AQUA - Earnings call transcript Q4 2020 | Evoqua Water Technologies Corp

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Operator

Hello and welcome to the Evoqua Water Technologies Fourth Quarter and Full Year 2020 Earnings Conference Call. At this time all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. After the speakers' opening remarks, there will be a question-and-answer session period. [Operator Instructions] As a reminder, this conference call is being recorded, and your participation implies consent to our recording of this call.

If you do not agree with these terms, please disconnect at this time. you. Thank like of call Investor now Brailer, to turn President Vice Relations. to would over the Dan I Please go ahead.

Dan Brailer

call This quarter call including financial Thank Officer. Chief year other you, are first fiscal and call we fourth Ben expectations. results Actual today's expectations conference statements, of quarter strategy, remarks, joining Ron market After us and of fiscal materially XXXX differ to as Maria, and Chief open our Vice may the will thanks our to forward-looking expectations everyone for Keating, President execution Stas, review the impact prepared for Executive includes our today's well COVID-XX growth Executive the the of relating Participating Financial on from and treatment results. potential for questions. and drivers. for and the call pandemic digital contaminants XXXX Officer; the our of full and to as President emerging

comparable presentation financial efforts please to been have For directly also for including its call presented XX. the the references forward-looking respect by to otherwise of may which which to measures With financial not call occurrence our have fiscal in this due call conference EBITDA ends seven on the On because to reconciliation and historical release, measure GAAP act and to we'll additional call, of impractical Ron. and conference this reconciled full unreasonable can recognized. Information of will we would financial difficulty information of slides. September website. year adjusted of or items of to on the results be financial Unless the certain this included guidance, year available obtained now specified, financial included the impact the this conference which via measures. be presentation to financial I appendix year, webcast be in Evoqua's quantitative All refer such Investor to turn forecast uncertainty on respect disclosed which described the the Relations for refer items to Means archived and days. With were access non-GAAP to measure risk the predicting press inherent was to Replays most posted measures non-GAAP website. a call to non-GAAP it have our call G factors over the in the with slides our required in section without Company's to corporate discussion therein. Ron? via such of filings, is that, a non-GAAP Regulation SEC the is certain Exchange periods like Evoqua, in this a next

Ron Keating

Slide turn Please Dan. X. to you, Thank

'XX, priorities FY finish we As remain our constant. COVID-XX

the to customer and focus safety the and our balance our improving business We liquidity on employees, uptime and the continue Company. of ensuring of health continuity and sheet

markets with market demand across have diverse end we dynamic been of set serve. Our conditions a that varying

from comes continue that trend the broad exposure. that our for some encouraged We're overall to by expect time. We portfolio balance

to our We have pandemic, the systems challenges. and effectively delivering strategy in technologies Memcor most turn adjusting performance, our responded and across we improvements an divestiture. solutions as resulted of managed treat in our industry proud FY for 'XX year which Throughout fiscal a our complex stronger key by of Slide we very X. our in operations team's I'm connected investing water the much financial structure, unprecedented increasingly outsourced to company. Please of and metrics year-over-year and exited water cost

full and mid-single X.X. year, during digits for book-to-bill double grew a digits ratio book Our with quarter the order the above

revenues asset more in that amount to project an revenues. and profitable which results increasing an long-term in place of water variable We of orders see outsourced capital recurring continue produces

As for results booked growth we quarter, activities. our underlying for water the may revenue muted quarter appear I'm growth, CPI remains bookings slightly, capital, relative our historical strong. system in year's our a strong increased largest to the outsourced given was treatment and wastewater that experience and quarter Organic we revenue during water the versus market, comparison. pipeline pleased last near-term order to particularly facility outsourced growth organic down fourth report growth

execution highlights are sale the year and and full to efforts, favorable after workforce. last and a adjusting organic to the Ongoing EBITDA acquisitions. Adjusted our revenue and mission year COVID-XX, operational our the guidance year in expected of to we full year guidance X.X% uncertainty to growth report which operational and dedication December our resiliency importance achieved fourth in and April adjusted We pandemic. compared full essential pleased challenged range, of for business cost price, year quarter high as was of increased of Memcor the by of which Overall, XX, full control $X.XX profitability. withdrew of the contributed efficiencies billion of midpoint created management cost the the revenues year higher the due the achieved end $XXX to million reinforced original EBITDA

initiatives has cash a Our year Liquidity over adjusted which now EBITDA, three $XXX high, all-time adjusted of ongoing free produced flow cash tracked conversion from well improved million, driven cost annual a above times leverage management. of net working XXX% to XXX%, variety an generation focus by and ago. down target, is and capital our on X.Xx

to we we're acquisition focused financial accretive to would to this do turn Please I ISS of employees our We leverage on like improving Technologies M&A had net and the the our also Evoqua another flexibility family. the Slide are while In welcome that Aquapure acquisitions, continue pleased tuck-in, and to tuck-in we able service to program September, completed X. ratio.

