AQUAVENTURE HOLDINGS LIMITED TAMPA, Fla., Nov. 9, 2017 /PRNewswire/ -- AquaVenture Holdings Limited (NYSE: WAAS) ("AquaVenture" or the "Company"), a leader in Water-as-a-Service(TM) ("WAAS(TM)") solutions, today reported financial results for the periods ended September 30, 2017.
Highlights
-- Total revenues for the three months ended September 30, 2017 were $29.9
million compared to $28.9 million in the prior year period, reflecting a
3.6% increase. On a segment basis, revenues for Seven Seas Water and
Quench increased 2.4% and 4.7%, respectively, over the prior year
period.
-- Net loss for the three months ended September 30, 2017 was $7.6 million,
compared to net loss of $4.7 million in the prior year period. The
increase in the net loss was mainly due to a $2.7 million increase, net
of income tax, in share-based compensation over the 2016 period.
-- Diluted loss per share for the three months ended September 30, 2017 was
$(0.29). There were no ordinary shares outstanding prior to October 6,
2016. Therefore, no diluted loss per share information is available for
the three months ended September 30, 2016.
-- Adjusted EBITDA of $9.7 million for the three months ended September 30,
2017 was flat compared to the prior year period. Adjusted EBITDA Margin
for the current quarter was 32.5%, compared to 33.7% in the prior year
period.
-- Adjusted EBITDA plus cash collected on the design and construction
contract acquired in our Peru acquisition was $11.7 million for the
three months ended September 30, 2017, compared to $9.7 million in the
prior year period, an increase of 20.6%.
-- On September 8, 2017, Quench acquired substantially all the assets of
Wellsys Corporation, an exclusive importer and reseller of branded and
private-label point-of-use ("POU") systems and related products. The
acquisition enables Quench to participate more broadly in the global POU
market through the Wellsys dealer network and provides an opportunity to
secure Quench's own exclusive supplier of POU units and related
products.
-- On August 2, 2017, Quench acquired substantially all the assets of
Quench Canada, a Toronto-based POU provider.
-- On August 4, 2017, AquaVenture Holdings completed a $150 million debt
financing.
-- Seven Seas Water finalized amendments to its BVI water purchase
agreement and BVI loan agreement on August 4, 2017.
"I am pleased with our operational and financial results through the first three quarters of the year. We have achieved revenue growth of 5.4% on a year-to-date basis over the comparable prior year period in 2016, which includes 4.2% of inorganic growth from completed acquisitions. We added to our inorganic growth during the current quarter through Quench's acquisition of Wellsys, which extends our sales channels to an expansive dealer network, and the previously-announced Quench Canada acquisition. We finished the quarter with over $100 million in investable cash and a new debt facility which is designed to expand as we make acquisitions. With this strong capital base and a very attractive M&A pipeline, we are very encouraged with our ability to augment our organic growth with attractive acquisitions," said Doug Brown, AquaVenture's Chairman and Chief Executive Officer. "In addition, I want to reiterate how proud I am of the way our Seven Seas Water operations team weathered the impact of the hurricanes in September. All of our plants were able to restart operations as soon as electricity was restored to them and we experienced limited damage to our facilities. We continue to work with the impacted communities that we serve to support them as they rebuild. I would like to thank our team for its continued dedication to these ongoing efforts."
Recent Developments
Quench Acquisitions. On September 8, 2017, Quench acquired substantially all the assets of Wellsys Corporation ("Wellsys"), a supplier of branded and private-labeled point-of-use water coolers and purification systems, for a total purchase price of $6.9 million. Unlike Quench's existing direct customer equipment sales business model, Wellsys systems are sold exclusively through an indirect channel of dealers in the United States, Canada, Mexico and South Africa, which expands Quench's participation in the growing POU market domestically and internationally. In addition, the acquisition provides an opportunity to develop, source and distribute Quench-exclusive innovative coolers and purification offerings, and to develop relationships with Wellsys dealers that we believe could ultimately lead to potential acquisitions.
On August 2, 2017, effective August 1, 2017, Quench acquired substantially all the assets of Quench Water Canada, a Toronto-based POU operator for a total purchase price of $0.7 million. This acquisition establishes a presence in Canada and is expected to be used as a platform for further expansion.
