AQUA - Earnings call transcript Q1 2021 | Evoqua Water Technologies Corp

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Operator

Hello and welcome to the Evoqua Water Technologies' First Quarter 2021 Earnings Conference Call. At this time, all participants have been placed on 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 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

a COVID-XX drivers, XXXX This on includes as Thanks, Lorie, the well year the questions conference President and to as as Quarter other keep call materially expectations us growth the and may We pandemic, and Fiscal ask our the for Results. from our questions. end and of statements, expectations thanks, of expectations. Program, Acquisition and everyone, review results for Chief for Executive Chief President our demand digital our relating Ben possible. Ron call to quarter full Vice to potential are contaminants today's question and joining Officer; today's Financial call Keating, for the the Participating forward-looking Stas, Officer. to as including After and treatment accommodate prepared you emerging the call differ market please follow-up market execution remarks, drivers. Actual Executive Financial XXXX, second of of impact we many one and strategy, will to open that First order

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

Ron Keating

turn you, to Slide Please X. Dan. Thank

improving our markets, our and challenges end on navigating prior while into hand. we we're believe our of and diverse remain ensuring but and bright the the reach customer relationships, future with we're the our through business across the varied opportunities, balance in broadening the geographic We're X. on stated plan customer for M&A solidifying and extending anticipation sheet company. our turn focused We to at Slide growth the safety our The As encouraged continuity program. set Please vaccine solutions the rollout. of investing we portfolio and future, the COVID-XX employees, of our impact pandemic focused look health our as of liquidity in calls, of priorities has uptime, and future's

year from as quarter. Our with were the the the even strong Fiscal execution which impacted overall of business compared pleased We expected. QX of prior as XXXX, COVID-XX results first quarter last to were was largely non a

prior and the business is in the year have quarter this we'll Memcor which Additionally, last comparison. our

pipeline, ratio and and markets. projects set [ph] both was opportunity bookings book-to-bill outsourced of north Our of X% diverse comprised capital to see across and a continue water of robust a we end solid

a Price pleased over quarter largely potential north and APAC First performance notable execution and quarter a Liquidity down well closely ISS of working a prior improving microelectronics. by impacted in commodity strong XXX in leverage revenues, were favorable region. profitability. target, points revenues strength basis capital year Slide by was more organic XXX% year, due supported operational side flow initiatives. Please with to challenges ABT we're and to Cash slightly continues with remains We're was adjusted had rate capital our monitoring conversion turn the increase access realignment $XXX by of and with primarily coming the in supported above stable margin approximately prior EBITDA than Xx. to net inflation $XX by to positive increased slightly COVID-XX the with trends net and report cost solid at strong particularly million million strong X. with quarter.

contaminants strategy sustainable service We We become with our municipal of own to contract $X.XX footprint, first, sustainable solutions our The within turnkey PFAS customers to a in around become and ways: our continue solutions through a pleased win chemicals. Evoqua handprint, our develop about offerings; more our service treatment recent sustainability two remove more to provide emerging water receive California internal to driving drinking and in to were we and plant to from sustainability. [ph], highlight think three-year enabling order million operations. enhance our a second,

an through treat another includes online installed also carbon improve activated also our to for internally service media granular continually XXXX. six extended and and well minimize Our solution our emerging own solution our operations contaminants. working contract service is which other on service previously PFAS also exchange The We're and includes impact. site, vessels, to

pleased sites. and well XXXX as focus occurs. we We to safety a from to internal time and solution our rate We're operations to and overall dedicated cause root safety of as reduce of tremendous amount customer year. operations safety the in service our by incidents FY incident is focus the when XX% review prior Our our a on primary it as

not internally we've our until while integral and we customer and satisfied the governance report be progress. look X. to Sustainability It we're XXXX is is advance spring what release but forward sustainability made our Slide handcraft business. sustainability to our more highlight are The and to structure details zero providing sustainability Please do. on at will your our preparing impact. turn with we feedback. progress expand to incidents, our report will pleased this We to we We're

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

as recurring make comprises capital while ultimately sales, aftermarket service XX-month a We Currently, on down approximately and Our These we at and combined profitable XX% during grown adjusted numbers trajectory stable, and sale X% impact revenues business and service FY have we've of due business steady our this and annual primarily profitable The pursue business. adjust of our growth. the for overall of previously service compounded rate a Memcor. operate XXXX continues drive aftermarket of projects have growth our removal the shown to to from up divestiture. of time. XX% EBITDA the slide X% approximately trailing adjusted growth from the with of the to

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

the strong well serve our However, model our past us years utilize of have talk Please performance turn growth revenues [ph] acquisitions periods services we're will we impacted continuing a and growth for be Slide visibility to investments. business activity the our into by and been X. important believe an service continue period. and Acquisitions products and can strategy. COVID-XX. uncertain an over during investment on as and during proxy high from This annualized in our basis to capital the R&D five seen this have We

portfolio Neptune and to tucked and market acquisitions them in expanding have targets footprint. portfolio product focused the be our our the transactions. XXXX, size penetrating it's of will to groups. markets and service -- and and XX of all target gaps, XX Benson development vertical supporting of with be Our technology of our been exception acquired expanding We filling consider on we've vertical geographic companies Since continue geographic product the

