Q2 2025 Vertiv Holdings Co Earnings Call
Breka: Good morning. My name is Breka, and I will be your conference operator today. At this time, I would like to welcome everyone to the Vertiv's second quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. Please note that the call is being recorded. I would now like to turn the program over to your host today, Lynne Maxeiner, to begin. Please go ahead.
Good morning. My name is Ba, and I will be your conference operator today.
At this time, I would like to welcome everyone to the verdicts second quarter 2025 earnings conference call.
All lines have been placed on mute to prevent any background noise.
Please note that the call is being recorded.
I would now like to turn the program over to your host today.
Lean maxina.
To begin.
Lynne Maxeiner: Great. Thank you, Breka. Good morning and welcome to Vertiv's second quarter 2025 earnings conference call. Joining me today are Vertiv's executive chairman, Dave Cote, chief executive officer, Giordano Albertazzi, and chief financial officer, David Fallon. We have one hour for the call today. During the Q&A portion of the call, please be mindful of others in the queue and limit yourself to one question. And if you have a follow-up question, please rejoin the queue. Before we begin, I would like to point out that during the course of this call, we will make forward-looking statements regarding future events, including the future financial and operating performance of Vertiv. These forward-looking statements are subject to material risk and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. We refer you to the cautionary language included in today's earnings release.
Please go ahead.
Great. Thank you. Ba. Good morning and welcome to bird of second quarter 2025 earnings conference call. Joining me today are verda's executive chairman, Dave, Cody, chief executive officer, Gio Albert hatsy, and Chief Financial Officer, David Fallon. We have 1 hour for the call today, during the Q&A portion of the call, please be mindful of others in the queue and let me yourself to 1 question. And if you have a follow-up question, please, rejoin the queue.
Lynne Maxeiner: You can learn more about these risks in our annual and quarterly reports and other filings made with the SEC. Any forward-looking statements that we make today are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of new information or future events. During this call, we also present both GAAP and non-GAAP financial measures. Our GAAP results and GAAP to non-GAAP reconciliations can be found in our earnings press release and in the investor slide deck found on our website at investors.vertiv.com. With that, I'll turn the call over to executive chairman, Dave Cote.
Before we begin, I would like to point out that during the course of this call. We will make forward looking statements regarding future events, including the future financial. And operating performance, averted before looking statements are subject to material risk and uncertainties that could cause actual results to differ materially from those, in the forward-looking statements, we refer you to the cautionary language included in today's earnings release. You can learn more about these risks in our annual and quarterly reports and other filings made with the SEC.
Any forward-looking statements that we make today are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of new information or future events. During this call, we also present both gaap and non-gaap financial measures. Our Gap results and gaap to non-gaap, reconciliations can be found in our earnings, press release, and in the investor slide deck, found on our website at investors.gov
With that, I'll turn the call over to Executive chairman. Dave, Cody,
Dave Cote: Morning, everyone. At the same, pleased with how well we've performed midway through 2025. We continue to outperform and deliver strong results. Gio and the team are executing very well, continuing to build a strong track record of financial performance. And our investments in R&D and capacity are paying off today as planned and positioning us well for the future. The transformation at Vertiv continues to accelerate, and I am more excited today than I've ever been about what is ahead. We're in a digital revolution that's got a long way to go, and data centers remain fundamental to all of it. Our global scale and technology leadership aren't easily replicated, and we keep widening that gap. We maintain our proven strategy of driving growth through both organic expansion and strategic acquisitions to extend our market leadership.
Morning everyone. At the Sam pleased with how well we perform Midway through 2025.
We continue to help perform and deliver, strong results, Geo, and the team are executing very well. Continuing to build a strong track record of financial performance.
And our investments in R&D and capacity are paying off today as planned and positioning us well for the future.
The transformation in advertising continues to accelerate, and I am more excited today than I've ever been about what is ahead.
We are in a digital revolution that has a long way to go, and data centers remain fundamental to all of it.
Our global scale and Technology leadership aren't easily replicated and we keep widening that Gap.
Dave Cote: Our recent Great Lakes acquisition announcement showcases our disciplined approach to deploying capital, where we see clear strategic benefits and value creation opportunities. Our M&A pipeline remains robust, and we'll continue to take this same approach, moving decisively when we find opportunities that enhance our technology leadership, engineering capability, global capacity, and overall growth profile. Our ongoing investments in ER&D and capacity expansion ensure we stay ahead of market demand while delivering the innovative solutions our customers expect. This digital age is just getting started, and Vertiv is poised to capitalize on the massive long-term opportunities. With that, I'll turn it over to Gio to walk through the details of our performance and outlook. I'm confident he and the team will continue to execute at a high level and deliver value for our shareholders.
We maintain our proven strategy of driving growth through both organic expansion and strategic Acquisitions to extend our Market leadership. Our recent Great Lakes acquisition announcements, showcases our discipline approach to the coin Capital where we see clear strategic benefits, and value creation opportunities,
Our m&a pipeline remains robust.
Same approach, moving decisively, when we find opportunities that enhance. Our technology leadership engineering capability Global capacity and overall growth profile.
Our ongoing investments in the ER&D and capacity expansion ensure we stay ahead of market demand while delivering the innovative solutions our customers expect.
this digital age is just getting started. Converted is poised to capitalize on the massive long-term opportunity.
With that, I'll turn it over to Gio to walk through the details of our performance and Outlook.
Confident, he and the team will continue to execute at a high level and deliver value for our shareholders.
Giordano Albertazzi: Thank you, Dave, and welcome, everyone. Thank you for joining us today. We go to slide three now. I am quite pleased with what we have delivered in Q2. Our adjusted diluted earnings per share was 95 cents, approximately 42% up from second quarter '24, primarily driven by higher adjusted operating profit. Our organic sales grew a very robust 34% year-on-year, with strong performance in the Americas up in the mid-40s and APAC up in the mid-30s. EMEA delivered high single-digit growth. For the first time, we surpassed $3 billion in orders this quarter. Well, not bad at all. This is certainly promising in terms of long-term trajectory. Q2 orders were up approximately 15% from Q2 '24, and certainly not an easy comp, and up 11% sequentially from one Q2 '25. Our trailing 12-month organic orders growth was 11%. Our Q2 book-to-bear ratio of 1.2 times is particularly encouraging.
Thank you, Dave. And uh welcome everyone, thank you for joining us today. Uh, we go to slide 3 now.
I am quite pleased with what we have delivered in Q2 our adjusted diluted earnings per. Share was 95 cents approximately 42% up from second quarter 24, primarily driven by higher adjustable operating profit. Our organic sales, grew a very robust 34% urine year with strong performance in the Americas up in the mid-40s and apart up in the mid-30s immediate delivered High single digit growth.
For the first time, we surpassed 3 billion dollars in orders this quarter.
Well, not bad at all. Uh this is certainly promising in terms of long-term trajectory
Due to orders were up approximately 15% from uh Q2 24, and certainly not an easy comp and up, 11% sequentially from 1 q25.
Giordano Albertazzi: We continue to build backlog at very high levels. Momentum in our business is accelerating. Our Q2 adjusted operating profit was $489 million, up 28% year-on-year, driven by higher sales. Our adjusted operating margin of 18.5%, in line with guidance, is approximately 110 basis points lower than prior years. This was primarily driven by the net impact of tariffs. Our updated guidance takes into consideration tariffs active on the 28th of July, reflecting a moderate improvement in the tariff situation compared to our Q1 guidance. The temporary costs of the supply chain and manufacturing transition to tariff-optimized footprint are higher than we initially estimated. We're also experiencing some temporary costs to deliver a steeper growth than expected and some executional challenges in EMEA. We expect all these factors will significantly moderate during the year, and we believe they will be materially resolved by year-end.
Our trailing 12-month organic orders growth, was 11%, our Q2 book to be ratio of 1.2 times, is particularly encouraging.
We continue to build backlog at very high levels. Momentum in our business is accelerating
Our Q2 adjusted operating profit was $489 million, up 28% year-over-year, driven by higher sales.
Our adjusted operating margin of 18.5% in line with guidance is approximately 110 basis points lower than prior year.
This was primarily driven by the net impact of tariffs.
Our updated guidance takes into consideration, tariffs active active on the 28th of July, reflecting a moderate Improvement in the Tariff situation compared to our q1 guidance.
The temporary costs of uh the supply chain and Manufacturing transition to tariff, optimize footprint are higher than we initially estimated. We're also experiencing some temporary costs to deliver a steeper growth than expected and some execution of challenges in emia
Giordano Albertazzi: For Q3 and for the full year, we are raising our investment in ER&D and in growth compared to prior guidance. Our second quarter free cash flow of $277 million, though lower on a year-on-year basis, corroborates a strong cash generation trend with adjusted free cash flow of $542 million in the first half. A robust growth of 24% year-on-year. This performance was driven by our improved operational execution, resulting in higher adjusting operating profit. We are raising the full year adjusted free cash flow guidance to $1.4 billion. Our disciplined financial management is reflected in our strong balance sheet with a net leverage ratio of just 0.6 times at quarter end. We are raising our full year 2025 net sales guidance by $550 million to $10 billion. We expect organic growth to be approximately 24% for the full year.
we expect all these factors will significantly moderate during the year and we believe they will be materially resolved by your end.
43 and 4 for the full year. We are raising our investment in ERND UH and in growth compared to prior guidance.
Our second quarter free cash flow of 20277 million though, lower on a year-on-year basis. Corroborates, a strong cash generation Trend with adjusted free, cash flow of 542 million in the first half.
A reboost, a robust growth of 24%, Chiron. This performance was driven by our improved operational execution, resulting in higher adjusting operating profit. We are raising the full year, adjusted free cash flow, guidance to 1.4 billion dollars.