Hurricanes Irma and Maria. During the first half of September 2017, two category 5 hurricanes went through the Caribbean, impacting St. Maarten, the US Virgin Islands ("USVI"), the British Virgin Islands ("BVI"), Turks and Caicos Islands and the Bahamas where Seven Seas Water has plants. Revenues during the three months ended September 30, 2017 were negatively impacted by approximately $0.6 million related to the hurricanes due to lost production days. In addition, Seven Seas Water incurred $0.2 million of expenses in the third quarter related to the hurricanes, resulting primarily from repairs and maintenance expense, transportation of supplies to the impacted islands, and employee assistance packages. All of the plants in the affected regions are operating and producing water to meet current demand, with the exception of a small non-core auxiliary plant in the USVI that is still awaiting power from a local utility and which averages approximately $20 thousand per month in revenue.
Corporate Debt Financing. On August 4, 2017, AquaVenture entered into a $150.0 million senior secured credit agreement that provides a four-year, non-amortizing term loan that bears interest at LIBOR plus 6.00%. Total loan proceeds were approximately $147 million, net of debt financing costs and origination fees, of which the Company used approximately $100 million to repay in full the outstanding amounts due on the existing indebtedness of our Trinidad, USVI, Curacao and Quench subsidiaries. The remaining proceeds will be used for acquisitions, project development opportunities and working capital needs.
BVI Matters. On August 4, 2017, the Company and the Government of the British Virgin Islands ("BVI") amended the Paraquita Bay water purchase agreement ("WPA") to reduce the water rate, modify contractual formulas applied to calculate increases in the water rate and revise the original WPA payment profile, effective January 1, 2017. The Company also amended its BVI loan agreement, which provided for an approximately one-year extension of the amortization schedule of the current loan and reduced the current spread applied to the LIBOR base by 50 basis points.
Consolidated Financial Performance
For the third quarter of 2017, total revenues increased 3.6% to $29.9 million from $28.9 million in the 2016 period. Total gross margin decreased 190 basis points to 48.6% for the third quarter of 2017 from 50.5% in the prior year period.
Total selling, general and administrative expenses ("SG&A") increased to $17.7 million in the third quarter of 2017 from $15.1 million in the prior year period. The $2.6 million increase was primarily due to an increase in share-based compensation resulting from equity grants made in connection with our initial public offering ("IPO") during the fourth quarter of 2016 (the "IPO Grant").
Net loss for the third quarter of 2017 was $7.6 million, compared to a net loss of $4.7 million in the prior year period. Adjusted EBITDA was $9.7 million for the third quarter of 2017, which remained flat compared to the prior year period. Adjusted EBITDA Margin of 32.5% for the third quarter of 2017 decreased 120 basis points from 33.7% in the prior year period. Adjusted EBITDA plus the cash collected on the design and construction contract was $11.7 million in the third quarter of 2017 compared to $9.7 million in the prior year period, an increase of 20.6%.
Net cash provided by operating activities for the quarter ended September 30, 2017 was $1.2 million compared to $1.0 million for the comparable period of 2016. Capital expenditures and long-term contract expenditures were $4.2 million for the quarter ended September 30, 2017 compared to $4.9 million in the prior year period.
As of September 30, 2017, cash and cash equivalents were $118.1 million and total debt was $175.0 million.
For the nine months ended September 30, 2017, total revenues increased 5.4% to $88.8 million from $84.3 million in the prior year period and gross margin declined 220 basis points to 47.0% from 49.2% in the prior year period. Total SG&A increased to $51.0 million for the nine months ended September 30, 2017 from $43.3 million in the prior year period. The $7.7 million increase in SG&A was primarily due to an increase in share-based compensation resulting from the IPO Grant. Net loss for the nine months ended September 30, 2017 was $19.2 million compared to $12.9 million in the prior year period. Diluted loss per share for the nine months ended September 30, 2017 was $(0.73). There were no ordinary shares outstanding prior to October 6, 2016. Therefore, no diluted loss per share information is available for the nine months ended September 30, 2016.
Adjusted EBITDA was $27.6 million for the nine months ended September 30, 2017, a 2.0% increase over Adjusted EBITDA of $27.1 million in the prior year period. Adjusted EBITDA Margin declined 100 basis points to 31.1%, compared to 32.1% in the prior year period. Adjusted EBITDA plus the cash collected on the design and construction contract was $33.7 million for the nine months ended September 30, 2017 compared to $27.1 million in the prior year period, an increase of 24.5%.
