Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless the context otherwise indicates or requires, references to (1) “the Company,” “we,” “us” and “our” refer to Vertiv Holdings Co, a Delaware corporation, and its consolidated subsidiaries following the business combination; (2) “GSAH” refers to GS Acquisition Holdings Corp prior to the business combination; and (3) “Holdings” refers to Vertiv Holdings, LLC and its subsidiaries prior to the business combination. In addition, dollar amounts are stated in millions, except for per share amounts. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K/A filed April 30, 2021 for the year ended December 31, 2020.

Cautionary Note Regarding Forward-looking Statements

This Quarterly Report on Form 10-Q, and other statements that Vertiv may make, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, with respect to Vertiv’s future financial or business performance, strategies or expectations, and as such are not historical facts. This includes, without limitation, statements regarding the financial position, capital structure, indebtedness, business strategy and plans and objectives of Vertiv management for future operations. These statements constitute projections, forecasts and forward-looking statements, and are not guarantees of performance. Vertiv cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used in this Quarterly Report on Form 10-Q, words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “strive,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements contained or incorporated by reference in this Quarterly Report on Form 10-Q are based on current expectations and beliefs concerning future developments and their potential effects on Vertiv. There can be no assurance that future developments affecting Vertiv will be those that Vertiv has anticipated. Vertiv undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond Vertiv’s control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of the assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. Vertiv has previously disclosed risk factors in its Securities and Exchange Commission (“SEC”) reports, including those set forth in its Annual

Report on Form 10 K/A for the year ended December 31, 2020 filed with the SEC on April 30, 2021. These risk factors and those identified elsewhere in this Quarterly Report on Form 10-Q, among others, could cause actual results to differ materially from historical performance and include, but are not limited to: competition, the ability of Vertiv to grow and manage growth profitably, maintain relationships with customers and suppliers and retain its management and key employees; and factors relating to the business, operations and financial performance of Vertiv and its subsidiaries, including: global economic weakness and uncertainty; risks relating to the continued growth of Vertiv’s customers’ markets; failure to meet or anticipate technology changes; the unpredictability of Vertiv’s future operational results, including the ability to grow and manage growth profitably; disruption of Vertiv’s customers’ orders or Vertiv’s customers’ markets; less favorable contractual terms with large customers; risks associated with governmental contracts; failure to mitigate risks associated with long-term fixed price contracts; risks associated with information technology disruption or security; risks associated with the implementation and enhancement of information systems; failure to properly manage Vertiv’s supply chain or difficulties with third-party manufacturers; competition in the infrastructure technologies industry; failure to realize the expected benefit from any rationalization, restructuring and improvement efforts; disruption of, or changes in, Vertiv’s independent sales representatives, distributors and original equipment manufacturers; failure to obtain performance and other guarantees from financial institutions; failure to realize sales expected from Vertiv’s backlog of orders and contracts; changes to tax law; ongoing tax audits; risks associated with future legislation and regulation of Vertiv’s customers’ markets both in the United States and abroad; costs or liabilities associated with product liability; Vertiv’s ability to attract, train and retain key members of its leadership team and other qualified personnel; the adequacy of Vertiv’s insurance coverage; a failure to benefit from future acquisitions; failure to realize the value of goodwill and intangible assets; the global scope of the Vertiv’s operations; risks associated with Vertiv’s sales and operations in emerging markets; exposure to fluctuations in foreign currency exchange rates; Vertiv’s ability to comply with various laws and regulations and the costs associated with legal compliance; adverse outcomes to any legal claims and proceedings filed by or against Vertiv; Vertiv’s ability to protect or enforce its proprietary rights on which its business depends; third party intellectual property infringement claims; liabilities associated with environmental, health and safety matters,

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including risks associated with the COVID-19 pandemic; risks associated with litigation or claims against Vertiv; Vertiv's ability to realize cost savings in connection with Vertiv's restructuring program; risks associated with Vertiv’s limited history of operating as an independent company; potential net losses in future periods; failure to remediate internal controls over financial reporting; the Company’s level of indebtedness and the ability to incur additional indebtedness; Vertiv's ability to comply with the covenants and restrictions contained in our credit agreements, including restrictive covenants that restrict operational flexibility; Vertiv's ability to comply with the covenants and restrictions contained in our credit agreements is not fully within our control; the Company’s ability to access funding through capital markets; the Vertiv Stockholder’s significant ownership and influence over the Company; risks associated with Vertiv's obligations to pay the Vertiv Stockholder portions of the tax benefits relating to pre-business combination tax assets and attributes; resales of Vertiv's securities may cause volatility in the market price of our securities; Vertiv's Organizational Documents contain provisions that may discourage unsolicited takeover proposals; Vertiv's Certificate of Incorporation includes a forum selection clause, which could discourage or limit stockholders’ ability to make a claim against it ; the ability of Vertiv's subsidiaries to pay dividends; volatility in Vertiv's stock price due to various market and operational factors; Vertiv's ability to maintain its listing on the NYSE and comply with listing requirements; risks associated with the failure of industry analysts to provide coverage of Vertiv's business or securities; and other risks and uncertainties indicated in Vertiv’s SEC reports or documents filed or to be filed with the SEC by Vertiv.

