Market Overview

AquaVenture Holdings Limited Announces Fourth Quarter and Full Year 2019 Earnings Results

Share:

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 and full year ended December 31, 2019.

2019 Highlights

For the three months ended December 31, 2019:

  • Total revenues of $52.6 million reflected a 25.7% increase over the prior year period, comprised of a 11.7% and 39.4% increase in the Seven Seas Water and Quench segments, respectively.
  • Net loss of $7.0 million, or ($0.22) per share, compared to net loss of $6.7 million, or ($0.25) per share, in the prior year period.
  • Adjusted EBITDA was $19.7 million, a 37.9% increase over the prior year period. Adjusted EBITDA Margin was 37.5%, an improvement of 330 basis points.
  • Adjusted EBITDA plus principal collected on the Peru construction contract increased 35.5% to $21.1 million from $15.6 million in the prior year period.
  • Quench completed four acquisitions during the quarter, including Mirex AquaPure Solutions L.P. (Houston, Texas), Flowline Canada, Inc. (Edmonton, Canada), Pure Planet Water, Inc. (Palm Desert, California) and Jonli Water Services, Inc. (Montreal, Quebec, Canada). In aggregate, these acquisitions added more than 2,500 customers and more than 5,000 units, including both company-owned rental and customer-owned service units, to Quench's installed asset base.

For the full year ended December 31, 2019:

  • Total revenues of $203.5 million reflected a 39.7% increase over the prior year, comprised of a 33.0% and 45.4% increase in the Seven Seas Water and Quench segments, respectively.
  • Net loss of $20.1 million, or ($0.69) per share, compared to net loss of $20.7 million, or ($0.78) per share, in the prior year.
  • Adjusted EBITDA was $75.3 million, a 55.1% increase over the prior year. Adjusted EBITDA Margin was 37.0%, an improvement of 370 basis points.
  • Adjusted EBITDA plus principal collected on the Peru construction contract increased 50.8% to $80.6 million from $53.5 million in the prior year.

Tony Ibarguen, AquaVenture's President and Chief Executive Officer announced: "AquaVenture delivered another year of strong financial results, driven by the continued execution on our organic and inorganic growth strategies. A large percentage of our year-over-year growth was related to the significant acquisitions completed during the fourth quarter of 2018, which we successfully and efficiently integrated into our systems and processes during 2019. Quench added to this inorganic growth with six acquisitions during 2019 and two so far in 2020. In addition, Quench delivered an impressive 13.6% organic growth in 2019, driven by solid performance in both the indirect dealer unit and direct rental business, which now has approximately 160,000 rental units in its installed asset base. Within our Seven Seas Water segment, we experienced significant growth in our AUC business that we acquired in November 2018, which now has 105 leased wastewater treatment plants. In addition, we demonstrated the value of our long-term customer relationships by completing a nine-year extension of our contract in The Bahamas and both a contract extension as well as a water production capacity expansion with our Limetree Bay Terminals customer in St. Croix. We also had significant achievements as a company in 2019, including the completion of our first follow-on public equity offering in July. All this culminated in the announcement of our definitive merger agreement to be acquired by Culligan in late December, which we believe handsomely rewards our shareholders, original investors, and teammates. We thank them all for their faithful support of our vision and efforts over the years. We look forward to completing this transaction in the near future and are excited for the road ahead as we continue to create clean water solutions for our customers around the world."

Business Update and Recent Developments

On December 23, 2019, the Company announced it had entered into a definitive merger agreement to be acquired by Culligan, a total solutions provider of water filtration systems and treatment solutions, which is controlled by Advent International, one of the largest and most experienced global private equity investors. The merger agreement provides that Culligan will acquire all of the outstanding shares of AquaVenture for $27.10 per share in an all-cash transaction valued at approximately $1.1 billion, including AquaVenture's net debt. Due to the pending acquisition, AquaVenture does not plan to host an earnings conference call or provide forward-looking guidance.

