Earnings Call Transcript - VRT Q4 2024

Operator, Operator

Good morning. My name is Nadia, and I will be your conference operator today. At this time, I would like to welcome everyone to Vertiv Holdings Co's fourth quarter and full year 2024 earnings conference call. 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, Lynne Maxeiner, Vice President of Investor Relations.

Lynne Maxeiner, Vice President of Investor Relations

Great. Thank you, Nadia. Good morning, and welcome to Vertiv Holdings Co's fourth quarter and full year 2024 earnings conference call. Joining me today are Vertiv Holdings Co's Executive Chairman, Dave Cote, Chief Executive Officer, Giordano Albertazzi, and Chief Financial Officer, David Fallon. 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. 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 of Vertiv Holdings Co. These forward-looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Refer 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. 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 investors.vertiv.com. With that, I will turn the call over to Executive Chairman Dave Cote.

Dave Cote, Executive Chairman

I would say we executed the fourth quarter in a quite convincing way. Beating our sales guidance significantly and seeing that growth translate very nicely into EPS and cash flow. This is a strong inflection of the continuing transformation underway at Vertiv Holdings Co, and it's building a very nice track record of consistently delivering outperformance. I would have to say over the last two or three months, I have been quite surprised to see the overreactions to any kind of news in our stock. Whether it was the Stargate Opt, the deep sea big crushed downward, which made no sense, given that the news implying lower cost to compute means more data, meaning more data centers, meaning more Vertiv Holdings Co, was actually good, not negative. And today, seeing the reaction to these from analyst reports, is reaction to orders. Again, orders are quite strong for us. And if you take a look at orders historically, they're always lumpy. Just the way it is. It just lumpy quarter to quarter. And it seems to be masking the really good news we had in the fourth quarter regarding America's orders especially as you look at hyper and colo, which is a focus for everyone. It's extraordinarily strong, and that all seems to be getting masked. There's nothing I can do, and nothing Gio and his team can do about what it means to those kind of overreactions. What we can manage is the continued outperformance of the company when it comes to sales, earnings, and cash flow. We delivered another great year in 2024 that set a firm foundation for outperformance in 2025 and beyond. I continue to believe that the best is still ahead. We have an absolutely terrific position in a very good industry. That's going to go on for a long time given that the digital age has a long way to go and there’s nothing that replaces data centers at this point or anything even on the horizon that says you can replace it. So I expect our continued outperformance to well, continue for a long time. My confidence is born not just from being in great end markets, but from the benefits we're seeing from our seed planting in R&D, customer relationships, and CapEx. I'm more convinced sitting here today that Vertiv Holdings Co is well positioned to keep winning now and winning later. It's a great combination for our shareholders. So with that, I'll turn it over to Gio.

