Well, good morning, everyone. Welcome to day one of Oppenheimer's Nineteenth Annual Industrial Growth Conference. Very happy to have you with us. I'm Noah Kaye, Managing Director in Oppenheimer's Sustainable Growth and Resource Optimization Resource Practice. We're very pleased to have the management team of Vertiv here with us today for a fireside chat and meetings throughout the day. I'd like to welcome in CEO, Giordano Albertazzi, CFO, David Fallon, and VP Global Treasury and IR, Lynne Maxeiner. Thank you all for being here, and looking forward to the discussion. All right. Thanks, Noah. Thanks a lot. Well, fantastic. So it's an exciting and a busy time in your industry, and you've continued to see growth and demand. You had 60% orders growth last quarter, doubling of AI-related pipeline in the last couple of months, accelerating movement of projects from pipeline to orders. That's a lot of growth to manage. So maybe we can start with how the sales cycle is evolving. You know, can you talk us through when order placement is occurring in the project planning process? Is the customer already approved, secured before placing orders? Has site prep begun? Help us understand the cycle evolution. Yeah. So, of course, we're talking about the acceleration, the majority of acceleration is taking place on the colo hyperscale part of our market that we serve. So I'll concentrate there. And what we have seen, as we shared with the investor community a couple of weeks back, is really an acceleration of pipeline. When do customers place orders? Typically, large colo and hyperscalers place an order when they have definitely a site, when they have power, and then when they are about to start construction or already in the process of construction. Different parts of the portfolio, Vertiv, or anyway, generally speaking, digital infrastructure or data center infrastructure, may be order at different stages. But typically, we know where our kit and our systems and solutions will be installed, and we know the characteristics and the design. So it's a high level of certainty by the time we get an order. Actually, the time we quote and then get an order. That's on average the situation we face. Mm-hmm. As I was saying, in general, the acceleration of the pipeline. Yeah. Sorry. No, not at all, Giordano. Thank you. You know, and so having talked about involvement earlier in the planning process, you know, does this migration earlier in the project cycle support gains in wallet share? And where do you see the greatest opportunity for shared gains from this collaboration process? Yeah, we like this early involvement truly a lot. The fact that the infrastructure is undergoing changes, the fact that our clients need to, and anyway, everyone operating in the industry needs to understand what the future will look like in terms of infrastructure technology. And the fact that our customers often do not have an answer differently from periods of stability- Mm-hmm ... from a technology standpoint- Mm ... gives us the opportunity to sit around the table with our customers and share our vision with their vision, and so be involved early in the process. We define design with them and have deep technology conversations that clearly gives us the possibility to see better what's coming, but also to be earlier and stronger in the entire process of negotiation, defining future needs. We like it, we like it a lot. We believe this gives us opportunities for gain share across the spectrum of our technology. But certainly, there is a technology that is net new, that is the liquid cooling, and being early in the process gives us a particularly important opportunity to accelerate market share gain in that space. Yeah. You know, and we'll dive into liquid cooling in just a bit. You talked about the kind of confidence and certainty around the orders just given the timing of the cycle. A lot of discussion recently about power availability and utility interconnects as gating factors for deployment in the industry. You know, so to what extent is there any potential of timing risk to backlog from grid availability? And you know, I think I wanna take the flip side of this as well. You know, the company has UPS systems and battery storage, fuel cell offerings, and these all help address the power availability concern. To what extent are you seeing or anticipate increased uptake of those solutions, whether it's microgrids or redundant power supply? So, the way we look at the industry and the way we have characterized the industry is permitting and power availability, like, a slowing down factor on the growth that could be even higher than the growth that we have, you know, we've seen and expected. Mm. When we were talking about a 14%-17% growth for the colo and hyperscale, already that factored in these headwinds or these limiting factors. Mm-hmm. We do not see it necessarily as something that is creating a risk to our backlog. Mm. As I said earlier, when an order is placed to us, that's typically against an existing site, and the site is being built. So, thinking in