Giordano Albertazzi: We're also raising our full year adjusted diluted EPS guidance to $3.80, or 33% higher than prior year. We're taking our adjusted operating profit guidance to just under $2 billion at the midpoint. So 2025 is shaping up to be a strong year. With that, we move to slide four. Our TTM orders organic growth and our sequential orders growth, both at 11%, are a testament to Vertiv's strong momentum in the market, particularly considering very strong orders in second quarter '24. Our backlog stands strong at $8.5 billion, up 21% versus prior year and 7% sequentially from Q1, supporting our increased guidance for the year. Our price is aligned with our expectations. We're seeing robust pipeline growth across all regions, well-balanced across our portfolio. And remember, these are tangible quoted opportunities.
Our disciplined financial management is refracting, our strong balance sheet with the net leverage. Ratio of just 0.6 times at quarter end, we are raising our full year. 2025, net sales guidance by 550 million dollars to 10 billion dollars. We expect organic growth to be approximately 24% for the full year. We're also raising our full year, adjusted diluted EPS guidance to 3.80 or 33% higher than prior year,
We're taking our adjusted operating profit guidance to just under 2 billion dollars at the midpoint. So 2025 is shaping up to be a strong year.
With that, we move to slide 4.
Our TTM orders organic growth and our sequential orders growth, both at 11%, are a testament to the strong momentum in the market. Particularly considering very strong orders in Q2 2024, our backlog stands strong at $8.5 billion.
Up. 21% versus per year and 7% sequentially from q1 supporting our increase, the guidance for the year.
Giordano Albertazzi: In EMEA, while 2025 full year net sales are expected to be flat compared to 2024, we are seeing sequential growth in the orders pipeline, providing optimism for 2026 and beyond. The regulatory environment is becoming more conducive to AI infrastructure investment, reflected in our customer discussions and pipeline. While we are on the topic of orders, let me briefly explain a change in how we'll communicate orders. As we have consistently said, orders in this industry can be lumpy, and this lumpiness can sometimes create unnecessary stock market reactions for Vertiv. Beginning on our Q4 and full year 2025 earnings call, we will provide projected full year orders rather than quarterly orders and backlog information. We believe this better aligns with how we run our business. We will provide updates on the full year projections quarterly as we progress through the year and as we deem necessary.
Our price is aligned with our expectations. We're seeing robust pipeline growth across all regions, well balanced across our portfolio. And remember, these are tangible quoted opportunities.
In the year 2025, net sales are expected to be flat. Compared to 2024, we are seeing sequential growth in the orders pipeline, providing optimism for 2026 and beyond.
The regular tree environment is becoming more conducive to AI infrastructure investment reflected in our customer discussions and Pipelines.
While we are on the topic of orders, let me briefly explain a change in how we communicate orders.
As we have consistently said orders in, this industry can be lumpy and this lumpiness, can sometimes create unnecessary stock market reactions for vertiv.
Giordano Albertazzi: Let's now move to the right side of the slide. The tariff situation remains quite dynamic and fluid, with the tariff perimeter changing frequently, and this can create inefficiencies in the playbook and execution as we adjust to a changing landscape. This guidance is based on the tariffs in place on the 28th of July. We are vigorously executing tariff countermeasures. We believe tariffs will be materially offset exiting 2025. We are deliberately increasing spending in engineering and R&D capacity and go to market to fuel growth. We are fine-tuning our supply chain as suppliers accelerate their localization efforts to address the tariff situation. Our supply chain resilience is helping us well. As growth accelerates, our capacity expansion strategy continues to be two-pronged: strategic manufacturing and service investment ahead of anticipated growth, capacity liberation through Vertiv operating system productivity improvement. Let's now go to slide five.
Beginning on our Q4 and full year 2025 earnings call. We will provide projected full year orders rather than quarterly orders and backlogging information. We believe this better aligns with how we run our business. We will provide updates on the full year, projections, quarterly as we progress through the year, and as we deem necessary.
Let's now move to the right side of the slide.
The tariff situation remains quite dynamic and fluid, with a tariff perimeter changing frequently, and this can create inefficiencies in the playbook and execution.
As we adjust to a changing landscape.
These guidelines are based on the tariffs in place on the 28th of July.
we are vigorous executing tariffs counter measures, We Believe tariffs will be materially upset exiting 2025
We are deliberately increasing spending in engineering and R&D capacity and go-to-market initiatives to fuel growth.
Um, we are fine-tuning our supply chain as a supplier. Accelerate their localization efforts to address the Tariff situation. Our supply chain uh, resilience is helping us well as growth accelerates our capacity expansion strategy continues to be 2 pronged.
Strategic manufacturing and service investment ahead of anticipated growth capacity, liberation through virtual operating system, productivity improvement.
Giordano Albertazzi: Grey space and white space no longer are separate spaces. Grey space is the traditional critical infrastructure that powers and cools the data center. The white space is where the IT equipment, the IT stack, lives: the racks, service, the compute infrastructure. With an increase in rack density, the physical integration and interoperability between these spaces has become absolutely evident and critical. Think about it. With hundreds of kilowatts per rack, the mechanical, electrical infrastructure, and the IT stack are so intimately connected, sharing the same space, that they need to be thought of as one system. This is where Vertiv's trends really come into play. You will have heard me describe Vertiv as the connective tissue between the grey and the white space, between facilities and IT. Our traditional expertise in grey space is seamlessly becoming white space infrastructure expertise.
Let's now go to slide 5.
Grace space and wide space. No longer are separate spaces.
Great space. Is the traditional critical infrastructure that powers and cools the data center. The white space is where the it equipment. The it stack uh lives direct service the Computing infrastructure.
With increasing drug density, the physical integration and interoperability between these spaces has become absolutely evident and critical.
Think about it with hundreds of kilowatts per rack, the mechanical, electrical infrastructure and the IT stack are. So intimately connected sharing the same space that they need to be thought of as 1 system. This is where virtus Trends really come into play. You will have heard me, describe vertiv as the connective tissue uh between the gray and the white space between the facilities. And it are traditional expertise in Gray spaces is a seamlessly becoming wide space infrastructure expertise.
Giordano Albertazzi: White space deployment is becoming more complex, more time-consuming, more multidisciplinary. This is a unique opportunity for advanced prefabrication to dramatically reduce fit-out complexity, reducing deployment time by an order of magnitude. This is smart run. A step change in how we think about white space deployment. Allow me another angle. The IT equipment has traditionally had frequent refresh cycles. As density increases over time, this may drive regular refresh cycles of the white space mechanical and electrical infrastructure. Let's now switch to the right side of slide five. Let's stay on this slide. We have announced a new acquisition, as you know, Great Lakes, which is expected to close this quarter. We anticipate that this transaction will bring us an extensive portfolio of high-end rack solutions and innovation capabilities that are essential in today's increasingly demanding AI infrastructure white space.
White space deployment is becoming more complex, more time. Consuming more multi-disciplinary. This is a unique opportunity for uh Advanced prefabrication to dramatically reduce fit out complexity reducing deployment Time by an order of magnitude.
This is smart. Run a step change. Now we think about whitespace deployment.
The it equipment has traditionally had frequent refresh Cycles.
As density increases over time, this may drive regular refresh cycle of the whites space mechanical and electrical infrastructure.
Let's now switch to the right side of uh slide 5. Let's stay on this slide. We have announced a new acquisition as you know a great lakes which is expected to close this quarter.
Giordano Albertazzi: Great Lakes' portfolio includes custom racks, integrated cabinets, heavy-duty racks and cabinets, and enhanced cable management solutions. Great Lakes' high-end infrastructure solution technology, capacity, and engineering expertise complement very well the rest of Vertiv's capabilities in the grey and white space. With manufacturing and assembly facilities in the US and Europe, we anticipate Great Lakes will enhance our ability to serve customers with speed and scale. We are enabling the end-to-end infrastructure for AI factories. We're gaining a growing presence in the white space. Our understanding of the entire system, from power to cooling to IT infrastructure, positions us uniquely to solve the complex challenges that our customers face. And with that, I'll turn it over to David. David, over to you.
We anticipate that this transaction will bring us an extensive portfolio of high-end rack solutions and innovation capabilities that are essential in today's increasingly demanding AI infrastructure space.
Great Lakes portfolio, includes custom racks, integrated cabinets heavy-duty racks and cabinets and enhanced Cable Management Solutions, Great Lakes, high-end infrastructure solution, technology capacity and Engineering expertise.
Complement very well, the rest of Alberta's capabilities in the gray and white space.
With manufacturing and assembly facilities in the US and Europe. We anticipate Great Lakes will enhance our ability to serve customers with the speed and scale.
We are enabling the end-to-end infrastructure for AI factories. We're getting a growing presence in the wide space.
Our understanding of the entire system from power to cooling to it. Infrastructure position us uniquely to solve the complex challenges that our customers face.
David Fallon: Perfect. Thanks, Gio. Turning to slide six, let me walk you through our second quarter results. And starting on the left, another strong quarter for earnings growth with adjusted EPS of 95 cents, which is up 42% from last year. And that's primarily driven by higher adjusted operating profit and lower net interest. Once again, we delivered strong organic sales growth of 34%, almost $300 million above prior guidance. And compared to last year, Americas was up 43%, APAC up 37%, and EMEA, still influenced by a lag in AI infrastructure build, was up 7%. And as Gio stated, pipelines across all three regions continue to grow nicely, including EMEA. Our adjusted operating profit of $489 million was up 28% from last year and $54 million higher than guidance.
And with that, I'll turn it over to David. David over to you, perfect. Thanks, Gio um, turning to slide 6. Uh, let me walk you through our second quarter results and starting on the left and other strong quarter for earnings growth with adjusted EPS, uh, of 95 cents, which is up 42% from last year. And that's primarily driven by higher adjusted operating profit and uh, lower net interest.
Um, once again we delivered uh, strong organic sales growth of 34% almost uh 300 million dollars above prior guidance.
