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

Good morning and welcome to Virta's first quarter 2026 earnings conference call. Joining me today are Virta's Executive Chairman Dave Cody, Chief Executive Officer Gio Albertopse, and Chief Financial Officer Craig Chamberlain. 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 would 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 averted. These forward-looking statements are subject to material risk 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.verdive.com. With that, I'll turn the call over to Executive

Chairman Dave Posey. I'm very pleased with how we started the year. The momentum we're seeing across the business is strong. It's translating into the kind of performance that gives us confidence to raise our outlook for the full year. What we're seeing in customer conversations is different than six months ago. The urgency has increased. The scale of deployments is larger. And the technical complexity is creating opportunities for companies that can solve system-level problems, which is exactly where we excel. We're seeing broad-based strength, and that tells you something about the depth of demand and our ability to capture it. I like what we're seeing in the industry and the continued evolution of Virgo. We're still in the early stages of the infrastructure build-up for AI. Our competitive advantages are compounding. If you can deliver products, systems, integrated solutions, and services at scale, you become even more important to your customers technology roadmaps we're also managing the challenge as well tariffs supply chain complexity labor constraints these are real but they're manageable and additionally they raise the bar in ways that favor established players like us geo and the team are executing very well in this rapid growth environment balancing aggressive growth and share gain with operational discipline we're expecting a strong year ahead and strong years in the future so with that let me turn it over to Gio to discuss it further Gio well thank you very much Dave let

us go to slide three well I'm quite pleased with how we started 2026 Q1 was very strong with organic sales up 23% year in year, we reported growth of 30% when we include M&A and FX. From a regional perspective, America was the primary engine with 44% organic growth, APAC was up 12% organically, while EMEA was down 29% organically. In the few slides, you will hear us elaborate on some of the encouraging dynamics we're seen in EMEA. Adjusted operating margin came in at 20.8 percent, up 430 basis points EUR near and 180 basis points above our guidance. Margin performance and strong top-line growth drove adjusted operating profit over 551 million dollars, up 64 percent EUR near. Adjusted diluted CDPS of $1.17 were up 83% versus Q125 and exceeded our guidance by 19 cents. Adjusted free cash flow of $653 million was up 147 versus the prior year, driven by higher operating profit and continued working capital improvement. We are raising our full-year guidance, and we now expect adjusted diluted EPS of $6.35, up 51% from 2025. This is supported by raising our adjusted operating profit guidance to $3.2 billion, up 53% from 2025. Adjusted operating margin is now expected to be 23.3 percent to 190 basis points higher than 2025. And let's go to slide four, and let's start with the market environment. Our pipeline momentum continues to be strong. Our pipeline generation is robust, and we're still expecting another year of strong orders performance in 2026. We anticipate orders to be up year over year, which reflects the sustained demand environment we're seeing across our markets. Americas continues to show remarkable strength. The market momentum is broad-based and robust. Our pipeline in the region continues to expand as we convert opportunities. In EMEA, the spring continues to uncoil. coil. We're seeing improving market sentiment throughout the quarter with momentum building. I know we do not disclose orders, but we are very pleased with EMEA's Q1 bookings. We feel good about EMEA returning to year-over-year sales growth in the second half, which you see embedded in our guidance. When it comes to APAC, we see positive market dynamics across the region. Rest of Asia and India are showing convincingly strong pipelines and dynamics with robust momentum building. China is also showing encouraging pipeline movements and dispositions as well as we move through the year. On pricing, we continue to see favorable dynamics. We expect positive price costs in 26, including the impact of tariffs and tariffs countermeasures. From a manufacturing and supply chain perspective, we're expanding while continuing to strengthen our resilience. Our regionalized footprint and multi-sourcing strategies are maintaining stability despite evolving trade dynamics and tensions in the Middle East. We are accelerating our strategic capacity investments to meet the demand we're seen. We're expanding our global manufacturing service footprint while unlocking latent capacity with VOS-driven productivity gains. Our cost management remains disciplined. We expect these investments to position us very well for the current and future demand environment. We manage commodities and components proactively. This, combined with our multi-source model and supply diversification, provides a critical buffer in what remains in the inflationary environment. Through various countermeasures, we are actively working to mitigate tariff exposures, including recent changes under section 122 and 232. In this very dynamic environment, growth-wise, geopolitically, etc., we stay focused on supply chain resilience, growth, capacity expansion, and navigating the tariff environment.

A lot going on, but we are focused on execution.