Net cash provided by operating activities for the nine months ended September 30, 2017 of $11.9 million was flat compared to the 2016 period. Capital expenditures and long-term contract expenditures were $11.9 million for the nine months ended September 30, 2017 compared to $16.6 million in the prior year period.
Third Quarter 2017 Segment Results
Seven Seas Water
Seven Seas Water revenues of $14.2 million for the third quarter of 2017 increased 2.4% from $13.9 million in the prior year period. The increase was mainly due to the inclusion of incremental revenues of $1.1 million from our Peru operations acquired in October 2016. These increases were partially offset by $0.6 million of lower revenues related to Hurricanes Irma and Maria. In addition to the hurricane impacts, revenues from our BVI plant decreased $0.4 million primarily due to rate adjustments in connection with the August 4, 2017 contract amendment.
Seven Seas Water gross margin of 44.4% for the third quarter of 2017 remained relatively flat compared to 44.6% in the prior year period. The gross margin of 44.4% included a decline resulting from the BVI contract amendment and an offsetting increase from better-than-expected performance in Peru during the current quarter.
Seven Seas Water SG&A for the third quarter of 2017 increased $1.6 million, or 33.2%, to $6.6 million from $5.0 million in the prior year period. The increase was mainly due to a $1.8 million increase in share-based compensation resulting from the IPO Grant and $0.3 million higher acquisition-related expenses in the current quarter, partially offset by a $0.3 million decrease in compensation and benefits primarily due to elevated discretionary compensation expense in the same period of 2016.
Net loss for our Seven Seas Water segment was $2.9 million for the three months ended September 30, 2017 as compared to a net loss of $1.9 million in the prior year period. Adjusted EBITDA of $6.9 million for the third quarter of 2017 increased 10.4% over Adjusted EBITDA of $6.2 million in the prior year period. Adjusted EBITDA Margin increased 360 basis points to 48.5% in the third quarter of 2017 from 44.9% in the prior year period. Adjusted EBITDA plus cash collected on the design and construction contract was $8.9 million in the third quarter of 2017 compared to $6.2 million in the prior year period, an increase of 42.9%.
For the nine months ended September 30, 2017, Seven Seas Water revenues were $43.2 million, an increase of 5.6% over the prior year period revenues of $41.0 million. Gross margin for the nine months ended September 30, 2017 decreased 380 basis points to 40.1% from 43.9% in the prior year period. Total SG&A expenses for the nine months ended September 30, 2017 increased $4.7 million to $18.7 million from $14.0 million in the prior year period. Net loss for the nine months ended September 30, 2017 was $7.9 million, compared to a net loss of $4.1 million in the prior year period. Adjusted EBITDA of $18.6 million for the nine months ended September 30, 2017 remained relatively flat compared to the prior year period. Adjusted EBITDA Margin decreased 240 basis points to 43.1% from 45.5% in the prior year period. Adjusted EBITDA plus cash collected on the design and construction contract was $24.7 million for the nine months ended September 30, 2017 compared to $18.7 million in the prior year period, an increase of 32.5%.
Quench
Quench revenues of $15.7 million for the third quarter of 2017 increased 4.7% from $15.0 million in the prior year period. Rental revenues increased $1.0 million, or 8.3%, compared to the prior year period, which was comprised of 6.2% organic growth due to additional units placed under new leases in excess of unit attrition, and 2.2% (or $0.3 million) from acquisitions. The increase in rental revenue was partially offset by a decrease in other revenues of $0.3 million, or 12.5%, due to a $0.8 million reduction in direct customer equipment sales, primarily related to a single large customer, offset in part by $0.4 million of Wellsys dealer equipment sale revenue and a $0.1 million increase in coffee sales.
Quench gross margin for the third quarter of 2017 decreased 350 basis points to 52.4% compared to 55.9% for the same period of 2016. The decrease was primarily due to (i) increased costs for service personnel and rental depreciation related to growth in the rental installed base and (ii) a decline in other gross margin related to decreases in higher-margin direct customer equipment sales and growth of lower-margin businesses, including coffee and Wellsys dealer equipment sales.
