AquaVenture Holdings Limited (NYSE:WAAS) (“AquaVenture” or the
“Company”), a leader in Water-as-a-Service® (“WAAS®”) solutions,
today reported financial results for the quarter ended June 30,
2019.
Financial Highlights and Recent Developments
- Total revenues of $51.4 million reflected a 49.2% increase over
the prior year period, comprised of 10.3% organic growth and 38.9%
inorganic growth. Revenues on a segment basis comprised of an
increase of 49.6% for Quench and 48.7% for Seven Seas Water.
- Net loss of $3.5 million, or ($0.13) per share, compared to net
loss of $4.9 million, or ($0.19) per share, in the prior year
period.
- Adjusted EBITDA was $18.7 million, a 66.4% increase over the
prior year period. Adjusted EBITDA Margin was 36.4%, an improvement
of 380 basis points.
- Adjusted EBITDA plus principal collected on the Peru
construction contract increased 60.7% to $20.0 million from $12.4
million in the prior year period.
- The Company completed its first follow-on offering of 4,715,000
ordinary shares at a public offering price of $16.88, including
615,000 ordinary shares issued upon the underwriters’ full exercise
of their option to purchase additional shares. The aggregate net
proceeds received by the Company from the offering was
approximately $75 million, after deducting underwriting discounts
and commissions and other estimated offering expenses.
- Quench completed the acquisition of Aguaman, Inc. on June 1,
2019, acquiring substantially all the point-of-use water filtration
assets of the Miami-based company. In addition, Quench acquired the
point-of-use water filtration assets of Carolina Pure Water
Systems, LLC on July 15, 2019, which is based in Raleigh, North
Carolina. These asset acquisitions collectively added over 3,100
customers and 4,600 rental units to Quench’s installed asset
base.
Tony Ibarguen, AquaVenture’s President and Chief Executive
Officer announced: “AquaVenture delivered strong second quarter
results, significantly growing top line revenues and Adjusted
EBITDA plus principal collected on the Peru construction contract.
Our performance during the second quarter was fueled by the
strategic acquisitions made in 2018, as well as robust organic
growth. At Quench we continued to execute on our acquisition
strategy with two deals sourced through our indirect dealer
network. Additionally, the successful execution of our first
follow-on offering in July strengthens our balance sheet and
positions us well for future acquisitions. We are pleased with our
strong first half results and believe we have momentum to drive
solid performance for the remainder of the year. As a result, we
anticipate that full year 2019 results will be at the upper end of
the previously provided outlook ranges and are raising the floor of
the guidance ranges. We remain committed to driving growth in both
businesses 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, progressing towards our ultimate goal
of creating clean water solutions for customers around the
world.”
Consolidated Financial Performance
For the three months ended June 30, 2019, total revenues of
$51.4 million increased 49.2% from $34.4 million in the prior year
period, which were comprised of 10.3% organic growth and 38.9%
inorganic growth. Total gross margin of 51.7% decreased 120 basis
points from 52.9% in the prior year period.
Total selling, general and administrative expenses (“SG&A”)
increased to $22.9 million in the second quarter of 2019 from $19.3
million in the same period of 2018. SG&A as a percentage of
revenue was 44.5% for the three months ended June 30, 2019, a
decrease from 56.0% for the three months ended June 30, 2018.
Net loss for the second quarter of 2019 was $3.5 million,
compared to a net loss of $4.9 million in the same period of 2018.
Adjusted EBITDA was $18.7 million for the second quarter of 2019, a
66.4% increase over $11.2 million in the prior year period.
Adjusted EBITDA Margin of 36.4% for the second quarter of 2019
increased 380 basis points from 32.6% in the same period of 2018.
Adjusted EBITDA plus the principal collected on the Peru
construction contract was $20.0 million in the second quarter of
2019, an increase of 60.7% over $12.4 million in the same period of
2018.
For the six months ended June 30, 2019, total revenues of $97.9
million increased 46.3% from $67.0 million in the prior year
period. Gross margin was 52.0% compared to 52.6% in the prior year
period, a decrease of 60 basis points. Total SG&A was $45.7
million for the first half of 2019, or 46.7% of revenue, compared
to $38.9 million in the first half of 2018, or 58.0% of revenue.
