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 September
30, 2019.
Financial Highlights and Recent Developments
- Total revenues of $52.9 million reflected a 43.8% increase over
the prior year period, comprised of 10.5% organic growth and 33.3%
inorganic growth. On a segment basis, Quench and Seven Seas Water
revenues grew 44.7% and 42.5%, respectively, over the prior year
period.
- Net loss of $3.9 million, or ($0.13) per share, compared to net
loss of $2.7 million, or ($0.10) per share, in the prior year
period.
- Adjusted EBITDA was $20.4 million, a 60.5% increase over the
prior year period. Adjusted EBITDA Margin was 38.4%, an improvement
of 400 basis points compared to the prior year period.
- Adjusted EBITDA plus principal collected on the Peru
construction contract increased 55.9% to $21.7 million from $13.9
million in the prior year period.
- In July, 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 $75.4 million, after deducting underwriting
discounts and commissions and other estimated offering
expenses.
- Quench completed the acquisitions of Mirex AquaPure Solutions,
L.P. and Flowline Canada, Inc. on October 1, 2019, acquiring
substantially all the point-of-use water filtration assets of the
Houston, Texas and Edmonton, Canada based companies,
respectively.
- Seven Seas Water extended its agreement with its customer in
The Bahamas by nine years, effective August 1, 2019. Under the
agreement, the Company will continue delivering potable water and
wastewater treatment services to the Emerald Bay development in
Great Exuma, The Bahamas.
Tony Ibarguen, AquaVenture’s President and Chief Executive
Officer announced: “AquaVenture delivered another robust quarter of
revenue and Adjusted EBITDA growth, as we executed on our organic
and inorganic growth strategies. In our Quench segment, we showed
very strong organic growth of 18% year over year, and continued to
execute on our acquisition strategy, acquiring Carolina Pure Water
Systems during the third quarter and announcing the acquisitions of
Mirex AquaPure Solutions and Flowline Canada in early October. In
our Seven Seas Water segment, we had a solid quarter in the
wastewater business, growing our active lease portfolio to 102
leases as of September 30, 2019, up from 97 leases at June 30,
2019; and in the desalination business we announced the extension
of our agreement in The Bahamas by nine years, demonstrating the
value of our long-term customer relationships. Given the strong
year-to-date results and our confidence in the growth momentum in
both businesses, we are raising our full year 2019 guidance ranges
to meet our improved expectations. We are pleased with the
trajectory and execution of both businesses as we continue to
create clean water solutions for customers around the world.”
Consolidated Financial Performance
For the three months ended September 30, 2019, total revenues of
$52.9 million increased 43.8% from $36.8 million in the prior year
period, which were comprised of 10.5% organic growth and 33.3%
inorganic growth. Total gross margin of 50.0% decreased from 53.4%
in the prior year period.
Total selling, general and administrative expenses (“SG&A”)
increased to $23.5 million in the third quarter of 2019 from $20.8
million in the same period of 2018. SG&A as a percentage of
revenue was 44.4% for the three months ended September 30, 2019, a
decrease from 56.6% for the three months ended September 30,
2018.
Net loss for the third quarter of 2019 was $3.9 million,
compared to a net loss of $2.7 million in the same period of 2018.
Adjusted EBITDA was $20.4 million for the third quarter of 2019, a
60.5% increase over $12.7 million in the same period of 2018.
Adjusted EBITDA Margin of 38.4% for the third quarter of 2019
increased 400 basis points from 34.4% in the same period of 2018.
Adjusted EBITDA plus the principal collected on the Peru
construction contract was $21.7 million in the third quarter of
2019, an increase of 55.9% over $13.9 million in the same period of
2018.
For the nine months ended September 30, 2019, total revenues of
$150.9 million increased 45.4% from $103.8 million in the prior
year period. Gross margin was 51.3% compared to 52.9% in the prior
year period, a decrease of 160 basis points. Total SG&A was
$69.3 million for the nine months ended September 30, 2019, or
45.9% of revenue, compared to $59.7 million for the nine months
ended September 30, 2018, or 57.5% of revenue. Net loss was $13.1
million, or ($0.46) per share, compared to a net loss of $14.0
million, or ($0.53) per share in the prior year period.
