Great, thank you, Lucas. Good morning and welcome to Vertiv's second quarter 2026 earnings conference call.

Joining me today are Vertiv's Executive Chairman, Dave Cote; Chief Executive Officer, Gio Albertazzi; and Chief Financial Officer, Craig Chamberlin. 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'd 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 risks 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, and 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 will 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.

I am incredibly pleased by our second quarter performance and outlook for the rest of the year and beyond. We have a great position in a good industry and continue to execute very well.

Gio and his team stay at the forefront of technology with organic investments and acquisitions. The industry outlook is incredibly good because the digital age has decades to go.

Our outlook is incredibly good, and deservedly so, as we provide the picks and shovels for the digital age. The seed planting Gio and his team have been doing continues to pay off and will do so even more in the future as the benefits from our technology investments unfold over time.

With all that goodness, we still have opportunity to further improve. As Gio likes to say, we are still far from our full potential.

The future is so bright, we have to wear shades. I love it.

With that, I now turn it over to Gio.

Thank you, Dave, and welcome, everyone. Let us go to slide 3.

A strong quarter: EPS, margin, profit, and cash convincingly strong, continuing on a trajectory of strong sales growth even with some timing elements, pleased with what we see in July, and full confidence in H2 execution and backlog. As a result, we have raised our full-year outlook.

Net sales were up 24% versus Q2 '25, driven by continued strength in the Americas, which grew 29%, and APAC, also up 29%. Importantly, EMEA returned to positive net sales growth with a 2% year-on-year increase.

On an organic basis, net sales grew 18%, with additional 5% from acquisitions and 1% from favorable currency. Adjusted operating margin came in at 22.6%, exceeding our guidance and growing 410 basis points year-on-year.

The strong margin performance translated into adjusted operating profit of $738 million, up 51% from a year ago. Adjusted diluted EPS were $1.52, or 60% up from second quarter '25, driven primarily by higher volume and continued operational productivity.

Adjusted free cash flow came in at $925 million, a very strong 234% year-on-year growth, driven by higher operating profit and working capital efficiency. Free cash flow conversion exceeded 150% in the quarter.

We are raising our full-year guidance across all key metrics. Net sales raised to $14 billion, a $250 million increase from previous guidance, up 37% year-on-year.

Adjusted diluted EPS now at $6.70, a 60% increase from '25. AOP now expected almost 60% up year-on-year, and adjusted free cash flow expected at $2.5 billion.

We achieved a net cash position at the end of Q2. Let's now move to slide 4, and let's start with the market environment on the left.

Our global pipeline momentum remains very strong, and we expect another year of robust orders growth. Demand signals are clear and broad-based.

Regionally, let's start with Americas, where market continues to be strong. Pipeline is actually accelerating, corroborating the long-term growth trajectory of our business.

EMEA's momentum is further strengthening. This reinforces our confidence in the acceleration for the second half of the year.

APAC showed broad-based strength, pipeline expansion, and favorable market conditions. This supports continued growth across the region.

Pricing continues to be favorable. We expect positive price-cost in '26, including the current impact of tariffs and countermeasures.

Now to the right side of this slide. Q2 revenue showed strong growth year-on-year, quarter-to-quarter.

We are executing on further acceleration in Q3 and Q4 on strong backlog. Additional capacity is online globally.

Examples are Johor in Malaysia, five large plant expansions in Americas, chiller capacity increase in EMEA, and more. During Investor Day, you saw that this expansion is rapid and broad-based, at speed, but always in a very disciplined fashion.

We are delivering data center infrastructure solutions at an increasing scale and level of complexity. That's exactly where we want to be.

We experienced some minor timing shifts in Q2 revenue, primarily driven by multiphase project execution and temporary supply chain dynamics, but the demand is there and the trajectory is strong. Keep in mind there are increasingly large projects underway, think SmartRun and think even bigger with One-Core.

These come with significant interdependencies, a lot of coordination, a lot of rapid learning. I like the pace of our progress, and we get stronger every day.

On capital expenditures, we now expect to be at the high end of our range, 4% of '26 sales, as we further expand global capabilities and capacity going into '27. We continue to invest for the long term in a disciplined manner, in future power architecture, advanced thermal systems, services, and converged infrastructure.

These are the building blocks that enable the next-generation AI data centers and factories, and we intend to continue to lead the industry. Let's now go to slide 5.

I am sure many of you will recall our CTO Scott Armul's power architecture presentation at our Investor Day in May. I want to reiterate and build on what we shared there.

Multiple power architectures will coexist in the future. Vertiv supports each one of them through a complete, orchestrated power train.