And let's go now to slide five. We continue to see very robust growth in demand for data centers, and as a result, we are focusing investments on capacity expansion, supply chain, and engineering capabilities. We are committed to continue to grow capacity supporting our customer demands, and we continue to deliver above market growth. Our capex in Q1, sustainably higher than in the same quarter last year, is testament to that commitment. We are making significant investments in capacity expansion across both manufacturing and services. On the manufacturing side, we're expanding capacity organically across multiple sites globally, and particularly across the Americas, of which you see some details here. These investments are strategic and positions us to meet the accelerating demand. We do this for growth, but also to bolster our overall operational resiliency. This capacity expansion is broad based, power management, thermal management, infrastructure solutions and IT systems across all technologies. We're doing the same with our services capability. Specifically, we're scaling our people and service capacity vigorously and convincingly across all service technologies and regions. In particular, the acquisition of PerchRite significantly strengthens our fluid management and liquid cooling capabilities, enhancing our system-level services offering. This is one of the most technically demanding and financially consequential aspects of modern data center operations. With respect to our supply chain, we have prioritized multi-sourcing strategies to mitigate supplier risk. Strategic acquisitions are further strengthening our supply chain capabilities. And finally, we continue to prioritize investment in our engineering capabilities in multiple directions. Clearly, one is engineering labs, central to development of our technology portfolio. Customer witness test capabilities are another important area of investment. The complexity of data center technologies requires extensive test capacity at the beginning of a delivery. Growing customer test capacity with volume is a growth enabler. We will have an opportunity to continue to elaborate on what capacity expansion means during our upcoming investor day. And with that, it's over to you, Craig.

Thanks, Gio. Let's start with the first quarter results on slide six. As you can see, we had an excellent start to the year. Adjusted diluted EPS was $1.17, up 83% year-over-year, and 19 cents above our prior guidance. On the top line, net sales were $2.65 billion, up 30% versus prior year, with organic net sales up 23%, with acquisitions contributing 4% and favorable FX adding 3%. This organic growth was driven by Americas up 44% and APAC up 12%, partially offset by EMEA down 29% organically. Adjusted operating profit of $551 million increased 64% versus the prior year and came in $56 million higher than our guidance. Our adjusted operating margin of 20.8% expanded by 430 basis points versus last year, showing a great operating performance from the team. The main drivers were strong operational leverage on higher volumes, productivity gains, and favorable price cost execution, which was partially offset by ongoing tariff headwinds. on the cash side we delivered 653 million of adjusted free cash flow that's up 147 from the prior year first quarter this was supported by higher operating profit and working capital efficiency partially offers offset by higher cash tax and increased net capex as we continue investing in capacity and er and d to support business growth we exited the quarter with net leverage of 0.2 times providing us with significant strategic flexibility flipping this slide seven let's look at segment performances by region america has delivered another outstanding quarter net sales were 1.81 billion up 53 with 44 organic growth reflecting strong broad-based momentum across nearly all product lines adjusted operating profit was 490 million with margins benefiting from operational leverage disciplined execution and commercial intensity looking at APAC net sales were 514 million, up 15%, 12% organically. Organic growth came in below quarterly guidance primarily due to timing. Adjusted operating profit of 67 million was up approximately 48% year-on-year, mainly driven by volume leverage and operating discipline. Turning to EMEA, net sales were 321 million, down 29% organically. We believe this is a temporary reflection of softer orders that we saw in q2 and q3 of 2025 however we are seeing operating where opportunity generation accelerating reflecting improved customer demand and supporting a return to sales growth in the back half of 2026. we saw a step down in margins here year over year due to operating deleverage however our conviction has gotten stronger for a second half recovery in emia which you see embedded in our emia full year guidance on slide eight let's discuss our second quarter guidance. We're projecting adjusted diluted EPS at the midpoint of $1.40, which is 47% higher than our second quarter 2025. Net sales at the midpoint are $3.35 billion, which reflects 27% net sales growth versus prior year. Adjusted operating profit at the midpoint of $710 million represents 45% growth versus second quarter 2025. This strong profit growth is supported by robust organic sales growth and continued operating leverage. Adjusted operating margins at the midpoint of 21.2 percent is up 270 basis points supported by strong organic sales growth and fixed cost leverage. Additionally, we expect to materially offset unfavorable margin impact from tariffs. This guidance reflects our confidence in the strength of our market position and our ability to execute on the significant opportunities ahead of us. Now on to slide nine. Let's talk about our full year 2026 guidance. We continue to expect another strong year of strong performance across all key metrics. We are raising adjusted diluted EPS guidance by 33 cents to a midpoint of $6.35 which represents 51 percent growth versus prior year. For net sales we're updating our guide to 13.75 billion at the midpoint, reflecting 34% net sales growth versus prior year. By region, we expect organic growth rates of high 30s in Americas, mid-20s in APAC, and flat in EMEA. The updated adjusted operating profit is now at a midpoint of $3.2 billion, representing 53% growth versus prior year and $160 million higher than our prior guidance. This strong profit growth is driven by a combination of robust organic sales growth and continued operational leverage finally on margins we're guiding to 23.3 percent adjusted operating margin at the midpoint an expansion of 290 basis points from 2025 and 80 basis points higher than our prior guidance this expansion is supported by 30 organic sales growth and continued operational leverage we expect to be price calls positive for the year inclusive of terrorist impact and the countermeasures with fixed cost leverage still investing in growth er and d and capacity for adjusted free cash flow we're maintaining our guidance of 2.2 billion at the midpoint up 17 versus prior year primarily due to higher operating profit partially offset by higher cash tax and net capex investment with that i'll hand it back to

