AQUA - Earnings call transcript Q2 2022 | Evoqua Water Technologies Corp

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Operator

Hello, and welcome to the Evoqua Water Technologies Second Quarter 2022 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 to 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

shortages forward-looking XXXX conference on Thank our the materially prepared statements markets, After our well as you, President Executive to year call quarter Vice to call COVID-XX the us differ integration and remarks, the for from results. challenges, call of Brittany. Thanks XXXX quarter and expectations, related questions. and relating and statements statements, and Chief to expectations. everyone we’ll review as may for Chief labor Executive business, fiscal President strategy including opportunities, demand our and the open pandemic. Ben pipeline, general Ron outlook order macroeconomic and Cor call third our ongoing in performance results our are impact of today’s joining includes Officer; chain Mar today’s financial end conditions, This Keating, Participating Stas, second our future Actual Officer. to pipeline, growth supply acquisition inflation, Financial full

to the archived call disclosed Means the call Replays is XXh. this of our Information For turn posted call, to I’d certain refer on Evoqua, release, next full On which a company’s also to the filings Evoqua’s we’ll on the like year, with via in measures. call website. now available for Relations to respect Relations information conference call September which will risk press website. to to over Ron? Investor of measures this days. described or the our specified, refer non-GAAP which was therein. access to financial With at including that, to conference on the obtained fiscal Ron. discuss measures factors additional SEC on presentation included this appendix please financial XX Investor conference in the such call, year webcast were Unless non-GAAP be be this slides for can this year references and ends otherwise

Ron Keating

and Thank slide appreciate and our strong to expanded thank I points We growth us. outlook. turn organic quarter was and to provide had approximately organic interest XX% you, Evoqua. joining I'm of margin Dan another margin basis expansion. in you pleased insight Please into three. results year-over-year. adjusted EBITDA And for and XX your Overall up growth

more XX%, We year-over-year as we our stronger capital about speak by remains availability is demand to strong and aftermarket, inflationary Digitally-enabled diversification and I Market demand well will continues markets, grew above year-over-year ratio up see and and sciences life strength this and are service. to visibility, ISS We up Navigating X% pressures pleased solid water sequentially. as that a organization. grow, and organic will see and make challenges almost demand. regions later are dynamic time book-to-bill slide. today. microelectronics, and resilient and outsourced this broad growth including to managing and Supply growth and beverage. XX% on we one. double-digit are well labor multiple most of lines, chain Evoqua more revenues a continue material across food backlog across product capital end across see

order We teams and this We in capital working jump well growth. have is integration completed our strong progress. track, organic together. Cor, the on first very pleased in did support The are quarter initial of a working revenue see with and the we're Mar our with quarter and net

cash nice Evoqua for our Excluding capital opportunities Mar ratio sales net future working generation. capital Cor, brought to and would have been XX.X%. working significant Cor Mar provides assets

on is a delivering liquidity cash strong generation. slide company focused flow on and Please four. focused water balance turn remains to results. strong, Our financial are Evoqua and technology sheet we performance-driven

you delivered past several results As six years. metrics the these across over see, can we've outstanding key

We talented and complex focused focused availability, to focused water to profitable and strategy. our we we're proud four war remains world's of made on growth. execution. notable team the We're demonstrate problems, lead on seamlessly of and model most in solving and turn of the highlights several actions slide actions Please Ukraine. This the labor to some challenging and the taking while dedicated strength progress levels, macroeconomic macro supply The business the visibility, slide challenges; executing driving that have on we our our have a chain five. our serve remain environment daily but material availability, customers, results

as insight have order challenges -- no to demand providing also chain simple them Supply performance. are expect into price and and market we for and are some fixes no well We cost availability backlog, time. as remain material

Our on customer in over-communicating schedules as actions, team has to nimble responding been delivery issues expectations. and daily well as focused mitigating against

on our supply market. Additionally, in the they and impacts we're COVID-XX the closely monitoring chain have China lockdowns may China and

in grew single several digits Labor business we've China challenges double-digit and organization. from the is quarter, availability antigen Our talent confronting a are this which over last every decline growth the quarters. the experienced almost

recruiting, We developing our team. in actively retaining and are engaged

quarters quickly tremendous are implemented on have site several Digital been pleased connectivity several over double-digits in our and that seeing margin see providing digitally-enabled positive virtually training, programs partnerships, We university markets. grow skills benefits benefits. productivity provides payback such internal and initiatives labor partnerships, school to results. trade as and past with tight customers and development the sales we We've being

