Vertiv Holdings Co (NYSE: VRT), a global provider of critical digital infrastructure and continuity solutions, today reported strong operating and financial results for its third quarter ended September 30, 2020.
Vertiv reported third quarter 2020 net sales of $1,162 million, an increase of $91 million, or 8.5%, from last year’s third quarter (8.3% organically excluding the impact of foreign currency). Higher net sales were primarily driven by a strengthening position in the growing cloud and colocation market segments. EMEA regional net sales increased 24% with strength primarily driven by colocation and telecom. APAC regional net sales were up 17% led by strength in data centers, 5G projects and industrial.
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The Americas region was down 3% due to COVID-related site access issues and a tougher comparison to the prior year quarter, which had more large-project activities. Orders in the third quarter were up 15.5% from last year’s third quarter as strength continued in cloud, colocation and telecommunication markets. Vertiv’s backlog continued to be strong, reaching a record $1.85 billion at the end of September, increasing over $90 million from the end of June.
Third quarter net loss increased $2 million from last year’s third quarter as higher gross profit and lower selling, general and administrative expenses were offset by $80 million of restructuring program expenses and a $17 million increase in foreign currency transaction losses. Adjusted EBITDA of $179 million improved 31% from the same quarter last year, and adjusted EBITDA margin increased 270 basis points to 15.4%, strengthened by higher contribution margin and lower fixed costs.
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Free Cash Flow and Liquidity
Net cash flow provided by operating activities in the third quarter was $138 million, and free cash flow of $129 million was up $115 million from last year’s third quarter, primarily driven by $45 million lower cash interest, $43 million higher adjusted EBITDA and $21 million lower working capital cash usage.
We continue to anticipate strong free cash flow in the fourth quarter, consistent with historic trends. Liquidity at the end of the third quarter remained strong at $653 million, an increase of $123 million from the end of the second quarter. The ABL facility was paid down by $170 million as we continue to reduce debt and strengthen our balance sheet.
Restructuring Program
To support our ongoing margin expansion targets, we expensed $80 million in the third quarter pursuant to a restructuring program – including a $71 million restructuring reserve and a $9 million impairment charge. This restructuring program, which is expected to drive $85 million in annualized run-rate cost savings by 2023, primarily focuses on headcount efficiencies, footprint optimization and various activities that will support execution of our long-term strategic initiative to hold fixed costs constant as we grow.
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