Evoqua Water Technologies Corp (AQUA) 2023 Q1 法說會逐字稿

Hello, and welcome to the Evoqua Water Technologies First Quarter Fiscal 2023 Earnings Conference Call. (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. Thank you.

大家好，歡迎來到 Evoqua Water Technologies 2023 財年第一季度收益電話會議。 （操作員說明）提醒一下，正在錄製此電話會議，您的參與意味著同意我們錄製此電話。如果您不同意這些條款，請此時斷開連接。謝謝。

I would now like to turn the call over to Dan Brailer, Vice President of Investor Relations. Please go ahead.

我現在想把電話轉給投資者關係副總裁 Dan Brailer。請繼續。

Thank you, Todd. Thanks, everyone, for joining us for today's call to review our first quarter 2023 financial results. Participating on today's call are Ron Keating, President and Chief Executive Officer; and Ben Stas, Executive Vice President and Chief Financial Officer. After our prepared remarks, we will open the call to questions.

謝謝你，托德。感謝大家參加今天的電話會議，回顧我們 2023 年第一季度的財務業績。參加今天電話會議的有總裁兼首席執行官 Ron Keating；執行副總裁兼首席財務官 Ben Stas。在我們準備好的發言之後，我們將開始提問。

This conference call includes forward-looking statements, including our full fiscal year 2023 expectations, long-term financial targets, statements relating to our pending merger with Xylem, statements relating to demand outlook in our end markets, growth opportunities, our order pipeline, order conversion, cash generation, our acquisition strategy and pipeline, integration and performance -- future performance of our recent acquisitions, supply chain challenges, inflation, labor shortages and general macroeconomic conditions. Actual results may differ materially from our expectations. For additional information on Evoqua, please refer to the company's SEC filings, including the risk factors described therein.

本次電話會議包含前瞻性陳述，包括我們對 2023 財年的完整預期、長期財務目標、與我們與 Xylem 即將進行的合併相關的陳述、與我們終端市場需求前景相關的陳述、增長機會、我們的訂單渠道、訂單轉換、現金產生、我們的收購戰略和管道、整合和績效——我們最近收購的未來表現、供應鏈挑戰、通貨膨脹、勞動力短缺和總體宏觀經濟狀況。實際結果可能與我們的預期存在重大差異。有關 Evoqua 的更多信息，請參閱該公司向美國證券交易委員會提交的文件，包括其中描述的風險因素。

On this conference call, we'll also discuss certain non-GAAP financial measures. Information with respect to such non-GAAP financial measures is included in the appendix of the presentation slides for this call, which can be obtained at Evoqua's Investor Relations website. Unless otherwise specified, references on this call to full year measures or to a year refer to our fiscal year, which ends on September 30. Means to access this conference call via webcast were disclosed in the press release, which was posted on our Investor Relations website. Replays of this conference call will be archived and available for the next 60 days.

在本次電話會議上，我們還將討論某些非 GAAP 財務措施。有關此類非 GAAP 財務措施的信息包含在本次電話會議演示幻燈片的附錄中，可在 Evoqua 的投資者關係網站上獲取。除非另有說明，否則本次電話會議對全年措施或一年的引用是指我們截至 9 月 30 日的財政年度。通過網絡廣播訪問本次電話會議的方式已在發佈在我們的投資者關係上的新聞稿中披露網站。此電話會議的重播將被存檔並在接下來的 60 天內提供。

With that, I would now like to turn the call over to Ron. Ron?

有了這個，我現在想把電話轉給羅恩。羅恩？

Thank you, Dan. And thank you for joining us. Before we present our results, I'm once again pleased to announce that on January 23, we entered into a definitive agreement for Xylem to acquire Evoqua in an all-stock transaction at a 30% premium to our closing price on the Friday before signing. Joining forces with Xylem is an exciting development for the market and an exciting opportunity for our team members. The combination provides a platform to leverage our combined strengths and we look forward to increasing our collective impact as we address increasingly complex global water challenges.

謝謝你，丹。感謝您加入我們。在我們展示我們的結果之前，我再次高興地宣布，1 月 23 日，我們達成了最終協議，賽萊默將以全股票交易的方式收購 Evoqua，價格比我們在簽約前週五的收盤價溢價 30% .與 Xylem 聯手對市場來說是一個令人興奮的發展，對我們的團隊成員來說也是一個令人興奮的機會。合併提供了一個平台來發揮我們的綜合優勢，我們期待在應對日益複雜的全球水資源挑戰時增加我們的集體影響。

As a company, we remain focused on executing our plan until the deal closes. We will operate as business as usual until the combination is approved by regulatory agencies and both sets of company shareholders. I'm pleased to provide insight into our prior quarter results, and we'll appreciate you limiting your Q&A to our results and not to the combination or transaction.

作為一家公司，在交易完成之前，我們將繼續專注於執行我們的計劃。在監管機構和雙方公司股東批准合併之前，我們將照常營業。我很高興提供對我們上一季度業績的見解，我們將感謝您將您的問答僅限於我們的業績，而不是合併或交易。

Please turn to Slide 3. We're very pleased with our start to fiscal 2023. Our first quarter revenues were up 19% over the prior year period, with organic growth contributing 9.1%. We're pleased to report strong revenue growth across both segments. ISS organic revenue growth was nearly 8% and APT organic revenue growth was more than 12% year-over-year. We had strong sales across all regions and most end markets with price realization and volume both contributing to growth. FX continues to be a headwind, primarily for APT as the dollar weakened throughout the quarter from its late peak in September.

請轉到幻燈片 3。我們對 2023 財年的開局感到非常滿意。我們第一季度的收入比去年同期增長了 19%，其中有機增長貢獻了 9.1%。我們很高興地報告這兩個部門的收入增長強勁。 ISS 有機收入增長近 8%，APT 有機收入增長超過 12%。我們在所有地區和大多數終端市場都有強勁的銷售，價格實現和銷量都為增長做出了貢獻。外匯仍然是一個不利因素，主要是對 APT 而言，因為美元從 9 月末的峰值在整個季度走弱。

Adjusted EBITDA was up approximately 34% and margin expanded 190 basis points over the prior year quarter. We are very pleased that our LTM-adjusted EBITDA margin grew 40 basis points to 17.5%. We continue to see broad-based demand across our key end markets, particularly in life sciences and food and beverage. Our order flow remained healthy as well, with our book-to-bill ratio again over 1.0 and our pipeline remains robust. Given the first quarter performance and the order momentum, we are confident in delivering on the year's commitments made in our Q4 earnings call.