the as that ways. one sustainable We We continues think values continue future We sustainability in to impact sustainability. our of to and on sustainable around our refine strategy shared in our added we about expand. two core past a

offerings; above sustainable more own become within footprint become to customers service our enabling sustainable and our and solutions more our handprint, through internal to driving our our second, operations. First,

other of As in provide efforts, filtration to a and created sales our highlighted provide handprint, how we examples Through including our municipal In exchange exchange systems a excellent September, carbon growth operations. year opportunities to prevented to we system XX,XXX removal future. renewable featured our their PFAS the from waste-to-energy regen years XXXX an PFAS drinking portion provide with facilities and Valley three develop for tons than one highlight more expanded report, emerging the cost-effective additional earlier circular contaminants in expect increasing our multi-use another of process sustainability we've many We're carbon an on in of but pleased as our Two efficient we're sale for California, we opportunities being landfilled and also Agency small continues ion to remove of Santa well. water. the relationship of on Water sales, our that the and Clarita to media. space. in from PFAS add in executing

Our in the technologies as increases. deployment demand being fuel energy specified are biogas for future renewable market

initiatives generation, of have early Our Please solutions in turn and great operations. established meaningful of operations the promise broad water to future both our Slide the this examples opportunity an We're portfolio and our in treatment X. sustainable provide and market. but of maintenance excellent expanding impact revenue days on for technologies capabilities growth

a benefit a since our represents business growth. XX-month on revenue from stable This revenue and Our graph adjusted recurring been basis has to continues EBITDA from resilient and XXXX. be rolling and sustainable quarter-to-quarter

ultimately X% business. Our stable, comprises capital business We make grown aftermarket our recurring revenues our pursue overall EBITDA approximately XX% primarily compounded total during combined and Currently, drive service a XX% rate of time. annual to growth projects while have at of profitable with of and and approximately our sales, service service XX% adjusted up aftermarket of this growth.

our the of we've to nature business discussed, variability. subject previously is As quarterly

high that I over to an basis Ben. our and COVID-XX visibility uncertain revenues our turn during from have us serve now call we the service to dislocation. seen this performance during services would continue products period. the in like our This However, well the be believe model of business into and can annualized strong to on will

Ben Stas

to turn X. Slide Ron. you, Thank Please

the year organic $XXX divestiture the down of fourth were revenues, the impact the quarter, of acquisitions net to Evoqua For Pure million. X.X% prior excluding the Frontier and and Memcor versus

by end care. and industry health light in microelectronics, and saw varied general we demand While growth market,

quarter an overall $X.X for $X QX 'XX Slide was mentioned, million. approximately a approximately Please FY Ron million sales of million quarter. was cost of was to quarter note, Price and the fourth of favorable Please in growth organic XX.X%.Fourth $XX.X Memcor of turn strong XX.X%. the with very EBITDA As margin $XX adjusted EBITDA X. was adjusted million included XXXX of quarter

the segment divestiture. to realignment primarily The with growth the full organic impacted sales realize year, and up segments. of the capital was future Capital benefits year will year, two throughout the aftermarket $X.XX the services were X.X% periods. growth within for of billion, which continues expect both we Company Memcor in result negatively revenues strong in as in greater after adjusting pull-through mix For

we Looking for margins, year. increased orders, second into half margins full to from X. $XXX the to XX in higher Memcor offset being while turn versus approximately outsourced the trend increased we XXXX, saw EBITDA orders EBITDA the XXXX. expect year. outpace continuing the water of capital Adjusted Adjusted and Profitability favorable the to divestiture benefited cost Slide prior partly XX.X% costs, impact. gross price Please basis points by reductions million

mostly flat related fourth in revenues gas, as with Service quarter markets delays. revenue due and slowdowns, well was as growth Solutions had Our end to microelectronics. refining, deferrals Integrated and primarily capital driven Services impacted organic oil and in segment COVID-XX

customer Our profitability due particularly digital customers restrict very strategy our and to enhance high, in capabilities to continues our pandemic. the interest site as remains access

we're wastewater largest to order. as addition, facility outsourced this quarter, pleased our mentioned, this project to year, water first earlier our have also water organic In booked outsourced booking treatment Ron

plant Both of projects years, revenues. excess providing We online profitable in wastewater to recurring XX of in half expect the have second of the and XXXX. contracts stable, come these

impacts to strong continue water capital opportunities. was the of prior cost down EBITDA margin outsourced employment as higher and pursue declined costs. pipeline well Adjusted year. points We basis EBITDA $XX productivity and a to for from due XX million service to COVID-XX XX.X%, quarter as the Adjusted

full a the were increased to margins included the segment Adjusted essentially grew $X were million year. approximately almost year, site Product and EBITDA in decline which revenues COVID-XX or flat reduced Applied demand adjusted million in to XX.X%. EBITDA Technologies lines, primarily $XXX revenues customer closures. $XXX to For of turn prior by multiple Please X% product million quarter XX. sales X.X%, across at organic driven delays million Slide $XXX X% to fourth versus over due

pleased the sales impacted positively demand by are the in electrodeionization Asia see rebound to quarter the basis lines. from XXX the pandemic in with FX product solid and Pacific We market disinfection points.