Adjusted EBITDA was $55.6 million for the nine months ended
September 30, 2019, a 62.3% increase over $34.2 million in the same
period in 2018. Adjusted EBITDA Margin increased 380 basis points
to 36.8% from 33.0% in the prior year period. Adjusted EBITDA plus
the principal collected on the Peru construction contract was $59.5
million for the nine months ended September 30, 2019, an increase
of 57.1% over the prior year period.
As of September 30, 2019, cash and cash equivalents were $109.5
million and total debt was $317.6 million.
Net cash provided by operating activities for the nine months
ended September 30, 2019 was $20.2 million compared to $22.0
million for the same period of 2018. Cash flow from operations for
the nine months ended September 30, 2019 was impacted by higher
cash interest expense related to incremental borrowings, 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, and higher working capital needs principally driven by
the substantial year-over-year growth in our Quench segment.
Capital expenditures were $28.6 million for the first nine months
of 2019, compared with $12.9 million in the prior year period. The
increase in capital expenditures was primarily due to growth
activities in connection with our AUC operations.
Third Quarter 2019 Segment Results
Seven Seas Water
Seven Seas Water revenues for the three months ended September
30, 2019 increased $6.6 million, or 42.5%, compared to the same
period of 2018, which were comprised of 42.0% inorganic growth and
0.5% organic growth. Bulk water revenues increased $0.4 million, or
2.5%, compared to the prior year period, primarily due to the
commencement of our water contract in Anguilla which began in
October 2018. Rental revenues and product sales increased $3.9
million and $2.4 million, respectively, primarily due to the
inclusion of our AUC operations which were acquired in November
2018.
Seven Seas Water gross margin for the three months ended
September 30, 2019 decreased 510 basis points to 51.5% compared to
56.6% in the prior year period. Impacting the gross margin for the
three months ended September 30, 2019 was $0.7 million of
additional depreciation expense on property, plant and equipment
related to the finalization of purchase accounting for the AUC
acquisition. Bulk water gross margin of 53.6% remained relatively
flat compared to the prior year period. Rental and product sales
gross margin of 53.8% and 17.0%, respectively, for the three months
ended September 30, 2019 had no comparative period as both
primarily related to the acquisition of the AUC operations in
November 2018.
Seven Seas Water SG&A expenses of $6.9 million for the three
months ended September 30, 2019 decreased $0.7 million compared to
the prior year period. The decrease was primarily due to lower
share-based compensation expense of $1.5 million driven by the
completion of the vesting of certain equity grants made in
connection with our initial public offering in 2016. This decrease
was partially offset by $0.7 million higher amortization expense
and $0.1 million higher compensation and benefits expense primarily
due to the acquisition of the AUC operations in November 2018.
Seven Seas Water SG&A expenses as a percentage of revenue were
31.1% for the three months ended September 30, 2019, a decline
compared to 48.8% for the same period of 2018.
Net income for our Seven Seas Water segment was $0.6 million for
the three months ended September 30, 2019 compared to $0.4 million
in the same period of 2018. Adjusted EBITDA of $11.9 million for
the third quarter of 2019 increased 54.7% over $7.7 million in the
prior year period. Adjusted EBITDA Margin increased 420 basis
points to 53.4% in the third quarter of 2019 from 49.2% in the same
period of 2018. Adjusted EBITDA plus principal collected on the
Peru construction contract was $13.2 million in the third quarter
of 2019, an increase of 48.3% over $8.9 million in the prior year
period.
For the nine months ended September 30, 2019, Seven Seas Water
revenues were $65.2 million, an increase of 42.6% over revenues of
$45.7 million in the prior year period. Gross margin decreased 190
basis points to 54.3% from 56.2% in the prior year period. Total
SG&A expenses were $21.5 million for the nine months ended
September 30, 2019, or 33.0% of revenue, as compared to $22.4
million in the prior year period, or 48.9% of revenue. Net income
was $2.2 million compared to a net loss of $3.6 million in the
prior year period. Adjusted EBITDA was $34.4 million for the nine
months ended September 30, 2019, an increase of 54.7% over $22.2
million in the same period of 2018. Adjusted EBITDA Margin
increased 410 basis points to 52.7% from 48.6%. Adjusted EBITDA
plus principal collected on the Peru construction contract was
$38.3 million, a 48.2% increase over $25.8 million in the prior
year period.