調整後的 EBITDA 增長約 34%，利潤率比去年同期增長 190 個基點。我們很高興 LTM 調整後的 EBITDA 利潤率增長 40 個基點至 17.5%。我們繼續看到我們主要終端市場的廣泛需求，特別是在生命科學和食品和飲料領域。我們的訂單流也保持健康，我們的訂單出貨比再次超過 1.0，我們的渠道依然強勁。鑑於第一季度的業績和訂單勢頭，我們有信心兌現在第四季度財報電話會議上做出的年度承諾。

Net working capital increased in the quarter as we intentionally built inventory to support our order activity. Operating cash flow was, in turn, impacted, though we still expect to exceed our 100% adjusted free cash flow conversion target for the fiscal year. We're able to reduce our net debt leverage ratio to 2.5x and our balance sheet is healthy and flexible and remains a top priority in this rising interest environment.

由於我們有意建立庫存以支持我們的訂單活動，本季度淨營運資金有所增加。運營現金流反過來受到影響，但我們仍預計將超過本財年 100% 調整後的自由現金流轉換目標。我們能夠將淨債務槓桿率降至 2.5 倍，我們的資產負債表健康靈活，在利率上升的環境中仍然是重中之重。

Please turn to Slide 4. Water is essential for daily life, whether for human consumption, industrial production or commercial purposes. Manufacturers are requiring more stringent levels of ultra-pure water while wastewater reuse has become vital in protecting, diminishing water supplies and reducing the strain on municipalities.

請轉到幻燈片 4。水對於日常生活至關重要，無論是用於人類消費、工業生產還是商業用途。製造商對超純水的要求越來越嚴格，而廢水再利用對於保護、減少供水和減輕市政壓力變得至關重要。

Water is becoming increasingly complex and Evoqua is an essential treatment provider making clean water more accessible. The long-term market trends are very favorable, and we expect our business to be resilient through normal market cycles.

水正變得越來越複雜，而 Evoqua 是使清潔水更容易獲得的重要處理供應商。長期市場趨勢非常有利，我們希望我們的業務能夠在正常的市場週期中保持彈性。

This slide highlights key financial metrics that demonstrate our resilient business model, driven in part by our recurring revenue streams with service and aftermarket making up approximately 60% of our revenue. Digitally connected outsourced water, strong and growing end markets and our industry-leading service are just a few drivers for organic growth in favorable and unfavorable market conditions.

這張幻燈片突出顯示了我們有彈性的商業模式的關鍵財務指標，部分是由我們的經常性收入流推動的，其中服務和售後市場約占我們收入的 60%。數字連接的外包水、強大且不斷增長的終端市場以及我們行業領先的服務只是在有利和不利的市場條件下實現有機增長的幾個驅動因素。

As stated previously, cash flow was down for the quarter but we continue to target adjusted free cash flow conversion of 100% and have achieved that level for several years. Our management team is focused on driving strong and consistent cash generation that is supported by our base of stable, profitable and recurring revenues. We're making strategic decisions on working capital, and we'll see opportunities for improvement as supply chain performance becomes consistent.

如前所述，本季度現金流量有所下降，但我們繼續將調整後的自由現金流量轉換目標定為 100%，並且已經實現了幾年的水平。我們的管理團隊專注於推動強大而持續的現金產生，這得到我們穩定、盈利和經常性收入基礎的支持。我們正在就營運資金做出戰略決策，隨著供應鏈績效變得一致，我們將看到改進的機會。

Please turn to Slide 5. This chart represents our second quarter expected order activity by end market compared to the prior year second quarter. We continue to expect strong orders across most end markets, particularly life sciences, food and beverage and aquatics. Microelectronics has been very strong in the prior year period, and we expect similar results in the quarter. Microelectronics remains on a long-term upcycle, though timing on -- timing and project schedules could create some volatility in this key end market.

請轉到幻燈片 5。此圖表顯示了與去年第二季度相比，我們按終端市場劃分的第二季度預期訂單活動。我們繼續期待大多數終端市場的訂單強勁，尤其是生命科學、食品和飲料以及水產。微電子在去年同期非常強勁，我們預計本季度會有類似的結果。微電子仍處於長期上升週期，但時間安排和項目時間表可能會在這個關鍵的終端市場造成一些波動。

Overall, we expect to see stable growing order demand across most of our end markets for the remainder of fiscal 2023. And as I previously commented, our inventory investments have us well positioned to convert our backlog effectively and to achieve a higher rate of on-time customer delivery. We've seen some project delays related to permitting issues and customer schedule management, but cancellations remain immaterial.

總體而言，我們預計在 2023 財年剩餘時間內，我們大多數終端市場的訂單需求將穩定增長。正如我之前評論的那樣，我們的庫存投資使我們能夠有效地轉換我們的積壓訂單並實現更高的開工率時間客戶交貨。我們已經看到一些與許可問題和客戶進度管理相關的項目延遲，但取消仍然無關緊要。

Please turn to Slide 6. We look at our environmental impact through our own footprint on the environment, but also through the products and services we provide to our customers. We are pleased to highlight 2 recent handprint wins which are expected to positively impact our customers' water conservation and reuse initiatives while generating an attractive return on investment.

請轉到幻燈片 6。我們通過我們自己對環境的足跡以及我們提供給客戶的產品和服務來審視我們對環境的影響。我們很高興地強調最近贏得的 2 項手印，預計這將對我們客戶的節水和再利用計劃產生積極影響，同時產生有吸引力的投資回報。

Our first highlight showcases the potential impact of the Infrastructure Law with an industrial chemical manufacturing, partnering with a regional municipal wastewater facility in Virginia. Evoqua was selected for the pilot to design, source and assemble a wastewater treatment system that combine ultrafiltration and RO technologies in a mobile platform. The pilot will test the treatment of wastewater for recycling and providing high-quality feedwater for plant use. The goal of the pilot is to determine the potential for a full-scale system with support from the new Infrastructure Bill.