And compared to last year America's was up 43% AP pack up 37% and a Mia still influenced by a lag in AI infrastructure build uh was up 7%.
Uh and as Gio stated pipeline's across all 3 regions continued to grow nicely including Amia.
David Fallon: Our adjusted operating margin of 18.5% was down 110 basis points from last year, but in line with guidance, with the year-over-year decline primarily driven by tariffs as expected. Now, based upon operational leverage from the much higher volume, it would be reasonable to expect adjusted operating margin to be higher than the 18.5% actual end guide. However, as Gio mentioned, we experienced higher-than-anticipated operational efficiencies and execution challenges in the quarter in support of significantly higher volumes, in addition to higher-than-anticipated supply chain and manufacturing transition costs to mitigate tariffs. We expect some of these factors to continue in the third quarter, but be materially resolved by the end of the year and as we enter 2026. As implied in our full-year guidance, we expect fourth quarter adjusted operating margin to be more than 23%, keeping us on track with our targeted 25% full-year adjusted operating margin by 2029.
Our adjusted operating profit of $489 million was up 28% from last year and $54 million higher than guidance.
Our adjusted operating margin of 18.5% was down 110 basis points from last year, but in line with guidance. The year-over-year decline was primarily driven by tariffs, as expected.
Now, based upon operational leverage from the much higher volume, it would be reasonable to expect adjusted operating margin to be higher than the 18.5% actual and guide.
However, as Gio mentioned, we experienced higher-than-anticipated operational efficiencies and execution challenges in the quarter in support of significantly higher volumes, in addition to higher-than-anticipated.
Supply chain and Manufacturing transition costs to mitigate terrorists.
We expect some of these factors to continue in the third quarter, but the materially resolved by the end of the year, and as we enter 2026,
As implied in our full year guidance.
Uh, we expect fourth quarter, adjusted operating margin to be more than 23%.
David Fallon: And finally, on this page, adjusted free cash flow was down $60 million from last year's second quarter, primarily due to favorable trade working capital timing last year. But year-to-date adjusted free cash flow is up 24%. And as you will see in a few slides, we are raising our full-year guidance by $100 million to $1.4 billion. In short, you can likely check the box on free cash flow. Now, moving to slide seven, looking at our segment results, Americas had another strong quarter with organic sales up 43%. And that was driven by continued strength in colocation and hyperscale markets. And despite tariff headwinds, adjusted operating margin remained strong at 24%. APAC's 37% organic sales increase was driven by strong growth across the region. Margin expanded to 10.6%, primarily driven by operational leverage and a discrete expense in last year's second quarter.
Uh, keeping us on track with our targeted 25% full year. Adjusted operating margin by 2029.
And finally, on this page, adjusted free cash flow was down million dollars from last year's second quarter primarily due to favorable trade working capital timing last year.
But year to date adjusted free cash flow is up 24%. And as you will see, in a few slides, we are raising our full year guidance by 100 million dollars to 1.4 billion.
Um, in short, you can likely check the box on free cash flow.
Now, moving to slide 7 uh looking at our segment results.
America's had another strong quarter with Organic sales up 43% and that was driven by continued strength and co-location and hyperscale markets.
Strong at 24%.
Apex 37% organic sales increase was driven by strong growth across the region.
David Fallon: EMEA's top line grew 7% organically in the second quarter, lagging the other regions as we expected. We anticipate EMEA sales will be down organically in the back half of 2025 and relatively flat for the full year. But as a reminder, EMEA was our fastest growing region in 2024, and we expect growth to reaccelerate based upon the healthy pipeline. Lower margin in EMEA is primarily driven by two things. First, we did have some operational execution challenges in the second quarter that we expect to address in the coming quarters. Second, we made a deliberate decision to invest in fixed costs in the region ahead of expected growth while expanding regional capacity pursuant to supply chain shifts to the US in response to tariffs.
Margin expanded to 10.6%, primarily driven by operational leverage and a discrete expense from last year. Second quarter,
The me is Topline group uh 7% organically in the second quarter, lagging the other regions as we expected. Um we anticipate a Mia sales will be down, organically in the back half of 2025 and relatively flat for the full year but as a reminder emia was our fastest growing region in 2024 and we expect growth to re accelerate based upon the healthy pipeline.
Lower margin in the Mia is primarily driven by 2 things first. We did have some operational execution challenges in the second quarter that we expect to address in the coming quarters.
David Fallon: While this investment in these supply chain actions contributes to excess capacity and costs in the near term, these should be absorbed when volumes reaccelerate in EMEA. As mentioned, pipeline remains healthy, and we anticipate the strong pipeline to convert to top line as soon as 2026. Next, moving to slide eight, we guide third quarter adjusted EPS of 97 cents, 28% higher than last year. This improvement is primarily driven by an expected 22% increase in adjusted operating profit. On the top line, we expect another strong quarter of organic growth at 22%, with Americas in the mid-30s, APAC in the low 20s, and EMEA down upper single digits, in part driven by a challenging comp in last year's third quarter. We expect adjusted operating margin of 20%, relatively consistent with 2024, despite tariff headwinds, as we continue to leverage higher sales and drive positive price costs.
Second, we made a deliberate decision to invest in fixed costs in the region ahead of expected growth while expanding regional capacity. This was done pursuant to supply chain shifts to the US in response to tariffs.
Well this investment in these supply chain actions, contribute to excess uh capacity and costs in the near term. They should be absorbed when volumes react in a Mia.
As mentioned, the pipeline remains healthy, and we anticipate the strong pipeline to convert to topline as soon as 2026.
Next moving, uh, to slide 8, uh, we guide third quarter adjusted, EPS of 97 cents.
28% higher than last year. This Improvement is primarily driven by an expected 22% increase in adjusted operating profit.
On the top line, we expect another strong quarter of an organic growth at 22%.
with America's in the mid-30s APAC and the low 20s, and a Mia down upper single digits, um, in part driven by a challenging cop in last year's third quarter,
David Fallon: Implied is 150 basis points sequential improvement from the second quarter, primarily driven by progress in resolving some of the operational inefficiencies and execution challenges. Moving to slide nine, let me walk you through our full-year financial guidance. We are raising projected adjusted EPS to $3.80, 33% higher than last year, primarily driven by higher adjusted operating profit and lower net interest. We are raising our full-year top line guide by $150 million to $10 billion, with $110 million of this increase from favorable foreign exchange. The resultant underlying organic growth of 24% is driven by expected continued growth in the Americas and APAC, while we expect EMEA to be relatively flat. For adjusted operating profit, we are raising our full-year guidance to just under $2 billion, up 28% from last year. And as Gio mentioned, this guidance assumes tariffs active on July 28th.
We expect adjusts that operating margin of 20% relatively consistent with 2024 despite tariff headwinds as we continue to leverage, higher sales and drive positive price costs.
Implied is 150 basis points, sequential improvement from the second quarter, primarily driven by progress in resolving some of the operational inefficiencies and execution challenges.
Moving the slide 9.
Let me walk you through our full year financial guidance.
Uh, we are raising projected adjusted EPS to $3.80, 33 percent higher than last year, primarily driven by higher adjusted operating profit and lower net interest.
We are raising our full-year topline guidance by $50 million to $10 billion, with $110 million of this increase coming from favorable foreign exchange.
The resultant uh underlying organic growth of 24% is driven by expected continued growth in the Americas and APAC. Uh while we expect a Mia to be relatively flat,
For adjusted operating profit, we are raising our full-year guidance to just under $2 billion, up 28% from last year.
David Fallon: We expect all other things being equal, a possible downside scenario from potential August 1st tariffs, as currently understood, and things are changing rapidly and somewhat challenging to quantify. But we believe that would still place our full-year adjusted operating profit within our guidance range for adjusted operating profit. Full-year adjusted operating margin is projected to be approximately 20% at the midpoint, 60 basis points higher than last year, despite tariff headwinds, and 50 basis points lower than prior guidance. We continue to drive margin improvement, including positive price cost and productivity. And implied in our guidance is fourth quarter adjusted operating margin in excess of 23%, once again keeping us on track to attain our long-term target by 2029.
And as Gio mentioned, this guidance assumes tariffs active on uh July 28th.
Uh, we expect all other things being equal, a possible downside scenario from potential August 1st tariffs as currently understood. Things are changing rapidly and are somewhat challenging to quantify, but we believe that would still place our full year operating profit within our guidance range for adjusted operating profits.
Full year, adjusted operating margin is projected to be approximately 20% at the midpoint.
60 basis points higher than last year, despite tariff headwinds and 50 basis points lower than prior guidance.
We continue to drive margin Improvement, including positive price cost and productivity and implied. In our guidance is fourth quarter, adjusted operating margin in excess of 23%.
David Fallon: And finally, on this page, we are increasing our full-year adjusted free cash flow guidance to $1.4 billion, up $100 million from prior guidance, driving full-year adjusted free cash flow conversion to 95% as we continue to drive initiatives to optimize trade working capital. And when you piece it all together, the growth trajectory, the margin progression, and the free cash flow performance, these numbers certainly demonstrate the continued strength of our execution and our ability to drive significant growth while expanding margins. We talked a fourth quarter guidance slide in the appendix. And if you look at the exit rates across all financial metrics, we believe we should be very well positioned for a strong start to 2026. And with that said, I turn it back over to Gio.
Uh, once again, keeping us on track to attain our long-term Target by 2029
And when you piece it all together, the growth, trajectory the margin progression and the free cash flow performance. These numbers
Certainly, we will demonstrate the continuous strength of our execution and our ability to drive significant growth while expanding margins.