On the left side of the slide, you see the different architectures: our AC foundation with, as an example, Vertiv Trinergy and EnergyCore battery storage system and the rest of the Vertiv power train, of course. This architecture is broadly deployed, growing, and will continue to be used by many categories of customers.

The next architecture, serving even higher density, has a medium-voltage AC source that feeds low-voltage AC to deliver 800V DC at rack and pod level. Here you see new Vertiv technologies like medium-voltage bats UPS and Vertiv 800V DC sidecars.

This is under customer validation in '26, with deployment planned in '27. Then the 800V DC architecture at data hall level.

Here Vertiv solutions will include MV DC UPS and solid-state transformer. To cover the multiple ways to address the end-to-end power train, we are active in development, with planned '27 customer validation supporting '28 deployment.

As stated, rather than transitioning to a single architecture, the market is expected to leverage both AC and DC solutions as power requirements continue to evolve for years to come. Now the right side of the slide gives an example of deploying multiple power architectures as sites evolve and expand.

I'm thrilled to highlight our collaboration with NVIDIA and Foxconn's Big Bear AI business unit focused on AI supercomputing at their site in Kaohsiung, Taiwan. For the initial phase of this site, Big Bear AI awarded the power, thermal, and services business to Vertiv for what is Taiwan's first AI data center featuring NVIDIA GB300.

On top of this, we are collaborating for the world's first AI data center adopting 800V DC architectures at the rack and pod level featuring NVIDIA Vera Rubin. This is an example of early customer validation of our roadmap and supports the broad power architecture evolution.

This is real. This is happened.

In a nutshell, as the number of viable power architectures expand and AC and DC coexist to deliver on the 800V DC, Vertiv content opportunity per megawatt expands, and we're leading this transition. Let us now go to page 6, and let's continue on the topic of technology.

I want to spend a moment talking about Vertiv data center cooling architectures and our unique fluid management services. When the two are combined, we ensure our customers to use nearly zero water.

As they scale, many customers have been and are adopting closed-loop cooling architectures as they optimize power and water use. A closed-loop cooling architecture is just that: closed or sealed with water recirculating.

Typically, it does not require additional water after the fill at startup. Vertiv's end-to-end thermal chain technologies for both the primary and secondary cooling loops—examples are Vertiv Liebert cooler, Vertiv CoolChip CDUs, to name a few—fully enable this approach.

This architecture enables a data center to run on no water consumption. Now let's take the focus on water use a step further.

Let's also address the initial system fill, and this is where PurgeRight near-zero comes into the equation. As part of our unique fluid management technology and services, our PurgeRight near-zero utilizes a closed-loop recirculation system to capture, treat, and reuse water during startup.

This reduces the water normally used in the process by up to 90% during the startup of a data center. For our customers, this means a faster and more cost-effective deployment and commissioning of liquid cooling systems and chilled water circuits.

This means significantly less waste and less disruption on site. More broadly, this expands Vertiv's differentiation in thermal management services, where managing fluid performance from start throughout decades of operational life.

PurgeRight near-zero is scaling through our existing serving network, a capability we believe no one else can replicate at our scale. With that, over to you, Craig.

Thanks, Gio. Turning to slide 7, let's walk through our second quarter financial results in more detail.

On adjusted diluted EPS, we delivered $1.52, that's up $0.57 or 60% versus prior year, and $0.12 above guidance. The year-over-year improvement was driven by $0.58 from higher after-tax adjusted operating profit, which was driven primarily from higher sales volume and increased profitability.

Looking at net sales, we delivered $3.274 billion in the quarter, that's up $636 million, or 24% versus prior year. Organic sales growth was 18%, with 5% additional growth contribution from acquisitions and an additional 1% growth contribution from favorable foreign exchange.

By regions, Americas grew 21% organically, APAC grew 26% organically, and EMEA was down 2% organically. Moving to adjusted operating profit, we delivered $738 million, that's up $249 million or 51% versus prior year, and $28 million above the midpoint of our guidance.

Adjusted operating margin of 22.6% expanded 410 basis points year-over-year and came in 140 basis points above guidance. The margin expansion was driven by strong operational execution, continued productivity gains, and favorable price-cost execution, partially offset by tariff impacts.

We're also continuing investing in capacity and engineering R&D to support future business growth. To round out the quarter, adjusted free cash flow momentum was outstanding, with the quarter ending at $925 million, up $648 million or 234% from prior year.

