Evoqua Water Technologies : Q4 2021 Presentation(opens in new window)

Fourth Quarter and Full Year 2021

Earnings

November 16, 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. You can generally identify forward- looking statements by our use of forward-looking terminology such as "aim," "anticipate," "assume," "believe," "continue," "could," "estimate," "expect," "goal," "intend," "may," "might," "plan," "progress," "potential," "predict," "projection," "seek," "should," "will," or "would" or the negative thereof or other variations thereon or comparable terminology. 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; our ability to execute projects on budget and on schedule; material, freight, and labor inflation, commodity availability constraints, and disruptions in global supply chains and transportation services; 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 own and our customers' safety standards; failure to effectively treat emerging contaminants; our ability to continue to develop or acquire new products, services and solutions that allow us to compete successfully in our markets; 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; our ability to achieve the expected benefits of our restructuring actions; 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, skilled technical, engineering, sales, and other key personnel and to attract and retain key talent in increasingly competitive labor markets; risks associated with international sales and operations; our ability to adequately protect our intellectual property from third-party infringement; risks related to our contracts with federal, state, and local governments, including risk of termination or modification prior to completion; risks associated with product defects and unanticipated or improper use of our products; our ability to accurately predict the timing of contract awards; risks related to our substantial indebtedness; our increasing dependence on the continuous and reliable operation of our information technology systems; risks related to foreign, federal, state and local environmental, health and safety laws and other applicable laws and regulations and the costs associated therewith; and other risks and uncertainties, including those listed under Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021, to be filed with the SEC, 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 fiscal year 2022, expectations related to demand outlook in our end-markets, growth opportunities, our order pipeline, PFAS related regulatory action, supply chain challenges, material availability, price/cost, labor shortages, inflation, and general macroeconomic conditions, our goals relating to our own greenhouse gas emissions and water reuse, and statements related to the ongoing impact of the COVID-19 pandemic. Any forward-looking statements made in this presentation speak only as of November 16, 2021. Except as required by law, we do not undertake any 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 after the date of this presentation. 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 financial measures that are not calculated and presented in accordance with generally accepted accounting principles in the United States ("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

Q4 2021 performance highlights

REVENUE

PROFITABILITY

OPERATIONAL EXECUTION

LEVERAGE/ LIQUIDITY PROFILE

• Revenue grew 11.0% to $426.0 million; organic revenue grew 9.5%
• • ISS organic growth 11.5%; strong volume and favorable price
  • APT organic growth 5.8%; growth in all regions and favorable price
• Book to bill ratio > 1.0; ISS backlog stable sequentially, YOY up 17%
• Adjusted EBITDA $81.9 million, up $6.3 million; adjusted EBITDA margin 19.2%
• • Favorable price/cost Q4 and FY
  • Favorable mix from service and aftermarket growth
  • Higher operating expenses primarily due to labor inflation
• Focus on material availability, talent recruitment and pricing actions
• COVID-19protocols ongoing; aligned with health authorities and customers
• Net working capital as a % of LTM revenue improved to 10.3% vs 12.5% Q4'20
• FY'21 operating cash flow of $178.7 million, up $1.7 million from FY'20
• FY'21 adjusted free cash flow to adjusted net income conversion rate of 181.4%
• ~$449 million of liquidity(1); $144 million increase from Q4'20
• Net leverage ratio improved to 2.5x

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

© 2021 EVOQUA WATER TECHNOLOGIES | 3

Financial highlights

REVENUE(1)

($ in millions)
		Memcor	$1,444	$1,430	$1,464
$1,340

FY'18	FY'19	FY'20	FY'21
ADJUSTED EBITDA(1)		17.1%
($ in millions)		16.8%
	16.3%
16.2%

Memcor

Adjusted EBITDA margin

CASH FLOW

($ in millions)		$177.0	$178.7
	$125.2
$81.0			$153.3
		$134.4
	$103.2
$45.8
FY'18	FY'19	FY'20	FY'21

(Total net debt to adjusted EBITDA)

4.1x	3.8x
		3.0x	3.0x	2.9x	2.8x	2.5x
Q4'18	Q4'19	Q4'20	Q1'21	Q2'21	Q3'21	Q4'21

ISS BACKLOG

		($ in millions)	$236.5								($ in millions)
$222.3							$700
				$178.8	$185.5	$181.0	$175.5
								$151.2		$350
		Q4'18	Q4'19	Q4'20	Q1'21	Q2'21	Q3'21	Q4'21
		NWC as % of LTM revenue							$-
	16.6%	16.4%	12.5%	13.2%	12.9%	12.3%	10.3%
			FY'18

1. Historical results include Memcor. FY19 and FY20 revenue of $60 million and $14.4 million, respectively. FY19 and FY20 adjusted EBITDA of $8.1 million and $1.3 million, respectively. Memcor ® is a trademark of Rohm & Haas Electronic Materials Singapore Pte. Ltd

		CAGR
		18%
		16%
		28%
FY'19	FY'20	FY'21
Total ISS Backlog
Service/Aftermarket (AM) Backlog
Capital Backlog		| 4

Evoqua's Q1 FY22 end market order demand outlook

	Q1 2022	PERCENTAGE OF
	EXPECTED
PRIMARY END	(1)
DEMAND	SALES (FY19)
MARKETS	OUTLOOK(2)
	Light &		20%~
	General
	Industry
	Healthcare /
	Pharma /
	Biotech
	Chemical
	Processing3		DIGITS
	Municipal		SINGLEMID/
	Drinking
	Water3
	Refining &		LOW
	Marine3

1. Management estimates; denoting approximate relative size of each end market
2. Q1 2022 expected order demand compared to Q1 2021
3. Large prior year orders in Chemical Processing, Marine and Municipal Drinking

Water impact quarter over quarter comparison

Q1 2022

EXPECTED

PRIMARY ENDDEMAND

MARKETSOUTLOOK(2)

Municipal

Waste

Water

Power

Microelectronics

Aquatics

Food &

Beverage

KEY DEFINITION

GrowthNeutral

Slight Decline

Decline

© 2021 EVOQUA WATER TECHNOLOGIES | 5