were down was from As margins Ron for QX to business impacts M&A containment X%. approximately execution period $XX divestiture XXXX of were Adjusted points grew core impacts, basis percentage remaining APT's adjusting for EBITDA XX.X%, cost Memcor sales the Adjusted over the XXX impacted quarter increase primarily EBITDA Memcor's prior XX contributed The for an approximately points fourth year. XX.X%. million. M&A and of favorably approximately profitability. mentioned, actions decline. Operational the the the

we footprint manufacturing During rationalization consolidated facilities segment, now program. part We XX the from in ongoing five our as of XXXX. operating down year, facilities the XX in APPT have

outsourced For $XX year, by year. XXX on and quarter basis spending EBITDA up the a to of year-to-date adjusted was Capital the basis points Slide to million turn XX. for margin water over Please the increased XX.X%, $XX full primarily APT's driven contracts. million prior

quarter the outsourced solid and with capital Our finished combination pipeline opportunities. a water of

uncertainties closely the a improved to prior the improvement sales, continue to working of pandemic. Fourth from the quarter capital pipeline notable the net QX of LTM year. given We monitor XX.X%

see requirements. net to may range sales capital of working Over the expect varying long mid-teens given have projects capital we working of some term, amounts

quarter, from net the was Adjusted adjusted income. receivables year manage cash year inventory for $XX the continue a and cash receivable million Slide cash million XXX% flow liquidity, levels, almost XXX% in uncertainties. the million for basis, XX. turn On $XXX by second $XXX We've consecutive $XX to at record our versus our was increased due business EBITDA, XXXX, in every free increase. million our down year at leverage times free the year. to which balances given X a improving sequentially We the adjusted Operating rate year lows. past $XXX year. cash to the million target quality the 'XX, the Please flow FY actively conversion in accounts which of managed the and Net XX% COVID-XX finished full times approximately flow for prior exceeding of for quarter X.X was finished and approximately was

basis XXX credit call is like Ron. debt of cost to now of over year. points The primarily improvement average to lower by an market turn is weighted and approximately lower a quarter spread. I fourth X.X%, rates reduction QX Our almost back over would last of driven the

Ron Keating

We organic one growth Thanks, favorable currently Each initiatives The enabled outsourced industry the long-term treatment supported Evoqua's believe total turn attractive Ben. water revenues. multiple represents Please our the most is Slide water water is of XX. of drivers. growth. to of water long-term on sectors and segment having the macro ISS segment's and drive capabilities steady, focused segment Outsourced to profitable one-third revenues. stable approximately digitally has

services where We also that opportunities. of competitively and will selenium, connected, growth in attractive portfolio percentage complexity PFAS, XX% digitally are continue micro-plastics which time. working to meaningful We're and of other drive create double and on focused vertical approximately solutions emerging markets water have ISS revenues several our over to differentiated. we're contaminants treatment,

we developing product geographic two time to and completion e-commerce APT Slide and focused the the FY developed In segment. we and of we quarter how the market realignment, enable growth continued may materialize. of to that user drivers next-generation development of investment a second treat team within As second rich installed on our thought to Please we to call, We're utilizes innovations marketing number products challenges new additionally, sales. routine on and experience half turn robust coverage. we've retrofit we're meaningful capabilities growth an product end needs. drive digital and segment near meaningful base. provided lines. This as complex with our APT of our the organic the wastewater We're drive component channel leveraging We also particularly see And out we disinfection aftermarket enhances should an the ISS aftermarket of XX. our as over markets capture expectation channel platform for a from for partner, business rehabilitation the demand 'XX international technologies segment our and growth attractive as build actively water

and expected. back, treatment. represents by supported current in water sales in end Looking demand our largely and industry light as expectation for for higher-than-expected performance as a did markets primary demand incorporating our from of insights drinking slide. our broad diverse operating chart see and We general on We serve represented QX, was updated and teams. markets municipal in set PFAS our This this end

the backlog, to in of to FY rising end each neutral markets our representing be approximately based or on we revenue. the top, but growing. XX% on out are bottom for accounting of XX smallest Our 'XX show to annual of page, digits, end see continuing, the market Overall, our low mid-single X size to order expect uneven demand segments

in XXXX. -- very in the expect fourth We given the decline of in a QX sales strong first quarter microelectronics,

segments detailed and of of ramping session. to In XXXX. not in end I'm in challenging with in sharp three Slide entered drivers on as address are new the segment revenue enter Evoqua Refining We'll to results Q&A is very pipeline orders team's the year, microelectronics overall the market negative, market year and the but we for Our little second a efforts summary, XX. Please same Company. market the the about a to drivers those both currently be priorities this strong, and generated and see specific we from we a turn as the proud happy is expect we focus very of during for half questions The the more outlook XXXX. large

Memcor the were year and the year-over-year for divestiture. metrics with challenges we market determination We against and key improvements fourth adjusting very Our resilience. quarter results saw met most financial solid, the throughout

on and treatment. to and customers water outsourced we're Evoqua solutions, growing, letting while is to customers water turn increasing core competency, in focus seeing the allowing handle complexities book order challenges their more Our

care digital Our and we In and been digital strategy past SPD. and we with introducing will expansion year, health outsourced digital connected enabler services municipal year, our in has continuity SD, this is water a be offerings solution significant highlighted our growth. Vantage business to in greater. the never water the offerings. Interest our capabilities Throughout new of offerings digital

do It highly a what core, company. our sustainable day. at are, is We we every

Our are ability years, wastewater other and heavy respond favorable expected to to solutions coming are be waste-to-energy to we in markets. increased demand seeing the micro-plastics, metals in contaminants emerging our for and very PFAS, the

in and mentioned, a flow cash we As Ben liquidity. had strong free generating year