Quench
Quench revenues for the three months ended September 30, 2019
increased $9.5 million, or 44.7% compared to the same period of
2018, which were comprised of 26.5% of inorganic net growth and
18.2% organic growth. The prior year period included $1.3 million
of revenue from the Atlas High Purity Solutions business which was
divested in October 2018. Rental revenues increased $4.1 million,
or 25.2%, compared to the prior year period, which was comprised of
15.9% inorganic net growth from acquisitions and 9.3% of organic
growth due to additional units placed under new leases in excess of
unit attrition. Product sales increased $5.4 million compared to
the same period of 2018, which included $3.2 million of inorganic
net growth primarily due to the acquisitions of PHSI and Bluline in
December 2018, and $2.2 million of organic growth driven by higher
indirect dealer equipment sales and coffee sales.
Quench gross margin for the three months ended September 30,
2019 decreased to 48.9% from 51.0% for the same period of 2018.
Rental gross margin for the third quarter of 2019 was 53.7%, a
decrease from 56.2% in the prior year period, primarily due to an
increase in depreciation and amortization expense as a percentage
of revenues, and higher freight expense, partially offset by lower
compensation and benefits as a percentage of revenues due to the
continued leveraging of the platform, as well as lower filtration
and parts expense. Product sales gross margin increased to 39.5%
for the three months ended September 30, 2019 from 34.2% in the
prior year period, primarily driven by the inclusion of PHSI dealer
equipment sales.
Quench SG&A expenses for the three months ended September
30, 2019 increased $3.3 million to $15.5 million compared to the
prior year period. The increase was driven by $2.3 million higher
amortization expense primarily related to the addition of
intangible assets from recent acquisitions and $0.7 million higher
compensation and benefits primarily driven by increased headcount
from the inclusion of staff added from certain acquisitions.
Partially offsetting this increase was lower share-based
compensation expense of $0.5 million driven by the completion of
the vesting of certain equity grants made in connection with our
initial public offering in 2016. Quench SG&A expenses as a
percentage of revenue were 50.4% for the three months ended
September 30, 2019, a decline compared to 57.5% for the same period
of 2018.
Quench had a net loss of $2.0 million for the third quarter of
2019 compared to a net loss of $2.3 million in the prior year
period. Adjusted EBITDA of $9.4 million for the third quarter of
2019 increased 63.8% over $5.7 million in the same period of 2018.
Adjusted EBITDA Margin increased 360 basis points to 30.6% in the
third quarter of 2019 from 27.0% in the prior year period.
For the nine months ended September 30, 2019, Quench revenues
were $85.7 million, an increase of 47.6% over revenues of $58.1
million in the prior year period. Gross margin decreased 140 basis
points to 48.9% from 50.3%. Total SG&A expenses were $44.1
million for the nine months ended September 30, 2019, or 51.5% of
revenue, as compared to $34.1 million in the prior year period, or
58.7% of revenue. Net loss was $6.8 million compared to $7.2
million in the prior year period. Adjusted EBITDA was $24.2 million
for the nine months ended September 30, 2019, an increase of 66.9%
over $14.5 million in the same period of 2018. Adjusted EBITDA
Margin increased 330 basis points to 28.2% from 24.9%.
Corporate and Other
Corporate and Other SG&A of $1.1 million for the three
months ended September 30, 2019 increased $0.1 million compared to
the same period of 2018.
Corporate and Other SG&A was $3.6 million for the nine
months ended September 30, 2019, an increase of $0.4 million
compared to $3.2 million in the prior year period, primarily due to
higher professional fees in connection with corporate
activities.