impact operations. While to There minimal conflict, Ukraine markets we sales broader hope on direct long implications been and lasting. the end quick be Evoqua the for the to a has may

and rise well-positioned markets prices. seeing order Overall energy we impacted the the demand grow. and our market remains chain is disruptions resulting supply cost and we growing. strong, in and with are opportunities, We're believe book growth to by steel we're attractive However, multiple

has very done actions fleet a team this market. have our price/cost and terrific has been steel year-to-date. job challenging, Our effective as been managing have positive but pricing costs been Freight, dynamic

performance positive organic revenue an a performance, metrics. especially since growth the discussed year. in constraints This delivering have on previous Organic are pleased for the revenues Two turn XX% while have as shows placed our full actions X% both to XXXX. key the the considering take targets price/cost margin. of financial increased slide has basis by our LTM expectation and since when XXXX Please points to of graph end slide. EBITDA for a long-term X% adjusted business with to EBITDA six. ratio continue margin the We're grown We and X%, XX

focused our as continuing organic side achieve target. us strategic to to tuck-in levers business, profitably the right-hand slide, highlighted M&A well of our the on pursue multiple growing as while growth EBITDA help margin opportunities We're organic On we've targets. adjusted

order XXXX. strong markets Frontier to industries. comps to in flat the seasonal and slide aquatics order end to end orders wastewater on outlook to are across This second order markets. in the beverage improving The We quarter from markets, and a very Expected demand sciences, capacity of additional refining the announce last The end anticipate expect quarter strong chart Please demand year power light prior life we power from slight refining most third and order year's third last based year. prior the strong solid. in in rate. see quarter third are the showing We the demand end quarter. across most deferral expected sectors markets services fiscal demand decline including year's across general are growth growth strong microelectronics, both and Municipal our both quarter in to demand demand. expect orders and half refinery this food third are a driving second with the third end quarter of due seven. underlying of acquisitions by due market to half represents Overall, from turnaround compared to our order markets and of turn

all conversion blue We is fuels. are energy in potentially reductions. also COX experience conversion green energy Evoqua's challenges of renewable supports the and the involved and and There Please food investments to to sources energy market generation chain water refining There and in legacy underway natural sources eight. global varying developing where are traditional made in wastewater supply feedstock focused slide order fuels, is order and our moves a and delays. turn for visibility on fit in transition renewable cleaner treatment multiple as process extents, many renewable limiting anticipate a biofuels. particularly and vertical markets of are being downstream hydrogen. renewable and gas processing them to Evoqua applications natural alternative creating

most goals and while the Our water produce their carbon technologies wastewater streams, them energy. renewable to intensity a also customers allow difficult treat source our of of organic portfolio achieve to voice helping

refinery water investments. plays a vital role process providing water new also core for utility greenfield Our portfolio makeup in

technologies to leading nine. our Additionally, Ionpure build-out future our role the today of a play within within will investments the APT slide are and also and Anodes notable economy. hydrogen brands hydrogen Magneto Please turn in the segment Special

within our and look where footprint. impact our win we We are The we to Evoqua the Creating slide and sustainability have segment. a a sustainability ISS and very remove year further County and last report water date what our the their selected year's We details reporting. released XX. on accomplishments contract. sustainability to systems highlights impact known team GRI ahead. to have matured the thoughtful highlights future. of handprint The path handprint SASB, to report done on the fiscal Orange drinking forward both our in go from PFAS This utilize our enhancing District ongoing the provide standards to report to reflection on service from of also want core PFAS The our past Earth customer pleased year Day this to and to reducing service Water XXXX two-year was in April report

a water year for for and Austin, Samsung their Semiconductor a will their treat Texas commitment plant. Sustainability majority drinking conservation as was Evoqua's district's the to the residents. recognized Austin of this reuse We million of Award water X.X winner

at team the to over and winners Evoqua celebration sustainability on past Sustainability honored like award now a would the I to Samsung Earth with opening NYSE's Bell Ben. turn Day. call ceremony Our

Benedict Stas

turn Ron. you, Thank Please XX. to slide

Organic quarter, increase regions saw product capital most approximately by growth versus well For services, $XXX revenues reported XX%, volume prior broad-based across up to million. and the and realization. as the approximately as lines second revenues growth We and grew driven year. were aftermarket revenues price XX% in

