# Vertiv Holdings Co: Form 10-Q for the period ended Mar 31, 2021

- Company: [Vertiv Holdings Co](/companies/vrt.md) (CIK 1674101)
- Form: 10-Q
- Filed: 2021-05-03
- Accepted by EDGAR: May 3, 2021, 16:52 ET
- Period: 2021-03-31
- Accession: 0001628280-21-008627
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1674101/000162828021008627/vrt-20210331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1674101/000162828021008627/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2021-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2021-01-01 to 2021-03-31 | $1.10bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2021-01-01 to 2021-03-31 | $740.4m | us-gaap:CostOfGoodsAndServicesSold |
| Selling, general and administrative | 3 months, 2021-01-01 to 2021-03-31 | $250.1m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2021-01-01 to 2021-03-31 | $79.8m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2021-01-01 to 2021-03-31 | $24.1m | us-gaap:InterestExpense |
| Income tax | 3 months, 2021-01-01 to 2021-03-31 | $10.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2021-01-01 to 2021-03-31 | $31.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2021-01-01 to 2021-03-31 | $0.09 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2021-01-01 to 2021-03-31 | $0.09 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2021-01-01 to 2021-03-31 | 353,448,585 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2021-01-01 to 2021-03-31 | $60.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2021-01-01 to 2021-03-31 | $16.8m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2021-03-31 | $677.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2021-03-31 | $2.67bn | us-gaap:AssetsCurrent |
| Total assets | at 2021-03-31 | $5.16bn | us-gaap:Assets |
| Current liabilities | at 2021-03-31 | $1.65bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2021-03-31 | $4.43bn | us-gaap:Liabilities |
| Long-term debt | at 2021-03-31 | $2.13bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2021-03-31 | $22.0m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2021-03-31 | $728.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 28,623 characters.

*Unless the context otherwise indicates or requires, references to (1) “the Company,” “we,” “us” and “our” refer to Vertiv Holdings Co, a Delaware corporation, and its consolidated subsidiaries following the Business Combination; (2) “GSAH” refers to GS Acquisition Holdings Corp prior to the Business Combination; and (3) “Holdings” refers to Vertiv Holdings, LLC and its subsidiaries prior to the Business Combination. In addition, dollar amounts are stated in millions, except for per share amounts. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K/A filed April 30, 2021 for the year ended December 31, 2020.*

### Overview

We are a global leader in the design, manufacturing and servicing of critical digital infrastructure technology that powers, cools, deploys, secures and maintains electronics that process, store and transmit data. We provide this technology to data centers, communication networks and commercial and industrial environments worldwide. We aim to help create a world where critical technologies always work, and where we empower the vital applications of the digital world.

### Key Developments

Below is a summary of selected key developments affecting our business during first quarter 2021:

- On March 10, 2021, Vertiv Group Corporation, a Delaware corporation (the “Borrower”) and an indirect wholly owned subsidiary of Vertiv Holdings Co, Vertiv Intermediate Holding II Corporation, a Delaware corporation

(“Holdings”) and the direct parent of Vertiv Group, and certain direct and indirect subsidiaries of the Borrower

entered into an Amendment No. 1 to Term Loan Credit Agreement (the "Term Loan Amendment") with Citibank,

N.A., as administrative agent (in such capacity, the “Term Agent”), and the lenders party thereto, which Term Loan

Amendment amended the Term Loan Credit Agreement, dated as of March 2, 2020 (as amended by the Term

Loan Amendment, the “Term Loan Credit Agreement”), by and among Holdings, the Borrower, the Term Agent and

the lenders from time to time party thereto, to, among other things, reduce the interest rate margin for the

Borrower’s outstanding term loans under the Term Loan Credit Agreement by 0.25%, to 2.75% in respect of term

loans bearing interest based on the LIBOR rate and to 1.75% in respect of term loans bearing interest based on a

base rate defined in the Term Loan Credit Agreement. The maturity date for such term loans remains March 2,

2027, and all other material provisions of the Original Term Loan Credit Agreement re main materially

unchanged.