Eugio. Well, thank you, Craig. And let us go to slide 10. And before I wrap up, I once again want to invite all of you to tune in to our 2026 Investor Conference that will be held on the 19th and 20th of May in Greenville, South Carolina. This will be an excellent opportunity to gain firsthand insight into Vertif's visions and strategy from our leadership team. On the first day, the agenda includes a comprehensive market update, a detailed financial overview, and our updated multi-year outlook and Q&A sessions, of course, with the leadership team. The following day, we will have a technology session where you'll hear about how we continue to innovate and drive the industry. This will be followed by a tour of our Peltzer Infrastructure Solutions facility for those who will be joining us in person. It's going to be a great opportunity to see what we're building and where we are headed. Now let's go to slide 11. Our first quarter results were strong testament to Verti's execution capabilities and the momentum continuing to build in our markets. The demand environment is robust and we are very well positioned to carry that forward. We've received, we have recently announced two strategic acquisitions that are expected to strengthen our competitors with competitive position. Thermal Key, which is anticipated to close in a few months will expand our thermal management portfolio with great heat exchange know-how and a leading range of dry coolers a capability for the globe starting in EMEA heat rejection is becoming more complex for AI data centers and a portfolio comprising chillers dry coolers trim coolers offers great flexibility and efficiency opportunities for our customers. B-Marker Structures, which brings custom engineers structural fabrication capabilities that accelerate our ability to deliver manufactured and converged infrastructure solutions at scale. Both are expected to provide capacity and capabilities to better serve our customers while expanding our technology base. We have raised our 2026 guidance reflecting our confidence in the trajectory of the business and opportunities ahead. EMEA is absolutely part of the AI story, and we're seeing that play out with customer projects like EcoData Center in Sweden, designed to support the most demanding AI workloads with NVIDIA's latest generation Verarobian GPUs. Vertiv One Core was selected to deliver the full data center solution here, encompassing power, thermal, IT-wide space, and services. We are excited about our collaboration with CPower Energy. Together, we are enabling U.S. data centers to turn their on-site energy assets into grid resources, accelerating speed to power, improving resilience, and reducing cost for data centers and their communities. This is a kind of end-to-end thinking that sets Vertiv apart. Our long-standing customer relationships combined with our DE partnerships create a significant competitive advantage that is very difficult to replicate. We continue to move further and the market is recognizing it. Achieving investment grade credit ratings and inclusion in the S&P 500 are meaningful milestones. They reflect the strength of this business, the execution prowess of this team, and the confidence the market has place in our trajectory i do not take that lightly neither does the rest of the vertive team we hold ourselves to a high standard and will continue to raise the bar we had a strong quota we expect to build on it and we will and with that we can begin the q a we will now begin the

question and answer session in order to ask a question press star then the number one on your telephone keypad in the interest of time please limit yourself to one question and if you have a follow-up question please rejoin the queue we'll pause for just a moment to compile the q a roster then your first question comes from the line of scott davis

with melius research please go ahead hey guys can you talk about the prefab market like how important this market is, or is there any way to think about a TAM? You seem to have a lot of content in prefab, and just trying to get a sense of how the customers view the importance of that

content. Thank you for the question, Scott. Multiple dimensions to this. One is we know that speed or time to token is absolutely essential in the market. Clearly, prefabrication alleviate challenges on sites. A construction site is always a complex system to manage. There is a scarcity of talent trade resources. We see and we certainly are stimulating, if you will, an increasing adoption of prefabrication, but there is way more to it than that. For us, prefabrication is not just prefabrication. It's convergence of our solution into a system like one core, not only one core, but one core, smart run, et cetera, systems that are designed, converged, and optimized already from the beginning on a given set of loads and silicon. And it is also a way to make the whole system more efficient and more dense in many respects. So there are multiple reasons why this is being adopted. And there are multiple reasons why we believe we are ahead of the pack here because we're not just an integrator, we provide technology. You were also asking about the TAM for us. Clearly that is a concentrator of opportunity for us because the prefabrication is for us an all-vertive technology solution so that that help us