On December 31, 2019, the Company's water supply agreement in Curacao expired and our customer, the Curacao Refinery Utilities B.V. ("CRU"), exercised its right to purchase the desalination facilities pursuant to the terms of the water supply agreement. The Company received a cash payment of $3.5 million, the applicable buy-out amount, on the contract expiration date of December 31, 2019. As a result of the transaction, the Company recorded a gain on sale of property, plant and equipment in the amount of $3.2 million which is reflected within selling, general and administrative expenses ("SG&A") in our Seven Seas Water segment.

On January 13, 2020, Quench acquired substantially all the assets of Smart Water Solutions LLC, a point-of-use water filtration company and Bluline dealer based in Butler, New Jersey. In addition, effective February 3, 2020, Quench acquired substantially all the assets of Krystal Kleer LLC, a point-of-use water filtration company based in Meridian, Connecticut. In aggregate, these acquisitions added approximately 6,000 rental units to Quench's installed asset base.

Consolidated Financial Performance

For the three months ended December 31, 2019, total revenues of $52.6 million increased 25.7% from $41.8 million in the prior year period, which were comprised of 4.8% organic growth and 20.9% inorganic growth. Total gross margin of 50.6% decreased from 54.0% in the prior year period.

Total SG&A increased to $26.7 million in the fourth quarter of 2019 from $24.0 million in the same period of 2018. SG&A as a percentage of revenue was 50.8% for the three months ended December 31, 2019, a decrease from 57.3% for the three months ended December 31, 2018.

Net loss for the fourth quarter of 2019 was $7.0 million, compared to a net loss of $6.7 million in the same period of 2018. Adjusted EBITDA was $19.7 million for the fourth quarter of 2019, a 37.9% increase over $14.3 million in the same period of 2018. Adjusted EBITDA Margin of 37.5% for the fourth quarter of 2019 increased 330 basis points from 34.2% in the same period of 2018. Adjusted EBITDA plus the principal collected on the Peru construction contract was $21.1 million in the fourth quarter of 2019, an increase of 35.5% over $15.6 million in the same period of 2018.

For the year ended December 31, 2019, total revenues of $203.5 million increased 39.7% from $145.6 million in the prior year. Gross margin was 51.1% compared to 53.2% in the prior year, a decrease of 210 basis points. Total SG&A was $96.0 million for the year ended December 31, 2019, or 47.2% of revenue, compared to $83.6 million for the year ended December 31, 2018, or 57.4% of revenue. Net loss was $20.1 million, or ($0.69) per share, compared to a net loss of $20.7 million, or ($0.78) per share in the prior year period.

Adjusted EBITDA was $75.3 million for the year ended December 31, 2019, a 55.1% increase over $48.6 million in the prior year. Adjusted EBITDA Margin increased 370 basis points to 37.0% from 33.3% in the prior year. Adjusted EBITDA plus the principal collected on the Peru construction contract was $80.6 million for the year ended December 31, 2019, an increase of 50.8% over the prior year.

As of December 31, 2019, cash and cash equivalents were $103.3 million and total debt was $316.6 million.

Net cash provided by operating activities for the year ended December 31, 2019 was $31.0 million compared to $26.9 million for the same period of 2018. Capital expenditures were $36.6 million for the full year 2019, compared with $19.6 million in the prior year. The increase in capital expenditures was primarily due to growth activities in connection with our AUC operations.

Fourth Quarter and Full Year 2019 Segment Results

Seven Seas Water

Seven Seas Water revenues for the three months ended December 31, 2019 increased $2.4 million, or 11.7%, compared to the same period of 2018, which were comprised of 11.3% inorganic growth and 0.4% organic growth. Bulk water revenues increased $1.0 million, or 6.6%, compared to the prior year period, primarily due increases in our Limetree Bay Terminals and Anguilla operations driven by higher production volumes resulting from capacity expansions completed during 2019. Rental revenues increased $1.8 million, primarily due to timing of the acquisition of the AUC operations, which was acquired in November 2018.

