Evoqua Water Technologies : Q2 2021 Presentation(opens in new window)

Second Quarter 2021 Earnings May 5, 2021

Forward-looking statement safe harbor and non-GAAP financial information

This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All of these forward-looking statements are based on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. These and other important factors may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements, or could affect our share price. Some of the factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include, among other things, general global economic and business conditions, including the impacts of the COVID-19 pandemic and disruptions in global oil markets; our ability to compete successfully in our markets; our ability to execute projects on budget and on schedule; the potential for us to incur liabilities to customers as a result of warranty claims or failure to meet performance guarantees; our ability to meet our customers' safety standards or the potential for adverse publicity affecting our reputation as a result of incidents such as workplace accidents, mechanical failures, spills, uncontrolled discharges, damage to customer or third-party property or the transmission of contaminants or diseases; our ability to continue to develop or acquire new products, services and solutions and adapt our business to meet the demands of our customers, comply with changes to government regulations and achieve market acceptance with acceptable margins; our ability to implement our growth strategy, including acquisitions and our ability to identify suitable acquisition targets; our ability to operate or integrate any acquired businesses, assets or product lines profitably or otherwise successfully implement our growth strategy; our ability to achieve the expected benefits of our restructuring actions; material and other cost inflation and our ability to mitigate the impact of inflation by increasing selling prices and/or improving our productivity efficiencies; our ability to accurately predict the timing of contract awards; delays in enactment or repeals of environmental laws and regulations; the potential for us to become subject to claims relating to handling, storage, release or disposal of hazardous materials; our ability to retain our senior management and other key personnel; our increasing dependence on the continuous and reliable operation of our information technology systems; risks associated with product defects and unanticipated or improper use of our products; litigation, regulatory or enforcement actions and reputational risk as a result of the nature of our business or our participation in large-scale projects; seasonality of sales and weather conditions; risks related to government customers, including potential challenges to our government contracts or our eligibility to serve government customers; the potential for our contracts with federal, state and local governments to be terminated or adversely modified prior to completion; risks related to foreign, federal, state and local environmental, health and safety laws and regulations and the costs associated therewith; risks associated with international sales and operations, including our operations in the People's Republic of China; our ability to adequately protect our intellectual property from third-party infringement; risks related to our substantial indebtedness; our need for a significant amount of cash, which depends on many factors beyond our control; and other risks and uncertainties, including those listed under Part I, Item IA. "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended September 30, 2020, as filed with the SEC on November 20, 2020, and in other filings we may make from time to time with the SEC. All statements other than statements of historical fact included in the presentation are forward-looking statements, including, but not limited to, expectations for the third quarter and full fiscal year 2021, statements related to the COVID-19 pandemic, the impact of which remains inherently uncertain, demand outlook in our end-markets and the impact of the proposed infrastructure legislation. Any forward- looking statements made in this presentation speak only as of May 5, 2021. We undertake no obligation to update or revise, or to publicly announce any update or revision to, any of the forward-looking statements made herein, whether as a result of new information, future events or otherwise. These forward-looking statements should not be relied upon as representing the Company's views as of any date subsequent to the date of this presentation.

Immaterial rounding differences may be present in the data included in this presentation.Certain prior period amounts have been reclassified to conform to the current period presentation.

Use of Non-GAAP Financial Measures - This presentation contains non-GAAP financial measures, which are adjusted financial measures that are not calculated and presented in accordance with generally accepted accounting principles in the United States, or "GAAP." These non-GAAP adjusted financial measures are provided as additional information for investors. We believe these non-GAAP adjusted financial measures, which include organic and inorganic revenue, adjusted net income, EBITDA, adjusted EBITDA, adjusted EBITDA margin, net working capital, net leverage ratio, total net debt, adjusted free cash flow, adjusted free cash flow conversion and Integrated Solutions and Services segment backlog, are helpful to management and investors in highlighting trends in our operating results and provide greater clarity and comparability period over period to management and our investors regarding the operational impact of long-term strategic decisions as to capital structure, the tax jurisdictions in which we operate and capital investments. The presentation of this additional information is not meant to be considered in isolation or as a substitute for GAAP measures. For definitions of the non-GAAP financial measures used in this presentation and reconciliations to the most directly comparable respective GAAP measures, see the Appendix to this presentation.

© 2021 EVOQUA WATER TECHNOLOGIES | 2

COVID-19 priorities remain in place

PROTECT EMPLOYEES

• Protect the health and safety of employees, customers, supply chain partners and communities
• Follow CDC and other health guidelines
• Ensure adequate PPE supplies for all personnel

ENHANCE BUSINESS RESILIENCY

• Maintain business continuity
• Maximize customer operating uptime
• Manage cost structure to support business priorities
• Advance digital strategy

IMPROVE LIQUIDITY AND BALANCE SHEET FLEXIBILITY

• Manage for cash and liquidity while preserving employment base
• Actively manage working capital
• Continue to focus on financial deleveraging

© 2021 EVOQUA WATER TECHNOLOGIES | 3

Q2 2021 performance highlights

• Book to bill ratio > 1.0; growing outsourced water service orders
• Revenue changed (1.5)% to $346.6 million; organic revenue declined (3.5)%

REVENUE

• ISS organic down (6.8)% impacted primarily by strong capital prior year comps

• • APT organic up 3.5% driven primarily by APAC demand across multiple product lines
• Adjusted EBITDA $58.0 million, up $1.3 million; margin 16.7%, up 60 bps YOY
• • Margin improvements driven by cost controls, operational efficiencies and price

PROFITABILITY realization

• Partially offset by lower volume and productivity due to reductions and delays in customer capital spending

OPERATIONAL EXECUTION

LEVERAGE/ LIQUIDITY PROFILE

• Strategic supply chain initiatives to mitigate inflationary pressures and prepare for economies to re-opening
• COVID-19protocols in place
• LTM net working capital as a % of revenue improved to 12.9% vs 13.9% Q2'20
• YTD operating cash flow of $63.1 million, up $24.2 million from YTD Q2'20
• YTD adjusted free cash flow to adjusted net income conversion rate of 215%
• ~$336 million of liquidity(1); $31 million increase from Q4'20
• Net leverage ratio improved to 2.9x

(1)Liquidity is defined as cash plus revolver borrowing capacity

© 2021 EVOQUA WATER TECHNOLOGIES | 4

Evoqua's Q3 end market order demand outlook

	Q3 2021	PERCENTAGE OF
	EXPECTED
PRIMARY END	(1)
DEMAND	SALES (FY19)
MARKETS	OUTLOOK(2)
	Light &		20%~
	General
	Industry
	Healthcare /
	Pharma /
	Biotech
	Chemical		DIGITS
	Processing
	Municipal		SINGLEMID/
	Drinking
	Water
	Refining		LOW
	Marine

1. Management estimates; denoting approximate relative size of each end market
2. Q3 2021 expected order demand compared to Q3 2020
3. Q3 2021 outlook accounts for YOY challenging comparable

Q3 2021

EXPECTED

PRIMARY ENDDEMAND

MARKETSOUTLOOK(2)

Municipal

Waste

Water

Power

Microelectronics

(3)

Aquatics

Food &

Beverage

KEY DEFINITION

GrowthNeutral

Slight Decline

Decline

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