terms of risk, I see that risk quite low. But as you say, and as I mentioned, certainly, power availability a factor, just like kind of a multiple sources of power, a factor. In this respect, the UPS role is becoming more important, from pure power backup to power management. Combine that also with BES S or, you know, other ways to manage, for example, transition across various energy sources, and you'll see a power infrastructure that is increasingly complex- Mm ... for a data center. And that's something that we like. We are spending R&D efforts to strengthen the portfolio further, adding battery energy storage systems and fuel cells solutions to the rest of our end-to-end complete power portfolio. That's exactly because the market needs that, and we, being a key player in the space, and certainly one with enormous depth of knowledge of the application, can certainly help our customers and profit from the situation. Gio, I want to unpack that just a little bit more, because, you know, I, obviously, you know it, people in the industry know it. I'm not sure investors or all investors fully appreciate the difference that, you know, efficiency and power quality management, you know, are making here in terms of, you know, both reliability and real, you know, cost savings, you know, to customers. As you get into these bigger, you know, data centers, you know, talking towards, you know, gigawatt, the efficiency, 1% of efficiency is a huge delta, right? In terms of, of performance, in terms of, you know, cost savings. And so maybe you can talk a little bit about your historical strength and, you know, medium to large size UPS, you know, why that really matters more now, to what extent it's a share gain driver. Yeah, the three-phase, medium, large power UPS has been historically a very important strength of Vertiv's portfolio, built over the decades and always with a very sharp focus on data center applications. So we see that, as I was saying, corroborated by the dynamics of the industry. So if it was important before, it's gonna be even more important going forward. It's not just about clean energy, it's about managing different sources of energy, and doing that in an increasingly efficient manner. So, efficiency, a couple of points of efficiency can mean $ millions in energy cost for a data center. When it comes to power quality, that's a part that is non-negotiable, given the critical nature and the, I can say, how important it is to protect, to protect the loads. Mm. When the load is very expensive and very critical in terms of business continuity, GPU-based server or rack- Mm ... or as an entire AI Factory- Mm ... well, then you understand that it's absolutely imperative to have the highest power quality. At the same time, you understand that any down times, be it at rack level or the entire infrastructure level, can be extremely painful economically. There is actual cost, but there is also reputational cost for the providers of services- Mm ... of, IT services. Yeah. So in the context of these longer project timelines, you know, how do we think about margin protection on the backlog, just as we get into these longer project sales cycles? Yeah, we, we talked several times already, and indeed, you have seen that realized in our, in the price that we have delivered in 2022 and 2023, but also in our projections going forward of price cost positivity. We have a pricing muscle as we like to say, that is quite strong at this moment. So when we think about long-term agreements and backlog that goes out, you know, when we price, we factor in scenarios. When we negotiate terms, we factor in ways to be able to have conversations and have triggers with our customers to shoot the direction of travel from a cost perspective be different from what we are forecasting. But then there is the ability to link our supplier agreements with our customer agreements. So it's really multifaceted. And I feel quite comfortable that we are, you know, touching or ticking all the boxes that we need to make sure that the long backlog coverage is net-net an opportunity for value in various areas. So, you've talked about maintaining a 25%-30% cushion on capacity versus supply in the past. How should we think about managing that cushion? Does movement towards some of these larger, longer cycle projects reduce the need to hold back capacity for, you know, what we call, you know, shorter turns revenue? We shouldn't see the, the lengthening lead times, as necessarily something that, requested lead time, just to be sure what our customers ask us to do- Right ... as something that changes the overall demand, demand model. When we say we have a 25%, say, 25% wiggle room, and that's probably the expression I, I literally use, is because we do not design our capacity on max utilization. Where a max utilization, for example, would be a full, third shift or more, if we can work. But nonetheless, our capacity is constantly, being taken, up. I gave examples of power in the last earnings call. I gave the example of, liquid cooling, prior, earnings call. So, we're