Giordano Albertazzi: Well, thank you, David. Thanks a lot. We go to slide 10. There we go. So some key thoughts here to wrap up. Growth is certainly ongoing, and it is here to stay. We have demonstrated the ability to meet our customer needs and to gain market share, delivering a 30% sales growth in the first half of '25. While this has required accelerated investment in engineering and R&D capacity and go-to-market, we are aligning execution to this speedier growth rate. We are vigorously addressing the temporary margin challenges. This has my and my team's full attention. I'm confident we will see constant improvement. We have raised 2025 guidance for adjusted diluted EPS, net sales, AOP, and adjusted free cash flow. The speed of technological evolution isn't abating, and the industry is changing quite dramatically. We're driving this change and helping to shape the future of data center infrastructure.
We talked about the fourth quarter guidance, which is included on the slide in the appendix. If you look at the exit rates across all financial metrics, we believe we should be very well positioned for a strong start to 2026. With that said, I turn it back over to Gio.
Well, thank you, David. Thanks a lot. We go to slide 10.
There we go. So, um, uh, some key thoughts are here to wrap up. Growth is certainly ongoing, and it is here to stay. We have demonstrated the ability to meet our customer needs.
And to gain market share, delivering a 30% sales growth, in the first half of 25.
While this has required accelerated investment in engineering and R&D capacity and go to market. We are, uh, aligning execution to this speedia growth rate, we have vigorously addressing the temporary margin challenges. This has my, and my teams through attention, I'm confident we will see constant Improvement.
We have raised our 2025 guidance for adjusted diluted EPS, net sales AOP, and adjusted free cash flow.
Giordano Albertazzi: Lastly, let me highlight two particularly exciting developments that demonstrate our technology leadership and innovation in the market. Let's start with our collaboration with CoreWeave, which showcases Vertiv's position at the forefront of AI infrastructure. With CoreWeave and Dell, we were the first to launch and deploy NVIDIA's GB300 and VL72. This follows our head start with GB200 and VL72 reference design. Our infrastructure offering is always at least one GPU generation ahead, which is absolutely critical for our customers. And let me continue with our collaboration with Oakland. With the data center industry keenly focused on accessing increasingly large sources of power and power generation, our collaboration with Oakland is about making access to advanced nuclear power plants easier.
The speed of technological evolution isn't updating, and the industry is changing quite dramatically. We're driving this change and helping to shape the future of data center infrastructure.
Uh, lastly, let me highlight 2, particularly exciting development that demonstrate our technology leadership and innovation in the market. Let's start with our collaboration with cool weave, which is showcases advertised position at the Forefront of AI infrastructure with Co weave and Delaware where where the first to launch and deploy nvidia's. GB, 300, nvl, 72.
Giordano Albertazzi: Working on power and thermal reference architectures tailored to Oakland's great advanced nuclear power plant technology, we will enable this to happen at scale and in ways that significantly enhance the overall data center efficiency. These collaborations demonstrate how Vertiv is actively shaping the future of the data center infrastructure, working with innovative partners to solve the industry's most pressing challenges while maintaining our focus on efficiency, reliability, and sustainability. I conclude by saying that the industry is effervescent, optimistically intense, and driving acceleration. We're raising our full-year guidance, and we are confirming our long-term margin objective. We are making sure we continue to lead the industry forward through this acceleration for the years to come. With that, let us start the Q&A session. And over to you, Breka.
This follows our head start with GB200, and we are 72 reference designs. Our infrastructure offering is always at least one GPU generation ahead, which is absolutely critical for our customers. Let me continue with our collaboration with, okay, with the data center industry, keenly focused on accessing an increasingly large source of power generation. Our collaboration with Oklo is about making access to advanced nuclear power plants easier, working on power and thermal references.
Get back to the tailored to Oklahoma's. Uh, great Advanced nuclear power plant technology. We will enable this to happen at scale and in ways that significantly enhance the overall data center efficiency.
Um, these collaborations demonstrate how Vertiv is actively shaping the future of the data center infrastructure.
Working with the Innovative Partners to solve the industry's, most pressing challenges, while maintaining our focus on efficiency, reliability and sustainability.
I conclude by saying that the industry is aerated optimistically, intense and driving acceleration.
Breka: Thank you, Gio. We will now begin the question and answer session. And if you would like to ask a question, you can do so by pressing star, followed by one, on your telephone keypad. In the interest of time, please limit yourself to one question. And if you have a follow-up, please rejoin the queue. We will pause for a moment to compile the Q&A. The first question comes from Steve Tusa with JP Morgan. Your line is open, Steve.
We're raising our full-year guidance and we are confirming our long-term margin objective. We are making sure we continue to lead the industry forward through this acceleration in the years to come with that. Let us start the Q&A session, and uh, over to you, Bria.
Thank you, g.
You will have again the question and answer session.
And if you would like to ask a question, you can do so by pressing star, followed by 1 on your telephone keypad.
In the interest of time, please limit yourself to one question. And if you have a follow-up, please rejoin the queue.
We will pause for a moment to compile the Q&A.
Steve Tusa: Hey, guys. How's it going?
The first question comes from Steve tuza with JP Morgan. Your line is open Steve.
Hey guys. How's it going?
Giordano Albertazzi: Doing very well, Steve. How are you doing?
Steve Tusa: So just on the margin side, I think you're going to be exiting the year at like a mid-30s incremental margin, which I think is relatively something that we would target, I think, over the long term that you guys have talked about. I know you're continuing to invest every year, and there's always some incremental friction as you're delivering at this rate, which is pretty dramatic. But is there any reason why we wouldn't think about '26 as a more normal year on margins, given your kind of easy comps and that exit rate?
Doing very well Steve, how you doing? Um so so uh just on the on the margin side I think you're going to be exiting the year at like a 30, mid 30s incremental margin which I think is
I know you're continuing to invest every year and there's always, um, some incremental friction as you're, um, delivering at this rate, which is, you know, pretty dramatic. Um, but is there any reason why we wouldn't think about 26, is, you know, a more normal year on margins, given your, you know, kind of easy comps and that and that exit rate
um,
Giordano Albertazzi: Certainly, the direction of speed coming out of 2025 is encouraging in terms of the long-term trajectory. I was vocal in the script thinking in terms of continuing to believe that our objectives in terms of long-term margins are correct. So I would think that you're not probably too far from what we think the future could look like.
Steve Tusa: Great. Thank you.
Certainly uh certainly the the direction of speed uh coming out of U of 2020. Um, 5 is uh, is encouraging. In terms of the long trajectory long-term trajectory you, you know, uh, we I was in the script thinking, in terms of uh, continue to um uh, believe that our objectives in terms of uh, of uh, long-term margins are, are are correct. So I I would think that, um, you know, probably too far from what we think the future could look like, uh,
Great. Thank you.
Breka: Thank you. Your next question comes from Amit Dharani with Evercore. Your line is open.
Thank you.
Your next question comes from Amit Donnie with evercore, your line is open.
Amit Daryanani: Thanks a lot. Good morning, everyone. I guess, you know, I was hoping, Gio, you could spend a little bit of time on the strength that we're seeing in both your backlog and orders right now. And maybe just touch on it on two fronts. One, are you seeing a shift in duration of your orders right now? Or maybe you can talk about the range of what that order book or backlog looks like. That would be really helpful. And then secondarily, can you just touch on the diversity of this backlog? You mentioned CoreWeave, I think, at the end of your comments. And certainly, the NeoCloud seemed to be ramping up in a much bigger way. So I'd love to just understand, you know, how do you think of the duration of this backlog and then also the customer diversity that's perhaps starting to happen over here?
Um thanks a lot. Good morning, everyone. Um, I guess, you know, I was hoping go. You could spend a little bit of time on the strength that we're seeing in, both your backlog and orders right now um, and maybe just touch on on 2D right now. Um or or maybe you can talk about the range of what that order book or backlog. Looks like that would be really helpful and then the secondarily. Can you just touch on the diversity of this backlog? Uh you mentioned core view. I think at the end of your uh comments and certainly the nio cloud seemed to be ramping up in a much bigger way. So, I'd love to just understand, you know, how do you have the duration of this backlog and then also the customer diversity, that's perhaps, starting to happen over here.
Giordano Albertazzi: Amit, I mean, I will take this as a one question. Let's put it this way. So two aspects of your one question. One is, what is the duration and what is the mix in terms of time frames of our backlog and pipeline? Backlog is pretty much similar to what we have seen historically. There is no kind of either a dramatic elongation or dramatic shrinkage of the backlog. If anything, what we see, and it's quite reassuring, we like it, is that some of our customers would like to have stuff earlier. And there is an appetite for us to deliver, if you will. When we can deliver, and we can deliver, as we have demonstrated in the second quarter, we have increasing the customer base that is ready to receive. That's a good sign for the industry as a whole.
Uh, I mean I will take this as a 1 question representative way. So, uh, 2 2 aspects of of the order 1 question 1 is the um, what what is the duration and what is the, um, the the the mix in terms of uh uh time time frames of uh, of our backlog and um
And uh, pipeline, uh, backlog is pretty much, uh, similar to what we have seen. Historically, there is no kind of a either, a dramatic elongation or dramatic. Uh, um, shrinkage of, uh, of the backlog. If anything, what we see and it's, uh, it's quite reassuring. We like it. Uh, is that, um, some of our customers would like, to, to have stuff earlier, uh, and, uh, there is an appetite to to, um,
Giordano Albertazzi: When it comes to orders, let's say top pipeline more than orders, because orders and what I say backlog is pretty much like for like. You would say it's like when the order is received. In a pipeline, we have a little bit of an elongation, which is a positive elongation. Don't think about anything that distorts the shape between, for example, what is six months, next six months, or next 12 months vis-Ã -vis beyond the next 12 months. But there is a little bit more elongated visibility. But again, nothing that dramatically changes the shape. We have a nicely kind of actionable pipeline that supports our growth ambition. There was an aspect about diversity. I'd say that clearly, if we think about the part of the market that grows the fastest, we're certainly thinking what we call the core hyperscale.
