AQUA - Earnings call transcript Q3 2022 | Evoqua Water Technologies Corp

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Operator

Hello and welcome to the Evoqua Water Technologies Third Quarter 2022 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. After the speakers’ 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. to of call Investor like Brailer, to now President Vice Relations. would turn over the Dan I Please go ahead.

Dan Brailer

our and Participating forward-looking are; Thanks, open remarks, everyone Executive and third This results. Chief growth inflation, our long-term performance and questions. general call Officer; the to expectations. future Actual and to full labor today’s statements, for joining shortages cash Executive call financial targets, fourth After conference us call results our demand quarter strategy year XXXX from challenges, our for and Ben and Financial quarter fiscal expectations, XXXX order of conversion, to statements Vice and Officer. Keating, our we’ll outlook opportunities, President Ron today’s including order acquisition Stas, conditions. review on materially includes Chief integration relating call in President macroeconomic differ financial pipeline, recent our prepared end-markets, acquisitions, generation, pipeline, our may chain our supply

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

Ron Keating

to and joining interest and results and challenges. insights Market strong supply outlook. inflationary provide with results. and and I Thank you, the overall quarter, I’m appreciate for a thank chain your remains you despite our pressures robust, third Dan pleased I’m had us. pleased Evoqua and demand We

We’re times disruptions conversion our time. and lead tightly managing may our impact potential that any order

We turn continue to to a this Overall strong. quarter’s was X% organic very experience revenue Please approximately robust X. growth the in and Slide pipeline, growth quarter again was year-over-year. third order

aftermarket, as to diverse growth of growth as particularly across see service. all well broad-based diversification – capital organic product most across We’re and lines pleased regions,

of SAP integration Mar progress. quarter track pleased system growth price mentioned, growth positive remained EBITDA greater the Cor adjusted our acquisitions our revenue in job three was X.X. XX continuing pushing since team to continue We expanded We to great solid and is As to basis on XX-month margin by The Organic for working with on based see slides. and complete by is QX with X.X%. of we’re declined Adjusted but in about Ben conversion XX% were be discuss that a basis ratio X.X% completed second trailing points done and order be year-over-year items we QX The demand and the quarter Xst. for and expand remain end and book made price-cost on we’ve to a than the margin basis is XXXX. margin pleased down quarter, year-to-date. points robust year-to-date. to will XX by later the our has APT’s on January ISS with bill various the EBITDA

on we continue and strengthened, cash balance liquidity flow and sheet to Our focus generation.

free flow adjusted sequentially LTM QX. basis versus on Our an improved cash flow cash and operating

or Cash times. our sheet through and million to balance turn to investments X. stringent Water X.X be a whether the continues in ultrapure is improve while flow organic Slide debt an levels essential are production reducing consumption, $XXX to increased Please and supplies commercial industrial become and tuck-in to liquidity strain for further wastewater growth, leverage on improved of in more acquisitions, the to reduction. Our requiring diminishing Manufacturers purposes. daily for element fund water, priority vital net life, reuse to human has ratio water municipalities. protecting

market water our connected to trends the market. treatment service we drivers end-markets our water, remain ‘XX industry-leading more COVID technologies through and through – and resilient over generation. outsourced favorable, market make margin water our and aftermarket to growing the favorable cash Each this, be strong cycles. more with growing conditions. sales these resilient streams just highlight financial demand-constrained market of Organic organic growth, long-term. Evoqua’s of is clean expect complex, in FY This Because expect business slide making Digitally recurring in revenue. part a are As our adjusted and are XX% essential graphs pandemic and to highlights metrics becomes of flow due accessible. a with service free that resiliency the annually very strong and growth approximately normal and ‘XX unfavorable This up EBITDA cash few in we for key our resistant and long-term revenue

have positive ‘XX. price-cost FY an As in inflationary Intense absolute to basis. costs stated margins dilutive previously, been on we dollar remain

For approximately XX quarter. inflationary impacted in quarter, a improved second impact the XX the which basis EBITDA from point adjusted basis costs by points, margin

adjusted target we price-cost the We EBITDA expect of we and quarter. headwinds, continue fourth in robust pricing positive our Despite these with to processes margin. XX% remain maintain long-term

generation. focused cash is team and consistent strong management on Our driving

foundation cash profitable attractive recurring Our an stable, of generation. revenue strong for provides and base

see well opportunities for and We time. working have over improvement additional managed capital

year’s cash prior fourth chart the free conversion we’ve fourth to an flow Slide years. activity and X. several adjusted Please XXX% over expected that target quarter. order our for compared This to continued higher basis LTM We or of end-market represents on quarter achieved by to turn

in particularly & quarters’ from QX Beverage, both in dynamics due Food last are shown, quarter outlet quarter most a to Light market last As orders expect year. strong end-markets, industries. strong General fourth Sciences, improving from & Microelectronics are see quarter showing and orders Refining orders year’s Expected very we across to Power fourth with decline Life favorable the across end-markets. prior fourth

the our and every executing the the labor We demand on well do fulfilling our Microelectronics team of has expect conversion on anticipate order market, At of chain positioned behalf customers. which creating potential We’re we for remain. proud end-markets delays challenges Evoqua, fiscal diverse employees we’re a our upturn for demand day. most remainder this of undergone XXXX. see supply in strong cyclical order of to expect we strong Overall, that of to across

