EX-99.1 2 ex-99d1.htm EX-99.1 Ex_99.1

EXHIBIT 99.1

Picture 3

Press Release

 

investors@aquaventure.com

Investors Hotline: 855-278-WAAS (9227) 

 

FOR IMMEDIATE RELEASE

February 27, 2019

 

AquaVenture Holdings Limited Announces Second Quarter 2018 Earnings Results

(Tampa, Fla.) – AquaVenture Holdings Limited (NYSE: WAAS) (“AquaVenture” or the “Company”), a leader in Water-as-a-ServiceTM (“WAASTM”) solutions, today reported financial results for the quarter and full year ended December 31, 2018.

2018 Highlights

For the three months ended December 31, 2018:

·

Total revenues of $41.8 million reflected a 29.9% increase over the prior year period, comprised of 38.2% and 22.6% increases in the Seven Seas Water and Quench segments, respectively.

·

Net loss of $6.7 million, or ($0.25) per share, compared to net loss of $6.3 million, or ($0.24) per share, in the prior year period. 

·

Adjusted EBITDA was $14.3 million, a 32.2% increase over the prior year period.  Adjusted EBITDA Margin was 34.2%, an improvement of 60 basis points.

·

Adjusted EBITDA plus principal collected on the Peru construction contract increased 29.9% to $15.6 million from $12.0 million in the prior year period.

·

AquaVenture completed the strategic acquisitions of AUC on November 1, which is included in our Seven Seas Water segment, and Pure Health Solutions, Inc. (“PHSI”) on December 18, which is included in our Quench segment.  In addition, Seven Seas Water entered into a 10-year water supply agreement with the Water Corporation of Anguilla, and Quench completed several smaller acquisitions during the quarter.

·

AquaVenture accessed $150 million of incremental borrowings to fund acquisitions and reduced its interest rate.

For the full year ended December 31, 2018:

·

Total revenues of $145.6 million reflected a 20.6% increase over the prior year, comprised of 26.1% and 14.6% increases in the Quench and Seven Seas Water segments, respectively.

·

Net loss of $20.7 million, or ($0.78) per share, compared to net loss of $24.9 million, or ($0.94) per share, in the prior year. 

·

Adjusted EBITDA was $48.6 million, a 23.8% increase over the prior year.  Adjusted EBITDA Margin was 33.3%, an improvement of 80 basis points.

·

Adjusted EBITDA plus principal collected on the Peru construction contract increased 22.2% to $53.5 million from $43.8 million in the prior year.

1

 

 

Tony Ibarguen, AquaVenture’s President and Chief Executive Officer announced: “AquaVenture delivered another year of strong financial results highlighted by our ability to drive growth both organically and through M&A.  We completed 11 transactions in 2018, including five in the fourth quarter.  This success has been across both our Seven Seas Water and Quench platforms, and the fourth quarter’s results include the acquisitions of AUC and PHSI, our two largest acquisitions since we became a publicly traded company.  AUC expands our offerings in the Seven Seas Water segment in the attractive wastewater treatment and water reuse businesses, and PHSI broadens both our direct and indirect sales channels within our Quench segment. During the quarter we also amended our senior secured credit agreement by increasing our borrowing capacity and reducing our interest rate.  These amendments helped fund our fourth quarter acquisitions and support our future growth initiatives.  In summary, we are very happy with what we were able to accomplish in 2018 as we continue to expand our water-as-a-service solutions to more customers, in more locations, and with a broader array of product offerings.  Going forward, our primary focus will continue to be on growing internally generated cash flow and investing in strong, organic expansion, coupled with continued strategic M&A execution in the water-as-a-service applications of desalination, wastewater treatment and point-of-use purification.  Our team brings great passion to our purpose of performing for our shareholders by creating clean water solutions for customers around the world.”

Consolidated Financial Performance

For the fourth quarter of 2018, total revenues increased 29.9% to $41.8 million from $32.2 million in the 2017 period.  Total gross margin of 54.0% was relatively flat compared to the prior year period.

Total selling, general and administrative expenses (“SG&A”) increased to $24.0 million in the fourth quarter of 2018 from $19.4 million in the same period of 2017.

Net loss for the fourth quarter of 2018 was $6.7 million, compared to a net loss of $6.3 million in the same period of 2017.  Adjusted EBITDA was $14.3 million for the fourth quarter of 2018, a 32.2% increase over $10.8 million in the prior year period. Adjusted EBITDA Margin of 34.2% for the fourth quarter of 2018 increased 60 basis points from 33.6% in the same period of 2017. Adjusted EBITDA plus the principal collected on the Peru construction contract was $15.6 million in the fourth quarter of 2018, an increase of 29.9% over $12.0 million in the same period of 2017.

Net cash provided by operating activities for the quarter ended December 31, 2018 was $4.8 million compared to $4.4 million for the same period of 2017. Capital expenditures were $6.7 million for the fourth quarter of 2018, compared to $3.2 million in the same period of 2017. 

As of December 31, 2018, cash and cash equivalents were $56.6 million and total debt was $319.7 million.

For the full year ended December 31, 2018, total revenue of $145.6 million increased 20.6% from $120.8 million in 2017. Gross margin of 53.2% was relatively flat compared to the prior year.  Total SG&A increased to $83.6 million for the full year ended December 31, 2018, compared to $72.4 million in 2017.  Net loss for the full year ended December 31, 2018 was $20.7 million, or ($0.78) per share, compared to a net loss of $24.9 million, or ($0.94) per share, in the prior year. 

