Q4 2024 Earnings Summary
- Vertiv is experiencing extraordinarily strong orders in the Americas, particularly in the colocation and cloud segments, indicating robust growth prospects in their largest market.
- The company is well-positioned to capitalize on the growing AI infrastructure demand, being agnostic to whether the workloads are inference or training, and can support high-density compute requirements regardless of the silicon provider, which expands their addressable market.
- Despite current timing delays in orders in EMEA due to regulatory and slower decision-making processes, Vertiv expects acceleration in orders and growth in that region during 2025, supported by a strong pipeline, indicating that any current weakness is temporary.
- Potential Disconnect Between Vertiv's Orders and Customer CapEx Spending: Multiple analysts questioned whether there is a disconnect between Vertiv's reported orders and the significant CapEx investments announced by their customers. Analyst Stephen Tusa noted that Vertiv's orders seemed to have stepped down over the last two quarters, despite customers talking about doubling their data center businesses. This may indicate that Vertiv is not fully capturing the market growth.
- Weakness and Delays in the EMEA Region: The company acknowledged a slowdown in orders in the EMEA region, with some projects being pushed into 2025 due to regulatory issues and slower decision-making. Vertiv reduced its EMEA growth outlook from high teens in mid-November to high single digits, suggesting regional challenges that could impact near-term performance.
- Concerns About First Quarter Revenue Seasonality: Analysts expressed concern that the first-quarter revenue guidance appears lower than normal seasonality, possibly indicating demand softness or timing issues. Stephen Tusa highlighted that, from a timing perspective, the first quarter seems to be down more than normal seasonality, which could be a potential concern.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +26% | The total revenue increased from $1.865 billion to $2.346 billion (26% YoY), driven by robust sales volumes and effective execution across regions and product lines. This build on previous period momentum—where higher sales volumes and pricing improvements set a strong foundation—ensures continued revenue expansion. |
Operating Income | +60% | Operating income surged by 60% YoY, rising from $285.2 million to $457.2 million, reflecting strong operational leverage from improved margins and cost efficiencies. Enhanced pricing actions and productivity gains, similar to those observed in earlier periods, contributed to this robust performance. |
Net Income | -37% | Net income declined roughly 37% YoY, falling from $232.6 million to $147.0 million, despite the notable top‐line and operating improvements. This divergence suggests that increased non‐operating expenses—such as higher income tax expense or other financial adjustments—offset the operational gains witnessed in prior periods. |
Interest Expense | -28% | Interest expense was reduced by 28% YoY, from $42.9 million to $30.7 million, primarily stemming from favorable debt restructuring, including amendments to the Term Loan that lowered the interest rate margin, together with increased interest income. This mirrors earlier efforts to manage financing costs effectively. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Adjusted EPS | Q1 2025 | no prior guidance | $0.60 | no prior guidance |
Organic Sales Growth | Q1 2025 | no prior guidance | 19% | no prior guidance |
Adjusted Operating Profit | Q1 2025 | no prior guidance | $325 million | no prior guidance |
Adjusted Operating Margin | Q1 2025 | no prior guidance | 16.9% | no prior guidance |
Adjusted Free Cash Flow | Q1 2025 | no prior guidance | Slightly higher than Q1 2024 | no prior guidance |
Adjusted EPS | FY 2025 | no prior guidance | $3.55 | no prior guidance |
Sales | FY 2025 | no prior guidance | Approximately $9.2 billion | no prior guidance |
Organic Sales Growth | FY 2025 | no prior guidance | 16% | no prior guidance |
Adjusted Operating Profit | FY 2025 | no prior guidance | $1.935 billion | no prior guidance |
Adjusted Operating Margin | FY 2025 | no prior guidance | 21% | no prior guidance |
Adjusted Free Cash Flow | FY 2025 | no prior guidance | $1.3 billion | no prior guidance |
R&D and Growth Investments | FY 2025 | no prior guidance | Approximately $160 million | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Sales Growth | Q4 2024 | 13% | 25.8% year-over-year (calculated from 1,865.4To 2,346.4) | Beat |
Adjusted Operating Profit | Q4 2024 | $437 million | $457.2 million | Beat |
Adjusted Operating Margin | Q4 2024 | 20.4% | 19.5% (calculated from $457.2M ÷ $2,346.4M) | Missed |
Adjusted Operating Profit | FY 2024 | $1.485 billion | $1,367.4 million (sum of 202.6, 336, 371.6, 457.2) | Missed |