high for As talent to continue and skilled are in we be pleased five spring. including end-market we this we quarters, in Renewable with Sciences, Beverage. team priority expand the in our quarter, a Please in acquisition end-markets for with the treatment highlight fall past to & the partnering ADI us Life wastewater we’ve Food, Energy, Microelectronics, recruitment turn particularly for since key Slide members, XXXX. Over company been highlighted to Food X. has HBCUs

and these gaining With are the product with line today’s in processed contaminants Digestion strength sanitizing applications. equipment. strict environment, our improved processing purity such been best-in-class High driven for manufacturing historically requires see multiple has Anaerobic to pleased and strong for as also treatment. high water traction We have for ADI Beverage wastewater water organic for regulatory need wastewater have applications, And treatment.

source wastewater portfolio renewable producing intensity of streams, energy. by the waste also to treat goals difficult achieve of allow Our carbon technologies a biogas, helping to most organic customers them while their

utility Our the services own core processed plays environment, in water markets. but on through water Slide water products turn our provide these X. through our a impact also and We environmental the also vital role portfolio Please makeup processed customers. production to look to our footprint we and at into providing

customers’ We’re system positively pleased are Renewable recent wastewater to a an conservation and – that design, two to Filtration to to selected XX% allow generating annual an of Reverse Bakersfield highlight combined treat while our per approximately was attractive Osmosis with to for which wins, source minute. ROI. water Ultra and system expected Granular recovery, designed savings Fuels Carbon, assemble gallons gallons and million Evoqua XXX of Handprint Activated to water. water The technologies – up of impact XXX estimated

a which wastewater helped by demand replacing an significant processing also system. aging increases experienced We dairy plant,

day. was Anaerobic turn Digester up this cubic X,XXX selected treatment, per X. Our expected will XXX Slide the to an homes. to is day, Through Please daily we US treat produce biogas wastewater which average meters per cubic usage of to approximately of of X,XXX meters

While we programmatic – tuck-in, see long-term to process continue organic momentum we well. in growth, M&A our as invest in

including Smith specialty an service Life have of Smith January resins Beverage welcome Engineering we Engineering and capabilities opportunity our ISS support key closed Data vertical to These across the the Epicor markets, our Epicor. vertically was strengthens market. acquisitions Food since three and supplier Centers, key We Microelectronics. integrate our acquisitions for Xst, new segment. & Power from Sciences, colleagues now and

previously, mentioned margins the would to EBITDA to Ben. the the XX And XX% in I Cor like business Mar achieve now on turn our reiterate call over next integration to it expectation for of we to be I continues track. XX adjusted As to the months.

Ben Stas

you, Thank to Slide turn Ron. Please X.

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

million increased EBITDA were Strong year volume, margin the of and of XX.X% favorable $XX adjusted profitability. for prior price improved over to mix XX.X% overall primary drivers quarter Third an

impacts of a turn the to XX. points Ron Please drove inflationary mentioned XX year-over-year decline for As quarter. basis earlier, Slide margin approximately

pipeline and prior slightly revenues in third and outsourced X% $XXX strong largely down Integrated were than most grew sales in and for were due to Service strength price Microelectronics Chemical Solutions realization Sciences. and Life offset opportunity and end-markets. volume. strong but projects aftermarket Services million. Organic Our and Organic approximately XX% capital Processing, water by were sales revenues revenues to more growing. The is capital year quarter strong driven by across segment

an Our digital strategy and important long-term for driver growth strategic continues to profitability. be

consolidation down prior was as more XX Approximately cost. points of quarter Adjusted the XX.X% of higher year-to-date, EBIT COVID up subsidies EBITDA to $XX.X million margin operations. the well benefits XX.X%, settlements points normalized inflation. impact and year. and basis was to revenues Cor’s of for the the and Adjusted of insurance of digitally from margin For the from to Mar the as of was year prior declined increased enabled favorable result were basis XXX XX dilutive Approximately favorable decline quarter points from volume, the one-time price XX%. basis due return travel claims the

we discussed, to turn on favorable price-cost we Slide Please benefits as XX. dollars. However, had EBITDA adjusted

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

XX% or And driven up We by this the million saw $XX up primarily year. was Food capital, Beverage. growth & over prior year-over-year backlog QX quarter Microelectronics of Third strong and XX% sequential versus year. in

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

book our see to QX. to bill expect above ratio We X remain in

strong as regions XX.X% by pipeline in increased EBITDA $XX.X growth QX. XX.X% chain delays As the price by million, our or the million lines. Ron but increased driven quarter more XX.X% million. closely driven increased points book basis well third Please impacts. mentioned, Product $XX all XX. by were growth turn and volume, offset product volume, as most for up favorable partly we’re and than potential Applied Adjusted and realization approximately inflationary mix, X%. visibility to Technologies’ creates to monitoring third shipment revenues approximately Adjusted Slide XXX margins $XXX quarter across revenues EBITDA supply for order to as Organic

to to we’ve – consolidation locations. Over has consolidation the several from fixed significant XX in XX cost going APT, last which margin from undertaken centers footprint XX. manufacturing higher Please has revenue turn growth. provided improved driven This better performance for XXXX organic in actions years, absorption, Slide

revenue organic and gains and technologies to growth expands in new our develop long-term is market that APT’s pursues portfolio core product initiatives of share One innovative markets.