XX.X%, of an to mix and points, XX. contributed margin strong XX% improved an Second for volume, EBITDA price Please increase slide to million quarter $XX cost profitability. favorable basis increased to XX of overall turn adjusted

driven to continues strategy. be end M&A all price approximately sciences an Our revenues Services, Integrated revenues second and quarter revenues XX% XX%, than Services segment, million. Organic by volume up aftermarket realization. to $XXX driven & grew more were food and Capital markets. part capital Solutions the year. beverage and our grew microelectronics, by life were important rates growth prior versus sales double-digit of and

progress and We initial pleased Cor synergies integration. on track are to after are The report good integration the on quarter. Mar one

XX Adjusted Our the is approximately higher in Digitally-enabled grew for outsourced cost, the of volume, prior slide Mar and XX. increased Mar due XX% Adjusted year. of pipeline was water Cor cost EBITDA to versus XX.X%, Please primarily quarter Cor. strong impacted $XX to the inflationary and price and the quarter prior for margins by capital the to EBITDA acquisition million favorable project from growing. year revenues points acquisition XX% the down increases basis turn

see to year-over-year backlog. ISS continue strong growth We in

up approximately backlog from capital. and being Cor million XX% March over with quarter with million Mar $XX the Second growth or coming $XX as backlog XX, services. quarter, of of prior approximately was million added capital both $XX

Our to be across pipeline markets. multiple with continues robust, opportunities end

one see fiscal to book-to-bill expect XXXX. above ratio throughout remain We our

operational revenues in million mentioned, create As half levels book, order of XX. second visibility mix. pipeline, benefiting supplier X%, XX. to Product strong second Technologies' slide APAC, the the Revenues volume for to the Please potential inventory and were chain are approximately constraints $XX flat our we second growth. favorable grew inflationary margin and $XXX quarter America volume variances X%. $XX EBITDA up turn in slightly. and or while Organic year-over-year EBITDA nearly for Adjusted at closely and Please quarter supply revenues turn and to driven from delays increased due costs. shipment higher North monitoring million, the declined million, slide XX.X% Applied Ron was Adjusted to EMEA by year. lead-times increased X%

and growth of product core new markets. expands end long-term that share portfolio APT's in market developed One pursue organic our has technology innovative gains and to initiatives

TOC. acquired We UV Based VT range application lines in One production The UV number total as carbon less defects smaller VX micro the the part manufacturing chip line next-generation low and system combines or reduction reduce to the processes lower processes, the reduce pressure UV are ultra-pure footprint in has water TOC in highlight our of pleased and a the the and reduction processes UVs, of this TOC. improved equipment power TOC, industry. system, to the organic to off efficiency the for efficiency. use of is producing manufacturing the of

strong approximately seeing across and opportunities turn The treatment revenues. X.X% included global the Capital systems, million aftermarket wastewater recurring abroad the sales. was outsourced water, ISS market, North as has our for reuse. in XX. America Please $XX are well and primarily of offering especially a spending, We systems to for in is quarter or microelectronics, build in slide also approximately as

net of LTM working capital quarter Second sales. XX.X% was

excluding of As to Ron approximately capital Cor. the mentioned, was sales our net XX.X% working impact Mar

organic strong revenue, have As accounts of seen we contract inventory. a in result increases receivable, and assets our

in of Mar to expect see cash order chain business leverage anticipate support I working the over of Year-to-date, versus on rates improvements year. indicated capital conversion low-teens varying prior mentioned, in percentage help supply year-to-date given to range amounts as to million working have the we some capital operating $XX in investments the we adjusted backlog, cash Adjusted XX. Operating focus to projects flow mitigate to the Cor's we net basis. time integrate as to higher to in inventory and was free XX% million Please was be long-term, was requirements. $XX capital of cash turn -- uncertainties. capital, slide impacted working been a net QX the income may flow have Also, and flow in net by have as over a We could we strong growing sales previously past, working capabilities.

of Our adjusted times net leverage EBITDA. ratio finished X.X at

target results over within our leverage run Ron expected As well key of the earlier, of Cor maintaining annualized the remains a times, X.X within end is leverage of on Mar a targeted impact priority. long as approximately basis, sheet range our strong range, our QX forma with with a mentioned balance pro net the