to capture more of the TAM. That's helpful, Gio. Excuse my voice. The allergies are killing me the last couple of days. You mentioned capacity as with productivity, and I'm kind of intrigued. What kind of productivity levels can you run when you're trying – I mean, you're adding capacity obviously quickly. You're trying to get a lot of stuff out the door. What kind of levels of

productivity can you actually run at? Thanks. Well, my productivity comment was really kind of the manufacturing systems in a factory vis-a-vis having kind of a piece-by-piece assembly going on on site. That is the traditional way in which the data center business is run. I wouldn't go down the path of exactly comparing, but when we prefabricate, and certainly we will have an opportunity to have a direct conversation when we walk the floor in Peltzer, but we definitely achieve manufacturing productivity levels when we manufacture the systems.

Thank you, guys. Appreciate it. Best of luck this year.

Thank you. Your next question comes from the line of Amit Daryanani with Evercore. Please go ahead.

Perfect. Thanks. I'll try to stick to Lynn's ask for one question. Maybe it's multi-part though. Gio, the calendar 26 guide that you folks have right now sort of implies 30% organic growth for the full year versus I think we've done like 22, 23% growth in the first half of the year. Can you just help us understand what are the levers that you're seeing and maybe you can quantify some of these levers that you're seeing that enable the step-up in growth in the back half versus the first half? I assume EMEA and maybe more capacity and Ruben are all parts of the story, but I would love to just understand what do you see that gives you confidence that growth can accelerate organically in H2 versus H1?

I will start. Certainly, Craig will also complement here. But I'd say that it's really two things if you really think about at a high level. One is capacity. We are adding capacity. We're constantly adding capacity. But as you could see from our CAPEX profile and what we mentioned about Q1, we're very, very focused on adding capacity. And a lot of that capacity starts to hit us in the second half. But the other thing is, if you think about our Q4 orders, there certainly is a good load of backlog in that part of the year, if you think about the customer requested lead times that we've been talking quite extensively. So there's more to it, but I would say those are two important elements to the equation.

Yeah, and, Mitt, I'll just double-click on that a little bit. You're right in terms of APAC and EMEA. When you think of them in terms of the first half versus the second half, there is an accelerated growth in the second half in both of those regions. And we've talked extensively about that in terms of what we look like from and what we expect the uncoiling of EMEA to happen and how we're seeing that come through. And that's the way it is in the guide as well.

Perfect. Thanks, Scott. I'll step back in the queue.

Your next question comes from the line of Jeff Sprague with Vertical Research Partners. Please go ahead.

Hey, thank you. Good afternoon, everyone. Hey, I wanted to come around to service. Obviously, a very clear acceleration in the last several quarters and actually service growth kind of coupling to product growth in the Americas. We've been waiting for this backlog growth to really come through strongly. it looks like it's happening at this point. But could you maybe just address the field organization, the ability for service to grow at this pace, how the margin complexion of service may or may not be changing, and just how to think about that outlook over the balance of the year?

Yeah, there's certainly multiple angles here, Jeff. And again, I'm sure we'll have an opportunity to further elaborate in May, but at a high level, of course, satisfied with the trajectory of services, and that's true for both the project services and the lifecycle services. To your question about what is our structural organization, we're very, very present in in the territory, very, very local. But at the same time, we understand that the big projects that are out today are also sometimes concentrated. So we have developed the ability to move people and have teams of people that are dedicated to addressing the big data center deployment when it comes to project services. But we remain and we continue to nurture and strengthen and grow a very local, on-the-territory type of services presence. We mentioned a couple of times that we are investing heavily. I mentioned it in my script. We are growing our services population, and we will have details in May. And, of course, here our strength and tradition and experience in training newcomers is absolutely essential, combined with increasingly strong tools that are at the tip of the finger of our engineers. is. So absolutely multifaceted. What we like when we talk in general about services is the fact that the install base that is being created is very, very conducive to our life cycle capture

and business over time. Yep. And Jeff, I'll just double click on that a little bit too. In terms of, on a reported basis, yes, products and services are equal. If you look at organic, you're seeing the feeling or you're feeling the impact of purge right there as well. So I just wanted you to be sure that you kind of understood that. Purge right is a big impact for us, so we like that.

Yeah, I did see that. I wonder, though, if you could also just maybe a little bit more color on how to think about margins. I guess the nature of my question is, right, labor-related services, We don't think about operating leverage, right? It's man hours or people hours, but there's, you know, kind of other more sophisticated services that come into play. So just how should we think about operating leverage in that business as it grows?