in developing in of Singapore. manufacturing UV facility a We’re The global manufacturer serve pleased of and newly facilities APT our global product leading United – lines. Wallace UK the edge opened will Kingdom ATV, Tiernan the two solutions, and excellence disinfection center highlight & to as

X% Slide is core Capital development quarter water expected Singapore and will orders Please turn Evoqua’s market to Ionpure, support approximately a was primarily market facility manufacture leading approximately Asia-Pacific outsourced growth $XX and market. million in for revenues. Our product for for to the plans XX. spending, or the the Microelectronics of

to sheet. support net LTM working higher Net was Cor capital the increased working This quarter sales. supported levels. balance capital acquisition, was by as of the strong also working includes $XX net Third acquired XX% Mar opening which rates capital million of organic business’s in order inventory

working free year. adjusted over be outsourced were requirements. Adjusted to approximately As of to adjusted over capital net we in XXX% year-to-date we our the anticipate organic was to low-teens to long-term, given XXX% operating prior basis. varying as cash could may expenditure range, cash amounts Year-to-date we net flow cash XX. on a in projects have returned conversion QX continue as capital investments, the income a Please flow see in pleased primarily to growth and million have the some sales flow We support of turn capital the $XX strong versus past, was million indicated orders. for working in $XXX water percentage Slide

sheet X balance times, X.X remains at key and a is finished our priority range now and Evoqua. to for of a strong targeted within times ratio flexible X.X maintaining leverage net reported Our

Our approximately Ron. of basis now points rate prior is Ron? place year. interest for fixed to like is call the weighted debt the of debt X.X%, into over would fixed $XXX has back million XX is cost I a XX% Approximately the swap, in to third turn which quarter average through over up XXXX. rate an or total approximately our

Ron Keating

Thank quarter most demand regions Market Please we’re a turn both across you, delivering We strong, strong metrics. all and remained pleased Slide to growth and segments, XX. key lines. most outstanding across results Ben. had product organic broad-based financial with

robust grow to Our pipeline levels. and remains continues to record backlog

costs dynamic chain and market managing uncertainties. We’re through rising a where supply

higher connected continues we’re the in positive remains Price margin into were execution working up be final operational again is QX, our and water backlog. costs, make the to quarter expansion to pleased expected positive contributing of ISS utilization our maintain model. to year, strong for recurring segment’s and convert the is sales and Heading that and price-cost Digitally Outsourced but overall inflationary with despite fiscal excellent on sales year, material the to and are to progress we’re challenging. We revenue double-digits. labor focused availability.

closely I shipments maintaining and call continue We provided the will chain orders on outlook as purchase timing our the challenges. we remarks, fiscal monitor prepared customer the create questions. now are to could our year. for supply to Closing previously of uncertainties open

Operator

[Operator Instructions] take And Capital Please question with Markets. we’ll from Deane RBC first Dray our ahead. go

Deane Dray

Good Thank you. morning, everyone.

Ron Keating

Deane. morning, Good

Ben Stas

Deane. morning, Good

Deane Dray

Hey.

you’re impact working I you’ve take cash details the flow should quarter, even with the of capital XX%, of I the But start Mar the sales, in impressive to Cor. the tier think I free the in the and appreciate given net – sector. on top on at us through kind

cash anything the You company? the gave How you Mar guys this or does was guys anything conversion? but the quarter? there Cor, capital their on cash good compare working total bad that for else in number And know, to free flow there is

Ben Stas

higher Yeah, Deane, cash conversion great than question. Mar is markedly – Cor’s is Evoqua’s.

their Most they We than receivables, and they payables SAP. work on that we their faster. pay there implement some do opportunity. do and occur have and some to them after we Both will slower of collect

Inventory, feel for do shared they are on the services, robust hand. of inventory these that working like unlock – a integration bit level the quite of business they opportunities at a have benefits with capital. into we of us. And So can we

our you mid-teens well safety of note I down to of place and – period put talked level. with a look percentage they’re as inventory we rates Evoqua, think our like in our results. you bring and know of would overall about very it to working see very this DPO, to we capital in the strong our last review mid-XXs, inventory, on we the prior you the them as sales, On DSO order and that if you’ll days did current that stock call more time. as quarter, support in consistent was two And when at and

Deane Dray

Yeah, that makes sense.

– inventory. buffer we’re additional We’re seeing

for question In Ron, compared and we’ve fact, second some what two is follow-up right, revenues carrying. XX%. really competitors to so tiny up All digital days the your seen of

not being semiconductors. impacted require talking chip You is, and – you’re about products know supplies, do interesting these you’re not because talking that about services what’s there’s by

you stand? going that does the And kind are forward? businesses from where what growth digital you expecting rate So of know

Ron Keating

more our not We been we chip that we’re basis. good price we’re – supplying going stabilizing impacted have to and – Deane. in. know supply able – putting we’re – Thanks, supply And products that times systems it’s It’s APT a chip been had we’re know, on things a Actually, product you where managing able seeing – customers we that into actually the own build global by impacted to are – we’re be. good expectations, side connected and least our into a on overly by But little that. we’re at we’re have where that’s line. we’re and the to on you lead trend

digital the and continue to double-digits. will solutions, – growth, connected with with the that pleased go We’re digital water at I anticipate

opportunities You customer deployed though there, connected know, a as systems money the event. lot billing weren’t And of that the a or signed them systems. we know we had them in we’re way charging by gallon, that against water deploying connected by the in we even for invested you up billing until

ongoing already systems – growth have where in connected that’s see place. because you we the see of digital you’ll So and water, continued and

– positive. to And customers that’ll are converting anticipate We’re tailwinds as market that. as – of the we bode that’ll the well very

Deane Dray

a where clarify, you revenue of expect to in And couple enabled do much you digitally how would characterize just years? total of as the mix And it today?