Net loss for the six months ended June 30, 2019 was $9.1 million,
or ($0.34) per share, compared to a net loss of $11.3 million, or
($0.42) per share in the prior year period.
Adjusted EBITDA was $35.2 million for the six months ended June
30, 2019, a 63.3% increase over $21.6 million in the same period in
2018. Adjusted EBITDA Margin increased 370 basis points to 35.9%
from 32.2% in the prior year period. Adjusted EBITDA plus the
principal collected on the Peru construction contract was $37.8
million for the six months ended June 30, 2019, an increase of
57.8% over the prior year period.
As of June 30, 2019, cash and cash equivalents were $41.3
million and total debt was $318.2 million.
Net cash provided by operating activities for the six months
ended June 30, 2019 was $6.5 million compared to $13.8 million for
the same period of 2018. The decrease in cash flow from operations
was primarily due to higher working capital needs principally
driven by the substantial year over year growth in our Quench
segment, higher cash interest expense related to incremental
borrowings, and higher operating cash outflows related to the
prospective adoption of the new lease accounting guidance which
requires certain cash outflows to be recategorized in operating
activities from investing activities. Capital expenditures were
$16.9 million for the first half of 2019, compared with $7.2
million in the prior year period. The increase in capital
expenditures was primarily due to growth activities in connection
with the AUC operations.
Second Quarter 2019 Segment Results
Seven Seas Water
Seven Seas Water revenues of $22.9 million for the three months
ended June 30, 2019 increased $7.5 million, or 48.7%, compared to
the same period of 2018, which were comprised of 43.9% inorganic
growth and 4.8% organic growth. Bulk water revenues increased $1.3
million, or 8.7%, compared to the prior year period, primarily due
to an increase of $0.7 million from our USVI operations due to
higher production volumes in the current quarter compared to the
same period of 2018 and an increase of $0.4 million in connection
with the commencement of our water contract in Anguilla which began
in October 2018. Rental revenues and product sales increased $3.6
million and $2.7 million, respectively, due to the inclusion of the
AUC operations which were acquired in November 2018.
Seven Seas Water gross margin for the three months ended June
30, 2019 decreased 80 basis points to 55.3% compared to 56.1% in
the prior year period. Bulk water gross margin of 55.5% increased
250 basis points compared to 53.0% in the prior year period
primarily due to higher revenues in our USVI and BVI operations
without a commensurate increase in costs, partially offset by a
lower gross margin in St. Maarten due to the timing of certain
repairs and maintenance activities. Rental and product sales gross
margin of 72.9% and 15.8%, respectively, for the three months ended
June 30, 2019 had no comparative period as both related to the
acquisition of the AUC operations in November 2018.
Seven Seas Water SG&A expenses of $7.3 million for the three
months ended June 30, 2019 remained relatively flat compared to the
prior year period. The current quarter reflected an increase of
$1.2 million in amortization expense of definite-lived intangible
assets and $0.2 million higher compensation and benefits expense
primarily due to the acquisition of the AUC operations in November
2018. Offsetting these increases was a decrease of $1.5 million in
share-based compensation expense driven by the completion of the
vesting of certain equity grants made in connection with our
initial public offering in 2016. SG&A as a percentage of
revenue was 32.0% for the three months ended June 30, 2019, a
decrease from 46.5% for the three months ended June 30, 2018.
Net income for our Seven Seas Water segment was $1.4 million for
the three months ended June 30, 2019 compared to a net loss of $1.6
million in the same period of 2018. Adjusted EBITDA of $11.6
million for the second quarter of 2019 increased 58.3% over $7.3
million in the prior year period. Adjusted EBITDA Margin increased
310 basis points to 50.8% in the second quarter of 2019 from 47.7%
in the same period of 2018. Adjusted EBITDA plus principal
collected on the Peru construction contract was $12.9 million in
the second quarter of 2019, an increase of 51.2% over $8.5 million
in the prior year period.