- On December 17, 2020, the Company announced its plans to redeem for cash all of its outstanding public warrants to purchase shares of our Class A common shares. In December 2020, $156.5 of cash was generated from the exercise of 13.6 million public warrants. In January 2021, 9.3 million public warrants were exercised generating cash proceeds of $107.5. Public warrants that remained unexercised as of 5 p.m. New York City time on January 19, 2021 were no longer exercisable, and the registered holders of such unexercised public warrants became entitled to receive the redemption price of $0.01 per warrant. All public warrants were exercised or redeemed as of January 22, 2021.
- As previously disclosed in our 2020 Form 10-K/A as filed on April 30, 2021, we restated the Company’s previously issued consolidated financial statements as of and for the year ended December 31, 2020, as well each of the quarters within 2020 to make the necessary accounting corrections related to warrant accounting.

### RESULTS OF OPERATIONS

### Comparison of the quarters ended March 31, 2021 and March 31, 2020 (as restated)

*(Dollars in millions)*

|  | 2021 | 2020 (as restated) | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $1,098.4 | $897.3 | $201.1 | 22.4% |
| Cost of sales | 740.4 | 610.3 | 130.1 | 21.3% |
| Gross profit | 358.0 | 287.0 | 71.0 | 24.7% |
| Selling, general and administrative expenses | 250.1 | 264.8 | (14.7) | 5.6% |
| Amortization of intangibles | 31.8 | 32.4 | (0.6) | 1.9% |
| Restructuring costs | 2.0 | (1.1) | 3.1 | 281.8% |
| Foreign currency (gain) loss, net | (6.9) | 1.8 | (8.7) | 483.3% |
| Other operating expense (income) | 1.2 | 1.3 | (0.1) | 7.7% |
| Operating profit (loss) | 79.8 | (12.2) | 92.0 | 754.1% |
| Interest expense, net | 24.1 | 68.9 | (44.8) | 65.0% |
| Loss on extinguishment of debt | 0.4 | 174.0 | (173.6) | 99.8% |
| Change in fair value of warrant liabilities | 13.6 | (60.6) | 74.2 | 122.4% |
| Income tax expense (benefit) | 10.0 | 13.8 | (3.8) | 27.5% |
| Net income (loss) | $31.7 | $(208.3) | $240.0 | 115.2% |

### Net Sales

Net sales were $1,098.4 in Q1 2021, an increase of $201.1, or 22.4 percent, compared with $897.3 in Q1 2020. The increase in sales was primarily driven by recovery from the COVID-19 pandemic in the APAC segment coupled with demand gains in critical infrastructure and solutions. By offering, critical infrastructure & solutions sales increased $166.4 including the positive impacts from foreign currency of $14.4. Services & spares sales increased $15.5, including positive impacts from foreign currency of $7.8. Integrated rack solutions sales increased $19.2 including the positive impacts from foreign currency of $3.7.

Excluding intercompany sales, net sales were $501.5 in the Americas, $357.4 in Asia Pacific and $239.5 in EMEA. Movements in net sales by segment and offering are each detailed in the Business Segments section below.

### Cost of Sales

Cost of sales were $740.4 in Q1 2021, an increase of $130.1, or 21.3 percent compared to Q1 2020. The increase in cost of sales was primarily due to the flow-through impact of higher net sales volume. Gross profit was $358.0 in Q1 2021, or 32.6 percent of sales, compared to $287.0, or 32.0 percent of sales in Q1 2020.

### Selling, General and Administrative Expenses

Selling, general and administrative expenses (SG&A) were $250.1 in Q1 2021, a decrease of $14.7 compared to Q1 2020. SG&A as a percentage of sales were 22.8 percent in Q1 2021 compared with 29.5 percent in Q1 2020. The decrease in SG&A was primarily the result of fixed cost reduction actions in response to the COVID-19 pandemic, including discretionary spending cuts, and one-time transaction related bonuses in 2020.

### Other Operating Expenses

Other operating expenses include amortization of intangibles, restructuring costs, foreign currency (gain) loss, and other operating expense (income). Other expenses was $28.1 for Q1 2021. This was a $6.3 decrease from Q1 2020. The decrease was primarily due to a change in foreign currency (gain) loss of $8.7, partially offset by increased restructuring costs of $3.1.