We are deleveraging strengthen the the business and to intend further balance sheet.

the conditions. our order continue of For and expect sales. comments, business, challenges we to driven Based EBITDA current potential continue conversion view capital year-over-year visibility, the from outlook lower limit up largely be to changing our to market COVID-XX and slightly by we adapt adjusted full to flat to versus year revenues timing XXXX and on

we're XX into more have I provide and that visibility I hope this between assumptions and and $XXX note providing for and to revenues the like XXXX and to questions. to granular our more $XX transparency adjusted framework view and in takes up your provided insight information between million now thinking a the XX, to year. be $XX appendix find first will about million. quarter, and Given for to million we how on EBITDA be a you key puts Slide beneficial. the expect open we're $XXX We call the and million would the also

Operator

line The first of Thank [Operator for now question comes open questions. Instructions] Jones floor Nathan Stifel. is from you. Our of the

Nathan Jones

I'd the start on 'XX like to question framework. just with good

bit up outsourced better up year structural up some that revenue, this EBITDA. slightly, of would a the flat you've more have to you little slightly You've water, had the slightly. made you would I than up if some slightly to with got to shifting mix flat revenue of have flat to EBITDA, had thought flat that improvements

in that of and could talk 'XX? framework going just into few takes in your a the puts are maybe assumptions you that So about

Ron Keating

and to a about few, talk I'll I'll Nathan. hand then Ben. Sure, it

We As a is have continuing we disinfect, a sites. based yield across tremendous order pipeline but unknowns are good to 'XX, years take service great additional we're also, increase those for I into customer takes into see will outsourced that results back flow-through, water water on cautious there. talk and come. go up and to longer see activity shift that the We time what that's and on a the as had kind puts the little little to do to had little in start do to the few able over projects and opportunities get look delays that's unknowns then COVID. the benefits projects. into based as we of to year, case that longer watching running. the upon that a to giving we the us weeks great water slide, We've the to capital continuing think end. about a takes It's executing to And on tax giving going And the outsourced just installed, again, of we're the outlook bit what be to past hit to But term. load we're some cycle the versus get long outsourced we actually and -- the with given the in

Ben Stas

QX, had the as rates Yes, and you strong some recall, growth first half, last pre-COVID. Nathan, pretty we year, even

capital little you're moving margins, capital take because when we recorded mentioned, to from water, which you of a last in ending as So a you're Ron as a an time. outsourced months water the to as lot microelectronics that's outside of you we really six nice you have longer temporary And capital sell year, a of tough at dip you sell comps convert year in had programs, well. of recording within following over September, convert -- a outsourced our fiscal and our those water numbers you period year bit

terms conversion So recurring that's a steady, in a business. the pain generation benefited of the that revenue. saw of year A we bit to tough the short-term as and 'XX, which the outsourced of 'XX this long-term we of for in in stable in bit cash little of replay what first little gain comps of due well water for 'XX half as

Ron Keating

Yes. one going have of into out little year carries And over first the in time. the you more just that water point projects, higher cost a the outsourced installation

Ben Stas

Right.

Nathan Jones

things those make sense. Yes,

Ben Stas

accrue be will cash longer This flow. term. to margins will This free and stronger

Nathan Jones

revenue that's But question just that, investment. Yes. from I certainly happy on water that. recognition under delayed return cost. the and follow-up being very pretty outsourced my We're price and about understand high-margin high

were said You you dollars XQ. in a positive million of couple

starting seen are to costs. starting to which You've a rise input of couple prices steel rise oil prices here, bigger your here

quarter about You you're XXXX. for year cost full first talk and how about price thinking price/cost

Ben Stas

cost benefits, a little some goes We're see tougher. bit neutron in the still 'XX. We'll be going year of But Yes. assuming price basically to it's QX. benefits for on, as brunch

Operator

RBC line Capital next Our the Dray Markets. question from comes Deane of of

Deane Dray

cash we'll Maybe frankly, and and year. upside Ben with start for this the the flow quarter free

and payments? take capital exceptional any said I us mid-teens. going to prepared I here go exceptionally, remarks XX.X%, you -- through back And hear you did the exceptional that's it's there's one-timers to this there But that's to sales? you're in Just about Because if work tax the think improvement. in like working say at

Just that additional clarify that. inventory? Is

Ben Stas

terms as and working We Yes. tapered can we that record sure change at of low year sales that in you right a terms to levels and So depending our some overdue liquidate growth we're of but is right? over sales has working some great certainly happened collections, in now levels too, had capital, as his our to record tend on growth receivables of terms other collections, want and and the sitting dues. thing, of in flat current capital make of

going not get benefits had program come chain our of through. well onetime financing year to is also as happened benefits stay, that but supply benefits the this those will the We you're

that, that's XXX(k) we suspension of also cash with benefit accrued year, in the for a while second of to associated addition the -- we XXX(k), the get the we $X.X In about did half million.