Our the XX of back now over improvement I quarter weighted Ron? X.X%, year. like to the second to basis average turn prior Ron. an for cost the debt of approximately was points over would call approximately

Ron Keating

growth and product outstanding most the slide turn pleased strong, both XX. segments, We with across broad-based organic Thanks key remained business. Ben. demand to a metrics most had and Please strong the with quarter of Market results are revenue across we regions lines.

and our grow. Our pipeline continues remains robust to backlog

market chain are labor and and challenges potential and material monitoring rising the closely We're to cost managing We and order supply availability conversion. impacts macroeconomic backlog with through a constraints. and dynamic

pleased positive We full working price/cost positive we're to a cost again in and for are have achieve year. the quarter, to price the ratio second

model. contribution outsourced its to grow continue highly and benefit our to business through ISS the from water We recurring revenue to segment

the by million Cor of integration. low-end are respectively. a year to our business $X We successful ranges to off $XX the and and pleased Mar of as and and increasing adjusted full by we million, part have EBITDA outlook raising a revenue are great In Evoqua, start we're closing, a the

revenue a EBITDA million, We billion and in range adjusted $X.XX billion year to and $X.XX expect $XXX to be respectively. to $XXX of million full

call the for consistent in third quarter, I quarters will questions. adjusted past open be XX%, to XX For approximately as which slide with percentage on expect now is outlook, of the as EBITDA the the we shown full a appendix. year third

Operator

RBC first [Operator Markets. take Instructions] Deane Dray our And we Capital question with will from

Your line is now open.

Deane Dray

morning, you. everyone. Thank Good

Ron Keating

Deane. morning, Good

Benedict Stas

Good morning, Deane.

Deane Dray

just for some one. can market, here, in positive second you the did how delays. staying sales sales earnings less these momentum that Hey, working potential kind capital a shipment take half. of Thanks. price/cost and and positive them? services. of tough and Ron, on where But visibility start book-to-bill But highlight a lot links like effects above your delays, shipment I weakest us are maybe we know And with potential visibility through the directional you're

Ron Keating

Deane. better future I've it and does with about outsourced the the We're of I great in our of And mean, balanced capital us appreciate gives Deane. service the never the the backlog, seen confidence Thanks back obviously, the to I primarily other guide. what of some being those we've half our And with around end what's the holds. felt affect giving we for happen water markets, issues. areas. chain and all, say product question. in shipments is to just and year, expansions like to continues areas the the grow of you even grow that only highlighted, some have, But the in I'd We're as the opportunities what we momentum, supply installations need still, to service business. first

confidence And availability, we're microelectronic with on available of being so, just have we impacts shutdown, and But balanced challenges the got as coming. China chain lot what's well. a on supply chip

cautious being about we're that. So,

Deane Dray

I P&L. emphasis can how -- upper wanted water on That's broadly sustainability these first initiatives just these it relates to all who implies have how and one just that right-hand use page about six, for we're need lowered the through That's that? to been multiple real a to showing and you right growth And timing, into take first we the us and report to helpful. opportunities Thanks. water what Can growth across reading and the all while. here. managed. that's this interesting you But their the are list you go that's seeing And back I look talk initiatives. companies being the sales efforts expand think got initiatives lot organic have up familiar It's side. of conservation a They the on

Ron Keating

the right water slide about water on I conservation, ESG the And Yeah. around every absolutely the order mind, recycled slides and is mean, and reuse, being great It ultimately, having. question. front in in the and it focus with what's thinking environment end seven doing initiatives the It's activity see conservation into sustainability. for markets company's and a what highlights whole center Deane, we're rate we

So, a investing and lot in. of you see and it well if where sciences, reflect operate industrial what's you life with on very the we fits companies back recycling reuse, happening core markets being that very on focused in more microelectronics,

to that that's QX order the to, QX top will XXXX. activity on actually very robust of So, see anticipate in activity what of highlights lead and we that order in

as water about So, in we we markets forward things is are feeling end drop the that's the one all down. helping look strong very of of conservation

Deane Dray

really to And quick Cor, Ben. a them for That’s us right. to just hear. they to benchmark? how where Evoqua's do good take working on And All one capital you Mar sales? get soon can just On the stand

Benedict Stas

Thank Deane. you. question, Great Yeah.