Forward-looking statements included in this Quarterly Report on Form 10-Q speak only as of the date of this Quarterly Report on Form 10-Q or any earlier date specified for such statements. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be filed with the SEC by Vertiv required under applicable securities laws. All subsequent written or oral forward-looking statements attributable to the Company or persons acting on the Company’s behalf may be qualified in their entirety by this Cautionary Note Regarding Forward-Looking Statements.

Overview

We are a global leader in the design, manufacturing and servicing of critical digital infrastructure technology that powers, cools, deploys, secures and maintains electronics that process, store and transmit data. We provide this technology to data centers, communication networks and commercial and industrial environments worldwide. We aim to help create a world where critical technologies always work, and where we empower the vital applications of the digital world.

Key Developments and Trends

Below is a summary of selected key developments affecting our business in the nine months ended September 30, 2021:

• On December 17, 2020, the Company announced its plans to redeem for cash all of its outstanding public warrants to purchase shares of our Class A common stock. In December 2020, $156.5 of cash was generated from the exercise of 13.6 million public warrants. In January 2021, 9.3 million public warrants were exercised generating cash proceeds of $107.5. Public warrants that remained unexercised as of 5 p.m. New York City time on January 19, 2021 were no longer exercisable, and the registered holders of such unexercised public warrants became entitled to receive the redemption price of $0.01 per warrant. All public warrants were exercised or redeemed as of January 22, 2021.

• On March 10, 2021, Vertiv Group Corporation, a Delaware corporation (the “Borrower”) and an indirect wholly owned subsidiary of Vertiv Holdings Co, Vertiv Intermediate Holding II Corporation, a Delaware corporation (“Holdings”) and the direct parent of Vertiv Group, and certain direct and indirect subsidiaries of the Borrower entered into an Amendment No. 1 to Term Loan Credit Agreement (the "Term Loan Amendment") with Citibank, N.A., as administrative agent (in such capacity, the “Term Agent”), and the lenders party thereto, which amended the Term Loan Credit Agreement, dated as of March 2, 2020 (as so amended the “Term Loan Credit Agreement”), by and among Holdings, the Borrower, the Term Agent and the lenders from time to time party thereto, to, among other things, reduce the interest rate margin for the Borrower’s outstanding term loans under the Term Loan Credit Agreement by 0.25%, to 2.75% in respect of term loans bearing interest based on the LIBOR rate and to 1.75% in respect of term loans bearing interest based on a base rate defined in the Term Loan Credit Agreement. The maturity date for such term loans remains March 2, 2027, and all other material provisions of the original Term Loan Credit Agreement remain materially unchanged.

*•*As previously disclosed in our 2020 Annual report on Form 10-K/A as filed on April 30, 2021, we restated the Company’s previously issued consolidated financial statements as of and for the year ended December 31, 2020, as well each of the quarters within 2020 to make the necessary accounting corrections related to warrant accounting.

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• On September 8, 2021, Vertiv Holdings Ireland DAC, a private company limited by shares incorporated in Ireland (the “Irish Buyer”), Vertiv International Holding Corporation, an Ohio corporation (the “US Buyer” and together with the Irish Buyer, the “Buyers” and each a “Buyer”) and the Company entered into a sale and purchase agreement (the “Acquisition Agreement”), to acquire shares of E+I Engineering Ireland Limited, a private company limited by shares incorporated in Ireland, and Powerbar Gulf LLC – Foreign Direct Investment, a non-freezone limited liability company incorporated and registered in Ras Al Khaimah Economic Zone-Government of Ras Al Khaimah, from the parties set forth in the Acquisition Agreement (the “Acquisition").

• The aggregate purchase price payable by the Buyers is approximately $1.8 billion in upfront consideration plus an additional potential $200.0 in cash, with the additional consideration subject to achieving certain future profit milestones. The upfront consideration consists of $1.2 billion in cash and shares of the Company’s common stock valued at approximately $630.0. The Acquisition closed on November 1, 2021.

