of the infrastructure build out for AI. Our competitive advantages are compounding. If you can deliver products, systems, integrated solutions and services that scale, you become even more important to your customers. Technology roadmaps we’re also managing the challenges well. Tariffs, supply chain complexity, labor constraints, these are real, but they’re manageable and additionally they raise the bar in ways that favor established players like us. Gio and the team are executing very well in this rapid growth environment, balancing aggressive growth and share gain with operational discipline. We’re expecting a strong year ahead and strong years in the future. So with that let me turn it over to Gio to discuss it further.
Gio Albertazzi (Chief Executive Officer)
Gio well thank you very much Dave. Let us go to slide 3. Well, I’m quite pleased with how we started 2026. Q1 was very strong with organic sales up 23% year on year with reported growth of 3. 30%. When we include MA and FX from a regional perspective, America was the primary engine with 44% organic growth. APEC was up 12% organically. LATAM was down 29% organically. In the few slides you will hear us elaborate on some of the encouraging dynamics we are seeing in EMEA (Europe, Middle East, and Africa). Adjusted operating margin came in at 20.8%, up 430 basis points year on year and 180 basis points above our guidance margin. Performance and strong top line growth drove adjusted operating profit of $551 million up 64% year on year. Adjusted diluted EPS of $1.17 were up 83% versus Q1.25 and EXC exceeded our guidance by $0.19. Adjusted free cash flow of $653 million was up 147 versus the prior year driven by higher operating profit and continued working capital improvement. We are raising our full year guidance and we now expect adjusted diluted EPS of $6.35 up 51% from 2025. This is supported by raising our adjusted operating profit guidance to $3.2 billion, up 53% from 2025. Adjusted operating margin is now expected to be 23.3%, 290 basis points higher than 2025. And let’s go to Slide 4. And let’s start with the market environment. Our pipeline momentum continues to be strong, our pipeline generation is robust and we’re still expecting another year of strong orders performance in 2026. We anticipate orders to be up year over year which reflects the sustained demand environment we are seeing across our markets. Americas continues to show remarkable strength the market momentum is broad based and robust. Our pipeline in the region continues to expand as we convert opportunities in emea. The spring continues to uncoil. We’re seeing improving market sentiment throughout the quarter with momentum building. I know we do not disclose orders, but we are very pleased with EMEA (Europe, Middle East, and Africa)’s Q1 bookings. We feel good about EMEA (Europe, Middle East, and Africa) returning to year over year sales growth in the second half which you see embedded in our guidance. When it comes to apac, we see positive market dynamics across the region. Rest of Asia and India are showing convincingly strong pipelines and dynamics with robust momentum building. China is also showing encouraging pipeline movement and this positions us well as we move through the year on pricing, we continue to see favorable dynamics. We expect positive price costs in 2016 including the impact of tariffs and tariffs countermeasures. From a manufacturing and supply chain perspective, we’re expanding while continuing to strengthen our resilience. Our regionalized footprint and multi sourcing strategies are maintaining stability despite evolving dynamic trade dynamics and tensions in the Middle East. We are accelerating our strategic capacity investments to meet the demand we’re seeing. We’re expanding our global manufacturing service footprint while unlocking latent capacity with VOS driven productivity gains. Our cost management remains disciplined. We expect these investments to position us very well for the current and future demand environment. We manage commodities and components proactively. This combined with our multi source model and supplier diversification provides a critical buffer in what remains in an inflationary environment. Through various countermeasures, we are actively working to mitigate tariff exposures including recent changes under Section 122 and 232. In this very dynamic environment, growth wise, geopolitically, etc. We stay focused on supply chain resilience growth, capacity expansion and navigating the tariff environment. A lot going on but we are focused on execution and let’s go now to Slide 5. We continue to see very robust growth in demand for data centers and as a result we are focusing investments on capacity expansion, supply chain and engineering capabilities. We are committed to continue to grow capacity supporting our customer demand and we continue to deliver above market growth. Our capex in Q1 sustainably higher than in the same quarter last year is testament to that commitment. We are making significant investments in capacity expansion across both manufacturing and services. On the manufacturing side, we’re expanding capacity organically across multiple sites globally and particularly across the Americas, of which you see some details here. These investments are strategic and positions us to meet the accelerating demand. We do this for growth but also to bolster our overall operational resiliency. This capacity expansion is broad based power management, thermal management infrastructure solutions and IT systems across all technologies. We’re doing the same with our services capability. Specifically, we’re scaling our people and service capacity vigorously and convincingly across all service technologies and regions. In particular, the acquisition of Purgerite significantly strengthens our fluid management and liquid cooling capabilities, enhancing our system level services offering. This is one of the most technically demanding and financially consequential aspects of modern data center operations. With respect to our supply chain, we have prioritized multi sourcing strategies to mitigate supplier risk. Strategic acquisitions are further strengthening our supply chain capabilities. And finally, we continue to prioritize investment in our engineering capabilities in multiple directions. Clearly one is engineering labs central to development of our technology portfolio. Customer witness test capabilities are another important area of investment. The complexity of data center technologies requires extensive test capacity at the beginning of a delivery. Growing customer test capacity with volume is a growth enabler. We will have an opportunity to continue to elaborate on what capacity expansion means during our upcoming investor day. And with that, it’s over to you, Craig.