Quench SG&A for the third quarter of 2017 increased $0.2 million, or 2.4%, to $9.8 million from $9.6 million in the prior year period. The increase was mainly due to a $0.7 million increase in share-based compensation resulting from the IPO Grant and a $0.4 million increase in amortization expense of deferred lease costs related to the increase in the units placed on lease, partially offset by a $0.8 million decrease in expenses related to the implementation of a new software-as-a-service enterprise resource planning ("ERP") system and a $0.3 million decrease in depreciation expense related to the acceleration of depreciation in the prior year on an existing ERP system.
Quench reported a net loss of $3.0 million for the third quarter of 2017 compared to a net loss of $2.3 million in the prior year period. Adjusted EBITDA of $3.9 million for the third quarter of 2017 remained relatively flat compared to the prior year period. Adjusted EBITDA Margin decreased 220 basis points to 24.7% in third quarter of 2017 from 26.9% in the prior year period.
For the nine months ended September 30, 2017, Quench reported total revenues of $45.6 million, a $2.3 million, or 5.2%, increase compared to the prior year period revenues of $43.3 million. Gross margin for the nine months ended September 30, 2017 decreased 70 basis points to 53.5% from 54.2% in the prior year period. Total SG&A expenses for the nine months ended September 30, 2017 increased $1.3 million to $29.0 million, compared to $27.7 million in the prior year period. Net loss for the nine months ended September 30, 2017 was $8.2 million, compared to a net loss of $7.3 million in the prior year period. Adjusted EBITDA was $11.8 million for the nine months ended September 30, 2017, a 23.6% increase from Adjusted EBITDA of $9.6 million for the nine months ended September 30, 2016. Adjusted EBITDA Margin also increased 380 basis points to 25.9% for the nine months ended September 30, 2016 from 22.1% in the prior year period.
Corporate and Other
Corporate and Other SG&A for the third quarter of 2017 increased $0.8 million to $1.3 million from $0.5 million in the prior year period. The increase was mainly due to a $0.5 million increase in insurance and professional fees, including elevated legal, audit and consulting and advisory costs, since becoming a public company in October of 2016 and in connection with Sarbanes Oxley Act implementation efforts and the adoption of the new revenue and lease accounting guidance. In addition, share-based compensation increased $0.2 million from incremental equity awards granted to certain members of our board of directors in late 2016 and early 2017.
For the nine months ended September 30, 2017, Corporate and Other SG&A increased to $3.3 million from $1.5 million in the prior year period. The increase was mainly due to a $1.2 million increase in insurance and professional fees, including elevated legal, audit and consulting and advisory costs, since becoming a public company in October of 2016 and in connection with Sarbanes Oxley Act implementation efforts and the adoption of the new revenue and lease accounting guidance. In addition, share-based compensation increased $0.4 million from incremental equity awards granted to certain members of our board of directors in late 2016 and early 2017.
2017 Outlook
For the full year 2017 outlook, the Company has incorporated the impacts of both the hurricanes on the Seven Seas Water operations and the addition of the Wellsys acquisition at Quench. After factoring in these impacts, the Company is not changing its previously provided financial results and still expects the following:
-- Revenues expected between $119 and $122 million;
-- Adjusted EBITDA expected between $34 and $37 million;
-- Cash collected on the design and construction contract acquired in our
Peru acquisition continues to be projected at $8.1 million annually
(approximately $2 million per quarter); and
-- Adjusted EBITDA plus the cash collected on the design and construction
contract acquired in our Peru acquisition expected between $42 and $45
million.
The above statements are based on current expectations and supersede previously provided guidance. 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(TM) 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 U.S.-based provider of Point-of-Use, or POU, filtered water systems and related services to approximately 40,000 institutional and commercial customers; and Seven Seas Water, a multinational provider of desalination and wastewater treatment solutions, providing approximately 8 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 Thursday, November 9 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 November 16, 2017 at 1-844-512-2921, or, for international callers, at 1-412-317-6671, conference ID #13672421. 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 2017 financial results; expectations regarding future business development and acquisition activities; its anticipated impacts and incremental costs related to recent hurricanes; its expectations regarding performance, growth, cash flows and margins from recently completed acquisitions; its expected margins and the impacts thereon from various customer contracts; and the impacts on operating results of the timing, size 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.
