AquaVenture Holdings Limited (NYSE: WAAS) (“AquaVenture” or the
“Company”), a leader in Water-as-a-ServiceTM (“WAASTM”) solutions,
today reported financial results for the quarter and full year
ended December 31, 2018.
2018 Highlights
For the three months ended December 31, 2018:
- Total revenues of $41.8 million
reflected a 29.9% increase over the prior year period, comprised of
38.2% and 22.6% increases in the Seven Seas Water and Quench
segments, respectively.
- Net loss of $6.7 million, or ($0.25)
per share, compared to net loss of $6.3 million, or ($0.24) per
share, in the prior year period.
- Adjusted EBITDA was $14.3 million, a
32.2% increase over the prior year period. Adjusted EBITDA Margin
was 34.2%, an improvement of 60 basis points.
- Adjusted EBITDA plus principal
collected on the Peru construction contract increased 29.9% to
$15.6 million from $12.0 million in the prior year period.
- AquaVenture completed the strategic
acquisitions of AUC on November 1, which is included in our Seven
Seas Water segment, and Pure Health Solutions, Inc. (“PHSI”) on
December 18, which is included in our Quench segment. In addition,
Seven Seas Water entered into a 10-year water supply agreement with
the Water Corporation of Anguilla, and Quench completed several
smaller acquisitions during the quarter.
- AquaVenture accessed $150 million of
incremental borrowings to fund acquisitions and reduced its
interest rate.
For the full year ended December 31, 2018:
- Total revenues of $145.6 million
reflected a 20.6% increase over the prior year, comprised of 26.1%
and 14.6% increases in the Quench and Seven Seas Water segments,
respectively.
- Net loss of $20.7 million, or ($0.78)
per share, compared to net loss of $24.9 million, or ($0.94) per
share, in the prior year.
- Adjusted EBITDA was $48.6 million, a
23.8% increase over the prior year. Adjusted EBITDA Margin was
33.3%, an improvement of 80 basis points.
- Adjusted EBITDA plus principal
collected on the Peru construction contract increased 22.2% to
$53.5 million from $43.8 million in the prior year.
Tony Ibarguen, AquaVenture’s President and Chief Executive
Officer announced: “AquaVenture delivered another year of strong
financial results highlighted by our ability to drive growth both
organically and through M&A. We completed 11 transactions in
2018, including five in the fourth quarter. This success has been
across both our Seven Seas Water and Quench platforms, and the
fourth quarter’s results include the acquisitions of AUC and PHSI,
our two largest acquisitions since we became a publicly traded
company. AUC expands our offerings in the Seven Seas Water segment
in the attractive wastewater treatment and water reuse businesses,
and PHSI broadens both our direct and indirect sales channels
within our Quench segment. During the quarter we also amended our
senior secured credit agreement by increasing our borrowing
capacity and reducing our interest rate. These amendments helped
fund our fourth quarter acquisitions and support our future growth
initiatives. In summary, we are very happy with what we were able
to accomplish in 2018 as we continue to expand our
water-as-a-service solutions to more customers, in more locations,
and with a broader array of product offerings. Going forward, our
primary focus will continue to be on growing internally generated
cash flow and investing in strong, organic expansion, coupled with
continued strategic M&A execution in the water-as-a-service
applications of desalination, wastewater treatment and point-of-use
purification. Our team brings great passion to our purpose of
performing for our shareholders by creating clean water solutions
for customers around the world.”
Consolidated Financial Performance
For the fourth quarter of 2018, total revenues increased 29.9%
to $41.8 million from $32.2 million in the 2017 period. Total gross
margin of 54.0% was relatively flat compared to the prior year
period.
Total selling, general and administrative expenses (“SG&A”)
increased to $24.0 million in the fourth quarter of 2018 from $19.4
million in the same period of 2017.
Net loss for the fourth quarter of 2018 was $6.7 million,
compared to a net loss of $6.3 million in the same period of 2017.
Adjusted EBITDA was $14.3 million for the fourth quarter of 2018, a
32.2% increase over $10.8 million in the prior year period.
Adjusted EBITDA Margin of 34.2% for the fourth quarter of 2018
increased 60 basis points from 33.6% in the same period of 2017.
Adjusted EBITDA plus the principal collected on the Peru
construction contract was $15.6 million in the fourth quarter of
2018, an increase of 29.9% over $12.0 million in the same period of
2017.
Net cash provided by operating activities for the quarter ended
December 31, 2018 was $4.8 million compared to $4.4 million for the
same period of 2017. Capital expenditures were $6.7 million for the
fourth quarter of 2018, compared to $3.2 million in the same period
of 2017.
As of December 31, 2018, cash and cash equivalents were $56.6
million and total debt was $319.7 million.