Giordano Albertazzi, Chief Executive Officer

Well, thank you very much, Dave. And with that, we turn to slide three. As I said, this was another great quarter. Clearly, a strong close to another year of very strong performance altogether. Adjusted earnings per share were $0.99, a 77% increase versus the prior year. It's a direct reflection of the substantial increase in profitability. Q4 organic sales growth of 27% will see with the sales growth of over 20% in both Americas and APAC, and over 30% in EMEA. Our trailing twelve-month orders remained strong at about 30%. We are particularly encouraged by the Americas trailing twelve months, which are up over 50%. More to come on this in the next few slides. The strong flow-through to profit from our large beetle sale was visible with adjusted operating profit of $504 million and adjusted operating margin of 21.5%, which expanded 380 basis points compared to the prior. Adjusted free cash flow generation was $362 million in Q4 and over $1.1 billion for the year. Our net leverage reduced to 1x as we finished the year. We entered 2025 with a very strong balance sheet which gives us a lot of optionality relative to capital deployment. In 2024, we deployed $600 million of share repurchase and announced an increase in our dividend of 50%. We increased our R&D by $50 million, doubling down on the technology and new products that continue to separate Vertiv Holdings Co from the competition. We anticipate our adjusted EPS for 2025 to be between $3.5 and $3.6, consistent with the guidance we provided in Northland. We have increased our estimate of 2025 sales at approximately $9.2 billion midpoint. This is about $75 million higher than our implied sales guidance in November despite projected FX headwinds, and the Q4 over delivered. We enter 2025 stronger than we have ever been. Let's go now to slide four. As mentioned, our trailing twelve-month order growth is 30%. America's TTM organic orders were up 50% in total, with particularly strong core and hyperscale orders. This suggests a strong market, as well as a very strong Vertiv Holdings Co presence in the market. Southeast Asia, Australia, New Zealand, and India trailing twelve-month orders were up significantly as well. We saw weakness in EMEA in Q4 as some project activity had a shift in timing to 2025. We are quite pleased with what we are seeing and winning in the market. And it supports our revenue projection for 2025 as does our strong backlog, which is up 30% year on year despite FX headwinds. This is a backlog to sales ratio of 78%, well above the 69% we had a year ago relative to 2024 actual sales. We believe our strong backlog and new product pipeline set up very well for many years. As Dave noted in his remark, we have heard consistently from the largest types of scalars that the likely compute and LLM efficiency should drive more AI adoption. Most of these hyperscalers have confirmed significant increases in their CapEx spend to support AI. This means large investments in data center builds that need our equipment and services. That sounds like very good news indeed for Vertiv Holdings Co. It's now go to slide four. We are in slide four. Sorry. We go to the right side of slide four; supply chain resilience continues to strengthen. We have matured as an organization in this area. We have been successfully working to drive geographic balance and we continue doing so. We have multiple sources of supply to deal with geographical uncertainty. We believe price cost will be positive for 2025. While questions remain relative to potential tariff impacts, we have been adding regional sourcing and manufacturing options to complement our existing global supply chain. The situation with tariffs remains very fluid, so it would be premature to discuss it in detail. At the same time, it is worth mentioning we have built scenarios and playbooks aimed at strategically mitigating some of the tariff impacts. To be clear, although there is much uncertainty regarding the scope and breadth of tariffs, we believe we are well prepared and have taken strategic actions to help mitigate risks. For example, in 2024, we expanded and strengthened our supply base and manufacturing footprint in the United States as part of our overall capacity strategy to grow with the customer demand we see in the US. Vertiv Holdings Co's operating system is truly becoming part of the culture. That is translating into tangible productivity gains. It is also liberating capacity needed to support the strong demand trajectory. In combination with our ongoing footprint expansion. Let's now move to slide five. I want to highlight the importance and strength of our power portfolio. Much of the recent focus has been on thermal technology, which, of course, we love. There is an equally exciting story around power. Vertiv Holdings Co's complex technology changes are happening in the data center at a speed the industry has not seen before. AI is going to drive the need for much more power and much more complexity around the distribution of that power in a data center. You have heard, say, the system matters. Well, the system matters more than ever before. It is important to how the entire system functions together and to design the infrastructure in a way that maximizes efficiency and reliability. And now more than ever, in a way that is future-proof. While the increasing densification and challenges of enabling AI data centers, we see more and more opportunities to further integrate power conversion, distribution, and thermal management in ways that can simplify the mechanical and electrical infrastructure.

Operator, Operator

Let's now move to slide six.

Giordano Albertazzi, Chief Executive Officer

First, let's be clear. We are a market leader in power management and have the complete powertrain. This includes all the power gear listed on the left side of the slide. Power management represents approximately one third of our total business, and we have been in these markets for decades at global scale. When we engage with our customers on their system designs, our full view of the power system enables us to help them properly scope the solution and right-size each element of the infrastructure. We offer a holistic view of the total infrastructure and have access to an engagement with customers regarding their full facility design and challenges. Visibility into the future of the IT loads and hourly R&D allow us to partner with our customers to ensure their infrastructure is very importantly, future-proof. Our differentiators of FullPower, which apply broadly across our portfolio, also include global and leading services. Scale and well-established customer relationships. We can package different elements of the critical infrastructure together according to the customer system design in a pre-engineered and validated way within Vertiv Holdings Co manufacturing facilities before being deployed to the customer's site via modules or skids. This offers tremendous value and flexibility to our customers. We see high demand for these solutions, and we are well positioned to capture that growth. We now turn to slide seven. Technology is at the core of what we do, and we have unique abilities in the market. For example, Vertiv Holdings Co's expertise and capabilities in both AC power and DC power conversion and power distribution enable us to work with customers to evaluate different system design approaches to best meet their needs. Our technology and portfolio are clear differentiators in the market. We are helping to define the roadmaps of the future. On the right side of the slide are some examples of recent innovations. Many of you got to see some of our innovative technologies at FC 2024. Very flexible solutions to give customers the ability to adapt to their infrastructure and adapt the infrastructure to the changing conditions within the data, helping them to future-proof their infrastructure. As we sit at the table with the largest cost customers and technology partners in the world, we have the honor and important responsibility to help them navigate increasingly technical complex infrastructure requirements. And then we scale. Vertiv Holdings Co can talk technical and scale evolution with our customers at levels most cannot. Let's go to slide eight. We announced a small acquisition in December, BSE, which has high efficiency, high capacity, centrifugal chiller technology, and heat reuse technology. This technology is increasingly used to support high-density compute applications. The approach here is quite similar to the one we took with Kaltura a little over a year ago. These are technology-based acquisitions, early on the technology maturity curve, that reinforce our organic progress and can scale globally. We are very excited to add this technology to our portfolio. When we look at the right side of the slide, we have a strong balance sheet. We have ample liquidity, and net leverage is at 1x. Our capital deployment priorities remain consistent with what we described in November. We would focus growth investment, organic or inorganic. We also have optionality with our share repurchase program, which has $2.4 billion remaining under the board authorization. We have optionality with our dividend. We announced a 50% increase to $0.15 annually back in November, and we expect to double that amount over the five-year planning period. We committed to achieving and maintaining investment-grade ratings and continue to make progress. With that, over to you, David.