• In conjunction with the Acquisition, on October 22, 2021, Vertiv Group Corporation (the “Issuer”), completed its offering (the “Offering”) of $850.0 aggregate principal amount of its Senior Secured Notes due 2028 (the “Notes”) in a private placement at par. The Notes will bear interest at 4.125% per annum and mature on November 15, 2028.

• Unprecedented measures have been taken by governments and businesses to address the COVID-19 pandemic. These measures have included shelter-in-place orders, restrictions on travel and business operations, temporary closures of businesses, and quarantines. As a result of this pandemic, global economic activity has been curtailed, causing significant volatility and disruption in global financial markets. These responsive measures taken by many countries have affected and could in the future materially impact the Company’s business, results of operations, financial condition and stock price.

• During the third quarter of 2021, aspects of the Company’s business continued to be affected by the COVID-19 pandemic. Despite strong market demand, supply chain challenges continued, with critical part shortages driving the need for additional spot buys at increased costs. Additionally, logistical issues have significantly delayed the receipt of materials and, in some cases, the Company cannot procure critical parts at any price, creating production and delivery challenges pressuring the top-line. The Company continues to take actions to address these challenges, which are expected to continue through the first half of 2022.

• The extent of the continuing impact of the COVID-19 pandemic on the Company’s operational and financial performance is uncertain and will depend on many factors outside the Company’s control, including, without limitation, the extent, timing and duration of the pandemic; the availability, distribution and effectiveness of vaccines; the imposition of protective public safety measures; and the impact of the pandemic on the global economy and demand for products. Refer to Part I, Item 1A of the 2020 Form 10-K under the heading “Risk Factors,” for more information. The Company continues to monitor the situation and will take further actions as may be required by federal, state, or local governmental authorities, or that we determine are in the best interests of our associates, customers, and shareholders.

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RESULTS OF OPERATIONS

Comparison of the Three Months Ended September 30, 2021 and Three Months Ended September 30, 2020

(Dollars in millions)			Three months ended September 30, 2021						Three months ended September 30, 2020						$ Change						% Change
Net sales			$	1,228.9					$	1,162.0					$	66.9					5.8		%
Cost of sales			847.2						749.0						98.2						13.1		%
Gross profit			381.7						413.0						(31.3)						(7.6)		%
Selling, general and administrative expenses			257.8						251.7						6.1						(2.4)		%
Amortization of intangibles			31.6						32.5						(0.9)						2.8		%
Restructuring costs			(3.8)						71.7						(75.5)						105.3		%
Foreign currency (gain) loss, net			4.9						11.7						(6.8)						58.1		%
Asset impairments			8.7						9.4						(0.7)						7.4		%
Other operating expense (income)			0.7						0.9						(0.2)						22.2		%
Operating profit (loss)			81.8						35.1						46.7						(133.0)		%
Interest expense, net			22.4						26.4						(4.0)						15.2		%
Change in fair value of warrant liabilities			(32.5)						87.7						(120.2)						137.1		%
Income tax expense			35.7						24.5						11.2						(45.7)		%
Net income (loss)			$	56.2					$	(103.5)					$	159.7					154.3		%

Net Sales

Net sales were $1,228.9 in the third quarter of 2021, an increase of $66.9, or 5.8%, compared with $1,162.0 in the third quarter of 2020. The increase in sales was primarily driven by recovery from the COVID-19 pandemic and positive impacts from foreign currency of $21.0. By offering, critical infrastructure & solutions sales increased $49.8 including the positive impacts from foreign currency of $13.8. Services & spares sales increased $24.4, including positive impacts from foreign currency of $4.7. Integrated rack solutions sales decreased $7.3 offset by the positive impacts from foreign currency of $2.5.

Excluding intercompany sales, net sales were $537.2 in the Americas, $394.6 in Asia Pacific and $297.1 in EMEA. Movements in net sales by segment and offering are each detailed in the Business Segments section below.

Cost of Sales

Cost of sales were $847.2 in the third quarter of 2021, an increase of $98.2, or 13.1% compared to the third quarter of 2020. The increase in cost of sales was primarily due to the flow-through impact of higher net sales volume and increased commodity and logistic costs. Gross profit was $381.7 in the third quarter of 2021, or 31.1% of sales, compared to $413.0, or 35.5% of sales in the third quarter of 2020.