For the full year ended December 31, 2018, total revenue of
$145.6 million increased 20.6% from $120.8 million in 2017. Gross
margin of 53.2% was relatively flat compared to the prior year.
Total SG&A increased to $83.6 million for the full year ended
December 31, 2018, compared to $72.4 million in 2017. Net loss for
the full year ended December 31, 2018 was $20.7 million, or ($0.78)
per share, compared to a net loss of $24.9 million, or ($0.94) per
share, in the prior year.
Adjusted EBITDA was $48.6 million for the full year ended
December 31, 2018, a 23.8% increase over Adjusted EBITDA of $39.2
million in 2017. Adjusted EBITDA Margin increased 80 basis points
to 33.3%, compared to 32.5% in the prior year. Adjusted EBITDA plus
the principal collected on the Peru construction contract was $53.5
million for the full year ended December 31, 2018, an increase of
22.2% over 2017.
Net cash provided by operating activities for the full year
ended December 31, 2018 was $26.9 million compared to $19.0 for the
same period of 2017. In addition, capital expenditures were $19.6
million, compared to $14.4 million in the prior year period.
Fourth Quarter and Full Year 2018 Segment Results
Seven Seas Water
Seven Seas Water revenues for the three months ended December
31, 2018 increased $5.7 million, or 38.2%, compared to the same
period of 2017, which were comprised of 35.5% inorganic growth and
2.7% organic growth. This increase was comprised of increases of
$2.8 million in product sales and $2.3 million in rental revenue
driven by the inclusion of the acquisition of the AUC operations
completed in November 2018. In addition, bulk water revenue
increased $0.7 million compared to the prior year period, driven by
increased volumes in certain operations and higher water rates in
others in the current quarter compared to the same period of 2017,
and the commencement of our water contract in Anguilla.
Seven Seas Water gross margin for the three months ended
December 31, 2018 decreased 50 basis points to 54.5%. The decrease
was primarily related to the acquisition of the AUC operations in
November 2018, which has an overall lower gross margin than the
bulk water business, partially offset by an increase in the bulk
water gross margin compared to the prior year period. Bulk water
gross margin of 55.5% increased 400 basis points compared to the
prior year period primarily due to lower depreciation expense in
connection with a purchase price refund received on in-service
equipment at our Trinidad operations and by higher revenues without
a commensurate increase in costs at our BVI operations, partially
offset by higher expenses for repairs and maintenance. Rental and
product sales gross margin of 74.7% and 17.5%, respectively, for
the year ended December 31, 2018 had no comparative period as both
related to the acquisition of the AUC operations. Financing gross
margin is 100% but causes a decrease to the total Seven Seas Water
gross margin compared to the prior year period as a result of
declining financing revenues due to the continued amortization of
the long-term receivables.
Seven Seas Water SG&A expenses for the three months ended
December 31, 2018 remained relatively flat compared to the same
period of 2017. SG&A expenses of $7.8 million during the fourth
quarter of 2018 included $0.7 million of higher amortization
expense of definite-lived intangible assets and $0.5 million of
higher compensation and benefits expense primarily due to the
acquisition of the AUC business. These increases were offset by
$1.2 million of lower share-based compensation expense resulting
from the completion of the vesting of certain equity grants made in
connection with our initial public offering in 2016.
Net income for our Seven Seas Water segment was $0.1 million for
the three months ended December 31, 2018 compared to a net loss of
$3.2 million in the same period of 2017. Adjusted EBITDA of $9.4
million for the fourth quarter of 2018 increased 33.7% over the
prior year period. Adjusted EBITDA Margin decreased 150 basis
points to 45.7% in the fourth quarter of 2018 from 47.2% in the
same period of 2017. The decline in Adjusted EBITDA Margin was
driven by higher expenses for repairs and maintenance during the
quarter at several of our plants. Adjusted EBITDA plus principal
collected on the Peru construction contract was $10.7 million in
the fourth quarter of 2018, an increase of 30.1% over the prior
year period.
For the full year ended December 31, 2018, Seven Seas Water
revenues were $66.4 million, an increase of 14.6% over 2017. Gross
margin increased 250 basis points to 55.7% from 53.2% in the prior
year. Total SG&A expenses for the full year ended December 31,
2018 increased $1.7 million to $30.1 million from $28.4 million in
2017. Net loss for the full year ended December 31, 2018 was $3.5
million compared to a net loss of $10.5 million in 2017. Adjusted
EBITDA was $31.7 million, an increase of 19.5% over the prior year.
Adjusted EBITDA Margin increased 200 basis points to 47.7% from
45.7% in the prior year. Adjusted EBITDA plus principal collected
on the Peru construction contract was $36.6 million, a 17.9%
increase over 2017.