The improvement was driven by higher adjusted operating profit, strong working capital performance, including project milestone collections, which is inclusive of initial advanced payments, and lower cash interest. These items were partially offset by higher cash taxes and higher spending on CapEx investments.

At our quarter end, our net leverage is at -0.1 times, providing even more flexibility. Just a quick note on our deferred revenue: you'll see an increase in the quarter, and that's driven by project advance payments and ongoing milestone collections.

We are very happy with our execution on project milestone development, and what you're seeing in deferred revenue is a combination of the payments at project initiation, order placement, and ongoing project milestone execution. Flipping to slide 8, let's look at segment performance.

In Americas, net sales were $2.071 billion, up 29% with organic growth of 21%. Organic sales growth remained strong in the quarter.

As Gio mentioned earlier, some minor timing shifts in 2Q revenue, these shifts were reflected in the Americas revenue numbers and were primarily driven by multiphase project execution and temporary supply chain congestion. However, we expect the associated timing delay to resolve in the second half of 2026.

Adjusted operating profit was $571 million, driving 360 basis points in adjusted operating margin percentage. The margin expansion was delivered by ongoing commercial excellence and strong operational execution.

Moving to APAC, the region had strong results, with net sales at $720 million, up 29% with organic growth of 26%. We continue to see strong in-market demand, and the commercial execution across the team gives us confidence going forward.

Adjusted operating margin percentage grew 270 basis points in the quarter due to strong operating leverage realized in the region. In EMEA, net sales were $484 million, up 2% with organic sales down 2%.

We continue to see a strengthening market, which supports our position for the region to return to organic sales growth in the second half of 2026. EMEA also saw strong growth in adjusted operating margin percentage, up 380 basis points year-on-year.

The team continues to drive improved operational execution, which came through in this strong margin performance. Turning to slide 9, let's walk through our third quarter 2026 guidance.

For 3Q, we're projecting adjusted diluted EPS of $1.80 at the midpoint. That represents 45% growth versus prior year.

That year-over-year improvement is driven by continued volume growth and ongoing margin expansion. On net sales, we expect $3.75 billion at the midpoint, that's up $1.074 billion or 40% versus prior year.

Organic sales growth is expected to be up approximately 35%, with an additional 5% from acquisitions. By region, we expect Americas organic growth in the high 30s, APAC in the high 30s, and EMEA in the mid-teens.

Adjusted operating profit is expected to be $918 million at the midpoint, that's up $322 million or 54% versus prior year. Adjusted operating margin is expected to be 24.5% at the midpoint, that's up 220 basis points year-over-year and is driven by strong organic sales growth, continued operational leverage, and ongoing productivity realization.

Now let's turn to slide 10 for our updated full-year 2026 guidance. We're raising our outlook across all key metrics.

Starting with adjusted diluted EPS, we now expect $6.70 at the midpoint. That's up $2.50 or 60% versus 2025.

The updated range is now at $6.65 to $6.75. This is an increase of $0.35 at the midpoint versus prior guidance.

The year-over-year improvement is driven by continued volume growth and ongoing margin expansion. For net sales, we now expect $14 billion at the midpoint, that's up $3.77 billion or 37% versus 2025.

This represents an increase of $250 million versus our prior guidance. Organic sales growth is expected to be at 31%, with 5% growth from acquisitions and 1% growth from favorable currency.

By region, we expect Americas organic growth in the high 30s, APAC in the low 30s, and EMEA in low single digits. Moving to adjusted operating profit, we now expect $3.325 billion at the midpoint.

That's up approximately $1.235 billion or 59% versus 2025. This is an increase of $125 million versus our prior guidance.

Adjusted operating margin is expected to be 23.8% at the midpoint, expanding approximately 340 basis points from 2025 and up 50 basis points versus our prior guidance. The margin expansion is driven by continued operational leverage and positive price-cost execution, which is offsetting some tariff headwinds.

Finally, adjusted free cash flow is expected to be $2.5 billion at the midpoint. That's up $613 million or 32% versus 2025.

The year-over-year improvement is driven by higher adjusted operating profit and lower cash interest, which is partially offset by higher cash taxes and higher investments in capital expenditures. We're delivering strong results, raising our outlooks, and executing with discipline.

Based on our performance and momentum, we're very confident in our ability to continue driving results throughout the balance of the year. With that, I'll send it back to you, Gio.

Thank you, Craig. Let's go to slide 11 to wrap up.

Strong Q2 performance, we are delivering, and the team continues to raise the bar on what's possible. We raised our full-year '26 guidance across all key metrics.

The momentum is strong. It's broad-based, and it's accelerating.