For the six months ended June 30, 2019, Seven Seas Water
revenues were $43.0 million, an increase of 42.7% over revenues of
$30.1 million in the prior year period. Gross margin decreased 20
basis points to 55.8% from 56.0%. Total SG&A expenses of $14.6
million for the six months ended June 30, 2019 remained relatively
flat compared to the prior year period. However, SG&A as a
percentage of revenue decreased to 34.0% from 49.0% in the prior
year period. Net income for the first half of 2019 was $1.5 million
compared to a net loss of $3.9 million for the first half of 2018.
Adjusted EBITDA was $22.5 million for the six months ended June 30,
2019, an increase of 54.8% over $14.5 million in the same period of
2018. Adjusted EBITDA Margin increased 410 basis points to 52.3%
from 48.2%. Adjusted EBITDA plus principal collected on the Peru
construction contract was $25.1 million, a 48.2% increase over
$16.9 million in the prior year period.
Quench
Quench revenues of $28.5 million for the three months ended June
30, 2019 increased $9.5 million, or 49.6%, compared to the same
period of 2018, which were comprised of 34.6% of inorganic net
growth and 15.0% organic growth. The prior year period included
$1.1 million of revenue from the Atlas High Purity Solutions
business which was divested in October 2018. Rental revenues
increased $4.2 million, or 28.2%, compared to the prior year
period, which was comprised of 21.6% inorganic net growth from
acquisitions and 6.6% of organic growth due to additional units
placed under new leases in excess of unit attrition. Product sales
increased $5.3 million compared to the same period of 2018, which
included $3.5 million of inorganic net growth primarily due to the
acquisitions of PHSI and Bluline in December 2018, and $1.8 million
of organic growth driven by higher indirect dealer equipment sales
and coffee sales.
Quench gross margin for the three months ended June 30, 2019
decreased 140 basis points to 48.8% from 50.2% for the same period
of 2018. Rental gross margin for the second quarter of 2019 was
52.2%, a decrease from 55.1% in the prior year period, primarily
due to an increase in depreciation and amortization expense as a
percentage of revenues related to additional units placed on lease
and higher freight expense, partially offset by lower compensation
and benefits as a percentage of revenues due to continued
leveraging of the platform achieved through increased customer
density. Product sales gross margin increased to 42.0% for the
three months ended June 30, 2019 from 33.1% in the prior year
period, primarily driven by the higher-margin indirect PHSI dealer
equipment sales.
Quench SG&A expenses for the three months ended June 30,
2019 increased $3.2 million to $14.4 million compared to the prior
year period. The increase was driven by $1.2 million higher
amortization expense primarily related to an increase in intangible
assets from recent acquisitions, $0.9 million higher
acquisition-related expenses primarily due to adjustments
associated with purchase consideration recorded for acquired
employees, $0.8 million higher compensation and benefits primarily
driven by increased headcount from the inclusion of staff added
from certain acquisitions and a $0.5 million increase in general
expenses related to the expansion of our operations. Partially
offsetting this increase was a $0.5 million decrease in share-based
compensation expense driven by the completion of the vesting of
certain equity grants made in connection with our initial public
offering in 2016. SG&A as a percentage of revenue was 50.5% for
the three months ended June 30, 2019, a decrease from 58.7% for the
three months ended June 30, 2018.
Quench had a net loss of $2.1 million for the second quarter of
2019 compared to a net loss of $2.3 million in the prior year
period. Adjusted EBITDA of $8.0 million for the second quarter of
2019 increased 71.6% over $4.7 million in the same period of 2018.
Adjusted EBITDA Margin increased 360 basis points to 28.0% in the
second quarter of 2019 from 24.4% in the prior year period.
For the six months ended June 30, 2019, Quench revenues were
$55.0 million, an increase of 49.2% over revenues of $36.8 million
in the prior year period. Gross margin decreased 80 basis points to
49.0% from 49.8%. Total SG&A expenses were $28.6 million for
the six months ended June 30, 2019, or 52.0% of revenue, as
compared to $21.9 million in the prior year period, or 59.5% of
revenue. Net loss of $4.9 million for the first half of 2019
remained relatively flat compared to the prior year period.
Adjusted EBITDA was $14.8 million for the six months ended June 30,
2019, an increase of 68.9% over $8.8 million in the same period of
2018. Adjusted EBITDA Margin increased 310 basis points to 26.9%
from 23.8%.