Adjusted EBITDA was $48.6 million for the full year ended December 31, 2018, a 23.8% increase over Adjusted EBITDA of $39.2 million in 2017.  Adjusted EBITDA Margin increased 80 basis points to 33.3%, compared to 32.5% in the prior year. Adjusted EBITDA plus the principal collected on the Peru construction contract was $53.5 million for the full year ended December 31, 2018, an increase of 22.2% over 2017.

Net cash provided by operating activities for the full year ended December 31, 2018 was $26.9 million compared to $19.0 for the same period of 2017.  In addition, capital expenditures were $19.6 million, compared to $14.4 million in the prior year period.

 

2

 

 

Fourth Quarter and Full Year 2018 Segment Results

Seven Seas Water

Seven Seas Water revenues for the three months ended December 31, 2018 increased $5.7 million, or 38.2%, compared to the same period of 2017, which were comprised of 35.5% inorganic growth and 2.7% organic growth.  This increase was comprised of increases of $2.8 million in product sales and $2.3 million in rental revenue driven by the inclusion of the acquisition of the AUC operations completed in November 2018.  In addition, bulk water revenue increased $0.7 million compared to the prior year period, driven by increased volumes in certain operations and higher water rates in others in the current quarter compared to the same period of 2017, and the commencement of our water contract in Anguilla.

Seven Seas Water gross margin for the three months ended December 31, 2018 decreased 50 basis points to 54.5%. The decrease was primarily related to the acquisition of the AUC operations in November 2018, which has an overall lower gross margin than the bulk water business, partially offset by an increase in the bulk water gross margin compared to the prior year period.  Bulk water gross margin of 55.5% increased 400 basis points compared to the prior year period primarily due to lower depreciation expense in connection with a purchase price refund received on in-service equipment at our Trinidad operations and by higher revenues without a commensurate increase in costs at our BVI operations, partially offset by higher expenses for repairs and maintenance. Rental and product sales gross margin of 74.7% and 17.5%, respectively, for the year ended December 31, 2018 had no comparative period as both related to the acquisition of the AUC operations. Financing gross margin is 100% but causes a decrease to the total Seven Seas Water gross margin compared to the prior year period as a result of declining financing revenues due to the continued amortization of the long-term receivables.

Seven Seas Water SG&A expenses for the three months ended December 31, 2018 remained relatively flat compared to the same period of 2017. SG&A expenses of $7.8 million during the fourth quarter of 2018 included $0.7 million of higher amortization expense of definite-lived intangible assets and $0.5 million of higher compensation and benefits expense primarily due to the acquisition of the AUC business.  These increases were offset by $1.2 million of lower share-based compensation expense resulting from the completion of the vesting of certain equity grants made in connection with our initial public offering in 2016.

Net income for our Seven Seas Water segment was $0.1 million for the three months ended December 31, 2018 compared to a net loss of $3.2 million in the same period of 2017. Adjusted EBITDA of $9.4 million for the fourth quarter of 2018 increased 33.7% over the prior year period. Adjusted EBITDA Margin decreased 150 basis points to 45.7% in the fourth quarter of 2018 from 47.2% in the same period of 2017. The decline in Adjusted EBITDA Margin was driven by higher expenses for repairs and maintenance during the quarter at several of our plants. Adjusted EBITDA plus principal collected on the Peru construction contract was $10.7 million in the fourth quarter of 2018, an increase of 30.1% over the prior year period. 

For the full year ended December 31, 2018, Seven Seas Water revenues were $66.4 million, an increase of 14.6% over 2017.  Gross margin increased 250 basis points to 55.7% from 53.2% in the prior year. Total SG&A expenses for the full year ended December 31, 2018 increased $1.7 million to $30.1 million from $28.4 million in 2017.  Net loss for the full year ended December 31, 2018 was $3.5 million compared to a net loss of $10.5 million in 2017. Adjusted EBITDA was $31.7 million, an increase of 19.5% over the prior year. Adjusted EBITDA Margin increased 200 basis points to 47.7% from 45.7% in the prior year. Adjusted EBITDA plus principal collected on the Peru construction contract was $36.6 million, a 17.9% increase over 2017.

Quench

Quench revenues for the three months ended December 31, 2018 increased $3.9 million, or 22.6%, compared to the same period of 2017, which were comprised of 13.2% of inorganic growth and 9.4% of organic growth. Rental revenues increased $3.1 million, or 22.5%, compared to the prior year period, which reflected 17.3% of inorganic growth from acquisitions and 5.2% of organic growth due to additional units placed under new leases in excess of unit

3

 

 

attrition.  Product sales increased $0.8 million compared to the same period of 2017 due to an increase in indirect equipment sales to dealers, higher direct customer equipment sales and an increase in coffee sales.

Quench gross margin for the fourth quarter of 2018 increased 40 basis points to 53.6% from 53.2% for the same period of 2017.  Rental gross margin for the fourth quarter of 2018 was 57.3%, an increase of 70 basis points over the prior year period, primarily due to continued leveraging of the platform with higher revenues achieved as additional units are placed under lease without a commensurate increase in costs. Product sales gross margin was 38.8% for the three months ended December 31, 2018 compared to 40.0% in the prior year period. The decrease was primarily due to the increase in lower-margin indirect equipment sales compared to the prior year period.

Quench SG&A for the three months ended December 31, 2018 of $14.6 million increased $4.2 million compared to the prior year period.  The increase was driven by $2.3 million of higher acquisition-related costs including contingent consideration accounted for as post-combination earnout compensation, $0.9 million of restructuring expenses incurred in connection with the acquisition of PHSI in December 2018, $0.6 million of higher compensation and benefits expense primarily driven by increased headcount from the inclusion of staff added from certain acquisitions and additional resources to support growth strategy and $0.5 million of higher amortization expense primarily related to an increase in intangible assets from recent acquisitions.  Partially offsetting this was a $0.6 million decrease in share-based compensation expense resulting from the completion of the vesting of certain equity grants made in connection with our initial public offering and a $0.3 million decrease in loss of disposal of assets.

