To Our Shareholders

In January 2023, Vertiv welcomed a new CEO with clearly articulated priorities: institutionalize operational excellence and execution; build a high-performance culture of collaboration, accountability and innovation; and deliver profitable growth and improved cash flow. One year later, we can say that, while there is still much more to be done to reach Vertiv’s full potential, we have made tremendous progress on each of those priorities.

With a renewed sense of urgency and an almost obsessive focus on execution, we strengthened our operating system, enhanced the resiliency of our supply chain, and improved efficiency and accountability across the business. We aligned our culture around five strategic priorities: customer focus, financial strength, innovation, operational excellence, and fostering high-performance, guided by our core values and principles. This is the DNA we are embedding across the organization. In 2023, Vertiv delivered strong results, including profitable growth and improved cash flow, and repeatedly raised and exceeded financial guidance across certain key financial metrics over the course of the year. This strong performance enabled Vertiv to raise its annual cash dividend in 2024, to be declared and paid quarterly, and to implement our first share repurchase program as part of our overall capital deployment strategy to provide greater flexibility in returning capital to shareholders.

In 2023, we continued to drive innovation, increasing our engineering, research and development (ER&D) spend by 8% versus prior year, enhanced our product offerings, and further deepened relationships with our partners and customers, strengthening our market leadership position and laying a strong foundation for sustained long-term growth and value creation.

2023: By the Numbers⁽¹⁾

Vertiv’s financial results demonstrated improved performance and progress with all key metrics meeting or exceeding our financial guidance in 2023, thanks to improved execution across all aspects of the business. Net sales for the year rose 21% to $6.9 billion as compared to 2022, and we ended the year with a record backlog of $5.5 billion, 16% higher than our 2022 year-end backlog. Driven by strong sales growth and a sharp focus on operational improvements, operating profit increased 290% to $872 million, adjusted operating profit increased 140% to $1,054 million and adjusted operating margins approximately doubled to 15.3% for the year.

Our strong operating results translated into greatly improved cash flow in 2023 even as Vertiv continued to invest in innovation and capacity expansion.

Operating cash flow was $901 million and adjusted free cash flow was $778 million for the year, both increasing more than $1 billion from 2022. Vertiv continued to pay down debt with net leverage at the end of 2023 at 1.9x, within our target net leverage range of 1.0x to 2.0x.

Reflecting this strong financial performance and cash flow, Vertiv raised its annual cash dividend to $0.025 per share in 2023 and raised its annual cash dividend to $0.10 per share for 2024, to be paid quarterly with the first $0.025 dividend having already been declared and paid. Additionally, the Board approved a share repurchase program authorizing the company to repurchase up to $3 billion of common stock through 2027. These steps demonstrate the flexibility of our capital deployment strategy.

A Robust and Accelerating Market

Data continues its relentless growth and demand for critical digital infrastructure remained strong in 2023, driven by the continued development of the cloud and an accelerating demand for artificial intelligence (AI) infrastructure. The acceleration of AI is an additional tailwind compounding favorable market trends that were already underway. We expect the cloud and colocation data center market to grow 14-17% over the next five years. As a result, we expect total annual growth in the data center market to rise 9-12% over the next five years.

In telecom, which tends to be more cyclical and where Vertiv has deep relationships with the telecommunications network operators, providers are gearing up to handle these growing volumes of data and the need for data centers to communicate at high speeds. Vertiv technology is essential for businesses in commercial and industrial sectors, such as healthcare, retail, and manufacturing, as their applications become more vital. All of these trends play directly to Vertiv’s strengths — our unique ability to develop and deliver solutions across the entire thermal and power technology spectrum and customize at scale, our unmatched service organization, our strong partnerships with leading industry and technology players, and our deep customer relationships. We believe that Vertiv is uniquely positioned for continued leadership in a strong and accelerating market.

Gearing Up for Growth

In 2023, Vertiv expanded its capacity, footprint, and capabilities to meet current commitments, a reflected in our record-high backlog, and to meet accelerating customer demand for data center infrastructure to support deployment of high-performance compute needed for AI applications.

We are continuing to invest in capacity, footprint, and capabilities across the spectrum of our thermal and power management technologies.

Since acquiring the E&I Engineering business in November 2021, Vertiv has more than doubled its manufacturing capacity for switchgear, busbar, and integrated solutions by opening new facilities and expanding production capacity in existing facilities. In November 2023, Vertiv announced its expansion with a new manufacturing facility in Londonderry, Northern Ireland, to support growing demand in Europe, the Middle East and Africa (EMEA) and globally. We anticipate doubling capacity again by the end of 2025 through increased utilization and expansions underway in South Carolina, Mexico, Slovakia, United Arab Emirates, Ireland, and Northern Ireland.

In December 2023, Vertiv acquired CoolTera Ltd. (CoolTera), a leading provider of liquid cooling solutions for high-density/AI computing. The addition of CoolTera further strengthened Vertiv’s expertise in high-density cooling solutions and enhanced our ability to serve our global data center customers and the needs of AI at scale. We are focused on quickly and efficiently integrating CoolTera into the Vertiv global manufacturing footprint, and we have started production of liquid cooling solutions utilizing the CoolTera technology and know-how acquired through the transaction beginning in February 2024, just two months after acquisition.

In early January 2024, Vertiv opened a new manufacturing facility in Pune, India. This is Vertiv’s third in India and will help meet surging demand for critical digital infrastructure solutions globally, including India and the APAC region in general. The new plant adds meaningful manufacturing capacity for our thermal management solutions tailored for colocation, cloud, telecom, and enterprise data centers.