We continue to invest with discipline, not just for the 45% growth we expect in the second half, but for the years beyond: capacity, innovation, services. On M&A, we closed ThermoKey in June, strengthening our heat rejection capabilities.

We closed Strategic Thermal Labs in April. We're adding server-side liquid cooling and cold plate expertise for high-density thermal management.

Together, these two acquisitions expand what we offer across the full thermal spectrum, from heat rejection to direct-to-chip cooling. Allow me two additional spotlights.

At the Naval Postgraduate School, in partnership with NVIDIA, we delivered a fully engineered package, rack power and cooling system into an existing on-prem facility. This includes liquid cooling integration, commissioning, and deployment support.

This is a repeatable at-scale reference architecture for NVIDIA GB300. We call this Vertiv Smart IT solution.

The project established an advanced locally operated AI environment for education, research, engineering, modeling, and simulation. This also shows how an existing facility can rapidly be transformed to support next-generation accelerated computing, easy for enterprise and sovereign customers to adopt.

In EMEA, Germany, our collaboration with Data4 is a great example of the momentum we are seeing in that region. Vertiv delivers complete powertrain, including switchgear, UPS, and battery systems, etc., and thermal chain like chilled water units, free-cooling chillers, and our industry-leading services.

It all will enable Data4's new Frankfurt site. This is exactly the kind of optimized end-to-end system deployments where Vertiv excels.

To conclude, I'm more confident in our trajectory today than I've ever been. We're executing, we're investing ahead of the curve, and increasingly our customers are asking us to help them architect the most complex infrastructures.

That's the role we've earned, and it's the role we intend to further strengthen. With that, let's go to the Q&A.

yes, thanks for the reminder, operator. I haven't figured out my phone yet.

Anyway, sorry, guys, and good morning, still good morning. I just want to address a little bit of the issue that maybe hurting your stock a little bit today with the timing shifts in 2Q revenues, the supply chain congestion comment.

Can you give us a little bit more detail on that, and more explicitly, complexity is something that I would imagine is going to just do nothing but increase over the next 5 years and perhaps forever. Is this potentially going to be an ongoing issue, not just a one-off, and if so, how do you mitigate or kind of manage through it so that it really doesn't disrupt quarters the way that perhaps it can?

Thanks, Scott, for the question. You're right, complexity is increasing.

Some of the projects are not only bigger, but multidimensional. There could be a lot of supply chain interdependencies, and this supply chain is not necessarily an external supply chain, it can be very often an internal within Vertiv supply chain.

Now, clearly, like everything and like we've done in so far, there is a learning curve. I'm pleased with the speed at which we're progressing in this learning curve, and this learning curve is a learning curve at execution on this complexity.

I'm pretty confident about our direction of travel. Again, these are the first very large projects with this level of complexity, and we are more and more equipped for this, not just from a technology standpoint, but from a logistics and operations in general.

When it comes to the second part of your question, if there's an ongoing impact on the future, well, certainly, as I said, there is a learning curve that we are progressing on at speed, but there is also the fact that we're prudent anyway in our second-half guidance. This is true in general also for the future.

If you think about our H2 guidance, we're not assuming all stars aligned, we have a wiggle room for this progress on the learning curve not to be perfect, though, of course, speed and perfection is our goal.

Fair point. Then just a quick one, is there a price where you would start buying back stock a little bit more aggressively, just given the pullback we're seeing in the entire complex right now?

I think we always look at it opportunistically, Scott, and that's the thing that we've talked about even at Investor Day. Given today, it is a good time to look at it, but I think that's always something that we evaluate and what do we consider our capital deployment, and it's one of the areas we look at.

So.

Fair enough. I wish you all the best, guys.

Good luck in the fall. Thanks, Scott.

Thank you.

Hey, thanks. Good morning.

Hey, Gio, just on the comment that the pipeline is actually accelerating. I assume that's sort of all hyperscale, but could you give a little bit more context on sort of the nature of the acceleration?

Is it scope to Vertiv? Is it kind of additional customers?

Is it existing customers looking to do more quickly? It seems to support the comment you're making about robust orders for the year, but just love a little bit more color there, if you could.

Let's start from the end, good day, Jeff. Let's start from from the end.

Yes, of course, is this this is support certainly supporting our our comments about that about orders. When when I talk about pipeline, I always like to talk about magnitude of pipeline, if you will, and speed of pipeline.