Ron Keating

have to like XX%. could we our that we time we we’re get connected have on Deane, connectivity, Yeah, said that feel up the site know you around XX/X revenue we – of that over XX%, are that neighborhood so with – we’re we somewhere full in

Deane Dray

you. Terrific, thank

Ron Keating

Thank you.

Operator

Stifel. Jones Please our ahead. next question we’ll Then from go take with Nathan

open. is line Your

Nathan Jones

Good morning, everyone.

Ron Keating

Nathan. Good morning,

Nathan Jones

that you more that labor and still more little some the I fixed and the in side of – the over reset on talk give are stand bit Could on more some difficult on that issues? on get terms more there. would kinds of that business you a if to some us last enable through. easily you’re to or those the little to mean potentially maybe few pressures want – contract contract a on the changed pass more terms of I pricing ISS you about a are more – on nature – that through there? color maybe where bit – to you’ve I the seeing slowly, that that pricing know margins think You and side little service the know years

Ron Keating

Yeah, Nathan, the Ben what I’ll talk contract the speak terms. let – seen. on to to what we’ve the details I’ll

been have contracts. price We escalators pass able to the on in

our with contracts the period We do surcharges far into then, a inside contracts. to go the on different on we as the the depending materials we’ve shorter what now, quote, much on go. quote into And between our just a a on negotiated raw – what processor. I validity have a our times enable lead have mean, ability and the validity us even time indexes quote And out to going time, XX-day of somewhere as XX-day

talk – and know actions as move material you – and as right you the percentages? price fuel want So know labor on to on about around ISS the you taken certainly side, we’ve and moves Ben, the to cost. we’ve cost commodity able being far

Ben Stas

Yeah.

impacts the the that that – the one reason fill had techs with And inflationary-related. that being and for on have we you – becoming two does margin trained. time, as on inflation XX as highlighted that earlier, job to going was ISS declined, about one-times include associated the the well techs productivity they’re points to onboarding And but there basis of in some majority some is were service – I positions. new call of period as labor So

cost lot to on that just pressure there’s but of we’re that a So up of last way should a to increases, work. the of pass as able a a speed. is our of there, once abate little bit but continuing techs these thing And part contracts fuel are

dollar So neutral to positive. dollar it’s

EBITDA on pressure put percentage. margin does it However,

of so the even margin, were though headwinds associated and dollar ISS, with dollars for or on had basis positive we about were price-cost And points price-cost XX price-cost favorable.

those things, So are the Nathan. key

Nathan Jones

passed get Can likely chips of the opportunities probably are the another can large much the very guys that. talk into projects. the I an capacity put the relationships you very you through that that here? of you had in folks enabled. had go where thanks if more There Microelectronics capacity. Yeah, to some on about some, large opportunity I some with chips got all finally question to US, and you Congress fairly some know, for which know not – significant

be? opportunities you know Just out context the could you big how any there of for for Evoqua and realizing be what these them can us give timeframe revenue might

Ron Keating

we QX see very this this The positive. the shows one and in, Nathan, very thing is continues know it are the we the Slide to tailwinds year, marketplace. opportunities Microelectronics, we our in X pointed QX the again, – in with strong due We strong you out have coming orders Yeah, as expected simply tremendous that red, think is, prior orders. on that

We of lot to us activity cases it’s – United And that challenged very in are fight getting is companies the So This starved where versus States. onshoring these lot. this, know or investing the going benefit helped technologies. water – lot. strong, help are long-term a And fabs being proper are they or for regions order – see has the a quite even opportunity Microelectronics you for a in you a order or activity. inside know and these water of regions chips

us wastewater water a it’s on very Evoqua, fits to So side well the the as benefit as well side. processed huge

– So we’re on positive we’re it.

Nathan Jones

questions. the it I’ll taking on. very pass thanks Great, much for

Ron Keating

Thank you.

Operator

Andrew go our from Berenberg. with take ahead. question Please next we’ll Buscaglia And

Your open. line is

Andrew Buscaglia

morning, guys. good Hey,

Ron Keating

morning. Good

Ben Stas

morning, Good Andrew.

Andrew Buscaglia

and what’s we below forward, XX it in? came come And expect do to you came $XX know where expectation, the you’d around is it million, sort clarification $XX of It on a in bit in going deal you Just on little below that know a going What – down Mar contribution. was what million, then my Cor there? – sequentially.