Quench had a net loss of $4.2 million for the fourth quarter of 2018 compared to a net loss of $2.0 million in the prior year period. Adjusted EBITDA of $6.0 million for the fourth quarter of 2018 increased 23.2% over $4.8 million in the same period of 2017. Adjusted EBITDA Margin increased 20 basis points to 28.2% in the fourth quarter of 2018 from 28.0% in the prior year period.

For the full year ended December 31, 2018, Quench reported total revenue of $79.2 million, a 26.1% increase compared to $62.8 million in the prior year. Gross margin decreased 220 basis points to 51.2% from 53.4% in 2017. Total SG&A expenses for the full year ended December 31, 2018 increased $9.3 million to $48.7 million.  Net loss for full year ended December 31, 2018 was $11.4 million, compared to a net loss of $10.2 million in 2017. Adjusted EBITDA was $20.4 million for the full year ended December 31, 2018, a 22.7% increase over $16.7 million in 2017.  Adjusted EBITDA Margin decreased 70 basis points to 25.8% from 26.5% in the prior year.

Corporate and Other

Corporate and Other SG&A for the three months ended December 31, 2018 increased $0.3 million compared to the same period of 2017, primarily due to higher professional fees in connection with corporate activities including acquisitions and amendments to our senior secured credit agreement.

For the full year ended December 31, 2018, SG&A was $4.8 million compared to $4.6 million in the prior year period. 

2019 Outlook

For the full year 2019 outlook, the Company expects to achieve the following results:

·

Revenues between $190 million and $197 million;

·

Adjusted EBITDA between $67 million and $72 million;

·

Principal collected on the Peru construction contract is projected to be $5.3 million; and

·

Adjusted EBITDA plus the principal collected on the Peru construction contract between $72 million and $77 million.

These ranges do not include estimates in connection with any pending or future acquisitions.

4

 

 

The above statements are based on current targets. These statements are forward-looking, and actual results may differ materially. We do not provide GAAP financial measures on a forward-looking basis because we are unable to predict with reasonable certainty the ultimate outcome of unusual gains and losses, acquisition-related expenses and purchase accounting fair value adjustments, among other factors, without unreasonable effort. These items are uncertain, depend on various factors, and could be material to our results computed in accordance with GAAP.

About AquaVenture 

AquaVenture is a multinational provider of WAAS™ solutions that provide customers a reliable and cost-effective source of clean drinking and process water primarily under long-term contracts that minimize capital investment by the customer. AquaVenture is composed of two operating platforms: Quench, a leading provider of filtered water systems and related services with over 140,000 units installed at institutional and commercial customer locations across the U.S. and Canada; and Seven Seas Water, a multinational provider of desalination and wastewater treatment solutions, providing more than 8.5 billion gallons of potable, high purity industrial grade and ultra-pure water per year to governmental, municipal, industrial and hospitality customers. 

Conference Call and Webcast Information

AquaVenture will host an investor conference call on Wednesday, February 27, 2019 at 8:00 a.m. EDT. Prior to the conference call, AquaVenture will post an investor presentation on the Investor Relations section of the Company’s website, www.aquaventure.com. Interested parties are invited to listen to the conference call by dialing 1-877-407-0789, or, for international callers, 1-201-689-8562 and ask for the AquaVenture conference call. Replays of the entire call will be available through March 6, 2019 at 1-844-512-2921, or, for international callers, at 1-412-317-6671, conference ID #13686947. A webcast of the conference call will also be available through the Investor Relations section of the Company’s website, www.aquaventure.com. A copy of this press release is also available on the Company’s website.

Safe Harbor Statement

This release contains forward-looking statements that are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 and of Section 21E of the Securities Exchange Act of 1934. The forward-looking statements in this release do not constitute guarantees of future performance. Investors are cautioned that statements in this press release regarding management’s future expectations, beliefs, intentions, goals, strategies, plans or prospects, including, without limitation, statements relating to AquaVenture’s strategic focus; its forecast of full-year 2018 financial results; expectations regarding future business development and acquisition activities; its expectations regarding performance, growth, cash flows and margins from recently completed and pending acquisitions; its ability to capitalize on vertical integration opportunities; and the impacts on operating results of the timing, size, integration and accounting treatment of acquisitions, constitute forward-looking statements. Forward-looking statements can be identified by terminology such as “anticipate,” “believe,” “could,” “could increase the likelihood,” “estimate,” “expect,” “intend,” “is planned,” “may,” “should,” “will,” “will enable,” “would be expected,” “look forward,” “may provide,” “would” or similar terms, variations of such terms or the negative of those terms. Such forward-looking statements involve known and unknown risks, uncertainties and other factors including those risks, uncertainties and factors detailed in AquaVenture’s filings with the Securities and Exchange Commission. As a result of such risks, uncertainties and factors, AquaVenture’s actual results may differ materially from any future results, performance or achievements discussed in or implied by the forward-looking statements contained herein. AquaVenture is providing the information in this press release as of this date and assumes no obligations to update the information included in this press release or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

5

 

 

AQUAVENTURE HOLDINGS LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

 

 

 

 

 

 

 

 

 

 

 

 

    

December 31, 

    

December 31, 

 

 

 

2018

 

2017

 

ASSETS

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

56,618

 

$

118,090

 

Restricted cash

 

 

 —

 

 

 —

 

Trade receivables, net of allowances of $1,034 and $1,045, respectively

 

 

21,437

 

 

19,593

 

Inventory

 

 

15,496

 