mid that it free see right? terms depends what stays capital the with capital how working decline a today expect on as in If little that percentage we'll cash It accelerates that If in higher happens it's of and us some flow. today. this the beyond we our those things at into growth, growth goes. very downside working in are the that expectations, strong are that year could all lower So push be single We'll end it we where digits low gave teens. the to case, of stable

Deane Dray

Just CapEx free outsourced there now? flow be at and sticking CapEx sort you're with were that obligation looking XXXX, growth for cash you to contracts, these if of would type of you it when see CapEx water the what for the year estimate

Ben Stas

Yes.

lot expecting versus it depends on range going higher again, ability a that in and total. get the in how year. range growth be and our but COVID projects X% to So this to CapEx in that unfolds of We're line, these in up to that be uncertainties it's

So large project little we're We excited outsourced is booked we that Ron a water to talked see about. that our very should about. due higher very, which program, ever largest

CapEx our to year. a to little level this going that's higher drive So

steady news. the a recurring will stable, So CapEx some. it's for push up revenues good next It's it project, high-return very very but years, XX

Deane Dray

that neutral, that That's Ron, contribution Is there. PFAS do it would to Health you're that clarification we for get like demand pharma, then perfectly that water, markets. with Page I'm -- PFAS XX, higher. including contributing I end for how had just I for more I've the some pick all really to us. because given would I much And sounds the biotech there fine and might as like love if And And with happy slide, care, have on. see be would growth been municipal expect two well? ultra-pure to growth,

Ron Keating

Yes, certainly, Dean.

good good growth again, we lapping prior pretty very year, the side. biotech and on the had we quarter On the in see we're biotech, a health care that pharma and first do pharma fiscal

due the volumes elective keep happening And the and hospital on restriction heard beds of things up and you've given some had going to the down systems other COVID to about that surgeries mixed open. requirement certainly, as, have are

and up a of nicely. systems very across pharma with So bit the we've seen mix being hospital biotech little

highlighted got about, also out trajectories earlier. couple we mentioned and last the the great SPD growth products side that We new I rolled expanding with digital excited business. of on a we're we're of That's that that the middle year Vantage that that into in

Slide lot as capital efficiency. retrofit think get our the actually retrofit So against a ability on QX and spending they will we've be overall, systems just I same half municipal we to as get PFAS entering products make water and municipal some context turn in Municipal that some the latter it around nice just QX, And full got year, large on install to then on on green that it's be QX but to they inside of the the have to basically in against activity, rehab expansions, assets to sure place expected drinking it's executing we're their XX, highlighting. the outlook a as and this. to the year, that on They going demand neutral. backlog, what again, are to have may we for of of side, not activity across. the municipal are money On then protecting give that order Then And rehab that, recycled is see. are spending that green. thing, our we're that be This and obviously we're PFAS delivering. our does around with applications is money municipal quarter to wastewater, wanting but really the the make sure operating is giving but they can or operate

be X% on for growth, is everyone's X% green growth. basically mid- to knowledge decline is going -high single-digit our down the on or a Slight then and I to organically. we -high single-digit to backlog. talk Again, also strictly call, decline double red what in digits. comps is we our the Neutral As is order and what highlight outlook, decline going QX is green about on this to is mid- where be this to to we'll up going see be year-over-year see based

Operator

from Suisse. Crédit next question Walsh of the line of Our John comes

John Walsh

obviously do have to been tuck-ins here. Maybe small first, some you able

the the pipeline, strengthening a you're sheet. give is of us You still did fragmented color Could thinking how on about more kind about make balance little it a bit market. M&A a you just comment very

can Just you any there? color share

Ron Keating

of question. Sure, John. put we There's year. as made a we in relationships complete discussing into had last accretive a bit were and of a been September you we business, at acquisition to activity. and time, activity tuck-in with fiscal do the fragmented the Thanks very We number. saw opportunity phase as a it entered actually We September. quite COVID expect, them with pause, some it on come through, nice you the do and highlight, for the us as our would to able for in M&A We've a for M&A we tremendous

very have a pipeline. long We large a list in

expectation would Our to we somewhere revenue below. $X between million Xx which range below five in to year, the was were then we doing Xx around buying sales $XX somewhere is those or And around six to acquisitions to somewhere pre-synergy that. activity cost, a be level around go on as pre-COVID. Xx them post-synergy acquisition their million same we're as the level tuck-in typically slightly typically, tuck-in forward acquisitions And

John Walsh

the perspective. install held what of access kind don't be might COVID of Great. know to during from access well side? might versus the be site some site the if on business comments maybe actually Your dissect it's a impacting what more And I between very then possible business up MRO

is it Or been see where then in there's guess -- So that back? maybe demand elongation the access portfolio demand around MRO, if I site of parts of site is is some there when you restriction? do color pent-up more of it kind access comes just that and

Ron Keating

Yes.