So, of saw came not high. what they're I I Evoqua. first It's atypical when to

that they're XX% So, range. in

like And we and processes, our to cetera. on et systems would it end-to-end integrate management, our that them we allows management, so, get -- receivables inventory into once

before to we will first little And that like it's them to during going get capital immediately, what to them but a bit of can cash time. then our And we supply just fruit some difficult the Cor. down we're capital But this advantage of integration of working chain. make working see down a are get on over closer we the paid time obviously, is taking working time get to of on we take benefits low-hanging to that Mar that real we that get would systems, Evoqua care finish the through There's and traditionally step effectively customers integration, believe and out very down. certainly we take level. we'll be But the so, that's for at our the them we of sure reduces what pull lot to

Deane Dray

Yeah. Thank you. like That great a sounds opportunity.

Operator

question from We Jones Nathan will take next with Stifel. our

is open. Your line

Nathan Jones

Good morning, everyone.

Ron Keating

Good morning, Nathan.

Benedict Stas

Nathan. morning, Good

Nathan Jones

ask in guidance I XX% this got averaged your for the than math half revenue The delays Is to the in really potentially extra shipments a I'm about in XX% over years, the your little the caution revenue revenue. last be some half the just and one you first another than guidance the that first half Mar second did of second and bit range. those X% revenue to going capital fourth? around for has to higher half is Cor. and higher

Ron Keating

needed I forward. to lot we're make tied guide It is, of we going some of giving Nathan. availability for want to It's even not ship. for are ship. a to we're mean, basically, capital being a to And it's A that be the ready for as customer and components sure able our to shipments able of site installs. us what balancing to availability it's be

you -- on to rest run doing managing and we with and be with to into infrastructure more conversion the managing our for we where a going because be the the just of components install. to it's is customers being what So, need to It's is the getting is when ready site team challenges rate not were little that’s a remarkable job, with having our approval, that able complete projects. us done they're they that need the things actually clarity

Operator

take next And from will Mike Baird. we Halloran our from question

open. Your line is

Michael Halloran

Good morning, everyone.

delays, you conversion just you still the customers that would talked an what one? just understanding strategy, Do and here environment, are continues of today in not than engaged because just timing there? is on the lot iterative a you're on Or seeing So, do positive going more complications have be about challenges are to strategy backlog progression this to the think cetera. digital -- that labor a a think et of we've the they year ago out is be been

Ron Keating

even in in Mike, -- opening my comment Yeah. digitally honestly, remarks, a payback. that And on I labor virtually I pretty would a more market tight and quick in customers the engaged connected creates being much made site us. are

of digital our you'll the just delivering prop customers, what what three able through. actually challenge is value what that now four think the we're years take. to And we've So, strategy rolled the I wind they're making up with to out past sure coming over having absolutely deployment to our with of is

us preparing being is to it to site. put site at ready And on with so, the their they're prop their for them be or value that least just with there able transition

Michael Halloran

you've then right like recently the moves And leverage if pipeline capital internally? ability some all initiatives external aggressive with transactions Thanks made what balancing of your you you have are side, thinking the and targeted and just obviously, for How that range the come looks nice priority about here. be that. kind on to

Ron Keating

acquisitions Yeah. acquisition have very robust We opportunities. still and tuck-in of a funnel

executing feel so, good We is. that. where the on And sheet about balance we're it

Our capital do that. capability continuing deployment availability and to we're on execute to it, and

Michael Halloran

Appreciate it. time. the Thanks for

Ron Keating

Thanks.

Operator

We Buscaglia will our Berenberg. Andrew take next from question with

line Your is open.

Andrew Buscaglia

Morning, guys.

you today, about terms a hoping Just terms there of for of tracking? potential in the bigger can some horizon talk you're catalyst eyes area. data but bit specifically. got recorded, And anything little drivers more in you in could that your I with know that on weather some of where increased is points spending -- you at

Ron Keating

that in it's typically the pipelines we're north applications I we going about are next months. third million, Yeah. consistent than that they're to, the actually moving to final seen we coming the after. the districts sustainability Andrew, in I it where water was prior that on of continues and has we've on MCLs highlighted faster of be received. level with things what I fairly that and the where be quarters are but XX we've be one treating going that of $XXX would will at track the anticipate say, to what still And others, slide we certain as PFAS stay continuing think, mean to a it waiting winning the to set