 

8,228

 

Current portion of long-term receivables

 

 

6,538

 

 

6,878

 

Prepaid expenses and other current assets

 

 

8,272

 

 

3,874

 

Total current assets

 

 

108,361

 

 

156,663

 

Property, plant and equipment, net

 

 

150,064

 

 

112,771

 

Construction in progress

 

 

15,427

 

 

10,437

 

Restricted cash

 

 

4,153

 

 

4,269

 

Long-term receivables

 

 

40,574

 

 

43,796

 

Other assets

 

 

6,251

 

 

4,307

 

Deferred tax asset

 

 

4,191

 

 

38

 

Intangible assets, net

 

 

205,443

 

 

122,169

 

Goodwill

 

 

190,999

 

 

99,495

 

Total assets

 

$

725,463

 

$

553,945

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

8,235

 

$

3,508

 

Accrued liabilities

 

 

25,116

 

 

12,837

 

Current portion of long-term debt

 

 

6,494

 

 

6,483

 

Deferred revenue

 

 

3,890

 

 

2,454

 

Total current liabilities

 

 

43,735

 

 

25,282

 

Long-term debt

 

 

313,215

 

 

167,772

 

Deferred tax liability

 

 

18,465

 

 

5,266

 

Other long-term liabilities

 

 

13,450

 

 

11,429

 

Total liabilities

 

 

388,865

 

 

209,749

 

Commitments and contingencies

 

 

 

 

 

 

 

Shareholders' Equity

 

 

 

 

 

 

 

Ordinary shares, no par value, 250,000 shares authorized; 26,780 and 26,482 shares issued and outstanding at December 31, 2018 and December 31, 2017, respectively

 

 

 —

 

 

 —

 

Additional paid-in capital

 

 

582,127

 

 

568,593

 

Accumulated other comprehensive income

 

 

(421)

 

 

(17)

 

Accumulated deficit

 

 

(245,108)

 

 

(224,380)

 

Total shareholders' equity

 

 

336,598

 

 

344,196

 

Total liabilities and shareholders' equity

 

$

725,463

 

$

553,945

 

6

 

 

AQUAVENTURE HOLDINGS LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 

 

 

    

2018

    

2017

    

2016

 

 

 

 

  

 

 

  

 

 

  

 

Revenues:

 

 

 

 

 

 

 

 

 

 

Bulk water

 

$
57,262

 

$
53,436

 

$
50,893

 

Rental

 

 
64,216

 

 
52,997

 

 
48,699

 

Product sales

 

 
20,105

 

 
9,796

 

 
10,267

 

Financing

 

 
4,025

 

 
4,534

 

 
1,713

 

Total revenues

 

 
145,608

 

 
120,763

 

 
111,572

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

Bulk water

 

 
26,516

 

 
27,145

 

 
25,525

 

Rental

 

 
28,025

 

 
23,484

 

 
21,437

 

Product sales

 

 
13,565

 

 
5,779

 

 
5,869

 

Total cost of revenues

 

 
68,106

 

 
56,408

 

 
52,831

 

Gross profit

 

 
77,502

 

 
64,355

 

 
58,741

 

Selling, general and administrative expenses

 

 
83,645

 

 
72,421

 

 
70,876

 

Loss from operations

 

 
(6,143)

 

 
(8,066)

 

 
(12,135)

 

Other expense:

 

 

 

 

 

 

 

 

 

 

Gain on bargain purchase, net of deferred taxes

 

 

—

 

 

            —

 

 
1,429

 

Interest expense, net

 

 
(15,046)

 

 
(11,537)

 

 
(11,147)

 

Other income (expense), net

 

 
(850)

 

 
(1,850)

 

 
1,299

 

Loss before income tax expense

 

 
(22,039)

 

 
(21,453)

 

 
(20,554)

 

Income tax expense (benefit)

 

 
(1,311)

 

 
3,411

 

 
365

 

Net loss

 

 
(20,728)

 

 
(24,894)

 

 
(20,919)

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 
(404)

 

 
(17)

 

 

—

 

Comprehensive loss

 

$
(21,132)

 

$
(24,911)

 

$
(20,919)

 

 

 

 

 

 

 

 

 

 

 

 

Loss per share – basic and diluted(1)

 

$
(0.78)

 

$
(0.94)

 

$
(0.28)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding – basic and diluted(1)

 

 
26,583

 

 
26,426

 

 
25,784

 

 

(1)  Represents loss per share and weighted-average shares outstanding for the period following the corporate reorganization and initial public offering.  There were no ordinary shares outstanding prior to October 6, 2016 and, therefore, no loss per share information has been presented for any period prior to that date.

 

 

7

 

 

AQUAVENTURE HOLDINGS LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 

 

 

 

2018

    

2017

 

2016

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(20,728)

 

$

(24,894)

 

$

(20,919)

 

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

 

 

 

 

 

  

 

 

  

 

Depreciation and amortization

 

 

34,533

 

 

29,648

 

 

27,548

 

Share-based compensation expense

 

 

11,188

 

 

12,120

 

 

4,015

 

Provision for bad debts

 

 

1,035

 

 

605

 

 

1,044

 

Deferred income tax provision

 

 

(3,287)

 

 

1,488

 

 

165

 

Inventory adjustment

 

 

308

 

 

89

 

 

(23)

 

Loss (gain) on extinguishment of debt

 

 

 —

 

 

1,389

 

 

(1,610)

 

Gain on bargain purchase, net of deferred taxes

 

 

 —

 

 

 —

 

 

(1,429)

 

Loss on disposal of assets

 

 

1,563

 

 

1,468

 

 

1,246

 

Amortization of debt financing fees

 

 

963

 

 