December last Aquapure Technologies acquisitions excellent acquisitions These two fits in in model. our respectively. the service Our reach our are and in acquired ISS to services service Ohio September expand Ultrapure Texas markets and in us industrial and enabled

geographic currently on focused pipeline our industry-leading network. and expanding Our remains service we're opportunity robust

We continue our X. organic segments. expect profile. multiple leverage improving Please quarter, turn highlighted our net while we growth both program Slide acquisition to drivers for Last also to

Regenerative leader new and Practice more APT recently parks, water over of which We even product replacement using call and in awarded providing This The Sullivan FP doubles Defender This chemicals. look This innovations success Media turn a Defender sustainable which used be XXXX we special. product is sustainable APT and leadership parks competitive I over aquatics for of had. an one region several region provide We're and an year, the introductions consumption of is & swimming our at talents filtration, a footprint I'm opened is the more more and improved proud Frost than senior very would to addressable an to making to smaller market Neptune safer infrastructure product New water APAC is highlight ultimately large Benson line zoos office the we now quarters. FP-series APT Beth. introduced and FP the product a the We've like to the were theme aquatic in targeted Defender the Defender product Award estimate market in expansion team in helps the for propers. what product classic currently in also in market aquariums. region. is applications The and global is innovation fitness forward recognition highly they've this and less water, sharing the the highly XX,XXX luxury a using next to to clubs over municipal environment. including having India. experience swim schools, medium-sized Last have added to been energy market. health treatment pleased our healthier, the reducing Best a less sand Filter.

Ben Stas

Ron. turn Slide Thank X. Please you, to

the microelectronics of divestiture in For revenues the end Regionally growth and declines the Memcor declined the $XXX in were first market exchange solid services, of by expect and recent excluding Demand healthcare in in X.X%. impact capital vary of acquisitions, Asia we million. were service with foreign experienced net quarter, pharmaceutical and Pacific. down revenues impact Organic growth reported refining.

first efficiencies operational growth. and year. controls, XX.X%, $XX.X realignment basis over points overall Cost contributed For adjusted for adjusted prior quarter, XXX million EBITDA benefits margin EBITDA up of was the to the

million $XX favorable approximately first adjusted approximately quarter. The of cost Slide and prior the Memcor quarter Please was year included Price in slightly million. EBITDA XX. of the to of sales $X.X turn

Our large primarily and end X.X%. revenue impacts and in by site in driven primarily Integrated impacts was the timing annual down projects in temporary Services The to Segment the service and and due capital with gas service revenues aftermarket oil protocols. to Solutions prior delays an costs quarter first year, productivity maintenance restricted the and associated COVID-related decline COVID-related of markets safety higher access were

mix. in margin Pacific X.X%, Our were digital XX. digit Please revenues Adjusted $XX volume XXXX. to slide to revenues as enhance divestiture to $XXX Product due remains interest the costs increased down favorable year. cost from pandemic. million Technologies' the access Applied on XXX particularly declined quarter EBITDA decline. cost offset digitally-enabled price XX.X%, unfavorable site XX, double down December profitability, strategy the XXX to Asia lower customers revenues and which partly Organic capability higher from with due strong impacted and points driven rates by region, continues by and positively absorption customers growth to prior from basis for was included points. FX very quarter sales controls impact EBITDA the turn restrict in Adjusted the high, the X.X% million, basis Ongoing growing our first Memcor our the

year quarter turn prior Please outsourced cost Capital profitability. million. $XX EBITDA $XX to Adjusted revenues flat the for primarily points the spending over the As over orders XX.X% approximately and XX% EBITDA slightly $XX execution million we slide was million. quarter to for operational year. prior and increased commented increased XXX were containment QX versus earlier, Memcor's benefited XX. actions favorably APT water to for basis margins Adjusted

water previously given solid a we As capital with outsourced monitoring mentioned, pipeline remains the and opportunities. the of of our We're the closely uncertainties pandemic. pipeline combination

year of improvement XX.X% sales, the an Quarter First quarter. points of prior working over net LTM capital XX QX basis was

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

levels. of continue and actively to our manage Please inventory accounts We the turn receivable Slide to XX. quality

opening continues As his quarter balance year. sheet cash given corporate flow Ron our the mentioned to the the $XX.X Operating million and maintain priorities, managing was the from one in resulting be business uncertainties flexibility to comments, $X.X of the in versus strong liquidity prior million for pandemic.