When I talk about speed of pipeline, when we talk about acceleration, it means that the sales cycle within the within the pipeline can can be faster or slower. We notice in an acceleration, becoming faster sales cycle, but at the same time, just to be extremely clear, the strength is also in sheer size of the pipeline in terms of quarter-to-quarter, year-on-year year-on-year growth, and this is broad-based pretty much across across the world, but also it's broad-based across the various customer categories, certainly certainly, that the whole range, hyperscalers, it is true for enterprise, it's certainly true for colo, neocloud, pretty pretty broad-based.

Just to add on to that, Jeff, I would also just say, again, as hyperscalers and colos, hyperscalers are sometimes deploying through colos, to look at it that way, you might get a little bit of a mix there. Just to ensure, going back to what Gio said, we're seeing it, again across regions, across products, and that's the way we really look at it, but that's the way we would view our pipelines and see it accelerating in all those spaces.

Just a quick one if I could. Do you have a solid-state transformer solution at scale at this point, or where do you stand on that product evolution?

Just like one of the slides was describing, the solid-state is currently a matter of product development for us. It's in product development phase,

thank you.

Thanks.

Yep, good afternoon, everyone. Thanks for taking my question.

I guess, Gio, if you just go back to the supply chain issues and delays, can you just talk about how much revenue is actually pushed out due to these challenges you had in the quarter? I.e., missed the Street numbers by $100 million, but I'm actually wondering if the supply issues were perhaps much larger than that from a dollar perspective.

Maybe just on the same lines, can you just talk about, was that a Vertiv-specific issue or something on the customer side that led to this impact, and then how do you see this flowing back into the margins of the back half? Thank you.

Good afternoon. Is it customer or is it Vertiv?

On the customer side, pretty much we see the same dynamics that we have seen historically, no big differences. When it comes to the Vertiv side and the exact amounts, well, we will not be too specific, but the majority of what we're seeing is really coming from those dynamics that I have described while I was going through my opening remarks, but also the conversation with Scott.

That is pretty much the dynamics that we see. Is it on the supply chain?

The supply chain is always a matter of working the sequence of things, nothing different than what we have experienced historically, and we are pleased with how we are strengthening the resilience of our business in general.

Amit, I would just add that just to clarify, we're talking about the large project deployments and the learning curve around that, which has confounding effects from both the external supply chain and our own internal supply chain. There are some, I'd say, gray areas in there when we typically can recover from a late part in our smaller supply chains, but when it becomes a larger supply chain, it becomes more confounding.

Again, not to define that specifically, but that's the areas where we're seeing it the most, is in those large project deployments, and we're learning and understanding what that takes to go forward and how to iron those out, and then also, again, as we talked about, thinking of not always that being perfect in the second half as we look into the guidance.

Thank you. Good morning, everyone.

I'll keep it to one question. Really good performance on free cash flow conversion this quarter, but for Craig, I'd be interested in hearing was there any contribution from customer deposits on orders?

I know that's something you all have been looking at. Dave Cote knows from his aero and defense days that that's pretty standard to require deposits on larger orders, any contribution there?

Deane, and again, I want to congratulate you. I know you're retiring in September, congratulations, a great career, fantastic career.

To your question, yeah, if you look at the face of the balance sheet, you'll see that our deferred revenue did go up, and our deferred revenue is a read-through in terms of those advanced deposits on orders, but it's also ongoing deposits as we go through the milestones of delivering those larger projects. It's a combination of both, but that is driving the working capital and the great cash performance when you look at it across the entire balance sheet.

Definitely an indicator of strong commercial performance on both sides.

Great. Thank you for those kind words, and I appreciate all the support from the team, and wish you all continued success.

Thanks.

Thanks, Deane.

Thanks. Good morning, everyone.

Just want to pick up on that topic. I think this is the first time, maybe I'm wrong, but the first time I've heard progress collections, kind of phased payments.

Maybe just touch on that. I know your assortment is changing with One-Core and SmartRun.

Maybe just talk about that. What kind of percentage of revenue are we talking about now that actually has progress collections?

Then just this is not a second question, by the way, it's more of kind of a add-on to the first one. The balance sheet numbers moved quite a lot this quarter.

The ThermoKey acquisition seemed quite small, but did it come with quite a big balance sheet? Thanks.

ThermoKey didn't come with a large balance sheet, I'll answer that one first, and then we can go a little bit, I'll double-click on it as we go further into your question, Nigel. In terms of the actual progress collections, yeah, there is a portion that we get upfront, and there's a portion as we deliver milestones, and a lot of that is related to delivering products to the end project, and so that's how you would start phasing it in.

Sometimes you get those a month before you deliver projects, sometimes you get those at the end of design, they're all phased in different ways. We would get a portion upfront, we'd get a portion at the delivery milestones that we set forth, always in our view staying ahead of the curve in terms of a cash position in that project.