2019 Outlook
For the full year 2019 outlook, the Company has incorporated the
strong financial performance reported for the nine months ended
September 30, 2019 and the anticipated contribution of the
acquisitions completed since the beginning of the year. As a
result, the Company increased its full year 2019 outlook and now
expects to achieve the following financial results:
- Revenues between $197 and $201 million;
- Adjusted EBITDA between $72 million and $75 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 $77 million and $80 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 more than 155,000
company-owned 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,
November 6, 2019 at 8:00 a.m. EST. 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 1-855-327-6837, or, for international callers,
1-631-891-4304 and ask for the AquaVenture conference call. Replays
of the entire call will be available through November 13, 2019 at
1-844-512-2921, or, for international callers, at 1-412-317-6671,
conference ID #10007809. 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)
September 30,
December 31,
2019
2018
ASSETS
Current Assets:
Cash and cash equivalents
$
109,520
$
56,618
Trade receivables, net of
allowances of $1,109 and $1,034, respectively
24,441
21,437
Inventory
18,330
15,496
Current portion of long-term
receivables
7,403
6,538
Prepaid expenses and other
current assets
8,846
8,272
Total current assets
168,540
108,361
Property, plant and equipment,
net
162,458
150,064
Construction in progress
21,346
15,427
Right-of-use assets
10,982
—
Restricted cash
4,268
4,153
Long-term receivables
34,468
40,574
Other assets
11,006
6,251
Deferred tax asset
4,473
4,191
Intangible assets, net
180,395
205,443
Goodwill
199,194
190,999
Total assets
$
797,130
$
725,463
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current Liabilities:
Accounts payable
$
7,881
$
8,235
Accrued liabilities
21,487
25,116
Current portion of long-term
debt
7,269
6,494
Deferred revenue
4,621
3,890
Total current liabilities
41,258
43,735
Long-term debt
310,307
313,215
Deferred tax liability
18,036
18,465
Other long-term liabilities
13,650
13,450
Operating lease liabilities,
non-current
10,090
—
Total liabilities
393,341
388,865
Commitments and contingencies
Shareholders' Equity
Ordinary shares, no par value,
250,000 shares authorized; 31,722 and 26,780 shares issued and
outstanding at September 30, 2019 and December 31, 2018,
respectively
—
—
Additional paid-in capital
662,225
582,127
Accumulated other comprehensive
income
(252
)
(421
)
Accumulated deficit
(258,184
)
(245,108
)
Total shareholders' equity
403,789
336,598
Total liabilities and
shareholders' equity
$
797,130
$
725,463
AQUAVENTURE HOLDINGS LIMITED
AND SUBSIDIARIES
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
Revenues:
Bulk water
$
14,992
$
14,626
$
44,916
$
42,682
Rental
24,286
16,261
68,660
45,041
Product sales
12,769
4,952
34,511
13,012
Financing
900
985
2,809
3,048
Total revenues
52,947
36,824
150,896
103,783
Cost of revenues:
Bulk water
6,958
6,771
20,481
20,021
Rental
11,245
7,130
30,898
20,240
Product sales
8,271
3,256
22,157
8,624
Total cost of revenues
26,474
17,157
73,536
48,885
Gross profit
26,473
19,667
77,360
54,898
Selling, general and
administrative expenses
23,518
20,826
69,256
59,689
Income (loss) from operations
2,955
(1,159
)
8,104
(4,791
)
Other expense:
Interest expense, net
(6,214
)
(3,396
)
