Vertiv Holdings Co (VRT) Bundle
Understanding Vertiv Holdings Co (VRT) Revenue Streams
Understanding Vertiv Holdings Co’s Revenue Streams
Vertiv Holdings Co generates revenue through multiple streams, primarily categorized into products and services. The following sections provide a detailed breakdown of these revenue sources, year-over-year growth rates, and contributions from various business segments.
Breakdown of Primary Revenue Sources
For the nine months ended September 30, 2024, the revenue breakdown is as follows:
| Region | Net Sales (in millions) | Year-over-Year Change (in millions) | Percentage Change |
|---|---|---|---|
| Americas | $3,244.7 | $419.8 | 14.9% |
| Asia Pacific | $1,173.8 | $76.4 | 7.0% |
| Europe, Middle East & Africa | $1,246.9 | $171.4 | 15.9% |
Year-over-Year Revenue Growth Rate
The overall net sales for the first nine months of 2024 totaled $5,665.4 million, reflecting an increase of $667.6 million or 13.4% compared to the same period in 2023, which had net sales of $4,997.8 million.
Contribution of Different Business Segments to Overall Revenue
The contributions from different segments for the nine months ended September 30, 2024, are presented below:
| Segment | Net Sales (in millions) | Percentage of Total Revenue |
|---|---|---|
| Americas | $3,244.7 | 57.2% |
| Asia Pacific | $1,173.8 | 20.7% |
| Europe, Middle East & Africa | $1,246.9 | 22.0% |
Analysis of Significant Changes in Revenue Streams
During the first nine months of 2024, product sales increased by $540.6 million, while service and spares sales grew by $127.0 million. This growth was partially offset by foreign currency impacts totaling approximately $29.4 million.
In the Americas, net sales were driven by a product increase of $342.8 million and service and spares increase of $77.0 million. The Asia Pacific region saw product sales improve by $50.9 million and service and spares increase by $25.5 million. In the Europe, Middle East & Africa segment, products increased by $146.9 million and service and spares by $24.5 million.
A Deep Dive into Vertiv Holdings Co (VRT) Profitability
A Deep Dive into Vertiv Holdings Co's Profitability
The financial health of Vertiv Holdings Co can be assessed through various profitability metrics. These metrics provide insights into the company's ability to generate profit relative to its revenue, costs, and equity.
Gross Profit, Operating Profit, and Net Profit Margins
For the nine months ended September 30, 2024, the financial figures are as follows:
- Net Sales: $5,665.4 million
- Cost of Sales: $3,601.4 million
- Gross Profit: $2,064.0 million
- Gross Profit Margin: 36.4%
- Operating Profit: $910.2 million
- Operating Profit Margin: 16.1%
- Net Income: $348.8 million
- Net Profit Margin: 6.2%
Trends in Profitability Over Time
Comparing the profitability metrics from the first nine months of 2024 to the same period in 2023:
| Metric | 2024 | 2023 | Change | Percentage Change |
|---|---|---|---|---|
| Net Sales | $5,665.4 million | $4,997.8 million | $667.6 million | 13.4% |
| Gross Profit | $2,064.0 million | $1,717.1 million | $346.9 million | 20.2% |
| Operating Profit | $910.2 million | $587.0 million | $323.2 million | 55.1% |
| Net Income | $348.8 million | $227.6 million | $121.2 million | 53.3% |
Comparison of Profitability Ratios with Industry Averages
When compared to industry averages, the profitability margins for Vertiv Holdings Co indicate strong performance:
- Gross Profit Margin: Vertiv 36.4% vs. Industry Average 30%
- Operating Profit Margin: Vertiv 16.1% vs. Industry Average 10%
- Net Profit Margin: Vertiv 6.2% vs. Industry Average 5%
Analysis of Operational Efficiency
Operational efficiency can be gauged through the trends in gross margins and cost management:
- Gross Margin Trend: Increased from 34.4% in 2023 to 36.4% in 2024
- SG&A Expenses: Increased to $1,012.4 million in 2024 from $963.5 million in 2023, but as a percentage of sales, it decreased from 19.3% to 17.9%
- Reduction in Restructuring Costs: Decreased from $23.5 million in 2023 to $4.1 million in 2024, indicating improved operational stability
In summary, the profitability metrics for Vertiv Holdings Co in 2024 demonstrate robust growth and operational efficiency, outperforming industry averages across key metrics.
Debt vs. Equity: How Vertiv Holdings Co (VRT) Finances Its Growth
Debt vs. Equity: How Vertiv Holdings Co Finances Its Growth
Long-term Debt: As of September 30, 2024, the company had total long-term debt of $2,909.6 million, down slightly from $2,919.1 million at the end of 2023. The breakdown includes:
- Term Loan due 2027: $2,102.2 million at a rate of 7.20%
- Senior Secured Notes due 2028: $850.0 million at a rate of 4.125%
- Unamortized discount and issuance costs: ($21.4 million)
Short-term Debt: The current portion of long-term debt was $21.2 million as of September 30, 2024, compared to $21.8 million at the end of 2023.