Seven Seas Water gross margin for the three months ended December 31, 2019 decreased 120 basis points to 53.3% compared to 54.5% in the prior year period. Bulk water gross margin of 53.6% decreased from 55.5% in the prior year period primarily due to lower depreciation expense in the prior year period in connection with a purchase price refund received on in-service equipment at our Trinidad operations, and severance-related charges in our Curacao operations resulting from the expiration of our water supply agreement at the end of 2019. Rental gross margin of 68.7% decreased from 74.7% in the prior year period primarily due the finalization of the purchase accounting for the AUC acquisition which resulted in higher depreciation expense on property, plant and equipment in the fourth quarter of 2019 compared to the prior year period. Product sales gross margin of 10.6% decreased from 17.5% in the prior year quarter driven by a higher mix of lower-margin contracts compared to the prior year period.

Seven Seas Water SG&A expenses of $3.4 million for the three months ended December 31, 2019 decreased $4.3 million compared to the prior year period. The decrease was driven by a $3.0 million net gain on sale of property, plant and equipment primarily in connection with our customer in Curacao exercising its right to purchase the desalination facilities pursuant to the water supply agreement, and $1.1 million lower professional fees primarily due to higher costs in the prior year period related to the acquisition of the AUC operations in November 2018. Seven Seas Water SG&A expenses as a percentage of revenue were 14.9% for the three months ended December 31, 2019, a decline compared to 37.6% for the same period of 2018.

Net income for our Seven Seas Water segment was $5.1 million for the three months ended December 31, 2019 compared to $0.1 million in the same period of 2018. Adjusted EBITDA of $12.3 million for the fourth quarter of 2019 increased 30.5% over $9.4 million in the prior year period. Adjusted EBITDA Margin increased to 53.3% in the fourth quarter of 2019 from 45.7% in the same period of 2018. Adjusted EBITDA plus principal collected on the Peru construction contract was $13.7 million in the fourth quarter of 2019, an increase of 27.9% over $10.7 million in the prior year period.

For the year ended December 31, 2019, Seven Seas Water revenues were $88.3 million, an increase of 33.0% over revenues of $66.4 million in the prior year. Gross margin decreased 170 basis points to 54.0% from 55.7% in the prior year. Total SG&A expenses were $25.0 million for the year ended December 31, 2019, or 28.3% of revenue, compared to $30.1 million in the prior year, or 45.4% of revenue. Net income was $7.3 million compared to a net loss of $3.5 million in the prior year. Adjusted EBITDA was $46.7 million for the year ended December 31, 2019, an increase of 47.5% over $31.7 million in 2018. Adjusted EBITDA Margin increased 520 basis points to 52.9% from 47.7%. Adjusted EBITDA plus principal collected on the Peru construction contract was $52.0 million, a 42.3% increase over $36.6 million in the prior year.

Quench

Quench revenues for the three months ended December 31, 2019 increased $8.3 million, or 39.4% compared to the same period of 2018, which were comprised of 30.3% of inorganic growth and 9.1% organic growth. Rental revenues increased $4.6 million, or 27.3%, compared to the prior year period, which was comprised of 19.0% inorganic net growth from acquisitions and 8.3% of organic growth due to additional units placed under new leases in excess of unit attrition. Product sales increased $3.7 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 $0.5 million of organic growth driven by higher indirect dealer equipment sales and coffee sales.

Quench gross margin for the three months ended December 31, 2019 decreased 510 basis points to 48.5% from 53.6% for the same period of 2018. Rental gross margin for the fourth quarter of 2019 was 52.0%, a decrease from 57.3% 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 facilities expense. Product sales gross margin of 39.0% for the three months ended December 31, 2019 increased 20 basis points over the prior year period.

Quench SG&A expenses for the three months ended December 31, 2019 increased $0.9 million to $15.5 million compared to the prior year period. The increase was driven by higher amortization expense related to an increase in intangible assets from recent acquisitions, higher compensation and benefits primarily driven by increased headcount from the inclusion of staff added from certain acquisitions. Partially offsetting this increase was higher acquisition-related expenses and restructuring costs incurred in the prior year period in connection with the PHSI acquisition. Quench SG&A expenses as a percentage of revenue were 52.6% for the three months ended December 31, 2019, a decline compared to 68.9% for the same period of 2018.

Quench had a net loss of $2.7 million for the fourth quarter of 2019 compared to a net loss of $4.2 million in the prior year period. Adjusted EBITDA of $8.3 million for the fourth quarter of 2019 increased 38.9% over $6.0 million in the same period of 2018. Adjusted EBITDA Margin of 28.0% in the fourth quarter of 2019 remained relatively flat compared to the prior year period.