No, I mean, I think you would probably, you know, you point to the fact of what we're seeing from our own, you know, overall incremental margins when you think about that. or overall incremental margins were always in the neighborhood of 30 to 35 percent. I would say that would kind of be similar in terms of the way that we would expect services to pull through as well.

Great. Thank you. Your next question comes from the line of Andrew Alden with Bank of America. Please go ahead. Hi, guys. Good morning. Hey, Andrew.

Just maybe we can talk about the evolution of behind the meter just has become a lot more prominent over the past four or six months. What technology avenues does it open to Vertiv? And I'm sort of thinking controls, you know, best controls, you know, sort of UPS transition as part of direct current architecture, but also, you know, maybe different chiller technology, things like absorption chillers. I'm sure you've thought about the roadmap over the next two, three years, and I know you'll talk about at the analyst day, but it seems to be evolving fairly

rapidly how are you positioned well I think I think you you've got it pretty much right Andrew in terms of certainly bring your own power is something that is here to stay and we see it very very clearly you know we we talked about partnerships today remember the partnership we have with Caterpillar So, in various shapes and form, bring your own power is a very important part of the data center equation, especially in the U.S. Certainly, we play a role in everything microgrids, battery engine storage systems, interfacing and making sure that the entire power train, be it direct or alternate, are consistent and designed for a bring-your-own-power solution. But as we multiple times and keep saying, the data center needs to be looked at as one system. So you're right when you say, hey, this has implications, might have implications also So on the thermal side of things, or so exactly, absorption is one of the things that naturally people and we think about. So we will have more details in May. But rest assured that we see Bring Your Own Power being an integral part of how we design and think a data center so it is an opportunity for us ultimately because may it makes the system more complex and with more possibly with more content for us thank you your next question comes

from the line of Nicole de blaze with Deutsche Bank please go ahead yeah

Thanks good morning guys. Hey good morning Nicole. Can we just double click a little bit on what you're seeing in EMEA? It seems like from the commentary at the beginning of the call that you're gaining conviction in the second half ramp so could you just talk a little bit more about you know what you're seeing and hearing from customers there that's driving that higher

competency? Well we we see well you're right exactly as I said we're very pleased we're We're very pleased with Q4 orders, we're very pleased with Q1 orders, and pleased by what we see in the pipeline. So, we see the market moving, we see pipeline acceleration increasing. That is really a signal and a proof of a pervasive market and a demand that is there, which was natural. That's why we were talking about a coiled spring, because there is a shortage of data center capacity, significant shortage of data center capacity and even more profound shortage of AI capable data centers in EMEA and in Europe in particular. So hence the dynamics that you see. And of course, we are very well positioned in Europe because of historically our strong presence, but also because a lot of the players are players here and are players in in Europe so there is a very

encouraging opportunity there your next question comes from the line of Patrick Bauman with JP

Morgan please go ahead oh good morning um just had a quick one on margins um just wanted to see if you could give some color on uh the sequential expectations so from first quarter reported to the second quarter guidance, it looks like the incremental margin is kind of in the low 20s, and I'm just wondering if you could unpack the moving parts on that, you know, whether it's capacity investments or tariffs or whatever, just any color you can give on that.

Yeah, and Patrick, I would say, again, when we look at it sequentially or year-over-year, Year-over-year, it's in the low 30s, which is what we are expecting in terms of our guide. Quarter-over-quarter, there is a little bit of headwinds as we bring on capacity. This is probably one of our bigger ramps in terms of capacity in the second quarter. So there would be a little bit of, I'd say, a change in that when you look at it from first quarter to second quarter. But if you look across the full year, we're still guiding to that between that 30% to 35% for the overall sequential margin. So I'd say it's a bit of a bump from 1Q to 2Q in terms of when we're bringing on capacity and working through, you know, all the different various actions that we have to do, you know, offsetting all the tariffs and working through that. The 232s have now changed. So I think there's a little bit of a dip there, but I'd say overall still feel very strong about the year being in the 30 to 35 range that we've given.

Just a quick follow-up on that. The tariffs, I think you said to materially offset it, you thought that would be at end of first quarter is that kind of slipped out the second quarter now because of because of the changes or is are you are you kind of already there at the end of

the first quarter i'd say we're already there at the end of the first quarter as 232s have changed you know we're continuing to do um i'd say actions and countermeasures around those and if you look at it for the full year we feel confident that we'll continue to materially offset those okay

Best of luck.

Your next question comes from the line of Andrew Kaplowitz, LaCity. Please go ahead.