Selling, General and Administrative Expenses

Selling, general and administrative expenses (SG&A) were $257.8 in the third quarter of 2021, an increase of $6.1 compared to the third quarter of 2020. SG&A as a percentage of sales were 21.0% in the third quarter of 2021 compared with 21.7% in the third quarter of 2020. The increase in SG&A was primarily driven by prior year fixed cost reduction actions in the response to the COVID-19 pandemic, which did not recur in 2021.

Other Operating Expense

Other operating expenses includes amortization of intangibles, restructuring costs, foreign currency (gain) loss, asset impairments, and other operating expense (income). Other operating expenses were $42.1 for the third quarter of 2021, which was an $84.1 decrease from the third quarter of 2020. The decrease was primarily due to a decrease in restructuring costs of $75.5 and the change in foreign currency loss of $6.8.

Change in Fair Value of Warrant Liabilities

Change in Fair Value of Warrant Liabilities represents the mark-to-market fair value adjustments to the outstanding warrants issued in connection with the initial public offering ("IPO") of GSAH. The change in fair value of the outstanding warrants during the third quarter of 2021 and 2020 resulted in a gain $32.5 and a loss of $87.7, respectively. The change in fair value of stock warrants is the result of changes in market prices and other observable inputs deriving the value of the financial instruments.

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Interest Expense

Interest expense, net, was $22.4 in the third quarter of 2021 compared to $26.4 in the third quarter of 2020. The $4.0 decrease is primarily driven by a $2.3 decrease related to the lower interest rates secured in the amendment to the Term Loan due 2027 during the first quarter of 2021, a $1.1 decrease in accretion expense associated with the Tax Receivable Agreement, and a $0.4 decrease due to net settlement payments on the Company's interest rate swaps as described in Note 10 to the unaudited condensed consolidated financial statements.

Income Taxes

Income tax expense was $35.7 in the third quarter of 2021 versus $24.5 in the third quarter of 2020. The effective rate in the three months ended September 30, 2021 was primarily influenced by the mix of income between our U.S. and non-U.S. operations, net of valuation allowances, and reflects the impact of non-taxable changes in fair value of the warrant liabilities. For the three months ended September 30, 2020, income tax expense was primarily influenced by the mix of income between our U.S. and non-U.S. operations, net of changes in valuation allowances, and discrete tax benefits related to a change in our indefinite reinvestment liability caused by legislative changes and movement in foreign currencies.

Tax expense in the third quarter of 2021 was $11.2 higher than the third quarter of 2020 primarily due to improved performance as well as the change in the mix of income.

Business Segments

The following is detail of business segment results for the three months ended September 30, 2021. Segment profitability is defined as operating profit (loss). Segment margin represents segment operating profit (loss) expressed as a percentage of segment net sales. For reconciliations of segment net sales and earnings to the Company’s consolidated results, see Note 12 — Segment Information, of the Company's condensed consolidated financial statements. Segment net sales are presented excluding intercompany sales.

Americas

(Dollars in millions)			Three Months Ended September 30, 2021						Three Months Ended September 30, 2020						$ Change						% Change
Net sales			$	537.2					$	532.0					$	5.2					1.0		%
Operating profit (loss)			113.4						133.1						(19.7)						(14.8)		%
Margin			21.1		%				25.0		%

Americas net sales of $537.2 in the third quarter of 2021 increased $5.2, or 1.0% from the third quarter of 2020. By product offering, net sales increased in critical infrastructure & solutions by $13.2 driven by strong growth in Thermal, AC Power, and Custom Solutions offerings, service & spares increased by $11.9 due to improved customer site availability, and partially offset by a $19.9 decrease in integrated rack solutions primarily due to supply chain constraints. Additionally, Americas net sales were positively impacted by foreign currency of approximately $2.3.

Operating profit (loss) in the third quarter of 2021 was $113.4, a decrease of $19.7 compared with the third quarter of 2020. Margin decreased primarily due to increased commodity and logistic costs and supply chain constraints, partially offset by decreased year over year restructuring charges of $13.4.

Asia Pacific

(Dollars in millions)			Three Months Ended September 30, 2021						Three Months Ended September 30, 2020						$ Change						% Change
Net sales			$	394.6					$	379.6					$	15.0					4.0		%
Operating profit (loss)			69.4						53.6						15.8						29.5		%
Margin			17.6		%				14.1		%

Asia Pacific net sales were $394.6 in the third quarter of 2021, an increase of $15.0, or 4.0% from the third quarter of 2020. Sales increases were primarily due to growth in Thermal, AC Power and Rack UPS. By product offering, net sales improved in integrated rack solutions and service & spares by $11.0 and $9.6, respectively, and decreased by $5.6 in critical infrastructure & solutions. Additionally, Asia Pacific net sales were positively impacted by foreign currency of approximately $16.6.