Corporate and Other
Corporate and Other SG&A of $1.2 million for the three
months ended June 30, 2019 increased $0.2 million compared to the
same period of 2018, primarily due to higher professional fees in
connection with corporate activities including capital raising.
Corporate and Other SG&A was $2.5 million for the six months
ended June 30, 2019, an increase of $0.3 million compared to $2.2
million in the prior year period.
2019 Outlook
For the full year 2019 outlook, the Company has incorporated the
strong financial performance reported for the six months ended June
30, 2019 and the anticipated impact of the acquisitions completed
since the beginning of the year. As a result, the Company
anticipates that full year 2019 results will be at the upper end of
the previously provided outlook ranges and is therefore raising the
floor of its guidance ranges. The Company now expects to achieve
the following financial results:
- Revenues between $192 and $197 million;
- Adjusted EBITDA between $69 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 $74 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 approximately
150,000 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,
August 7, 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 August 14, 2019 at
1-844-512-2921, or, for international callers, at 1-412-317-6671,
conference ID #13692476. 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 2019 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)
June 30,
December 31,
2019
2018
ASSETS
Current Assets:
Cash and cash equivalents
$
41,312
$
56,618
Trade receivables, net of
allowances of $956 and $1,034, respectively
23,962
21,437
Inventory
17,810
15,496
Current portion of long-term
receivables
7,251
6,538
Prepaid expenses and other
current assets
10,066
8,272
Total current assets
100,401
108,361
Property, plant and equipment,
net
153,726
150,064
Construction in progress
17,089
15,427
Right-of-use assets
9,285
—
Restricted cash
4,249
4,153
Long-term receivables
36,379
40,574
Other assets
9,652
6,251
Deferred tax asset
4,370
4,191
Intangible assets, net
196,472
205,443
Goodwill
190,846
190,999
Total assets
$
722,469
$
725,463
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current Liabilities:
Accounts payable
$
8,451
$
8,235
Accrued liabilities
20,912
25,116
Current portion of long-term
debt
7,058
6,494
Deferred revenue
3,884
3,890
Total current liabilities
40,305
43,735
Long-term debt
311,109
313,215
Deferred tax liability
18,548
18,465
Other long-term liabilities
12,953
13,450
Operating lease liabilities,
non-current
8,383
—
Total liabilities
391,298
388,865
Commitments and contingencies
Shareholders' Equity
Ordinary shares, no par value,
250,000 shares authorized; 26,985 and 26,780 shares issued and
outstanding at June 30, 2019 and December 31, 2018,
respectively
—
—
Additional paid-in capital
585,603
582,127
Accumulated other comprehensive
income
(185
)
(421
)
Accumulated deficit
(254,247
)
(245,108
)
Total shareholders' equity
331,171
336,598
Total liabilities and
shareholders' equity
$
722,469
$
725,463
AQUAVENTURE HOLDINGS LIMITED
AND SUBSIDIARIES
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
Revenues:
Bulk water
$
15,614
$
14,360
$
29,924
$
28,056
Rental
22,567
14,821
44,374
28,780
Product sales
12,269
4,249
21,742
8,060
Financing
937
1,015
1,909
2,063
Total revenues
51,387
34,445
97,949
66,959
Cost of revenues:
Bulk water
6,941
6,743
13,523
13,250
Rental
10,047
6,654
19,653
13,110