four You QX $XXX to approximately LTM income. million almost operating increased free quarter, years, can on the $XX net adjusted for we've XXX% see flow million of a the over past almost basis. cash flow was $XX from million which was Adjusted cash

half-a-turn fourth prior and net almost leverage quarter. down Our Xx compared adjusted finished from the a EBITDA, ratio which the to was year stable

the over S&P market and upgrades spread. and by Moody's continued capital and reduction over flows, improvement cost the working call Our quarter, prior turn the reductions. Ron. We to were improvement approximately of like pleased operations is driven during credit leverage progress to lower an would as back including The now receive lower by to factors debt well very year. as points several from cash in basis weighted a debt rating is rates average driven X.X%, XXX I

Ron Keating

Please for and incorporating QX, end teams. Thanks, represents set primary XX. turn for from sales chart operations to demand represented this serve of diverse our our on expectations Slide and current as This markets updated a Ben. slide. our We and end broad markets insights order

the size on the mid-single low of Our top revenue. smallest our FY for the end to representing to accounting in of each rising XX% are digits annual XXXX approximately bottom markets page,

PFAS be large our back, water municipal to first solid opportunities drinking XX in noted and quarter quarter little or largely of outlook order growing. to treatment expected. expect opportunities. drive to of neutral overall specific summary, performance We financial out of but We'll drivers Q&A drivers market the Looking was the was and is In markets second we our employees, continues priorities our not in during revenue XX. both negative, to more those beverage. a segments Slide our preserve to continue pharma, water our turn questions detailed session. happy strength. for protect varying challenges address drinking are global healthcare, food be and aquatics about company. end primary to the we're pandemic X our to see Please refining in as municipal demand the and segments market and for market the to The present Overall, service demand maintaining expected and the customers

our a show to operating through continue pandemic will the We company. resiliency, stronger as

book Our markets. across them order solve in is we're customers engaged actively helping water multiple complex growing problems with and

and and technologies Our large footprint leading for service world-class base, solutions market our as positions installed of component ongoing growth. portfolio well

execution and were solid profit expected. We were results quarter first efficiencies. drive largely Our higher pleased margins through as to operating and

digit our our our by enhancing demand to see nature service the company The been double One the day, offerings. we're digital in business. We're sustainable expanding. We've growth outsource and grown. meet continue to water has pleased capabilities Water interest sustainability treat is highly to of digitally-enabled Every a goals. emerging customers helping market contaminants their expand Our offering our

and is We waste have these to applications markets. and in to demands a future. solutions reusing increased that for across fuel other metals solutions. and for microplastics, municipal, Recycling PFAS, front-to-back and will complex our continue we treatment seeing heavy the and We're treating industrial grow wastewater expect foreseeable contaminants growth to energy water markets trend

limit expect remain leverage. close noting and strength our and drivers our The to improve opportunities appendix slightly were full pipeline of outlook navigating dynamic and challenges year quarter, view COVID-XX our our market guidance Evoqua team conditions. and overall to Service and with The continuing on revenues while to to solid. of Ultrapure now we the XXXX continue robust flat, we up XX, potential and M&A provided flow, balance will consistent welcome and versus In Slide outlook. to liquidity we're our active with trademark, visibility net be first I quarter tuck-in upside on on last is financial the EBITDA XXXX. cash We sheet Based to by downside. current Industrial maintaining free we're from the and adjusted commenting not

half quarter, deliver into your adjusted revenues to Also and million visibility full questions. of open call million years, our approximately the the $XXX prior be for the our to EBITDA between will XX% second Given adjusted to now be anticipate million. million between anticipate $XX we XX year's $XXX to with EBITDA. I first consistent we and EBITDA fiscal

Operator

Halloran the Our of from Baird. Thank line Mike comes you. [Operator of Instructions] question first

Michael Halloran

Hey, good morning, everyone.

thoughts get the Just cadence year? thinking want some to through how you're about on

Ron Keating

start let I'll the XX% the But, about, half add the as in see XX% Mike. in and we half. of year, the just in, typically first come second talked Ben EBITDA we of

If January you COVID, year the at really hit where remember, that XXXX, first quarter impacted last in year and we March. quarter, February had was actually looked the second this the we then, in And of first weren't as really not. us quarter it COVID was of impacted by by

so, lap looks order given And activity. starting and we're comment? Ben, in COVID we back about to half good do it actually the our to what want you feel like the years

Ben Stas

Mike. sure. Yes, Hey,

very is more we're COVID time. half-the those the significant. much quarters a split and potential the is normally cause right? approximately stable variability, mean, and uncertainty half certainly, LTM quarter thinking COVID little year more than do stable. fluctuate steady second on any basis. is But much a to half, a be XX-XX, more subject XX-XX, an But to full-year EBITDA and to time fluctuations has to from of And each with again, that's about I see. stable aligned what very we business again, which So first the traditionally is But

now we're second So, first about thinking right half-the half. XX-XX,

Michael Halloran

maybe kind you traction, really understand term? how How in moving are the And And that favorable, cadence it other what on starting Ben, you're to book-to-bill these about mean short how trends words, look you some the are can years update, operate thinking [ph]. you lot can years couple orders? of help has how an positive an that about for initiatives impacts to thinking is information what a just water and us update gain what are that that's those? tracking In implications what start out do outsourced today? build-on next the Maybe success order ones as of like, beyond of