investors@aquaventure.com
Investors Hotline: 855-278-WAAS (9227)
AQUAVENTURE HOLDINGS LIMITED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
September 30, December 31,
2017 2016
---- ----
ASSETS
Current Assets:
Cash and cash equivalents $118,070 $95,334
Restricted cash 166 166
Trade receivables, net of allowances of $951 and
$1,166, respectively 17,761 15,473
Inventory 8,710 6,246
Prepaid expenses and other current assets 8,612 6,401
----- -----
Total current assets 153,319 123,620
Property, plant and equipment, net 113,908 116,092
Construction in progress 10,602 9,398
Long-term contract costs 82,061 87,512
Restricted cash 4,147 5,895
Other assets 41,114 44,311
Deferred tax asset 376 515
Intangible assets, net 53,919 51,330
Goodwill 99,526 98,023
------ ------
Total assets $558,972 $536,696
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $4,533 $3,880
Accrued liabilities 11,922 13,075
Current portion of long-term debt 6,063 27,963
Deferred revenue 3,302 2,820
----- -----
Total current liabilities 25,820 47,738
Long-term debt 168,983 115,753
Deferred tax liability 4,665 2,874
Other long-term liabilities 2,414 2,825
----- -----
Total liabilities 201,882 169,190
------- -------
Commitments and contingencies
Shareholders' Equity
Ordinary shares, no par value, 250,000 shares
authorized; 26,452 and 26,388 shares issued and
outstanding at September 30, 2017 and December
31, 2016, respectively - -
Additional paid-in capital 566,958 558,141
Accumulated other comprehensive income (13) -
Accumulated deficit (209,855) (190,635)
-------- --------
Total shareholders' equity 357,090 367,506
------- -------
Total liabilities and shareholders' equity $558,972 $536,696
======== ========
AQUAVENTURE HOLDINGS LIMITED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
Three Months Ended Nine Months Ended
------------------ -----------------
September 30, September 30, September 30, September 30,
2017 2016 2017 2016
---- ---- ---- ----
Revenues:
Bulk water $14,206 $13,879 $43,238 $40,951
Rental 13,428 12,396 39,238 36,153
Other 2,259 2,583 6,318 7,147
----- ----- ----- -----
Total revenues 29,893 28,858 88,794 84,251
Cost of revenues:
Bulk water 7,904 7,683 25,903 22,976
Rental 6,083 5,256 17,508 15,989
Other 1,385 1,356 3,692 3,863
----- ----- ----- -----
Total cost of revenues 15,372 14,295 47,103 42,828
Gross profit 14,521 14,563 41,691 41,423
Selling, general and administrative expenses 17,734 15,112 50,964 43,264
------ ------ ------ ------
Loss from operations (3,213) (549) (9,273) (1,841)
Other expense:
Interest expense, net (2,055) (2,802) (5,574) (8,231)
Other expense, net (1,453) (86) (1,728) (221)
------ --- ------ ----
Loss before income tax expense (6,721) (3,437) (16,575) (10,293)
Income tax expense 846 1,275 2,645 2,633
--- ----- ----- -----
Net loss (7,567) (4,712) (19,220) (12,926)
Other comprehensive income:
Foreign currency translation adjustment (13) - (13) -
--- --- --- ---
Comprehensive loss $(7,580) $(4,712) $(19,233) $(12,926)
======= ======= ======== ========
Loss per share - basic and diluted(1) $(0.29) $(0.73)
Weighted-average shares outstanding - basic and diluted(1) 26,441 26,414
(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.