constantly taking the capacity up. What we do not know, just like anyone does not know, is exactly how that demand may accelerate or peak, in terms of, you, you may have a, a big job coming to you, requiring a very specific, shortly time. Then we use all those mechanisms to absorb that. But at the same time, you may see a demand coming a little bit earlier than your ramp up of capacity has modeled, and then you use that wiggle room. But long term, you go back to not using that wiggle room, otherwise, wiggle room, it is no more. But that's the logic that we use. Maybe it'll help us to understand better, to what extent the orders growth you're seeing is mainly coming from the hyperscalers, which would presumably be bigger projects, larger, longer lead times, versus on-prem? Maybe you can touch on on-prem as well in terms of the trends there. Yeah. I've been very clear about two things. One is the acceleration that we have seen, both in the last quarter of 2023 from an order standpoint, and this first quarter of 2024, is predominantly coming from a hyperscale and colocation. That's where this accelerated way of getting ready for AI is really coming. The non-core or cloud, so everything, let's call it, enterprise, that will be predominantly and more an on-prem solution and, you know, and many other types of models. Mm. But that is pretty much reflecting the direction that we shared with the investors at Investor Day in November. So, a mid-single, a mid-single digit, more or less. When we think about what's going on in the market, you know, is there a possibility that the enterprise part of the business will accelerate just as simple effect of AI being adopted more more globally and more across the board in the market? Well, I think, I think that possibility is there. I think the possibility is there. Still it's early stage, but, but it. I think it's a, it's a very legitimate way of looking at the market dynamics. I want to put a little spending framework around your capacity management and your growth. You guided CapEx to $200 million in 2024, $130 million last year. You know, you're ramping liquid cooling capacity, I believe it was 40-45x by the end of 2024. You're doubling switchgear busway capacity by 2025. First of all, talk about how those expansions are tracking, if you can, and then can you talk about how much of this investment is based off of just purely the current, you know, orders and backlog versus where you see the industry moving over time? ... The examples of capacity expansion that you gave are certainly then accompanied by a more general expansion of capacity across all lines of business. But definitely the expansion of capacity is following the plans that we have internally, and that we have-- that even those that we have shared with investor community. So we are happy about the progress. Yeah, we are pretty satisfied about the way we are implementing those plans, definitely. When it comes to what do we base that upon? We base it on demand, expectations or backlog. Well, it's hard to separate the two in a sense, because we have demand expectations, then we have-- I mentioned we are pretty maniacally looking at our pipeline, opportunity pipeline. That gives us quite a good visibility out in the market. So there is a demand, where the demand should go, modeling what's happening out there, what people, experts in the industry say, and we are among those industry experts. Then we corroborate that vision with what we see happening in our pipelines, speed of the pipeline, the size of the pipeline, how many opportunities we generate in any given period, and we track that speed as well, and then we see how that translates into orders, and backlog. So it's hard for me to separate the three. Mm. It's almost a flow. So we look at all three together. Clearly, they need to be consistent. In the moment, they are inconsistent somewhere along this, let's say, demand, high-level demand expectations, pipeline indications, and order booking. That means there's something wrong somewhere in the process, in the expectations or in the execution. But in this moment, the three are pretty much heading in the same direction. And we like what we see in terms of the direction. Very interesting perspective. Thank you. So I wanted to talk about a portion of the business that doesn't always get a lot of airtime, and that's services. You know, we're wondering, what does all this orders growth imply for service? First, can you help us size the service opportunity that's really embedded, you know, in the backlog and the implied growth of the company? Okay. So you know, I like to say service is one of the most important superpowers of Vertiv. Mm-hmm. It's really something that separates us from competition, but something that is enormously important, and if you will, testament to the fact that we've been in the industry for years and decades, so that we have built something that indeed that takes decades to build. So, I agree also with you that, you know, we-- everyone can think and talk more in terms of a service and service