Quench
Quench revenues for the three months ended December 31, 2018
increased $3.9 million, or 22.6%, compared to the same period of
2017, which were comprised of 13.2% of inorganic growth and 9.4% of
organic growth. Rental revenues increased $3.1 million, or 22.5%,
compared to the prior year period, which reflected 17.3% of
inorganic growth from acquisitions and 5.2% of organic growth due
to additional units placed under new leases in excess of unit
attrition. Product sales increased $0.8 million compared to the
same period of 2017 due to an increase in indirect equipment sales
to dealers, higher direct customer equipment sales and an increase
in coffee sales.
Quench gross margin for the fourth quarter of 2018 increased 40
basis points to 53.6% from 53.2% for the same period of 2017.
Rental gross margin for the fourth quarter of 2018 was 57.3%, an
increase of 70 basis points over the prior year period, primarily
due to continued leveraging of the platform with higher revenues
achieved as additional units are placed under lease without a
commensurate increase in costs. Product sales gross margin was
38.8% for the three months ended December 31, 2018 compared to
40.0% in the prior year period. The decrease was primarily due to
the increase in lower-margin indirect equipment sales compared to
the prior year period.
Quench SG&A for the three months ended December 31, 2018 of
$14.6 million increased $4.2 million compared to the prior
year period. The increase was driven by $2.3 million of higher
acquisition-related costs including contingent consideration
accounted for as post-combination earnout compensation, $0.9
million of restructuring expenses incurred in connection with the
acquisition of PHSI in December 2018, $0.6 million of higher
compensation and benefits expense primarily driven by increased
headcount from the inclusion of staff added from certain
acquisitions and additional resources to support growth strategy
and $0.5 million of higher amortization expense primarily related
to an increase in intangible assets from recent acquisitions.
Partially offsetting this was a $0.6 million decrease in
share-based compensation expense resulting from the completion of
the vesting of certain equity grants made in connection with our
initial public offering and a $0.3 million decrease in loss of
disposal of assets.
Quench had a net loss of $4.2 million for the fourth quarter of
2018 compared to a net loss of $2.0 million in the prior year
period. Adjusted EBITDA of $6.0 million for the fourth quarter of
2018 increased 23.2% over $4.8 million in the same period of 2017.
Adjusted EBITDA Margin increased 20 basis points to 28.2% in the
fourth quarter of 2018 from 28.0% in the prior year period.
For the full year ended December 31, 2018, Quench reported total
revenue of $79.2 million, a 26.1% increase compared to $62.8
million in the prior year. Gross margin decreased 220 basis points
to 51.2% from 53.4% in 2017. Total SG&A expenses for the full
year ended December 31, 2018 increased $9.3 million to $48.7
million. Net loss for full year ended December 31, 2018 was $11.4
million, compared to a net loss of $10.2 million in 2017. Adjusted
EBITDA was $20.4 million for the full year ended December 31, 2018,
a 22.7% increase over $16.7 million in 2017. Adjusted EBITDA Margin
decreased 70 basis points to 25.8% from 26.5% in the prior
year.
Corporate and Other
Corporate and Other SG&A for the three months ended December
31, 2018 increased $0.3 million compared to the same period of
2017, primarily due to higher professional fees in connection with
corporate activities including acquisitions and amendments to our
senior secured credit agreement.
For the full year ended December 31, 2018, SG&A was $4.8
million compared to $4.6 million in the prior year period.
2019 Outlook
For the full year 2019 outlook, the Company expects to achieve
the following results:
- Revenues between $190 million and $197
million;
- Adjusted EBITDA between $67 million and
$72 million;
- Principal collected on the Peru
construction contract is projected to be $5.3 million; and
- Adjusted EBITDA plus the principal
collected on the Peru construction contract between $72 million and
$77 million.
These ranges do not include estimates in connection with any
pending or future acquisitions.
The above statements are based on current targets. These
statements are forward-looking, and actual results may differ
materially. We do not provide GAAP financial measures on a
forward-looking basis because we are unable to predict with
reasonable certainty the ultimate outcome of unusual gains and
losses, acquisition-related expenses and purchase accounting fair
value adjustments, among other factors, without unreasonable
effort. These items are uncertain, depend on various factors, and
could be material to our results computed in accordance with
GAAP.
About AquaVenture
AquaVenture is a multinational provider of WAAS™ solutions that
provide customers a reliable and cost-effective source of clean
drinking and process water primarily under long-term contracts that
minimize capital investment by the customer. AquaVenture is
composed of two operating platforms: Quench, a leading provider of
filtered water systems and related services with over 140,000 units
installed at institutional and commercial customer locations across
the U.S. and Canada; and Seven Seas Water, a multinational provider
of desalination and wastewater treatment solutions, providing more
than 8.5 billion gallons of potable, high purity industrial grade
and ultra-pure water per year to governmental, municipal,
industrial and hospitality customers.