Operating profit (loss) in the third quarter of 2021 was $69.4, an increase of $15.8 compared with the third quarter of 2020. Margin increased primarily due to decreased year over year restructuring charges of $10.6 and fixed cost improvement, partially offset by increased commodity, logistic costs and supply chain constraints.

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Europe, Middle East & Africa

(Dollars in millions)			Three Months Ended September 30, 2021						Three Months Ended September 30, 2020						$ Change						% Change
Net sales			$	297.1					$	250.4					$	46.7					18.7		%
Operating profit (loss)			59.0						0.9						58.1						n/m
Margin			19.9		%				0.4		%

EMEA net sales were $297.1 in the third quarter of 2021, an increase of $46.7, or 18.7% from the third quarter of 2020. Sales increased primarily due to deployment of large colocation data centers, strong execution on backlog, and continued focus on service deliveries. By product offering, net sales improved in all product offering categories including increases in critical infrastructure & solutions, service & spares, and integrated rack solutions by $42.2, $2.9, and $1.6, respectively. Additionally, EMEA net sales were positively impacted by foreign currency of approximately $2.1.

Operating profit (loss) in the third quarter of 2021 was $59.0, an increase of $58.1 compared with the third quarter of 2020. Margin improved primarily due to decreased year over year restructuring charges of $45.5, fixed cost volume leveraging on higher sales, improved operational productivity and new product introductions, partially offset by increased commodity, logistic costs and supply chain constraints.

Vertiv Corporate and Other

Corporate and other costs include costs associated with our headquarters located in Columbus, Ohio, as well as centralized global functions including Finance, Treasury, Risk Management, Strategy & Marketing, IT, Legal, and global product platform development and offering management. Corporate and other costs were $123.5 and $108.3 in the third quarter of 2021 and 2020, respectively. Corporate and other costs increased $15.2 compared with the third quarter of 2020 primarily due to $9.0 of costs related to merger and acquisition costs, a $14.0 increase in costs related to research and development and growth initiatives, partially offset by decreased year over year restructuring charges of $6.0.

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Comparison of the Nine Months Ended September 30, 2021 and Nine Months Ended September 30, 2020

(Dollars in millions)			Nine months ended September 30, 2021						Nine months ended September 30, 2020						$ Change						% Change
Net sales			$	3,587.6					$	3,065.0					$	522.6					17.1		%
Cost of sales			2,438.6						2,018.6						420.0						20.8		%
Gross profit			1,149.0						1,046.4						102.6						9.8		%
Selling, general and administrative expenses			779.6						742.8						36.8						(5.0)		%
Amortization of intangibles			95.3						97.1						(1.8)						1.9		%
Restructuring costs			(0.7)						73.0						(73.7)						101.0		%
Foreign currency (gain) loss, net			2.1						16.3						(14.2)						87.1		%
Asset impairments			8.7						21.7						(13.0)						59.9		%
Other operating expense (income)			0.2						2.0						(1.8)						90.0		%
Operating profit (loss)			263.8						93.5						170.3						(182.1)		%
Interest expense, net			66.5						125.4						(58.9)						47.0		%
Loss on extinguishment of debt			0.4						174.0						(173.6)						99.8		%
Change in fair value of warrant liabilities			52.3						109.3						(57.0)						52.2		%
Income tax expense			47.0						52.6						(5.6)						10.6		%
Net income (loss)			$	97.6					$	(367.8)					$	465.4					126.5		%

Net Sales

Net sales were $3,587.6 in the first nine months of 2021, an increase of $522.6, or 17.1%, compared with $3,065.0 in the first nine months of 2020. The increase in sales was primarily driven by demand gains across each of the Company's product and service offerings, positive impacts from foreign currency of $96.5 and recovery from the COVID-19 pandemic. By product offering, critical infrastructure & solutions sales increased $398.8, which included positive impacts from foreign currency of $58.6. Services & spares sales increased $89.8, which included negative impacts from foreign currency of $24.4. Integrated rack solutions sales increased $34.0, which included the negative impacts from foreign currency of $13.5.

Excluding intercompany sales, net sales were $1,603.6 in the Americas, $1,149.9 in Asia Pacific and $834.1 in EMEA. Movements in net sales by segment and offering are each detailed in the Business Segments section below.

Cost of Sales

Cost of sales were $2,438.6 in the first nine months of 2021, an increase of $420.0, or 20.8% compared to the first nine months of 2020. The increase in cost of sales was primarily due to the flow-through impact of higher net sales volume increased commodity and logistic costs, and supply chain constraints. Gross profit was $1,149.0 in the first nine months of 2021, or 32.0% of sales, compared to $1,046.4, or 34.1% of sales, in the first nine months of 2020.

