Vertiv Holdings 10-Q 2024-09-30

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of October 21, 2024, there were 375,335,992 shares of the Company’s Class A common stock, par value $0.0001, outstanding.

PART I. FINANCIAL INFORMATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)

VERTIV HOLDINGS CO

(Dollars in millions except for per share data)

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

VERTIV HOLDINGS CO

(Dollars in millions)

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

VERTIV HOLDINGS CO

(Dollars in millions)

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Unless the context otherwise indicates or requires, references to (1) “the Company,” “Vertiv,” “we,” “us” and “our” refer to Vertiv Holdings Co, a Delaware corporation, and its consolidated subsidiaries. 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 unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q (this "Form 10-Q") and the audited consolidated financial statements and the notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 23, 2024 (the “2023 Form 10-K”).

Cautionary Note Regarding Forward-Looking Statements

This 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, and as such are not historical facts. Such statements may include, without limitation, those regarding Vertiv’s future financial performance or position, capital structure, indebtedness, business performance, strategy and plans, and expectations and objectives of Vertiv management for future operations and financial performance. These statements constitute projections, forecasts and forward-looking statements, and are not guarantees of results of performance. Vertiv cautions that such forward-looking statements are subject to numerous assumptions, risks and uncertainties, which may 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 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. When Vertiv discusses its strategies or plans, it is making projections, forecasts or forward-looking statements. Such statements are based on the beliefs of, as well as assumptions made by and information currently available to, Vertiv’s management at the time of such statements.

The forward-looking statements contained in this 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. Forward-looking statements included in this Form 10-Q speak only as of the date of this filing or any earlier date specified for such statements. 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. All subsequent written or oral forward-looking statements attributable to Vertiv or persons acting on Vertiv’s behalf are qualified in their entirety by this Cautionary Note Regarding Forward-Looking Statements.

These forward-looking statements involve a number of risks and 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 the 2023 Form 10-K. These risk factors and those identified elsewhere in this Form 10-Q, among others, could cause actual results to differ materially from historical performance and include, but are not limited to: risks relating to the continued growth of Vertiv’s customers’ markets; 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; competition in the infrastructure technologies industry; failure to obtain performance and other guarantees from financial institutions; failure to realize sales expected from Vertiv’s backlog of orders and contracts; failure to properly manage Vertiv’s supply chain or difficulties with third-party manufacturers; our ability to forecast changes in prices, including due to inflation in material, freight and/or labor costs, and timely implement measures necessary to mitigate the impacts of any such changes; risks associated with our significant backlog, including that the impacts of any measures taken to mitigate inflation will not be reflected in our financial statements immediately; failure to meet or anticipate technology changes; risks associated with information technology disruption or security; risks associated with the implementation and enhancement of information systems; failure to realize the expected benefit from any rationalization, restructuring and improvement efforts; Vertiv’s ability to realize cost savings in connection with Vertiv’s restructuring program; disruption of, or changes in, Vertiv’s independent sales representatives, distributors and original equipment manufacturers; changes to tax law; ongoing tax audits; costs or liabilities associated with product liability; the global scope of Vertiv’s operations; risks associated with Vertiv’s sales and operations in emerging markets; risks associated with future legislation and regulation of Vertiv’s customers’ markets both in the United States and abroad; 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; risks associated with current and potential litigation or claims 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; failure to achieve environmental, social and governance goals; failure to realize the value of goodwill and intangible assets; exposure to fluctuations in foreign currency exchange rates; exposure to increases in interest rates set by central banking authorities; failure to maintain internal controls over financial reporting; the unpredictability of Vertiv’s future operational results, including the ability to grow and manage growth profitably; potential net losses in future periods; Vertiv’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; Vertiv’s ability to access funding through capital markets; the significant ownership and influence certain stockholders have over Vertiv; 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; the ability of Vertiv to grow and manage growth profitably, maintain relationships with customers and suppliers and retain its management and key employees; Vertiv's ability to manage the succession of its key employees; and factors relating to the business, operations and financial performance of Vertiv and its subsidiaries, including: global economic weakness and uncertainty; 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 corporate transactions; risks associated with Vertiv’s limited history of operating as an independent company; and other risks and uncertainties indicated in Vertiv’s SEC reports or documents filed or to be filed with the SEC by Vertiv.