Andrew Buscaglia

conversion, what around, what being products I level the you and or terms But lot like that to it. conservatism other have, -- backlog be know chain pricing COVID And you delays in is, not of questions think I way. that, -- out of relative yeah, guess back this issues of in do the finally or expect got more half a guidance. of any in you question trying I that’s converting wouldn't guess, is your given ISS I then, around point, why deliver at the to that Got the the manage Okay. to conservatism I secondly, your just reiterated on on supply able guess,

Ron Keating

I for on Nathan's us customers actually ready think, and Comment around made question, deliver. it's earlier to I being

our bit site that having now operation site we've So, And deliver. as it ready we capabilities, little it's us having want larger able or -- better the our is to own because getting the manage that system to We're our that a complete COVID comment systems backlog? us it products. lot delays, their site goes into. putting customer site. we a access on develop water a to than you can in on And for that had was more historically do and on customers than actually the of to access much that to components get actually Ben, is have

Benedict Stas

Andrew, to you ourselves we've see working can Yeah. prepared in capital, able our as to be deliver.

our And things potential on also a very not cetera, the our front, things our but that obviously, to the are in for front keep upside, for on. certain certain take control, there's, aren't Ron we control. potential for China eye measured we there as macro wanted that So, on there approach the reasons that just have talked et that macro to the such in are lockdowns, is about,

we sure balanced, very very upside. the try also are to And take potential ready make so, of advantage to but we

Andrew Buscaglia

it. Got

you, Thank Okay. guys.

Operator

Walsh We will Credit question take with from next our Suisse. John

Your line open. is

John Walsh

Hi. Good questions. morning and the thanks for taking

Ron Keating

Hi, John.

John Walsh

guess, I Hey, first, maybe just questioning. on up the line of following PFAS

manufacturers well water obviously districts. districts We've of installing to actually You've contaminant? as lot the they as and start packaging from they're some remove say products. treat seen Are to food systems, at PFAS going want a that you their demand conversations different chains as manufacturers with for a to it highlighted having water

Ron Keating

issue feel Yeah. going doing have they that’s John, we an have like where actually to have had conversations an with types that of with they're various different issue or coming they off-site. manufacturers

industrial that operators frankly, do because to water want moved make would in do but it though. -- going It's pretty some what's plant. testing water you'll drinking aquifers early they the system, this, in And much quickly that, They see oil wind see to their I that wells, up more think before say on cleaning districts it days. paying with as happened it's sure and they're So, to well. still it treat PFAS. actually have want their still for on The they to pretreatment. their I emerge gets because they're they water to in attention more and

John Walsh

Great. QX. in the you maybe confidence QX full language is the for working just being for highlighted you price/cost can looking more the year? in Do price? full five, here bit, the year. like positive looks positive a Or just have obviously, to achieve little you you the positive And unpackage It then, slide price/cost that and just price/cost need at getting

Ron Keating

we confidence have years watch we've got approach for a regularity, that We that had is off for deliver that's and pricing disciplined ratio the So, the commodities that very paying last a price/cost we've year. we several now. with will full positive

So, team that able operating drive that to they're the on price. execution the has delivered again,

that impact getting margins of see to we've the though, through. that sure the still have, challenges is on Some enough fall And had margin price we a well. making we're the little high as

Benedict Stas

Ron. Yes,

continue just very EBITDA we've look margins So to been inflationary during to our is expand unprecedented that we're margin, at times. able add to you if there -- proud these really

about of on adjust helped as that job terms for quarters, mix great by So, XX margin. has both year-to-date the the in But impact including price/cost, been the that and outsourced drag basis water. team net for if that's well you EBITDA strategy as of points our a

versus strategy proud price/cost to our impact cognizant that's also stay of so so that we're drag take just when -- out. we're on we there But a the price/cost, able impactful. be ahead on pretty expand but as if cost. to is margin, even shows the It with you price And associated overall

Ron Keating

EBITDA the these making times. comment a made, EBITDA but target which Yeah. during there, XX% the is and great And led being I delayed adjusted progress to of little John, progress, our in -- on that still

John Walsh

appreciate Yeah. the No, that's great. Really Thank questions. you. you taking

Ron Keating

Thank you.