Ben Stas

we – quarter. of A had the – going business, as of associated key that No lot sales with disruption the including but SAP should as of know this mid-XXs this – concentrates we range very other ongoing be to but strong quarter on little that terms expect the in you supply a in bit just that But rebound of in chain that business the integration looks stable demand an the as – area there, basis. lines. and implementation, other product well concentrate certainly and in our

Ron Keating

And organic that, Andrew to organic through ISS. a going because And that’s that see our in, growth, one growth piece Mar base will – that’s and in because be – one Cor show as servicing. you’ll accounts will customers, selling in part we’re those coming Mar revenue key growth, on is Cor’s also we’re as – it’s that going to growth those more broad it’s into reported customer aligned

Andrew Buscaglia

Okay.

would organic makes the Okay given – it that way I optically like the think it’s guidance, given would sense, your negative so like Is comp. one comp, just imply on going to held to world. looking that decline? is and think in at is – that the that the just looking edges would kind what’s growth of going segment, about that ISS that really tough guidance you then go guidance, the But probably and

Ben Stas

Last you year was if QX, look. very a strong

a the delays. do out was And wanted we’ll very, take and wide, all we up want the sales reflect there see, – of as potential in well. comps. see know, balanced know, you how conditions, is So ISS we’ll very a a it as But of to approach. you head there had highlighted that the to sort very prior take But the QX to opening out. know economic of robust COVID customer have strong put range it for you why possibilities. still That’s various shakes We year. – script, – all some the into we in chance I we uncertain And

Ron Keating

the that’s think key. I

is activity fantastic. our talked is order are terrific, You as know – we backlogs about

being highlighted being not end-market necessarily say we’re the delays, that we’re I able we go. on accept – the not Even of waiting see as our for products to of them deliver where only behalf, times, ready on we’re order – to our delivering, the it’s charts, customers to – behalf really on a lot conversions,

And so fourth quarter we difficulty]. – we were balanced [technical were the in

Andrew Buscaglia

fair you. enough. Okay, Thank

Ron Keating

Thank you.

Operator

from And Saree we’ll question take go our Boroditsky Jefferies. Please with next ahead.

Saree Boroditsky

morning. good Hi,

issued health this safe advisory EPA to was to you a and the opportunity know expect that revenue guys? limit do said there of ultimately you you basically level no turn How PFAS. the You influence upcoming for the proposal

Ron Keating

rather – it’s dimmer switch highlighted here it’s to $XXX to to we’re as local a mean, and – And like know going and – mean on it’ll has and – and but the are I that’s we’ve do strong pipeline regulatory a But you that – And see – on is it’s know think off. you really past, a as like million, we’ve we projects be – requirements – that to in a EPA winning a And the be positive going to we north left is it’ll tailwind are continue – so We choose to ramp as we’ll to continuing start just a switch starting adopt than more that’s third this ramping turning see have little municipalities for go more highlighted. we and time. to up the know and the it out to still a But the think you it’s the as – something after. you we the I Saree, water market districts of – and I is, it. And what be is that and be projects forward. and going opportunity put the of we going about define come specifically I it’ll light – know be. a think go very some quite and states

Saree Boroditsky

Thank growth can little in seeing for market? know you you. a to what positive outlook And then you staying your Power this continue? this deeper are And order into more

Ron Keating

around opportunities Power and Yeah, I the plants some power are to continue coal-fired Power to operate. of see mean, we continuing distribution,

positive they’re the the their So know then, outlook to the as – treating And off with of our they’re all able being coming the technologies Evoqua – have the to shut mobilized. it you with And wastewater, of down, far what ponds. be it prop that you very treating have ones of we we do the brings dewatering stacks. around water ash that know value as speaks

as been very the that have So tech great can applications mobile in know in in those we for and each the products built well – apply where technology – Power a we’ve – and market a to place tough you know treat contaminants those you emerging – is as those for while, contaminants – assets.

Saree Boroditsky

taking question. thanks my Great, for

Operator

And question we’ll ahead. with Please Oppenheimer. go Bryan our Blair from take next

Your line open. is

Bryan Blair

morning, you. Thank everyone. Good

Ron Keating

Good morning.

Ben Stas

Bryan. morning, Good

Bryan Blair

Circling the the second, that sense. track, Cor you’re for months the pacing noted XX you toward you’ve integration very that back is the next to – a XX% over – know points margin XX in positive you’re Mar on target key you’re to

you Are you being to to-date? discussed a know in for synergies realized while. other there of heavy lifting callouts in for speak terms know that integration? did And You terms any implementation, to are you willing say you’ve of time SAP the

Ron Keating

opportunities the of ahead and are key drivers, of the are all office we’ve – facility consolidations. got aligned that us on are key are some the we’ve all talk got implementation, I’ll cetera. the could I’ll coming et our medical, there, facilities really synergies. Ben – plants that back the know benefits, around we’ve you But, The – about really about drivers talk – SAP

Mar area acquisition, ISS Cor, If are you’ll branch. we an also we in have did service locations XX those we recall, of when market highlighted and a that the XX

move know of know that – Cor both to heavy feel you the great right on a or into able what’s And the into And, lifting know reiterate certainly both the really what is. facility space. forward center happening. with going within pretty pleased being that. XX% you EBITDA making curve. We combined progress we Ben? we again, – more of bell move we’re to whether fits So is ours they facility, businesses in, to Mar we for be find That you need for the that’s because

Ben Stas

we margins But more to into gain we’re is – But those the And running and are mapped haven’t and in processes our get come of synergies are to get have to consolidations through, come that’ll and those come approval. we as difficulty]. so and Bryan, the finished the through are the approving the synergies, the – consolidation we Yeah, been but best we SAP the our yet – – footprint are – implementation, internal footprint process lifting, strong out, we heavy they and to seen far, and [technical starting growing. early lion’s share those – still of also when really

Bryan Blair

Okay.