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.

Outlook and Trends

Below is a summary of trends and events that are currently affecting, or may in the future affect, our business, operations and short-term outlook:

• Capacity Expansion: We have invested in capacity expansion to meet current and anticipated additional customer demand. For example, since acquiring E&I in late 2021, we have approximately doubled our manufacturing capacity for switchgear, busbar and integrated solutions by opening new facilities and adding production to existing facilities. Additionally, in order to support our thermal management activity, we opened a new manufacturing facility in Pune, India in 2024 to further support our manufacturing capacity. We also recently opened a new facility in Pelzer, South Carolina to support the production of modular solutions, modular power systems and other infrastructure systems. We anticipate continuing to invest in capacity globally to provide the geographic presence that our customers need, and the ability to rapidly scale and to ensure resiliency.

• Artificial Intelligence ("AI"): Increased maturity and adoption of AI and high-performance compute is currently impacting the data center industry, driving technology innovation which has led to increased demand. The Company has invested in developing new product, services, and solutions to serve this industry trend, is increasing capacity to support additional demand for AI infrastructure as necessary and we will continue to invest to support additional growth driven by AI.

• Thermal Management Portfolio Expansion: We continue to invest in expansion of our thermal management portfolio and product capabilities to meet customer demands. The complexity of hybrid air and liquid cooling created by AI workloads presents significant opportunities for innovation within, and expansion of, the entire thermal chain to better optimize performance, power utilization, control, and heat re-use. Our investment and expansion efforts are directed at capturing new technologies across the entire thermal chain from chip to heat rejection and re-use and more to meet growing demands. Further, we are focused on the continued growth and expansion of our portfolio geographically, as we leverage our best-in-class regional products and expand such offerings into other regions and globally.

RESULTS OF OPERATIONS

Comparison of the Three Months Ended September 30, 2024 and Three Months Ended September 30, 2023

Net Sales

Net sales were $2,073.5 in the third quarter of 2024, an increase of $330.9, or 19.0%, compared with $1,742.6 in the third quarter of 2023. The increase in sales was primarily driven by higher sales volumes, partially offset by the negative impacts from foreign currency of $4.2. Product sales increased $266.3, which included the negative impacts from foreign currency of $2.5. Services & spares sales increased $64.6, which included the negative impacts from foreign currency of $1.7.

Excluding intercompany sales, net sales were $1,198.6 in the Americas, $432.4 in Asia Pacific and $442.5 in Europe, Middle East & Africa. Movements in net sales by segment and offering are each detailed in the Business Segments section below.

Cost of Sales

Cost of sales were $1,317.1 in the third quarter of 2024, an increase of $202.1, or 18.1% compared to the third quarter of 2023. The increase in cost of sales was primarily driven by the impact of higher volumes. Gross profit was $756.4 in the third quarter of 2024, or 36.5% of sales, compared to $627.6, or 36.0% of sales in the third quarter of 2023. The margin expansion in the third quarter of 2024 was primarily driven by higher sales volumes, pricing actions exceeding inflationary costs and manufacturing and procurement productivity.

Selling, General and Administrative Expenses

Selling, general and administrative expenses (“SG&A”) were $334.6 in the third quarter of 2024, an increase of $7.4, or 2.3% compared to the third quarter of 2023. The increase in SG&A was primarily driven by increased compensation costs and increased research and development costs. SG&A as a percentage of sales were 16.1% in the third quarter of 2024 compared with 18.8% in the third quarter of 2023.

Other Operating Expense

The remaining other operating expenses includes amortization of intangibles, restructuring costs, foreign currency (gain) loss, and other operating expense (income). These remaining operating expenses were $50.2 for the third quarter of 2024, which was a $0.7 increase from the third quarter of 2023. The increase was primarily due to a $5.0 increase in restructuring costs and a $2.6 increase in foreign currency loss offset by $3.3 of income related to mark-to-market gains on our economic hedges.

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 ("Private Placement Warrants") issued in connection with the initial public offering of our predecessor GS Acquisition Holdings Corp. The change in fair value of the outstanding Private Placement Warrants during the third quarter of 2024 and 2023 resulted in a loss of $67.2 and $61.6, respectively. The change in fair value of these warrants is the result of changes in market prices of our common stock and other observable inputs deriving the value of the financial instruments. As of September 30, 2024 and 2023, there were 5,266,667 Private Placement Warrants outstanding.

