Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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Unless the context otherwise requires, all references in this section to the “we,” “us,” “our,” the “Company” or “GSAH” refer to GSAH prior to the consummation of the Business Combination. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the audited financial statements and the notes related thereto which are included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Special Note Regarding Forward-Looking Statements,” “Item 1A. Risk Factors” and elsewhere in this Annual Report on Form 10-K.

Overview

As of December 31, 2019, we were a blank check company incorporated as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We reviewed a number of opportunities to enter into a business combination with an operating business, and entered into the Merger Agreement on December 10, 2019. We financed the Business Combination through the issuance of shares of our Class A common stock to the Vertiv Stockholder, the PIPE Investors and the Subscribing Vertiv Executives and cash.

At December 31, 2019, we had cash and cash equivalents of $955,457, current liabilities of $6,602,104 and deferred underwriting compensation of $24,150,000.

Results of Operations

For the years ended December 31, 2019, 2018 and 2017, we had net income/(loss) of $4,389,796, $5,030,748 and $(1,276), respectively. Our income for 2019 consist solely of dividends earned. Our business activities from Inception to December 31, 2019 consisted primarily of our formation, completing our IPO and identifying and evaluating prospective acquisition targets for an initial business combination.

Liquidity and Capital Resources

Until the closing of the IPO, our only source of liquidity was from the sale of the founder shares to an affiliate of our Sponsor and the proceeds of a promissory note (the “Note”) from an affiliate of the Sponsor, in the amount of $300,000, as well as the proceeds of a 2016 promissory note from an affiliate of the Sponsor (the “2016 Note”), in the amount of $300,000. The Note and the 2016 Note were repaid upon the closing of the IPO and in December 2016, respectively.

On June 12, 2018, we closed the IPO of 69,000,000 units, including 9,000,000 units issued pursuant to the exercise by the underwriters of their option to purchase additional units in full, at a price of $10.00 per unit, generating proceeds to us of $690,000,000 before underwriting discounts and expenses. Simultaneously with the closing of the IPO, we closed the private placement of an aggregate of 10,533,333 private placement warrants, each exercisable to purchase one share of our Class A common stock, par value $0.0001 per share, at an exercise price of $11.50 per share, to the Sponsor, at a price of $1.50 per private placement warrant, generating proceeds of $15,800,000. On the closing of the IPO, we placed $690,000,000 of proceeds (including $24,150,000 of deferred underwriting discount) from the IPO and the sale of the private placement warrants into a trust account (the “Trust Account”) and held $2,000,000 (net of offering expenses, other than underwriting discounts, paid upon the consummation of the IPO) of such proceeds outside the Trust Account. Of the funds held outside the Trust Account, $300,000 was used to repay the Note to the Sponsor, with the balance used or reserved for: offering and formation costs; legal, accounting, due diligence, travel and other expenses in connection with any business combinations; legal and accounting fees related to regulatory reporting requirements; NYSE continued listing fees; office space, administrative and support services; a reserve for liquidation expenses; and working capital to cover miscellaneous expenses (including franchise taxes net of anticipated interest income).

At December 31, 2019 we had cash and cash equivalents held outside the Trust Account of $955,457 and working capital deficit of $4,845,200, not including balances of Trust Account, deferred underwriting compensation and franchise tax liabilities. At December 31, 2019, such funds held outside the trust account were held in money market funds registered under the Investment Company Act and compliant with Rule 2a-7. As of December 31, 2019, we held $706,486,486 in Goldman Sachs Financial Square Treasury Investments Fund, a money market fund managed by an affiliate of the Sponsor.

On March 11, 2019, GS Sponsor Member, an affiliate of the Sponsor, provided us with the Sponsor Commitment (as defined below) pursuant to which GS Sponsor Member agreed that, if funds were needed by us through June 12, 2020 to pay ordinary course expenses, GS Sponsor LLC would provide us with liquidity of up to an aggregate of $2.0 million. As of December 31, 2019, we have received all of the $2.0 million from GS Sponsor LLC pursuant to this commitment. GS Sponsor Member did not receive any additional interest in us in exchange for any such contribution and any liquidity provided under the Sponsor Commitment was in the form of a contribution with respect to the Sponsor’s Founder Shares.

In addition, income on the funds held in the Trust Account were released to us to pay our franchise and income taxes.

On the Closing Date, Vertiv Holdings Co (formerly known as GS Acquisition Holdings Corp), consummated the Business Combination pursuant to that certain Merger Agreement, by and among GSAH, Vertiv Holdings, the Vertiv Stockholder, the First Merger Sub and the Second Merger Sub. As contemplated by the Merger Agreement, (1) First Merger Sub merged with and into Vertiv Holdings, with Vertiv Holdings continuing as the surviving entity and (2) immediately following the First Merger and as part of the same overall transaction as the First Merger, Vertiv Holdings merged with and into Second Merger Sub, with Second Merger Sub continuing as the surviving entity and renamed “Vertiv Holdings, LLC.” As a result of the consummation of the Business Combination, (a) the Company directly owns all of the equity interests of Vertiv Holdings, LLC and indirectly owns the equity interests of its subsidiaries and (b) the Vertiv Stockholder, the sole equity owner of Vertiv Holdings prior to the Business Combination, holds 118,261,955 shares of our Class A common stock as of March 9, 2020. In connection with the Business Combination, the registrant changed its name from GS Acquisition Holdings Corp to “Vertiv Holdings Co”. See “Item 1. Business—Business Combination.”