Craig Chamberlain (Chief Financial Officer)
Thanks Gio. Let’s start with the first quarter results on slide 6. As you can see, we had an excellent start to the year. Adjusted diluted EPS was $1.17 up 83% year over year and 19 cents above our prior guidance. On the top line, net sales were 2.65 billion, up 30% versus prior year with organic net sales up 23% with acquisitions contributing 4% and favorable FX adding 3%. This organic growth was driven by Americas up 44% and APAC up 12%, partially offset by EMEA (Europe, Middle East, and Africa) down 29%. Organically adjusted operating profit of 551 million increased 64% versus the prior year and came in 56 million higher than our guidance. Our adjusted operating margin of 20.8% expanded by 430 basis points versus last year, showing a great operating performance from the team. The main drivers were strong operational leverage on higher volumes, productivity gains and favorable price cost execution, which was partially offset by ongoing tariff headwinds. On the cash side, we delivered $653 million of adjusted free cash flow. That’s up 147% from the prior year first quarter this was supported by higher operating profit and working capital efficiency, partially offset by higher cash tax and increased net CapEx. As we continue investing in capacity and R&D to support business growth, we exited the quarter with net leverage of 0.2x, providing us with significant strategic flexibility. Flipping to Slide 7, let’s look at segment performances by region, Americas delivered another outstanding quarter. Net sales were 1.81 billion, up 53% with 44% organic growth reflecting strong broad based momentum across nearly all product lines. Adjusted operating profit was 490 million with margins benefiting from operational leverage, disciplined execution and commercial intensity. Looking at APAC, net sales were 514 million, up 15% 12% organically. Organic growth came in below quarterly guidance primarily due to timing. Adjusted operating profit of 67 million was up approximately 48% year on year, mainly driven by volume, leverage and operating discipline. Turning to EMEA (Europe, Middle East, and Africa), net sales were 321 million, down 29% organically. We believe this is a temporary reflection of softer orders that we saw in Q2 and Q3 of 2025. However, we are seeing opportunity generation accelerating reflecting improved customer demand and supporting a return to sales growth in the back half of 2026. We saw a step down in margins here year over year due to operating deleverage. However, our conviction has gotten stronger for a second half recovery in EMEA (Europe, Middle East, and Africa) which you see embedded in our EMEA (Europe, Middle East, and Africa) full year guidance on Slide 8. Let’s discuss our second quarter guidance. We’re projecting adjusted diluted EPS at the midpoint of $1.4 which is 47% higher than our second quarter 2025. Net sales at the midpoint are 3.35 billion which reflects 27% net sales growth versus prior year. Adjusted operating profit at the midpoint of 710 million represents 45% growth versus the second quarter 2025. This strong profit growth is supported by robust organic sales growth and continued operating leverage. Adjusted operating margins at the midpoint of 21.2% is up 270 basis points supported by strong organic sales growth and fixed cost leverage. Additionally, we expect to materially offset unfavorable margin impact from tariffs. This guidance reflects our confidence in the strength of our market position and our ability to execute on the significant opportunities ahead of us. Now on to slide nine. Let’s talk about our full year 2026 guidance. We continue to expect another strong year of strong performance across all key metrics. We are raising adjusted diluted EPS guidance by $0.33 to a midpoint of $6.35 which represents 51% growth versus prior year for net sales. We’re updating Our guide to 13.75 billion at the midpoint reflecting 34% net sales growth versus prior year by region. We expect organic growth rates of high 30s in Americas, mid 20s in APAC and flat in EMEA (Europe, Middle East, and Africa). The updated adjusted operating profit is now at a midpoint of 3.2 billion, representing 53% growth versus prior year and 160 million higher than our prior guidance. This strong profit growth is driven by a combination of robust organic sales growth and continued operational leverage. Finally, on margins, we’re guiding to 23.3% adjusted operating margin at the midpoint an expansion of 290 basis points from 20, 25 and 80 basis points higher than our prior guidance. This expansion is supported by 30% organic sales growth and continued operational leverage. We expect to be price calls positive for the year, inclusive of tariffs impact and the countermeasures with fixed cost leverage. Still investing in growth ER&D and capacity for adjusted free cash flow, we’re maintaining our guidance of 2.2 billion at the midpoint, up 17% versus prior year primarily due to higher operating profit partially offset by higher cash tax and net capex investment. With that, I’ll hand it back to you Gio.
Gio Albertazzi (Chief Executive Officer)
Well, thank you Craig and let us go to slide 10. And before I wrap up, I once again want to invite all of you to tune in to our 2026 investor conference that will be held on the 19th and 20th of May in Greenville, South Carolina. This will be an excellent opportunity to gain firsthand insight into vertif’s visions and strategy from our leadership team. On the first day the agenda includes a comprehensive market update, a detailed financial overview and our updated multi year outlook and Q and A sessions of course with the leadership team. The following day we will have a technology session where you’ll hear about how we continue to innovate and drive the industry. This will be followed by a tour of our Peltar Infrastructure Solutions facility. For those who will be joining us in person, it’s going to be a great opportunity to see what we’re building and where we are headed. Now let’s go to slide 11. Our first quarter results were strong testaments to Vertiv’s execution capabilities and the momentum continuing to build in our markets. The demand environment is robust and we are very well positioned to carry that forward. We have recently announced two strategic acquisitions that are expected to strengthen our competitive …
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