For us, uh, to, to deliver if you will, uh, when we can deliver and and we can deliver as we have demonstrated in the second quarter, uh, we have increasing the customer base. That is, uh, that is ready to receive. That's a good sign for the industry as it all, when it comes to orders. Um, let's say talk pipeline more than orders because orders. And what I say backlog is pretty much like for like, as I say, is saying, like when the order is received in a pipeline, we have a little bit of an elongation, which is a positive elongation don't think about anything that these stores, the shape between, for example, what is 6 month? Next 6 months, or next 12 months, uh, V beyond the next 12 months but there is a little bit more elongated visibility. But again nothing that uh dramatically changed the shape, uh we have a nicely kind of actionable uh pipeline um that supports our growth ambitions.
Giordano Albertazzi: And you know that that is quite a large container for us. That includes certainly hyperscale, traditional colocation, sovereign, and definitely NeoCloud. So it's a well-balanced in that respect. Next. Yeah. Ready for the next.
Um, there there was an aspect about diversity. Uh, I'd say that clearly. If we think about the part of the market that grows the fastest certainly thinking, what the, uh, what we call the, the caller hypers scale and, you know, that that is a quite a, quite a large container for us. Um, that includes, uh, certainly hyperscale traditional collocation, uh, stubborn and, uh, and definitely new Cloud. So it's a well, balanced in that respect.
Next. Yeah. Ready for the next.
Breka: We now have Jeff Sprek with Vertiv Research Partners. Please go ahead.
We now have a just spread with Vertical Research Partners. Please go ahead.
Scott Davis: Hey, thank you. Good morning, everyone. I'm going to sneak an unrelated two-parter in here too, if I can. Just first on tariffs and inflation. Just given this kind of remarkable demand pulse you're seeing, do you have kind of the commercial leverage to fully recover tariffs? We're just talking about some kind of delay in terms of moving through the order backlog and converting to sales. And then, I'm sorry, Gio, could you just maybe address a little scare through the market a couple of weeks ago on AWS delivering some kind of or developing some kind of liquid cooling application, how you put something like that in context to your business? Thank you.
Tariffs. We're just talking about some kind of delay um you know, in terms of uh moving through the order backlog and converting to sales and then I'm sorry. Gio could you just uh maybe address uh little scare through the market, a couple weeks ago on, you know, AWS, you know, delivering some kind of or developing some kind of liquid cooling application. How you put something like that in context to your business? Thank you.
Giordano Albertazzi: Well, I really have a hard time, Jeff, reconciling these two questions into one. So let me start from the AWS one. So in general, think in terms of hyperscalers having certainly a very strong opinion on how they want their infrastructure to be. Now, no two hyperscalers have the same behaviors. No two hyperscalers have the same design philosophy. But certainly, with every single hyperscaler, you need to have a very strong relationship. And you have to be involved in the technology that very often, together with them, is developed. So I don't want to over-elaborate on the specific case because I'll let AWS talk about that. But in general, think about us being always connected with hyperscalers. And as I said several times, it's very important to be in the labs with them, to have our engineers and their engineers working together.
Well, I really have a hard time, Jeff, reconciling these two book questions into one. So, uh, let me, um, let me start from the AWS, uh, uh, one. Um, so in general, think in terms of, uh,
um,
Hyperscalers, having certainly a very a very um, strong opinion on how how they want their infrastructure to be now, no 2, hyper scalars, have anybody behaviors? Uh, no 2 hyper scalars, have the same uh, uh, designed philosophy, but certainly with the, with every single hyperscale, uh, you usually have, uh, a very strong relationship and you have to be involved in, uh,
Giordano Albertazzi: And that will bring good things about. That could be kind of a customization of products that are in our portfolio or us working on the technology exactly the way they want it. So I don't think there should be any scare. This is not an anomaly in the way the market works. And we are here to scale with our hyperscale customers. We are here to co-engineer with them.
In the, in the technology, um, that uh, very often together with them is, uh, is developed. So I don't want to over elaborate on the specific case. Because, uh, um, um, I I I like AWS talk about that but, but in general, um, think about us being always connected with, uh, with hyperscalers and, uh, and it as I said, several times, it's very important to be in the labs with them to have, have an, our engineers and their Engineers working together. And that will, uh, you know, uh, bring good things about. That could be kind of a customization of, uh, products that are in our portfolio or, uh,
Us, uh, working on the technology is exactly the way they, the way they want it. So, I don't think there should be any scare. This is not, uh, an anomaly in the way the market, uh, the market works, and, uh, we are here to, to scale with our, um, hyperscale customers. We are here to co-engineer, uh, with them.
Breka: Thank you. We now have a question from Nigel Coe with Wolf Research.
Thank you.
You now have a question from Nigel Co with Wolfe research.
Amit Daryanani: Thanks. Good morning. And Gio, I promise I'll keep this to one question. No two-parters within one question, just one question, I think. So.
Giordano Albertazzi: Let's see. Let's see.
Amit Daryanani: Let's see. You'd be the judge. So can we just talk about win rates? There's obviously a lot of speculation around the evolution to liquid cooling and lots of new entrants and the like. So just wondering, you know, in terms of your win rates, especially on the AI infrastructure side of things, how is your win rate comparing to the last two or three years? And here comes the and. Is there any change in the way that the hyperscalers are procuring equipment? And I'm just wondering if the system-wide approach is starting to gain traction as opposed to RFPs for specific components of the system.
Thanks, good morning and uh, Gio I promise, I'll keep this to 1 question. No, no 2 Partners within 1 question, just 1, question. Um, I think so. Um, let's see, let's see, let's see. Well, you you be the judge so, um, can we just talk about win rates? Um, uh, there's obviously a lot of speculation around, you know, the evolution to liquid cooling and lots of new entrance and, uh, and the like, so just just wondering, you know, in terms of your win rate, especially on the AI infrastructure side of things. Uh, how was your win rate comparing to the last 2 or 3 years? Um, and, and here comes the and, um, is there any change in the way that, uh, the hyperscalers are procuring equipment, and I'm just wondering if the system wide approach is starting to, uh, is starting to gain traction as opposed to rfps for specific components of the system.
Giordano Albertazzi: So in general, we will not go in the details of win rates for AI infrastructure, not AI infrastructure. Remember that already, probably a year ago, we were saying, hey, being too analytical about what is AI, what is not AI, is tools precision. But in general, we see good stability in our win rate. Now, we should go project line by project line. We should go BU by BU. But in general, when we see things in aggregate, we have stability of win rates, which is, of course, if you combine win rates and pipeline, it's certainly a good sign. And we don't see a dramatic way or any significant way in which hyperscalers go about procuring their infrastructure component or their solutions and systems.
Um,
In general, um, we will not go in the, in the details of win rates for AI infrastructure. Not AI infrastructure. Remember that it already probably a year ago. We were saying. Hey, maybe being too analytical about what is AI, what is not AI is a full, uh, Precision. Uh, but but in general, um, we see good stability in, in our, in our
Giordano Albertazzi: And again, there are some hyperscalers who have been historically very much, oh, I want to design it and, yeah, consult with you as I design. And then you will be part of our, let's say, supply chain for the specific system. And there are others that sit with you and say, hey, these are my needs. What do you want to do? How do we design around my needs? What do you have around my needs? Clearly, you know, most of people think in terms of suppliers as multi-source for resilience. But then again, in that case, from that point of view as well, it is a customer-by-customer type of decision and philosophy. So in general, nothing dramatically different. Even as the technology, or what they buy, is moving with the technology of the industry, the technology evolution of the industry.
Our win rate now, we should go project line by project line. We should go Be You by bu. But but in general, when we see things in in in aggregate, uh, we have stability of win rates, which is, of course, if you combine win rates and pipeline. So, sort of a good, a good sign. So, um, and um, we don't see a dramatic way or any significant way in which, um, hyperscalers, uh, go about, uh, procuring, uh, their, their infrastructure component or their, or their Solutions and and systems. And again, uh, there are some hyperscalers who have been historically, very much. Oh, I want to design it. And, uh, yeah. Consult with you, as I design and then, uh, and then you will be part of our uh, uh, let's say supply chain for the specific system and the others that sit with you and say, hey, these are my needs.
My needs what you have around my needs clearly. You know, most of people, uh, think in terms of, uh, Supply suppliers as, uh, as a multi-source for resilience. But but then again, in that case, it's from that point of view as well. It is, it is a, a customer Buy customer type of, uh, type of decision and philosophy. So in general nothing dramatically different, um, even as
the the technology or what, uh, they buy is moving with the technology of of the industry that technology revolutionaries
Amit Daryanani: Okay. Thank you.
Okay, thank you.
Breka: Thank you. We now have Scott Davis with Meleus Research. Please go ahead when you're ready.
Thank you.
We now have Scott Davis with MAS Research. Please go ahead when you're ready.
Scott Davis: Hey, good morning, everybody.
Giordano Albertazzi: Good morning.
Hey, good morning everybody.
Good morning.
Scott Davis: I want to drill down, if we can, into the operational inefficiencies. And just, Gio, if you could just talk a little bit about root cause. You know, are these the standard things of kind of, you know, premium freight and overtime labor and third shift inefficiencies and stuff like that? Or are there other kind of hiccups that you're having while you're adding capacity as far as getting components, getting, you know, getting tooling and stuff like that? I mean, what just a little bit more granularity, I think, on where you're seeing those inefficiencies, I think, would be helpful. Thanks.
I want to, uh, I want to drill down if if we can into the operational inefficiencies and and just go, if you can just talk a little bit about root cause you know, are are these the standard things of kind of
you know, premium for 8 and overtime, labor and third shift in efficiencies, and stuff like that or or or there are other
Giordano Albertazzi: Yeah, I think it's a combination of things, Scott. And we have addressed that during the, as we're going through the slides. But I really like to think about it in three ways. One is there is a tariff transition. I mean, we talked about tariffs, setting tariffs, etc., in the state-to-state. But when you transition from a certain footprint of supply chain and manufacturing to another one that is more adjusted to the tariff, you have to involve new sources. Sometimes you have to have new certification. You have to move a backlog from one place to another. You have stops and goes that, of course, inject inefficiency. And some of that, of course, you can fight, and you do, and we do. Some other is what you have to face.