Debt-to-Equity Ratio: The debt-to-equity ratio as of September 30, 2024, stood at 1.60, calculated using total liabilities of $7,077.7 million and total equity of $1,813.7 million. This is above the industry average of approximately 1.0, indicating a higher reliance on debt financing compared to peers.
Recent Debt Issuances and Credit Ratings: The company has not issued new debt in 2024 but has refinanced existing debt to lower interest rates. The credit rating is currently rated B by S&P, reflecting a stable outlook.
Balancing Debt Financing and Equity Funding: In the first nine months of 2024, the company utilized $640.4 million in cash from financing activities, primarily due to $599.9 million in share repurchases and $28.1 million in dividends. This indicates a strategy to return value to shareholders while managing its debt levels.
| Debt Type | Outstanding Amount (in millions) | Interest Rate | Maturity Date |
|---|---|---|---|
| Term Loan | $2,102.2 | 7.20% | 2027 |
| Senior Secured Notes | $850.0 | 4.125% | 2028 |
| Unamortized Discount and Issuance Costs | ($21.4) | ||
| Total Long-term Debt | $2,909.6 | ||
| Current Portion of Long-term Debt | $21.2 |
Overall Financial Position: The company’s total liabilities were $7,077.7 million against total equity of $1,813.7 million, resulting in total assets of $8,891.4 million.
Assessing Vertiv Holdings Co (VRT) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
As of September 30, 2024, the current ratio of the company stands at 1.38, calculated as current assets of $4,804.6 million divided by current liabilities of $3,489.2 million. The quick ratio is slightly lower at 0.87, indicating the company has $2,328.5 million in accounts receivable and $908.7 million in cash and cash equivalents available to cover its current liabilities.
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, is reported at $1,315.4 million for the period ending September 30, 2024. This reflects an increase from $1,696.3 million as of December 31, 2023, indicating a trend of increased current liabilities, primarily driven by a rise in accounts payable and deferred revenue.
| Period | Current Assets (in millions) | Current Liabilities (in millions) | Working Capital (in millions) |
|---|---|---|---|
| September 30, 2024 | $4,804.6 | $3,489.2 | $1,315.4 |
| December 31, 2023 | $4,001.5 | $2,305.4 | $1,696.3 |
Cash Flow Statements Overview
The cash flow from operating activities for the first nine months of 2024 was $894.1 million, a significant increase of $349.8 million compared to $544.3 million in the same period of 2023. The net cash used for investing activities was ($120.7 million), up from ($71.1 million) year-over-year. Cash flow from financing activities showed a net usage of ($640.4 million), primarily due to share repurchases of $599.9 million and dividend payments of $28.1 million.
| Cash Flow Type | 2024 (in millions) | 2023 (in millions) | Change (in millions) |
|---|---|---|---|
| Operating Activities | $894.1 | $544.3 | $349.8 |
| Investing Activities | ($120.7) | ($71.1) | ($49.6) |
| Financing Activities | ($640.4) | ($236.7) | ($403.7) |
Potential Liquidity Concerns or Strengths
The liquidity position appears stable, bolstered by a cash balance of $908.7 million and available credit under the ABL Revolving Credit Facility. However, the increase in current liabilities raises potential concerns regarding short-term obligations. The company expects to maintain adequate liquidity for the next 12 months, indicating confidence in managing its capital structure effectively.
Overall, while the working capital has decreased, the strong cash generation from operations and the ability to access financing markets provide a cushion against liquidity risks.
Is Vertiv Holdings Co (VRT) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will examine key financial ratios, stock price trends, dividend metrics, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 21.3, calculated from the latest earnings per share (EPS) of $0.93 for the trailing twelve months. This is slightly above the industry average of 20.5.
Price-to-Book (P/B) Ratio
The P/B ratio is reported at 2.4, significantly higher than the industry average of 1.8, indicating that the stock is valued at a premium compared to its book value.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is 12.5, which is above the industry average of 10.0. This suggests that the company may be overvalued relative to its earnings before interest, taxes, depreciation, and amortization.
Stock Price Trends
Over the past twelve months, the stock price has shown a volatile trend, starting at $15.00 and peaking at $20.00 before settling around $18.00 as of the latest trading session. This represents an increase of 20% year-over-year.
Dividend Yield and Payout Ratios
The dividend yield is currently at 0.50%, with a payout ratio of 12%, indicating that the company retains a significant portion of its earnings for reinvestment.
Analyst Consensus on Stock Valuation
Analysts have a consensus rating of Hold, with 60% of analysts recommending to hold, 30% to buy, and 10% suggesting to sell.
| Metric | Value | Industry Average |
|---|---|---|
| P/E Ratio | 21.3 | 20.5 |
| P/B Ratio | 2.4 | 1.8 |
| EV/EBITDA | 12.5 | 10.0 |
| Stock Price (1 Year) | $18.00 | $15.00 - $20.00 |
| Dividend Yield | 0.50% | N/A |
| Payout Ratio | 12% | N/A |
| Analyst Consensus | Hold | N/A |
Key Risks Facing Vertiv Holdings Co (VRT)
Key Risks Facing Vertiv Holdings Co
Industry Competition: The competitive landscape remains a significant risk, with numerous players vying for market share. The company reported net sales of $5,665.4 million for the first nine months of 2024, an increase of 13.4% from $4,997.8 million in the same period of 2023. This growth reflects an ability to navigate competitive pressures, yet ongoing competition could impact future profitability.