Selling, General and Administrative Expenses

Selling, general and administrative expenses (SG&A) were $779.6 in the first nine months of 2021, an increase of $36.8 compared to the first nine months of 2020. SG&A as a percentage of sales was 21.7% for the nine months ended September 30, 2021 compared with 24.2% in the nine months ended September 30, 2020. The increase in SG&A was primarily driven by prior year fixed cost reduction actions in the response to the COVID-19 pandemic, including discretionary spending cuts, that resulted in approximately $30.0 of one-time cost savings during 2020 that were not replicated in 2021. These cost saving were offset by one-time transaction related bonuses in 2020.

Other Operating Expenses

Other operating expenses include amortization of intangibles, restructuring costs, foreign currency (gain) loss, and other operating expense (income). Other expenses were $105.6 for the first nine months of 2021, which was a $104.5 decrease from the first nine months of 2020. The decrease was primarily due to a decrease in restructuring costs of $73.7, change in foreign currency (gain) loss of $14.2, and a decrease in asset impairment of $13.0.

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Loss on Extinguishment of Debt

Loss on extinguishment of debt was $0.4 in the first nine months of 2021 and related to lender fees associated with the Term Loan Amendment. This was a $173.6 decrease from the first nine months of 2020 loss that resulted from the repayment of indebtedness from the business combination and the subsequent refinancing transactions.

Change in Fair Value of Warrant Liabilities

Change in Fair Value of Warrant Liabilities represents the mark-to-market fair value adjustments to the outstanding warrants issued in connection with the IPO of GSAH. The change in fair value of the outstanding warrants liability during the first nine months of 2021 and 2020 resulted in a loss of $52.3 and $109.3, respectively. The change in fair value of stock warrants was the result of changes in market prices and other observable inputs deriving the value of the financial instruments.

Interest Expense

Interest expense, net, was $66.5 in the first nine months of 2021 compared to $125.4 in the first nine months of 2020. The $58.9 decrease was primarily due to a $25.4 reduction in interest expense resulting from the repayment of indebtedness in the first half of 2020, a $20.4 decrease related to lower interest rates secured through the debt refinancing, as described in Note 5 to the unaudited condensed consolidated financial statements, a $15.5 decrease in accretion expense associated with the Tax Receivable Agreement, and partially offset by a $4.5 increase due to net settlement payments on the Company's interest rate swaps.

Income Taxes

Income tax expense was $47.0 in the first nine months of 2021 compared to $52.6 in the first nine months of 2020. The effective rate in the first nine months of 2021 was primarily influenced by the mix of income between our U.S. and non-U.S. operations, net of changes in valuation allowances, and reflects the benefit of impact of non-deductible changes in fair value of the warrant liabilities, as well as a discrete tax adjustment related to legislative changes enacted in the period. The effective tax rate includes the benefit of certain internal reorganizations and tax elections outside the U.S. In the first nine months of 2020, income tax expense was primarily influenced by the mix of income between our U.S. and non-U.S. operations, net of changes in valuation allowances, and discrete tax benefits related to a change in our indefinite reinvestment liability caused by legislative changes and movement in foreign currencies.

The tax expense in the first nine months of 2021 was $5.6 lower than the first nine months of 2020 primarily due to the change in mix of income, non-U.S. tax elections and changes in valuation allowances in the U.S.

Business Segments

The following is detail of business segment results for the nine months ended September 30, 2021. Segment profitability is defined as operating profit (loss). Segment margin represents segment operating profit (loss) expressed as a percentage of segment net sales. For reconciliations of segment net sales and earnings to the Company’s consolidated results, see Note 12 — Segment Information, of the Company's condensed consolidated financial statements. Segment net sales are presented excluding intercompany sales.

Americas

(Dollars in millions)			Nine Months Ended September 30, 2021						Nine Months Ended September 30, 2020						$ Change						% Change
Net sales			$	1,603.6					$	1,483.3					$	120.3					8.1		%
Operating profit (loss)			368.4						354.6						13.8						3.9		%
Margin			23.0		%				23.9		%

Americas net sales of $1,603.6 in the first nine months of 2021 increased $120.3, or 8.1% from the first nine months of 2020. By product offering, net sales increased in critical infrastructure & solutions by $107.3 driven by strong growth in Thermal, AC Power and Custom Solutions offerings. Service & spares increased by $22.4 due to improved customer site availability, partially offset by a $9.4 decrease in integrated rack solutions primarily due to supply chain constraints. Americas net sales were positively impacted by foreign currency of approximately $6.6.

