Vertiv Q2 2022 Earnings Report
Key Takeaways
Vertiv reported strong demand with a 17% increase in orders and a record high backlog of $4.4 billion. Net sales grew by 11.0%, with organic net sales up by 7.9%. However, operating profit decreased to $26 million, and adjusted operating profit decreased to $82 million due to inflation and other cost headwinds. The company lowered its full-year adjusted operating profit guidance.
Second quarter orders increased 17% compared to the prior year quarter, with 11% from higher volume and 10% from pricing.
Backlog remained strong with another record quarter end of $4.4 billion at the end of June, increasing 39% from the end of 2021.
Second quarter operating profit decreased $76 million to $26 million and adjusted operating profit of $82 million decreased $52 million from the prior year second quarter.
Americas net sales increased 14.6% and were up 6.6% organically, driven primarily by price realization.
Vertiv
Vertiv
Vertiv Revenue by Geographic Location
Forward Guidance
Vertiv anticipates a strong second half of 2022 with sequential acceleration of financial performance, positioning the company well for 2023. Third quarter guidance includes net sales of $1.46B - $1.50B and adjusted operating profit of $130M - $150M. Fourth quarter guidance includes net sales of $1.68B - $1.72B and adjusted operating profit of $240M - $265M. Full year 2022 adjusted operating profit guidance was lowered to $475M - $500M.
Positive Outlook
- End market demand continues to be strong, as evidenced by continued strength in cloud and colocation markets.
- Price realization remains on plan.
- Supply chain constraints have started to ease with new suppliers coming online in support of the higher expected volume in the second half.
- Actions are taking hold and will bridge to a very strong fourth quarter and 2023.
- Pricing increases should outpace inflation in the second half
Challenges Ahead
- Change in full year 2022 adjusted operating profit guidance is driven by higher sales volume more offset by foreign exchange, additional material inflation, lower expected profit from E&I, higher fixed costs due to the timing of the volume ramp-up in the second half and other cost headwinds.
- Third quarter guidance is lower than originally anticipated.
- Foreign currency negatively impacted second quarter sales by approximately $60 million.
- Net cash used by operating activities in the second quarter was $206 million, $265 million less cash generated compared to the prior year quarter
- Free cash flow for the full year to be in the range of a $25 million generation of cash to a $25 million use of cash
Revenue & Expenses
Visualization of income flow from segment revenue to net income