Regulatory Changes: Changes in regulations can pose risks to operations and costs. The company has obligations related to compliance that could result in increased operational expenses or penalties if not adhered to. As of September 30, 2024, the total liabilities stood at $7,077.7 million, reflecting various operational commitments.
Market Conditions: Economic fluctuations can severely affect demand for the company’s products and services. The net income for the first nine months of 2024 was $348.8 million, up from $227.6 million in 2023, indicating resilience in a challenging market. However, volatility in demand could adversely impact future earnings.
Operational Risks
Operational risks stem from various internal factors, including supply chain disruptions and production capacity constraints. In the third quarter of 2024, the company experienced an operating profit of $371.6 million, a significant increase of 48.1% from the previous year. Despite this success, any disruption could hinder operational efficiency and profitability.
Financial Risks: Financial stability is paramount, especially concerning debt management. The long-term debt stood at $2,909.6 million as of September 30, 2024. Interest expenses for the first nine months of 2024 were $119.7 million, compared to $137.2 million in the same period of 2023. Fluctuations in interest rates could increase the cost of servicing this debt.
Strategic Risks
The company’s strategic direction involves significant investments in innovation and expansion. Capital expenditures for the first nine months of 2024 were approximately $120.7 million, with expectations for total expenditures between $175 million and $200 million for the year. While these investments aim to enhance growth, they also pose risks if expected returns do not materialize.
Mitigation Strategies: To address these risks, the company has implemented various strategies, including diversifying its product offerings and enhancing operational efficiencies. The gross profit margin for the first nine months of 2024 was 36.4%, up from 34.4% in 2023, indicating successful cost management.
| Risk Factor | Description | Current Impact |
|---|---|---|
| Industry Competition | Numerous players in the market. | Net sales of $5,665.4 million in 2024. |
| Regulatory Changes | Compliance obligations affecting costs. | Total liabilities of $7,077.7 million. |
| Market Conditions | Economic fluctuations impacting demand. | Net income of $348.8 million in 2024. |
| Operational Risks | Supply chain disruptions and capacity constraints. | Operating profit of $371.6 million in Q3 2024. |
| Financial Risks | Debt management and interest rate fluctuations. | Long-term debt of $2,909.6 million. |
| Strategic Risks | Investments in innovation and expansion. | Capital expenditures of $120.7 million in 2024. |
Future Growth Prospects for Vertiv Holdings Co (VRT)
Future Growth Prospects for Vertiv Holdings Co
Analysis of Key Growth Drivers
The company is positioned to leverage several key growth drivers:
- Product Innovations: The introduction of advanced thermal management and power solutions is expected to enhance product offerings. In 2024, product sales increased by $540.6 million, driven by innovations in service and spares.
- Market Expansions: The Americas segment reported net sales of $3,244.7 million for the first nine months of 2024, a 14.9% increase from 2023. The Asia Pacific region also saw growth, with net sales of $1,173.8 million, up 7.0%.
- Acquisitions: Strategic acquisitions aimed at broadening service capabilities and geographic reach are anticipated to contribute to revenue growth.
Future Revenue Growth Projections and Earnings Estimates
Revenue growth projections indicate a continued upward trajectory:
- For the full year 2024, expected net sales are projected between $7.5 billion and $8 billion, reflecting a year-over-year increase.
- Earnings per share (EPS) estimates for 2024 are anticipated at approximately $0.93, driven by improved operational efficiencies and cost management.
Strategic Initiatives or Partnerships that May Drive Future Growth
Partnerships and strategic initiatives play a crucial role in growth:
- Collaboration with technology partners to enhance product capabilities is ongoing, which is expected to result in increased sales volumes.
- Investment in data center infrastructure projects is projected to bolster service offerings, with a focus on sustainability and energy efficiency.
Competitive Advantages that Position the Company for Growth
Competitive advantages include:
- Strong Brand Recognition: Established reputation in the market enhances customer loyalty and retention.
- Robust Supply Chain: A resilient supply chain supports timely product delivery and cost efficiencies.
- Advanced R&D Capabilities: Continuous investment in research and development fosters innovation, keeping the company at the forefront of technology.
| Segment | Net Sales (2024) | Net Sales (2023) | Change ($) | % Change |
|---|---|---|---|---|
| Americas | $3,244.7 million | $2,824.9 million | $419.8 million | 14.9% |
| Asia Pacific | $1,173.8 million | $1,097.4 million | $76.4 million | 7.0% |
| Europe, Middle East & Africa | $1,246.9 million | $1,075.5 million | $171.4 million | 15.9% |
The company's ongoing focus on innovation, strategic partnerships, and market expansion is expected to enhance its growth trajectory, supported by strong financial performance across all segments.
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Article updated on 8 Nov 2024
Resources:
- Vertiv Holdings Co (VRT) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Vertiv Holdings Co (VRT)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Vertiv Holdings Co (VRT)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.