Vertiv Holdings Co Class A Common Stock 2026 Q3 Earnings Call

Good morning. My name is Warren, and I will be your conference operator today. At this time, I would like to welcome everyone to Vertiv's third quarter 2026 earnings conference call. All lines have been placed on mute to prevent any background noise. Please note that this call is being recorded. I would now like to turn the program over to your host for today's conference call, Lynne Maxeiner, Vice President of Investor Relations.

Great. Good morning, and welcome to Vertiv's third quarter 2026 earnings conference call. 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 statements are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. We undertake no obligation to update these statements as a result of new information or future events. Please refer to the cautionary language included in today's earnings release and the risks disclosed in our annual and quarterly reports and other filings made with the SEC. Additionally, non-GAAP measures referenced today are defined and reconciled in our earnings press release and in the investor slide deck found on our website at investors.vertiv.com.

Finally, during the Q&A portion of the call, please be mindful of others in the queue and limit yourself to one question. With that, I'll turn the call over to Executive Chairman, Dave Cote.

Well, to paraphrase Mark Twain, the rumors of our demise have been greatly exaggerated. I'm really pleased with the third quarter and our year-to-date performance. This performance is testament to how customers look at Vertiv, our thought leader, with leading technology and reliability, undeniable ability to scale, and superior service performance and capabilities. This is reflected, among other things, in our strong Q3 organic orders on top of very strong first-half organic orders, as Gio will mention. Q3 organic orders are not only strong but also very balanced across customer types. Orders are strong no matter how you look at them, with or without Neocloud. Our customers clearly believe in us. By the way, to be clear, we're not planning to share orders data going forward.

This order strength and financial performance notwithstanding, Gio will be the first to say that we are relentlessly focused on further improving our customer and financial performance across the board. We can still be a lot better. Gio is never satisfied. What you're seeing in these results isn't something that happened overnight. This is the payoff from years of seed planting, years of investing in technology, capacity, service, and all capabilities because we believe this opportunity was going to be big. Turns out it's even bigger than most people imagined, and we believe it's going to stay big for a long time. We are just at the beginning of the digital age, and we anticipate it has decades left to run. The foundation for it is data storage and processing, which means data centers. No data centers, no digital age, and Vertiv supplies the picks and shovels.

We are at the forefront of the technology change in those picks and shovels and intend to stay there. As you know, I've always believed it's important to have a great position in a good industry, preferably with technology differentiation, and then develop a high-performance culture, so you then perform well for customers and investors. Vertiv is doing that. I'm pleased with how rapidly the high-performance culture is developing at Vertiv. The more technology changes, the better it is for us. It's exciting stuff. Like that famous book says, we're accomplishing two seemingly conflicting things at the same time. We're delivering very strong results today while investing aggressively for tomorrow. That's generally hard to do. Most companies choose one or the other. Gio and his team are doing both, and I believe the gap between us and everyone else just keeps getting wider.

The fact is, we're still early. We ain't done yet. Not even close. As you've heard me say in the past, buy now while supplies last. So let me hand it over to Gio to take you through it all. Gio? Well, thank you very much, Dave, and let us go to slide 3.

A very strong quarter indeed. Net sales up 61% versus Q3 2025, with broad-based trends across all regions. Americas up 75%, APAC up 50%, and EMEA back to convincing growth at 23%. Organic net sales grew approximately 55%, with an additional 6% from acquisitions. Disciplined execution drove adjusted operating margin to 25.2%, up to 190 basis points year-on-year, exceeding our guidance. Adjusted operating profit was over $1 billion, up 83% year-on-year. Adjusted diluted EPS of $2.21 were up 78%, primarily driven by higher volume and continued operational productivity. Adjusted free cash flow was up 50% year-on-year at $652 million. Our net cash position continued with a negative leverage of 0.2 times at quarter end. The balance sheet remains very strong. We are raising our full-year guidance across all key metrics.

Net sales expected at $14.65 billion, $650 million up on July guidance, and approximately 38% organic growth. Adjusted diluted EPS now expected at $7.15 up 70% from 2025. Adjusted operating profit guidance raised to more than $3.5 billion, up 68% year on year. Full-year adjusted operating margin expected to be 24%, approximately 360 basis points higher than 2025. Adjusted free cash flow guidance raised to $2.7 billion. With that, let's move to slide 4, and let's start with the market environment. Our pipeline remains very strong globally. Demand signals are clear and broad-based across technologies, customer types, and regions. We expect another year of robust orders growth. You know we do not disclose orders and we'll continue not to, but it is worth sharing that our Q3 orders were more than 100% up year on year organically.

This is to give a sense of what this strength practically translates into. Also important to share that our customer mix, call it all hyper, enterprise, neocloud, et cetera, very much represents the market mix. Let's now talk regionally. Americas pipeline sequential quarter-to-quarter growth is the fastest we have seen all year, translating into very strong organic Q3 orders. Yes, power availability, permitting, general sentiment, and construction site skilled labor availability are pacing items, but not slowing down growth. We've been talking about the EMEA spring uncoiling. In Q3, the pipeline in EMEA has approximately doubled year on year, and organic orders grew even more. Momentum is now in the market, and we see these dynamics carrying well into 2027 and beyond. When it comes to APAC, it's a broad-based strength, particularly in Australia and India. Organic orders were up substantially in the quarter in APAC.

China is showing encouraging green shoots. Commercial execution continues to be favorable, and we expect positive price cost in 2026, including the current impact of tariffs and countermeasures. Now to the right of the slide, and let's talk about operations and supply chain. The sequential and year-on-year revenue growth you saw in the quarter reflects the combination of ongoing capacity expansion, improving utilization, Vertiv operating system adoption, and overall disciplined backlog execution. It also reflects increasingly mature execution for complex converged infrastructure projects. We are making significant capacity investments globally to be well-positioned to serve our customers and execute on a robust backlog. In the Americas, we announced several new or expanded facilities for infrastructure solutions, power management, thermal management, and rack systems. In EMEA, we are expanding our Slovakia campus for power and thermal management and infrastructure solutions, scaling up our power facilities in Ireland.

We are also on track to doubling chiller production capacity by year end. In Asia Pacific, our new Johor, Malaysia factory is now operational, strengthening our ability to serve customers across Southeast Asia and Australia. These capacity additions are already contributing to our Q3 and Q4 growth. It's not just our own capacity. We keep on proactively securing and expanding long-term capacity agreements with key suppliers to ensure they scale in lockstep with our growth. Let me also welcome Mike Resha, our new EVP of Manufacturing and Logistics. Mike brings very strong operational experience and capabilities and very strong lean expertise. Anders remains with us in a senior advisory capacity focused on a successful handover and on special projects. Let us now go to slide 5. Time to first token matters a lot to our customers.

It indicates how quickly an investment in AI data center and compute becomes revenue-generating. I want to highlight the work we're doing with NVIDIA, the DSX ecosystem, and Polar Data Centers to significantly reduce time to first token, accelerating every phase of the cycle. The design phase, for example. Pre-engineered reference designs are configured and validated in a digital twin. This reduces the design time by a factor of 10. The deployment phase. Factory build and modularly deployed infrastructure significantly removes complexity from site. It happens in parallel with site preparation. This cuts deployment time by up to half. The result is up to 30% more cumulative AI token output in the first 12 months from project kickoff. Same installed capacity, just productive much sooner for our customers.

Polar Data Centers is already applying this at the first 41 megawatts phase of its Herøya campus in Norway, and it is scalable to 100 megawatts. With that, over to you, Craig.