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 source
version on businesswire.com: https://www.businesswire.com/news/home/20200305005872/en/
investors@aquaventure.com Investors Hotline: 855-278-WAAS
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