我們的第一個亮點展示了基礎設施法對工業化學品製造的潛在影響，與弗吉尼亞州的區域市政污水處理設施合作。 Evoqua 被選中作為試點來設計、採購和組裝一個在移動平台上結合超濾和反滲透技術的廢水處理系統。該試點將測試廢水的回收處理，並為工廠提供高質量的給水。試點的目標是在新基礎設施法案的支持下確定全面系統的潛力。

A full-scale system would be designed to reduce the demand on the water treatment facility by 3,000 gallons per minute and to open additional drinking water capacity that could serve more than 14,000 homes in the region.

一個全面的系統將被設計成每分鐘減少 3,000 加侖水處理設施的需求，並開放額外的飲用水容量，可以為該地區的 14,000 多個家庭提供服務。

We also helped the supermarket chain divert high-strength organic waste using our anaerobic membrane bioreactor. The biological process converts the waste into biogas that is then converted into renewable energy. This system will treat up to 230,000 tons of food waste annually, reducing the landfill burden while producing 1,400 million BTUs of biogas per day which is the average daily use of approximately 7,000 U.S. homes.

我們還使用我們的厭氧膜生物反應器幫助連鎖超市轉移高強度有機廢物。生物過程將廢物轉化為沼氣，然後再轉化為可再生能源。該系統每年將處理多達 230,000 噸食物垃圾，減少垃圾填埋場的負擔，同時每天產生 14 億 BTU 的沼氣，這是大約 7,000 個美國家庭的平均每日使用量。

Please turn to Slide 7. While helping our customers improve their sustainability with our solutions, we're still addressing our own operations to minimize our footprint. We are very pleased to announce that we were recently selected as 1 of only 19 companies to receive The Terra Carta Seal. The Terra Carta Seal was launched at the COP26 Conference by King Charles III when he was the Prince of Wales. It recognizes global companies that are driving innovation and demonstrating their commitment to the creation of genuinely sustainable markets. The Terra Carta was awarded to companies with ambitions aligned with the recovery plan for nature, people and the planet, which was launched in January of 2021.

請轉到幻燈片 7。在幫助我們的客戶通過我們的解決方案提高可持續性的同時，我們仍在解決我們自己的運營問題，以盡量減少我們的足跡。我們非常高興地宣布，我們最近被選為僅有的 19 家公司之一，獲得了 Terra Carta Seal。 Terra Carta Seal 由查爾斯三世國王在 COP26 會議上發布，當時他還是威爾士親王。它認可正在推動創新並表明其對創建真正可持續市場的承諾的全球公司。 Terra Carta 被授予雄心壯志與 2021 年 1 月啟動的自然、人類和地球恢復計劃相一致的公司。

We're also privileged to have Ranked #6 this year on the Corporate Knights' list of the 100 most sustainable companies in the world. It is the second year that Evoqua has been included in the top 100 rankings and an improvement from our 19th position in 2021. We are honored to be recognized as a sustainability leader, enabling our customers to become more sustainable through our solutions and with our services.

我們也有幸今年在 Corporate Knights 的全球 100 家最具可持續性公司名單中排名第 6。這是 Evoqua 第二年進入前 100 名，比 2021 年的第 19 位有所提升。我們很榮幸被公認為可持續發展領導者，通過我們的解決方案和服務使我們的客戶變得更具可持續性.

Last but not least, we received the Frost & Sullivan 2022 Global Company of the Year Award in the Water Technology category. The company was honored for our visionary innovation, market-leading performance and unmatched customer service. We thank Frost & Sullivan for recognizing us at the forefront of innovation and growth in our industry. Our team has worked tirelessly to achieve these great awards, and I'm thankful for their efforts and the progress that we continue to make.

最後但同樣重要的是，我們獲得了水技術類別的 Frost & Sullivan 2022 年度全球公司獎。該公司因我們富有遠見的創新、市場領先的性能和無與倫比的客戶服務而受到表彰。我們感謝 Frost & Sullivan 認可我們處於行業創新和增長的前沿。我們的團隊孜孜不倦地獲得了這些偉大的獎項，我感謝他們的努力和我們不斷取得的進步。

I would now like to turn the call over to Ben.

我現在想把電話轉給本。

Thank you, Ron. Please turn to Slide 8.

謝謝你，羅恩。請轉到幻燈片 8。

For the first quarter, reported revenues were up 19% to approximately $436 million. Organic revenue growth contributed approximately 9%, driven by broad-based price realization and volume growth. We saw organic revenue growth in aftermarket services and capital as well as across all regions and most product lines versus the prior year.

第一季度，報告的收入增長了 19%，達到約 4.36 億美元。在廣泛的價格實現和銷量增長的推動下，有機收入增長貢獻了約 9%。與上一年相比，我們看到售後服務和資本以及所有地區和大多數產品線的有機收入增長。

First quarter adjusted EBITDA increased approximately 34% over the prior year period to $72.7 million for an overall margin of 16.7%. Favorable price realization, mix and higher sales volume were primary drivers of improved profitability. Adjusted EBITDA margins increased approximately 190 basis points over the prior year period. We were pleased that price/cost was positive and accretive to margins for the quarter.

第一季度調整後的 EBITDA 比去年同期增長約 34% 至 7270 萬美元，總利潤率為 16.7%。有利的價格實現、組合和更高的銷量是提高盈利能力的主要驅動力。調整後的 EBITDA 利潤率比去年同期增加了約 190 個基點。我們很高興價格/成本是積極的並且增加了本季度的利潤率。

Please turn to Slide 9. Our Integrated Solutions and Services segment's first quarter revenues were up approximately 25% to $305 million. Light and General and Life Sciences saw strong growth. Organic revenues growth contributed nearly 8%, driven primarily by price realization. Service and aftermarket revenues were strong across most end markets. Our capital projects and outsourced water pipeline is strong and growing. Digitally enabled revenues were up over 20% versus the prior year quarter.