Interest Expense

Interest expense, net, was $35.9 in the third quarter of 2024 compared to $43.5 in the third quarter of 2023. The $7.6 decrease is primarily driven by $4.9 of reduced interest expense as a result of our Term Loan amendments which resulted in a reduction to our interest rate margin and a $2.6 increase in interest income. To the extent interest rates continue to fluctuate our interest expense will change, although we expect these changes to be mitigated by our interest rate swaps and interest income.

Income Taxes

Income tax expense was $91.9 in the third quarter of 2024 compared to $51.7 in the third quarter of 2023. The $40.2 increase is primarily due to increased business performance and the change in the discrete tax benefits related to stock compensation. The effective rate in the third quarter of 2024 was primarily influenced by the negative impact of non-deductible changes in fair value of the warrant liabilities and discrete tax benefits related to stock compensation. For the third quarter of 2023, income tax expense was primarily influenced by the mix of income between our U.S. and non-U.S. operations, net of valuation allowances, and reflects the negative impact of non-deductible changes in fair value of the warrant liabilities.

Business Segments

The following is detail of business segment results for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. 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 our consolidated results, see “Note 11 — Segment Information,” of our Unaudited Condensed Consolidated Financial Statements. Segment net sales are presented excluding intercompany sales.

Americas

Americas net sales were $1,198.6 in the third quarter of 2024, an increase of $195.4, or 19.5%, from the third quarter of 2023. The increase in sales was primarily driven by higher sales volumes due to products increasing by $160.0 and service & spares increasing by $35.4. Americas net sales were negatively impacted by foreign currency of approximately $10.7.

Operating profit (loss) in the third quarter of 2024 was $303.4, an increase of $96.9 compared with the third quarter of 2023. Margin increased primarily due to higher sales volumes, improved price realization, manufacturing and procurement productivity, and leveraging our fixed costs.

Asia Pacific

Asia Pacific net sales were $432.4 in the third quarter of 2024, an increase of $43.8, or 11.3%, from the third quarter of 2023. The increase in sales were primarily driven by growth particularly in Greater China and Asia, and the positive impact of foreign currency of approximately $3.3. Net sales of products improved by $28.4, and service & spares improved by $15.4.

Operating profit (loss) in the third quarter of 2024 was $44.1, a decrease of $5.6 compared with the third quarter of 2023 mainly driven by sales from product mix and a benefit related to employee related costs in the third quarter of 2023.

Europe, Middle East & Africa

Europe, Middle East & Africa net sales of $442.5 in the third quarter of 2024, increased by $91.7, or 26.1%, from the third quarter of 2023. Sales increases were primarily due to increased volumes due to products increasing by $77.9 and service & spares increasing by $13.8 and the positive impact of foreign currency of approximately $3.2.

Operating profit (loss) in the third quarter of 2024 was $114.4, an increase of $37.7 compared with the third quarter of 2023. Margin increased primarily due to fixed cost leverage on higher volumes, procurement driven productivity improvement and price realization.

Vertiv Corporate and Other

Corporate and other costs include costs associated with our headquarters located in Westerville, Ohio, as well as centralized global functions including Finance, Treasury, Risk Management, Strategy & Marketing, and Legal. Corporate and other costs were $45.0 and $36.5 in the third quarter of 2024 and 2023, respectively. Total corporate, other, and elimination costs increased $8.5 compared to the third quarter of 2023 primarily due to an increase of certain employee related costs and an increase in the foreign currency loss of $2.6.

Comparison of the Nine Months Ended September 30, 2024 and Nine Months Ended September 30, 2023

Net Sales

Net sales were $5,665.4 in the first nine months of 2024, an increase of $667.6, or 13.4%, compared with $4,997.8 in the first nine months of 2023. The increase in sales was primarily driven by higher sales volumes, partially offset by the negative impacts from foreign currency of $29.4. Product sales increased $540.6, which included negative impacts from foreign currency of $21.0. Services & spares sales increased $127.0, which included negative impacts from foreign currency of $8.4.