Ben Stas

reduce a Just working wanted capital, to remind you a also capital their sizably really to on implementation, of – there’s as a post-SAP opportunity working healthy there’s sales. percentage

Bryan Blair

for you I the the – sense. Smith deals but contribution if highlighted impacted Understood, quickly from – know and you that can – I’m at expected closed economic M&A and strategic the speak And strategy? all you that curious realized And tuck-ins in then drive I’m makes uncertainty that smaller, of Epicor. your kind July. your they’re financial – pipeline, has to if

Ron Keating

is resin of – specialty – the that for now. I’ll and with some power Epicor I both a have I’ll processing part thrilled go Smith to of some Evoqua we’ve with for speak one time done time business for the after. – we that markets them. mean, See we’re Epicor quite quite teams as to with

line we But they’re will – we – for it’s top more were that executing sales not So really but and that vertical is you of lot us highlighted a a then, necessarily I potential bigger lot opportunities on. Minneapolis Smith growth vertical – and areas integration know, as with great was already of it’s a the key support markets very in – in Data the EBITDA a had growth. located. top And the that of Life in but us Centers, line gives Microelectronics, – a that play, integration script, in – it the the where Sciences,

we a And and know we Smith to on know a very close as that which we’ve with as us Minneapolis tied see market we’ll became know have deck. is that and the robust. penetration very we go tuck-in it think we’ve wanted now and highlighted continue pipeline very I focused M&A, So, Cor market, highlighted on M&A, the you in we footprint great the – once Mar for you still and heavily just for about opportunity after The Mar were well. X Slide on in – the Smith together, the transaction, talked between around strategy large that geographic able to that Cor fits in you

Bryan Blair

Appreciate Thanks the Okay. detail. again. all

Ron Keating

Yeah, thanks.

Operator

next go Cowen. ahead. to Giordano Joe Please with we’ll go And

line open. is Your

Joe Giordano

guys. morning good Hey,

Ron Keating

morning, Good Joe.

Ben Stas

Good morning, Joe.

Joe Giordano

to orders just above to of to some order shipments relative would book sort fourth circle you like more is maybe But for do that at delayed circle are in quarter shipping X. – about metric mentioned to third more like color be to back are mentioned that or stuff You that? delays for any bill is also you of that. average you look on accelerating daily have because And book many ISS to bill XQ expected want kind some quarter something because like like

Ron Keating

would at ISS X.X%, I being Joe. – result up. not revenue APT as I in if revenue able it’s the – it’s mean, not quarter, specifically for organic of growth very Yeah, organic It’s growth, – say I is you XX%. mean, coming of had a growth had to show almost look revenue a they very the to orders rate. is positive a us of not bill at book high,

by really ratio on the tailwinds it’s And the know well – bill those it’s between building X delivering. that in know continues strategy team. that executed being market you means book having growth pleased you really backlog. with So the we’re a that the and the two, we’re to just And above we’re

Joe Giordano

level lately curious is like for involved fundamentally maybe and from incremental maybe things just with about residents are something those Salt like, do the if your in thing, there? at those or – just action words, reading plans and and there’s from And just City been comment, different? you more commentary and better – a one leaders like their more hearing And areas seem Mead like high that Lake you on I’m areas it’s lot additional but you any need about it looking to you’re guys businesses Lake know whether know, screwed. areas in and going what’s how,

Ron Keating

capture, very go it’s and something United I have on been situation sure continued recycle, And if Yeah, so – western absolutely making – some we States efficient droughts time. by paid are quite mean, know they differently. And they of their half question. is great to it it’s chain, we’ve are at reuse, being businesses It in that focused do attention broadly. with for difficult see more they’re that water a is the or the wastewater that than capacity, there. operating you expanding doing rather more around

we’re – so frankly, impact know, with our you things And is sure partnering what in what more on we’re of our with have does that. water what industrial are - single on Evoqua one have to to investing our in on areas and pleased as resource that a that So situation. market focused company And customers those the natural we of we’d very our be the is industrial It’s opportunity with do. that – with we to – to every customers we that us – they we highlight is can day aligning they’re make sustainability. precious like efficient we’re preserve handprint

Joe Giordano

guys. Thanks,

Ron Keating

you. Thank

Operator

go Kaplowitz next take Please Andy our question with ahead. And we’ll from Citigroup.

Andy Kaplowitz

morning, Good guys.

Ron Keating

Hey, Andy.

Ben Stas

Good morning, Andy.