For the year ended December 31, 2019, Quench revenues were $115.2 million, an increase of 45.4% over revenues of $79.2 million in the prior year. Gross margin decreased 240 basis points to 48.8% from 51.2%. Total SG&A expenses were $59.6 million for the year ended December 31, 2019, or 51.7% of revenue, compared to $48.7 million in the prior year, or 61.5% of revenue. Net loss was $9.6 million compared to $11.4 million in the prior year. Adjusted EBITDA was $32.4 million for the year ended December 31, 2019, an increase of 58.7% over $20.4 million in 2018. Adjusted EBITDA Margin increased 240 basis points to 28.2% from 25.8%.

Corporate and Other

Corporate and Other SG&A expenses for the three months ended December 31, 2019 increased $6.2 million to $7.8 million compared to the same period of 2018. The increase was primarily due to $6.6 million of expenses in the fourth quarter of 2019 incurred in connection with the definitive merger agreement entered into in December 2019.

Corporate and Other SG&A expenses for the year ended December 31, 2019 increased $6.6 million to $11.4 million compared to the same period of 2018, which was driven by $6.6 million of expenses incurred in connection with the definitive merger agreement entered into in December 2019.

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 160,000 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.

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 expectations regarding performance, growth, cash flows and margins from recently completed and pending acquisitions; 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,

 

 

2019

 

2018

ASSETS

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

103,307

 

$

56,618

Trade receivables, net of allowances of $1,213 and $1,034, respectively

 

 

26,755

 

 

21,437

Inventory

 

 

17,385

 

 

15,496

Current portion of long-term receivables

 

 

7,561

 

 

6,538

Prepaid expenses and other current assets

 

 

8,130

 

 

8,272

Total current assets

 

 

163,138

 

 

108,361

Property, plant and equipment, net

 

 

167,173

 

 

150,064

Construction in progress

 

 

17,786

 

 

15,427

Right-of-use assets

 

 

10,721

 

 

Restricted cash

 

 

4,233

 

 

4,153

Long-term receivables

 

 

32,529

 

 

40,574

Other assets

 

 

11,820

 

 

6,251

Deferred tax asset

 

 

4,883

 

 

4,191

Intangible assets, net

 

 

186,409

 

 

205,443

Goodwill

 

 

198,889

 

 

190,999

Total assets

 

$

797,581

 

$

725,463

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

5,703

 

$

8,235

Accrued liabilities

 

 

29,903

 

 

25,116

Current portion of long-term debt

 

 

7,491

 

 

6,494

Deferred revenue

 

 

4,810

 

 

3,890

Total current liabilities

 

 

47,907

 

 

43,735

Long-term debt

 

 

309,104

 

 

313,215

Deferred tax liability

 

 

17,342

 

 

18,465

Other long-term liabilities

 

 

13,864

 

 

13,450

Operating lease liabilities, non-current

 

 

9,777

 

 

Total liabilities

 

 

397,994

 

 

388,865

Commitments and contingencies

 

 

 

 

 

 

Shareholders' Equity

 

 

 

 

 

 

Ordinary shares, no par value, 250,000 shares authorized; 31,838 and 26,780 shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively

 

 

 

 

Additional paid-in capital

 

 

664,920

 

 

582,127

Accumulated other comprehensive income

 

 

(150)

 

 

(421)

Accumulated deficit

 

 

(265,183)

 

 

(245,108)

Total shareholders' equity

 

 

399,587

 

 

336,598

Total liabilities and shareholders' equity

 

$

797,581

 

$

725,463

AQUAVENTURE HOLDINGS LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31,

 

 

2019

 

2018

 

2017

Revenues:

 

 

 

 

 

 

 

 

 

Bulk water

 

$

60,460

 

$

57,262

 

$

53,436

Rental

 

 

94,282

 

 

64,216

 

 

52,997

Product sales

 

 

45,074

 

 

20,105

 

 

9,796

Financing

 

 

3,671

 

 

4,025

 

 

4,534

Total revenues

 

 

203,487

 

 