Kind of hiccups that you're having while you're adding capacity as far as getting components, getting, you know, getting uh, tooling and stuff like that. I mean, what just a little bit more granularity I think, on on where you're seeing those inefficiencies, I think would be uh, would be helpful. Thanks.
Giordano Albertazzi: If you then think in this ongoing anyway, but ongoing and overlap, two-way situation in which we're growing at 34%, then you have that compounding with exactly what you were saying. So you have to enable that growth more over time. You have premium freights. And that is the premium freight for that. It is the premium freight for the tariff reconfiguration. It's probably a combination of the two. So clearly, all these two elements, both these elements, sorry, both these elements, so the tariff transition and the strong acceleration are normalizing. And are normalizing as we make more capacity available, as we design the way we operate and align the way we operate to a higher level of growth. So you were talking about retooling. Let's talk about retooling. That would probably be more a tariff transition, using it to get extended a little bit, the definition of that.
Yeah, I I I think it's a combination of things Scott. And uh, you know, we we've addressed that um, during the um, in the as we're going through slides. But I really like to think about it in in 3 ways. 1 is uh there is a tariff transition. I mean, we talked we talked about uh tariffs uh setting tariffs Etc and the steady state, but when you transition uh, from a, from a certain footprint of supply chain and Manufacturing to another 1, that is more adjusted to the, to the Tariff, you have to involve new sources. Uh, sometimes you have to have new certification, you have, uh, you move a backlog from 1 place to another, um, um, you have stops and goes, um, that of course inject inject inefficiency. Um, and some of that, of course, you can, uh, uh, fight and you and you, and you and you do. And we do some other is what you have to face. Um,
If if if you don't think in this ongoing anyway but ongoing and over overlapped uh 2-way situation in which we we're growing at 34% then you have that compounding with exactly what you were saying. So you have to have uh, to to enable that growth, uh, moreover time you have uh, uh, premium Freights and and that is the premium Freight for. That is the premium Freight for the Tariff? Uh, uh, reconfiguration is probably combination a combination of the 2. So, um,
Clearly, um, all these two elements, both these elements, are sorry. Both these elements. So the tariff transition and the, uh, strong acceleration are normalizing.
Giordano Albertazzi: But then there will certainly be the overtime, the backlog movements, the freights. We talked about some other EMEA-specific operational executional challenges that are specific to a part of our business that we are addressing with focus and, dare I say, with my even my direct involvement on certainly more than a weekly basis. All things that, as I was saying, we believe will be in full control.
And are normalizing as we make more capacity available, as we, uh, design, the way we operate and, uh, and align the way we operate to a higher, uh, level of, uh, of growth. So, um, you were talking about retooling, let's talk about retooling, that would probably be more at tariff transition using it to get extended a little bit the, the, the definition of that. But then, there will certainly be the overtime, the backlog movements, the the, um, um, the, the, the freight, um, we talked about, uh, some other IMEI specific, uh, um, uh, operational. Uh, um, exec.
Itional, uh, uh, challenges that that are specific to, um, to to, um, a part of our business that we are addressing, you know, with, uh, with, uh, with focus and, uh, data say, with my, even my direct involvement on, uh, on certainly more than a, than a weekly basis. All things that, uh, as as I was saying, We Believe will be in, uh, in full control.
Scott Davis: Thank you, guys. Appreciate it.
Giordano Albertazzi: Thank you.
Thank you guys. Appreciate it.
Thank you.
Breka: Thank you. Your next question comes from Andrew Oben with Bank of America.
Your next question comes from, and you open with Bank of America.
Scott Davis: Oh, yes. Good morning.
Giordano Albertazzi: Hey, good morning too.
Uh yes. Good morning.
Scott Davis: Hey. Yeah. So one of the things that sort of came up last quarter, you know, during various channel checks, is that there are a lot of teething pains on liquid cooling systems in the industry. And I would guess that this sort of bodes well for service contracts. And any color or commentary on growth rates for thermal service contracts or liquid cooling? Because I think at the annual day last year, you know, people have sort of thought that this could be an attractive growth opportunity for Vertiv. Thank you.
A lot of teething pains and liquid cooling systems in the industry. And I would guess that this sort of boats well for service contracts and uh,
Giordano Albertazzi: Yep. Thank you, Andrew. So certainly, let's say if you think about the cooling and go back to what I was saying when we're going through the slides, the degree of intimacy, interoperability between a cooling system, liquid cooling system, and a multimillion-dollar rack is enormous. And the system is quite complex from a technology standpoint, from a calibration balancing standpoint. So we are fully convinced, and we see that indeed being the case, that our service strength is really making a difference in the deployment of liquid cooling at scale. Let's not forget scale. It's a big element here, but also during the life cycle of the liquid cooling system. So yes, the answer is straight yes. We believe that liquid cooling is helpful and will be certainly favorable in terms of our thermal services and thermal contract growth.
Um, any color or commentary on growth rates for thermal service contracts or liquid cooling? Because I think of the analyst Day last year, you know, people have sort of thought that this could be an attractive uh growth opportunity for vertiv, thank you.
Yep. Uh, thank you Andrew. So uh certainly um,
Let let's say If you think about the cooling, um, and if you go back to to what I was saying, uh, the, when we're going through the slides, the, the degree of intimacy, um, interoperability between the cooling system liquid cooling system and, uh, and a multi-million dollar rack is, uh, is is enormous and, uh, and, and the system is quite, uh, is quite complex from a technology, from a technology standpoint, from a from a calibration balancing standpoint. So, um, we uh, fully convinced and we see that indeed, uh, uh, being the case that that, uh, uh, Service. Uh, strength is, uh, is, is, is really making a difference, in, in the deployment of liquid cooling, uh, at scale. I don't know if we got scale, it's a big element here, uh, but also during the life, uh, during the life cycle of
Uh, of the liquid cooling system. So, uh, yes. Uh, the answer is straight. Yes, we believe that, um, liquid cooling is helpful and will, uh, uh, be certainly.
Giordano Albertazzi: It's an area we truly believe will be strong going forward.
Scott Davis: Thank you.
Favorable in terms of our thermal Services of thermal contract. Uh, uh, growth is an area. We we, we truly believe will be will be strong going forward.
Thank you.
Breka: Thank you. We now have Michael Elias with TD Cowen on the line.
Thank you.
We now have much of TD cow and I'm aligned.
Steve Tusa: Great. Thanks for taking the question. Just curious, as you think about the evolution of what goes into the data center, i.e., you know, increasingly looking at taking a medium voltage directly to the rack and rack densities getting up to 1 to 2 megawatts per rack, how do you think about your current product footprint and any ways that you need to evolve your offering in order to keep pace with the evolutions inside the data center? Thank you.
Giordano Albertazzi: Well, thanks, Mike. I think this is certainly something that is happening. It's very clearly in our roadmaps. And you're right. Just as we saw the thermal or the cooling infrastructure evolve, and it's not finished, of course, it will continue to evolve. By the same token, the same will happen on the power side of things. You heard us, you probably heard us, and people heard us vocally support NVIDIA's plan to have a higher, let's say, voltage type of rack power distribution in general. But this, of course, will have reverberations across the entire power infrastructure. So yes, the portfolio is evolving.
Great, thanks for taking the question. Um, just curious, as you think about the evolution of what goes into the data center, i.e., you know, increasingly looking at taking a medium voltage directly to the rack and rack density is getting up to 1 to 2 megawatts per rack. How do you think about your current product footprints and any ways that you need to evolve your offering in order to keep pace with the evolution inside the data center? Thank you.
Well, thanks, Mike. I think this is uh um certainly not something that is happening is very clearly in our road maps. Um, and uh, and you're right um, or as it just as we saw uh the the thermal uh, or the cooling infrastructure evolved.
Giordano Albertazzi: What we are really happy about and we nurture very carefully and very intensely is the relationship we have with the key players, be them silicon or hyperscalers, by which we together define what the future will be like one, two, three years out and align our portfolio and our technology. If you think about this kind of a higher voltage DC power, that's something that, of course, leverages very well our decades-long DC power technology. But you can think about this evolution, again, I want to stay on the power side, is something that is even broader. As data centers will become more and more self-sufficient from a power generation standpoint, and we know that that is certainly a trend, not the sole trend, but it's certainly a trend.
And it's not and it's not finished of course it'll continue to to evolve by the same token. Uh, the same uh, will happen on the power side of uh Power side of things. You you you heard us uh, you probably heard us of people who heard us, uh, um, vocally, uh, support, um, um, nvidia's, uh, uh, plan to have, uh, a a higher. Let's say, voltage type of uh, um uh rack power distribution and in, in general. But this of course, will have reverberations uh, across the entire power infrastructure. So, uh yes, the portfolio is evolving, what we are really happy about and we nurture very carefully and very intensely is the relationship. We have with a key players, be them silicon, or a hyperscalers, by which we together Define what the future.
Will be like 1, 2 3 years out and align our portfolio and our technology. If you think about this kind of a um, higher voltage, uh, DC power, uh, that's something that, of course uh is, is very um, leverages very well, our uh, uh decades uh, long DC power technology. But you can think about this Evolution. Again, I want to stay on the power side as something that is
Giordano Albertazzi: Well, then you'll see, back to my Oakland point earlier, as you see that the power train, the power infrastructure will need to be very well orchestrated exactly from power generation all the way to inside the rack. And there will be various architectures that really will depend on, again, the type of philosophy and also the type of use of a certain data center, how much flexibility you want to have to different types of loads. So long story short, the system is becoming more important. The system is becoming more complex. And this is an exercise that we are, of course, engaging in and we are very excited about. Thank you.