and operation service the it's have density on and of and a is an side it's happens inside to Primarily new a we the an what our the or strictly facility. delays a we additional to of expansion maintenance execute side delay of is our access customer's route. service have great What of inside around see around question. ultimately ability of and gain slowdown installations, offering So that where occurred

team that our So customers have ensure a little in the members. takes it team the safety we're their time the going continuity because of of through a a coming and and we out going of more longer, it takes our safety have out ensuring operations, in calls, little of of to customer and members protocol less and lot disinfecting a

a bit kind when delay a what were you early and in than industry demand bow we talked about. they second was So and of a think highlighted we due wave the the flush of systems the ofa A fair pent-up in go access online, shutdown amount we half about when it comments, and actually when March, we and that as of expected shut off up. had light my the saw I year. of you so higher demand get we general pent-up back came the in some them late They had in occurred of had started to that and

saw our demand we bit half a in so as given than a And higher year of initially the the outlook. we of second had

expecting. this We're wave we're next anticipate by as still application. see that much you a they're utilizing in shutting reduction in We that. just They're seeing So pleased don't water. down customer the

Our goes delay. of access. be like on. still bit do steel it a just team a We feel may operational We still

may occur. levels demand business drop their to due lockdowns activity restrictions on As additional or

Operator

Our next question comes of Boroditsky Jefferies. from Saree

Saree Boroditsky

Similar to market. on the healthcare comments your

chart, the think As for turn first market that could end areas quarter, you the year. but you full are at just color one the will highlight you look for

to in better seeing of you're markets us for? give what sense the a Just

Ron Keating

Saree. Yes,

markets it execution rebounding and there a first and ability sites. outlook I on better of order to activity the through, uncertain to one So I on not, reason we've we each year, and we'll just based the little is highlighted our we go access some quarter to order hitting our I see whether order do expected a give is in go into say as depending a the the of believe didn't of be to is full because shutdown latter truly on a here these bit markets we would really and and outlook activity get as other the what the order. -- knowhow we this didn't the backlog the year. is QX, coming in, But in as good we to anticipate mean, possibly, we And it's for is this think microelectronics I activity first that react. are half going as COVID a

update So through we'll better and to chart more this we put go we'll future visibility. it hit give get we that, quarter, outlook we as continue the presentations into first as

Saree Boroditsky

ABT. developing fully expect Great. site go talked to this you for online? the cost e-commerce of an about And then talk about you Could you just initiative when investment this and

Ben Stas

Yes. The investment is behind already us.

made the largely investment. we've So

and and refreshed the in see that K. disclosed we see disclose you'll You'll that our website,

Operator

question the Kapplets Citi. of comes Andrew next from Our of line

Eitan Buchbinder

on is for Bookbinder Eitan This Andy.

backlog segments slightly for in flat about fiscal volume gradual a outsourced should in two APT mix How revenue headwinds where light picking be So between up. of margins your ISS to fiscal water think incremental 'XX the versus up adjusted we potentially could driving in and framework in recovery? EBITDA during 'XX

Ben Stas

you of the noted. parts There's Yes. one hand, of as outsourced you've lot a have right, moving On there. water, benefits

On with in have prominent. lockdowns become COVID the continue, particularly this customers associated more due challenges servicing higher the to other you hand, likely and to costs that's environment if

can for hopefully, of overall, margins on that. what the how do lot in with this increase So and a year, things year. and to COVID it to continue we achieve depends regards a But unfold happens slight

we get tough In the to of Ron comps situation. between and half in half, have As second return normal second earlier. half, should comps and we theory, debate and vaccine the first a talked cove have we first easier the as mentioned, out there, more should we in benefits half, about

on But to put tough want continue points some the So like this Eitan. at our towards Board year. this bit time, it's XX%. we to We'd overall, point a call journey in to

Eitan Buchbinder

within including channels a organic then expansion, market you helpful. drivers end focus. list an That's as growth international for And and follow-up, APT,

business see $XX With million as a is to the sales, experiencing relative your understanding recovery in to where what that you geographies? is China China faster growth other do million $XX economy the in trajectory about potential your

Ben Stas

of quarter single this COVID. a that on double-digit China, year and shutdowns, quarter because record certainly, And more But the experienced uncertainties Yes. in will growth we of of occurred We the good where growth large feel digits fourth in quarters saw into we about depends hardest. a we a But tough area it they to the abates total That, hopefully, fourth double-digit lot that hit that on China is that year. Again, early and expect in snapback. return assuming that for after to fully return was the don't most into some past. this get at. the extremely did were We we've COVID rate growth encouraging.

Operator

of line Goldman Lee of comes Sachs. question the next Our from Brian

Brian Lee

versus know you're I upon So be Can a this seem here you assumptions guess, delays couple outlook time. touched potentially real the moving out the the seeing what throughout a given you around fiscal some calling that or quantify to But the 'XX of times there. trends order call. bit conversion, pieces? pieces typical the these having the of help are you're couple muting a I maybe maybe expectations order

shift either terms, just expecting? we of in the what of or see, a year? So sort it sense can then If is kind pull giving benchmark mix, quantify year-on-year what of things you are potentially to that? the if capital, a normalize you the versus through sort move for how to outsourced us and as in any And then of on much

Ben Stas

Yes.