878

 

 

816

 

Accretion of debt

 

 

 —

 

 

60

 

 

333

 

Other

 

 

23

 

 

49

 

 

(53)

 

Change in operating assets and liabilities:

 

 

 

 

 

  

 

 

  

 

Trade receivables

 

 

 2

 

 

(4,301)

 

 

(681)

 

Inventory

 

 

(2,162)

 

 

(1,219)

 

 

(450)

 

Prepaid expenses and other current assets

 

 

(1,135)

 

 

(710)

 

 

270

 

Long-term receivable

 

 

5,661

 

 

6,309

 

 

1,614

 

Other assets

 

 

(4,124)

 

 

(3,462)

 

 

(2,283)

 

Current liabilities

 

 

2,579

 

 

(1,011)

 

 

1,130

 

Long-term liabilities

 

 

463

 

 

460

 

 

778

 

Net cash provided by operating activities

 

 

26,882

 

 

18,966

 

 

11,511

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(19,626)

 

 

(14,445)

 

 

(17,256)

 

Proceeds from sale of fixed assets

 

 

680

 

 

 —

 

 

 —

 

Net cash paid for acquisition of assets or business

 

 

(198,473)

 

 

(9,921)

 

 

(45,875)

 

Proceeds from disposal of business

 

 

2,879

 

 

 —

 

 

 —

 

Other

 

 

—

 

 

22

 

 

 3

 

Net cash used in investing activities

 

 

(214,540)

 

 

(24,344)

 

 

(63,128)

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

Proceeds from long-term debt

 

 

150,000

 

 

150,000

 

 

23,675

 

Payments of long-term debt

 

 

(6,528)

 

 

(118,205)

 

 

(17,517)

 

Payment of debt financing fees

 

 

(70)

 

 

(3,677)

 

 

(340)

 

Payments related to debt extinguishment

 

 

 —

 

 

(433)

 

 

 —

 

Payments of secured borrowings

 

 

(17,500)

 

 

 —

 

 

 —

 

Payments of acquisition contingent consideration

 

 

(112)

 

 

 —

 

 

(864)

 

Proceeds from exercise of stock options

 

 

442

 

 

73

 

 

 2

 

Shares withheld to cover minimum tax withholdings on equity awards

 

 

(422)

 

 

(455)

 

 

 —

 

Proceeds from the issuance of Employee Stock Purchase Plan shares

 

 

285

 

 

204

 

 

 —

 

Issuance costs from issuance of ordinary shares in IPO

 

 

 —

 

 

(1,169)

 

 

123,030

 

Net cash provided by financing activities

 

 

126,095

 

 

26,338

 

 

127,986

 

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

 

 

(25)

 

 

 4

 

 

 —

 

Change in cash, cash equivalents and restricted cash

 

 

(61,588)

 

 

20,964

 

 

76,369

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

122,359

 

 

101,395

 

 

25,026

 

Cash, cash equivalents and restricted cash at end of period

 

$

60,771

 

$

122,359

 

$

101,395

 

8

 

 

AQUAVENTURE HOLDINGS LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - SEGMENT DATA

(IN THOUSANDS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31, 2018

 

 

 

Seven Seas

 

 

 

 

Corporate

 

 

 

 

 

    

Water

    

Quench

    

    & Other    

    

    Total    

 

Revenues:

 

 

    

 

 

    

 

 

 

 

 

    

 

Bulk water

 

$
14,580

 

$

—

 

$

 —

 

$
14,580

 

Rental

 

 
2,318

 

 
16,857

 

 

 —

 

 
19,175

 

Product sales

 

 
2,817

 

 
4,276

 

 

 —

 

 
7,093

 

Financing

 

 
977

 

 

—

 

 

 —

 

 
977

 

Total revenues

 

 
20,692

 

 
21,133

 

 

 —

 

 
41,825

 

Gross profit:

 

 

 

 

 

 

 

 

 

 

 

 

 

Bulk water

 

 
8,085

 

 

—

 

 

 —

 

 
8,085

 

Rental

 

 
1,731

 

 
9,659

 

 

 —

 

 
11,390

 

Product sales

 

 
493

 

 
1,659

 

 

 —

 

 
2,152

 

Financing

 

 
977

 

 

—

 

 

 —

 

 
977

 

Total gross profit

 

 
11,286

 

 
11,318

 

 

 —

 

 
22,604

 

Selling, general and administrative expenses

 

 
7,782

 

 
14,569

 

 
1,605

 

 
23,956

 

Income (loss) from operations

 

 
3,504

 

 
(3,251)

 

 
(1,605)

 

 
(1,352)

 

Other expense, net

 

 
(3,420)

 

 
(1,011)

 

 
(945)

 

 
(5,376)

 

Income (loss) before income tax expense

 

 
84

 

 
(4,262)

 

 
(2,550)

 

 
(6,728)

 

Income tax expense (benefit)

 

 
17

 

 
(16)

 

 

 —

 

 
1

 

Net income (loss)

 

$
67

 

$
(4,246)

 

$
(2,550)

 

$
(6,729)

 

 

 

 

 

Three Months Ended December 31, 2017

 

 

 

Seven Seas

 

 

 

 

Corporate

 

 

 

 

 

    

Water

    

Quench

    

    & Other    

    

    Total    

 

Revenues:

 

 

    

 

 

    

 

 

 

 

 

    

 

Bulk water

 

$
13,885

 

$

—

 

$

 —

 

$
13,885

 

Rental

 

 

—

 

 
13,759

 

 

 —

 

 
13,759

 

Product sales

 

 

—

 

 
3,478

 

 

 —

 

 
3,478

 

Financing

 

 
1,083

 

 

—

 

 

 —

 