opportunity, and we do that, and we do that a lot internally. How much service is embedded in our backlog? Two aspects to that. First, important to separate the two souls or the two parts of services for us. One is project services. Everything that goes and is sold with a product, with a system, with a solution, and that typically includes project manager, project management, commissioning, all the things that allow for a complex system and product, typically part of a very complex infrastructure, to start work, I mean, to be available to the customer. So that's an important part of the business. That is squarely into, in actuality, let's say, part of the backlog when we say orders for AI hyperscale has increased. That's part of those orders. But then there is, in that backlog, clearly and very importantly, let's say the opportunity, the potential opportunity. Everything we do, everything we deliver is very critical. Back to our conversation, very critical. If you think about the very critical nature of liquid cooling, can you be more critical than that? You actually touch the actual server, the actual GPU. So you are in the... You know, it's almost the blood and the brain. GPU is the brain, and the liquid circuit is the blood. So criticality is of the essence. So, the installed base that the backlog creates, is that something that we typically capture quite well? Well, you know, it's funny because I think historically, your, your service contracts were more associated with, with power rather than thermal. And by the way, I'm always gonna be attentive to the service opportunity 'cause I think- Uh-huh ... I know I worked in my family service business in the HVAC space, so, you know, I'm somewhat biased. But basically, as liquid cooling deployments grow, you know, it seems like the number of companies that can actually service these systems is more limited, perhaps than the broader thermal offering. You know, so can you maybe talk about the incremental service revenue opportunity associated with the liquid cooling build-out? So you were saying UPS probably historically more central, is that correct, to the equation? Correct. That also has to do with some of the model, service models, that may have characterized our activity in North America for the non-power side of the portfolio. But more generally speaking, again, I see—I always look at the service opportunity being proportional to the critical nature of the kit. So clearly power very critical and complex. Hence a direct and a very crisp opportunity. But when you see and when you look at the, at the thermal, part of the business, you take, large chillers, large, direct expansion, units, you think in terms of, again, liquid cooling for the reasons that I was explaining. Then the very same critical nature that, is characteristic of a, of a UPS, say, definitely applies, definitely applies to, to that part of the infrastructure too. So we see, comparable, comparable to the UPS and to the power, attached rates for the, for that part of the thermal, of the thermal portfolio. And again, I go back to my, the specific case of liquid cooling, my analogy of, of the brain and the blood veins, et cetera, and the CDU becomes the heart. And it's a heart where you want to have a service presence very, very close by, if not embedded, in the larger sites, to make sure that not only you can intervene if something goes wrong, but you can have the right telemetry, you can have the right digital services, the condition-based maintenance that equipment of that critical nature may have. So, one point you were mentioning is, not many companies have that service presence. Right. Well, I agree with that. Not many companies have that service presence. And again, if your data center is in, I don't know, in Spain, or if it is in on one side of the US, you cannot wait just to fly someone in, or in Singapore, or in Malaysia. You cannot wait to fly someone in if a problem occurs. You have to have people that are local and that are trained. Training is an important factor. We've been training service engineers, again, for decades. We have a very well-oiled machine, and the expansion and this acceleration requires a lot of training prowess. Sure. It's something that we make available to the industry. Thank you for that. You know, I think around the margin trajectory and services, you know, we can clearly see the improvement on the product side and gross margins, you know, as a combination of the pricing, the efficiency, the Vertiv Operating System. Services margins, more gradual improvement. How do we think about the margin trajectory for services, you know, relative to all the growth that you're seeing on the product side? I'll start talking about... Again, going back to the two aspects of services, the project services and the life cycle services. If you will, they also have somewhat different margin profiles, with the latter, of course, being more, you know, stronger as it is for every industry. So every time we look at service margin, let's remember there is a mix element to that equation, and