Excluding intercompany sales, net sales in the first nine months of 2024 were $3,244.7 in the Americas, $1,173.8 in Asia Pacific and $1,246.9 in Europe, Middle East & Africa. Movements in net sales by segment and offering are each detailed in the “Business Segments” section below.

Cost of Sales

Cost of sales were $3,601.4 in the first nine months of 2024, an increase of $320.7, or 9.8%, compared to the first nine months of 2023. The increase in cost of sales was primarily driven by the impact of higher sales volumes. Gross profit was $2,064.0 in the first nine months of 2024, or 36.4% of sales, compared to $1,717.1, or 34.4% of sales, in the first nine months of 2023. The margin increase was primarily driven by higher sales volumes and improved price realization.

Selling, General and Administrative Expenses ("SG&A")

SG&A expenses were $1,012.4 in the first nine months of 2024, an increase of $48.9, or 5.1% compared to the first nine months of 2023. The increase in SG&A was primarily driven by increased compensation costs, a one-time supplier expense, increased IT and research and development expense, and professional service fees. SG&A as a percentage of sales was 17.9% for the nine months ended September 30, 2024 compared with 19.3% in the nine months ended September 30, 2023.

Other Operating Expenses

The remaining other operating expenses include amortization of intangibles, restructuring costs, foreign currency (gain) loss, and other operating expense (income). These remaining other expenses were $141.4 for the first nine months of 2024, which was a $25.2 decrease from the first nine months of 2023. The decrease was primarily due to a $19.4 decrease in restructuring costs and a $4.6 decrease in foreign currency loss.

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 Private Placement Warrants. The change in fair value of the outstanding warrant liability during the first nine months of 2024 and 2023 resulted in a loss of $269.2 and a loss of $103.4, respectively. The change in fair value of these Private Placement Warrants was the result of changes in market prices of our common stock and other observable inputs deriving the value of the financial instruments and the exercise of 5,266,666 of the private placement warrants in February 2023 by GS Sponsor LLC. As of both September 30, 2024 and 2023, there were 5,266,667 private placement warrants that remained outstanding.

Interest Expense

Interest expense, net, was $119.7 in the first nine months of 2024 compared to $137.2 in the first nine months of 2023. The $17.5 decrease is primarily driven by a $13.6 increase in interest income and a $7.7 decrease in interest due to lower ABL Revolving Credit Facility borrowings during the period. To the extent interest rates continue to fluctuate our interest expense will change, although we expect these changes to be mitigated by our interest rate swaps.

Income Taxes

Income tax expense (benefit) was $171.4 in the first nine months of 2024 compared to $118.8 in the first nine months of 2023. The $52.6 increase is primarily due to increased business results between the periods as well as the change in the fair value of warrant liabilities between the periods net of increased tax benefits due to stock compensation activity. The effective rate in the first nine months of 2024 was primarily influenced by the negative impacts of non-deductible changes in fair value of the warrant liabilities and discrete tax benefits related to stock compensation. In the first nine months of 2023, 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 the negative impacts of non-deductible changes in fair value of the warrant liabilities and changes to our indefinite reinvestment liability.

Business Segments

The following is detail of business segment results for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. 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 our consolidated results, see “Note 11 — Segment Information,” of our Unaudited Condensed Consolidated Financial Statements. Segment net sales are presented excluding intercompany sales.

Americas

Americas net sales were $3,244.7 in the first nine months of 2024, an increase of $419.8, or 14.9%, from the first nine months of 2023. The increase in sales was primarily driven by higher sales volumes due to products increasing by $342.8 and service & spares increasing by $77.0. Americas net sales were negatively impacted by foreign currency of approximately $12.3.

Operating profit (loss) in the first nine months of 2024 was $776.3, an increase of $232.3 compared with the first nine months of 2023. Margin increased primarily due to higher sales volumes, manufacturing and procurement productivity, and improved price realization.

Asia Pacific

Asia Pacific net sales were $1,173.8 in the first nine months of 2024, an increase of $76.4, or 7.0%, from the first nine months of 2023. Sales increases were primarily driven by growth throughout the region, partially offset by the negative impact of foreign currency of approximately $15.1. Net sales of products improved by $50.9 and service & spares improved by $25.5.