Product sales
7,827
2,842
13,886
5,368
Total cost of revenues
24,815
16,239
47,062
31,728
Gross profit
26,572
18,206
50,887
35,231
Selling, general and
administrative expenses
22,869
19,289
45,738
38,863
Income (loss) from operations
3,703
(1,083)
5,149
(3,632)
Other expense:
Interest expense, net
(6,508)
(3,354)
(13,068)
(6,604)
Other expense, net
(199)
(152)
(148)
(292)
Loss before income tax
expense
(3,004)
(4,589)
(8,067)
(10,528)
Income tax expense
471
332
1,072
739
Net loss
(3,475)
(4,921)
(9,139)
(11,267)
Other comprehensive income:
Foreign currency translation
adjustment
116
(107)
236
(190)
Comprehensive loss
$
(3,359)
$
(5,028)
$
(8,903)
$
(11,457)
Loss per share – basic and
diluted
$
(0.13)
$
(0.19)
$
(0.34)
$
(0.42)
Weighted-average shares
outstanding – basic and diluted
26,949
26,550
26,907
26,521
AQUAVENTURE HOLDINGS LIMITED
AND SUBSIDIARIES
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Six Months Ended June
30,
2019
2018
Cash flows from operating
activities:
Net loss
$
(9,139
)
$
(11,267
)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Depreciation and amortization
24,536
16,051
Share-based compensation
expense
2,286
6,649
Provision for bad debts
435
473
Deferred income tax provision
(91
)
(300
)
Provision for inventory
120
106
Loss on disposal of assets
752
938
Amortization of deferred
financing fees
512
475
Adjustment to acquisition
contingent consideration
136
—
Other
85
25
Change in operating assets and
liabilities:
Trade receivables
(2,892
)
2,964
Inventory
(2,420
)
(1,878
)
Prepaid expenses and other
current assets
(1,269
)
77
Long-term receivable
3,717
3,108
Right-of-use assets
834
—
Other assets
(5,577
)
(1,671
)
Current liabilities
(4,964
)
(2,195
)
Operating lease liabilities,
non-current
(609
)
—
Long-term liabilities
94
216
Net cash provided by operating
activities
6,546
13,771
Cash flows from investing
activities:
Capital expenditures
(16,935
)
(7,215
)
Proceeds from sale of fixed
assets
21
16
Net cash paid for acquisition of
assets or business
(1,175
)
(12,457
)
Net cash used in investing
activities
(18,089
)
(19,656
)
Cash flows from financing
activities:
Payments of long-term debt
(3,285
)
(3,369
)
Payment of deferred financing
fees
—
(71
)
Payments of secured
borrowings
(196
)
—
Payments of acquisition
contingent consideration
(1,389
)
—
Proceeds from exercise of stock
options
1,783
86
Shares withheld to cover minimum
tax withholdings on equity awards
(770
)
(203
)
Proceeds from the issuance of
Employee Stock Purchase Plan shares
177
132
Net cash used in financing
activities
(3,680
)
(3,425
)
Effect of exchange rates on cash,
cash equivalents and restricted cash
13
(12
)
Change in cash, cash equivalents
and restricted cash
(15,210
)
(9,322
)
Cash, cash equivalents and
restricted cash at beginning of period
60,771
122,359
Cash, cash equivalents and
restricted cash at end of period
$
45,561
$
113,037
AQUAVENTURE HOLDINGS LIMITED
AND SUBSIDIARIES
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS - SEGMENT DATA
(IN THOUSANDS)
Three Months Ended June 30,
2019
Three Months Ended June 30,
2018
Seven Seas
Corporate
Seven Seas
Corporate
Water
Quench
& Other
Total
Water
Quench
& Other
Total
Revenues:
Bulk water
$
15,614
$
—
$
—
$
15,614
$
14,360
$
—
$
—
$
14,360
Rental
3,570
18,997
—
22,567
—
14,821
—
14,821
Product sales
2,735
9,534
—
12,269
—
4,249
—
4,249
Financing
937
—
—
937
1,015
—
—
1,015
Total revenues
22,856
28,531
—
51,387
15,375
19,070
—
34,445
Gross profit:
Bulk water
8,673
—
—
8,673
7,617
—
—
7,617
Rental
2,601
9,919
—
12,520
—
8,167
—
8,167
Product sales
433
4,009
—
4,442
—
1,407
—
1,407
Financing
937
—
—
937
1,015
—
—
1,015
Total gross profit
12,644
13,928
—
26,572
8,632
9,574
—
18,206
Selling, general and
administrative expenses
7,318
14,397
1,154
22,869
7,142
11,188
959
19,289
Income (loss) from operations
5,326
(469
)
(1,154
)
3,703
1,490
(1,614
)
(959
)
(1,083
)
Other expense, net
(3,400
)
(1,633
)
(1,674
)
(6,707
)
(2,591
)
(792
)
(123
)
(3,506
)
Income (loss) before income tax
expense
1,926
(2,102
)
(2,828
)
(3,004
)
(1,101
)
(2,406
)
(1,082
)
(4,589
)
Income tax expense (benefit)
492
(21
)
—
471
472
(140
)
—
332
Net income (loss)
$
1,434
$
(2,081
)
$
(2,828
)
$
(3,475
)
$
(1,573
)
$
(2,266
)
$
(1,082
)
$
(4,921
)
AQUAVENTURE HOLDINGS LIMITED
AND SUBSIDIARIES
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS - SEGMENT DATA
(IN THOUSANDS)
Six Months Ended June 30,
2019
Six Months Ended June 30,
2018
Seven Seas
Corporate
Seven Seas
Corporate
Water
Quench
& Other
Total
Water
Quench
& Other
Total
Revenues:
Bulk water
$
29,924
$
—
$
—
$
29,924
$
28,056
$
—
$
—
$
28,056
Rental
6,709
37,665
—
44,374
—
28,780
—
28,780
Product sales
4,431
17,311
—
21,742
—
8,060
—
8,060
Financing
1,909
—
—
1,909
2,063
—
—
2,063
Total revenues
42,973
54,976
—
97,949
30,119
36,840
—
66,959
Gross profit:
Bulk water
16,401
—
—
16,401
14,806
—
—
14,806
Rental
4,937
19,784
—
24,721
—
15,670
—
15,670
Product sales
726
7,130
—
7,856
—
2,692
—
2,692
Financing
1,909
—
—
1,909
2,063
—
—
2,063
Total gross profit
23,973
26,914
—
50,887
16,869
18,362
—
35,231
Selling, general and
administrative expenses
14,618
28,598
2,522
45,738
14,745
21,907
2,211
38,863
Income (loss) from operations
9,355
(1,684
)
(2,522
)
5,149
2,124
(3,545
)
(2,211
)
(3,632
)
Other expense, net
(6,893
)
(3,028
)
(3,295
)
(13,216
)
(5,085
)
(1,557
)
(254
)
(6,896
)
Income (loss) before income tax
expense
2,462
(4,712
)
(5,817
)
(8,067
)
(2,961
)
(5,102
)
(2,465
)
(10,528
)
Income tax expense (benefit)
934
138
—
1,072
966
(227
)
—
739
Net income (loss)
$
1,528
$
(4,850
)
$
(5,817
)
$
(9,139
)
$
(3,927
)
$
(4,875
)
$
(2,465
)
$
(11,267
)
AQUAVENTURE HOLDINGS LIMITED AND
SUBSIDIARIES UNAUDITED 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 tax expense or
benefit, 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 June 30,
2019
Seven Seas
Corporate
Water
Quench
& Other
Total
(in thousands)
Net income (loss)
$
1,434
$
(2,081
)
$
(2,828
)
$
(3,475
)
Depreciation and amortization
5,902
6,676
—
12,578
Interest expense, net
3,263
1,572
1,673
6,508
Income tax expense (benefit)
492
(21
)
—
471
Share-based compensation
expense
674
442
159
1,275
(Gain) loss on disposal of
assets
(10
)
233
—
223
Acquisition-related expenses
92
884
94
1,070
Changes in deferred revenue
related to our bulk water business
(240
)
—
—
(240
)
ERP implementation charges for a
SAAS solution
—
248
—
248
Restructuring expense
—
34
—
34
Adjusted EBITDA
$
11,607
$
7,987
$
(902
)
$
18,692
Adjusted EBITDA Margin
50.8
%
28.0
%
—
%
36.4
%
Three Months Ended June 30,
2018
Seven Seas
Corporate
Water
Quench
& Other
Total
(in thousands)
Net loss
$
(1,573
)
$
(2,266
)
$
(1,082
)
$
(4,921
)
Depreciation and amortization
3,675
4,516
—
8,191
Interest expense, net
2,441
790
123
3,354
Income tax expense (benefit)
472
(140
)
—
332
Share-based compensation
expense
2,179
980
207
3,366
Loss on disposal of assets
3
382
—
385
Acquisition-related expenses
191
22
—
213
