PITTSBURGH--(BUSINESS WIRE)--Evoqua Water Technologies (NYSE:AQUA), an industry leader in mission-critical water treatment solutions, today reported results for its first quarter ended December 31, 2020.

Revenue for the first quarter of fiscal 2021 was $322.2 million, compared to $346.1 million in the prior year period, a decrease of 6.9%, or $23.9 million. The decline in revenue as compared to the prior year period reflects the divestiture of the Memcor product line, which resulted in a decrease to revenue of 4.1%, or $14.1 million, net of contributions from acquisitions. Organic revenue decreased 3.5%, or $12.0 million, mostly related to the pandemic’s impact on volume in the quarter, as well as the timing of completion of certain large projects in the prior year. The decline in revenue was partially offset by a favorable change in foreign currency translation of $2.2 million. Net income for the quarter was $6.5 million, resulting in diluted earnings per share (“EPS”) of $0.05, as compared to net income of $53.5 million and diluted EPS of $0.44 in the prior year period. The prior year period net income included the gain from the sale of the Memcor product line, which resulted in a net pre-tax benefit of $49.0 million. Adjusted EBITDA for the quarter was $44.8 million as compared to $43.6 million in the prior year period. See the “Use of Non-GAAP Measures” section below for additional information regarding adjusted EBITDA and organic revenue.

“We reported solid first quarter results while navigating varying demand trends across our end markets amid ongoing COVID-19 challenges. Our organization is focused on engaging with our customers and delivering solutions and technologies that address increasingly complex water treatment problems. Organic orders grew, our pipeline remains solid, and our book to bill ratio remains above 1.0.” said Mr. Ron Keating, Evoqua’s CEO.

Mr. Keating continued, “We continue to prioritize the health and safety of our team members, maintaining customer continuity and service excellence, and improving our balance sheet flexibility. Our team has responded well and our first quarter financial results were largely as expected. We note strength in adjusted EBITDA growth and margin as well as solid free cash flow. Our strong order book will continue to drive investments in organic growth opportunities and technology expansion.”

Mr. Keating stated, “We expect continued uneven market demand due to COVID-19 with visibility across the full year remaining somewhat limited. Our focus will remain on delivering organic growth through outsourced water solutions, wastewater recycle/reuse, Water One® digitally enabled systems and selling our broad portfolio of component technologies. We expect M&A to supplement our organic growth strategy, and we welcome the employees of Ultrapure & Industrial Services, our latest acquisition, to the Evoqua family. Our sustainability initiatives are gaining traction, and we are providing solutions to help our customers meet their sustainable objectives. We look forward to publishing our 2020 Sustainability Report this Spring.”

First Quarter Segment Results

Evoqua has two reportable operating segments - Integrated Solutions and Services and Applied Product Technologies. The results of our segments for the first quarter are as follows:

Integrated Solutions and Services

Segment revenues decreased $13.4 million, or 5.9%, to $214.7 million in the first quarter of fiscal 2021 as compared to the prior year period.

• Service revenues decreased $6.9 million as compared to the prior year period, primarily driven by temporary delays in annual maintenance in the oil and gas refining end market, the timing of completion of certain large projects in the prior year and shutdowns and delays due to COVID-19. Price realization related to established service contracts and service growth in the healthcare and pharmaceuticals end markets partially offset these declines.
• Capital revenues declined $4.0 million as compared to the prior year period, primarily related to the timing of projects in the microelectronics end market, which was partially offset by new projects across a variety of end markets.
• The remaining decrease was due to a reduction in aftermarket revenue of $2.5 million.

Operating profit decreased by $6.8 million, or 20.5%, to $26.4 million in the first quarter of fiscal 2021 as compared to the prior year period.

• Segment profitability decreased by $7.3 million as compared to the prior year period driven by lower volume and mix, lower productivity due to customer shutdowns and enhanced safety protocols as a result of the COVID-19 pandemic, and increased operating costs based on changes in allocation methodologies for corporate expenses. These declines were partially offset by additional price realization in the current period.
• Positive drivers to profitability were associated with a decrease in travel and discretionary spending of $1.7 million.
• Depreciation and amortization expense increased by $1.2 million compared to the prior year period as the segment continues to invest in revenue generating assets.

Segment adjusted EBITDA decreased $5.6 million, or 11.5%, to $43.2 million in the first quarter of fiscal 2021 as compared to the prior year period. The decline in segment adjusted EBITDA resulted from the same factors that impacted operating profit, other than the change in depreciation and amortization.

Applied Product Technologies

Segment revenues decreased by $10.5 million, or 8.9%, to $107.5 million in the first quarter of fiscal 2021 as compared to the prior year period.

• The divestiture of the Memcor product line resulted in a reduction in revenue of $14.4 million as compared to the prior year period.
• Revenues increased $6.0 million in the Asia Pacific region as compared to the prior year period. This volume increase was partially offset by revenue declines across multiple product lines in both the Americas and EMEA regions by $0.6 million and $3.7 million, respectively, as compared to the prior year period, mainly due to continued customer site access challenges and delays primarily impacting the Municipal Drinking Water and Aquatics end markets.
• Foreign currency translation resulted in a favorable revenue impact of $2.2 million as compared to the prior year period.

Operating profit decreased $49.7 million to $13.4 million for the first quarter of fiscal 2021 as compared to the prior year period.

• The decline in segment profitability was primarily related to the net pre-tax benefit on sale of the Memcor product line of $49.0 million in the prior year period. Operating profit was also impacted by a $1.2 million decrease related to the reduction in revenue volume as a result of the divestiture.
• Organic volume as well as improvement in operational efficiencies and cost containment measures, partially offset by the impact of variances in product mix, contributed a net $4.7 million in profitability as compared to the prior year period, while inflation and employee related costs reduced operating profit by $0.9 million.
• Operating profit was benefited $0.5 million by foreign currency translation as compared to the prior year period.
• Further net operating profit decrease of $3.8 million was attributable to higher restructuring costs and changes in other non-recurring activity as compared to the prior year period.

Segment adjusted EBITDA increased $3.2 million to $19.0 million in the first quarter of fiscal 2021, as compared to $15.8 million in the same period of the prior year. The increase in segment adjusted EBITDA was driven by the same factors that impacted segment operating profit, other than the change in depreciation and amortization, and also excludes restructuring and other non-recurring activity recognized in the period.

About Evoqua Water Technologies

Evoqua Water Technologies is a leading provider of mission critical water and wastewater treatment solutions, offering a broad portfolio of products, services and expertise to support industrial, municipal and recreational customers who value water. Evoqua has worked to protect water, the environment and its employees for more than 100 years, earning a reputation for quality, safety and reliability around the world. Headquartered in Pittsburgh, Pennsylvania, the company operates in more than 160 locations across ten countries. Serving more than 38,000 customers and 200,000 installations worldwide, our employees are united by a common purpose: Transforming Water. Enriching Life.