Bonds backing Vertiv Holdings Co. tumbled today after the special purpose acquisition company fell short of revenue estimates in the fourth quarter and delivered a miss on the earnings front.
Adjusted earnings per share of 6 cents marked a 50% drop from the same period in 2020 and fell far short of the 28 cents EPS Wall Street analysts were calling for. At $1.41 billion, fourth-quarter revenue was up 8% from the $1.31 billion Vertiv recorded this time a year ago, but it fell short of the consensus estimate of $1.42 billion.
Vertiv's $850 million October print of 4.125% senior secured bonds due 2028 shed around 4.25 points in mixed trading, dropping to 90.5 on the lows for a yield of about 5.853%. Inked in connection with its acquisition of E&I Engineering Ireland Ltd. and its affiliate, PowerGulf LLC, the bonds peaked in mid-January at around 101.375.
Guidance for the year ahead was another miss. Predictions of an adjusted per-share loss of 20 cents to 15 cents on revenue of between $1.1 billion and $1.15 billion in the first quarter did not live up to analyst expectations of a 23-cent-per-share gain on revenue of $1.27 billion. For the full year, Vertiv projected EPS between 65 cents and 75 cents on revenue ranging between $5.5 billion and $5.8 billion, versus Street expectations of $1.33 per share and revenue of $5.73 billion.
Vertiv executive chairman David Cote kicked off today's earnings call with a mea culpa and a pledge of a turnaround in the second half of the year.
"I and the Vertiv team are disappointed and embarrassed by our second half '21 and projected first half '22 financial performance. We got behind on the inflation recovery curve with insufficient price and have stayed there all year," Johnson told analysts, adding that the supply-chain issues that had exacerbated fourth-quarter losses continue to delay product completion.
CEO Rob Johnson urged investors on the call to look to the longer term.
"We won't see the full impact of our pricing actions in the first half of 2022, but those actions will kick in during the second half, and we expect the second half adjusted operating profit to be approximately $455 million, $230 million over the second half of 2021," Johnson said.
When asked about leverage and liquidity, Johnson said Veritiv faces no immediate covenant issues and that liquidity is expected to improve following a $50 million payment due at the end of June.
Vertiv generated an operating cash flow of $210.9 million in 2021, compared to $208.9 million the previous year with a $92 million cash interest benefit from debt restructuring offset by an inventory build, cash M&A expenses, and higher CapEx and cash taxes.
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