Conference Call and Webcast Information
AquaVenture will host an investor conference call on Wednesday,
February 27, 2019 at 8:00 a.m. EDT. Prior to the conference call,
AquaVenture will post an investor presentation on the Investor
Relations section of the Company’s website, www.aquaventure.com.
Interested parties are invited to listen to the conference call by
dialing 1-877-407-0789, or, for international callers,
1-201-689-8562 and ask for the AquaVenture conference call. Replays
of the entire call will be available through March 6, 2019 at
1-844-512-2921, or, for international callers, at 1-412-317-6671,
conference ID #13686947. A webcast of the conference call will also
be available through the Investor Relations section of the
Company’s website, www.aquaventure.com. A copy of this press
release is also available on the Company’s website.
Safe Harbor Statement
This release contains forward-looking statements that are made
pursuant to the safe harbor provisions of Section 27A of the
Securities Act of 1933 and of Section 21E of the Securities
Exchange Act of 1934. The forward-looking statements in this
release do not constitute guarantees of future performance.
Investors are cautioned that statements in this press release
regarding management’s future expectations, beliefs, intentions,
goals, strategies, plans or prospects, including, without
limitation, statements relating to AquaVenture’s strategic focus;
its forecast of full-year 2018 financial results; expectations
regarding future business development and acquisition activities;
its expectations regarding performance, growth, cash flows and
margins from recently completed and pending acquisitions; its
ability to capitalize on vertical integration opportunities; and
the impacts on operating results of the timing, size, integration
and accounting treatment of acquisitions, constitute
forward-looking statements. Forward-looking statements can be
identified by terminology such as “anticipate,” “believe,” “could,”
“could increase the likelihood,” “estimate,” “expect,” “intend,”
“is planned,” “may,” “should,” “will,” “will enable,” “would be
expected,” “look forward,” “may provide,” “would” or similar terms,
variations of such terms or the negative of those terms. Such
forward-looking statements involve known and unknown risks,
uncertainties and other factors including those risks,
uncertainties and factors detailed in AquaVenture’s filings with
the Securities and Exchange Commission. As a result of such risks,
uncertainties and factors, AquaVenture’s actual results may differ
materially from any future results, performance or achievements
discussed in or implied by the forward-looking statements contained
herein. AquaVenture is providing the information in this press
release as of this date and assumes no obligations to update the
information included in this press release or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
AQUAVENTURE HOLDINGS LIMITED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (IN
THOUSANDS) December 31, December
31, 2018 2017 ASSETS Current Assets: Cash and
cash equivalents $ 56,618 $ 118,090 Restricted cash — — Trade
receivables, net of allowances of $1,034 and $1,045, respectively
21,437 19,593 Inventory 15,496 8,228 Current portion of long-term
receivables 6,538 6,878 Prepaid expenses and other current assets
8,272 3,874 Total current assets
108,361 156,663 Property, plant and equipment, net 150,064 112,771
Construction in progress 15,427 10,437 Restricted cash 4,153 4,269
Long-term receivables 40,574 43,796 Other assets 6,251 4,307
Deferred tax asset 4,191 38 Intangible assets, net 205,443 122,169
Goodwill 190,999 99,495 Total assets $
725,463 $ 553,945 LIABILITIES AND SHAREHOLDERS'
EQUITY Current Liabilities: Accounts payable $ 8,235 $ 3,508
Accrued liabilities 25,116 12,837 Current portion of long-term debt
6,494 6,483 Deferred revenue 3,890 2,454
Total current liabilities 43,735 25,282 Long-term debt
313,215 167,772 Deferred tax liability 18,465 5,266 Other long-term
liabilities 13,450 11,429 Total
liabilities 388,865 209,749 Commitments
and contingencies Shareholders' Equity
Ordinary shares, no par value, 250,000