AQUAVENTURE HOLDINGS LIMITED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Nine Months Ended September 30,
-------------------------------
2017 2016
---- ----
Cash flows from operating activities:
Net loss $(19,220) $(12,926)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization 23,831 22,463
Adjustment to asset retirement
obligation 37 86
Share-based compensation expense 9,052 1,455
Provision for bad debts 450 712
Deferred income tax provision 1,930 2,216
Inventory adjustment 153 142
Loss on extinguishment of debt 1,389 -
Loss on disposal of assets 884 939
Amortization of debt financing fees 624 568
Adjustment to acquisition contingent
consideration - (51)
Accretion of debt 60 271
Other - 75
Change in operating assets and
liabilities:
Trade receivables (2,312) (1,329)
Inventory (1,766) (958)
Prepaid expenses and other current
assets (1,146) (1,179)
Other assets (2,017) (1,807)
Current liabilities (4) 359
Long-term liabilities (69) 855
--- ---
Net cash provided by operating
activities 11,876 11,891
------ ------
Cash flows from investing activities:
Capital expenditures (11,286) (15,037)
Long-term contract expenditures (613) (1,524)
Net cash paid for acquisition of
assets or business (9,921) (100)
Principal collected on note receivable 3,350 -
Other 22 3
--- ---
Net cash used in investing activities (18,448) (16,658)
------- -------
Cash flows from financing activities:
Proceeds from long-term debt 150,000 23,675
Payments of long-term debt (117,028) (11,891)
Payment of debt financing fees (3,579) (340)
Payments related to debt
extinguishment (433) -
Payment of acquisition contingent
consideration - (864)
Proceeds from exercise of stock
options 49 2
Shares withheld to cover minimum tax
withholdings on equity awards (356) -
Proceeds from the issuance of Employee
Stock Purchase Plan shares 75 -
Issuance costs from issuance of
ordinary shares in IPO (1,169) -
------ ---
Net cash provided by financing
activities 27,559 10,582
------ ------
Effect of exchange rates on cash, cash
equivalents and restricted cash 1 -
--- ---
Change in cash, cash equivalents and
restricted cash 20,988 5,815
Cash, cash equivalents and restricted
cash at beginning of period 101,395 25,026
------- ------
Cash, cash equivalents and restricted
cash at end of period $122,383 $30,841
======== =======
AQUAVENTURE HOLDINGS LIMITED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - SEGMENT DATA
(IN THOUSANDS)
Three Months Ended September 30, 2017 Three Months Ended September 30, 2016
------------------------------------- -------------------------------------
Seven Seas Corporate Seven Seas Corporate
Water Quench & Other Total Water Quench & Other Total
----- ------ ------- ----- ----- ------ ------- -----
Revenues:
Bulk water $14,206 $ - $ - $14,206 $13,879 $ - $ - $13,879
Rental - 13,428 - 13,428 - 12,396 - 12,396
Other - 2,259 - 2,259 - 2,583 - 2,583
--- ----- --- ----- --- ----- --- -----
Total revenues 14,206 15,687 - 29,893 13,879 14,979 - 28,858
Gross profit:
Bulk water 6,302 - - 6,302 6,196 - - 6,196
Rental - 7,345 - 7,345 - 7,140 - 7,140
Other - 874 - 874 - 1,227 - 1,227
--- --- --- --- --- ----- --- -----
Total gross profit 6,302 8,219 - 14,521 6,196 8,367 - 14,563
Selling, general and administrative expenses 6,607 9,828 1,299 17,734 4,962 9,602 548 15,112
----- ----- ----- ------ ----- ----- --- ------
Income (loss) from operations (305) (1,609) (1,299) (3,213) 1,234 (1,235) (548) (549)
Other (expense) income, net (1,764) (1,359) (385) (3,508) (1,896) (1,027) 35 (2,888)
------ ------ ---- ------ ------ ------ --- ------
Loss before income tax expense (2,069) (2,968) (1,684) (6,721) (662) (2,262) (513) (3,437)
Income tax expense 790 56 - 846 1,275 - - 1,275
--- --- --- --- ----- --- --- -----
Net loss $(2,859) $(3,024) $(1,684) $(7,567) $(1,937) $(2,262) $(513) $(4,712)
======= ======= ======= ======= ======= ======= ===== =======
Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016
------------------------------------ ------------------------------------
Seven Seas Corporate Seven Seas Corporate
Water Quench & Other Total Water Quench & Other Total
----- ------ ------- ----- ----- ------ ------- -----
Revenues:
Bulk water $43,238 $ - $ - $43,238 $40,951 $ - $ - $40,951
Rental - 39,238 - 39,238 - 36,153 - 36,153