David Fallon, Chief Financial Officer

Perfect. Thanks, Gio. Turning to slide nine, this slide summarizes our fourth-quarter financial results. Adjusted EPS of $0.99, which was 77% higher than last year's fourth quarter. This was primarily driven by higher adjusted operating profit, but also, continuing the balance sheet theme, favorably influenced by lower interest expenses. Strong free cash flow and improved balance sheet allowed us to execute two-term loan repricings in the past twelve months. Our organic net sale increased approximately 27% driven by double-digit growth across all three regions with EMEA leading the way at 33%. Fourth-quarter sales were more than $200 million higher than the midpoint with upside across all three regions. As we entered the fourth quarter, we certainly had the backlog and the capacity to over-deliver on our expectations. But we also had a significant number of new product launches, which sometimes introduces timing risk. Sometimes customers request a deferral of year-end shipments from December into January. However, our customers generally wanted product as soon as available, and our plants executed exceptionally well to mitigate new product launch risk. As a result, we significantly over-delivered the top line across all three regions, approximately $200 million higher than what we guided. Adjusted operating profit of $504 million was 53% higher than last year, driven by higher volume and continued improvement in commercial execution, including price cost. Adjusted operating margin of 21.5% was up 380 basis points from the fourth quarter of 2023 and 110 basis points higher than guidance. This provides a very strong foundation for 2025. We generated $362 million of adjusted free cash flow in the quarter, $135 million higher than guidance, driven by higher adjusted operating profit and continued improvement with trade working capital, which includes accounts receivable, inventory, accounts payable, and deferred revenue. Trade working capital as a percentage of annualized fourth-quarter sales declined to 13.1% at year-end down from 18.5% at the end of 2023. So good progress with working capital in 2024, but as always, we are never satisfied, and there's still a ton of opportunity going forward. Next, turning to slide ten, this slide summarizes our fourth-quarter segment results. As mentioned, we saw robust top-line growth across all three regions, each up more than 25% from last year's fourth quarter. Americas had another strong quarter with organic sales up 25%. Growth continues in a convincing way across colocation and hyperscale markets. Adjusted operating margin in the Americas expanded 420 basis points to 25.6% driven by commercial execution and operational leverage. Moving to the right on the slide, APAC sales increased 27% organically, with strength throughout the region, including China, which grew in the upper teens from last year's fourth quarter. While we are pleased to see this growth in China, we are not calling it an inflection point. We still see broad economic uncertainty as we enter 2025, but we continue to monitor signs of market growth and green shoots. So I guess I can invoke the obligatory CFO statement related to China. We are cautiously optimistic. Top-line growth in India and the rest of Asia continues to be strong as AI starts its penetration in those regions. We believe, based upon our strong AI value proposition, we will continue to expand market share across both India and the rest of Asia. APAC's adjusted operating margin increased 260 basis points from last year's fourth quarter with benefits from operational leverage and regional mix. Finally, to the far right, EMEA organic sales increased 33%. It was driven by strong demand from colocation and hyperscale customers across several product lines, but notably Switchgear. Adjusted operating margin for EMEA increased 370 basis points with benefits from operational leverage and productivity. EMEA once again prevailed in the market, but we expect the 2025 race to become increasingly competitive, and we look forward to continued improvement in both regions. Next, turning to slide eleven. This provides a summary of full-year 2024 results. It was another strong year across the board, and at this time last year, I mentioned how it is always a good thing on this slide when the orange bars are significantly higher than the gray bars, and we are pleased to see this once again for 2024 versus 2023. Unless we switch colors, we expect this to be the case going forward, including in 2025, which we will review in just a few moments. 