請轉到幻燈片 9。我們的集成解決方案和服務部門第一季度的收入增長了約 25%，達到 3.05 億美元。 Light and General 和 Life Sciences 增長強勁。有機收入增長貢獻了近 8%，主要受價格實現的推動。大多數終端市場的服務和售後市場收入都很強勁。我們的資本項目和外包供水管道很強大，而且還在不斷增長。與去年同期相比，數字化收入增長了 20% 以上。

Adjusted EBITDA increased approximately 29% to $69 million due to favorable price and the consolidation of Mar Cor's operations, partly offset by material inflation and productivity. Adjusted EBITDA margin for the quarter was 22.6%, up 80 basis points from the prior year.

調整後的 EBITDA 增長約 29% 至 6900 萬美元，原因是優惠的價格和 Mar Cor 的業務整合，部分被材料通脹和生產力所抵消。本季度調整後的 EBITDA 利潤率為 22.6%，較上年同期增長 80 個基點。

Please turn to Slide 10. We continue to see strong year-over-year growth in ISS backlog. First quarter backlog was up approximately $162 million or 21% on over the prior year quarter and up 3% versus Q4 of last year. Our pipeline continues to be robust with opportunities across multiple end markets. We expect to see our book-to-bill ratio remain above 1 in the fiscal year.

請轉到幻燈片 10。我們繼續看到 ISS 積壓的同比強勁增長。第一季度積壓訂單比去年同期增加約 1.62 億美元或 21%，比去年第四季度增加 3%。我們的管道繼續保持強勁，並在多個終端市場提供機會。我們預計本財年的訂單出貨比將保持在 1 以上。

Please turn to Slide 11. Applied Product Technologies first quarter revenues were approximately $130 million, up more than 7%. Organic revenue growth contributed $14.8 million or approximately 12%, driven by strong volume growth and price realization with revenue growth across all regions and most product lines.

請轉到幻燈片 11。Applied Product Technologies 第一季度的收入約為 1.3 億美元，增長超過 7%。有機收入增長貢獻了 1,480 萬美元，約佔 12%，這主要得益於強勁的銷量增長和價格實現以及所有地區和大多數產品線的收入增長。

Microelectronics, especially in APAC, saw strong growth. As Ron mentioned, foreign currency translation unfavorably impacted revenues. Adjusted EBITDA for the first quarter increased nearly 12% to approximately $25 million and adjusted EBITDA margins saw a 70 basis points improvement to 18.8%, driven by favorable price realization, higher sales volume and mix, partly offset by inflationary impacts, productivity and FX.

微電子，尤其是在亞太地區，增長強勁。正如 Ron 所提到的，外幣換算對收入產生了不利影響。第一季度調整後的 EBITDA 增長近 12%，達到約 2500 萬美元，調整後的 EBITDA 利潤率提高 70 個基點，達到 18.8%，這得益於有利的價格實現、更高的銷量和組合，部分被通脹影響、生產力和外匯抵消。

Please turn to Slide 12. Capital spending, primarily for outsourced water orders, was approximately $23 million for the quarter or approximately 5.2% of revenues. First quarter net working capital grew to 16% of LTM sales to facilitate strong order rate growth. As previously stated, higher inventory levels and accounts receivable collection timing in the quarter, primarily drove the increase in net working capital.

請轉到幻燈片 12。本季度主要用於外包水訂單的資本支出約為 2300 萬美元，約佔收入的 5.2%。第一季度淨營運資金增長到 LTM 銷售額的 16%，以促進強勁的訂單率增長。如前所述，本季度較高的庫存水平和應收賬款收款時間主要推動了淨營運資金的增加。

Specifically, we built stock for certain raw materials such as resins and membranes. Due to limited supply and extended international shipping times, another portion of the inventory increase was work in process needed to support strong forecasted demand. We anticipate this will be utilized in the coming months as backlog is converted. We expect to reach our target of 100-plus percent adjusted free cash flow conversion for the fiscal year.

具體來說，我們為某些原材料建立了庫存，例如樹脂和膜。由於供應有限和國際航運時間延長，庫存增加的另一部分是支持強勁預測需求所需的在製品。我們預計這將在未來幾個月內隨著積壓工作的轉換而得到利用。我們預計本財年將實現 100% 以上調整後自由現金流轉換的目標。

Please turn to Slide 13. We had a strong quarter of revenues and profitability, which allowed us to build on our balance sheet health. Debt reduction remains a priority. And as Ron mentioned, our net leverage ratio is now at 2.5x just 1 year after the Mar Cor acquisition.

請轉到幻燈片 13。我們有一個強勁的季度收入和盈利能力，這使我們能夠在資產負債表健康的基礎上再接再厲。減少債務仍然是一個優先事項。正如 Ron 所提到的，在收購 Mar Cor 僅一年後，我們的淨槓桿率現在為 2.5 倍。

I would now like to turn the call back over to Ron. Ron?

我現在想把電話轉回給羅恩。羅恩？

Thank you, Ben. Please turn to Slide 14. We had a strong quarter with outstanding results across most key financial metrics. In particular, adjusted EBITDA margin for the first quarter of 16.7% and LTM EBITDA margin of 17.5% are the highest margins we have reported since becoming a public company.

謝謝你，本。請轉到幻燈片 14。我們有一個強勁的季度，在大多數關鍵財務指標上都取得了出色的成績。特別是，第一季度 16.7% 的調整後 EBITDA 利潤率和 17.5% 的 LTM EBITDA 利潤率是我們成為上市公司以來報告的最高利潤率。

Market demand remains strong, and we are pleased to deliver broad-based organic growth across both segments, all regions and most product lines. Our pipeline remains robust and our backlog continues to grow. We continue to manage with rising costs and supply chain uncertainties, and we're pleased to once again be price/cost positive for the quarter.