Ben Stas

bit long-term Yes, business this expanded so is in I pandemic to And, has Capital area think environment be where cautious the the outsource short-term contract the a strong. that interest an that long-term the of which expense of some, potentially expanding water their is seeing in capital. in be water-type regard, and companies we're to the outsource contracts. very potential at accelerates continues have

book, order you is when services at water. our So it shifted certainly towards look in more outsource

long So for capital But, projects certainly term some short bodes put the business pressure the well that again, on and has of the term. capital. pandemic timing

area areas refining for types particularly pressure also of of business those some is in been the The on customer highlighted other is which services, there's we that on turnaround, demand turnarounds. the

will delay accelerate. they and forever, those Now, have can't to they

that's as the short created another we So a term work impact. that timing in pandemic, area had some QX. it's softness But, through

Ron Keating

second to that activity Mike, the seeing from operations typically end shown you in on our review feedback sales Slide related what end given quarter, the is outlook, our XX, the outlook we if market order market the team. and with we are

been the tied to little businesses refining So higher a is year. this. Ben's microelectronics point, then really give to [ph] against try prior and we comps And and less, have to the marine always guidance

Michael Halloran

Thank Appreciate gentlemen. it, you.

Operator

from the of Our line Stifel. next of comes Nathan Jones question

Nathan Jones

we dynamics. of steep think the different is bottom, And and when rise bit pass to were quite said is there you you're expecting than model input start just that the steel off a some ability morning. prices little considerably now a XXXX, you still up was costs talk like know to had but oil between is that would Good some the prices how first come down back talking for steel what slight it Can your quarter inflation, positive over mismatches timing pricing XXXX about I and year-over-year. lot here oil I price pretty have both your If next about had from I XXXX? cost in year-over-year, in quarters? few through. maybe up

Ron Keating

that question. the What prices great are Steel a very watching done quite the the good that's good amount we very commodities XXXX, have, months. related, limited versus we got of jumped in our Nathan, suppliers, the closely. over as get heavily few And from our you with models are have time past we've quotes visibility that tune indexes, staying we've we we live.

cycle projects, as lock of then, quote are so, is the once on have fashioned old much that we good. hedging as shorter a we time we're we we And way, And the locking are it buying soon amount commodities actually the the in in.

So we know fixed is. and price what fixed is, cost a

at we slightly moving. be As was neutral and a first think overall what full-year bit what year in the where in turn the There'll we commodities of but have up. various will looking be the quarter also the we're out slightly quarters, year, to to little the we see pressure we we we working at pipeline, against, favorable, said projects to slightly be looked favorable, anticipate

Nathan Jones

good news. That's the on Maybe just order of very rates. a couple questions

expecting above year-over-year, in progress book-to-bill that through what they the said us actual year? of can You move rates quarter, you one. to and order Any positive how give color as the you're were we growth on is the were

Ron Keating

revenue pleased above that Yes, were year-over-year book-to-bill with stayed the and of see changes. COVID given quarter, I order some in mean, even first rate the to changes the one, we

numbers over we growing. know the backlog we we give We that, expect and the don't -- is typically just really

already five have half And at the the flat, that we're As be expect first in that into of didn't that up. in it given, line -- slightly year, we've we our is guidance last to the year. full we coming look year, of you months with again, non-COVID

and we're as challenges that at always performing we a that the visibility. Slide on color end on little given expected, But markets as there's as slide. you showed look seeing, COVID we're, some XX, we and COVID again, the So with

Nathan Jones

color. it Thanks I'll on. pass for the Great.

Operator

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

Deane Dray

Good were start morning, by ISS? in with You timing the we of large impacted some can everyone. comment projects. Hey, the

give the reason Just was what the push to it they for was projects, you outsource there out, COVID-related us then, these with start some when and in do actually be effect? context think

Ben Stas

Yes.

just as [ph]. And disruptions, lot in in -- get demand year when So to end Deane, strong orders, And, clear again, last experiencing you're to had these prior all be microelectronics. still we that, first the on supply but overall, on was in half that just aware chain end of. market wins that's be microelectronics. market the year, capital is a remains some robust. so a going There's like strong in us lumpy it very tends for But capital microelectronics, we

we're year. comps So facing these this tough

Deane Dray

that shift fewer much can we're you're is the we for are of helpful. next contracts. question, All the more want me that the then, exactly of for you some And outsource first shift this recurring there you us? us to seeing you sales. mix leads is in the any that to impact half way see to where doing. we mix that's seeing to right, happening increases but It the have pinpoint mix shift? Is water revenues, how capital this what And quantify getting going of Can