Some of it's going to be related to deliveries where you would see revenue incurred, some of it might be delivered on terms of a design point, which would be a secondary milestone before revenue occurs. Again, they're all a little different in how we look through them, all the goal being staying ahead of the cash curve and being cash-positive on that.

On the other faces of the balance sheet, you mentioned lots of movement, we do have a significant ramp in the second half, you would see some inventory come on, and as that inventory comes on, you'll see AP come on as well. We did have a good quarter in terms of sales, so that's where our AR is going up as well.

All of this is a reflection of the volume you're seeing. ThermoKey had little impact to that.

Great, thank you.

Good morning, everyone.

Good day to you, Andrew.

Good morning. Gio, you updated us again regarding the evolution toward 800V DC potentially starting to impact Vertiv 2027, and I know you commented on SST and product development to Jeff, but when you step back, how confident are you that Vertiv's content per megawatt could go up as 800V DC technologies are adopted, as I think you reiterated today, and would you surmise that Vertiv's 800V DC offering could be toward the higher end of that $3.25 million to $3.75 million per megawatt range you gave us at the Analyst Day?

We're pretty convinced about that, and also when we look at all the elements of the power train in the various architectures, and when we think what happens inside the white space, in the gray space, we see value there for Vertiv and an expansion of revenue per megawatt. Not differently from our conversations or what we shared at Investor Day, it's 2 months ago, we continue to go through that math, and the math is corroborated by, of course, all the progress that we're doing on product development, but also on the activities that we are conducting with customers.

We would need to go elements per elements in that chain, but again, think about the entire power train, all the elements vis-à-vis what we have today, and see that with that density, with that complexity, our content is impacted favorably.

Thank you, Gio.

Yes, good morning. Good

morning, Andrew.

Just maybe another question on this deferred revenue. We've been getting lots of questions on this topic.

It's a large number, but I guess what folks are trying to figure out, and I know sort of some people have been asking similar question, has the structure of your deferred revenue sort of changed materially from what it was? I'm not asking, I know that it fluctuates quarter to quarter, I totally get that, but has the structure of what goes into deferred revenue changed materially?

Still if we look at deferred revenue over the past several quarters, it's apples to apples. All right,

it's apples to apples, Andrew. Now, what you might be feeling a little bit differently is, as we talked about back in fourth quarter, we had a large order influx on the infra solution business where, I would say, a lot of these milestones are set up in the project-based world as opposed to the point product-based world.

The project-based world might have more milestones before delivery of revenue, you would get one at input of order and then one along the way as a design, and then one potentially as you start to deliver products, you have different levels of milestone on those projects versus a point product. We know that the project bases that we've talked about a lot, those larger ones, One-Core, SmartRuns, we had a large order intake in the fourth quarter of last year that we spoke to, and again, that would be some of the stuff that you might be seeing in the deferred revenue as it comes through throughout the year.

Then, again, it is tied to our regular down payments as well, but no structural change in the way that we would recognize deferred revenue.

Thank you.

Thank you. I wanted to follow up on the conversation around the production disruption and some of the supply chain impact.

I guess you guys are obviously guiding to a pretty significant organic ramp here into the back half relative to what we saw in the first half. I guess anything that you could provide around confidence that you're seeing in this disruption getting better?

I would imagine that as the quarter went on, the monthly got better. I think you said July was off to a start that presumably supports this ramp.

I guess, has it gotten better, any just kind of color on that monthly cadence that gives more confidence in the back half? Thank you.

Thank you. I wouldn't use the word disruption.

I want to be clear about we talk about complexity and the interdependencies. As I said, very often in this large projects, you will see multiple Vertiv factories feeding other factories, besides of course external suppliers feeding those factories as well.

It's really a complexity. There is an operational aspects to your question, that is, we are getting stronger and stronger in the operational execution of that complexity, but the complexity doesn't go away, but our ability to handle that complexity is certainly accelerating very strong, and that's hence my comments.

Again, I wouldn't talk in terms of disruption.

Agreed. I think on your second point of why do we feel comfortable about the second half, as Gio said, it's a learning curve when you have these large projects and you do have congestion in your supply chain, which, again, some of that stuff's normal on point products, which is easier to iron out.

As you have a learning project for larger projects, some of it takes a little bit more time to get smoothed out and understand. We're seeing good signs of it being able to ratchet up that learning curve, and as we think about the second half, we've also assumed some of that congestion continues as we normally would, but on these projects, it might be a little bit further of congestion than we would have assumed then normal.