 
1,083

 

Total revenues

 

 
14,968

 

 
17,237

 

 

 —

 

 
32,205

 

Gross profit:

 

 

 

 

 

 

 

 

 

 

 

 

 

Bulk water

 

 
7,155

 

 

—

 

 

 —

 

 
7,155

 

Rental

 

 

—

 

 
7,783

 

 

 —

 

 
7,783

 

Product sales

 

 

—

 

 
1,391

 

 

 —

 

 
1,391

 

Financing

 

 
1,083

 

 

—

 

 

 —

 

 
1,083

 

Total gross profit

 

 
8,238

 

 
9,174

 

 

 —

 

 
17,412

 

Selling, general and administrative expenses

 

 
7,663

 

 
10,412

 

 
1,306

 

 
19,381

 

Income (loss) from operations

 

 
575

 

 
(1,238)

 

 
(1,306)

 

 
(1,969)

 

Other (expense) income, net

 

 
(2,805)

 

 
(772)

 

 
221

 

 
(3,356)

 

Loss before income tax expense

 

 
(2,230)

 

 
(2,010)

 

 
(1,085)

 

 
(5,325)

 

Income tax expense (benefit)

 

 
1,016

 

 
(26)

 

 

 —

 

 
990

 

Net loss

 

$
(3,246)

 

$
(1,984)

 

$
(1,085)

 

$
(6,315)

 

 

9

 

 

AQUAVENTURE HOLDINGS LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - SEGMENT DATA

(IN THOUSANDS)

 

 

 

Full Year Ended December 31, 2018

 

 

 

Seven Seas

 

 

 

 

Corporate

 

 

 

 

 

    

Water

    

Quench

    

    & Other    

    

    Total    

 

Revenues:

 

 

    

 

 

    

 

 

 

 

 

    

 

Bulk water

 

$
57,262

 

$

—

 

$

 —

 

$
57,262

 

Rental

 

 
2,318

 

 
61,898

 

 

 —

 

 
64,216

 

Product sales

 

 
2,817

 

 
17,288

 

 

 —

 

 
20,105

 

Financing

 

 
4,025

 

 

—

 

 

 —

 

 
4,025

 

Total revenues

 

 
66,422

 

 
79,186

 

 

 —

 

 
145,608

 

Gross profit:

 

 

 

 

 

 

 

 

 

 

 

 

 

Bulk water

 

 
30,746

 

 

—

 

 

 —

 

 
30,746

 

Rental

 

 
1,731

 

 
34,460

 

 

 —

 

 
36,191

 

Product sales

 

 
493

 

 
6,047

 

 

 —

 

 
6,540

 

Financing

 

 
4,025

 

 

—

 

 

 —

 

 
4,025

 

Total gross profit

 

 
36,995

 

 
40,507

 

 

 —

 

 
77,502

 

Selling, general and administrative expenses

 

 
30,143

 

 
48,670

 

 
4,832

 

 
83,645

 

Income (loss) from operations

 

 
6,852

 

 
(8,163)

 

 
(4,832)

 

 
(6,143)

 

Other expense, net

 

 
(11,549)

 

 
(3,374)

 

 
(973)

 

 
(15,896)

 

Loss before income tax expense

 

 
(4,697)

 

 
(11,537)

 

 
(5,805)

 

 
(22,039)

 

Income tax benefit

 

 
(1,210)

 

 
(101)

 

 

 —

 

 
(1,311)

 

Net loss

 

$
(3,487)

 

$
(11,436)

 

$
(5,805)

 

$
(20,728)

 

 

 

 

 

Full Year Ended December 31, 2017

 

 

 

Seven Seas

 

 

 

 

Corporate

 

 

 

 

 

    

Water

    

Quench

    

    & Other    

    

    Total    

 

Revenues:

 

 

    

 

 

    

 

 

 

 

 

    

 

Bulk water

 

$
53,436

 

$

—

 

$

 —

 

$
53,436

 

Rental

 

 

—

 

 
52,997

 

 

 —

 

 
52,997

 

Product sales

 

 

—

 

 
9,796

 

 

—

 

 
9,796

 

Financing

 

 
4,534

 

 

—

 

 

—

 

 
4,534

 

Total revenues

 

 
57,970

 

 
62,793

 

 

 —

 

 
120,763

 

Gross profit:

 

 

 

 

 

 

 

 

 

 

 

 

 

Bulk water

 

 
26,291

 

 

—

 

 

 —

 

 
26,291

 

Rental

 

 

—

 

 
29,513

 

 

 —

 

 
29,513

 

Product sales

 

 

—

 

 
4,017

 

 

—

 

 
4,017

 

Financing

 

 
4,534

 

 

—

 

 

—

 

 
4,534

 

Total gross profit

 

 
30,825

 

 
33,530

 

 

 —

 

 
64,355

 

Selling, general and administrative expenses

 

 
28,431

 

 
39,400

 

 
4,590

 

 
72,421

 

Income (loss) from operations

 

 
2,394

 

 
(5,870)

 

 
(4,590)

 

 
(8,066)

 

Other (expense) income, net

 

 
(9,673)

 

 
(4,167)

 

 
453

 

 
(13,387)

 

Loss before income tax expense

 

 
(7,279)

 

 
(10,037)

 

 
(4,137)

 

 
(21,453)

 

Income tax expense

 

 
3,246

 

 
195

 

 

 —

 

 
3,441

 

Net loss

 

$
(10,525)

 

$
(10,232)

 

$
(4,137)

 

$
(24,894)

 

10

 

 

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 taxes, depreciation and amortization as well as adjusting for the following items: share‑based compensation expense; gain or loss on disposal of assets; acquisition‑related expenses, including professional fees, purchase consideration recorded as compensation expense for acquired employees, and other expenses related to acquisitions; goodwill impairment charges; changes in deferred revenue related to our bulk water business; ERP system implementation charges for a SaaS solution, and charges incurred in connection with restructuring activities.  Adjusted EBITDA should not be considered a measure of financial performance under GAAP. Management believes that the use of Adjusted EBITDA, which is used by management as a key metric to assess performance, provides consistency and comparability with our past financial performance, and facilitates period‑to‑period comparisons of operations. Management believes that it is useful to exclude certain charges, such as depreciation and amortization, and non‑core operational charges, from Adjusted EBITDA because (1) the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations and (2) such expenses can vary significantly between periods.