shares authorized; 26,780 and 26,482shares issued and outstanding
at December 31, 2018 and December 31, 2017,respectively
— — Additional paid-in capital 582,127 568,593 Accumulated other
comprehensive income (421 ) (17 ) Accumulated deficit
(245,108 ) (224,380 ) Total shareholders' equity
336,598 344,196 Total liabilities and
shareholders' equity $ 725,463 $ 553,945
AQUAVENTURE HOLDINGS LIMITED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Year Ended December 31, 2018 2017
2016 Revenues: Bulk water $ 57,262 $ 53,436 $ 50,893
Rental 64,216 52,997 48,699 Product sales 20,105 9,796 10,267
Financing 4,025 4,534 1,713
Total revenues 145,608 120,763 111,572 Cost of revenues:
Bulk water 26,516 27,145 25,525 Rental 28,025 23,484 21,437 Product
sales 13,565 5,779 5,869
Total cost of revenues 68,106 56,408 52,831 Gross profit 77,502
64,355 58,741 Selling, general and administrative expenses
83,645 72,421 70,876 Loss from
operations (6,143 ) (8,066 ) (12,135 ) Other expense: Gain on
bargain purchase, net of deferred taxes — — 1,429 Interest expense,
net (15,046 ) (11,537 ) (11,147 ) Other income (expense), net
(850 ) (1,850 ) 1,299 Loss before
income tax expense (22,039 ) (21,453 ) (20,554 ) Income tax expense
(benefit) (1,311 ) 3,411 365 Net
loss (20,728 ) (24,894 ) (20,919 ) Other comprehensive income:
Foreign currency translation adjustment (404 ) (17 )
— Comprehensive loss $ (21,132 ) $ (24,911 ) $
(20,919 ) Loss per share – basic and diluted(1) $ (0.78 ) $
(0.94 ) $ (0.28 ) Weighted-average shares outstanding –
basic and diluted(1) 26,583 26,426 25,784 (1)
Represents loss per share and weighted-average shares outstanding
for the period following the corporate reorganization and initial
public offering. There were no ordinary shares outstanding prior to
October 6, 2016 and, therefore, no loss per share information has
been presented for any period prior to that date.
AQUAVENTURE HOLDINGS LIMITED AND SUBSIDIARIES UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN
THOUSANDS) Year Ended December 31,
2018 2017 2016 Cash flows from operating
activities: Net loss $ (20,728 ) $ (24,894 ) $ (20,919 )
Adjustments to reconcile net loss to net cash provided by operating
activities: Depreciation and amortization 34,533 29,648 27,548
Share-based compensation expense 11,188 12,120 4,015 Provision for
bad debts 1,035 605 1,044 Deferred income tax provision (3,287 )
1,488 165 Inventory adjustment 308 89 (23 ) Loss (gain) on
extinguishment of debt — 1,389 (1,610 ) Gain on bargain purchase,
net of deferred taxes — — (1,429 ) Loss on disposal of assets 1,563
1,468 1,246 Amortization of debt financing fees 963 878 816
Accretion of debt — 60 333 Other 23 49 (53 ) Change in operating
assets and liabilities: Trade receivables 2 (4,301 ) (681 )
Inventory (2,162 ) (1,219 ) (450 ) Prepaid expenses and other
current assets (1,135 ) (710 ) 270 Long-term receivable 5,661 6,309
1,614 Other assets (4,124 ) (3,462 ) (2,283 ) Current liabilities
2,579 (1,011 ) 1,130 Long-term liabilities 463
460 778 Net cash provided by operating
activities 26,882 18,966 11,511
Cash flows from investing activities: Capital expenditures
(19,626 ) (14,445 ) (17,256 ) Proceeds from sale of fixed assets
680 — — Net cash paid for acquisition of assets or business
(198,473 ) (9,921 ) (45,875 ) Proceeds from disposal of business
2,879 — — Other — 22 3
Net cash used in investing activities (214,540 )
(24,344 ) (63,128 ) Cash flows from financing activities:
Proceeds from long-term debt 150,000 150,000 23,675 Payments of
long-term debt (6,528 ) (118,205 ) (17,517 ) Payment of debt
financing fees (70 ) (3,677 ) (340 ) Payments related to debt
extinguishment — (433 ) — Payments of secured borrowings (17,500 )
— — Payments of acquisition contingent consideration (112 ) — (864
) Proceeds from exercise of stock options 442 73 2 Shares withheld
to cover minimum tax withholdings on equity awards (422 ) (455 ) —
Proceeds from the issuance of Employee Stock Purchase Plan shares
285 204 — Issuance costs from issuance of ordinary shares in IPO
— (1,169 ) 123,030 Net cash
provided by financing activities 126,095
26,338 127,986 Effect of exchange rates on
cash, cash equivalents and restricted cash (25 ) 4