Operating profit (loss) in the first nine months of 2024 was $106.8, an increase of $2.3 compared with the first nine months of 2023. Margin decreased primarily due to sales from lower margin products and a one-time supplier expense, slightly offset with price realization due fixed cost leverage.

Europe, Middle East & Africa

Europe, Middle East & Africa net sales were $1,246.9 in the first nine months of 2024, an increase of $171.4, or 15.9%, from the first nine months of 2023. Sales increases were driven by increased volume due to products increasing by $146.9, service & spares increasing by $24.5, and were negatively impacted by foreign currency of approximately $2.0.

Operating profit (loss) in the first nine months of 2024 was $294.2, an increase of $91.5 compared with the first nine months of 2023. Margin increased primarily due to higher sales volumes, improved price realization, and manufacturing and procurement productivity.

Vertiv Corporate and Other

Corporate and other costs include costs associated with our headquarters located in Westerville, Ohio, as well as centralized global functions including Finance, Treasury, Risk Management, Strategy & Marketing, and Legal. Corporate and other costs were $130.0 and $128.1 in the first nine months of 2024 and 2023, respectively. Total corporate, other, and elimination costs increased $1.9 compared to the third quarter of 2023 primarily due to an increase of certain employee related costs and deceased foreign currency loss of $4.6. The first nine months of 2023 included a one-time $7.8 benefit from the settlement of an escrow agreement.

Capital Resources and Liquidity

Our primary future cash needs relate to working capital, operating activities, capital spending, strategic investments and debt service.

Capital Expenditures: Our capital expenditures are primarily related to the maintenance of our long-term assets, as well as the investment in projects, such as capacity and facility expansion, that support growth and innovation to further our enterprise strategy. Our capital expenditures (including capitalized software) were approximately $120.7 during the first nine months of 2024. We expect to have capital expenditures (including capitalized software) of $175 to $200 for the full year 2024.

We have additional obligations as part of our ordinary course of business, beyond those committed for capital expenditures, which consist of debt obligations and other financial instruments. Refer below, as well as to “Note 5 — Debt” and “Note 13 — Commitments and Contingencies” of the Unaudited Condensed Consolidated Financial Statements for more information. In addition, we have uncertain tax positions that are further discussed in “Note 6 — Income Taxes” of the Unaudited Condensed Consolidated Financial Statements. We anticipate payments for lease obligations of approximately $60 for the full year 2024. We do not have any guarantees or other off-balance sheet financing arrangements, including variable interest entities, which could materially impact our financial condition or liquidity.

We, through our subsidiaries, are party to certain indebtedness arrangements, including the Senior Secured Notes due 2028, with an outstanding principal amount of $850.0 as of September 30, 2024 (the “Notes”), the Term Loan due 2027, with an outstanding principal amount of $2,102.2, as of September 30, 2024 (the “Term Loan”), and the ABL Revolving Credit Facility due 2029, which was extended earlier in 2024, providing up to $600.0 of revolving borrowings, for which we had no amounts outstanding as of September 30, 2024 (the “ABL Revolving Credit Facility” and collectively with the Term Loan, the “Senior Secured Credit Facilities”). See “Note 5 — Debt” of the Unaudited Condensed Consolidated Financial Statements for more detailed discussion of the material terms of the Notes and the Senior Secured Credit Facilities.

At September 30, 2024, we had $908.7 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. At September 30, 2024, Vertiv had $584.2 of availability (subject to customary borrowing base and other conditions) under the ABL Revolving Credit Facility, net of letters of credit outstanding in the aggregate principal amount of $15.8, and taking into account the borrowing base limitations set forth in the ABL Revolving Credit Facility.

We believe our current cash and cash equivalent levels, augmented by availability under 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.

Summary Statement of Cash Flows

Nine Months Ended September 30, 2024 and 2023

Net Cash provided by (used for) Operating Activities

Net cash provided by operating activities was $894.1 in the first nine months of 2024, a $349.8 increase in cash generation compared to the first nine months of 2023. Net income from operations of $348.8 included $453.4 of net non-cash expense items, consisting of depreciation and amortization of $206.0, a loss on the change in fair value of warrant liabilities of $269.2, non-cash stock-based compensation expense of $25.8, and amortization of debt discount and issuance costs of $5.5, offset by deferred taxes of $53.1. Trade working capital provided $69.2 in the first nine months of 2024 compared to $17.8 utilized in the first nine months of 2023.