145,608

 

 

120,763

Cost of revenues:

 

 

 

 

 

 

 

 

 

Bulk water

 

 

27,700

 

 

26,516

 

 

27,145

Rental

 

 

42,493

 

 

28,025

 

 

23,484

Product sales

 

 

29,330

 

 

13,565

 

 

5,779

Total cost of revenues

 

 

99,523

 

 

68,106

 

 

56,408

Gross profit

 

 

103,964

 

 

77,502

 

 

64,355

Selling, general and administrative expenses

 

 

95,986

 

 

83,645

 

 

72,421

Income (loss) from operations

 

 

7,978

 

 

(6,143)

 

 

(8,066)

Other expense:

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(25,386)

 

 

(15,046)

 

 

(11,537)

Other expense, net

 

 

(460)

 

 

(850)

 

 

(1,850)

Loss before income tax expense

 

 

(17,868)

 

 

(22,039)

 

 

(21,453)

Income tax expense (benefit)

 

 

2,207

 

 

(1,311)

 

 

3,441

Net loss

 

 

(20,075)

 

 

(20,728)

 

 

(24,894)

Other comprehensive income:

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

271

 

 

(404)

 

 

(17)

Comprehensive loss

 

$

(19,804)

 

$

(21,132)

 

$

(24,911)

 

 

 

 

 

 

 

 

 

 

Loss per share – basic and diluted

 

$

(0.69)

 

$

(0.78)

 

 

(0.94)

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding – basic and diluted

 

 

29,212

 

 

26,583

 

 

26,426

AQUAVENTURE HOLDINGS LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31,

 

 

2019

 

2018

 

2017

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

Net loss

 

$

(20,075)

 

$

(20,728)

 

$

(24,894)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

54,146

 

 

34,533

 

 

29,648

Share-based compensation expense

 

 

4,956

 

 

11,188

 

 

12,120

Provision for bad debts

 

 

1,219

 

 

1,035

 

 

605

Deferred income tax provision

 

 

(962)

 

 

(3,287)

 

 

1,488

Provision for inventory

 

 

376

 

 

308

 

 

89

Loss on extinguishment of debt

 

 

 

 

 

 

1,389

(Gain) loss on disposal of assets

 

 

(1,242)

 

 

1,563

 

 

1,468

Amortization of deferred financing fees

 

 

1,017

 

 

963

 

 

878

Accretion of and adjustments to acquisition contingent consideration

 

 

276

 

 

(27)

 

 

Accretion of and adjustments to asset retirement obligation

 

 

28

 

 

50

 

 

49

Other

 

 

(3)

 

 

 

 

60

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

Trade receivables

 

 

(5,757)

 

 

2

 

 

(4,301)

Inventory

 

 

(3,213)

 

 

(2,162)

 

 

(1,219)

Prepaid expenses and other current assets

 

 

1,129

 

 

(1,135)

 

 

(710)

Long-term receivables

 

 

6,982

 

 

5,661

 

 

6,309

Right-of-use assets

 

 

1,727

 

 

 

 

Other assets

 

 

(11,218)

 

 

(4,124)

 

 

(3,462)

Current liabilities

 

 

2,160

 

 

2,579

 

 

(1,011)

Operating lease liabilities

 

 

(1,781)

 

 

 

 

Long-term liabilities

 

 

1,277

 

 

463

 

 

460

Net cash provided by operating activities

 

 

31,042

 

 

26,882

 

 

18,966

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(36,612)

 

 

(19,626)

 

 

(14,445)

Net cash paid for acquisition of assets or business

 

 

(19,687)

 

 

(198,473)

 

 

(9,921)

Proceeds from sale of fixed assets

 

 

3,831

 

 

680

 

 

22

Net cash received for sale of business

 

 

 

 

2,879

 

 

Net cash used in investing activities

 

 

(52,468)

 

 

(214,540)

 

 

(24,344)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

Proceeds from long-term debt

 

 

 

 

150,000

 

 

150,000

Payments of long-term debt

 

 

(6,812)

 

 

(6,528)

 

 

(118,205)

Payment of deferred financing fees

 

 

(86)

 

 

(70)

 

 

(3,677)

