Sentiment Analysis of the earnings transcript to help figure out if there are any bullish or bearish sentiments that could be gathered from it. We're doing ML and AI based analysis on the earnings call to get some more insights.
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| Statement |
|---|
| Adjusted free cash flow of $778 million drove an adjusted free cash flow conversion of 114%, with this improved conversion benefiting from a significant increase in deferred revenue, primarily from advanced customer payments, which increased $280 million or 80% in the year while sales were up 21%, which we estimate contributed about 30 percentage points to that conversion |
| Our stock price increased 252% in 2023, putting us well ahead of the number one performer in all of the S&P 500 and its up very well again so far this year |
| We announced the capital allocation strategy at our November Investor Conference and is very flexible and we believe is structured well to provide additional benefits to share owners and is a great reflection of the cash generating capability of the company |
| A very nice and exceptionally promising change from where we were |
| We finished the year strong, quite strong in fact, and we fully expect this to set us up well to continue to provide good returns for our share owners in 2024 and beyond |
| Good year 2023 and looking forward for a stronger year yet in 2024, a lot of potential, very excited |
| You'll hear Gio talk about his focus areas for 2024 and what we plan to accomplish this year to deliver another good year for our investors |
| Backlog 16% up is something that makes us certainly very happy and that is heading in the right direction |
| Backlog grew 16% to reach a record high of $5.5 billion |
| But instead, we are convinced, and we are very happy about the pipeline, and we are happy about the example and specifically refer to our order intake in Q1 |
| Having said that, we're very happy about the trajectory, we're very happy about the trajectory of what is univocally destined to AI, but also the pull-through of what we know, believe, see is AI-driven, medium, long-term in our pipeline |
| We believe we meet the criteria and we believe Vertiv is a good candidate for S&P 500 inclusion |
| We finished the year strong |
| But we are very happy about the trajectory of the backlog and the trajectory of the pipeline |
| But we feel pretty good that we see continued growth in those customer advance payments |
| So as it relates to deferred revenue, and I may oversimplify this, but deferred revenue can grow for two reasons, one is, as you mentioned, backlog grows but the other is just improved execution and further penetrating customers with those advanced payments |
| Orders grew 23% year-on-year and 18% sequentially, good across all regions |
| Additionally, book-to-bill was very strong at 1.3x, a demonstration of market strength that gives us confidence in what we believe will be a strong demand environment for ’24 and beyond |
| Adjusted operating profit of $330 million and adjusted operating margin of 17.7%, really a step function improvement and a demonstration of our sharpened operational execution |
| We're positive about that |
| So we're positive |
| I'm pleased with a strong foundation |
| As we enter 2024, coupled with strong market demand, we feel good about our trajectory for the year and beyond |
| Cloud/Hyperscale continues to lead the growth with tangible signs of AI deployment and very strong build plans |
| We continue to see encouraging signs in Enterprise with customers starting to develop AI plans for their business |
| We like the acceleration in orders and the -- you remember we were vocal about the strength of pipeline, both at Earnings Call in October and in November at Investor Day |
| We have dynamics in the sense that certainly our second half orders ’23 were strong and good |
| So the -- as you notice, of course, we are very happy about our book-to-bill and our backlog |
| But we feel very good about our business in America |
| The India market is quite exciting and we are well positioned |
| Statement |
|---|
| Our sales performance was within guidance range, but slightly below midpoint, which was mainly attributable to a weaker China and some project delays in EMEA |
| APAC adjusted operating margin declined 220 points with unfavorable mix and the timing of fixed cost contributory factors |
| EMEA grew 1% organically in the fourth quarter, which was lower than anticipated, primarily due to delays on several larger projects |
| From a regional standpoint, APAC remains soft but continues to be a story of China and the rest of Asia |
| APAC sales increased 3% organically, but continues to be weighed down by China where sales were relatively flat year-over-year, but below expectations included in our quarterly guidance |
| We don't think the market is getting weaker but recovery is slow paced, if at all |
| We anticipate they will be down sequentially from Q4 but this is just a normal business pattern |
| So I'm thinking about the organic sales growth guide for 2024, which certainly terrific in an absolute sense is obviously a lot lower than what you achieved in 2023 |
| We do not see any imminent cycles and hence, we continue to believe that that market will be pretty slow |
| The challenge here for all in the industry, and that's why we cooperate very, very strongly with hyperscalers and the largest colos, is how do you design it in a way that you can transition that way? How can you build that intrinsic flexibility there? So that's why it's very difficult for me to answer in a credible way to your question |
| We certainly will have a challenging comparison in Q1, so do not expect necessarily this acceleration that we shared with you to happen necessarily in Q1 |
| It’s just -- on a net basis, it's just material slowdown versus 2023 |
| As I explained on a couple of occasions, it's very, very hard for us and I think for everyone, truly to be exact |
| As mentioned, this is lower than 2023 conversion primarily due to assumptions with deferred revenue and higher investment in CapEx |
| It's never infinite, but the constraining factor, if you will, if we can call it so, is the fact that simply there's large projects and with large projects we're talking have relatively long requested lead times from our customers |
| As Gio mentioned, that leverage declined to 1.9x within our target long-term leverage range of 1x to 2x and down from 5.6x at the end of 2022 |
| I mean, do you guys expect to grow orders in 2024? And I think you said you'd grow that deferred balance but it would be growing just slower than the 80% that you saw this year |
| 5G, of course, created acceleration a few years ago and then slowed down |
| Just by the same token, I've been vocal about the fact that while we continue to believe that we operate in a price favorable environment, but the marginal price gains will diminish for obvious reasons and a different inflationary environment we're in |
| Steve Tusa But I guess, is there any time this year that you'd expect price declines in orders year-over-year? Giordano Albertazzi We do not expect that |
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