our backlog decreased capital capital So our obviously. more has capital shift, service backlog service and on outsourced has outsourced decreased, our has increased the backlog significantly backlog outsourced the and has the increased, than

but first come that where in in of year we half this actually before had part this not half the those is second that Now orders year, in of last that will but more at year, expecting will impact microelectronics of pipeline time. in, now very are again, point the the have the a we're strong

related happens think downside maybe Regarding In chart. we a a it the and increase. it Should But We as the to hit get costs. happens worse slight on still perhaps expect pre-COVID thought, per? with maybe in scenarios, in but post-COVID both -- impacts little we don't down than ability impacts more also If to the revenue do a bad again, to you're upside case flow. should cost, post-COVID, of scenario. if lot potentially again, to COVID. we the year-over-year, things, starts not have be maybe the about full a a the what comes you results. we a That more the you decline, a to stable slight COVID don't be to in relatively it we of that lot uncertainties have standpoint, year of COVID COVID, -- the maybe as And

comps. and year 'XX, more You a have a makes muted a of post-COVID, which those half of considering pre-COVID a year a FY

Brian Lee

pass That it enough. I'll second Fair on. and And just sense. then makes question,

in But like plan or Just justice had for I sector, in Biden at XXXX as any pledging. enforceable or I maybe development, legislation the maybe election level some on general? funding I contaminants environmental the expectations, think state you thoughts particularly anything of of PFAS. either level initial that limits or water terms the know about think they were in federal seeing the addressing the guess, implications case the for water

Ron Keating

seeing a in We're election to amount round. Yes. a due fair Brian, of opportunity the come, just

going be to I big key. think that's the

justice have hazardous a has as in I think negotiation as it -- economic anticipate. and important time by hold, it now level, take to that equitable actually and that's pollution Biden/Harris get for the put complete, still and that, out wrapped fair will that it some the to on And hill already tackle some take enteral on You time we will limits would have defined that for and And of opportunity. environmental administration but take to PFAS they they're enforceable I do amount a setting going and designating PFAS. the substance what up

forward. moving still are states However,

focus a pipeline on with have from still have will we then aftermarket we been and a we against pull-through States activity order FY nice supply areas. that our anticipate our wanting as sure shift capital go in other of to So had light all they and United chain of customers states the And saw activity taking sales correct areas, side capital industry and individual that spoke and service while of other that nice investing longer-term PFAS that. we're to bit are action nicely, We've to and sales the we back water as and we districts on that deliver just seeing forward. little that the the 'XX industrial general make in some very

have is doesn't about it it thing sure industry operate. who's us and ultimately focus matter Everybody in healthy beings, clean, we water safe, that as office. to make for So all the really has also water but for reliable, to great on human

Operator

Buscaglia next Bamberg. Our of from question the Andrew of line comes

Andrew Buscaglia

on to given how Slide on laid lockdowns, of framework some the QX, that recently? just much from How much the wanted XX. some I ask the that maybe but more out headlines -- you to into assumes conservative of risk kind seems me, it

Ron Keating

locked would about that but have down it's more do concerns lockdown. we not necessarily And I say slowdown.

outlook locations. built So into what does as what our of into to six-week discussed has more a been we've getting potentially lockdown This four a built more slowdown, is a not -- have into challenge it. little

Andrew Buscaglia

other both in of on help us and that puts appreciated. year, modeling but as you out in Okay. in segments, additional there the full lot of the you can there's I segment? takes be expect And either, know guidance relates is then give color similar do for any growth would a to each it any your

Ron Keating

I we're right to annual stick want around the would up. now, we giving that to flat to color slightly say

consistently. I fairly segments those across think the you could apply each of

Ben Stas

in little will this also but footprint service they're a large and but typically a market. APT larger base, APT. APT positioned their And base have bit than revenue ISS that expect move the we due more they a recurring international better revenue environment And to with in

environment, slightly fare should better So in than this ISS APT.

Operator

Joseph comes from question Giordano next of line Cowen. the of Our

Unidentified Analyst

would any year Could over Francisco uncertainty, CapEx side? for expectations of is the color next appreciated. municipal your on Joe. specifically And the This given full the year, budget for on some be expand you on the

Ron Keating

Yes.

back Slide think I I'll XX, to I you if colors. go again through gave the what walk as just

quarter to we have that first colors up 'XX green is of on digits. the the So is -high single mid-

is already have municipal And So what well as our our service conference that that we to servicing. tied retrofit to do on projects. again, highlighted to anticipate footprint. digits, to we've of that so the breaking mid- PFAS or that to we're the orders backlog prior and calls. single some X% up of yellow against not servicing on And wastewater we're we water. pipeline. rehab, what is -high is as capital necessarily that's blue, It's -- we based and around munis modeling the And X% is sitting around to extension and as green, those decline, use you single-digit then double-digit mid- expectations lot -low X. some then and we a kind these tied drinking And red And have of then what on. side This can decline. of And numbers. some tied expansion is down water large activity A with the

Unidentified Analyst

That's Great. helpful. turning And then to Evoqua the market.

on you have guessing business? like mix exposed little look let it exposure, there? Given guys you some seen part of pool parks that maybe but in does like in the and what what in of expand the your I'm a terms other -- of also theme can is companies, bit strength commercial we've