— Change in cash, cash equivalents and
restricted cash (61,588 ) 20,964 76,369 Cash, cash equivalents and
restricted cash at beginning of period 122,359
101,395 25,026 Cash, cash equivalents and
restricted cash at end of period $ 60,771 $ 122,359 $
101,395
AQUAVENTURE HOLDINGS LIMITED AND
SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS - SEGMENT DATA (IN THOUSANDS)
Three Months Ended December 31, 2018 Seven
Seas Corporate Water Quench &
Other Total Revenues: Bulk water $ 14,580 $ — $ — $
14,580 Rental 2,318 16,857 — 19,175 Product sales 2,817 4,267 —
7,093 Financing 977 — —
977 Total revenues 20,692 21,133 — 41,825 Gross
profit: Bulk water 8,085 — — 8,085 Rental 1,731 9,659 — 11,390
Product sales 493 1,659 — 2,152 Financing 977
— — 977 Total gross profit
11,286 11,318 — 22,604 Selling, general and administrative expenses
7,782 14,569 1,605
23,956 Income (loss) from operations 3,504 (3,251 ) (1,605 )
(1,352 ) Other expense, net (3,420 ) (1,011 )
(945 ) (5,376 ) Income (loss) before income tax expense 84
(4,262 ) (2,550 ) (6,728 ) Income tax expense (benefit) 17
(16 ) — 1 Net income
(loss) $ 67 $ (4,246 ) $ (2,550 ) $ (6,729 )
Three Months Ended December 31, 2017 Seven Seas
Corporate Water Quench
& Other Total Revenues: Bulk water $ 13,885 $ — $
— $ 13,885 Rental — 13,759 — 13,759 Product sales — 3,478 — 3,478
Financing 1,083 — —
1,083 Total revenues 14,968 17,237 — 32,205 Gross
profit: Bulk water 7,155 — — 7,155 Rental — 7,783 — 7,783 Product
sales — 1,391 — 1,391 Financing 1,083 —
— 1,083 Total gross profit 8,238 9,174
— 17,412 Selling, general and administrative expenses 7,663
10,412 1,306 19,381
Income (loss) from operations 575 (1,238 ) (1,306 ) (1,969 )
Other (expense) income, net (2,805 ) (772 )
221 (3,356 ) Loss before income tax expense (2,230 )
(2,010 ) (1,085 ) (5,325 ) Income tax expense (benefit)
1,016 (26 ) — 990 Net
loss $ (3,246 ) $ (1,984 ) $ (1,085 ) $ (6,315 )
AQUAVENTURE HOLDINGS LIMITED AND SUBSIDIARIES UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - SEGMENT DATA
(IN THOUSANDS) Full Year Ended December 31,
2018 Seven Seas Corporate
Water Quench & Other Total
Revenues: Bulk water $ 57,262 $ — $ — $ 57,262 Rental 2,318 61,898
— 64,216 Product sales 2,817 17,288 — 20,105 Financing 4,025
— — 4,025 Total
revenues 66,422 79,186 — 145,608 Gross profit: Bulk water 30,746 —
— 30,746 Rental 1,731 34,460 — 36,191 Product sales 493 6,047 —
6,540 Financing 4,025 — —
4,025 Total gross profit 36,995 40,507 — 77,502
Selling, general and administrative expenses 30,143
48,670 4,832 83,645
Income (loss) from operations 6,852 (8,163 ) (4,832 ) (6,143 )
Other expense, net (11,549 ) (3,374 ) (973 )
(15,896 ) Loss before income tax expense (4,697 ) (11,537 )
(5,805 ) (22,039 ) Income tax benefit (1,210 ) (101 )
— (1,311 ) Net loss $ (3,487 ) $ (11,436 ) $
(5,805 ) $ (20,728 )
Full Year Ended December 31,
2017 Seven Seas Corporate
Water Quench & Other Total
Revenues: Bulk water $ 53,436 $ — $ — $ 53,436 Rental — 52,997 —
52,997 Product sales — 9,796 — 9,796 Financing 4,534
— — 4,534 Total revenues
57,970 62,793 — 120,763 Gross profit: Bulk water 26,291 — — 26,291
Rental — 29,513 — 29,513 Product sales — 4,017 — 4,017 Financing
4,534 — — 4,534
Total gross profit 30,825 33,530 — 64,355 Selling, general
and administrative expenses 28,431 39,400
4,590 72,421 Income (loss) from
operations 2,394 (5,870 ) (4,590 ) (8,066 ) Other (expense) income,
net (9,673 ) (4,167 ) 453
(13,387 ) Loss before income tax expense (7,279 ) (10,037 ) (4,137
) (21,453 ) Income tax expense 3,246 195
— 3,441 Net loss $ (10,525 ) $
(10,232 ) $ (4,137 ) $ (24,894 )
AQUAVENTURE HOLDINGS LIMITED AND
SUBSIDIARIESUNAUDITED KEY METRICS(IN
THOUSANDS)
Management uses key metrics for internal reporting and
forecasting purposes, when publicly providing its business outlook,
to evaluate the Company’s performance and to evaluate and
compensate the Company’s executives. The Company has provided these
metrics because it understands that some investors and financial
analysts find this information helpful in analyzing the Company’s
financial results and comparing the Company’s financial performance
to that of its peer companies and competitors.