Having the right capacity in place, and the flexibility and geographic presence that our customers require, is critical to sustaining growth and to ensuring resiliency in a dynamic market environment. Scale matters, particularly in the fast-growing hyperscale and colocation segments of the market, and Vertiv’s unique ability to scale efficiently and globally is a key competitive advantage that is recognized by our partners and customers.

Partner of Choice

Deepening relationships with our customers remains our paramount priority and the linchpin to our continued market leadership. One crucial way we are doing that is through our collaboration and partnerships with key technology leaders and customers to deliver innovative and groundbreaking critical digital infrastructure solutions. In 2023, Vertiv announced that it teamed with long-time technology partner NVIDIA and others to secure a $5 million grant from the U.S. Department of Energy’s COOLERCHIPS program for a three-year advanced cooling system project aimed at solving future data center efficiency and cooling challenges by combining for the first time two data center liquid cooling technologies into a single thermal management system.

In November 2023, Vertiv announced a collaboration with Intel to provide a liquid cooling solution that will support the revolutionary new Intel Gaudi3 AI accelerator, which is scheduled to launch in 2024. AI applications and high-performance compute generate higher amounts of heat, and liquid cooling is gradually becoming key to the transition to compute enabled by graphics processing units (GPUs). Partnerships such as these reflect the strength of Vertiv’s liquid cooling technologies and our ability to support the leaders of next generation AI technologies, like NVIDIA and Intel.

These partnerships demonstrate Vertiv’s industry-leading technology to support AI deployment at scale today, and through these collaborations with key technology leaders, we are developing a robust pipeline of future-ready technologies. We are in the earliest stages of AI deployment and are well-positioned to further strengthen our industry leadership.

Accelerating Innovation

Collaboration with our customers and technology partners is one crucial way Vertiv is driving innovation. Innovation is absolutely central to our strategy and it ensures we stay at the forefront of the industry. We continue to increase our investment in ER&D to enhance and expand our portfolio of offerings and develop and deploy the next generation of technologies for our customers and partners. Over the past several years, we’ve focused on institutionalizing a process to accelerate the speed at which we transform promising technologies into commercial products. Our ability to rapidly innovate is more important now than ever before across all the markets we serve and to enabling AI infrastructure.

Vertiv’s ability to provide end-to-end solutions across the entire power train and thermal chain is a critical advantage in meeting the unprecedented need for power and cooling, and in helping our customers to scale and meet the challenges of high-density compute with more demanding data workloads.

In 2023, we continued to introduce innovative new products to the market to meet current and future customer needs, including:

• The Vertiv™ Liebert® AFC chiller, a high-density outdoor, packaged free-cooling unit that provides capacities required to support general compute and enable future-ready solutions to adapt to hybrid data centers deploying liquid cooling applications common in AI and high-performance compute. Previously available in EMEA, Latin America, and Asia, the unit was introduced to the North America market in late 2023
• The Vertiv™ DynaFlex BESS is a battery energy storage system that enables energy resilience and operational flexibility for mission-critical facilities. The system allows organizations to fully leverage the capabilities of hybrid power systems, including solar, wind, hydrogen fuel cells, and other forms of alternative energy. This is a crucial step toward enabling “always on” power for mission- critical systems and providing system operators flexibility in their use of alternative energy sources.
• The Vertiv™ Liebert® XDU coolant distribution unit, which is designed to support liquid cooling within high-density environments and is available as both liquid-to-liquid and liquid-to-air heat exchange design, allows customers to tap into the benefits of liquid-cooled servers to support higher rack densities while maintaining optimal system conditions more efficiently.
• The Vertiv™ TimberMod™ is a variant for prefabricated infrastructure solutions, which can significantly reduce carbon footprint compared to steel alternatives. Mass timber, a type of engineered wood used in building construction, if responsibly sourced from well-managed forests as defined by the Forestry Stewardship Council, serves as a construction material with the potential to minimize resource depletion and lower carbon footprint by up to three times compared to steel, based on the reduction of carbon emissions associated with the cradle-to-gate product lifecycle and the transport of materials and structural elements to the assembly site.

We believe that Vertiv has the most comprehensive portfolio in the data center industry and our continuous, relentless innovation is how we will maintain and strengthen our market leadership.

Looking Ahead

Ongoing digitization, the rapid evolution of energy transition technology, and the continued increase in data center traffic, compounded and accelerated by the rapid emergence of AI, are robust trends and all play to Vertiv’s strengths in delivering the critical digital infrastructure the world needs. We are making the investments in innovation and expanding capacity to meet that accelerating demand.

At the same time, the global geopolitical environment has become even more volatile and uncertain. We are building resiliency into everything Vertiv does, from our supply chain to how we design and develop our products.

We have continued to develop and deploy the Vertiv Operating System (VOS) across the company, in operations and across the main processes, to realize operational efficiencies and productivity improvements across the entire business. We are vigorously adopting lean methodologies throughout the organization. These are foundational elements of our relentless pursuit of operational excellence.

While we are proud of the great progress made in 2023, our focus is squarely on building the future of Vertiv. We are doubling down on operational excellence and execution, building a high-performance culture, accelerating innovation, and deepening our relationships with our customers and partners. That’s how we will create long-term value for our customers, employees and shareholders.

Giordano Albertazzi
Chief Executive Officer

David M. Cote
Executive Chairman

Forward-Looking Statements

This letter contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27 of the Securities Act, and Section 21E of the Securities Exchange Act. These statements are only predictions and actual events or results may differ materially from those in the forward-looking statements set forth herein. Readers are referred to Vertiv’s filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q for a discussion of these and other important risk factors concerning Vertiv and its operations. Vertiv is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.

^[1]This letter contains certain non-GAAP metrics. For reconciliations to the relevant GAAP measures and an explanation of the non-GAAP measures and reasons for their use, please refer to Annex A in the Company’s proxy statement, filed on April 26, 2024.