Ron Keating

small parks, Absolutely, type. parks, XXX% use not This large. even of is business around Aquatics It hotel water is our single theme or large single-family home, multi-bathers. facilities applications with large is

year, quarter we what was based looking year-over-year what in see this of at on first highlight And and aquatics for again, on on So in that's the the difference you have based currently pipeline, that backlog, it's is quarter, it's pre-COVID. aquatics. first against the last our

Operator

Baumann Morgan. next of Our from comes Patrick the of line JP question

Patrick Baumann

you expect how total profile here. strong sales off, helping water a from My is years now, resiliency outsourced one-third Maybe beyond it's now that in to opine model XXXX context math a Is the Ron as implies XX% for and a first company, which expect sales ISS year-over-year and looks sales, could more on environment, company maybe five transitions XX of water but this -- of the recession the of is, comment how lower congrats in in of business right. capital total business tough the my the you year should on Ben, that question the maybe? improve definitely that outsourced the the year the we this outsourced?

Ron Keating

Evoqua little would the a curve outsourced But say we discuss markets deployed your and seeing worry in proposition well. this, bit recycle reuse core improve and seen help competency pure what extremely resonating demand that it more facility focusing us the water that we're outsourced is is the and is you clean, the operational leading percentages to your on and with they In I Ben application, driving wastewater well. into their strategy sales talk we've treat delivering that on the I'll what and extremely more playing let serve, Companies are and against backside, water free, doing have the them our it provide about and for industrial been specifically. teams let take out effectiveness. their back water out the we've how broad and execute value

are activities our rely to water and starting So customers of and treat water. more for the more outsourced on to us full cycle the

the In that all fact, date call was what outsourced Historically, we was we've process our wastewater water a booking. water. highlighted even that focused during booking actually had to is largest on

actually do the more be into treating the industrial of did that continuing shift them. customers not challenging cost So to seeing typically waste that, side where the business is but of their we're for concentrated wastewater

into their bring full and sustainability help their can so operations. liquid drive So their enabling around they're it circle, us to operations minimize and manage us to bringing come discharge them they in

of going Company's going highlight to and see of some seen continue that. what rates approximately, to as grow. So very for we that then I want will you you the the the would going anticipate we'll we've say on to did math revenue on positive trends are And be the growth would forward expect forward XX% you

Ben Stas

Yes.

we're it, in COVID period longer time. should things, things water. for could to addition taken the to I that acceleration backlog. customers will some see of certainly, potential And increased is and water an outsourced digital. And accelerate that one maybe more we think, we and expect in more outsourced continue have those seeing Those situation have has would whole things I nailed that a Ron the think our of two appetite and

tell. we're pipeline, more is this the what and seeing backlog conversion of outsourced water area. time and that in in more certainly, opportunities think But year's our I in will

Patrick Baumann

was versus expect when But organic still helpful. put outsourced mid a demand of about? the year, you kind function the water the shift you of low returns That's growth capital to fact this is for more function is growth the the to slight diminished of you single-digit such that that kind could talked the type is up

Ron Keating

Yes. Yes.

a So what to this is X, year shift for a level less larger profit carries outlook at a in is higher in we're highlighting outsourced the water but higher revenue out level. that and year longer-term revenue

So we giving we're in now if the for a it capital then source had the shifting we're outlook of are fair on projects amount sales 'XX, higher 'XX year-over-year, comparing because water.

Patrick Baumann

bit what would a -- X% then think lower guide, end year-over-year follow-up X% Helpful. And market my is the organically. did looks out, if quarter first down little of on than disconnect to imply. that like end I large don't And the like little But I just divestiture it just looks is know, Or in it comps revenue understand I I'm guide the trying you've a Helpful. project slide Memcor bit to in highlight the is of maybe you is this year? -- anything miscalculating. the kind maybe revenue would conservatism? Just a could versus if just markets? there last there

Ben Stas

last year, both, Memcor. we had in both but remember still little A

about $XX this occur year. million that it's So won't

last you're So midpoint that the guide. -- had lot particularly when capital, a of that take area. microelectronics addition you more to like if pre-COVID the you and And that, year-over-year do digits year, with comps of again, in decline in that, mid-single tough

Operator

[Operator Instructions]

Ron Keating

all that the is operator? So questions,

Operator

questions, At sir. this showing further time, I'm no

Ron Keating

Thank you.

again our and to making of quarter, our FY and 'XX to of delivering So markets that team fourth thank we healthy to sure serve. would on communities the Evoqua in I continuity the summary, we safe that like for continue insured and stay for terrific the members customers and operations

into to of very we're on 'XX are out will our to and how We the able unprecedented to focused strategy deliver stronger our entered a be challenged the execute, we very capital balance of our while to of increase that continue manage and liquidity year and very ensuring We and maintain come continue to and members, investing safety as pleased our team a going going company. in the and effectively to to business continue forward. the sheet customers, health

us the with thank for and call. in in So Company the the you look joining forward future. for questions the all appreciate you again the I and interest to speaking

Operator

this quarter you, Water Conference thank Earnings Technologies And concludes fourth Call. Evoqua XXXX today's

lines your have You may disconnect this at a now wonderful and time, day.

Evoqua Water Technologies (AQUA) 17 Nov 202020 Q4 Earnings call transcript