Payments related to debt extinguishment

 

 

 

 

 

 

(433)

Payments of secured borrowings

 

 

(422)

 

 

(17,500)

 

 

Payments of acquisition contingent consideration

 

 

(2,336)

 

 

(112)

 

 

Proceeds from exercise of stock options

 

 

3,088

 

 

442

 

 

73

Shares withheld to cover minimum tax withholdings on equity awards

 

 

(1,059)

 

 

(422)

 

 

(455)

Proceeds from the issuance of Employee Share Purchase Plan shares

 

 

403

 

 

285

 

 

204

Proceeds from issuance of ordinary shares, net of issuance costs

 

 

75,404

 

 

 

 

(1,169)

Net cash provided by financing activities

 

 

68,180

 

 

126,095

 

 

26,338

Effect of exchange rates on cash, cash equivalents and restricted cash

 

 

15

 

 

(25)

 

 

4

Change in cash, cash equivalents and restricted cash

 

 

46,769

 

 

(61,588)

 

 

20,964

Cash, cash equivalents and restricted cash at beginning of period

 

 

60,771

 

 

122,359

 

 

101,395

Cash, cash equivalents and restricted cash at end of period

 

$

107,540

 

$

60,771

 

$

122,359 

AQUAVENTURE HOLDINGS LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - SEGMENT DATA

(IN THOUSANDS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31, 2019

 

Three Months Ended December 31, 2018

 

 

Seven Seas

 

 

 

 

Corporate

 

 

 

 

Seven Seas

 

 

 

 

Corporate

 

 

 

 

 

Water

 

Quench

 

& Other

 

Total

 

Water

 

Quench

 

& Other

 

Total

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bulk water

 

$

15,544

 

$

 

$

 

$

15,544

 

$

14,580

 

$

 

$

 

$

14,580

Rental

 

 

4,158

 

 

21,464

 

 

 

 

25,622

 

 

2,318

 

 

16,857

 

 

 

 

19,175

Product sales

 

 

2,558

 

 

8,005

 

 

 

 

10,563

 

 

2,817

 

 

4,276

 

 

 

 

7,093

Financing

 

 

862

 

 

 

 

 

 

862

 

 

977

 

 

 

 

 

 

977

Total revenues

 

 

23,122

 

 

29,469

 

 

 

 

52,591

 

 

20,692

 

 

21,133

 

 

 

 

41,825

Gross profit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bulk water

 

 

8,325

 

 

 

 

 

 

8,325

 

 

8,085

 

 

 

 

 

 

8,085

Rental

 

 

2,855

 

 

11,172

 

 

 

 

14,027

 

 

1,731

 

 

9,659

 

 

 

 

11,390

Product sales

 

 

271

 

 

3,119

 

 

 

 

3,390

 

 

493

 

 

1,659

 

 

 

 

2,152

Financing

 

 

862

 

 

 

 

 

 

862

 

 

977

 

 

 

 

 

 

977

Total gross profit

 

 

12,313

 

 

14,291

 

 

 

 

26,604

 

 

11,286

 

 

11,318

 

 

 

 

22,604

Selling, general and administrative expenses

 

 

3,442

 

 

15,495

 

 

7,793

 

 

26,730

 

 

7,782

 

 

14,569

 

 

1,605

 

 

23,956

Income (loss) from operations

 

 

8,871

 

 

(1,204)

 

 

(7,793)

 

 

(126)

 

 

3,504

 

 

(3,251)

 

 

(1,605)

 

 

(1,352)

Other expense, net

 

 

(3,034)

 

 

(1,584)

 

 

(1,565)

 

 

(6,183)

 

 

(3,420)

 

 

(1,011)

 

 

(945)

 

 

(5,376)

Income (loss) before income tax expense

 

 

5,837

 

 

(2,788)

 

 

(9,358)

 

 

(6,309)

 

 

84

 

 

(4,262)

 

 

(2,550)

 

 

(6,728)

Income tax expense (benefit)

 

 

742

 

 

(52)

 

 

 

 

690

 

 

17

 

 

(16)

 

 

 

 

1

Net income (loss)

 

$

5,095

 

$

(2,736)

 