2024 adjusted EPS of $2.85 represents a 61% increase from the prior year, primarily driven by higher adjusted operating profit, but also favorably influenced by lower interest expense as I mentioned a few slides back. Organic sales were up 18% with strong performance across all three regions, all double digits higher. Demonstrating that we are well-positioned and winning in our end market across the globe. Adjusted operating profit increased by nearly half a billion dollars, with adjusted operating margin of 19.4%, up 410 basis points from 2023. Driven by both improved variable contribution margin and lower fixed cost as a percentage of sales. Our 2024 margin performance including exiting the year at 21.5% provides confidence for our full-year 2025 margin guidance of 21% as well as our long-term target of 25% by 2029. Last year, we experienced a step function in our adjusted free cash flow. We took another step upwards in 2024. We generated over $1.1 billion in adjusted free cash flow this past year which translates into a conversion of 103% after converting 114% last year. Our net leverage at the end of 2024 was approximately 1x. So we continue to execute well, building a track record of financial strength and consistency, which provides significant flexibility with capital deployment, as Gio mentioned. While also developing a balance sheet to achieve investment-grade ratings. Before moving off this slide, looking one last time at the numbers on the slide, it's hard not to be pleased with our results. EPS up 61%, Sales up 18%, AOP up 47%, and cash flow up 46%. It is a testament to our strategy and execution and hopefully, it instills confidence that we honor our financial commitments. Once again, pleased but never satisfied. 2024 is now behind us. In fact, we are already planning for 2026, but we still need to execute this year, and we summarize our outlook for 2025 in the next two slides. Moving to page twelve, this slide summarizes our first-quarter guidance. For avoidance of doubt, this first quarter and full-year guidance does not contemplate any recent or proposed changes in policies by the current US administration, including the potential impact from tariffs, with the exception of incremental direct tariffs on China imports, which have a relatively immaterial impact on our financials. We are expecting adjusted EPS of $0.60 for the first quarter, up 40% from last year. That's primarily driven by higher adjusted operating profit. First-quarter organic sales are expected to be up 19%, with Americas up in the low twenties, APAC mid-twenties, and EMEA low teens with this organic growth offset by an approximately $30 million foreign exchange headwind. We anticipate first-quarter adjusted operating profit of $325 million and adjusted operating margin of 16.9%, up 170 basis points from last year's first quarter. Although we do not provide explicit guidance, we expect first-quarter adjusted free cash flow to be slightly higher than the first quarter of 2024. Next, turning to slide thirteen, our full-year 2025 guidance. All metrics are relatively consistent with the preliminary outlook we provided at our November investor event. Reconfirming our confidence in the market backdrop and our ability to exit Q. Our adjusted EPS is expected to be $3.55 at the midpoint, 25% higher than 2024. This increase is primarily driven by higher adjusted operating profit and lower interest, partially offset by higher share count from the warrant exercise in the fourth quarter. 2025 sales are projected to be approximately $9.2 billion at the midpoint, approximately $75 million higher than the implied sales guidance in November. This increase is despite an estimated incremental $125 million foreign exchange headwind. On an absolute dollar basis, organic sales are up approximately $200 million from our November outlook. Of course, our full-year organic growth is lower on a percentage basis from what we presented a few months ago, 16% at the midpoint versus 17%. But this is primarily due to the significant $200 million top-line beat in the fourth quarter. Maybe from another perspective, if we compare our current 2025 sales guidance to the $2.8 billion we expected for 2024 in November, organic sales in 2025 actually claim to 19% on an apples-to-apples basis. Once again, on a dollar basis, our outlook for organic sales is approximately $200 million higher today than in November, and this is reflective of our growing confidence in the market and our ability to continue to drive value for our customers. On a regional basis, we expect the Americas to continue strong growth in the low twenties, low teens growth in APAC is primarily driven by India and the rest of Asia, and after strong top-line growth in 2024 of 21%, including 33% in the fourth quarter, we expect high single-digit growth in EMEA based upon more challenging comparables. But we continue to monitor catalysts for higher growth in that region as AI expands within that market and we have better visibility as we progress through the year. Adjusted operating profit is expected to be up 25% to $1.935 billion consistent with the midpoint of our 2025 outlook we provided in November, and once again, similar to sales, we are covering incremental foreign exchange headwind in adjusted operating profit driven by a stronger US dollar. The year-over-year adjusted operating profit is primarily driven by volume, commercial execution, and productivity, partially offset by higher OpEx investment and growth capacity and R&D, which we expect to be approximately $160 million combined in 2025. We are projecting adjusted free cash flow of $1.3 billion at the midpoint, including $275 million in CapEx or 3% of sales, demonstrating our continued commitment to invest in the growing market. Once again, we expect another year where the orange bars are nicely above the gray bars. This projected strong performance in 2025 should further solidify a strong foundation for continued top-line and bottom-line growth in 2026 and beyond.