Exactly. All in all, we believe that we are prudent in our second half and very, very well supported by the backlog.

Thank you.

Thanks, and good morning, guys. I'm sorry to beat a dead horse, but I'm going to.

I think with respect to the second-half ramp, there's still a lot of questions about what specifically is embedded and what isn't. Maybe a way to frame it, I'll try this: how much of the second-half ramp is based upon this improvement in learning curve and maybe unlocking some of the revenue that was pushed out of 2Q versus just the overall capacity ramp that you guys are doing at the same time, just so that we can try to get more comfortable with the step-up in revenues that are embedded in the second half and how much visibility you have into that?

Thank you.

Thank you, Nicole. When we talk about unlocking revenue, just let's be clear that the revenues that were, let's say, a little bit locked in some elements on the second quarter are being delivered, deployed in the second half, and we feel extremely well about that.

When it comes to some elements of congestion, possible elements of congestions, as Craig mentioned, we are prudent in our guidance, though we believe that there will be, and we are seeing certainly a strong acceleration and improvement from an operational standpoint, we still remain prudent in our guidance. There is capacity that is being released, and that is a big element, of course, of also the backlog conversion.

Look at it as three levels: the operational acceleration in the complex projects, the capacity coming available, that has been coming available in the second quarter, but even more so in the second half, a very strong backlog coverage, and over and above that, wrapped up with anyway a guidance that is not an all-star-aligned type of guidance.

Thanks, operator. Gio, I'm just curious to sort of compare and contrast some of the challenges you're having today to the challenges you had really kind of this time last year, and you got back on track pretty quickly from an operational, but that time it wasn't a revenue issue, it was more of a margin issue and an operational issue, and I know at heart you're an operational guy.

Just maybe compare and contrast that, and I just want to maybe explain the complexity within the complexity. What I mean by that is that are there multiple points of challenges or is there sort of one main challenge that's sort of cascading across the supply chain?

That a little bit color there would be helpful.

Thank you. Thank you, Amit.

I really appreciate you throw that parallel to exactly a year ago. It was a different nature.

That stage was Ireland and some execution challenges on the busbar switchgear that we have amply recouped, as you were saying. I think this highlights the fact that in a business that is moving at this speed, that is growing at this speed with the speed of technology evolution that we are experiencing and indeed driving, there is a lot of complexity to manage.

In many respect, the parallel is similar. You were talking about, well, that was a margin, this is a revenue, anyway, it's operational execution that we are concentrating on right now.

It may be different in the type of product line, if you will, it's not different in terms of the type of focus and the type of, let's say, recipe that we apply. Again, it's a matter of really continuing to mature operationally as the markets, the portfolio, the scope of what we do continues to evolve.

I feel very good about it, as I did a year ago.

Gio, are you reducing the on-time delivery of the customer? Because Vertiv has been one of the few companies that can deliver on time, in full.

Are you disappointing customers with this development that opens up market share opportunities for other companies, or no?

Look, our overall performance is, if anything, improving. I would say that the answer is not something that changes our perception in the market, we believe.

Yes, thank you for taking my question. One of the key topics at the Investor Day that we haven't discussed yet on the call this morning is around M&A.

I think you talked about something in the order of $24 billion that could be deployed, and in light of some of the pullback in financial market valuations as well as all the opportunities you see on the technology front including areas like 800V, I'm curious if you could give us your latest thoughts on the M&A opportunity and if the pipeline there is active and that might be something that could be executed upon relatively soon. Thanks.

I would say our outlook doesn't change in terms of the M&A world. We still look at it in the same way we looked at it back during Investor Day, but it is active.

We do see an active market, and we are participating in that active market, looking at several targets. Again, it has to fit us, and it has to be the right, I'd say, value play for us in terms of fit in our portfolio and what we believe we can grow and what we can return to investors in terms of what we're going to pay.

Again, I've always talked about we invest in ourselves first, and that's capacity, and that's R&D, and that's development, and that's the things we're always going to look at, and then we'll look at the external spots where we believe we can get true value out of an acquisition and an add-on, whether it be regional reach or a product that we believe can get us to the market faster or technology we don't currently have. Yes, we are active, and we continue to look at it in terms of that framework.

Thanks for taking the question. Talking about some of these learning curve developments around what seems to be more of a focus on the infrastructure solutions, the components of these, as we understand them, the building blocks, they're already part of the Vertiv portfolio largely, but I'm just curious, as you come up this learning curve, to what extent are you increasing your vertical integration across those building blocks and supply chain?