Good morning, everyone. Good morning, Andy. Obviously, you've talked about the Americas continuing to be strong, but maybe you could talk about how much of the business is still being driven by hyperscalers and colo versus enterprise. I assume it's still heavily weighted toward the forum, but enterprise markets seem to be picking up a bit, given AI needs and usage. you know when could that impact vertus is it something you see accelerating 2027

or not sort of yet clearly we continue to see hyperscale colo a neo cloud being the the biggest driver but certainly is true in in in America's but globally pretty much. Certainly, there is an element of enterprise here. A lot of enterprise will continue to happen through cloud, so not always easy to separate. But we see enterprise starting to adopt AI when that will be visible in terms of growth above the levels that we shared with you in the past uh that's something that we will certainly elaborate uh elaborate in uh in uh in may but is uh probably a little bit uh still far away as uh as independent there is a lot happening at cooler level if that helps it does thanks joe your next question comes from the line

of chris schneider with morgan stanley please go ahead thank you i wanted to ask about the

transition to 800 volt architecture there's a lot of moving the parts but just you know wondering what does this mean for vertive content and when does the company expect to start shipping to these 800 volts design facilities and just specifically interested in liquid cooling and wondering if there could be some cam expansion you know with applications beyond just cooling the chips as there is now a higher level of heat presumably running through the

facility? Thank you. Chris, thank you for your question. Clearly, we wouldn't see necessarily as a transition, a wholesale transition to 800 volt. Clearly, 800 volt is going to be an important portion of the total market as we go into 2027 and beyond. We are on time with our programs. We were talking about, second, how this year launches of our portfolio. We are pleased with where we are in terms of the customer feedbacks with, you know, the prototypes and validation activities that we have ongoing. Shipping will be a little bit further away, but, you know, I think it's a little bit premature to elaborate too much, where we see it as a 2027 thing, this one. When it comes to liquid cooling and the influence of 800 volt, I would say that there will be a correlation, not a causation necessarily, simply because 800 volt DC is applied for very high density compute. That very high-density computer will see not just liquid cooling for the chip, but for a much bigger array of electronics across the entire IT stack. And of course, that has then influenced the entire powertrain, thermal chain. So we see that as an opportunity for us. We're very excited, very excited about, very pleased with where we are with the 800-Volt programs and we're getting ready for it. I appreciate that. Thank you. Your next

question comes from the line of Amit Marotra with UBS Financial. Please go

ahead. Thank you. Good morning everybody. I just wanted to ask a question about the pipeline. I think what was so interesting last quarter is obviously you had a big big order number but I believe the pipeline also grew double digits But sequentially, maybe you can just talk about the pipeline as it kind of evolved in the first quarter, momentum and quoting activity, funnel, anything you can give within the confines of not talking about orders.

Yes. Well, thanks for that. Thank you for the question. Clearly, we were very vocal about the strength of the pipeline before, and we are as vocal about the strength of the pipeline at the end of Q1. And with that, the pipeline generation, that to us is exactly what you defined as the activity volume of commercial activity. And this growth and this dynamism is broad based across our technology range, and it's broad based across our regions. So very pleased and very encouraged to enhance our comment about our overall year orders. Anything to call out in duration?

I know you said most of it is within 12 months, maybe some bleeding into AAP months. Any change in complexion on the orders as you come into the first quarter or second quarter in terms of duration or no?

You're talking pipeline or you're talking orders, just to be clear? I can elaborate.

I'm talking about what's in the backlog right now. What's in the backlog?

Now, continue to think about a backlog shape that is, if anything, a little bit more elongated but not something dramatic to the point that the shape of the backlog is totally different. So there is no distortion of the backlog. If anything, it's a backlog that is a little bit more elongated. That, of course, gives us visibility, good visibility in 2027. You know, as we said, a lot of the projects in the industry are large projects where customers ask for, call it 12 to 15, sorry, 12 to 18-month delivery windows. We have seen some occasions the delivery, the requested delivery window, shorten a little bit. We, of course, maybe on that 9 to 12-month window, our average delivery time of which we're capable are shorter than that, but again, you can't really say. Different product lines, different dynamics, different dynamics, supply and demand, but in general, despite the fact that, of course, it's everything very dynamic, pretty much I go back to what I was saying, a backlog that is not dramatically different, if anything, a little bit more elevated.

Very good. Thank you, Gio. I appreciate it.

Your next question comes from the line of Julian Mitchell with Barclays. Please go ahead.