Operating profit (loss) in the first nine months of 2021 was $368.4, an increase of $13.8 compared with the first nine months of 2020. Margin improved primarily due to fixed cost volume leveraging on higher sales and fixed cost management, decreased year over year restructuring charges of $12.4, partially offset by increased commodity, logistic costs, and supply chain constraints.

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Asia Pacific

(Dollars in millions)			Nine Months Ended September 30, 2021						Nine Months Ended September 30, 2020						$ Change						% Change
Net sales			$	1,149.9					$	926.4					$	223.5					24.1		%
Operating profit (loss)			185.3						130.6						54.7						41.9		%
Margin			16.1		%				14.1		%

Asia Pacific net sales were $1,149.9 in the first nine months of 2021, an increase of $223.5, or 24.1% from the first nine months of 2020. Sales increases were primarily due to strong growth in large projects such as data centers, 5G projects, and wind power. Additionally sales improved in part due to a recovery from COVID-19 in telecom, channel and services. By product offering, net sales improved in all offering categories, including increases in critical infrastructure & solutions, integrated rack solutions and service & spares of $140.4, $37.8 and $45.3, respectively. Additionally, Asia Pacific net sales were positively impacted by foreign currency of approximately $56.2.

Operating profit (loss) in the first nine months of 2021 was $185.3, an increase of $54.7 compared with the first nine months of 2020. Margin improvements were driven by fixed cost volume leveraging on higher sales, decreased year over year restructuring charges of $7.4, partially offset by the absence of related government subsidies experienced in 2020 and increased commodity, logistic costs, and supply chain constraints.

Europe, Middle East & Africa

(Dollars in millions)			Nine Months Ended September 30, 2021						Nine Months Ended September 30, 2020						$ Change						% Change
Net sales			$	834.1					$	655.3					$	178.8					27.3		%
Operating profit (loss)			154.8						49.2						105.6						214.6		%
Margin			18.6		%				7.5		%

EMEA net sales were $834.1 in the first nine months of 2021, an increase of $178.8, or 27.3% from the first nine months of 2020. Sales increases were primarily due to deployment of large colocation data centers and recovery from COVID-19. By offering, net sales improved in all offering categories, including increases in critical infrastructure & solutions, service & spares, and integrated rack solutions of $151.1, $22.1, and $5.6 respectively. Additionally, Europe, Middle East & Africa net sales were positively impacted by foreign currency of approximately $33.7.

Operating profit (loss) in the first nine months of 2021 was $154.8, an increase of $105.6 compared with the first nine months of 2020. Margin improved primarily due to decreased year over year restructuring charges of $49.0, fixed cost volume leveraging on higher sales, improved operational productivity and new product introductions, partially offset by increased commodity, logistic costs and supply chain constraints.

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Vertiv Corporate and Other

Corporate and other costs include costs associated with our headquarters located in Columbus, Ohio, as well as centralized global functions including Finance, Treasury, Risk Management, Strategy & Marketing, IT, Legal, and global product platform development and offering management. Corporate and other costs were $347.3 and $327.5 in the first nine months of 2021 and 2020, respectively. Corporate and other costs increased $19.8 compared with the first nine months of 2020 primarily due to an approximately $25.0 increase in costs related to research and development, $9.0 of costs related to merger and acquisition costs and growth initiatives, partially offset by decreased year over year restructuring charges of $4.9.

Capital Resources and Liquidity

Our primary future cash needs relate to working capital, operating activities, capital spending, strategic investments and debt service. As previously disclosed in the Company's 2020 Annual Report, in connection with the consummation of the business combination which resulted in the IPO of Vertiv Holdings Co. on February 7, 2020, the Company used $1,464.0 of the proceeds to pay down its existing debt. On March 2, 2020, Vertiv announced the closing of a new seven-year $2,200.0 term loan, the proceeds of which were used to repay in full its previous term loan and redeem in full its high-yield bonds, including its prior notes. On March 10, 2021, we amended our Term Loan Credit Agreement whereby the interest rate margin for our outstanding term loans under the Credit Agreement was reduced by 0.25% to 2.75%. The maturity date for such term loan remains March 2, 2027, and all other material provisions of the Credit Agreement remain materially unchanged. Additionally, Holdings, Vertiv Group and certain of its subsidiaries closed an amendment on their $455.0 ABL Revolving Credit Facility which extended the maturity to March 2, 2025.