Adjusted EBITDA Margin

Adjusted EBITDA Margin, a non-GAAP financial measure, is defined as Adjusted EBITDA as a percentage of revenue.

11

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31, 2018

 

 

 

Seven Seas

 

 

 

 

  Corporate

 

 

 

 

 

    

Water

    

Quench

    

& Other

    

Total

 

 

 

(in thousands)

 

Net income (loss)

 

$
67

 

$
(4,246)

 

$
(2,550)

 

$
(6,729)

 

Depreciation and amortization

 

 
4,558

 

 
5,214

 

 

—

 

 
9,772

 

Interest expense, net

 

 
3,226

 

 
876

 

 
944

 

 
5,046

 

Income tax expense (benefit)

 

 
17

 

 
(16)

 

 

—

 

 
1

 

Share-based compensation expense

 

 
735

 

 
280

 

 
171

 

 
1,186

 

(Gain) loss on disposal of assets

 

 
(255)

 

 
312

 

 

—

 

 
57

 

Acquisition-related expenses

 

 
1,144

 

 
2,336

 

 
356

 

 
3,836

 

Changes in deferred revenue related to our bulk water business

 

 
(45)

 

 

—

 

 

—

 

 
(45)

 

ERP implementation charges for a SAAS solution

 

 

—

 

 
252

 

 

—

 

 
252

 

Restructuring expense

 

 

—

 

 
943

 

 

—

 

 
943

 

Adjusted EBITDA

 

$
9,447

 

$
5,951

 

$
(1,079)

 

$
14,319

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA Margin

 

 
45.7

%

 
28.2

%

 

—

%

 
34.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31, 2017

 

 

 

Seven Seas

 

 

 

 

  Corporate

 

 

 

 

 

    

Water

    

Quench

    

& Other

    

Total

 

 

 

(in thousands)

 

Net loss

 

$
(3,246)

 

$
(1,984)

 

$
(1,085)

 

$
(6,315)

 

Depreciation and amortization

 

 
3,590

 

 
4,282

 

 

—

 

 
7,872

 

Interest expense (income), net

 

 
2,682

 

 
773

 

 
(221)

 

 
3,234

 

Income tax expense (benefit)

 

 
1,016

 

 
(26)

 

 

—

 

 
990

 

Share-based compensation expense

 

 
1,966

 

 
863

 

 
239

 

 
3,068

 

Loss on disposal of assets

 

 
3

 

 
581

 

 

—

 

 
584

 

Acquisition-related expenses

 

 
965

 

 
10

 

 

—

 

 
975

 

Changes in deferred revenue related to our bulk water business

 

 
92

 

 

—

 

 

—

 

 
92

 

ERP implementation charges for a SAAS solution

 

 

—

 

 
332

 

 

—

 

 
332

 

Adjusted EBITDA

 

$
7,068

 

$
4,831

 

$
(1,067)

 

$
10,832

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA Margin

 

 
47.2

%

 
28.0

%

 

—

%

 
33.6

%

 

 

 

12

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Full Year Ended December 31, 2018

 

 

 

Seven Seas

 

 

 

 

  Corporate

 

 

 

 

 

    

Water

    

Quench

    

& Other

    

Total

 

 

 

(in thousands)

 

Net loss

 

$
(3,487)

 

$
(11,436)

 

$
(5,805)

 

$
(20,728)

 

Depreciation and amortization

 

 
15,469

 

 
19,064

 

 

—

 

 
34,533

 

Interest expense, net

 

 
10,846

 

 
3,229

 

 
971

 

 
15,046

 

Income tax benefit

 

 
(1,210)

 

 
(101)

 

 

—

 

 
(1,311)

 

Share-based compensation expense

 

 
7,172

 

 
3,168

 

 
848

 

 
11,188

 

(Gain) loss on disposal of assets

 

 
(15)

 

 
1,578

 

 

—

 

 
1,563

 

Acquisition-related expenses

 

 
2,549

 

 
2,708

 

 
451

 

 
5,708

 

Changes in deferred revenue related to our bulk water business

 

 
335

 

 

—

 

 

—

 

 
335

 

ERP implementation charges for a SAAS solution

 

 

—

 

 
1,278

 

 

—

 

 
1,278

 

Restructuring expenses

 

 

—

 

 
943

 

 

—

 

 
943

 

Adjusted EBITDA

 

$
31,659

 

$
20,431

 

$
(3,535)

 

$
48,555

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA Margin

 

 
47.7

%

 
25.8

%

 

—

%

 
33.3

%

 

 

 

 

 

Full Year Ended December 31, 2017

 

 

 

Seven Seas

 

 

 

 

  Corporate

 

 

 

 

 

    

Water

    

Quench

    

& Other

    

Total

 

 

 

(in thousands)

 

Net loss

 

$
(10,525)

 

$
(10,232)

 

$
(4,137)

 

$
(24,894)

 

Depreciation and amortization

 

 
14,306

 

 
15,342

 

 

—

 

 
29,648

 