Even broader uh, as data centers. Uh, as data centers, uh will become more and more self-sufficient from a power generation, uh, standpoint. And we know that that is certainly a trend, not the sole Trend but is certainly a trend
And all the way to inside the rack, uh, and there will be various architectures. That really will depend on again, the type of philosophy and also, the type of views of a certain, uh, data center, how much flexibility, uh, you want to have. Uh,
2 different type of loads. So, um, long story short.
The system is becoming more important. The system is becoming more complex, and this is an exercise that we are, of course, engaging in. We are very excited about it.
thank you.
Breka: Thank you. We now have Nicole Duple with Deutsche Bank. Please go ahead.
Thank you.
Nicole DeBlase: Yeah, thanks. Good morning, guys.
Go ahead.
Giordano Albertazzi: Good morning.
Yeah, thanks. Good morning, guys.
Nicole DeBlase: I just had a question on margin. So you know the guidance implies like a 10-basis point year-on-year decline in margins in the third quarter and then a pretty big step up to like over 200 basis points of expansion in the fourth quarter. So probably a question for David. But can we kind of walk through some of the puts and takes that give you guys confidence in that step up? Thank you.
Good morning.
Um, I just had a question on margin. So, you know, the guidance implies a 10 basis points year-on-year decline in margins in the third quarter and then a pretty big step up to over 200 basis points of expansion in the fourth quarter. So, probably a question for David. But can we kind of walk through some of the puts and takes that give you guys confidence in that step up? Thank you.
David Fallon: Yeah, I think it's two things, Nicole. Number one is the benefit of operational leverage. So, and you can get our exact Q4 numbers in the appendix, but there's an over $200 million increase in sales expected in Q4 versus Q3. So that definitely, you know, provides the benefits of operational leverage. And the other bucket is simply addressing the operational inefficiencies and execution challenges that we've seen in Q2 into Q3. Once again, we believe all of these should be resolved in Q4. So it may be oversimplifying things, but I think those are the two buckets that drive the improvement from Q3 to Q4.
Yeah, I think it's two things, Nicole. Number one is the benefit of operational leverage. So, um,
Nicole DeBlase: Simple is great. Thanks, David.
And you can get our exact Q4 numbers in in the appendix. But there's over 200 million dollar increase in sales, expected in Q4 versus Q3. So that definitely, you know, provides the benefits of operational leverage and, um, the other bucket is simply, um, addressing the operational inefficiency and uh, execution challenges that we've seen in Q2 into Q3 once again, we believe all of these, uh, should be resolved in Q4. So it may be oversimplifying things, but I think those are the 2 buckets that drive the improvement from Q3 to Q4.
That was great. Thanks David.
Hey.
Breka: Thank you. We now have Amrit Mathura with UBS. Your line is open.
Thank you.
I'm at Matilda with UBS.
Scott Davis: Thanks, operator. Good morning. Good morning, everybody. Just, Gio, at the front of the call, you had talked about the regulatory environment getting better for AI infrastructure, and that was being reflected in your pipeline. Can you just give us a little bit more color on that and, you know, what specifically is getting better? And, and, and, and also just, you know, I know you don't like commenting on orders for obvious reasons, but you have been quite generous in talking about trailing 12-month orders and the expectations there. We're getting past these tougher comps here where I think there looks like a possibility for TTM orders to reaccelerate. Wondering if you would engage with me in that type of conversation.
Next operator. Um, good more still morning. Good morning everybody. Um, so just go at the, at the front of the call. You had talked about the regulatory environment, getting better for AI infrastructure, and that was being reflected in your pipeline. Can you just
Giordano Albertazzi: Now, the case of very clear two questions. These guys, there's one. So let me address the regulatory environment and be patient with me. So this is in general, this is in general true. If we think about the US environment, of course, we see a lot of attention from the administration for the sector. It's not just the sector in terms of data center as in of itself, but elements that are then conducive very much to data center growth. That is all around power and power grid and power generation. So that's what I refer to. But also, my comment was a little bit oriented towards EMEA, where we see national governments, the EU, but also places like the UK, more aware of the importance and the strategic importance of AI. So that is slowly, must be said, slowly, but surely starting to head in the right direction.
Give us a little bit more color on that and you know what specifically is getting better. And and, and and also just, you know, I know you don't like commenting on orders for obvious reasons, but you have been, uh, quite generous in talking about trailing 12-month orders, and the expectations there were were getting past. These tougher comps here where I think their looks like a possibility for TTM orders to re accelerate wondering if you would engage with me and and that type of conversation.
All right. Now the case of uh, very clear to 2 questions. Uh, these guys does uh S1. So let me let me address the uh, regulatory environment and and be patient with me. So uh, in this is in general, this is in general true. If we if we think about the, the, the the US environment, of course, we see a lot of attention from the administration, uh, through the for the sector. Um, it's not just the sector. In terms of data center is no of itself, but elements that, uh, that conducive very much to Data Center to growth that is all around, uh, all around, uh, Power and, uh, power grid and power generation. So that's what I refer to. But also, um, my comment was, uh, a little bit rented towards, uh, towards me, uh, where, uh,
We see, uh, national governments, the EU, but also places like the UK, um, more, uh, aware of the importance and the strategic importance of, uh, AI. Um, so that is, uh, slowly.
Giordano Albertazzi: And one thing that I haven't mentioned this time that I'm fully convinced about is that one of the reasons why Europe is maybe a little lagging, you know, we're talking about a coil spring, is that so much kind of attention and time and resources are really focused on North America and the US. That's sometimes about the same players, the same players that play both in the US, North America, and Europe. And this is even more so true than it is, if you will, with Asia, that is its own dynamics and positive dynamics, I must say. So you will see that a lot of the attention is absorbed by what happens in the US. And we believe times will soon be mature for an acceleration in Europe and EMEA.
As we said slowly, uh, but but surely starting to head in the right direction. 1 thing that I haven't mentioned this time is I'm fully convinced about is that 1 of the reasons why, uh, Europe is, uh, maybe a little lagging, you know, we we're talking about uh, a, a coil spring is that so much kind of a
America and uh, and Europe.
This is even more so true than it is, if you will, with Asia. That has its own dynamics and positive dynamics, and the same. So, um, you will see that, um,
A lot of the attention is, is absorbed by by what happens in in the US. And, and we believe times, uh, will soon be mature for for an acceleration in, in, in Europe and India.
Amit Daryanani: What about the trailing 12 months?
Giordano Albertazzi: That's the second question. That's the second question. And as we said, I would be guiding orders, and that's not what we did.
What about the trailing 12 months? That's the second question. That's the second. That's, that's the second, uh, question. Uh, and, uh, as, as we said, we we, we, we, I would be guiding. I would be guiding, uh, um, orders and that's not what we do.
Amit Daryanani: All right. Thank you.
Giordano Albertazzi: And it was the second question. Be patient with me. Thanks.
All right, thank you. And it was and.
be patient with me. Thanks.
Breka: Thank you. We now have a question from Chris Snyder with Morgan Stanley. Your line is open.
Thank you.
You now have a question from Chris Snider with Morgan Stanley. Your line is open.
Amit Daryanani: Thank you. I wanted to ask on gross margin, which has obviously come under some pressure here in the first half after a period of very healthy expansion. Is this only a function of tariffs and some of the inefficiencies discussed earlier, or are there also headwinds from whether it be mixed or new technologies ramping, you know, i.e., liquid cooling? And when you guys look at, you know, the backlog, is the expectation that gross margin returns to expansion in Q4, and that kind of helps provide that operating lift, or is that still a little bit further out? Thank you.
Thank you. Um, I wanted to ask on gross margin, um which is obviously come under some pressure here in the first half after a period of very healthy expansion. Um, is this only the, a function of tariffs and some of the inefficiencies discussed earlier or are there also headwinds from whether it be mix or, or or new technologies ramping, um, you know, IE liquid cooling. Um, and when you guys look at, um, you know, the backlog, um, the expectation
Macros Martian returns to expansion in Q4, and that kind of helps provide that operating lift or is that still a little a little bit further out.
Giordano Albertazzi: A couple of things I've been, and please add, we are happy about the new technologies, and I think the new technologies corroborate our value story and certainly our margin story. As we explained, there are tariff elements and certainly growth inefficiency in the operational aspects that we, I think, discussed. Those are really the main elements. And when it comes to margin and the backlog margin, because we do not go in those level of details, but certainly we factor the margin in our backlog when we talk about when we give guidance in general. I don't know if you want to add anything, David.
Okay, well thanks, I've been and I believe, uh, please add, we, we are happy, uh, about the new technologies and I think the new technologies is corroborate our, uh, our Value Story. And certainly our, uh, uh, our margin, uh, margin story as as we explained, uh, there is, uh, there are tariff elements, uh, and certainly, you know, growth inefficiency, new operational, aspects that we um, I think a a disgust, you know. Um,
those are the really the, the the, the main, uh, the main elements and uh, when it comes to uh
David Fallon: Yeah, just on the topic of mix, you know, mix could be a factor quarter to quarter, you know, based on larger projects. But I'll tell you, for the full year, margin will not have a negative, or I'm sorry, mix will not have a negative impact on our margin. If anything, it will be slightly positive.
Margin in, in the backlog margin, because we do not go in those, uh, level of details. But, uh, but certainly we, we, we Factor the margin in our backlog. When we, when we talk about, uh, what when we give out, guidance in in general, I don't know if you want to add anything, you know. Yeah. Just on the topic of mix. You know. Mix could be a factor quarter to quarter. It it, you know, um,
You know, based on larger projects. But I I'll tell you for the full year, um, margin will not have a negative, I'm sorry, mix will not have a negative impact on our margin, if anything, it will be slightly positive.
Amit Daryanani: Thank you. Appreciate that.
David Fallon: Yep.
Thank you, appreciate that.
Yep.