Ron Keating

talk briefly just through And dealing the trends robust we we're on let the gone us this one to what positive. But, the quantification. trends ultra-pure do repeat about strategy letting we've and quantity customers are quality And provide back I'll are recurring that, which seeing. talk are out that really with just I'll very is of [indiscernible] the revenue rolled they Deane, Yes, And are speaks competency, and COVID. around [ph], doing digitally-enabled water to service. become quarters water. Ben we've them seen core and are, they more as coming to our

spoke shift, Ben, about, was is, very been several is we've about as mix do for seeing recurring that that repeatable to want good steady, long that the And the come talk? term discussing So good. you revenue going you value to news we're that's quarters. in it

Ben Stas

disclose obviously, the we orders. don't The I tell really what Yes, the offsetting services. area, is But in order services seeing that. you, is is we're Deane, is so growth capital the challenge can and

happen period contracts. you capital books So shorter just we transition of are again, know, seeing these as a out time service much than articulate. But you over long-term that as

So, we as the this through does pain. this, great is go create some it business, long-term for short-term but

Deane Dray

this is on the outsourcing exactly That's way pre-cash current capital reflected for all outlay at these looking in that's correct? flow projects, it. your we're And the performance quarter, that

Ben Stas

That's correct.

Deane Dray

Right. Good.

So you're even still that excess doing well in growth with CapEx? of XXX%,

Ben Stas

Yes, correct. that is

Deane Dray

emphasis lead And it more on here remediation how administration We any terms question the right. position? for When is last your then, share had up All would PFAS position on project? in PFAS Any update likely first a utilities, remediation that by be and a know in change ago, update with came me. your helpful? to couple of quarters the you be said you

Ron Keating

a great question. that's Yes, Deane,

around what a contracted watched share Water a we quarters With a consistent that coming reported and the with prior to the new administration, this, closely. very got we've California win And third XXXX. resin, We on we in in that opportunities. we're an that's District in emphasis another around where a our highlight actually remains there pipeline is highlighted of

them -- the of So we've will system. are to aftermarket good seen are very over neighborhood about that have capital And it's those what in be you're what a good, maintaining $XXX you're that in somewhere that because those they'll follow the that's longer-term have come sure to revenue will The on projects service-driven, news service be pipeline grow. going But as year. well. you is coming make that to and million expanded, the seven to it's going contracts years, next five see contracts is, that's over

Deane Dray

Just clear, capacity-constrained all way? to are to become in you be they of any you able capacity to be as available, the projects have go after these

Ron Keating

a have the the technology that's that we we We after. one multiple dealing go have of And are of not, you [indiscernible]; benefits capacity. solution approach with

just one-size-fits-all-around, to to sure and right and in, solution range technologies right not solution we broad the challenge PFAS. portfolio have it's a the very have we applied stick a one So can make complete we try in the that

Deane Dray

Terrific. Thank you.

Operator

Our next a comes Baumann of JPMorgan. in Patrick question

Patrick Baumann

in quick the there your it. markets. second something power Hi, profile? like what's order the got change specific little a on down a to the good morning. to an quarter you're to looks Is for bit; the end guiding and you're the about improvement power it be quarter up there? first I've Just in curious It market? be guiding question Is

Ron Keating

think -- our in the speaking to some us in expectation order and I guidelines. this the again, in have has for of the we been LG the what is market increases quarter power activity against

we've to on a companies the that, focused the at So looking very that they're actions sustainability that doing increasing challenged of for the they're micro-contaminants power a us coming and are lot been dealing with. as solution

Patrick Baumann

you and anything Okay, small -- I pipeline, the do and recent tuck-ins. on see the bolt-ons you acquisition were assume did more deals

You bigger at you're pipeline? that bolt-ons correct than looking wrong, the me anything if in I'm

Ron Keating

expanding tuck-in pretty I we service at find we opportunities. that on. the product footprint steady, XX The there XXXX, the we cap just we're acquisitions. in want not the the either or drive execute Texas as we startup, Ohio. XX that go sure Greenfield a this where six highlighted been strategy to tuck-in bolt-on. the our a highlighted, we that's on in in moment, in right And opening Yes, a with did, we've have in back And two as recurring, emphasis and since portfolio, comfortable repeatable done to we're opportunity it remarks, in we're we we've putting my very That that as revenue, executing is make the year, continue service strong acquisition have we with footprint to acquisitions proper been

And so, a the we've tuck-ins over focus shifted year. to the of next bit service

Patrick Baumann

it terms right year-over-year, think like got And margin makes margins that on right I'm the one for the down Ben, decline? sense. seems numbers the the It maybe it in then implies quarter guidance, If the what's of about the near-term second of quick in I I driver guide? are

Ben Stas

year were half a very last microelectronics Last profitable. very -- very was timing. project Again, of strong year it's was that strong first

Patrick Baumann

mix base which good Got it. last basically, in just had year. a it, the It's margin

Ben Stas

it's we normalizes time year. the have that lumpiness time, that Yes. the again, from And typical over quarterly to

