PITTSBURGH--(BUSINESS WIRE)--Evoqua Water Technologies Corp. (NYSE:AQUA), an industry leader in mission-critical water treatment solutions, today reported results for its third quarter of fiscal 2019.

Revenues for the third quarter of fiscal 2019 were $360.3 million, an increase of $17.8 million, or 5.2%, from $342.5 million in the prior year period. Revenue growth for the quarter was primarily attributable to an increase in service and aftermarket revenues from organic and recently acquired businesses, partially offset by lower capital revenues in the period and the negative impact of foreign currency exchange rates.

Net income for the third quarter of fiscal 2019 was $4.3 million, an increase of $3.3 million, from net income of $1.0 million in the prior year period, resulting in diluted earnings per share (“EPS”) of $0.03 compared to $0.01 in the prior year period. Net income for the quarter includes increased income tax expense of $6.5 million over the prior year period based on the projected effective tax rate for the fiscal year.

Adjusted EBITDA was $60.6 million in the third quarter of fiscal 2019, an increase of $2.6 million, or 4.5%, from $58.0 million in the prior year period. The increase in Adjusted EBITDA for the third quarter of fiscal 2019 as compared to the prior year period was driven by increased revenues, favorable price/cost and mix driven by higher service volumes.

“We are pleased to report results in-line with expectations driven by strong service and aftermarket sales growth,” said Ron Keating, Evoqua’s CEO. “Overall, third quarter sales were up 5.2% mostly due to service revenue growth of 14.5%. Integrated Solutions and Services sales grew 7.7% and Applied Product Technologies sales were up 1.3% for the quarter. Our order book continues to accelerate, growing faster than revenue, and we continue to see a robust pipeline of opportunities. The two-segment realignment benefits are materializing as expected resulting in enterprise selling of our broad portfolio of technologies and services. On a year-to-date basis, our order book is up low double digits.”

Mr. Keating continued, “We are reaffirming our 2019 guidance with expected revenues to be in the range of $1.38 billion to $1.44 billion and Adjusted EBITDA to be in the range of $220 million to $240 million. As global concerns arise around economic and environment challenges, we are seeing growing demand for our robust portfolio of sustainable solutions that leverages our vast service network, technologies and digital platform.”

Third Quarter Segment Results

For fiscal 2019, Evoqua has two reportable operating segments - Integrated Solutions and Services and Applied Product Technologies. The results of our segments for the third quarter are as follows:

Integrated Solutions and Services

The Integrated Solutions and Services segment provides tailored services and solutions in collaboration with our customers backed by life?cycle services including on?demand water, outsourced water, recycle / reuse and emergency response service alternatives to improve operational reliability, performance and environmental compliance. Key offerings within this segment also include equipment systems for industrial needs (influent water, boiler feed water, ultrahigh purity, process water, wastewater treatment and recycle / reuse), full-scale outsourcing of operations and maintenance, and municipal services, including odor and corrosion control services.

Segment revenues increased $16.1 million, or 7.7%, to $225.4 million in the third quarter of fiscal 2019 as compared to $209.3 million in the same period in the prior year. Organic revenues increased approximately 1.5% as compared to the same period in the prior year -

• Service revenues grew $5.8 million, exclusive of acquisitions.
• Aftermarket revenues increased, but were offset by reductions in capital revenues, leading to an overall decline of $2.9 million in product revenues, exclusive of acquisitions, primarily due to the timing of large capital projects in the power generation market.
• Recently acquired businesses of ProAct and Isotope contributed $13.3 million of revenue compared to the same period in the prior year.

Operating profit increased $8.2 million, or 28.1%, to $37.4 million in the third quarter of fiscal 2019 as compared to $29.2 million in the same period of the prior year -

• Segment profitability improved $8.8 million in the period driven by increased organic and acquisition related revenue volume, augmented by improved pricing, and favorable change in mix driven by the higher service volumes.
• Profitability in the current year was also favorably impacted by the non-recurrence of $2.6 million of charges related to the achievement of earn-out targets associated with the Noble and ADI acquisitions that were reflected in the prior year results.
• Negative drivers to segment profitability included $1.7 million of higher depreciation and amortization expense, primarily related to acquisitions and capital investment in service assets, as well as $1.5 million of additional operating expenses, partially derived from higher employment costs.

Segment Adjusted EBITDA increased $7.3 million, or 16.6%, to $51.4 million in the third quarter of fiscal 2019 as compared to $44.1 million in the same period in the prior year. The increase in segment Adjusted EBITDA resulted from the same factors which impacted operating profit, other than the change in depreciation and amortization, and for this segment also excludes -

• Charges in the prior year of $2.6 million related to the achievement of earn-out targets associated with the Noble and ADI acquisitions. There were no comparable charges incurred in the same period of the current year.

Applied Product Technologies

The Applied Product Technologies segment provides a range of highly differentiated and scalable products and technologies specified by global water treatment designers, OEMs, engineering firms and integrators. Key offerings within this segment include filtration and separation, disinfection, wastewater solutions, anode and electrochlorination technology and aquatics technologies and solutions for the global recreational and commercial pool market.

Revenues increased by $1.7 million, or 1.3%, to $134.9 million in the third quarter of fiscal 2019, as compared to $133.2 million for the comparable period in the prior year -

• Overall revenues increased $3.4 million in the period driven by aftermarket revenue growth, partially offset by declines in higher margin capital volume across multiple product lines.
• The impact of foreign currency translation was a reduction to revenue of $3.1 million.
• Recently acquired business ATG UV Technology Limited contributed $1.4 million of increased revenue.

Operating profit decreased $5.6 million, or 19.9%, to $22.5 million for the third quarter of fiscal 2019 from $28.1 million for the same period in the prior year -

• The decrease in profitability was mainly due to a gain on the sale of land for $7.0 million which was recognized in the prior year period, whereas the segment only recognized a gain on the sale of property of $0.4 million in the current year period.
• Other drivers of reduction in segment operating profit include the negative impact of foreign currency translation of $0.7 million and $0.3 million of higher depreciation expense.
• Current year profitability was favorably impacted by $2.0 million related to the benefits of lower employment cost, higher volumes, favorable price/cost, and other lower costs considered in Adjusted EBITDA that are specific to the segment.

Segment Adjusted EBITDA decreased $0.6 million, or 2.2%, to $27.3 million in the third quarter of fiscal 2019 as compared to $27.9 million in the same period in the prior year. The decline in segment Adjusted EBITDA was driven by the same factors which impacted segment operating profit, other than the change from depreciation and amortization, and for this segment also excludes -

• The impacts from product rationalization and facility consolidation, restructuring, costs associated with the remediation of a manufacturing defect caused by a third party vendor, and gain on sale of property in an aggregate amount of $0.4 million incurred during the period.
• Similar activity incurred in the same period of the prior year that impacted Adjusted EBITDA for this segment included $1.1 million of restructuring and realignment costs, $1.6 million of costs associated with the manufacturing defect caused by a third party vendor, and a gain of $7.0 million on sale of land at our Windsor, Australia location.

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 nine countries. Serving more than 38,000 customers and 200,000 installations worldwide, our employees are united by a common purpose: Transforming Water. Enriching Life.