Operator

We will next from with question take our Sachs. Lee Goldman Brian

Your open. line is

Brian Lee

guys. Hey, Thanks to moment. margin Maybe just on the for Good for that morning. questions. taking stay a topic

progression. implying or I XXXX. fiscal you're second of guidance, If are Speaking up versus I at margin half EBITDA from look the margins XX EBITDA basis XX think margins, roughly the points

I bit, This this guess, down quarter, was flat. was APT a

expansion margin they you expansion of get in the where margin half the to second exiting think kind year? get how two sort year-on-year So, of across should about the that segments? both we year-on-year Can

Benedict Stas

And reflect Well, opportunity. it's side, healthy earlier. But certainly cost in guide continue that as We place, about, tougher some want on -- a hopefully better well. measured customers, the does continue in count costs programs on approach including I to work to margins of the as too talked particularly up, work expansion, that, the this about. as can if half to have we be The be that price reasons macroeconomic talked call certainly, a mix supply we the provide as going tough at provide through water with continue the in will do difficult will of of to that good year on to That as rise that capital but outsourced area in with chain margin microelectronics well some the well. continue relief. second more we the our It's prices other do able point. it the and some the be constraints, we we to just to as provide should as do to for mentioned and the second half go you

Ron Keating

anticipate this we in a second And Cor we're bigger was latter of Mar in bit Mar which That comes facilities year. half Cor Brian, next really a the half from integration, the the year first the benefit the through integrating as drag of quarter. of

Benedict Stas

those help that we Mar will a we as their as and facilities, integrate should good improve That's point. Cor, margins well.

Brian Lee

quantify, will, are talking for some terms here are about anyway bit had we a that? and the a Great. a then, in signal just any if of of seeing or Or thinking but half? of the then, helpful. call, commentary in potential order conversion, the that be being trends seeing are weeks super I bit know And months? talked the to areas Okay. this that and what's you of actually in some discussions or around of what the more kind maybe conservatism around of And the sort of kind as the sort pause, to of prudent today? earlier Or sort reason shifts commentary about of into you're sort guys you delays That's where your you second the are on

Ron Keating

about made the about I will And a great the deliver. feel backlog in It's on, we've call. to in Yeah. just the and -- business. Brian, backlog. grow. right the portfolio it's continues the to at the better We out execute we're It right rolled we strategy. it backlog mix very the of what want of great which echo I'll the never comment felt is. beginning where We've The

us deliver that. very much comment So, customer the other we is made this strong really ourselves. tied is to for more availability to feel than I about And

that's we a of marching customer lot visibility. on ready. up, hold is time lines where bit have requested, delays less we're to the And side for little getting the are our that where not hitting path so And a requests we're and a we're just because thinking down

it's it's guidance one that that balanced giving. backlog back But confidence now whether later. reason a deliver robust you very is we're will quarter and that's been very So, can quarters a the this in that we've have it or half two strong. It's

Brian Lee

a guys. pass I on. Thanks it Okay. will lot

Ron Keating

Thanks Brian.

Operator

take Molchanov Pavel next with from question James. We'll Raymond our

open. Your line is

Pavel Molchanov

there Thanks for M&A remaining not taking controlling did interest the own you the but Frontier previously situations not A stake, few other the already. Water you ago, any weeks that own where in historical Are acquired XXX%. you questions.

Ron Keating

JV that needed No, only up. Pavel, really we the that clean was have that had with one we to a

Benedict Stas

that also we should we in JV, say, up TWO quarter, also QX. -- cleaned QX, the this And I

forward the are on going TWO on QX fully are both and owned minority by interest Frontier effectively So, Evoqua. now

Pavel Molchanov

Okay. Understood. M&A. broadly And more about then,

of tuck-ins, second opportunities. back looking on the acquisition like of obviously, large to years bolt-on that So, ever. COVID? Cor, size pipeline What's your Kind two compared Mar

Ron Keating

expanding more is to on we expect I we think, announcing acquisitions additional to slide year, the my happen. anticipate back the in tuck-in half that It's even And a we're highlighted, the that do say the absolutely would the even I that pipeline I is pipeline one Yeah. and than actually, seeing. in actually of that's grow. that continuing of actionability expanding. comments

Benedict Stas

add, Yeah. are these as chain Pavel, or the players supply well. hurting initiatives supply to or just issues chain smaller

with strong very these this well smaller in chain, really of attractive ability manage through is So players supply a difficult to our lot environment. to Evoqua this

Pavel Molchanov

you much guys. Thank it. very Got

Benedict Stas

Thanks.

Operator

next take our question Joe from Giordano with We Cowen. will

Your line is open.