Concurrently with the execution of the Merger Agreement, GSAH entered into the Subscription Agreements with the PIPE Investors pursuant to which the PIPE Investors collectively subscribed for 123,900,000 PIPE Shares for an aggregate purchase price equal to $1,239,000,000. The PIPE Investment was consummated in connection with the consummation of the Business Combination. See “Item 1. Business—Business Combination.”

To further its objective to explore future financing options to optimize its capital structure, on January 31, 2020, Vertiv commenced a process to (i) amend and extend the Prior Asset-Based Revolving Credit Facility and (ii) refinance (a) the indebtedness represented by the Prior Term Loan Facility, (b) the 2022 Senior Notes, (c) the 2024 Senior Notes and (d) the 2024 Senior Secured Notes. In connection with the refinancing process, on January 31, 2020, Vertiv called each of the Prior Notes for conditional redemption on March 2, 2020, in accordance with the respective indentures governing the Prior Notes. In addition, a total of $500,000 principal amount of 2024 Senior Notes were tendered in the change of control offer made in connection with the Business Combination and were repurchased on February 7, 2020.

On the Closing Date and prior to the completion of the refinancing, Vertiv used a portion of the proceeds from the Business Combination, including the PIPE Investment, to repay $176 million of the outstanding indebtedness under the Prior Asset-Based Revolving Credit Facility and approximately $1.29 billion of the outstanding indebtedness under the Prior Term Loan Facility.

On March 2, 2020, Vertiv Holdings Co completed the refinancing by entering into (i) the Amendment to the Prior-Asset Based Revolving Credit Facility, which Amendment extended the maturity of, and made certain other modifications to, the Prior Asset-Based Revolving Credit Facility and (ii) the Term Loan Facility, with the borrowings thereunder used to repay or redeem, as applicable, in full the Prior Term Loan Facility and the Prior Notes. The refinancing transactions reduce Vertiv Holdings Co’s debt service requirements going forward and extend the maturity profile of its indebtedness. For more information regarding the refinancing transactions, see “Item 1. Business—Recent Developments.”

Off-Balance Sheet Arrangements

We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements (within the meaning of Item 303 of Regulation S-K) as of December 31, 2019. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements (within the meaning of Item 303 of Regulation S-K).

We have not entered into any off-balance sheet financing arrangements (within the meaning of Item 303 of Regulation S-K), established any special purpose entities, guaranteed any debt or commitments of other entities, or entered into any non-financial agreements involving assets.

Contractual Obligations

At December 31, 2019, we did not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities. On June 7, 2018, we entered into an administrative support agreement pursuant to which we agreed to pay an affiliate of the Sponsor a total of $10,000 per month for office space, administrative and support services. For the year ended December 31, 2019, we incurred expenses of $120,000 for such services. The administrative support agreement was terminated on the Closing Date.

The underwriters of the IPO were entitled to underwriting discounts and commissions of 5.5%, of which 2.0% ($13,800,000) was paid at the closing of the IPO and 3.5% ($24,150,000) was deferred. The deferred underwriting discount was paid to the underwriters on the Closing Date.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following as our critical accounting policies:

Net Income Per Common Share

We comply with accounting and disclosure requirements of FASB ASC Topic 260, Earnings Per Share. Net income per share of common stock is computed by dividing net income by the weighted average number of common shares outstanding during the period. We apply the two-class method in calculating earnings per share. Accretion associated with the redeemable shares of Class A common stock is excluded from Earnings Per Share (“EPS”) as the redemption value approximates fair value.

At December 31, 2019, we had outstanding warrants to purchase of up to 33,533,317 shares of Class A common stock. The weighted average of these shares was excluded from the calculation of diluted net income per share of common stock since the exercise of the warrants is contingent upon the occurrence of future events. At December 31, 2019, we did not have any dilutive securities or other contracts that could, potentially, be exercised or converted into shares of common stock and then share in our earnings. As a result, diluted net income per share of common stock is the same as basic net income per share of common stock for the year.

Redeemable Shares of Class A Common Stock

All of the 69,000,000 shares of Class A common stock sold as parts of the units in the IPO contain a redemption feature. In accordance with FASB ASC 480, redemption provisions not solely within our control require the security to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions of FASB ASC 480. Although we had not specified a maximum redemption threshold at December 31, 2019, GSAH’s Certificate of Incorporation provided that in no event would we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001.

Accordingly, at December 31, 2019, 65,673,521 of the 69,000,000 shares of our Class A common stock were classified outside of permanent equity at their redemption value.

Offering Costs

We comply with the requirements of the FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A – “Expenses of Offering.” We incurred offering costs in connection with our IPO of $992,949. These costs, together with the upfront underwriter discount and deferred discount of $37,950,000, were charged to the shares of our Class A common stock and warrants upon the closing of our IPO. The deferred discount was paid on the Closing Date.

Recent Accounting Pronouncements

In November 2016, the FASB issued Accounting Standards Update No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”), which requires companies to include cash and cash equivalents that have restrictions on withdrawal or use in total cash and cash equivalents on the statement of cash flows. We adopted this guidance as of January 1, 2019. Prior periods were retrospectively adjusted to conform to the current period presentation. The adoption of the guidance did not have a material impact on our Statement of Cash Flows.