Giordano Albertazzi, Chief Executive Officer

Well, thank you, David. So, hopefully, very strong numbers altogether. And we go to slide fourteen. I believe we are in an excellent position to achieve our five-year framework across all financial metrics. So I'm quite comfortable reiterating the five-year financial framework we presented in November. The market remains robust. We have good visibility into the future. We have a close collaboration with our customers and technology partners. We have a relentless focus on execution. As we sit here today, I am more confident in this outlook than ever before. So next, we go to slide fifteen. The focus areas for 2025 are very consistent with what you heard from us many times and they are core to the value creation model. We are laser-focused. We have very strong and longstanding relationships across the ecosystem of data center infrastructure. Enabling the success of our customers is essential to our success. We do this with speed and scale. Vertiv Holdings Co's operating system continues to mature throughout our entire organization as the way we do business every day. It becomes our core operating model that we continually optimize and improve to drive best practices and productivity throughout the organization. We intend to stay price-cost positive every year including 2025. We are able to do this by an intense focus on commercial execution where technology delivery and customer experience are all accelerated to lead the transformation and acceleration of the entire industry. We made progress in trade working capital, but still have a long way from being fully optimized. Speed is central in everything we do, including the cash conversion cycle. We have another strong year of growth ahead, and we continue with an intense focus on making sure we accelerate our operational leverage to drive strong financial results. Our cash flow has strengthened significantly and provides great flexibility relative to the capital deployment options discussed earlier. We go now to slide sixteen. This is a summary of our plans and guidance for 2025. 2025 will be a year of robust acceleration. In the industry and certainly at Vertiv Holdings Co. We continue to raise the bar on the company to capture the enduring growth that is ahead. But it is so much stronger than in the past. We intend to lead the transformation and acceleration of the industry, strengthening our enduring competitive advantages.

Operator, Operator

Thank you. We will now begin the question and answer session. In order to ask a question, please press star then the number one on your telephone keypad. And if you have a follow-up question, please rejoin the queue. Our first question goes to Andy Kaplowitz of Citigroup. Andy, please go ahead.

Andy Kaplowitz, Analyst

Good morning, everyone. Nice quarter. Thank you. Good morning. Good morning. Gio, you mentioned the timing of orders in EMEA influenced your Q4 result. Can you give us more color on the European weaknesses? Dave, I think, mentioned you had better visibility later in the year in Europe. So do you expect to see improved orders in Europe at some point in 2025? And then when you look forward in terms of order trajectory with the understanding that comps do get tougher, know you do not want to talk about orders too much, but obviously, people care. Do you expect your trailing twelve-month order growth to still be well into that double digits each quarter? Even as comps get more difficult?

Giordano Albertazzi, Chief Executive Officer

Well, I answered a lot of questions packed in one, Andy. So let me get one here. So you know, okay, multilayered. That's for this one. I can get you all there. So let me start with EMEA. We certainly saw a movement that was mature enough to be singled out and mentioned and shared with all of you. I'm very encouraged by the pipelines that we see in EMEA. We've been talking about EMEA several times as an area where the, if you will, wave of AI happens at a lag relative to specifically North America. But there I say also in my respects to what we see in places like Asia. As an example. But the same token, you know, we know that it's a fairly regulated place. So that is also probably helping or probably explaining some of these dynamics. At the same time, I do not want to highlight. I want certainly to highlight the strong performance of EMEA in 2024 and the stronger and strong here. So I'm positive about the outlook out there. When it comes to, in general, our outlook for orders, you know, we would continue to talk in terms of trailing twelve. We believe in a good training trail going forward in 2025 and one that fully supports our model, the model that we have shared with you in November. So I'm positive there, and my positivity really comes from the many news that you've seen in the market about investment, especially confirmed and strengthened by the pipelines that we see robust and continue to grow.