### Loss on Extinguishment of Debt

Loss on extinguishment of debt was $0.4 in Q1 2021 related to lender fees associated with the Term Loan Amendment. This was a $173.6 decrease from the Q1 2020 loss that resulted from the repayment of indebtedness from the Business Combination and the subsequent Refinancing Transactions. In Q1 2020, we recognized a $99.0 write-off of deferred financing fees and a $75.0 early redemption premium on our $500.0 of 12.00%/13.00% Senior PIK Toggle Notes due 2022 (the “2022 Senior Notes”), $750.0 of 9.250% Senior Notes due 2024 (“2024 Senior Notes”) and $120.0 of 10.00% Senior Secured Second Lien Notes due 2024 (the “2024 Senior Secured Notes” and, collectively with the 2022 Senior Notes and 2024 Senior Notes, our “Prior Notes”).

### Change in Fair Value of Warrant Liabilities

Change in Fair Value of Warrant Liabilities represents the mark- to -market fair value adjustments to the outstanding warrants issued in connection issued in connection with the IPO of GSAH. The change in fair value of the outstanding warrants during Q1 2021 was $13.6. The change in fair value of stock warrants is the result of changes in market prices deriving the value of the financial instruments.

### Interest Expense

Interest expense, net, was $24.1 in Q1 2021 compared to $68.9 in Q1 2020. The $44.8 decrease is primarily due to the reduction in outstanding borrowings resulting from the business combination and lower interest rates secured through the debt refinancing, as described in Note 6 to the consolidated financial statements, offset by an increase due to accretion on the Tax Receivable Agreement and net settlement payments on the Company's interest rate swaps.

### Income Taxes

Income tax expense was $10.0 in Q1 2021 versus $13.8 in Q1 2020. The effective rate in the year-to-date period is primarily influenced by the mix of income between our U.S. and non-U.S. operations, and reflects the negative impact of Global Intangible Low-Taxed Income (GILTI), which is partially offset by changes in valuation allowance in the U.S. For the three months ended March 31, 2020, income tax expense was primarily influenced by the mix of income between our U.S. and non-U.S. operations and changes in valuation allowance offsetting the tax effect in the U.S. and certain other jurisdictions as well as discrete tax adjustments related to remeasurement and legislative changes impacting the indefinite reinvestment liability and changes in the liability for uncertain tax positions.

The Q1 2021 tax expense is lower than Q1 2020 primarily due to the change in mix of income, non-U.S. tax incentives and changes in valuation allowances in the U.S.

The effective tax rate in Q1 2020 reflected the effect of significant valuation allowances offsetting tax benefits otherwise generated by losses in that period. The effective tax rate in Q1 2021 reflects a more customary relationship between tax expense and pre-tax results, as profits were generated more consistently across jurisdictions than in the prior period.

### Business Segments

The following is detail of business segment results for the three months ended March 31, 2021. Segment profitability is defined as operating profit (loss). Segment margin represents segment operating profit (loss) expressed as a percentage of segment net sales. For reconciliations of segment net sales and earnings to the Company’s consolidated results, see Note 13 — Segment Information, of the Company's condensed consolidated financial statements. Segment net sales are presented excluding intercompany sales.

### Americas

*(Dollars in millions)*

|  | Three months ended March 31, 2021 | Three months ended March 31, 2020 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $501.5 | $466.7 | $34.8 | 7.5% |
| Operating profit (loss) | 126.4 | 91.5 | 34.9 | 38.1% |
| Margin | 25.2% | 19.6% |  |  |

Americas net sales of $501.5 in Q1 2021 increased $34.8, or 7.5 percent from Q1 2020. Sales growth was primarily driven by hyperscale demand in critical infrastructure and solutions, specifically in AC power and thermal product lines. By offering, net sales increased in critical infrastructure & solutions and integrated rack solutions by $39.4 and $2.8, respectively, partially offset by a decrease in service and spares by $7.4. Americas net sales were negatively impacted by foreign currency by approximately $2.2.

Operating profit (loss) in Q1 2021 was $126.4, an increase of $34.9 compared with Q1 2020. Margin improved primarily due to contribution margin improvements (volume leverage), and fixed cost management.

### Asia Pacific

*(Dollars in millions)*

|  | Three months ended March 31, 2021 | Three months ended March 31, 2020 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $357.4 | $223.9 | $133.5 | 59.6% |
| Operating profit (loss) | 53.1 | 20.9 | 32.2 | 154.1% |
| Margin | 14.9% | 9.3% |  |  |

Asia Pacific net sales were $357.4 in Q1 2021, an increase of $133.5, or 59.6 percent from Q1 2020. Sales increases in this segment were driven by COVID 19 recovery in China and India. Additionally, this segment experienced strong growth in large project lines such as data centers, 5G projects, and wind power. By offering, net sales increased in all offering categories, including gains in critical infrastructure & solutions, integrated rack solutions and service & spares of $100.0, $17.3 and $16.2, respectively. Additionally, Asia Pacific net sales were positively impacted by foreign currency of approximately $13.6.