Net Cash used for Investing Activities

Net cash used for investing activities was $120.7 in the first nine months of 2024 compared to net cash used for investing activities of $71.1 in the first nine months of 2023. The increased use of cash over the comparable period was primarily driven by decreased proceeds from the disposition of property, plant and equipment of $12.4, increased capital expenditures of $26.2, and an increase in investments of capitalized software of $11.0.

Net Cash provided by (used for) Financing Activities

Net cash used for financing activities was $640.4 in the first nine months of 2024 compared to $236.7 provided by financing activities in the first nine months of 2023. The increase in cash used in 2024 was primarily the result of $599.9 of share repurchases related to common stock, $28.1 in dividend payments, offset by a decrease in year-over-year net repayments of $235.0 on the ABL Revolving Credit Facility in the first nine months of 2023, $16.6 decrease in net cash received associated with equity-based compensation activity, and $5.9 decrease of repayments on the Term Loan in the first nine months of 2024.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the U.S. 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 Unaudited Condensed Consolidated 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 Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q. The 2023 financial statements, as part of the 2023 Form 10-K, 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 - Description of Business and Summary of Significant Accounting Policies” of the 2023 Form 10-K.

There has been no material changes in our quantitative and qualitative market risk disclosures from those described in our 2023 Form 10-K.

Disclosure Controls and Procedures

The Company maintains (a) disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), and (b) internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).

The Company’s management, with the participation of its Chief Executive Officer and its Chief Financial Officer, conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2024 (the end of the period covered by this Quarterly Report on Form 10-Q). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2024, the Company’s disclosure controls and procedures were effective in ensuring that material information for the Company, including its consolidated subsidiaries, required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that it is accumulated and communicated to management, including our principal executive and financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

With the exception of the below, the Company is not a party to any material, pending legal proceedings or claims at September 30, 2024. From time-to-time, the Company may be a party to, or otherwise involved in, legal proceedings arising in the normal course of business. The nature of the Company’s business ordinarily results in a certain amount of pending as well as threatened claims, litigation, investigations, regulatory and legal and administrative cases, matters and proceedings, all of which are considered incidental to the normal conduct of business. When the Company determines that it has meritorious defenses to the claims asserted, the Company vigorously defends itself. The Company considers settlement of cases when, in management’s judgment, it is in the best interests of both the Company and its shareholders to do so.

On May 3, 2022, a putative securities class action, In re Vertiv Holdings Co Securities Litigation, 22-cv-3572, was filed against Vertiv, certain of the Company’s officers and directors, and other defendants in the Southern District of New York. Plaintiffs filed an amended complaint on September 16, 2022. The amended complaint alleges that certain of the Company’s public statements were materially false and/or misleading with respect to inflationary and supply chain pressures and pricing issues, and asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, as amended. These claims are asserted on behalf of a putative class of all persons and entities that (i) purchased Vertiv securities between February 24, 2021 and February 22, 2022; and/or (ii) purchased Vertiv securities in or traceable to the November 4, 2021 secondary public offering by a selling stockholder pursuant to a resale registration statement. On January 31, 2024, the Court issued an order dismissing the claims under Sections 11, 12(a)(2), and 15 of the Securities Act. The motion to dismiss the claims under Sections 10(b) and 20(a) of the Exchange Act remains pending.

On June 9, 2023, two Vertiv shareholders, Matthew Sullivan and Jose Karlo Ocampo Avenido, brought a derivative lawsuit, Sullivan v. Johnson, et al., C.A. No. 2023-0608, against Vertiv (as nominal defendant only) and certain of the Company’s directors and officers in Delaware Court of Chancery for breach of fiduciary duty. The complaint alleges that certain of the named directors and officers caused the Company to issue materially false and/or misleading public statements with respect to inflationary and supply chain pressures and pricing issues, and that the Company suffered damages as a result. This action has been stayed since August 10, 2023, pending the securities class action.

We believe we have meritorious defenses against the allegations made in the aforementioned lawsuits, which are at the preliminary stages. However, we are unable at this time to predict the outcome of these matters or the amount of any cost associated with their resolution.