Amit Daryanani, Analyst

Yep. Thanks for taking my question. Congrats on a nice sprint. Gio, I'm hoping you can just talk about how do you see Vertiv Holdings Co's opportunity longer term on two fronts. One, if we start to see inferencing getting pulled in a little bit more quickly, given what we're seeing with Deep Sea, for example, what does that mean for Vertiv Holdings Co? And then, second, really the second part of this, maybe you know, if you end up in a scenario where custom silicon gets more deployed in AI clusters versus NVIDIA, how do you think that plays out for Vertiv Holdings Co? I know you have a great relationship with NVIDIA, and you have their roadmap very well. But I would love to understand how that changes if the selecting is Marvell or Broadcom or someone else. Any insight on those two fronts would be great. Thank you.

Giordano Albertazzi, Chief Executive Officer

Yeah. Absolutely. Well, thanks a lot, Amit. And the two aspects here are very clear. So I must say that if we are very, let's say, agnostic whether it's inference or training. In many respects, we see a lot of the data center design already being thought in terms of hybrid application. So an acceleration of AI adoption, an acceleration towards inference that, you know, might be suggested by what we saw recently, also taking deep seek into consideration. If anything can only be good for the industry and for Vertiv Holdings Co as a whole. But even if we go in, double-click on that and say, hey, infrastructure sorry. Infrastructure for inference may be more edge, more enterprise. You know, we've been doing edge and enterprise very, very well, forever. You know? And you know that we have strengthened our hyperscale and large colo presence very convincingly in the last few years? But we have not at all lost our more distributed base muscle. So if you will, there is an ambidexterity there that can be put at full, you know, at full work to our advantage. It comes to custom silicon, of course, you know, we work a lot and we admire NVIDIA a lot, and that comes from generally working very well together. But again, silicon is silicon. Servers are servers. So loads are loads. We like the densification. We like the very high power per rack trajectory that I think is true across the board. But as we know, we can play very well in a high dense high liquid cooling, or a more let's say, traditionally more air type of infrastructure and environment. The same is absolutely true also for the power. So I think we are agnostic when we were thinking about our revenue per megawatt, also thinking about kind of a good mix of applications.

Steve Tusa, Analyst

Hi. How are you?

Giordano Albertazzi, Chief Executive Officer

Very well. Doing very well, sir.

Steve Tusa, Analyst

Can you just maybe explain the—I know there was a bit of revenue overdrive in the fourth quarter. But from a timing perspective, the first quarter seems to be worse than—or at least down more than normal seasonality quite substantially. You know, how do we look at those revenues from the fourth quarter in context of that? And how are you planning, you know, the first quarter season, you know, thinking about seasonality?

Giordano Albertazzi, Chief Executive Officer

Well, I think we should look at the first quarter in absolute terms. If you look at the first quarter in absolute terms, we have a very, very strong quarter here in our guidance. Now, of course, Q4 was particularly strong. So we should not look at Q1 as a quarter-to-quarter look. Really look at the first quarter sales as the acceleration that is taking place with a 19% organic growth in the first quarter. I feel very good about what that tells us about our overall trajectory. David, I do not know if you want to add anything there. Just from a numbers perspective, actually, if you look at our first quarter sales in 2025 as a percentage of the full-year guide, it is actually higher than what we saw in 2024. So I would say that there's actually a step up in 2025 versus the first quarter of last year. So, you know, certainly reflective in the 19% sales growth versus the 16% full-year sales growth. And then also a 31% increase in adjusted operating profit. Okay. And then just one follow-up for me, but, you know, there obviously, there's a lot of focus on orders, I think. For good reason. Everybody's trying to, you know, discern the trend relative to these CapEx numbers, the pipelines that are, you know, obviously, pretty eye-popping. Know, you're now two quarters kind of stepped down like relative to what we see at your customers and the way they're spending in these pipelines. Like, what is that disconnect? Is there some sort of disconnect between you guys and everybody else talking about doubling their data center businesses? I admit, obviously, that's a lower base for some of these guys. But, like, what is that disconnect between you and your customer spending that seems to have opened up here the last two quarters? I do not think there is a disconnect. Quite honestly. If you look at our orders trajectory last year, if you think about a 60% year on year growth in the first half of the last year. That's a lot of growth. When our customers talk about their CapEx, of course, they also talk about a lot of the silicon part of the CapEx, not all the data centers. So I feel pretty good about visibility of the market and what we win in the market. So I do not think there is a disconnect.