$

(9,358)

 

$

(6,999)

 

$

67

 

$

(4,246)

 

$

(2,550)

 

$

(6,729)

AQUAVENTURE HOLDINGS LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - SEGMENT DATA

(IN THOUSANDS)

 

 

 

Year Ended December 31, 2019

 

Year Ended December 31, 2018

 

 

Seven Seas

 

 

 

 

Corporate

 

 

 

 

Seven Seas

 

 

 

 

Corporate

 

 

 

 

 

Water

 

Quench

 

& Other

 

Total

 

Water

 

Quench

 

& Other

 

Total

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bulk water

 

$

60,460

 

$

 

$

 

$

60,460

 

$

57,262

 

$

 

$

 

$

57,262

Rental

 

 

14,788

 

 

79,494

 

 

 

 

94,282

 

 

2,318

 

 

61,898

 

 

 

 

64,216

Product sales

 

 

9,418

 

 

35,656

 

 

 

 

45,074

 

 

2,817

 

 

17,288

 

 

 

 

20,105

Financing

 

 

3,671

 

 

 

 

 

 

3,671

 

 

4,025

 

 

 

 

 

 

4,025

Total revenues

 

 

88,337

 

 

115,150

 

 

 

 

203,487

 

 

66,422

 

 

79,186

 

 

 

 

145,608

Gross profit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bulk water

 

 

32,760

 

 

 

 

 

 

32,760

 

 

30,746

 

 

 

 

 

 

30,746

Rental

 

 

9,901

 

 

41,888

 

 

 

 

51,789

 

 

1,731

 

 

34,460

 

 

 

 

36,191

Product sales

 

 

1,410

 

 

14,334

 

 

 

 

15,744

 

 

493

 

 

6,047

 

 

 

 

6,540

Financing

 

 

3,671

 

 

 

 

 

 

3,671

 

 

4,025

 

 

 

 

 

 

4,025

Total gross profit

 

 

47,742

 

 

56,222

 

 

 

 

103,964

 

 

36,995

 

 

40,507

 

 

 

 

77,502

Selling, general and administrative expenses

 

 

24,974

 

 

59,580

 

 

11,432

 

 

95,986

 

 

30,143

 

 

48,670

 

 

4,832

 

 

83,645

Income (loss) from operations

 

 

22,768

 

 

(3,358)

 

 

(11,432)

 

 

7,978

 

 

6,852

 

 

(8,163)

 

 

(4,832)

 

 

(6,143)

Other expense, net

 

 

(13,335)

 

 

(6,181)

 

 

(6,330)

 

 

(25,846)

 

 

(11,549)

 

 

(3,374)

 

 

(973)

 

 

(15,896)

Income (loss) before income tax expense

 

 

9,433

 

 

(9,539)

 

 

(17,762)

 

 

(17,868)

 

 

(4,697)

 

 

(11,537)

 

 

(5,805)

 

 

(22,039)

Income tax expense (benefit)

 

 

2,166

 

 

40

 

 

1

 

 

2,207

 

 

(1,210)

 

 

(101)

 

 

 

 

(1,311)

Net income (loss)

 

$

7,267

 

$

(9,579)

 

$

(17,763)

 

$

(20,075)

 

$

(3,487)

 

$

(11,436)

 

$

(5,805)

 

$

(20,728)

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; merger-related costs, 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 December 31, 2019

 

 

Seven Seas

 

 

 

 

Corporate

 

 

 

 

 

Water

 

Quench

 

& Other

 

Total

 

 

(in thousands)

Net income (loss)

 

$

5,095

 

$

(2,736)

 

$

(9,358)

 

$

(6,999)

Depreciation and amortization

 

 

6,127

 

 

8,565

 

 

 

 

14,692

Interest expense, net

 

 

3,003

 

 

1,536

 

 

1,565

 

 

6,104

Income tax expense (benefit)

 

 

742

 

 

(52)

 

 

 

 

690

Share-based compensation expense

 

 

678

 

 

449

 

 

220

 

 

1,347

(Gain) loss on disposal of assets

 

 

(3,206)

 

 

410

 

 

 

 

(2,796)

Acquisition-related expenses

 