Adjusted Operating Margin | FY 2024 | 19% | 17.1% (calculated from $1,367.4M ÷ $8,011.8M) | Missed |
Adjusted Diluted EPS | FY 2024 | $2.68 | ~$1.28 (quarterly sum of -0.02, 0.46, 0.46, 0.38) | Missed |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
AI-Driven Demand | Consistently highlighted as a major growth driver in Q1–Q3, with strong pipelines, high-density computing needs, and broad portfolio benefits | Reaffirmed as the main growth catalyst, driven by hyperscaler investments and increased power/complexity requirements for AI data centers | Continues to be a top positive driver, sustaining bullish sentiment |
EMEA Region Outlook | Q1 noted double-digit organic growth ; Q2–Q3 had strong performance (e.g., 25% organic growth in Q3) but no explicit negativity | Some project delays but confidence in a 2025 rebound, citing a robust pipeline and later-stage AI adoption in the region | Shift from earlier caution to optimism for 2025 growth |
Pricing Power & Margin Expansion | Emphasized across Q1–Q3 as a core driver of strong results and higher guidance; favorable price-cost environment and incremental margins | Not explicitly a key focus in Q4, but improved margin (21.5%) partly attributed to price/cost execution rather than volume alone | Still present but less explicit mention in Q4 |
Liquid Cooling | Specifically called out in Q1 and Q3 for AI and high-density workloads, with capacity expansions and broad solutions portfolio | No direct reference in Q4 [No Q4 references] | Absent in Q2 and Q4 |
Capacity Expansions | Discussed in Q1–Q3 to support demand (new plants, expanded facilities, and ongoing investments in powertrain/thermal) | Not explicitly noted in Q4; only general references to supply base expansion for strong demand | Ongoing but less detail provided in Q4 |
Orders vs. Customer CapEx Disconnect | Not mentioned in Q1–Q3 | Newly raised in Q4, with concerns about slower orders vs. high customer CapEx; management stated there is no real disconnect | New topic introduced in Q4 |
Q1 Revenue Seasonality | Historical pattern of Q4 being strongest and Q1 lowest, but no major concerns flagged in Q1–Q3 | No explicit new concerns in Q4; management advised focusing on absolute Q1 vs. Q4 performance | Not identified as a new worry in Q4 |
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EMEA Order Outlook
Q: What's causing European order weakness?
A: Giordano explained that EMEA saw material movement with orders pushed into 2025 due to regulatory issues and slower decision-making. He remains positive about EMEA's outlook, expecting acceleration in 2025 supported by robust pipelines. -
Order Growth vs. Customer CapEx
Q: Is there a disconnect between your orders and customer spending?
A: Giordano does not see a disconnect, noting a 60% year-on-year order growth in the first half of last year. He stated that customer CapEx includes silicon, not just data centers, and is confident in their market visibility and pipeline. -
Revenue Seasonality and Guidance
Q: Why is Q1 revenue down more than normal seasonality?
A: Giordano emphasized looking at Q1 in absolute terms, with a strong 19% organic growth. David added that Q1 sales as a percentage of the full-year guide are higher than last year, reflecting a step-up and supporting their trajectory. -
Capital Deployment and Buybacks
Q: What are your plans for capital deployment and buybacks?
A: Giordano stated that their M&A process remains robust but they won't make acquisitions just for the sake of it. They will continue an opportunistic approach to buybacks, authorized by the Board, and have the means to execute when the time is right. -
Impact of AI Inference and Custom Silicon
Q: How do inference acceleration and custom silicon affect Vertiv?
A: Giordano said they are agnostic between inference and training, viewing AI acceleration as beneficial. They excel in both edge and enterprise markets. Regarding custom silicon, they're agnostic to the silicon used and can adapt to different cooling and power requirements. -
Total Available Market Capture
Q: Is your dollar capture per megawatt increasing?
A: Giordano mentioned that they increased their capture range to $2.75 million to $3.5 million per megawatt in November. The exact position within this range depends on factors like region, design, and application. -
Tariff Exposure and Supply Chain Readiness
Q: What's your exposure to tariffs and supply chain issues?
A: Giordano noted they don't disclose product sourcing details but have more plants in the U.S. than Mexico. They feel prepared with playbooks to minimize impact and see a good supply chain supporting their growth plans. -
Pipeline Growth Confidence
Q: Can you quantify your pipeline growth?
A: Giordano reported robust pipeline growth quarter-over-quarter and significant year-over-year. While not providing specifics, he stated the growth is well-balanced across regions, extending visibility, and supporting long-term strategies.