市場需求依然強勁，我們很高興在兩個細分市場、所有地區和大多數產品線實現廣泛的有機增長。我們的管道依然強勁，我們的積壓工作繼續增長。我們繼續應對不斷上升的成本和供應鏈的不確定性，我們很高興再次對本季度的價格/成本有利。

Customers continue to see the value of outsourced water which continues to contribute to ISS's growth and recurring revenue model. Digitally connected sales were again up double digits.

客戶繼續看到外包水的價值，這繼續為 ISS 的增長和經常性收入模式做出貢獻。數字連接銷售額再次增長兩位數。

Heading into the second quarter, we are focused on sales and operational execution to convert our strong backlog. Price realization is expected to be positive as inflation abates in some pockets and overall labor and material availability show signs of improvement as well. We continue to monitor the timing of customer purchase orders and shipment requests as supply chain and regulatory uncertainties could create timing challenges.

進入第二季度，我們專注於銷售和運營執行，以轉換我們大量積壓的訂單。由於一些地區的通貨膨脹有所減弱，而且整體勞動力和材料供應也顯示出改善跡象，預計價格實現將是積極的。我們繼續監控客戶採購訂單和發貨請求的時間，因為供應鍊和監管的不確定性可能會帶來時間上的挑戰。

Given our backlog and order activity, we are confident in delivering our commitments for FY '23. However, given the pending transaction, we are not giving official forward guidance. I will now open the call for your questions and remind you to please focus on Evoqua performance and not the outlook for the pending transaction.

鑑於我們的積壓和訂單活動，我們有信心兌現我們對 23 財年的承諾。但是，鑑於未決交易，我們不提供官方前瞻性指導。我現在將打開您的問題電話，並提醒您請關注 Evoqua 的表現，而不是未決交易的前景。

(Operator Instructions) We'll take our first question from Deane Dray with RBC Capital Markets.

（操作員說明）我們將與 RBC 資本市場一起接受 Deane Dray 的第一個問題。

Congrats again on the merger agreement with Xylem.

再次祝賀與 Xylem 達成合併協議。

Thanks, Deane.

謝謝，迪恩。

Thanks, Deane.

謝謝，迪恩。

If we can start with the ISS pipeline, could you just take us through what kind of rank or the end markets, where are you seeing the most interest? And could you talk about any kind of reverse inquiries that you're getting from customers that potentially either within these verticals, but also geographically, are you getting any inbound questions from potential customers in Europe and Asia?

如果我們可以從 ISS 管道開始，您能否帶我們了解一下什麼樣的排名或終端市場，您最感興趣的地方在哪裡？你能談談你從客戶那裡得到的任何類型的反向查詢，這些客戶可能在這些垂直領域內，而且在地理上，你是否從歐洲和亞洲的潛在客戶那裡收到任何入站問題？

Yes. Thanks, Deane. As you look at Slide 5, we continue just to see strength across the majority of the end markets as we've highlighted. Life Sciences very robust. Chemical processing continues to be very strong. And the one that we had always pointed out is the canary in the coal mine that we'd be concerned about keeping an eye on, on was Light and General Industry and that continues to be a street of green. So we feel really good about it.

是的。謝謝，迪恩。當您查看幻燈片 5 時，正如我們強調的那樣，我們繼續看到大多數終端市場的實力。生命科學非常強大。化學加工繼續非常強勁。我們一直指出的是煤礦中的金絲雀，我們會關注它，它是輕工業和一般工業，它仍然是一條綠色的街道。所以我們對此感覺非常好。

I highlighted in the comments, actually, we're seeing strong activity from power and renewables as well, and we're certainly seeing that. So you kind of look at those markets, they're all very good. As we think about microelectronics and we show it is neutral. Last year, this quarter was just fantastic, and we anticipate it will be flat with last year. So we're feeling very good about the end markets that we're seeing right now.

我在評論中強調，實際上，我們也看到了來自電力和可再生能源的強勁活動，我們當然看到了這一點。所以你看看那些市場，它們都非常好。當我們考慮微電子時，我們表明它是中性的。去年，這個季度非常棒，我們預計它將與去年持平。所以我們對我們現在看到的終端市場感覺非常好。

Reverse inquiries. We're really not hearing a lot right now, but we are hearing customers kind of come out and say, obviously, we know who you're partnering with. The outlook for the combination is fantastic. We have got zero concerns coming out of customers. But I think if anything, it will be stronger as we start to make headway and we're planning. Obviously, right now, we're only in the planning phase, and we can only plan until the deal closes. And -- but international with APT is pretty much a great opportunity out of the gate.

反向查詢。我們現在確實聽得不多，但我們聽到客戶有點出來說，很明顯，我們知道你在和誰合作。合併的前景非常好。我們對客戶的擔憂為零。但我認為，如果有的話，隨著我們開始取得進展並且我們正在計劃，它會變得更強大。顯然，現在，我們只是在計劃階段，我們只能計劃到交易完成。而且——但是國際化的 APT 幾乎是一個很好的機會。

That's great to hear. And a follow-up for Ben on what's the expected free cash flow conversion timing for the year? Some of this, you said there was some accounts receivable collection timing, so that would suggest more near-term conversion, but just kind of the pace of free cash flow conversion for the year.

聽到這個消息我很高興。 Ben 的後續行動是關於今年預期的自由現金流轉換時間是什麼時候？其中一些，你說有一些應收賬款收款時間，所以這會建議更多的近期轉換，但只是今年自由現金流轉換的速度。

Yes. We expect to continue to improve as we go through the year. In Q4, $10 to be our strongest free cash conversion quarter, Deane. But we took the opportunity looking at our demand and looking at our outlook to make sure we secure the ability to meet that demand and secured some of the areas, in particular, for the service organization like resins and membranes to make sure we had the stock. And then APT on their end, they certainly are building the work in process to be delivered on that -- on the shipments that are coming.

是的。我們希望在這一年中繼續改進。在第 4 季度，10 美元將成為我們最強勁的自由現金轉換季度，Deane。但我們藉此機會審視我們的需求並審視我們的前景，以確保我們有能力滿足該需求並確保某些領域，特別是樹脂和膜等服務組織，以確保我們有庫存.然後是 APT，他們當然正在構建正在進行的工作，以在即將到來的貨物上交付。

So we naturally expect free cash flow to improve as we head through the year. And then as you know, we're -- at September year-end, and the calendar year-end, you typically see companies that tend at times, particularly with uncertain times hold on payables a bit, and we did see some of that in December, but receivables are looking fine as we go and we expect them to continue to look fine with full length collection.