Hi, good morning. Maybe just to switch tack a little bit to the sort of cash flow and balance sheet, I suppose just trying to understand the free cash flow dollar guide is unchanged. And I can see the sort of bigger working cap outflow dialed in, but I would think you'd get good customer advances from orders, and your working cap was a nice tailwind in Q1. So maybe just talk us through sort of the thinking there and the balance sheet allied to that, extremely unlevered as a result of that good Q1 cash flow. Any highlights you'd give us on sort of capital deployment from here?

and and i'll start off and i can pass it to uh to geo but i would say um in terms of just looking at the working capital over the course of the year kind of two points on that one is yeah we are investing in terms of the ramp so you you see a little bit of a drag from that from an inventory perspective and when we look at you know our order book and forecast out the way that we look at customer down payments or customer advancements we are a little bit prudent in the way that we we look at that in the way that we forecast that. So both of those come into consideration when we look at the guide, Julian. So again, you're feeling a little bit of that, and we basically would say the same thing. One, there's a little bit of a ramp in terms of inventory, and two, just some prudence in the way that we look at our order book and the down payments we expect. Number two, on the capital deployment, when you think of the 0.2 leverage, I think we go back to what we've said all along is there's two spaces where we love to invest in on a regular basis, And that's the R&D book and the capacity book. And you can see on the flow-through of our cash statement that we're following with that drumbeat. That's what we like to do, and that's where you see us continue to invest heavily. The other portions of that are capital deployment in terms of M&A or stock buyback or increased dividends. I think the biggest area that we'd use cash there and that we always look to have some dry powder would be the M&A space. We've done some this quarter, as you saw. I think we'd continue to keep that open and that optionality available for us.

Yeah, no, absolutely. Maybe a couple of comments on the M&A side. You see us having a very dynamic posture in that respect. When we say it said and continue to say that our M&A pipeline is very active, You have seen us do acquisitions that are both predominantly technology-based. We love technology, and, you know, our pipeline is well-structured and quite convincing. So we'll continue to be focused on this area of capital diplomacy.

Great.

your next question comes from the line of dean dre with rbc capital markets please go ahead

thank you good morning everyone hey i wanted to ask about the standard modular liquid cooling products just very interested in the level of customer take on this and you know what role will this product line play in the rollout to more of the colos and enterprise customers

Can you help me a little bit, Dean, because we have a very robust portfolio, I'd say, probably, without probably, as we believe the most robust. Can you help me exactly when you say standard liquid cooling product?

Yeah, these were the ones that were talked about and displayed at the last supercompute. So you're seeing, you know, you've heard him reference as liquid cooling in a box, and it's just for the customer, the colos, and enterprise who may not need such a customized system that Vertivis now has this line, and as does some of your competitors, on more of a standard modular design.

Oh, yeah. Let me elaborate on that. And thank you, Dean, for your question. When it comes to the liquid cooling portfolio, we have a certain ability to provide very optimized liquid cooling solutions on specific silicon types. so absolutely optimized we have a total ability to customize to customer needs when that is required so it is it is both an ability to talk to our customer and say hey this is what you really need for this type of silicon but also it is an opportunity for our customers to have exactly their design depending on very specific, in some cases, requirements. But if we go to super compute, the center stage was our smart run solution, which is the entire white space infrastructure comprising everything, white space data hold, power distribution, liquid cooling. So I would say that the integration and the convergence of that solution across multiple technology areas that normally happens on site with great consumption of time and cost is something that we have changed dramatically with a smart run. So Smart Run is extremely successful, and I think we have done our part, again, to change the way the industry works.

Are you expecting more regulation in liquid cooling? There's been a lot of discussion about that, and what would the implications be?

Not necessarily. I think this part of the industry is maturing, so there are some of the, let's say, way things are done are maturing and stabilizing a little bit in terms of water temperature, et cetera. But that, too, evolves over time as we know.

Great.

Your next question comes from the line of Nigel Coe with Wolf Research. Please go ahead.

Oh, thanks. Good morning, everyone. So I want to go back to the strength and free cash flow in 1Q. And obviously, you had another very strong quarter of the third income customer deposit bookings. And I'm just thinking, is this a way to think about backlog growth in the quarter? And I guess my question is, do we typically book the cash from the deposits in the same for is the orders um or is this a reflection of the strength we saw last quarter i'm just

trying to say is is that a way to think about the backlog risk i mean i think it depends on um the customer uh nigel in terms of what we get from a a advanced payment perspective or what we get from a down uh i'd say a down payment perspective and their payment terms in terms of when the actual cash would come in so again some of that strength in the first quarter is going to come from payments that were from orders in the fourth quarter someone's going to come from orders that were in the first quarter and that'll continue out through the year and as I was just mentioning to Julian as we look at our working capital across the year we are a little bit prudent in terms of how those payments will come in and when they will actually execute and how much we would get from a percentage perspective when we look at the order book as well so it's a combination of all those things but again it is a way to look at backlog but it's not entirely a read-through okay thank you your next question comes from

the line of Mark Delaney with Goldman Sachs. Please go ahead. Yes, good morning. Thank you