(19,282
)
(10,000
)
Other expense, net
(233
)
(228
)
(381
)
(520
)
Loss before income tax
expense
(3,492
)
(4,783
)
(11,559
)
(15,311
)
Income tax expense (benefit)
445
(2,051
)
1,517
(1,312
)
Net loss
(3,937
)
(2,732
)
(13,076
)
(13,999
)
Other comprehensive income:
Foreign currency translation
adjustment
(67
)
106
169
(84
)
Comprehensive loss
$
(4,004
)
$
(2,626
)
$
(12,907
)
$
(14,083
)
Loss per share – basic and
diluted
$
(0.13
)
$
(0.10
)
$
(0.46
)
$
(0.53
)
Weighted-average shares
outstanding – basic and diluted
31,201
26,590
28,354
26,544
AQUAVENTURE HOLDINGS LIMITED
AND SUBSIDIARIES
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Nine Months Ended September
30,
2019
2018
Cash flows from operating
activities:
Net loss
$
(13,076
)
$
(13,999
)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Depreciation and amortization
39,454
24,761
Share-based compensation
expense
3,609
10,002
Provision for bad debts
813
695
Deferred income tax provision
(260
)
(2,882
)
Provision for inventory
184
253
Loss on disposal of assets
1,554
1,506
Amortization of deferred
financing fees
765
712
Accretion of and adjustments to
acquisition contingent consideration
251
—
Other
12
38
Change in operating assets and
liabilities:
Trade receivables
(3,616
)
236
Inventory
(3,970
)
(1,407
)
Prepaid expenses and other
current assets
(16
)
142
Long-term receivables
5,200
4,596
Right-of-use assets
1,288
—
Other assets
(8,524
)
(2,643
)
Current liabilities
(4,161
)
(253
)
Operating lease liabilities
(120
)
—
Long-term liabilities
824
291
Net cash provided by operating
activities
20,211
22,048
Cash flows from investing
activities:
Capital expenditures
(28,639
)
(12,930
)
Net cash paid for acquisition of
assets or business
(7,941
)
(27,097
)
Other
331
16
Net cash used in investing
activities
(36,249
)
(40,011
)
Cash flows from financing
activities:
Payments of long-term debt
(5,074
)
(4,975
)
Payment of deferred financing
fees
—
(71
)
Payments of secured
borrowings
(372
)
—
Payments of acquisition
contingent consideration
(2,033
)
—
Proceeds from exercise of stock
options
1,812
86
Shares withheld to cover minimum
tax withholdings on equity awards
(905
)
(307
)
Proceeds from the issuance of
Employee Share Purchase Plan shares
177
132
Proceeds from issuance of
ordinary shares, net of issuance costs
75,438
—
Net cash provided by (used in)
financing activities
69,043
(5,135
)
Effect of exchange rates on cash,
cash equivalents and restricted cash
12
(7
)
Change in cash, cash equivalents
and restricted cash
53,017
(23,105
)
Cash, cash equivalents and
restricted cash at beginning of period
60,771
122,359
Cash, cash equivalents and
restricted cash at end of period
$
113,788
$
99,254
AQUAVENTURE HOLDINGS LIMITED
AND SUBSIDIARIES
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS - SEGMENT DATA
(IN THOUSANDS)
Three Months Ended September
30, 2019
Three Months Ended September
30, 2018
Seven Seas
Corporate
Seven Seas
Corporate
Water
Quench
& Other
Total
Water
Quench
& Other
Total
Revenues:
Bulk water
$
14,992
$
—
$
—
$
14,992
$
14,626
$
—
$
—
$
14,626
Rental
3,921
20,365
—
24,286
—
16,261
—
16,261
Product sales
2,429
10,340
—
12,769
—
4,952
—
4,952
Financing
900
—
—
900
985
—
—
985
Total revenues
22,242
30,705
—
52,947
15,611
21,213
—
36,824
Gross profit:
Bulk water
8,034
—
—
8,034
7,855
—
—
7,855
Rental
2,109
10,932
—
13,041
—
9,131
—
9,131
Product sales
413
4,085
—
4,498
—
1,696
—
1,696
Financing