Operating profit (loss) in Q1 2021 was $53.1, an increase of $32.2 compared with Q1 2020. Margin improvements were driven by leverage of fixed costs from high volume.

### Europe, Middle East & Africa

*(Dollars in millions)*

|  | Three months ended March 31, 2021 | Three months ended March 31, 2020 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $239.5 | $206.7 | $32.8 | 15.9% |
| Operating profit (loss) | 33.4 | 20.8 | 12.6 | 60.6% |
| Margin | 13.9% | 10.1% |  |  |

EMEA net sales were $239.5 in Q1 2021, an increase of $32.8, or 15.9 percent from Q1 2020. Sales increases were primarily due to deployment of large Colocation data centers in Europe. By product offering category, critical infrastructure & solutions and service & spares increased by $27.0 and $6.7, respectively, offset by a decline in integrated rack solutions of $0.9. Additionally, Europe, Middle East & Africa net sales were positively impacted by foreign currency of approximately $14.5.

Operating profit (loss) in Q1 2021 was $33.4, an increase of $12.6 compared with Q1 2020. Margin improved primarily due to fixed cost savings and contribution margin improvements (volume leverage, operation productivity, and pricing).

### Vertiv Corporate and Other

Corporate and other costs include costs associated with our headquarters located in Columbus, Ohio, as well as centralized global functions including Finance, Treasury, Risk Management, Strategy & Marketing, IT, Legal, and global product platform development and offering management. Corporate and other costs were $108.2 and $111.2 in Q1 2021 and Q1 2020, respectively.

### Capital Resources and Liquidity

Our primary future cash needs relate to working capital, operating activities, capital spending, strategic investments and debt service. In connection with the consummation of the Business Combination on February 7, 2020, the Company used $1,464.0 of the proceeds from the Merger Consideration and PIPE Investment to pay down its existing debt. On March 2, 2020, Vertiv announced the closing of a new seven-year $2,200.0 term loan, the proceeds of which were used to repay in full its previous term loan and redeem in full its high-yield bonds, including its 9.25% senior notes, 12.0%/13.0% PIK toggle senior notes and 10.0% second-lien notes. On March 10, 2021, we amended our Term Loan Credit Agreement whereby the interest rate margin for our outstanding term loans under the Credit Agreement was reduced by 0.25% to 2.75%. The maturity date for such term loan remains March 2, 2027, and all other material provisions of the Credit Agreement remain materially unchanged. Additionally, Holdings, Vertiv Group and certain of its subsidiaries closed an amendment on their $455.0 ABL Revolving Credit Facility which extended the maturity to March 2, 2025.

In addition to the cash inflow generated from the closing of the merger with GSAH, we believe that net cash provided by operating activities, augmented by long-term debt arrangements and the ABL Revolving Credit Facility, will provide adequate near-term liquidity for the next 12 months of independent operations, as well as the resources necessary to invest for growth in existing businesses and manage our capital structure on a short- and long-term basis. We expect to continue to opportunistically access the capital markets and financing markets from time to time. Access to capital and the availability of financing on acceptable terms in the future will be affected by many factors, including our credit rating, economic conditions, and the overall liquidity of capital markets. There can be no assurance that we will continue to have access to the capital markets and financing markets on acceptable terms.

At March 31, 2021, we had $677.2 in cash and cash equivalents, which includes amounts held outside of the U.S., primarily in Europe and Asia. Non-U.S. cash is generally available for repatriation without legal restrictions, subject to certain taxes, mainly withholding taxes. We are not asserting indefinite reinvestment of cash or outside basis for our non-U.S. subsidiaries due to the outstanding debt obligations in instances where alternative repatriation options other than dividends are not available. Our ABL Revolving Credit Facility provides for up to $455.0 of revolving borrowings, with separate sublimits for letters of credit and swingline borrowings and an uncommitted accordion of up to $145.0. At March 31, 2021, Vertiv Group and certain other subsidiaries of the Company had $433.9 of availability under the ABL Revolving Credit Facility, net of letters of credit outstanding in the aggregate principal amount of $21.1, and taking into account the borrowing base limitations set forth in the ABL Revolving Credit Facility.