very much for taking my question. I'm hoping to better understand what the mix shift over time towards solutions like Smart Run and OneCore means for your margins, and if there's a meaningful difference in what investors should expect for incremental margins as those become a bigger

piece of your overall sales mix. Yeah, I mean, I don't think in terms of as you mix more towards those that you're going to see a margin dilution from a mix perspective I would say we'd be able to hold you know relatively on a product basis margins kind of in line with what we'd expect historically as you mix towards those those product lines so I don't expect a major mixed headwind from that as we look at it becoming you know a bigger portion of our our sales and our outcomes I would say again there's there's multiple products in there and there's multiple mixes that we would go across all the different business units So, I wouldn't say it's a significant headwind that we're looking or we're adjusting for. Thank you.

Your next question comes from the line of Noah Kay with Oppenheimer & Co. Please go ahead.

Thank you. I guess just one related question to that, you know, because, Gio, you talked at the start about the convergence, right, of, you know, different disciplines, power, cooling, IT. historically we saw a lot of procurement of the different components based off of you know best point solutions if that's shifting can you talk a little bit about how it's shifting the conversations who you're having conversations with who's making the decisions among your customers and how that's

impacting your sales cycle well certainly convergence is very important and it's not just prefabrication, but it's an optimized system. That's why having an optimized system with all vertive technology is a winner. But we shouldn't think about this as replacing the point-to-point, let's say, the product point type of activity. It is a gradual and partial shift. And it really, different players have different degrees of adoption. So if you think about power modules, those are pretty much becoming a standard in the industry. So you'll see that people will start to buy power modules instead of necessarily going into each and every component inside. It's never black and white, but that's a direction. When it comes to the entire convergent system, the entire manufactured system, a la Smart Run, well, the interfaces might be slightly different, but again, it's not a totally different breed of players or people. You discuss the engineering or the transaction. But there is also a different category of people in the industry that might not have historically that type of procurement or engineering staff and experience. nor do they need it when someone is capable of providing an already fully optimized, pre-engineered, converged system and solution. So the market is going in multiple directions. Some are partially overlapping. Some are different. So we are very happy about our point product and point-to-point product, let's say, type of business, as well as we see integration and convergence becoming a bigger part of the market that we serve.

That's great, caller. See you in a few weeks. Thank you. Thank you.

Your next question comes from the line of Andrew Muscaglia with BMP Paribas. Please go ahead.

Hey, good morning, everyone. Good morning. I wanted to touch on, you know, you made a couple of deals in the quarter, Thermo Key, B Marco. Any way of framing the size of those or what you paid? And then are deals going forward more like kind of like these smaller bolt-ons or will we see some more along the lines of, like, a purge rate if you were to move forward this year with more acquisitions?

First off, just to answer the question on size, we didn't disclose any of the sizes of the businesses. So, again, I probably wouldn't refer back to that. I mean, in terms of materiality, you know, we did do some press releases on them, but we didn't give any of the sizes. But if they were materially impactful to us, we would have had to have done that. So, and I will pass over to you.

Can you repeat the question around purge right?

I'm not sure I heard you before. Just more so, you guys indicated interest in M&A, you're deploying capital towards that this year. Will we see more deals along the lines of like a purge right spending-wise or more of these like smaller bolt-on niche kind of acquisition?

Well, exactly. We, as you saw us with Paris Wright, when, you know, it's really about what the value of the asset that we have in front of us. So we have no reticence in cutting bigger checks when that's needed and what's opportune, let's say, as we're demonstrated. And, you know, our balance sheet is certainly very, very strong. And when we see value, we go for value, and value is not just per se, there's value in the context of our long-term strategy and our technology and market growth and strategy. So rest assured that we have no, how can I say, no fixed limits in that list.

Okay.

Thank you. This concludes our question and answer session. I would like to turn the conference back over to Gio Albertazzi for any closing remarks.

Well, thank you, Eugenia. Thank you very much. And thank you all for your questions and the conversation today. I'm quite pleased with what we have accomplished in the first quarter and how we're positioned as we move through 2026. The entire Vertiv team has executed well, and I'm grateful for the strong partnership we have with our customers, suppliers, and partners in general. We are making real progress, but as you've come to know, we are never content with where we are. I am pleased, but I'm certainly never satisfied. We'll continue investing ahead of the market, maintaining our leadership in technology and innovation, and executing with the speed and precision our customers expect from us. I'm more confident than ever about where VertiV is headed. The trajectory is strong, the opportunities are significant, and we're well-positioned to capture them. Thank you all, and I hope you have a wonderful rest of the day.

The conference has now concluded. Thank you for attending today's presentation. You may now discuss.