因此，我們自然會預計今年的自由現金流會有所改善。然後如你所知，我們 - 在 9 月末和日曆年末，你通常會看到公司有時傾向於，特別是在不確定的時期持有應付款項，我們確實看到了其中一些12 月，但隨著我們的進展，應收賬款看起來不錯，我們希望它們在全長收款後繼續看起來不錯。

Our next question comes from Nathan Jones of Stifel.

我們的下一個問題來自 Stifel 的 Nathan Jones。

I'm going to start with a bit of a follow-up to Deane's second question now on free cash flow and maybe a bit more on the inventory build. I think you guys have been expecting kind of a higher mix of capital versus outsourced kind of projects relatively speaking in '23. Some of these inventory build related to what are more near-term deliveries on those capital kinds of projects. And with this in the plan when we were coming into 2023, this building inventory? Or has it been because you're seeing better orders on the capital burn?

我現在將開始對 Deane 關於自由現金流的第二個問題進行一些跟進，也許還有更多關於庫存構建的問題。我認為你們在 23 年相對而言一直期待資本與外包項目的更高組合。其中一些庫存與這些資本項目的近期交付有關。在我們進入 2023 年時的計劃中，這個建築庫存？還是因為您看到資本燃燒的訂單更好？

We are seeing strong orders on the capital front. Across the board, we're seeing strong orders than we anticipated. And so as we saw those orders coming in as we went through the quarter, we decided -- and the activity order rates, we decided to make sure that we secured our stock to make sure we can be on those orders.

我們在資本方面看到了強勁的訂單。總體而言，我們看到的訂單比我們預期的要多。因此，當我們在整個季度看到這些訂單進來時，我們決定 - 以及活動訂單率，我們決定確保我們獲得庫存以確保我們可以處理這些訂單。

That's helpful. Go ahead.

這很有幫助。前進。

So from a plan perspective, obviously, it's -- things are developing stronger than planned. And we definitely want to -- the good thing about this business is we have visibility and it gives us time to respond. So obviously, we're responding accordingly.

所以從計劃的角度來看，很明顯，事情的發展比計劃的要強。我們絕對希望——這項業務的好處是我們有知名度，它讓我們有時間做出回應。很明顯，我們正在做出相應的回應。

My second question was around a comment you made in your prepared remarks that price cost was actually positive to margins in the quarter. Can you provide a bit more color around that and what the expectation is for price/cost maybe as we move through the year? Do you expect it to actually be positive to margins rather than just dollar positive?

我的第二個問題是圍繞你在準備好的評論中發表的評論，即價格成本實際上對本季度的利潤率是積極的。你能否提供更多關於它的顏色以及我們對價格/成本的期望是什麼？您是否期望它實際上對利潤率有利，而不僅僅是對美元有利？

So certainly, I'm not going to provide a lot of outlook. But I will tell you, we had $9 million positive on price/cost in the course. It was strong. And we did the math. It was certainly a nice healthy part of that margin expansion. The wildcard there is always what happens to inflationary impacts. But holistically, we seem to be seeing things settle down and we're certainly seeing the benefits of the price realization actions that we've been through...

所以當然，我不會提供很多前景。但我會告訴你，我們在課程中的價格/成本上有 900 萬美元。它很強大。我們做了數學計算。這當然是利潤率擴張的一個很好的健康部分。通配符總是會發生通貨膨脹影響。但總的來說，我們似乎看到事情穩定下來，我們當然看到了我們所經歷的價格實現行動的好處......

Yes, Nathan, I think that was a tremendous benefit for us in the quarter has been highlighted. And we've been waiting for these -- I mean we've been out in front of the cost curve with pricing actions, and they take a little bit to come into play and they just continue to flow-through.

是的，內森，我認為這對我們在本季度的巨大好處已經得到強調。我們一直在等待這些——我的意思是我們已經通過定價行動走在了成本曲線的前面，它們需要一點時間才能發揮作用，它們只會繼續流動。

I know you guys have been implementing strategic pricing increases as far back as 2021 that got a bit covered up by inflation over the last couple of years. Is it your intention to be able to hold pricing if you see actual declines in your costs?

我知道你們早在 2021 年就一直在實施戰略性價格上漲，但在過去幾年中被通貨膨脹所掩蓋。如果您看到成本實際下降，您是否打算保持定價？

Yes. I mean, as I've highlighted in prior calls, when we've talked about this, our pricing is very sticky. So once we go with the price increase, it is -- it takes quite a bit to pull that back. It's a sticky price that we feel confident in.

是的。我的意思是，正如我在之前的電話中強調的那樣，當我們討論這個問題時，我們的定價非常粘。因此，一旦我們開始提價，就需要相當多的時間才能將其拉回來。這是一個我們有信心的粘性價格。

(Operator Instructions) We'll take our next question from Sahil Manocha with Citi Group.

（操作員說明）我們將接受花旗集團 Sahil Manocha 的下一個問題。

Kind of holding in on ISS margins really quickly. You saw the 80 bps improvement sequentially. And previously, you had mentioned the onboarding of new service tech. Could you give us some color on how they're onboarding at this time?

有點很快地保持了 ISS 的利潤率。您看到了連續 80 個基點的改進。之前，您提到了新服務技術的入職。你能給我們一些關於他們現在如何入職的顏色嗎？

Yes. We feel very good about it. I mean it's taken a little bit of time. And we actually commented on our last call that the onboarding happened through the year. We were back to our normal run rate of openings at the end of the fourth quarter of last fiscal year. So what you're seeing is you're seeing the fall-through of more efficiency as we would normally expect to see. And we've got great confidence that, that will continue on.