### Long-Term Debt Obligations

There is a discussion in Note 6 — Debt of the consolidated financial statements of the long-term debt arrangements issued by the Company with certain of our subsidiaries named as guarantors or co-borrowers.

### Summary Statement of Cash Flows

### Three months ended March 31, 2021 and 2020

*(Dollars in millions)*

|  | 2021 | 2020 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net cash provided by (used for) operating activities | $60.7 | $(194.7) | $255.4 | (131.2)% |
| Net cash used for investing activities | (17.9) | (8.5) | (9.4) | 110.6 |
| Net cash provided by financing activities | 102.9 | 279.3 | (176.4) | (63.2) |
| Capital expenditures | (16.8) | (6.7) | (10.1) | 150.7 |
| Investments in capitalized software | (1.1) | (1.8) | 0.7 | (38.9) |

### Net Cash provided by (used for) Operating Activities

Net cash provided by operating activities was $60.7 in Q1 2021, a $255.4 increase in cash generation compared to Q1 2020. The increase in cash generation was primarily driven by higher sales and operating profit, lower cash paid for interest expense as a result of debt pay down and refinancing, improved trade working capital, and reduced one-time costs associated with the SPAC transactions in Q1 2020.

### Net Cash used for Investing Activities.

Net cash used for investing activities was $17.9 in Q1 2021 compared to net cash used for investing activities of $8.5 in Q1 2020. The increased use of cash over the comparable period was primarily the result of increased capital expenditures.

### Net Cash provided by Financing Activities

Net cash provided by financing activities was $102.9 in Q1 2021 compared to $279.3 in Q1 2020. The decrease in cash generation was primarily the result of Q1 2020 having many non-recurring financing activities such as the proceeds from the Business Combination of $1.827.0 partially offset by payments to the Vertiv Stockholder of $341.6 and repayments of Prior Notes of $1,370. Additionally, there were net borrowings on the ABL and Term Loan of $131.1 and $119.0, respectively. In Q1 2021, the financial activity was driven by proceeds from the exercise of warrants totaling $107.5.

### Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. The preceding discussion and analysis of our consolidated results of operations and financial condition should be read in conjunction with our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. The 2020 financial statements, as restated as part of our Form 10-K/A filed on April 30, 2021, includes additional information about us, our operations, our financial condition, our critical accounting policies and accounting estimates, and should be read in conjunction with this Quarterly Report on Form 10-Q. Our significant accounting policies are described in Note 1 - Summary of Significant Accounting Policies of Form 10-K/A.

### CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, and other statements that Vertiv may make, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, with respect to Vertiv’s future financial or business performance, strategies or expectations, and as such are not historical facts. This includes, without limitation, statements regarding the financial position, capital structure, indebtedness, business strategy and plans and objectives of Vertiv management for future operations. These statements constitute projections, forecasts and forward-looking statements, and are not guarantees of performance. Vertiv cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used in this Quarterly Report on Form 10-Q, words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “strive,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements contained or incorporated by reference in this Quarterly Report on Form 10-Q are based on current expectations and beliefs concerning future developments and their potential effects on Vertiv. There can be no assurance that future developments affecting Vertiv will be those that Vertiv has anticipated. Vertiv undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond Vertiv’s control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of the assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. Vertiv has previously disclosed risk factors in its Securities and Exchange Commission (“SEC”) reports, including those set forth in its Annual