a mix element that mixes more towards the project side of things when there is, again, acute acceleration on product demand, let's say. Having said that, the trajectory for service is pretty much aligned with the trajectory that we see for the rest of the industry. The same, the same logic, the same pricing, muscle, that we are using, the efficiency, the productivity that we're using for the rest of the business, that we are implementing for the rest of the business applies to service. Mm-hmm. Yeah, so, so on margins in general, you, you're guiding to 40% incrementals this year. You targeted 20+ margins in the 2026-2028 time frame. You know, we've been asked this by many, many investors: Is there any way to frame the plus comment in terms of what you could achieve with sustained incrementals above 30%? And, and how do we think about your biggest controllable levers to drive margin expansion in this time frame, besides the targeted 35%, you know, leverage on sales volume you typically have? Well, in general, what we say, and David always says that, and 20% is a number, and it's a number that we've had out there for quite some time, is a number that for us makes sense. It doesn't represent necessarily a ceiling, hence the plus. But, you know, what that plus plus will exactly look like, I think it would be a little bit premature to say. So, it's not that when we are at 20 or we'll be at 20, we'll pull the handbrake and stay there forever. Yeah. So let's see as we get closer to that level, what the opportunities are. And let's also see how the dynamics of the industry or the industries that we serve will play. When it comes to what are the levers? Certainly, there is the constant operational leverage that comes from fixed cost constant. So fixed cost constant is an important and continues to be a very important philosophy mantra for us. You know that, of course, we increase our spend in engineering and R&D in general to make capacity available. Yeah. But the underlying philosophy of fixed cost constant stays. Yeah. So anything else that doesn't have to scale up is sustained flat, and that is yielding and has proven to yield quite good operational leverage. And then, you know, an important element of what we do, an important change and acceleration in the last year and a half has been around Vertiv Operating System. So, driving productivity and driving efficiency across everything we do. Because I talked about fixed cost constant, productivity and leveraging our processes delivers a lot of that. But there is a variable part to VOS, to all the lean efforts that we are implementing that is starting to show in our numbers. A lot more to do, huh? Yeah. Just want to make sure no one thinks that, that we're done, we are done, and, and the, and efficiency and the productivity that we could have, have extracted from the, from the, from the company, from our system, from manufacturing, are already being extracted. Now, that's a forever journey, and we're very, very focused on, on continuous improvement and lean as part of Vertiv Operating System. And then there is the price cost, price cost lever that we have, already discussed quite, quite extensively. I want to end with a capital allocation question. You know, obviously, you saw a very strong deployment out of the gate in 1Q with buybacks, you know, $600 million spent on out of the $3 billion authorization. Can you talk to us a little bit about what the path is from here around buybacks? You know, is it going to be opportunistic? Are you looking to offset, you know, dilution? You know, talk to us a little bit about that philosophy and also, you know, where debt reduction sits in your priority list right now. I think we can and should go back to the philosophy that we shared with investor community on the twenty-ninth of November at our Investor Day. Things have not changed, actually. Our philosophy has not changed. We said that we, as you mentioned, authorization for buyback, we saw an opportunity, so we acted opportunistically. Going forward, we will continue with the same philosophy and with the same strategy. When it comes to debt leverage, we were talking about staying between one and two. Now, we're temporarily a little bit higher than that, and we also said that, you know, if for opportunistic reasons, we have to be a little bit higher than that, no drama. But again, going back to that 1-2 range, leverage is an important part of our strategy going forward. So it's the strategy as we shared it with the community in November, and that we have reiterated a few times since then. Well, we're at time. There are a lot of people listening. A lot of people want to meet with you today. We appreciate the time. Looking forward to more of the discussions today. I'm sure we're going to get into some of the additional questions we received. And those, anyone can follow up with us as they need. Again, you can email me at noah.kaye@opco.com. Again, you know, thank you very much to the Vertiv management team, and I hope everyone has a great conference. Thanks a lot. Thanks, everyone.