Other - 6,318 - 6,318 - 7,147 - 7,147
--- ----- --- ----- --- ----- --- -----
Total revenues 43,238 45,556 - 88,794 40,951 43,300 - 84,251
Gross profit:
Bulk water 17,335 - - 17,335 17,975 - - 17,975
Rental - 21,730 - 21,730 - 20,164 - 20,164
Other - 2,626 - 2,626 - 3,284 - 3,284
--- ----- --- ----- --- ----- --- -----
Total gross profit 17,335 24,356 - 41,691 17,975 23,448 - 41,423
Selling, general and administrative expenses 18,692 28,988 3,284 50,964 14,003 27,718 1,543 43,264
------ ------ ----- ------ ------ ------ ----- ------
Income (loss) from operations (1,357) (4,632) (3,284) (9,273) 3,972 (4,270) (1,543) (1,841)
Other (expense) income, net (4,139) (3,395) 232 (7,302) (5,428) (3,065) 41 (8,452)
------ ------ --- ------ ------ ------ --- ------
Loss before income tax expense (5,496) (8,027) (3,052) (16,575) (1,456) (7,335) (1,502) (10,293)
Income tax expense 2,424 221 - 2,645 2,633 - - 2,633
----- --- --- ----- ----- --- --- -----
Net loss $(7,920) $(8,248) $(3,052) $(19,220) $(4,089) $(7,335) $(1,502) $(12,926)
======= ======= ======= ======== ======= ======= ======= ========
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, goodwill impairment charges, changes in deferred revenue related to our bulk water business, ERP system implementation charges for a SaaS solution, initial public offering costs, gains (losses) on extinguishment of debt, IPO triggered compensation, gains on bargain purchases and certain adjustments recorded in connection with purchase accounting for acquisitions. Adjusted EBITDA should not be considered a measure of financial performance under GAAP. Management believes that the use of Adjusted EBITDA, which is used by management as a key metric to assess performance, provides consistency and comparability with our past financial performance, and facilitates period?to?period comparisons of operations. Management believes that it is useful to exclude certain charges, such as depreciation and amortization, and non?core operational charges, from Adjusted EBITDA because (1) the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations and (2) such expenses can vary significantly between periods.
Adjusted EBITDA Margin
Adjusted EBITDA Margin, a non-GAAP financial measure, is defined as Adjusted EBITDA as a percentage of revenue.
A reconciliation of our GAAP net loss to Adjusted EBITDA, for the periods presented is shown below:
Three Months Ended September 30, 2017
-------------------------------------
Seven Seas Corporate
Water Quench & Other Total
----- ------ ------- -----
(in thousands)
Net loss $(2,859) $(3,024) $(1,684) $(7,567)
Depreciation and amortization 4,278 3,856 - 8,134
Interest expense, net 880 790 385 2,055
Income tax expense 790 56 - 846
Share-based compensation
expense 2,048 855 239 3,142
Loss (gain) on disposal of
assets (22) 264 - 242
Acquisition-related expenses 738 139 - 877
Changes in deferred revenue
related to our bulk water
business 210 - - 210
ERP implementation charges
for a SAAS solution - 373 - 373
Loss on debt extinguishment 820 569 - 1,389
--- --- --- -----
Adjusted EBITDA $6,883 $3,878 $(1,060) $9,701
====== ====== ======= ======
Adjusted EBITDA Margin 48.5% 24.7% - % 32.5%
Three Months Ended September 30, 2016
-------------------------------------
Seven Seas Corporate
Water Quench & Other Total
----- ------ ------- -----
(in thousands)
Net loss $(1,937) $(2,262) $(513) $(4,712)
Depreciation and amortization 4,183 3,519 - 7,702
Interest expense (income),
net 1,806 1,027 (31) 2,802
Income tax expense 1,275 - - 1,275
Share-based compensation
expense 178 199 11 388
Loss on disposal of assets 6 410 - 416
Acquisition-related expenses 438 - - 438
Changes in deferred revenue
related to our bulk water
business 285 - - 285
ERP implementation charges
for a SAAS solution - 1,129 - 1,129
--- ----- --- -----
Adjusted EBITDA $6,234 $4,022 $(533) $9,723
====== ====== ===== ======
Adjusted EBITDA Margin 44.9% 26.9% - % 33.7%
A reconciliation of our GAAP net loss to Adjusted EBITDA, for the periods presented is shown below:
Nine Months Ended September 30, 2017
------------------------------------
Seven Seas Corporate
Water Quench & Other Total
----- ------ ------- -----
(in thousands)
Net loss $(7,920) $(8,248) $(3,052) $(19,220)
Depreciation and amortization 12,771 11,060 - 23,831