Report on Form 10 K for the year ended December 31, 2020 . These risk factors and those identified elsewhere in this Quarterly Report on Form 10-Q, among others, could cause actual results to differ materially from historical performance and include, but are not limited to: competition, the ability of Vertiv to grow and manage growth profitably, maintain relationships with customers and suppliers and retain its management and key employees; and factors relating to the business, operations and financial performance of Vertiv and its subsidiaries, including: global economic weakness and uncertainty; risks relating to the continued growth of Vertiv’s customers’ markets; failure to meet or anticipate technology changes; the unpredictability of Vertiv’s future operational results, including the ability to grow and manage growth profitably; disruption of Vertiv’s customers’ orders or Vertiv’s customers’ markets; less favorable contractual terms with large customers; risks associated with governmental contracts; failure to mitigate risks associated with long-term fixed price contracts; risks associated with information technology disruption or security; risks associated with the implementation and enhancement of information systems; failure to properly manage Vertiv’s supply chain or difficulties with third-party manufacturers; competition in the infrastructure technologies industry; failure to realize the expected benefit from any rationalization, restructuring and improvement efforts; disruption of, or changes in, Vertiv’s independent sales representatives, distributors and original equipment manufacturers; failure to obtain performance and other guarantees from financial institutions; failure to realize sales expected from Vertiv’s backlog of orders and contracts; changes to tax law; ongoing tax audits; risks associated with future legislation and regulation of Vertiv’s customers’ markets both in the United States and abroad; costs or liabilities associated with product liability; Vertiv’s ability to attract, train and retain key members of its leadership team and other qualified personnel; the adequacy of Vertiv’s insurance coverage; a failure to benefit from future acquisitions; failure to realize the value of goodwill and intangible assets; the global scope of the Vertiv’s operations; risks associated with Vertiv’s sales and operations in emerging markets; exposure to fluctuations in foreign currency exchange rates; Vertiv’s ability to comply with various laws and regulations and the costs associated with legal compliance; adverse outcomes to any legal claims and proceedings filed by or against Vertiv; Vertiv’s ability to protect or enforce its proprietary rights on which its business depends; third party intellectual property infringement claims; liabilities associated with environmental, health and safety matters, including risks associated with the COVID-19 pandemic; risks associated with litigation or claims against Vertiv; Vertiv's ability to realize cost savings in connection with Vertiv's restructuring program; risks associated with Vertiv’s limited history of operating as an independent company; potential net losses in future periods; failure to remediate internal controls over financial reporting; the Company’s level of indebtedness and the ability to incur additional indebtedness; Vertiv's ability to comply with the covenants and restrictions contained in our credit agreements, including restrictive covenants that restrict operational flexibility; Vertiv's ability to comply with the covenants and restrictions contained in our credit agreements is not fully within our control; the Company’s ability to access funding through capital markets; the Vertiv Stockholder’s significant ownership and influence over the Company; risks associated with Vertiv's obligations to pay the Vertiv Stockholder portions of the tax benefits relating to pre-Business Combination tax assets and attributes; resales of Vertiv's securities may cause volatility in the market price of our securities; Vertiv's Organizational Documents contain provisions that may discourage unsolicited takeover proposals; Vertiv's Certificate of Incorporation includes a forum selection clause, which could discourage or limit stockholders’ ability to make a claim against it ; the ability of Vertiv's subsidiaries to pay dividends; volatility in Vertiv's stock price due to various market and operational factors; Vertiv's ability to maintain its listing on the NYSE and comply with listing requirements; risks associated with the failure of industry analysts to provide coverage of Vertiv's business or securities; and other risks and uncertainties indicated in Vertiv’s SEC reports or documents filed or to be filed with the SEC by Vertiv.

Forward-looking statements included in this Quarterly Report on Form 10-Q speak only as of the date of this Quarterly Report on Form 10-Q or any earlier date specified for such statements. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be filed with the SEC by Vertiv required under applicable securities laws. All subsequent written or oral forward-looking statements attributable to the Company or persons acting on the Company’s behalf may be qualified in their entirety by this Cautionary Note Regarding Forward-Looking Statements.

## Market risk

As filed, 1,041 characters.

On a regular basis, Vertiv monitors third-party depository institutions that hold its cash and short-term investments, primarily for safety of principal and secondarily for maximizing yield on those funds. The Company diversifies its cash and short-term investments among counterparties to minimize exposure to any one of these entities. Vertiv also monitors the creditworthiness of its customers and suppliers to mitigate any adverse impact.

Vertiv uses derivative instruments to manage exposure to volatility in interest rates on certain debt instruments. Derivative financial instruments used by the Company are straightforward and non-leveraged. The counterparties to these instruments are financial institutions with strong credit ratings. Vertiv maintains control over the size of positions entered into with any one counterparty and regularly monitors the credit rating of these institutions. See Note 11 to the Unaudited Consolidated Financial Statements for additional information about hedges and derivative financial instruments.

## Controls and procedures

As filed, 7,140 characters.