是的。我們對此感覺很好。我的意思是這需要一點時間。實際上，我們在上次電話會議上評論說，入職是全年進行的。我們在上一財年第四季度末恢復到正常的開張率。因此，您所看到的是，正如我們通常期望看到的那樣，您正在看到更高效率的下降。我們非常有信心，這將繼續下去。

Awesome. I have a second question. So I've seen states like Maine, New York, California and Colorado seem to be getting more restrictive when it comes to PFAS. Have you seen a bump in your PFAS-related work as a result of these recently passed restrictions?

驚人的。我有第二個問題。所以我看到像緬因州、紐約州、加利福尼亞州和科羅拉多州這樣的州在 PFAS 方面似乎越來越嚴格。由於這些最近通過的限制，您是否看到與 PFAS 相關的工作有所增加？

Yes, it's a great question. It's interesting. And one of the things we've talked about is the states and municipalities that were out ahead of it already, we're putting projects in. So we've already been operating in those specific areas that you're highlighting with PFAS treatment. It speaks to that $100 million pipeline that we talk about typically on every call, and we're still winning about 1/3 of those.

是的，這是一個很好的問題。這真有趣。我們談到的其中一件事是已經領先於它的州和市政當局，我們正在投入項目。因此，我們已經在您強調的 PFAS 處理的那些特定領域開展業務。它談到了我們通常在每次通話中談論的 1 億美元管道，我們仍然贏得了其中的大約 1/3。

I think the big movement that everyone is waiting on is the MCL, the maximum contaminant limits actually to be passed and to be set. That was supposed to happen at the end of -- by the end of calendar '22, it did not occur. We're hearing it's pending very soon. But I would say, until that happens, you're kind of going to see that PFAS market be flat.

我認為每個人都在等待的大動作是 MCL，即實際要通過和設定的最大污染物限值。這本應在 22 年日曆結束時發生，但沒有發生。我們聽說它很快就會懸而未決。但我會說，在這種情況發生之前，你會看到 PFAS 市場持平。

(Operator Instructions) We'll take our next question from Joe Giordano with Cowen.

（操作員說明）我們將與 Cowen 一起接受 Joe Giordano 的下一個問題。

So your color on light industry, in general have been doing well sequentially. That was surprising. I mean, just in the early earnings we're hearing across our coverage, that is absolutely not the commentary of other companies within those markets. So maybe if there's like some distinction you can point to between maybe what some of your customers are facing from their own demand and then what they're demanding from you?

因此，您對輕工業的色彩總體上一直表現良好。那是令人驚訝的。我的意思是，就我們在報導中聽到的早期收益而言，這絕對不是這些市場中其他公司的評論。所以也許如果有一些區別，你可以指出你的一些客戶面臨的他們自己的需求和他們對你的要求之間的區別？

Yes. So Joe, as you look at our end market exposure, it continues to give us pretty high confidence. I mean we are very heavily concentrated in North America, as you know, the nearshoring and onshoring have continued to carry a pretty good order activity for us and a fairly robust pipeline. And the other thing that we speak about with regularity, the scarcity of water, the challenges on treating water to a level that is more difficult and then people trying to do and companies trying to do what's right around ESG metrics with recycle, reuse minimizing their water footprint feeds -- it really aligns very well with the Evoqua's offering, our solutions we take into the marketplace.

是的。所以喬，當你看到我們的終端市場風險時，它繼續給我們相當高的信心。我的意思是我們非常集中在北美，正如你所知，近岸外包和在岸外包繼續為我們帶來相當不錯的訂單活動和相當強大的管道。我們經常談論的另一件事是水資源短缺，將水處理到更困難的水平所面臨的挑戰，然後人們試圖做的事情和公司試圖圍繞 ESG 指標做正確的事情，包括回收、再利用，最大限度地減少他們的水足跡飼料——它確實與 Evoqua 的產品、我們進入市場的解決方案非常吻合。

So we're seeing -- and one thing we talk about is how our pipeline has shifted very heavily from just processed water to wastewater for recycling and reuse. That continues, and you're even seeing that across light and general industry as well.

所以我們看到 - 我們談論的一件事是我們的管道如何從僅處理過的水大量轉移到廢水以進行回收和再利用。這種情況還在繼續，你甚至會在輕工業和一般工業中看到這種情況。

And then just, Ben, if you could just clarify on the organic growth this quarter, how much of that with price versus volume?

然後，本，如果你能澄清一下本季度的有機增長，其中價格與數量有多少？

We certainly have a lot of price in there. With ISS, it was heavy on the price side. With APT, it was relatively proportional price to volume.

我們當然有很多價格在那裡。對於 ISS，價格方面很沉重。對於 APT，價格與數量成正比。

(Operator Instructions) We'll take our next question from Patrick Baumann with JPMorgan.

（操作員說明）我們將接受來自摩根大通的帕特里克鮑曼的下一個問題。

Quick question on -- you mentioned a couple of different times around customer schedule management, I think. And you talked about that's being felt most, if specific end markets. Because you also mentioned lumpiness, I think, in microelectronics, maybe that's what you're talking about, just...

快速提問——我想你在不同的時間提到了客戶計劃管理。如果是特定的終端市場，你談到了最能感受到這一點。因為你也提到了塊狀，我想，在微電子學中，也許這就是你所說的，只是......

Yes, just -- for...

是的，只是——為了……

Just looking for incremental color around kind of the scattered comments you made in the -- in your commentary around project delays, lumpiness in kind of projects, that sort of thing.

只是在你對項目延遲的評論中，在你對項目延遲、項目中的塊狀等的評論中，尋找關於你所做的分散評論的增量顏色。

Yes. So actually, as you think about our project outlays, -- and this is one of the difficulties we've had through the entire supply chain difficulty is, we're working, we're aligned, we're ready to deliver. It is customer sites being prepared for us to deliver to. So the larger and the more complex the system that we're selling, the more challenging that is for them to be on time because they're having to coordinate multiple other subcontractors, multiple other supply chains to be ready for our system to go in.

是的。所以實際上，當你考慮我們的項目支出時，這是我們在整個供應鏈困難中遇到的困難之一，我們正在努力，我們已經結盟，我們已準備好交付。正在為我們交付的客戶站點做準備。因此，我們銷售的系統越大越複雜，他們要按時完成的挑戰就越大，因為他們必須協調多個其他分包商和多個其他供應鏈，為我們的系統投入使用做好準備.