Joseph Giordano

Hey, guys. morning. Good

Ron Keating

Good morning. Joe. Hey,

Benedict Stas

Joe. Good morning,

Joseph Giordano

were slides infrastructure on things more think So, couple and was is about like This like deal I through. front the that. the last there of quarters, of there mind as going it

funds you're seeing you Just starting see from what that there. curious far? kind unlock to package so of Are

Ron Keating

this got the one and first to Infrastructure We've pipeline flow, and I activity really But half are that year. of municipal seven, we'll the of go the funds this a the slide in quarter. to to wastewater back that nice activity have think a on on towards reasons half Act. actually, lot you tied starting turned Joe, order XXXX the dollar start of green more there We see, that's we're across We'll And -- year. next order of calendar actual in of latter the see see flows half XXXX. it will

Joseph Giordano

them. when ready they are to but sense. makes in things What's to that are that not And like the like your structure customers on, at? to available backlog? have market? And the in when do That a of is reprice Like Yeah. take deliver you're things, are to you inherent agreements the service booked your to ready you when point have -- what's reprice ability that place, the to cost kind of lot stuff Ron,

Ron Keating

Yeah.

we pricing can majority and do commitments of what supply our built don't based are. actually on on have move chain have from we the costs moves our we the commodity the our based suppliers that So, into back-to-back contracts that if

So that's there.

delays looking also are orders. having as We change customer at signed and

I still asset are a that's delivering bit offset. our to go most not and tied basis. And incurring get and annual contracts as a sure you'll of a in not the majority build we to customers That's are benefit key indexes in different into we multiyear our we -- out daily can we're one of analysis are cost contracts of things that and of on by rolling different the we and holding the And around So, flexible in. and to kind you typically cases, little pricing indicators we service contracts, normal contracts, in that think able built remember, a actually making service reprice forward. model obviously, annual service of in those on the then, price/cost cases to the

Joseph Giordano

this is go of this stuff to like prices is be back to customer like price, Like stuff contractual clear, went having you're that's to and mechanical, just renegotiate But most the and not like up. right?

of accept in kind and you conversion that's So, around more it. not charging we much

Ron Keating

is That correct.

Joseph Giordano

Great. Thank you.

Ron Keating

you. Thank Yeah.

Operator

from question we follow-up Nathan Stifel. take And with will Jones a

open. is line Your

Nathan Jones

morning, Good everyone.

Yes, [indiscernible]. I think work I need labor. first question on to A I do.

on You biggest service are in service corporate? guy, more in talked Where the they labor? the issues about labor shortages. and around you manufacturing, Are labor the from seeing availability inflation

Ron Keating

Yeah.

strain manufacturing is, team in primarily has certainly the job team service difficult that difficult that really the service service Nathan, done biggest that, drivers, techs, on rank a else. And managing it guys everybody Our but a would find them and our but against nice I in The we plants. order. just is like feel

Nathan Jones

probably who a shrink to had is increase customers that one and penetration? I reuse water. discussion there underway of you I your an Is order of -- April sites R&D is that space conference guess big about an people takes be one had size question. I went from of a to where amount pushback lot would the more in issue. look is this And on for of in And it to it of to put in reduced the footprint, there greenfield initiatives that recycling that

Ron Keating

technology that at. on our looking team that is constantly work We Yeah. innovation that’s and with something regularity

full have that we lot suite that we a have other is of companies of benefits a have don't water the technologies. treatment of One

is way looking front what water at all end. the the also able reduced, that being pretty we're able to at back recycle times. unique to And availability as in processed from to the technologies in on process So, create. and wastewater footprint bringing go to all fed That we're be in to

one reason that. One of [technical Frontier [technical we continue there's we system. that as to opportunities, treatment the we compact technologies difficulty] think difficulty] most additional look business. at But That's

Nathan Jones

follow-up. Great. Thanks my for taking

Ron Keating

Nathan. Thanks

Operator

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

Ron Keating

here expect on continuing say executing like interest important. the thank for strategy what long-term. I'd And of you Obviously, execute the would to we do and on the thanks is every that we impactful we kind Evoqua results to day. over for your that are again team deliver So, have to the focused we and and in

safe. thank for everyone So, quarter. interest, you your We'll be you next and talk to

Operator

Thank That quarter today's Evoqua Technologies call. conference you. XXXX second Water concludes earnings

and lines for you may in disconnect thank You Evoqua. your interest now

Evoqua Water Technologies (AQUA) 3 May 222022 Q2 Earnings call transcript