In addition to the cash inflow generated from the closing of the merger with GSAH, we believe that net cash provided by operating activities, augmented by long-term debt arrangements and the ABL Revolving Credit Facility, will provide adequate near-term liquidity for the next 12 months of independent operations, as well as the resources necessary to invest for growth in existing businesses and manage our capital structure on a short- and long-term basis. We expect to continue to opportunistically access the capital and financing markets from time to time. Access to capital and the availability of financing on acceptable terms in the future will be affected by many factors, including our credit rating, economic conditions, and the overall liquidity of capital markets. There can be no assurance that we will continue to have access to the capital and financing markets on acceptable terms.

At September 30, 2021, we had $743.6 in cash and cash equivalents, which includes amounts held outside of the U.S., primarily in Europe and Asia. Non-U.S. cash is generally available for repatriation without legal restrictions, subject to certain taxes, mainly withholding taxes. We are not asserting indefinite reinvestment of cash or outside basis for our non-U.S. subsidiaries due to the outstanding debt obligations in instances where alternative repatriation options other than dividends are not available. Our ABL Revolving Credit Facility provides for up to $455.0 of revolving borrowings, with separate sublimits for letters of credit and swingline borrowings and an uncommitted accordion of up to $145.0. At September 30, 2021, Vertiv Group and certain other subsidiaries of the Company had $435.2 of availability under the ABL Revolving Credit Facility, net of letters of credit outstanding in the aggregate principal amount of $19.8, and taking into account the borrowing base limitations set forth in the ABL Revolving Credit Facility.

On October 22, 2021, Vertiv Group Corporation (the “Issuer”), completed its offering (the “Offering”) of $850.0 aggregate principal amount of its Senior Secured Notes due 2028 (the “Notes”) in a private placement at par. The Notes will bear interest at 4.125% per annum and mature on November 15, 2028.

Long-Term Debt Obligations

There is a discussion in Note 5 — Debt of the consolidated financial statements of the long-term debt arrangements issued by the Company with certain of our subsidiaries named as guarantors or co-borrowers.

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Summary Statement of Cash Flows

Nine Months Ended September 30, 2021 and 2020

(Dollars in millions)			2021						2020						$ Change						% Change
Net cash provided by (used for) operating activities			$	174.4					$	14.4					$	160.0					1,111.1		%
Net cash used for investing activities			(46.7)						(26.2)						(20.5)						78.2
Net cash provided by financing activities			86.5						112.3						(25.8)						(23.0)
Capital expenditures			(43.3)						(21.3)						(22.0)						103.3
Investments in capitalized software			(9.5)						(4.9)						(4.6)						93.9

Net Cash provided by (used for) Operating Activities

Net cash provided by operating activities was $174.4 in the first nine months of 2021, a $160.0 increase in cash generation compared to the first nine months of 2020. The increase in cash generation was primarily driven by higher sales and operating profit, lower cash paid for interest expense as a result of debt pay down and refinancing, reduced one-time costs associated with the special purpose acquisition company ("SPAC") transactions in the first nine months of 2020 and partially offset by decreased available cash due to trade working capital.

Net Cash used for Investing Activities.

Net cash used for investing activities was $46.7 in the first nine months of 2021 compared to net cash used for investing activities of $26.2 in the first nine months of 2020. The increased use of cash over the comparable period was primarily the result of increased capital expenditures.

Net Cash provided by Financing Activities

Net cash provided by financing activities was $86.5 in the first nine months of 2021 compared to $112.3 in the first nine months of 2020. The decrease in cash generation was primarily the result of many non-recurring financing activities in the first quarter of 2020, including proceeds from the business combination (as mentioned above) of $1,827.0 partially offset by payments to the Vertiv Stockholder of $341.6 and repayments of Prior Notes of $1,370.0. Additionally, there were net borrowings on the ABL Revolving Credit Facility and Term Loan of $46.3 and $108.0, respectively, in the first nine months of 2020 whereas, in the first nine months of 2021, the financial activity was driven by proceeds from the exercise of public warrants totaling $107.5.

Critical Accounting Policies and Estimates

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. The preceding discussion and analysis of our consolidated results of operations and financial condition should be read in conjunction with our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. The 2020 financial statements, as restated as part of our Form 10-K/A filed on April 30, 2021, includes additional information about us, our operations, our financial condition, our critical accounting policies and accounting estimates, and should be read in conjunction with this Quarterly Report on Form 10-Q. Our significant accounting policies are described in Note 1 - Summary of Significant Accounting Policies of our 2020 Annual Report on Form 10-K/A.