Interest expense (income), net

 

 
8,391

 

 
3,599

 

 
(453)

 

 
11,537

 

Income tax expense

 

 
3,246

 

 
195

 

 

—

 

 
3,441

 

Share-based compensation expense

 

 
8,050

 

 
3,391

 

 
679

 

 
12,120

 

(Gain) loss on disposal of assets

 

 
(19)

 

 
1,487

 

 

—

 

 
1,468

 

Acquisition-related expenses

 

 
1,766

 

 
149

 

 

—

 

 
1,915

 

Changes in deferred revenue related to our bulk water business

 

 
460

 

 

—

 

 

—

 

 
460

 

ERP implementation charges for a SAAS solution

 

 

—

 

 
2,152

 

 

—

 

 
2,152

 

Loss on debt extinguishment

 

 
820

 

 
569

 

 

—

 

 
1,389

 

Adjusted EBITDA

 

$
26,495

 

$
16,652

 

$
(3,911)

 

$
39,236

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA Margin

 

 
45.7

%

 
26.5

%

 

—

%

 
32.5

%

 

 

 

 

 

 

13

 

 

KEY METRICS

Principal collected on the Peru construction contract

As part of our Peru acquisition, we acquired the rights to a design and construction contract for the construction of a desalination plant and related infrastructure. Pursuant to the contract, we are entitled to receive monthly installment payments that continue until 2024 and are guaranteed by a major shareholder of the customer.  Due to the manner in which this contractual arrangement is structured, these payments are accounted for as a long-term receivable.  Prior to the adoption of the new revenue recognition standard on January 1, 2018, the principal and interest portions of these payments were not recognized as revenue in our consolidated financial statements and therefore were not included in Adjusted EBITDA or in determining Adjusted EBITDA Margin.  As a result of the adoption of the new revenue recognition standard, all financial information presented herein has been restated, including recording the interest portion of these payments as revenue and, thus, including them in Adjusted EBITDA and in determining Adjusted EBITDA Margin.  The principal collected on the Peru construction contract remains the only portion of these monthly payments that is not recognized as revenue in our consolidated financial statements, and therefore is not included in Adjusted EBITDA or in the determination Adjusted EBITDA Margin.

 

 

 

Three Months Ended December 31, 2018

 

 

 

Seven Seas

 

 

 

 

Corporate

 

 

 

 

 

  

Water

  

Quench

  

& Other

  

Total

    

 

 

(in thousands)

 

Principal collected on the Peru construction contract

 

$
1,263

 

$

 —

 

$

 —

 

$
1,263

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31, 2017

 

 

 

Seven Seas

 

 

 

 

Corporate

 

 

 

 

 

  

Water

  

Quench

  

& Other

  

Total

    

 

 

(in thousands)

 

Principal collected on the Peru construction contract

 

$
1,164

 

$

 —

 

$

 —

 

$

1,164

 

 

 

 

 

 

Full Year Ended December 31, 2018

 

 

 

Seven Seas

 

 

 

 

Corporate

 

 

 

 

 

  

Water

  

Quench

  

& Other

  

Total

    

 

 

(in thousands)

 

Principal collected on the Peru construction contract

 

$
4,900

 

$

 —

 

$

 —

 

$
4,900

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Full Year Ended December 31, 2017

 

 

 

Seven Seas

 

 

 

 

Corporate

 

 

 

 

 

  

Water

  

Quench

  

& Other

  

Total

    

 

 

(in thousands)

 

Principal collected on the Peru construction contract

 

$
4,514

 

$

 —

 

$

 —

 

$

4,514

 

14

 

 

Adjusted EBITDA plus Principal collected on the Peru construction contract

We understand that many in the investment community combine our Adjusted EBITDA and the principal we collect from the design and construction contract for purposes of reviewing and analyzing our financial results.  Our management and board of directors also use this combination in evaluating our performance (including in measuring performance for a portion of the compensation of our executive officers) because they believe it is helpful in better understanding the cash generated from our Seven Seas Water business.  In this regard, and for the sake of clarity and convenience, the combination of our Adjusted EBITDA and the principal collected on the Peru construction contract is presented.

 

 

 

Three Months Ended December 31, 2018

 

 

 

  Seven Seas  

 

 

 

 

  Corporate  

 

 

 

 

 

  

Water

  

Quench

  

& Other

  

Total

    

 

 

(in thousands)

 

Adjusted EBITDA plus principal collected on the Peru construction contract

 

$
10,710

 

$
5,951

 

$
(1,079)

 

$
15,582

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31, 2017

 

 

 

  Seven Seas  

 

 

 

 

  Corporate  

 

 

 

 

 

  

Water

  

Quench

  

& Other

  

Total

    

 

 

(in thousands)

 

Adjusted EBITDA plus principal collected on the Peru construction contract

 

$
8,232

 

$
4,831

 

$
(1,067)

 

$
11,996

 

 

 

 

 

 

Full Year Ended December 31, 2018

 

 

 

  Seven Seas  

 

 

 

 

  Corporate  

 

 

 

 

 

  

Water

  

Quench

  

& Other

  

Total

    

 

 

(in thousands)

 

Adjusted EBITDA plus principal collected on the Peru construction contract

 

$
36,559

 

$
20,431

 

$
(3,535)

 

$
53,455

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Full Year Ended December 31, 2017

 

 

 

  Seven Seas  

 

 

 

 

  Corporate  

 

 

 

 

 

  

Water

  

Quench

  

& Other

  

Total

    

 

 

(in thousands)

 

Adjusted EBITDA plus principal collected on the Peru construction contract

 

$
31,009

 

$
16,652

 

$
(3,911)

 

$
43,750

 

 

 

15