900
—
—
900
985
—
—
985
Total gross profit
11,456
15,017
—
26,473
8,840
10,827
—
19,667
Selling, general and
administrative expenses
6,914
15,487
1,117
23,518
7,616
12,194
1,016
20,826
Income (loss) from operations
4,542
(470
)
(1,117
)
2,955
1,224
(1,367
)
(1,016
)
(1,159
)
Other (expense) income, net
(3,408
)
(1,569
)
(1,470
)
(6,447
)
(3,044
)
(806
)
226
(3,624
)
Income (loss) before income tax
expense
1,134
(2,039
)
(2,587
)
(3,492
)
(1,820
)
(2,173
)
(790
)
(4,783
)
Income tax expense (benefit)
490
(46
)
1
445
(2,193
)
142
—
(2,051
)
Net income (loss)
$
644
$
(1,993
)
$
(2,588
)
$
(3,937
)
$
373
$
(2,315
)
$
(790
)
$
(2,732
)
AQUAVENTURE HOLDINGS LIMITED
AND SUBSIDIARIES
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS - SEGMENT DATA
(IN THOUSANDS)
Nine months Ended September
30, 2019
Nine months Ended September
30, 2018
Seven Seas
Corporate
Seven Seas
Corporate
Water
Quench
& Other
Total
Water
Quench
& Other
Total
Revenues:
Bulk water
$
44,916
$
—
$
—
$
44,916
$
42,682
$
—
$
—
$
42,682
Rental
10,630
58,030
—
68,660
—
45,041
—
45,041
Product sales
6,860
27,651
—
34,511
—
13,012
—
13,012
Financing
2,809
—
—
2,809
3,048
—
—
3,048
Total revenues
65,215
85,681
—
150,896
45,730
58,053
—
103,783
Gross profit:
Bulk water
24,435
—
—
24,435
22,661
—
—
22,661
Rental
7,046
30,716
—
37,762
—
24,801
—
24,801
Product sales
1,139
11,215
—
12,354
—
4,388
—
4,388
Financing
2,809
—
—
2,809
3,048
—
—
3,048
Total gross profit
35,429
41,931
—
77,360
25,709
29,189
—
54,898
Selling, general and
administrative expenses
21,532
44,085
3,639
69,256
22,361
34,101
3,227
59,689
Income (loss) from operations
13,897
(2,154
)
(3,639
)
8,104
3,348
(4,912
)
(3,227
)
(4,791
)
Other expense, net
(10,301
)
(4,597
)
(4,765
)
(19,663
)
(8,129
)
(2,363
)
(28
)
(10,520
)
Income (loss) before income tax
expense
3,596
(6,751
)
(8,404
)
(11,559
)
(4,781
)
(7,275
)
(3,255
)
(15,311
)
Income tax expense (benefit)
1,424
92
1
1,517
(1,227
)
(85
)
—
(1,312
)
Net income (loss)
$
2,172
$
(6,843
)
$
(8,405
)
$
(13,076
)
$
(3,554
)
$
(7,190
)
$
(3,255
)
$
(13,999
)
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 income (loss) to Adjusted
EBITDA, for the periods presented is shown below:
Three Months Ended September
30, 2019
Seven Seas
Corporate
Water
Quench
& Other
Total
(in thousands)
Net income (loss)
$
644
$
(1,993
)
$
(2,588
)
$
(3,937
)
Depreciation and amortization
6,319
8,599
—
14,918
Interest expense, net
3,151
1,593
1,470
6,214
Income tax expense (benefit)
490
(46
)
1
445
Share-based compensation
expense
681
466
176
1,323
Loss on disposal of assets
217
585
—
802
Acquisition-related expenses
134
92
29
255
Changes in deferred revenue
related to our bulk water business
249
—
—
249
ERP implementation charges for a
SAAS solution
—
89
—
89
Adjusted EBITDA
$
11,885
$
9,385
$
(912
)
$
20,358
Adjusted EBITDA Margin
53.4
%
30.6
%
—
%
38.4
%
Three Months Ended September
30, 2018
Seven Seas
Corporate
Water
Quench
& Other
Total
(in thousands)
Net income (loss)
$
373
$
(2,315
)
$
(790
)
$
(2,732
)
Depreciation and amortization
3,672
5,038
—
8,710
Interest expense (income),
net
2,817
805
(226
)
3,396
Income tax (benefit) expense
(2,193
)
142
—
(2,051
)
Share-based compensation
expense
2,174
988
191
3,353
Loss on disposal of assets
8
560
—
568
Acquisition-related expenses
699
196
95
990
Changes in deferred revenue
related to our bulk water business
134
—
—
134
ERP implementation charges for a
SAAS solution