Breka: Thank you. We now have the next question from Andy Kapulowit with City Group. Please go ahead, Andy.
Thank you.
We now have the next question from Andy.
David Fallon: Good morning, everyone.
Couple of weeks with the city group, please go ahead, Andy.
Good morning, everyone.
Giordano Albertazzi: Hey, Andy.
David Fallon: Gio, I think in the past, you said that the market and Vertiv are trending toward the high end of your 15 to 17 percent growth, Kager Fiberscaler and colocation revenue growth through '29, and your 12 to 14 percent growth for Vertiv. But given the recent order momentum, are we thinking that growth could be even higher, modestly higher rates, especially given you're seeing a broadening of AI spend, I think, into sovereigns or enterprise? Or would you say the order ramp has been more what you've been expecting, maybe just slightly faster?
and,
Deal. Uh, I think in the past you said that the market inverted or was trending toward the high end of your 15-17% growth, CAGR for fiber, Scalar, and colocation revenue growth of 29%, and your 12-14% growth for Vertiv. But given the recent order momentum, are we thinking that growth could be even higher, uh, potentially at higher rates? Especially since you're seeing a broadening of AI spend, I think in the sovereigns or enterprise. Or just say the order ramp has been more what you've been expecting, maybe just slightly faster.
Giordano Albertazzi: I think it would be early to think in terms of, let's say, or a correction or a change in our, let's say, market growth expectations. I think it would be premature. Certainly, we like what we see in terms of market demand. Certainly, going back to the point you were making, that range for hyper and colo that we gave, the 15 to 17 percent, we're probably thinking about the upper end. As usual, we continue to look at the market, to evaluate the market, and now it would be premature. Certainly, as we're saying, in this market where we are taking market share and yes, we are happy with the trajectory. But again, we're not even shocked in terms of that because we've been talking about our pipeline getting stronger for quite some time.
Um, I think it would be early to, uh, to think in terms of, uh, uh, let's say a
Giordano Albertazzi: And again, not commenting on any specific quarter because of the lumpiness that we have several times discussed. You know, we think that from a trailing 12, the momentum is the right one. It is the momentum that certainly implies market share gain.
David Fallon: Well, I tried. Thanks, Gio.
Our pipeline has been getting stronger for quite some time, and again, I know commenting on any specific quarter is difficult because of the lags that we have discussed several times. We think that from a trailing 12, the momentum is the right one, and it is momentum that certainly implies a market again.
Well, I tried. Thanks to you.
Giordano Albertazzi: Thanks you.
Thanks.
Breka: Thank you. We have a question from Mark Dennely with Goldman Sachs. Please go ahead.
Thank you.
We have a question from Mark, Talley. With Goldman Sachs, please go ahead.
Amit Daryanani: Yes. Thank you very much for taking my question. You said you expect to generate about 1.4 billion of free cash flow for this year and plan to use about 200 million for the Great Lakes acquisition. Can you speak to your priorities for the rest of the free cash flow and if you expect M&A to become a more regular part of your capital allocation framework from here? Thanks.
Uh, yes, uh, thank you very much for taking my question. You said you expected to generate about $1.4 billion of free cash flow for this year and plan to use about $200 million for the Great Lakes acquisition. Can you speak to your priorities for the rest of the free cash flow? And do you expect M&A to become a more regular part of your capital allocation framework from here? Thanks.
Giordano Albertazzi: Well, thank you, Mark. Certainly, M&A is an important element in our capital allocation strategy and certainly in our value, more broadly speaking, value creation model. And we've been very vocal about that. We're happy about what we have recently announced. So it is an important part. So again, it's an important part that we address with the team focus. We have a strong process and a very active pipeline. What exactly will happen would be obviously super premature to say, but we're not shy and will not be shy if the right timing and the right thing mature to the point that we can action. So I am certainly pleased with how much stronger our engine in this respect is. So I don't want to predict anything right now, but certainly, we have the means. We have the credibility, and we have the process in place. Thank you.
Uh, well, thank you, Mark. The, uh, certainly, um,
M&a is an important is is is an important element in our uh, in our uh uh, Capital allocation strategy and certainly in our value broad more, broadly, speaking value creation. Uh, uh, model and we've been, uh, very vocal about that. We're happy about, uh, uh, what we have recently announced. So, uh,
It is an important part. So, again, as an important part, uh, that we address, uh, with, uh, um, key focus, we have, uh, strong process and, uh, a very active pipeline. Uh, what exactly will happen? Uh, would be obviously super premature to say, but, uh, um, we're not shy and will not be shy if, uh, the right timing and the right thing, um, you know, uh, mature to the point that we, we, we can, we can action. So, um, I am certainly pleased with how, uh, much stronger our, uh, engine in this, uh, in this respect is. So I don't want to, um, you know, predict anything right now, but certainly we have the means, uh, we have the credibility and, uh, and we have, uh, the process in place.
Amit Daryanani: Thanks a lot.
Breka: Thank you. Our final question. I apologize. Our final question comes from NLK with Oppenhenner. Your line's open.
Thanks a lot. Thank you. Our final question. I apologize. Our final question comes from. No. Okay, we had open. Hannah, you're on Dayton.
Amit Daryanani: Oh, thanks. So, Gio, you talked at DCD earlier this week about the trend toward modular and prefab solutions as really accelerating. And I would love to understand to what extent your backlog has started to remix in that direction and perhaps whether we can even tie that trend to the demand acceleration you're seeing.
uh thanks um so so Joe you talked at the CD earlier this week about the trend toward modular and prefab Solutions uh as as really get accelerating
And I would love to understand what extent. Your backlog has started to remix in that direction and perhaps, whether we can even tie that Trend to the demand acceleration, you're seeing
Giordano Albertazzi: Well, thank you. That is certainly a trend that we see. We know that the industry needs speed, and speed in construction is paramount for success for our customers. But also, as I said several times, this is the construction industry. And if you have to build very, very, very complex systems like data centers on-site at speed, then there certainly are challenges, shortages, manpower, skilled labor shortages, and surely things can be done better in a prefabrication setup and mode. So yes, we see an acceleration in the modular business. Don't think the modular business as something else from what we do. For us, modular business is prefabricating a lot of our technology. So we're not just a regular kind of integrator. We indeed are absolutely not an integrator. We are prefabricating the technology that we own. And that makes a big difference.
Um, well, uh, well, uh, thank you. Uh, that is certainly a trend that we see, um,
We know that the industry.
Needs a speed and speed in construction is uh, Paramount uh, to success uh for for our customers.
But also, as I said several times, this is the construction industry. And if you have to cons to build, very uh very very complex systems, like data centers, um onsite at speed, then then there's certainly are challenges shortages, uh uh men power, uh skilled labor shortages and surely
Things can be done better in in a prefabrication setup and mode. So, uh, yes, we see an acceleration in the modular business. Don't think the model or business as something else. From what we, from what we do, uh, for us modular business is, uh, pre-fabrication a lot of our technology. So, uh,
Giordano Albertazzi: So it's not like, "Ooh, thermal is going down, power is going down, and prefabrication is going up." No, it is really integral. It's almost like a wrapping around our technologies and one that can create a lot of value to our customers. So, and this can be multiple things. If you take our smart run, our smart run that I was talking about earlier, you will have.Uh,
Breka: power racks, power distribution. You will have, secondary fluid network. You can include that in that everything, liquid cooling, busways, the controls, you name it. So it's really a way to package increasing the value that we deliver to our customers.
Um, our smart run that I was talking about earlier. You will have, uh, uh, Power racks power distribution. You will have, uh, uh, secondary fluid Network. You can include that in that everything liquid cooling, uh, busways, da, da, da controls, you name it. So it's really a way to package. Increasing the value that we deliver to our customer.
Lynne Maxeiner: That's very helpful. Thank you.
Breka: Thank you.
That's very helpful. Thank you.
Dave Cote: Thank you. This concludes our question and answer session. And I would like to turn the call back over to Geo for any closing remarks.
Thank you.
Thank you. This concludes our question-and-answer session, and I would like to turn the call back over to GA for any closing remarks.
Breka: Well, thanks a lot. And thank you for all the questions and the time today. Certainly, it's worth reiterating how excited I am, and we are, about the future of Vertiv. We are demonstrating our ability to deliver strong growth and profit, even in the face of a complex operating environment. Certainly, I'm pleased with our progress. And you know, never, never satisfied. The market opportunity ahead of us is significant, certainly driven by the accelerating digital transformation and the insatiable, dare I say, demand for data center infrastructure. We believe Vertiv is uniquely positioned to capitalize on this opportunity with our complete portfolio, deep customer relationships, and strong execution capability. So overall, I want you to know that I and the Vertiv team remain laser-focused on delivering for our customers and investors. The future has never been brighter, and I'm excited to continue this journey with all of you.
Oh, thank thanks a lot. And thank you for all uh for all the questions and the time today. Um.
Certainly, it's worth reiterating, how exciting I am and we are about a future. Um, we have demonstrated, you are demonstrating our ability to deliver a strong growth and profit. Um, even in the face of, uh, a complex operating environment.
Certainly I'm pleased. We have progressed and uh but you know uh you never never satisfied. The market opportunity that I hate of us is a significant.
Um, certainly driven by the accelerating digital transformation and the insatiable that I say demand for data science or infrastructure, uh, we believe vertiv is uniquely positioned to capitalize on this opportunity, uh, with our complete portfolio. Uh, deep customer relationships and strong execution capability. So, overall, I want you to know that I and the I am the vertiv team remain laser focused on delivering for our customers and investors.
Breka: So thank you and have a great rest of the day.
The future has never been as bright, and I'm excited to continue this journey with all of you. So thank you, and have a great rest of the day.
Dave Cote: Thank you. This concludes today's conference call. Thank you all for attending today's presentation. And you may now disconnect.
Thank you. This concludes today's conference call. Thank you for attending today's presentation, and you may now disconnect.