Andy Kaplowitz

hiring within labor stable I Is that getting you ISS. or service it you issue availability Is would know you your costs. Then impacting say and you worse? better mentioned business? fuel cost mentioned for

be Any on the You know, of those costs that down sort would costs helpful. in now? service shouldn’t color to more starting come business be

Ron Keating

stabilized. skilled It through in specifically. know make sure labor certainly happening and and you to having markets. of the we just wage in talk that market areas – about I’ll you highlight Yeah, certain – went period what’s certainly were market I’ll – We so a with addressing the overall service rates in we compression has know with in business labor

has it to across you to know and that strong that some with you them. Andy – quickly we’ve we seemed of stabilized are but I fill positions, stabilized. the it filling good know happened end experience has And – pretty and more the So, you in team COVID, very right know skilled and we’ve feel be now, at industry the some filling with good – of turnover a members with behind been like has – and actually able place,

a far pretty talk labor as fuel you So, and I know spot there. Ben – about I challenges and good at think goes. as can – that we’re

Ben Stas

quarter, quarter. saw higher I costs we then end some still think beginning the fuel having the of the uncertain. the at is started Certainly, towards it of fuel abatement

costs, point think I QX. more to time. But are what for in most suggest at maybe able the of place. we surcharge happens some outlooks stability the next we a But push fuel our to have mark for question customers, of this year fuel in our

through. that pass we So

not it also that a of on margins. as through puts surcharge pressure the it and – pushing necessarily the However, it you’re because fact the at margins higher goes, your traditional

margin So ISS. a that for margin bit – a drag of give does

Andy Kaplowitz

it’s market? maybe highlighted helpful, business, of drinking municipal could a cash, governments eventually water small know that blue I then, And commentary stable part in contribution. then that’s you [ATG] your leave much for It’s talk with you’ve just a seem guys. about then you and obviously, and [ph] wastewater, And municipal as bigger, relatively but got around QX flush

you what look those like So businesses do forward? moving know

Ron Keating

water. about talk I’ll so Yeah, municipal drinking

upgrades retrofit of rehab, see it’s continuing X. you are it Page we But business, you portion represented First know their to what and and with on systems see doing. as of work systems all, where we you can is being to a see – municipal smaller they’re we our their around stable know

municipal that addressed the for trying on spending continue future, you green, well being recycle it’ll to what’s so water. as is certainly happening infrastructure well as bill, foreseeable as across wastewater, municipal – see it what’s tell the – with the And what’s we reuse and we’re you I green, side to fits water drinking wastewater. as be know would

capacity. they’re to operating the plants efficiently. up make So are trying sure wastewater They’re to

that bill toward now. see the early go from continue lot and are to expect ratio ‘XX well rehab, way. we designed orders above book should half infrastructure being come and latter at would is projects We X, ‘XX. actually, And engineered to anticipate so retrofit very revenues there the a to And the that starting their with bill of good

Andy Kaplowitz

Appreciate it, guys.

Ron Keating

Thank you.

Operator

we’ll And ahead. question Raymond Please James. Molchanov next with – our take go Pavel from

Pavel Molchanov

the question. Thanks for taking

I maybe As year? how for I capacity, the you be next be International footprint capacity America, build pie or of recall or or of should you big for a year a North target International want XX% revenue. say, outside fiscal have slice was prediction Do that this will year, maybe of to expand you last what the

Ron Keating

our if Pavel think to revenue, at closer – you XX%. look it’s Yeah, International I

into but some America, and of has of through We’d faster in that team to China want certainly efficiently. some very North the – But continued much pretty we’d our at you us, good number. that. we’re emerging that XX% for is. North in like we are because is bit to know We I America selling grow operations. to meaning the overall where it’s reported is continue experienced mean, I at think to markets Now, Evoqua. it International – like pace But we – the COVID International know a challenge was markets operate mean, seeing going that we you grow of the and little a lockdowns,

more branching we’re India. Singapore, deeply in team Our into

deliver team So for an our opportunities grow. us job continuing environments. there’s know good in in – you to – there’s some tough excellent Europe to you know And then we as some in done market has

happy able to participate that are that excellence of markets two to know deck build of we new a the the it’s really continuation on we So in. you serve various were highlighted centers and the be in going to our open out we facilities

Pavel Molchanov

your roadmap? non-North looking context, consolidation American that of opportunities are at In part M&A as you

Ron Keating

We do.

into – Wigan, we the out because know acquisition portfolio that was you grown know business continue facility much And larger than look was We be product called we that of that out in moved of a that – it it the just back UK, has service evident ATG extensions. consolidated ‘XX, we to where extensions at those more to did that that would of just facility, around level the as tremendously. you

space product So forward acquisitions. you on And acquisitions of as well. to know internationally-based continue a been as historic those in go we lot have our we focus the

more looking there. technologies really around We’re

Pavel Molchanov

you much. very Thank

Ron Keating

Pavel. Thanks,

Operator

And with go we’ll Citi Please to Andy next I’m go go sorry, we’ll Walsh Credit – Kaplowitz John next to with Suisse. ahead.

John Walsh

I Good earlier quote And Q&A. Sinatra your Ben, Yeah. morning. in the liked

Ben Stas

Thanks.