Interest expense (income),
net 2,980 2,826 (232) 5,574
Income tax expense 2,424 221 - 2,645
Share-based compensation
expense 6,084 2,528 440 9,052
Loss (gain) on disposal of
assets (22) 906 - 884
Acquisition-related expenses 801 139 - 940
Changes in deferred revenue
related to our bulk water
business 697 - - 697
ERP implementation charges
for a SAAS solution - 1,820 - 1,820
Loss on debt extinguishment 820 569 - 1,389
--- --- --- -----
Adjusted EBITDA $18,635 $11,821 $(2,844) $27,612
======= ======= ======= =======
Adjusted EBITDA Margin 43.1% 25.9% - % 31.1%
Nine Months Ended September 30, 2016
------------------------------------
Seven Seas Corporate
Water Quench & Other Total
----- ------ ------- -----
(in thousands)
Net loss $(4,089) $(7,335) $(1,502) $(12,926)
Depreciation and amortization 12,271 10,192 - 22,463
Interest expense (income),
net 5,197 3,065 (31) 8,231
Income tax expense 2,633 - - 2,633
Share-based compensation
expense 843 601 11 1,455
Loss on disposal of assets 6 933 - 939
Acquisition-related expenses 935 - - 935
Initial public offering costs - - 367 367
Changes in deferred revenue
related to our bulk water
business 855 - - 855
ERP implementation charges
for a SAAS solution - 2,109 - 2,109
--- ----- --- -----
Adjusted EBITDA $18,651 $9,565 $(1,155) $27,061
======= ====== ======= =======
Adjusted EBITDA Margin 45.5% 22.1% - % 32.1%
KEY METRICS
Cash Collected on Design and 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 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 note receivable. As a result of this accounting treatment, which differs from existing contracts in our Seven Seas Water business, the cash collected on the design and construction contract is not recognized as revenue in our consolidated financial statements, and therefore is not included in Adjusted EBITDA or in determining Adjusted EBITDA Margin.
Three Months Ended September 30, 2017
-------------------------------------
Seven Seas Corporate
Water Quench & Other Total
----- ------ ------- -----
(in thousands)
Cash collected
on design and
construction
contract $2,025 $ - $ - $2,025
Three Months Ended September 30, 2016
-------------------------------------
Seven Seas Corporate
Water Quench & Other Total
----- ------ ------- -----
(in thousands)
Cash collected
on design and
construction
contract $ - $ - $ - $ -
Nine Months Ended September 30, 2017
------------------------------------
Seven Seas Corporate
Water Quench & Other Total
----- ------ ------- -----
(in thousands)
Cash collected
on design and
construction
contract $6,078 $ - $ - $6,078
Nine Months Ended September 30, 2016
------------------------------------
Seven Seas Corporate
Water Quench & Other Total
----- ------ ------- -----
(in thousands)
Cash collected
on design and
construction
contract $ - $ - $ - $ -
Adjusted EBITDA plus Cash Collected on Design and Construction Contract
We understand that many in the investment community combine our Adjusted EBITDA and the cash 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 cash collected on the design and construction contract is presented.
Three Months Ended September 30, 2017
-------------------------------------
Seven Seas Corporate
Water Quench & Other Total
----- ------ ------- -----
(in thousands)
Adjusted EBITDA
plus cash
collected on
design and
construction
contract $8,908 $3,878 $(1,060) $11,726
Three Months Ended September 30, 2016
-------------------------------------
Seven Seas Corporate
Water Quench & Other Total
----- ------ ------- -----
(in thousands)
Adjusted EBITDA
plus cash
collected on
design and
construction
contract $6,234 $4,022 $(533) $9,723
Nine Months Ended September 30, 2017
------------------------------------
Seven Seas Corporate
Water Quench & Other Total
----- ------ ------- -----
(in thousands)
Adjusted EBITDA
plus cash
collected on
design and
construction
contract $24,713 $11,821 $(2,844) $33,690
Nine Months Ended September 30, 2016
------------------------------------
Seven Seas Corporate
Water Quench & Other Total
----- ------ ------- -----
(in thousands)
Adjusted EBITDA
plus cash
collected on
design and
construction
contract $18,651 $9,565 $(1,155) $27,061
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SOURCE AquaVenture Holdings Limited