NON-GAAP FINANCIAL MEASURES
Among the key metrics are non-GAAP financial measures. The
Company has provided non-GAAP financial measures in addition to
GAAP financial results because it believes that these non-GAAP
financial measures provide useful information to certain investors
and financial analysts for comparisons across accounting periods
not influenced by certain non-cash items that are not used by
management when evaluating the Company’s historical and prospective
financial performance.
Adjusted EBITDA
Adjusted EBITDA, a non-GAAP financial measure, is defined as
earnings (loss) before net interest expense, income taxes,
depreciation and amortization as well as adjusting for the
following items: share-based compensation expense; gain or loss on
disposal of assets; acquisition-related expenses, including
professional fees, purchase consideration recorded as compensation
expense for acquired employees, and other expenses related to
acquisitions; goodwill impairment charges; changes in deferred
revenue related to our bulk water business; ERP system
implementation charges for a SaaS solution, and charges incurred in
connection with restructuring activities. Adjusted EBITDA should
not be considered a measure of financial performance under GAAP.
Management believes that the use of Adjusted EBITDA, which is used
by management as a key metric to assess performance, provides
consistency and comparability with our past financial performance,
and facilitates period-to-period comparisons of operations.
Management believes that it is useful to exclude certain charges,
such as depreciation and amortization, and non-core operational
charges, from Adjusted EBITDA because (1) the amount of such
expenses in any specific period may not directly correlate to the
underlying performance of our business operations and (2) such
expenses can vary significantly between periods.
Adjusted EBITDA Margin
Adjusted EBITDA Margin, a non-GAAP financial measure, is defined
as Adjusted EBITDA as a percentage of revenue.
A reconciliation of our GAAP net loss to Adjusted EBITDA, for
the periods presented is shown below:
Three Months Ended December 31, 2018 Seven
Seas Corporate Water Quench &
Other Total (in thousands) Net income
(loss) $ 67 $ (4,246 ) $ (2,550 ) $ (6,729 ) Depreciation and
amortization 4,558 5,214 — 9,772 Interest expense, net 3,226 876
944 5,046 Income tax expense (benefit) 17 (16 ) — 1 Share-based
compensation expense 735 280 171 1,186 (Gain) loss on disposal of
assets (255 ) 312 — 57 Acquisition-related expenses 1,144 2,336 356
3,836 Changes in deferred revenue related to our bulk water
business (45 ) — — (45 ) ERP implementation charges for a SAAS
solution — 252 — 252 Restructuring expense —
943 — 943
Adjusted EBITDA
$ 9,447 $ 5,951 $ (1,079 ) $ 14,319
Adjusted EBITDA Margin 45.7 % 28.2 % — % 34.2
%
Three Months Ended December 31, 2017 Seven
Seas Corporate Water Quench &
Other Total (in thousands) Net loss $
(3,246 ) $ (1,984 ) $ (1,085 ) $ (6,315 ) Depreciation and
amortization 3,590 4,282 — 7,872 Interest expense (income), net
2,682 773 (221 ) 3,234 Income tax expense (benefit) 1,016 (26 ) —
990 Share-based compensation expense 1,966 863 239 3,068 Loss on
disposal of assets 3 581 — 584 Acquisition-related expenses 965 10
— 975 Changes in deferred revenue related to our bulk water
business 92 — — 92 ERP implementation charges for a SAAS solution
— 332 — 332
Adjusted EBITDA $ 7,068 $ 4,831 $ (1,067 ) $
10,832
Adjusted EBITDA Margin 47.2 % 28.0 % —
% 33.6 %
A reconciliation of our GAAP net loss to Adjusted EBITDA, for
the periods presented is shown below:
Full Year Ended December 31, 2018 Seven Seas
Corporate Water Quench & Other
Total (in thousands) Net loss $ (3,487) $
(11,436) $ (5,805) $ (20,728) Depreciation and amortization 15,469
19,064 — 34,533 Interest expense, net 10,846 3,229 971 15,046
Income tax benefit (1,210) (101) — (1,311) Share-based compensation
expense 7,172 3,168 848 11,188 (Gain) loss on disposal of assets
(15) 1,578 — 1,563 Acquisition-related expenses 2,549 2,708 451
5,708 Changes in deferred revenue related to our bulk water
business 335 — — 335 ERP implementation charges for a SAAS solution
— 1,278 — 1,278 Restructuring expenses — 943 —
943
Adjusted EBITDA $ 31,659 $ 20,431 $ (3,535) $
48,555
Adjusted EBITDA Margin 47.7 % 25.8 % — % 33.3
%
Full Year Ended December 31, 2017 Seven
Seas Corporate Water Quench &
Other Total (in thousands) Net loss $
(10,525 ) $ (10,232 ) $ (4,137 ) $ (24,894 ) Depreciation and