Steve Tusa, Analyst

Right. So over time, you connect to that over time. You're connected to that.

Giordano Albertazzi, Chief Executive Officer

Those dynamics. This is the third task. That's part of the question. But, no, I, you know, we are very well connected with the market, very well aware of what happens. I'm very encouraged by our pipeline. We do not see that disconnection. We do not believe that disconnect exists.

Andrew Obin, Analyst

Hey. Yes. Good morning. Can you hear me?

Giordano Albertazzi, Chief Executive Officer

Yep, Andrew. Loud and clear.

Andrew Obin, Analyst

Excellent. Yeah. Thank you. So I think Dave in the beginning of the call sort of noted that America's orders were extraordinarily strong. So I guess you know, maybe put your comment within that what's extraordinarily strong, and and then thermal versus power and distributed IT? Think one of your competitors indicated distributed IT is weak and I guess going back to EMEA, you know, extraordinary strong American orders with flat orders overall sort of imply particular weakness in EMEA and maybe missing a couple of billion dollar data center projects. I know that I'm the third person asking if but there seems to be a disconnect between your revenue growth and your options, one of these numbers.

Giordano Albertazzi, Chief Executive Officer

Well, Andrew, thank you. So as we said in many points in our, as we were going through our deck, we're very pleased with the orders in the Americas and with the pipeline in the Americas. But the pipeline is also EMEA, as I was vocally mentioning at the beginning of this conversation. And that's particularly true if you look at the caller and cloud part of our orders in India. So the market is growing. We are seeing that, and we are successful in going after that market. When it comes to the mix, we see a pretty balanced mix here. Of course, the distributed IT is, by the nature of that market, growing much slower as we vocally shared with you in November already. And it's no surprise, no secret. Certainly, that doesn't mean that white space business for us is in an uncomfortable place. So we're pretty pleased about the mix of growth there and orders. Yeah, I cannot elaborate much more on EMEA than I did already. From what we've seen in EMEA, the pipeline is there, the market is slower, and we expect a pickup during the course of 2025 because that's what our pipelines tell us.

Nigel Coe, Analyst

Thanks. Good morning. So, Gio, the cone on EMEA, I know I do not want to beat this horse to death or anything, but you know, you did take down your outlook from high teens in mid-November to high single digits in EMEA. So just wondering, are we seeing projects pushing to the right, or is there some regulatory issue or, I do not know, power constrains? So just wondering, you know, what do you see in the image? Just a bit more information that would be would be helpful. And then just maybe go back to comments from the chairman around the stock price and things. Just wondering, you know, what have you got baked in for capital deployments, and at what point do you weigh in with buybacks?

Giordano Albertazzi, Chief Executive Officer

Just to say that. So yeah, but okay, clearly, again, EMEA had a strong fourth quarter when it comes to revenue, and I like to continue to stress this part because it's a very important part. But, yes, you know, if you look at the orders and the fact that we've worked about orders being pushed into 2025. There is clearly a movement to the right of some of the pipeline. Again, what we see here is regulatory slower decision making, all of the above. All of the above at the same time. What we hear in the market is not only from us but also public information, is that that is going to accelerate in 2025. That's what we read. That's what we hear. Talking to our customers, and this is what we see looking at our pipelines. When it comes to capital deployment and buybacks, what we said in November is still valid. We have a robust M&A process and pipeline. We continue to be very focused on that. But opportunities have their time. Again, we will not go and do a meaningful acquisition just for the sake of it. We want to make sure that we are super true to the value model that we have shared with you. It comes to buyback, you saw us taking another opportunistic posture last year, and we've been very, very clear about the fact that we will continue to be opportunistic in our approach. So let’s see how things unfold. If the right moment comes, we have the means, and we have the authorization from the board.

Jeff Sprague, Analyst

Thank you. Good morning, everyone. Maybe we could talk about just the tariff playbook here a little bit. You gave a little bit of color commentary in the opening remarks, expanded your US manufacturing a bit. But can you give us a sense of kind of the exposures, maybe size those for us? You know, what percent of your US sales, for example, are sourced in the US or some similar metric we can kinda get our arms around the order of magnitude that we're talking about here.