### Evaluation of Disclosure Controls and Procedures

The term "disclosure controls and procedures" is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 as "controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms." Our disclosure controls and procedures are designed to ensure that material information relating to us and our consolidated subsidiaries is accumulated and communicated to our management, including our President and Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding our required disclosures.

Our management, with the participation of our President and Chief Executive Officer and our Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures as of March 31, 2021 (the end of the period covered by this Quarterly Report on Form 10-Q). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of March 31, 2021, because of material weaknesses in internal control over financial reporting described below.

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934.

Management has assessed the effectiveness of the Company’s internal control over financial reporting as of March 31, 2021 based on criteria established in the Internal Control-Integrated Framework in 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.

Management has identified material weaknesses in controls related to (a) not fully designing, implementing and monitoring general information technology controls in the areas of user access and program change-management for systems supporting all of the Company’s internal control processes; and (b) the aggregation of open control deficiencies across the Company’s financial reporting processes because the controls were not fully designed and operating effectively.

Notwithstanding the identified material weaknesses, management has concluded that the consolidated financial statements included in this quarterly report on Form 10-Q present fairly, in all material respects, the Company's financial position, results of operations and cash flows for the periods disclosed in conformity with U.S. generally accepted accounting principles (U.S. GAAP).

### Remediation Plan

We currently are implementing a number of actions, as described below, to remediate the material weaknesses described in this Item 4. Company management is committed to ensuring that our internal controls over financial reporting are designed and operating effectively.

#### General Information Technology Controls (GITCs)

We continue to make progress in advancing foundational elements of our GITCs. These elements are providing value as we are leveraging them in the design of our future state processes and controls within Oracle, which is expected to go-live in 2021. Our remediation plan includes, but is not limited to:

- Implementing new, relevant IT systems;
- Implementing improved IT change management policies and procedures, control activities, and tools to ensure changes affecting financial IT applications are identified, authorized, tested, and implemented appropriately;
- Implementing improved processes for requesting, authorizing, and reviewing user access to key systems which impact our financial reporting, including identifying access to roles where manual business process controls may be required;
- Implementing appropriate segregation of duties in relevant systems that impact internal control over financial reporting;
- Increasing resources dedicated to monitoring GITCs to ensure compliance with policies and procedures; and
- Implementing additional training to ensure a clear understanding of risk assessment and monitoring activities related to automated processes and IT systems and GITCs.

#### Financial Reporting

We continue to make progress on our automated and manual business process controls, including reports generated from these IT systems, that are dependent upon the completeness and accuracy of information from the affected GITC material weakness. These elements are providing value as we are leveraging them in the design of our future state processes and controls within Oracle, which is expected to go-live in 2021. Our remediation plan includes, but is not limited to:

- Frequent communications between our Audit Committee and management regarding our financial reporting and internal control environment;
- Expanded Business Unit Finance, Accounting and Reporting and Information Technology teams through the addition of experienced and qualified resources;
- We will improve the process and controls in the determination of the appropriate accounting and classification of our financial instruments and key agreements;
- Delivery of additional internal controls training, as well as policy and control standardization where possible;
- Re-designed internal controls processes as part of our Sarbanes-Oxley program to drive accountability and efficiency;
- Instituted monthly review of financial statements disaggregated by key business units, and functional areas to evaluate results, observe adherence to policies and agree on necessary actions;
- Engaged outside resources to assist with the design and implementation of a risk-based internal controls plan, enhance process documentation, provide company-wide training, and help with management's self-assessment and testing of internal controls.

When fully implemented and operational, we believe the controls we have designed or plan to design will remediate the control deficiencies that have led to the material weaknesses we have identified and strengthen our internal controls over financial reporting.

The material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

### Changes in Internal Control over Financial Reporting

We have undertaken strategic remediation actions, as discussed above, to address the material weaknesses in our internal controls over financial reporting. These remediation actions continued throughout the quarter ended March 31, 2021 but have not materially affected our internal control over financial reporting.

## Risk factors

As filed, 222 characters.

The Company's risk factors, as of March 31, 2021, have not materially changed from those described in Part 1, Item 1A of our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2021 filed on April 30, 2021.

Filed May 3, 2021.
Source: SEC EDGAR, the filing index for accession 0001628280-21-008627. Last ingested by Listed: Oct 28, 2026, 06:05 ET. No prices; not investment advice.