Patrick Baumann

of appreciate course. time. lot, Yes, the Thanks a

Operator

Saree line Jefferies. comes of of Next question the from Boroditsky

Saree Boroditsky

facing Good market first half some year, of with end the comps in the morning. the Microelectronic is Thanks. tough favorable. remains

do we this be should thinking expect improve half? you how second So in about market to that? And the

Ron Keating

We do.

that as we it was referred But well I to microelectronics overall, improve come, us year Ben is expect are on half. year-over-year services the both what market, the offered. going for second installations comps, prior to the in earlier as very favorable mean, that the had. We outlook with large for with in orders just again, to projects the

Saree Boroditsky

quarter, And believe in you and in APT quarter. China then, bounce last back demand noted I strength this in starting you saw APAC for

vaccine regions, China? allows So if any could you opening are just up? in the talk currently facilities about as the apply seeing there we you're hopefully can what other start there to to And lessons that

Ron Keating

Yes, operational been is executing, good. our very China fully team and in it's

follow In you pleased second the highlighted as we in the fact, well also last a as nice in was continuing bounce year didn't operation to, was challenges. run half some other I in should we areas supply from operations the done that into along comments, is us -- open that to, our brought beginning, chain we've up that in we is Were that in Things very technology that component going that we very referred sustainable. markets to and as we as strength, make supply And robust, India pharmaceutical opportunity business other back going back technologies our provide that's highlighted sure of very side, to very to see modules. we the microelectronics forward. the saw, that and show strength and very

part that place, thing ensure major we've the other pandemic, and have run efficiently. team operate, team on is The able we to that right continued have they've to that challenge operations protocols thank our entire we is our facilities been through continue that. this and delivering in members And, that very just to in of very and our teams the done are Evoqua, effectively the and

Saree Boroditsky

the thanks for Great, color.

Operator

of a question line comes Kaplowitz Citi Andy of Our Group. from next

Andy Kaplowitz

morning. Good

lower but any think did significant forward? that some APT the obviously, at from you this on I tailwind us to focused from a give APT, is color So had on know But likely quarter record segment of alignment on done sales. that you've could you've how margin APT Memcor. tailwind in you the higher out more about perspective going cost

Ben Stas

sure. Yes,

also team actions a post-Memcor their post-Memcor also certainly done part streamlining footprint contributed footprint actions The but of and the improving sets effectiveness mentioned Memcor of to then, lot of that operational has APT up well that. business. optimization -- overall really we us actions a those job for And its that also, great aspects we've a of that the future. was But and taken the So that.

So of of But, really also bode also related mix, and impact execution. continued can well -- a and to that long the term, They that taken business APT it for these profitability right, improved by it APT. majority was actions quarter-to-quarter. has should of lot the better the actions

Andy Kaplowitz

mentioned to Maybe And are you a difficulty can maybe into staffing us fuel their business, give about little and industrial now, you faster COVID, a you the continues more that color you're the seeing growth. more given to customers, do could see doing customers that you evolution maybe what have transition outsourcing to what wastewater with transition?

Ron Keating

earlier are ultra-pure focus us that mentioned a is customers spoke And providing more water improvement around over actually product see stretched on little as and to to that or And we want you in it's a coming not water. contracts the time, to of service, adoption they core I call. on as sales they're impact, something they're out having do because part rate that. Yes, Ben seeing are are their see, their in, COVID actually producing and providing term an we that's earlier, taking applications, competency, on which the longer a bit an own capital outsource in -- to relying

favorable. industrial about seeing for the recycling, and in quite very us, it's gain gain and continue positive growth. space, that recycle it's to been of momentum reuse So we're Even speaking in my wastewater opening remarks,

foreseeable to a what to future. doing sustainability into marketplace going the provide and need Companies be market sustainable the they growth are that's think more I do to for to company be themselves. a

ESG, doing our thinking on saying, of We steady, liquid recycle the bring to are you're are repeatable right the going and we our term, revenue. to that customers from about reuse, companies is very enable our sustainability for to ultimately environment, minimize actually handprint that focused that partner with discharge, When frankly, in, very treatment, we're front-end Evoqua, back-end. and inside right drive solutions long make let's are sure and the let's and what's the very

time exciting So grow. I to it's we'll And in marketplace. that see think an continue the

Andy Kaplowitz

municipal we Just calendar mean, forward. pretty on when are one me, new like, any budgets, start me, you give? you're to seems for municipal, Anything color going but I need that like more there you're spending year, quick looks the one spend, tell customers bullish seeing they you'd as more

Ron Keating

that pretty our drinking And see Yes, being we contaminant I around of one which Andy, stay what spoke municipal we highlighted it's emerging the you on and market's you're treatment. seeing, it. green is and that as one bullish water, around, this think reasons

etc. PFAS, microplastics, So

take North doing is have a spec. in projects are such massive because rehab wastewater that customers for inside the systems, And doing had what side, and with very in On little work. that, history We've large do they're a sure retrofit actually operating long to rehab at their of have they installations the expansions. we team bit brings they area, of going not things, retrofit some site phone, in -- systems wastewater on we're us pretty on American actually look wastewater They're highlight, some making it, and out through this taking we at of done the need glasses at the systems. may to those, can people on with difficulty remarkable rehab where be be but COVID of on be our this getting has can engineers of or and electronic so at look can a our replacement some it, point

how little of norm. and and around new retrofit the creative in rehab getting some we're And municipal see on what wastewater you about So bit bullishness of stuff. to that's the operate the a

Andy Kaplowitz

it. Thank Appreciate you.