Changes in deferred revenue
related to our bulk water business
(55
)
—
—
(55
)
ERP implementation charges for a
SAAS solution
—
370
—
370
Adjusted EBITDA
$
7,333
$
4,654
$
(752
)
$
11,235
Adjusted EBITDA Margin
47.7
%
24.4
%
—
%
32.6
%
A reconciliation of our GAAP net loss to Adjusted EBITDA, for
the periods presented is shown below:
Six Months Ended June 30,
2019
Seven Seas
Corporate
Water
Quench
& Other
Total
(in thousands)
Net income (loss)
$
1,528
$
(4,850
)
$
(5,817
)
$
(9,139
)
Depreciation and amortization
11,598
12,938
—
24,536
Interest expense, net
6,622
3,152
3,294
13,068
Income tax expense
934
138
—
1,072
Share-based compensation
expense
1,266
815
205
2,286
(Gain) loss on disposal of
assets
(19
)
771
—
752
Acquisition-related expenses
449
1,131
255
1,835
Changes in deferred revenue
related to our bulk water business
105
—
—
105
ERP implementation charges for a
SAAS solution
—
557
—
557
Restructuring expense
—
130
—
130
Adjusted EBITDA
$
22,483
$
14,782
$
(2,063
)
$
35,202
Adjusted EBITDA Margin
52.3
%
26.9
%
—
%
35.9
%
Six Months Ended June 30,
2018
Seven Seas
Corporate
Water
Quench
& Other
Total
(in thousands)
Net loss
$
(3,927
)
$
(4,875
)
$
(2,465
)
$
(11,267
)
Depreciation and amortization
7,239
8,812
—
16,051
Interest expense, net
4,803
1,548
253
6,604
Income tax expense (benefit)
966
(227
)
—
739
Share-based compensation
expense
4,263
1,900
486
6,649
Loss on disposal of assets
232
706
—
938
Acquisition-related expenses
706
176
—
882
Changes in deferred revenue
related to our bulk water business
246
—
—
246
ERP implementation charges for a
SAAS solution
—
711
—
711
Adjusted EBITDA
$
14,528
$
8,751
$
(1,726
)
$
21,553
Adjusted EBITDA Margin
48.2
%
23.8
%
—
%
32.2
%
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 June 30,
2019
Seven Seas
Corporate
Water
Quench
& Other
Total
(in thousands)
Principal collected on the Peru
construction contract
$
1,316
$
—
$
—
$
1,316
Three Months Ended June 30,
2018
Seven Seas
Corporate
Water
Quench
& Other
Total
(in thousands)
Principal collected on the Peru
construction contract
$
1,212
$
—
$
—
$
1,212
Six Months Ended June 30,
2019
Seven Seas
Corporate
Water
Quench
& Other
Total
(in thousands)
Principal collected on the Peru
construction contract
$
2,605
$
—
$
—
$
2,605
Six Months Ended June 30,
2018
Seven Seas
Corporate
Water
Quench
& Other
Total
(in thousands)
Principal collected on the Peru
construction contract
$
2,400
$
—
$
—
$
2,400
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 June 30,
2019
Seven Seas
Corporate
Water
Quench
& Other
Total
(in thousands)
Adjusted EBITDA plus principal
collected on the Peru construction contract
$
12,923
$
7,987
$
(902)
$
20,008
Three Months Ended June 30,
2018
Seven Seas
Corporate
Water
Quench
& Other
Total
(in thousands)
Adjusted EBITDA plus principal
collected on the Peru construction contract
$
8,545
$
4,654
$
(752)
$
12,447
Six Months Ended June 30,
2019
Seven Seas
Corporate
Water
Quench
& Other
Total
(in thousands)
Adjusted EBITDA plus principal
collected on the Peru construction contract
$
25,088
$
14,782
$
(2,063)
$
37,807
Six Months Ended June 30,
2018
Seven Seas
Corporate
Water
Quench
& Other
Total
(in thousands)
Adjusted EBITDA plus principal
collected on the Peru construction contract
$
16,928
$
8,751
$
(1,726)
$
23,953
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190807005183/en/
investors@aquaventure.com Investors Hotline: 855-278-WAAS
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