amortization 14,306 15,342 — 29,648 Interest expense (income), net
8,391 3,599 (453 ) 11,537 Income tax expense 3,246 195 — 3,441
Share-based compensation expense 8,050 3,391 679 12,120 (Gain) loss
on disposal of assets (19 ) 1,487 — 1,468 Acquisition-related
expenses 1,766 149 — 1,915 Changes in deferred revenue related to
our bulk water business 460 — — 460 ERP implementation charges for
a SAAS solution — 2,152 — 2,152 Loss on debt extinguishment
820 569 — 1,389
Adjusted EBITDA $ 26,495 $ 16,652 $ (3,911 ) $
39,236
Adjusted EBITDA Margin 45.7 % 26.5 % —
% 32.5 %
KEY METRICS
Principal collected on the Peru construction contract
As part of our Peru acquisition, we acquired the rights to a
design and construction contract for the construction of a
desalination plant and related infrastructure. Pursuant to the
contract, we are entitled to receive monthly installment payments
that continue until 2024 and are guaranteed by a major shareholder
of the customer. Due to the manner in which this contractual
arrangement is structured, these payments are accounted for as a
long-term receivable. Prior to the adoption of the new revenue
recognition standard on January 1, 2018, the principal and interest
portions of these payments were not recognized as revenue in our
consolidated financial statements and therefore were not included
in Adjusted EBITDA or in determining Adjusted EBITDA Margin. As a
result of the adoption of the new revenue recognition standard, all
financial information presented herein has been restated, including
recording the interest portion of these payments as revenue and,
thus, including them in Adjusted EBITDA and in determining Adjusted
EBITDA Margin. The principal collected on the Peru construction
contract remains the only portion of these monthly payments that is
not recognized as revenue in our consolidated financial statements,
and therefore is not included in Adjusted EBITDA or in the
determination Adjusted EBITDA Margin.
Three Months Ended December 31, 2018 Seven
Seas Corporate Water Quench
& Other Total (in thousands) Principal
collected on the Peru construction contract $ 1,263 $ — $ — $ 1,263
Three Months Ended December
31, 2017 Seven Seas Corporate Water
Quench & Other Total (in thousands)
Principal collected on the Peru construction contract $ 1,164 $ — $
— $ 1,164
Full Year Ended December 31, 2018
Seven Seas Corporate
Water Quench & Other Total (in
thousands) Principal collected on the Peru construction
contract $ 4,900 $ — $ — $ 4,900
Full Year Ended December 31, 2017 Seven Seas
Corporate Water Quench & Other
Total (in thousands) Principal collected on the Peru
construction contract $ 4,514 $ — $ — $ 4,514
Adjusted EBITDA plus Principal collected on the Peru
construction contract
We understand that many in the investment community combine our
Adjusted EBITDA and the principal we collect from the design and
construction contract for purposes of reviewing and analyzing our
financial results. Our management and board of directors also use
this combination in evaluating our performance (including in
measuring performance for a portion of the compensation of our
executive officers) because they believe it is helpful in better
understanding the cash generated from our Seven Seas Water
business. In this regard, and for the sake of clarity and
convenience, the combination of our Adjusted EBITDA and the
principal collected on the Peru construction contract is
presented.
Three Months Ended December 31, 2018 Seven
Seas Corporate Water
Quench & Other Total (in thousands)
Adjusted EBITDA plus principal collected
on the Peru constructioncontract
$ 10,710 $ 5,951 $ (1,079 ) $ 15,582
Three Months Ended December 31, 2017 Seven
Seas Corporate Water Quench &
Other Total (in thousands)
Adjusted EBITDA plus principal collected
on the Peru constructioncontract
$ 8,232 $ 4,831 $ (1,067 ) $ 11,996
Full Year
Ended December 31, 2018 Seven Seas
Corporate Water Quench &
Other Total (in thousands)
Adjusted EBITDA plus principal collected
on the Peru constructioncontract
$ 36,559 $ 20,431 $ (3,535 ) $ 53,455
Full Year Ended December 31, 2017 Seven Seas
Corporate Water Quench & Other
Total (in thousands)
Adjusted EBITDA plus principal collected
on the Peru constructioncontract
$ 31,009 $ 16,652 $ (3,911 ) $ 43,750
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190227005146/en/
Press Releaseinvestors@aquaventure.comInvestors Hotline:
855-278-WAAS (9227)
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