—
315
—
315
Adjusted EBITDA
$
7,684
$
5,729
$
(730
)
$
12,683
Adjusted EBITDA Margin
49.2
%
27.0
%
—
%
34.4
%
A reconciliation of our GAAP net income (loss) to Adjusted
EBITDA, for the periods presented is shown below:
Nine months Ended September
30, 2019
Seven Seas
Corporate
Water
Quench
& Other
Total
(in thousands)
Net income (loss)
$
2,172
$
(6,843
)
$
(8,405
)
$
(13,076
)
Depreciation and amortization
17,917
21,537
—
39,454
Interest expense, net
9,773
4,745
4,764
19,282
Income tax expense
1,424
92
1
1,517
Share-based compensation
expense
1,947
1,281
381
3,609
Loss on disposal of assets
198
1,356
—
1,554
Acquisition-related expenses
583
1,223
284
2,090
Changes in deferred revenue
related to our bulk water business
354
—
—
354
ERP implementation charges for a
SAAS solution
—
646
—
646
Restructuring expense
—
130
—
130
Adjusted EBITDA
$
34,368
$
24,167
$
(2,975
)
$
55,560
Adjusted EBITDA Margin
52.7
%
28.2
%
—
%
36.8
%
Nine months Ended September
30, 2018
Seven Seas
Corporate
Water
Quench
& Other
Total
(in thousands)
Net loss
$
(3,554
)
$
(7,190
)
$
(3,255
)
$
(13,999
)
Depreciation and amortization
10,911
13,850
—
24,761
Interest expense, net
7,620
2,353
27
10,000
Income tax benefit
(1,227
)
(85
)
—
(1,312
)
Share-based compensation
expense
6,437
2,888
677
10,002
Loss on disposal of assets
240
1,266
—
1,506
Acquisition-related expenses
1,405
372
95
1,872
Changes in deferred revenue
related to our bulk water business
380
—
—
380
ERP implementation charges for a
SAAS solution
—
1,026
—
1,026
Adjusted EBITDA
$
22,212
$
14,480
$
(2,456
)
$
34,236
Adjusted EBITDA Margin
48.6
%
24.9
%
—
%
33.0
%
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 September
30, 2019
Seven Seas
Corporate
Water
Quench
& Other
Total
(in thousands)
Principal collected on the Peru
construction contract
$
1,344
$
—
$
—
$
1,344
Three Months Ended September
30, 2018
Seven Seas
Corporate
Water
Quench
& Other
Total
(in thousands)
Principal collected on the Peru
construction contract
$
1,237
$
—
$
—
$
1,237
Nine months Ended September
30, 2019
Seven Seas
Corporate
Water
Quench
& Other
Total
(in thousands)
Principal collected on the Peru
construction contract
$
3,949
$
—
$
—
$
3,949
Nine months Ended September
30, 2018
Seven Seas
Corporate
Water
Quench
& Other
Total
(in thousands)
Principal collected on the Peru
construction contract
$
3,637
$
—
$
—
$
3,637
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 September
30, 2019
Seven Seas
Corporate
Water
Quench
& Other
Total
(in thousands)
Adjusted EBITDA plus principal
collected on the Peru construction contract
$
13,229
$
9,385
$
(912)
$
21,702
Three Months Ended September
30, 2018
Seven Seas
Corporate
Water
Quench
& Other
Total
(in thousands)
Adjusted EBITDA plus principal
collected on the Peru construction contract
$
8,921
$
5,729
$
(730)
$
13,920
Nine months Ended September
30, 2019
Seven Seas
Corporate
Water
Quench
& Other
Total
(in thousands)
Adjusted EBITDA plus principal
collected on the Peru construction contract
$
38,317
$
24,167
$
(2,975)
$
59,509
Nine months Ended September
30, 2018
Seven Seas
Corporate
Water
Quench
& Other
Total
(in thousands)
Adjusted EBITDA plus principal
collected on the Peru construction contract
$
25,849
$
14,480
$
(2,456)
$
37,873
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191106005059/en/
investors@aquaventure.com Investors Hotline: 855-278-WAAS
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