 

15

 

 

3

 

 

111

 

 

129

Merger costs

 

 

38

 

 

10

 

 

6,610

 

 

6,658

Changes in deferred revenue related to our bulk water business

 

 

(160)

 

 

 

 

 

 

(160)

ERP implementation charges for a SAAS solution

 

 

 

 

81

 

 

 

 

81

Adjusted EBITDA

 

$

12,332

 

$

8,266

 

$

(852)

 

$

19,746

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA Margin

 

 

53.3

%

 

28.0

%

 

%

 

37.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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%

A reconciliation of our GAAP net income (loss) to Adjusted EBITDA, for the periods presented is shown below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2019

 

 

Seven Seas

 

 

 

 

Corporate

 

 

 

 

 

Water

 

Quench

 

& Other

 

Total

 

 

(in thousands)

 

 

Net income (loss)

 

$

7,267

 

$

(9,579)

 

$

(17,763)

 

$

(20,075)

Depreciation and amortization

 

 

24,044

 

 

30,102

 

 

 

 

54,146

Interest expense, net

 

 

12,776

 

 

6,281

 

 

6,329

 

 

25,386

Income tax expense

 

 

2,166

 

 

40

 

 

1

 

 

2,207

Share-based compensation expense

 

 

2,625

 

 

1,730

 

 

601

 

 

4,956

Loss on disposal of assets

 

 

(3,088)

 

 

1,766

 

 

395

 

 

(1,242)

Acquisition-related expenses

 

 

598

 

 

1,226

 

 

 

 

2,219

Merger costs

 

 

38

 

 

10

 

 

6,610

 

 

6,658

Changes in deferred revenue related to our bulk water business

 

 

194

 

 

 

 

 

 

194

ERP implementation charges for a SAAS solution

 

 

 

 

727

 

 

 

 

727

Restructuring expense

 

 

 

 

130

 

 

 

 

130

Adjusted EBITDA

 

$

46,700

 

$

32,433

 

$

(3,827)

 

$

75,306

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA Margin

 

 

52.9

%

 

28.2

%

 

%

 

37.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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%

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, 2019

 

 

Seven Seas

 

 

 

 

Corporate

 

 

 

 

 

Water

 

Quench

 

& Other

 

Total

 

 

(in thousands)

Principal collected on the Peru construction contract

 

$

1,371

 

$

 

$

 

$

1,371

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

Year Ended December 31, 2019

 

 

Seven Seas

 

 

 

 

Corporate

 

 

 

 

 

Water

 

Quench

 

& Other

 

Total

 

 

(in thousands)

Principal collected on the Peru construction contract

 

$

5,320

 

$

 

$

 

$

5,320

 

 

 

Year Ended December 31, 2018

 

 

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, 2019

 

 

Seven Seas

 

 

 

 

Corporate

 

 

 

 

 

Water

 

Quench

 

& Other

 

Total

 

 

(in thousands)

Adjusted EBITDA plus principal collected on the Peru construction contract

 

$

13,703

 

$

8,266

 

$

(852)

 

$

21,117

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31, 2018

 

 

Seven Seas

 

 

 

 

Corporate

 

 

 

 

 

Water

 

Quench

 

& Other

 

Total

 

 

(in thousands)

Adjusted EBITDA plus principal collected on the Peru construction contract

 

$

10,710

 

$

5,951

 

$

(1,079)

 

$

15,582

 

 

Year Ended December 31, 2019

 

 

Seven Seas

 

 

 

 

Corporate

 

 

 

 

 

Water

 

Quench

 

& Other

 

Total

 

 

(in thousands)

Adjusted EBITDA plus principal collected on the Peru construction contract

 

$

52,020

 

$

32,433

 

$

(3,827)

 

$

80,626

 

 

 

Year Ended December 31, 2018

 

 

Seven Seas

 

 

 

 

Corporate

 

 

 

 

 

Water

 

Quench

 

& Other

 

Total

 

 

(in thousands)

Adjusted EBITDA plus principal collected on the Peru construction contract

 

$

36,559

 

$

20,431

 

$

(3,535)

 

$

53,455

 

 

View Comments and Join the Discussion!
 
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com