John Walsh

looks kind that of But about, bridges could more of I the to the way got be but that that’s like not you’re what’s maybe if I nice that right It QX. to I question normal to it. on below the quarter-to-quarter you ask QX to seasonal because – or – I a kind going wondering nice, the just walk? margin understand get. happening the by was confused I’m I quarter-over-quarter, into little kind to got was sale kind your a and unpack to guess it’s not of of I I frame year-over-year go kind that of lift guidance. wanted back talking you

Ben Stas

Yeah, sure.

for of I have potential upside. as challenges, those our quarter. QX, see the customer strongest the left why which range. you that’s you for because chain uncertainties. did, supply delays, face, uncertainty, why at that the we really at macro have look But potential think the you top current if can that’s we we traditionally suggests look guidance recession, there potential we the are way for we the end circumstances And the history then is

so of control, in feel measured occur balanced. and to just I outside we this that. – like that certain stay environment, important accounted But sure delays our to I are again, if to it’s So, wanted things or we for make were are

John Walsh

activity Europe, And you United as Would more Okay, it question a now. coming there’s and to starting Germany, be whether hear curious fair. just out more that’s PFAS know But to to offer earlier – markets? about relates that broadens? you be thing, of of technology it’s the States. the you the Or then, would kind that as there got channel in maybe Belgium, right you lot have of we’re more PFAS But to more you how think as just hear opportunity that maybe those into difference channel in markets? have a those any it we’d love

Ron Keating

on – acquisitions, I that the to International around which I’ll actually I’ll for prior opportunities question Yeah, product tag about technologies. talked

One is focused PFAS. is disrupt of infield we’re that the on – areas on very

types of that very on they’re there’s you different throughout So know on that there of are are and interesting are Europe destruction to working lot happening. site of that a technologies trials That’s a us. lot PFAS, of

hope we’re those, available. the technology And that what and in – to engaged in there we and is we’re – we’re the attention see paying evolution – is to would PFAS. that’s So what

it, of you’re not you disrupt on having it’s location, move landfill it the it, it just concentrate it, is site the know to incinerate actually capture So PFAS or not is. it so

John Walsh

the questions – you. That and Great. you very thank taking that’s helpful. Appreciate

Ron Keating

Thanks, John.

Ben Stas

John. Thanks,

Operator

And go Lee ahead. next go Brian Please Goldman Sachs. to we’ll with

line Your open. is

Brian Lee

Hey, guys, here. squeezing me good morning and for in thanks

question ‘XX. into the this And side? we kind the new of any fiscal the Are guess kind know – thoughts try nice – you sort just sort the here, then, Ben, you in margin may just You here. sort model the expansion fill seen end APT early of secondly highest prior know, and APT normal question ’XX? a maybe improvement and second expecting we’ve XQ think to of on as follow-on Is – in to of of I’ll true-up the is the since about we year and in I the further the

availability. You you customer talked about know guys have

that wanting the the for customer you seen well be know think you know customer been – about as delays that’s worse and any and I prudent as your visibility? better or you capital that Have Thanks. around impacting either sales know think talked you forward shifts just or deployment outlook. the to you you and around about for potentially availability either how

Ron Keating

customer I’ll Yeah, others. to the talk – to you about about availability, cover and I’ll Ben leave the –

we get take know it’s year on historically end-market. It ready and whether fiscal our on or we occur. not turn lot measured this – been has a site, with you they’re is they service our throughout to faced our system that it What – depends us difficulties very we able spotty, with that. for to availability availability by of And challenges and or been has You COVID the not the been – to know has on what totally which been the – it’s being their through you been it primarily dealt product our know around or shutdown. application

where that’s I mean as So challenges. activity backlog our order our we great. is tremendous, we’ve is highlighted, the see

has We’re chain. supply chain, team managing job supply our managing a done remarkable

production delays. is what they’re we’re chain – to ready And is end-market, big for or by And larger more versus seeing, smaller what of so delays created think customers, balanced versus kind again line. now, against we’re installations to on know but turn and that their the varies but It tend the the of the supply – it’s you a their our that getting that’s challenge I site – they’re when ready us. have

Ben Stas

as bit little and talked in APT earlier margin these an has their excellent a done side that lot Yeah, on job about as we of portfolio. know, cost the area. done structural work we you of has expect well stick a been benefits will hard that that And,

be amount, positive with majority the – – business inflationary APT, disruptions manufacturing downside, they them. on of there’ll of still the and supply chain on the associated face productivity under the in like, the but our pressure facilities particularly, headwinds the impacts, impacting price-cost also in dollar On

well. able majority they’ve to So person deliver. An and that been in situations have does again, types is But their been – very with does item through very of show face those show their structure And sick out proud yeah, as where part challenges of to they of a to decisions. the up. margins portfolio up, that’s continue not a battle COVID not

Brian Lee

Great, thanks. pass I’ll it And on.

Ron Keating

Thank you.

Ben Stas

you. Thank

Operator

Ron I we call now – turn over back remarks. time, will to for this the at Keating And any closing

Ron Keating

been – interest really to Thank our way they’ve you would thank life. greatly you the around demand us of the operated, enriching which for impressive today. to – on to of members close and cause day, every have I that the meeting transforming all does you, just water and Evoqua. true given to what focus the in with appreciate we team they’ve Thank and way Evoqua a like purpose is you. globe, your delivered. customer sincere you’ve a again We and incredibly And our the – continue that staying time

with toward look your time. – So, We for forward again quarter. you speaking to thank you next

Operator

quarter concludes Thank today’s XXXX third you. that Water earnings Evoqua conference And Technologies call.

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

Evoqua Water Technologies (AQUA) 2 Aug 222022 Q3 Earnings call transcript