Giordano Albertazzi, Chief Executive Officer

Well, thanks, Jeff, for the question. We do not disclose what products are built where. That's true for the Americas. That's true for everywhere in the world. One thing that we like to mention is that we actually have more plants in the US than we have in Mexico. But that said, again, we feel prepared to, when we feel we have the right playbooks deployed, to work on minimizing the impact. So let’s really wait until we know better what will be out there so that we can be more accurate. I think right now, it would be speculation as of exactly what the impact could be or not be.

Jeff Sprague, Analyst

And maybe just a quick follow-up for me. I'll also. Just on just thinking about your total available market, right, the three to three and a half million per megawatt you've talked about including liquid cooling. Just wonder if your capture against that is moving up. You know, when you hear people future-proofing, integrated solutions, moduleization, which would mean you're bringing stuff more into your factory as opposed to being done by craft labor on-site. But all this would suggest kind of a higher dollar capture for Vertiv Holdings Co relative to maybe historical metrics. Can you provide any context to that thought?

Giordano Albertazzi, Chief Executive Officer

Well, I think if we go back to the history of our range of capture per megawatt, we moved up a little bit in November last year relative to the previous period. We believe that the range that we gave, $2.75 to $3.5 million dollars per megawatt, is pretty much telling the story. Now again, where exactly it moves in this spectrum depends on many things. It may be in some element, regional specific, design specific, the type of vertical market, and the type of application. So do we see us playing within this band and this segment that we gave you? Absolutely. But, you know, if the—I think it's a narrow enough band for us to share with all of you. If that band moves in any direction, we will certainly share that information.

Nicole DeBlase, Analyst

Yeah. Thanks. Good morning, guys. Just wanted to start on yet another question clarification first, when you guys talked about flat orders in Q4, I presume that's organic. It doesn't include the FX headwind. And then just thinking about what you're actually seeing in the pipeline, is there any possible way that you could quantify the level of pipeline growth that you're seeing? Just trying to get a bit of confidence in, you know, whether dollar orders can continue to step up as we move throughout 2025. Thank you.

Giordano Albertazzi, Chief Executive Officer

Yes. I think the answer to the first part of your question is yes, it was organic. That is. When it comes to pipeline, we do not have specifics on exactly what the pipeline is. What we're seeing is robust pipeline growth quarter on quarter and certainly significant year on year, much significant year on year pipeline growth if we compare ourselves on the 31st of December relative to the 31st of December of the prior year. That is very encouraging and supports our long-term plans and strategies. The good thing is it is well balanced across the various regions. Another element that we like is that kind of the visibility out so the horizon has extended as well. Now we are very meticulous in the way we manage our pipelines, and it's very consistent year on year. So what we see is encouraging and heading in the right direction.

Mark Delaney, Analyst

Yes. Thank you very much for taking my question. You spoke a bit already on the 1Q revenue outlook as a percent of the full-year guide, but I'm hoping you can provide some more details on your expectation for the shape of the year from a top-line perspective. And specifically, at Blackwell Supply Chain Readiness or other supply chain factors are gating the revenue growth in the first half. And then, you know, on that topic in particular with supply chain readiness, have you seen any changes in delivery schedules as a result of that? Thank you.

David Fallon, Chief Financial Officer

I can address the first part, Mark. If you look at the shape of the year from a top-line perspective and from a profitability perspective, just like prior years, we expect sequential increases each quarter as we progress through the year. From a percentage of the whole, you know, similar to the first quarter, which is comparable maybe a little bit higher than what we saw last year. We would see the cadence as a percentage of total sales each quarter in 2025 to be similar to what we saw in 2024, and that's also the case as it relates to adjusted operating profit.

Giordano Albertazzi, Chief Executive Officer

The second part of the question was about supply chain and whether it's supporting our growth and plans. I can wholeheartedly say yes. We see a good supply chain well supporting our plans.

Operator, Operator

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

Giordano Albertazzi, Chief Executive Officer

Well, thank you. Thank you very much, and certainly thank you for all your questions. I'd like to thank the entire Vertiv Holdings Co team for the passion and dedication in taking care of our customers, delivering results, and being the thought leader in our industry. We plan to build on the momentum of 2024 and deliver another very strong year in 2025. So with that, thanks everyone for joining us today. We truly appreciate it.

Operator, Operator

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