Is that a process that you are undertaking now? Is it something that needs to happen on a go-forward basis to mitigate and manage some of those challenges in architecting the solutions?

There

there is clearly always an analysis of make or buy, vertical integration in anything we do, be it at point-product level and at, let's say, large infrastructure solution level. When when we talk about vertical integration for infrastructure solutions, for us is really we are very vertically integrated in the sense that we're putting into our infrastructure solutions products that are Vertiv products.

Then then clearly we are in in good control of the of the supply chain in in that respect. We feel good in this moment.

We do not think there are any major gaps in vertical integration for what we're doing, but that doesn't mean that we will not adjust over time the mix of make or buy in whichever dimension that that could be, depending on depending on on the type of business, depending on where we manufacture, not all manufacturing locations are the same in terms of access to a nearby, let's say, supplier critical mass. It's it's always dynamic, but we do not foresee in this moment that there are any major gaps.

For example, if you think about an acquisition that we that we shared with you last quarter, Bemarc, that was that was a move to vertically integrate on on frame construction for our infrastructure solutions. That I think testament to the dynamic approach that we have when it comes to to make or buy.

Thank you, Gio.

Thanks, guys, for taking the question. Really appreciate it.

I'd love to get you guys' view, this is an 800V, 450V question. For 800V, how broadly throughout the marketplace are you expecting the next couple of years the technology be adopted?

Really the genesis for the question is there's, as you guys may know, there's sort of been speculation the last 2 months that one of the larger AI infrastructure companies could see a pushout that would use 800V as far as in 2029. If there were a major customer pushout, how broad are you guys anticipating the tech to be throughout the industry?

Then, we've heard really good things on 450V potential over the next 24 months. What's the right way to think about the impact that could have, and could that fill in any white space, if there were a meaningful, sort of AI infrastructure 800V customer pushout?

Thanks. If any context, it'd be helpful.

Thanks.

Thanks. A multidimensional, multilayer question, Ananda, here.

I will not comment on rumors in a market. As we shared with investors in May, but also earlier today, we believe that the adoption of 800V will be gradual, will be convincing.

We are certainly very invested in that part of the portfolio. Whether that happens at the speed that is currently in our roadmaps and that you saw or something slower than that, we will be flexible, and certainly we are extremely resilient with that because it means that other parts of the architectures that we provide to our customers will certainly take the share of the market in terms of architecture.

Whichever way, no matter the speed of acceleration, we think that we are in a good place because we have the architectures, we have the technologies, the roadmap says we shared. There is a 400V DC question, and that 400 DC volt question is an important one.

We see that some players are thinking in terms both of 800 and 400. The underlying technology is not dramatically different, and quite honestly, we're involved in both.

That's really helpful. Thanks so much.

Really appreciate it.

Yup.

Thanks for sneaking me in here. Gio, hoping just to get some texture around ongoing increasing confidence around the EMEA market specifically, and we saw step-up in margins sequentially this quarter.

How do you think about the sustainability there, or maybe even the potential for some further improvement in the back half of the year? Thank you.

Thanks for the EMEA question. We are pretty bullish about EMEA, as you've saw, certainly.

We believe in a strong second half and back to growth to see EMEA performing better than we expected anyway in the second quarter, very very confident in the second half. I was vocal about the fact that we were very happy with orders in EMEA in the first quarter.

I'd say that we like what we see in the second quarter, and there is backlog formation that is certainly convincing. We see that the improvement translates in top line and bottom line improvement, as demonstrated.

The market continues to accelerate, and we certainly have a very important position in that market.

Luke, I'll just hit on the fact that we do, as we've talked about through even back as early as last year, we do see a second-half increase in growth for EMEA in terms of where we expect their organic growth to go from a revenue perspective. In terms of, I would say, the gain that you saw in margin, it was a favorable comp, too, as Gio had mentioned, the Ireland portion did come through 2Q last year, which was in EMEA.

There's a little bit of favorable comp in there, but we do still expect margins to be pretty good.

Got it. Leave it there.

Thank you.

Thank you, and thank you very much, everyone. Thank you for the questions, and thank you for your time today.

I am very pleased with what we delivered this quarter and how we're positioned for the second half. The team is executing at a high level, scaling capacity, deepening customer partnership, and advancing our technology portfolio, all simultaneously.

It's not easy, but this invigorates us. Pipelines are strong, our operational discipline is sharp, and our customer trust us to deliver at scale.

Just to be clear, I am very encouraged by our trajectory. I am pleased, but certainly never satisfied.

With that, thank you all, and I wish you all a great rest of the day.