In November 2023, following the filing of the actions described above, the Company received a subpoena from the U.S. Securities and Exchange Commission (the “SEC”) and a parallel request for documents from the U.S. Attorney’s Office for the Southern District of New York, which relate to the allegations made in the class action complaint and derivative action. The Company is actively responding to these matters.

In January 2024, the Mexican tax administration service, the Servicio de Administracion Tributaria (the "SAT"), initiated a process to suspend the importer registration of one of the Company's wholly owned Mexico subsidiaries, Tecnología del Pacífico S.A. de C.V. (“TDP”), in connection with a contested customs tax audit for the period April 2016 to February 2018. SAT claimed its basis for the suspension was a failure by TDP to provide sufficient evidence of the export of goods temporarily imported at required levels under Mexico's Manufacturing, Maquila and Export Services Industries Program ("IMMEX Program"). The Company and TDP has disputed SAT’s position throughout the customs tax audit, through the filing of various petitions and appeals with appropriate documentation evidencing the complete and timely export of the goods temporarily imported during the audit period. TDP accepted a proposal from SAT to close the audit by making payments and fees totaling approximately $10.1 which was recorded in “Accrued expenses and other liabilities” on the Unaudited Condensed Consolidated Balance Sheets as of December 31, 2023 and subsequently paid in the first quarter of 2024. The Company intends to seek reimbursement of this amount as an undue payment in the near future from SAT, for which the outcome is currently unknown and no receivable has been established.

We are unable at this time to predict the outcome of these matters, including whether any proceedings may be instituted in connection with the government inquiries, or the amount of any cost associated with their resolution.

At September 30, 2024, other than as described above, there were no known contingent liabilities (including guarantees, taxes and other claims) that management believes were or will be material in relation to the Company’s Unaudited Condensed Consolidated Financial Statements, nor were there any material commitments outside the normal course of business.

ITEM 1A. RISK FACTORS

The Company's risk factors, as of September 30, 2024, have not materially changed from those described in Part 1, Item 1A of our 2023 Form 10-K for the fiscal year ended December 31, 2023.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

A) Recent Sales of Unregistered Securities

None.

B) Use of Proceeds from our Initial Public Offering of Common Stock

Not applicable.

C) Repurchases of Shares or of Company Equity Securities

On November 29, 2023, the Board of Directors of the Company approved a stock repurchase program, which authorizes the repurchase of shares of Company Class A common stock in an aggregate amount of up to $3.0 billion through December 31, 2027. The stock repurchase program does not obligate the Company to repurchase any specific dollar amount or number of shares of Class A common stock and the Board's authorization of the program may be modified, suspended or discontinued at any time.

During the first quarter of 2024, Vertiv purchased 9,076,444 shares of its common stock, par value $0.0001 per share. During the second quarter of 2024, all shares repurchased were retired. As of September 30, 2024, $2.4 billion remain for additional share repurchases. Excess share repurchase price over par value is allocated between additional paid-in capital, which is limited to amounts initially recorded for the same issue, and retained earnings. During the third quarter of 2024, Vertiv made no share repurchases.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

None.

During the fiscal quarter covered by this Quarterly Report on Form 10-Q, Robin Washington, a member of the Company's board of directors adopted a "Rule 10b5-1 trading arrangement" as such each term is defined in Item 408(a) of Regulation S-K. The Rule 10b5-1 trading arrangement, adopted by Ms. Washington on August 8, 2024, provides for the sale of up to 5,000 shares of Company Class A common stock and will remain in effect until the earlier of (1) November 12, 2025; (2) the first date on which all trades have been executed or all orders relating to such trades have expired; (3) upon written notice by Ms. Washington or the broker to terminate or modify the Rule 10b5-1 trading arrangement.

During the fiscal quarter covered by this Quarterly Report on Form 10-Q, a Rule 10b5-1 trading arrangement previously adopted on September 7, 2023 for Karsten Winther, President EMEA of the Company (the "Winther 10b5-1 Plan"), terminated pursuant to its terms. The Winther 10b5-1 Plan was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act and provided for the potential sale of up to 44,924 shares of Company Class A common stock.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.