Operator

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

Brian Lee

a out the that is to That taking for quickly you call thanks is questions. no representing divestiture any correct? just couple There's you're here impacts the Maybe where lapping And Memcor, other the would there? [indiscernible]. for are be Hey,, then, fully QX. quarter on that real there first guidance willing

Ben Stas

it's Memcor. No, only

Brian Lee

to another in project-heavy is fair a a here? way, margin where earlier, a and we see the which be made on down great. microelectronics, QX Okay, mix APT about to Is it QX bit ISS being you and And for ISS, mix question then, holding a in similar guidance comment response out weaker mostly so I that's driving that coming margins that that basis. into think for may trend is year-on-year versus assume up better QX of a that

Ben Stas

Yes.

Brian Lee

Okay. you most set to have And as relation then, in cost exposure, where inflation, to earlier question, you us can level think again commodities Ben, I the and commodity-wise.

current go-forward to starting think can are embedded see quantify And the be you impact just you about the outlook navigating in great. cost in that'd environment? then, you as what's If it, that Or already?

Ben Stas

Yes, sure.

the steel, commodities these are in terms larger have So that chemicals, impact. we plastics, of

Brian Lee

you the for do versus think embedding and you're what also for around Any seeing commentary outlook [ph]? quantification you is what real-time cost

Ron Keating

what's But Ben we prices, movements. getting from closer to had our that have XXXX, sure we back in we our quotes chain in through loop we're I'll our question to than close as team, quantification will real-time this. fact, had. to on earlier get commodity lot connected got making customers, with let with an I that very them, organization speak been these we've And focused we suppliers, we we're go supply is happening a watching real-time say on as

doing so, are. quoting quotes the in, against time locking we're amount the we're And of longer limiting term as also that, we're but quotes,

feel felt slightly we as favorable. price we through So neutral, will be pretty the like And at the quarter. first cost, looked good year,

Ben Stas

move, this closely. very time, we favorable, it what on other. think we're based in market it's the commodities slightly at fast, monitoring time, point think neutral, I in point this one again, it's a see move way can that or can But I at

price are I and we make prepared for on for cost based pricing our staying neutral actions, at also very disciplined what to slightly would respond are accordingly. this sense to think, moment, us. in year We the But favorable see

Brian Lee

price one, next to maybe contemplated respect that taken know here so? actions, there Okay, you've the I in actions in any are or the month already, early with year, any just last price or it's

Ron Keating

We actions our typically, have, will actually, contracts remember around may through taken we you our services. annual thing we've contracts, and the price One do that that already is year. continue to

contracts industry gives we an that our we long-term see So right commodity on see we setting to price renewals one opportunity services. move, commodities as live movements, year because the us it's typically actions where take aren't

Operator

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

Unidentified Analyst

is This basically, where get you ramp push for Fransisco [ph] morning. a to your here? starts margin tipping again, there revenue from to Joe. up I outlook when is point wanted Good to on ISS, may the is begin to that think on service going materially be higher

Ben Stas

access, we we maintenance. refining, also have a again, some lot have delayed think, of we I markets, like they've some and as their annual some challenges the challenges, where mentioned in have, site Yes, in the earlier, of comps half, first end we COVID of tough

rollout, lot COVID. So, hopefully of this year we the vaccine, depends effectiveness, second don't have of on half it a

viruses COVID-neutral second ISS. comps, abate for the have the successful, see better for a the you if we etc. of second this should year. And hopefully access half We will, half and of some issues,

Ron Keating

to beginning going with What back the big in in marine would next from opportunities outlet we micro a that ISS I is with can typically the flow refining gives of side but XX, American access that that little better. been service think has in Slide markets for the up the of tough, what we're earlier glean year, more year, think it has open point one Francisco, year-over-year And And North about typically, the to half thing we that end and see and the the talked in. serving, pullback. been markets is I pretty play Ben you

Unidentified Analyst

Great, that's muni on up very expectations. helpful. follow And then, a quick just the

on do strong expectations? Do to some comments any good maybe the demand year? of the growth hold You the you rest through And pretty there. you budget have seen expect have

Ben Stas

it at XX, we installed made Yes, that base showed the of That's for both we North as of about do. systems in century the earlier are those inside a now. that that wastewater America reason [ph]. We you're we've than more feel since looking speaks providing I muni to we the Slide about comment good been and an green, products have

one So, it started late our lines. on product of XXXXs

budgets retrofit still back we going investing and see to we're that's us. an don't plant. is we're So, rehab operator rehab where and have doing to make certainly at the of huge budgets They which the where installed retrofit municipal expand And fantastic out sure the for have they to for and specification and base, money, go operating the that capacity. they are

Unidentified Analyst

helpful. That's Thank you.