Again, when our system goes in, it's towards the end because they're getting ready to turn on the water. The system goes in, it gets delivered. And then until they turn it on and start the operation, it delays our billing around operating and maintenance or build on operate top contracts. So that's -- you kind of think about when you look at Page 5, the more complex, the larger systems like the microelectronics that I highlighted, would be the ones that would be a little more lumpy on customer timing and customer delays against the remainder of the project.

同樣，當我們的系統進入時，它接近尾聲，因為他們正準備打開水。系統進入，它被交付。然後直到他們打開它並開始運營，它會延遲我們圍繞運營和維護或建立在運營頂級合同上的賬單。所以那是——當你看第 5 頁時，你會想，更複雜、更大的系統，比如我強調的微電子，將是那些在客戶時間和客戶延遲方面比其餘部分更不穩定的系統的項目。

And that's something that you had previously embedded in your outlook. I think you're saying. So that's not something that is a surprise to you. It's just something that you're highlighting as -- yes, okay.

這是你之前已經嵌入到你的前景中的東西。我想你是在說所以這不是讓你感到驚訝的事情。這只是您要強調的內容——是的，好的。

We've been dealing with this from the end of the, I would say, the supply chain challenge. We deal with it always, but certainly, the supply chain difficulty has exacerbated that issue, and we've been managing this for the past 2 years.

我們一直在處理這個問題，我想說的是，供應鏈挑戰。我們一直在處理它，但可以肯定的是，供應鏈困難加劇了這個問題，我們在過去 2 年裡一直在處理這個問題。

And can you comment on how Mar Cor performed in the quarter and how that business is kind of performing versus expectations?

您能否評論一下 Mar Cor 在本季度的表現以及該業務的表現與預期相比如何？

Yes, I would say it's right on track. We feel very good about Mar Cor, where it is. It's right on track. We still have an expectation for our SAP rollout in the month of February, and things are lined up exactly as we anticipated.

是的，我會說這是正確的。我們對 Mar Cor 感覺很好，它就在那裡。這是正確的軌道。我們仍然期望在 2 月份推出 SAP，一切都按照我們的預期進行。

Our next question comes from Mike Halloran with Baird.

我們的下一個問題來自 Mike Halloran 和 Baird。

This is Ted on for Mike. Quick question for you. Obviously, the margin performance was pretty exceptional and a healthy amount of price helping there on the price/cost side of things. Could you maybe talk about the margins embedded in the expanding backlog, particularly given the current mix and just the sustainability of margin performance?

這是邁克的泰德。快速向您提問。顯然，利潤率表現非常出色，而且價格合理，有助於在價格/成本方面發揮作用。您能否談談不斷擴大的積壓中嵌入的利潤率，特別是考慮到當前的組合以及利潤率表現的可持續性？

Yes. I mean we feel good about it. We look at the margins in the backlog with regularity. And again, one thing that we highlighted as our pricing goes out. It's very sticky. It stays. Our backlog is already priced against price increases. And we feel good around the way that we're managing the business and able to manage the supply chain.

是的。我的意思是我們對此感覺良好。我們定期查看積壓訂單中的利潤。再一次，我們在定價結束時強調了一件事。它非常粘。它留下來。我們的積壓訂單已經根據價格上漲進行了定價。我們對我們管理業務和能夠管理供應鏈的方式感到滿意。

And then a bit of a clarifying question. I believe I heard something about some permitting hang-ups. Just a quick clarification. Is that a broader comment on changing the permitting environment? Or is that -- I suspect that's more of a one-off comment associated with a subset of projects?

然後是一個澄清問題。我相信我聽說過一些允許掛斷的消息。只是一個快速的澄清。這是對改變許可環境的更廣泛評論嗎？還是——我懷疑這更像是與項目子集相關的一次性評論？

It's a few specific projects in certain market areas. And again, that really goes to the question I had previously around how are we dealing with delays on a customer site. When they're dealing with delays around permitting, around getting their supply chain, the rest of the infrastructure in place for us to be able to deliver is something that we manage against with regularity. Sometimes it creates some lumpiness in the recognition of revenue against backlog on occasion. But it's nothing new that we haven't been dealing with in the past.

這是某些市場領域的一些特定項目。再一次，這真的涉及我之前關於我們如何處理客戶站點延遲的問題。當他們處理許可方面的延遲時，圍繞獲得他們的供應鏈，我們能夠交付的其餘基礎設施到位是我們經常管理的事情。有時，它有時會在確認積壓的收入時產生一些混亂。但這並不是我們過去沒有處理過的新鮮事。

(Operator Instructions) And it appears at this time, we have no further questions. I would now like to turn the call back over to Ron Keating for any additional or closing remarks.

（操作員說明）此時出現，我們沒有進一步的問題。我現在想將電話轉回給 Ron Keating，以徵求任何補充或結束語。

Thank you again for your interest in Evoqua. As always, I want to thank our team members for driving and delivering every day very safely to take care of our customers to deliver against the expectations that our customers have of us in the marketplace and making sure that we make them more competitive. We've got a fantastic team of people. I look forward to continuing to deliver against the market guarantees that Evoqua makes and the promises, and I appreciate all of you having an interest in speaking with us today. Thank you.

再次感謝您對 Evoqua 的關注。一如既往，我要感謝我們的團隊成員每天都非常安全地駕駛和交付，以照顧我們的客戶，以滿足客戶對我們在市場上的期望，並確保我們使他們更具競爭力。我們擁有一支出色的團隊。我期待著繼續兌現 Evoqua 做出的市場保證和承諾，感謝大家今天有興趣與我們交談。謝謝。

Thank you. That concludes today's Evoqua Water Technologies First Quarter Fiscal 2023 Earnings Conference Call. You may now disconnect your lines, and thank you for your interest in Evoqua.

謝謝。今天的 Evoqua Water Technologies 2023 財年第一季度收益電話會議到此結束。您現在可以斷開線路，感謝您對 Evoqua 的關注。