Operator

Your next from question comes the of line Berenberg. of Andrew Buscaglia

Andrew Buscaglia

talking I a a where your step over some Slide that that comps But that microelectronics? and think in accounts, general would back. maybe easy clarify, I year-over-year I comps entering taking we're in healthcare just on comp? of kind in seeing industrial light refining even you you're you're guys. kind can difficult areas of XX, this some COVID point. Everything's the from But similar at of kind had get of and Hey, there picked clarification that's about

Ron Keating

-- impact back pretty that robust. if February -- I this not What expected a Andrew, real at you we're us. made QX is until happen did the for and were earlier our look on January hit March Yes. last demand year's I'll again quickly. comment and and really calling COVID out QX --

lap now the the was we're year, the in January is quarter only of second it. month and or really March quarter last only impacted through actually February, coming we'll to Compared the when COVID-impacted quarter This by that. So, months.

Andrew Buscaglia

just impact. it's one-month so a Okay,

Okay.

Ron Keating

Yes.

Andrew Buscaglia

that's Thank you. it. right, All

Ron Keating

Thanks.

Operator

line Your from next comes of question Price Raymond Graham a of James.

Graham Price

This is on Graham morning. for good Molchanov. Hey, Pavel Price,

a question. Just on prior following up

of water shortfall drinking these there's tax You and mentioned because But with growth in seen invest the revenues slides that days. recession, areas. munis both concern to been municipal some wastewater in the that are

of to how those things. to and wondering about how that reconcile sort kind two of Just think

Ron Keating

based what order demand the in on is second Graham, on be. Slide quarter this outlook again, our activity Yes. in XX, once to we our expect

they're contaminant invest point to driven one we're seeing water, So called emerging to having the municipal that that I municipal even on California, XXXX. got that a challenges order, in, drinking slide PFAS the out contracted in of that's we and by

water. some happen seeing we're So, around that drinking of

wastewater install and have On some side, rehab the municipal retrofit is been against quite there in have the wastewater we that the base for that it systems time.

is that we're has gives replacing filtration, are good many, types make base there and Evoqua et over going of we're able scrapers, but the capital and on budget constraint something on municipalities that's the sure and they're those sure that where because opportunity design rich generally had aftermarket different us that not operating us to because years, does that strengths So, well install that when that's And making to at spending just back expansion they're chain many capacity. of declines. replacing connected really a come, cetera,

Graham Price

Congress then package. follow the stimulus And you. in Thank quickly lot infrastructure it. to my portion of up. COVID Got for at provide a least for There's appetite clearly a of next the

relates your will on as to role water thoughts wondering what it play? maybe, Just And especially PFAS then cleanup.

Ron Keating

Yes.

water is energy going been we've role going effort transmission of fair on they're in like to pretty of the around We to spending be amount where involved the what more feel be. is water. a on that system So,

to the and industry homeowners the treatment municipalities into homes general. the in from the water getting actually municipal So, system, into

not we will continue the in be design is a meaningful a defined call retrofit it PFAS even going what do timeframe on, spending that We what treatment believe to system be of sure the to yet hazardous treatment is even in in are five in [ph], that's did at what the So, and seven-year PFAS and focus exception going the be they capacity are I operating fair us was. the limits CPA it as referred something transmission, we MCLs before haven't of to but to making though a to of that being amount the rehab they think think becomes they really because still at necessarily what occurring substance. with

Graham Price

for you. thank it That's Great, me.

Ron Keating

Certainly.

Operator

would like now concludes to his closing over call Keating back the turn our remarks. Ron That question-and-answer I period. to you. for Thank

Ron Keating

you for to like you, I'd It's all, first to to of close pleasure quarter. to say be today. So, joining a the thank us able the present

continue mindful pandemic on We quarter. in the be very happening what's with to the second

Thank three our health asserting the have that we're interest. customer earlier to called team members ultimately balance flexibility our into team and the supply and serve. needs. service we safe you focus base making I their and improve. members, you the and We our our to providing customer I just continue execute on and base that I like would And safety priorities that's like that safely Operator. and to sure I forward continuity speaking for the of again to are marketplace you then of sheet ensuring quarter. capabilities to hope out for to continuing company's satisfying, next providing you, I thank fantastic stay with all your operating the we thank would look to

Operator

earnings conference Technologies Water XXXX quarter Evoqua first in participating Thank the you call. for

You disconnect. now may

Evoqua Water Technologies (AQUA) 2 Feb 212021 Q1 Earnings call transcript