UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2018
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-37903
AquaVenture Holdings Limited
(Exact name of registrant as specified in its charter)
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British Virgin Islands |
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98-1312953 |
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(State or other jurisdiction of |
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(IRS Employer |
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incorporation or organization) |
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Identification No.) |
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c/o Conyers Corporate Services (B.V.I.) Limited Commerce House, Wickhams Cay 1 |
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P.O. Box 3140 Road Town British Virgin Islands VG1110 |
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(813) 855‑8636 (Registrant’s telephone |
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(Address of principal executive office) |
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number, including area code) |
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Name on each exchange on which registered |
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Ordinary Shares, no par value |
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The New York Stock Exchange (NYSE) |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit). Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or and emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ☐ |
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Accelerated filer ☒ |
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Non-accelerated filer ☐ |
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Smaller reporting company ☒ |
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Emerging growth company ☒ |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of ordinary shares held by non-affiliates of the registrant, based on the closing price of the registrant’s ordinary shares on June 29, 2018, as reported by the New York Stock Exchange on such date was approximately $185,742,143. For purposes of this determination, ordinary shares held by each officer and director and by each person who owns 10% or more of the registrant’s outstanding ordinary shares have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
The total number of Ordinary Shares outstanding as of March 7, 2019 was 26,931,225.
Documents Incorporated By Reference
The registrant intends to file a definitive proxy statement pursuant to Regulation 14A within 120 days of the end of the fiscal year ended December 31, 2018. Portions of such definitive proxy statement are incorporated by reference into Part III of this Annual Report on Form 10-K. Except with respect to information specifically incorporated by reference in this Form 10-K, the Proxy Statement is not deemed to be filed as part of this Form 10-K.
EXPLANATORY NOTE
Unless otherwise specified, references in this report to the “Company”, “AquaVenture”, “we”, “us” and “our” refer to both AquaVenture Holdings LLC and its subsidiaries prior to our corporate reorganization effected immediately prior to our initial public offering and AquaVenture Holdings Limited and its subsidiaries following our corporate reorganization in 2016.
This Amendment No. 1 (“Amendment No. 1”) to the Annual Report on Form 10-K/A amends the annual report on Form 10-K of AquaVenture Holdings Limited for the fiscal year ended December 31, 2018, as filed with the Securities and Exchange Commission, or SEC, on March 11, 2019 (the “Original Filing”).
We are filing this Amendment No.1 to correct a clerical error in Item 6. Selected Consolidated Financial Data. Specifically, the Company has updated the December 31, 2016 amount for the line item “Property, plant and equipment, construction in progress and long-term contract costs” in the Consolidated Balance Sheet Data to reflect the recast balance resulting from the adoption of ASC 606.
This Amendment No.1 consists solely of the preceding cover page, this explanatory note, the information required by Item 6 of Form 10-K, a signature page and the certifications required to be filed as exhibits.
In accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Item 6 of the Original Filing is hereby amended and restated in its entirety. This Amendment No. 1 should be read in conjunction with the Original Filing and with our filings with the SEC subsequent to the Original Filing.
This Amendment No. 1 does not reflect events occurring after the filing of the Original Filing, and, except as described above, does not modify or update any other disclosures.
AQUAVENTURE HOLDINGS LIMITED
FIRST AMENDMENT TO THE ANNUAL REPORT ON FORM 10-K/A FOR THE YEAR ENDED DECEMBER 31, 2018
TABLE OF CONTENTS
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PAGE |
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2
Item 6. Selected Financial Data.
The following selected consolidated financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, the consolidated financial statements and related notes, and other financial information included in this Annual Report on Form 10-K. The related financial data in this section are not intended to replace the consolidated financial statements and are qualified in their entirety by the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. All financial data for the years ended December 31, 2017 and 2016 included within Item 6 in this Annual Report on Form 10-K has been restated in accordance with the adoption of authoritative guidance issued by the Financial Accounting Standards Board (“FASB”) regarding revenue from contracts with customers and the determination of the customer in a service concession contract (together referred to as the “Adopted Revenue Guidance”) on a full retrospective basis on January 1, 2018.
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Year Ended December 31, |
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2018(8) |
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2017(6)(7) |
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2016(3)(4)(5) |
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2015(2) |
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2014(1) |
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(in thousands) |
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Consolidated Statements of Operations and Comprehensive Income Data: |
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Revenues: |
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Bulk water |
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$ |
57,262 |
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$ |
53,436 |
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$ |
50,893 |
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$ |
47,444 |
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$ |
38,989 |
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Rental |
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64,216 |
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52,997 |
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48,699 |
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44,654 |
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23,995 |
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Product sales |
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20,105 |
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9,796 |
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10,267 |
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8,237 |
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4,143 |
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Financing |
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4,025 |
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4,534 |
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1,713 |
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— |
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— |
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Total revenues |
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145,608 |
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120,763 |
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111,572 |
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100,335 |
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67,127 |
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Cost of revenues: |
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Bulk water |
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26,516 |
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27,145 |
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25,525 |
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29,090 |
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21,037 |
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Rental |
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28,025 |
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23,484 |
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21,437 |
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20,210 |
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10,984 |
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Product sales |
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13,565 |
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5,779 |
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5,869 |
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4,190 |
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2,091 |
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Total cost of revenues |
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68,106 |
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56,408 |
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52,831 |
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53,490 |
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34,112 |
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Gross profit |
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77,502 |
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64,355 |
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58,741 |
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46,845 |
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33,015 |
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Selling, general and administrative expenses |
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83,645 |
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72,421 |
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70,876 |
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49,437 |
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31,653 |
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Goodwill impairment |
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— |
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— |
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— |
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27,353 |
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— |
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(Loss) income from operations |
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(6,143) |
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(8,066) |
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(12,135) |
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(29,945) |
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1,362 |
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Other expense: |
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Gain on bargain purchase, net of deferred taxes |
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— |
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— |
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1,429 |
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— |
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— |
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Interest expense, net |
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(15,046) |
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(11,537) |
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(11,147) |
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(8,507) |
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(5,148) |
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Other income (expense), net |
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(850) |
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(1,850) |
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1,299 |
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(364) |
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(325) |
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Loss before income tax expense |
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(22,039) |
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(21,453) |
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(20,554) |
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(38,816) |
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(4,111) |
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Income tax expense (benefit) |
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(1,311) |
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3,441 |
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365 |
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2,973 |
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(1,984) |
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Net loss |
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(20,728) |
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$ |
(24,894) |
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$ |
(20,919) |
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$ |
(41,789) |
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$ |
(2,127) |
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Loss per share – basic and diluted (9) |
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(0.78) |
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$ |
(0.94) |
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$ |
(0.28) |
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As of December 31, |
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2018 |
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2017 |
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2016 |
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2015 |
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2014 |
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(in thousands) |
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Consolidated Balance Sheet Data: |
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Cash and cash equivalents |
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$ |
56,618 |
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$ |
118,090 |
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$ |
95,334 |
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$ |
17,802 |
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$ |
37,499 |
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Working capital |
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$ |
64,626 |
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$ |
131,381 |
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$ |
77,676 |
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$ |
5,619 |
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$ |
30,946 |
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Property, plant and equipment, construction in progress and long-term contract costs |
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$ |
165,491 |
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$ |
123,208 |
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$ |
125,490 |
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$ |
217,193 |
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$ |
129,983 |
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Total assets |
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$ |
725,463 |
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$ |
553,945 |
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$ |
535,724 |
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$ |
425,656 |
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$ |
374,666 |
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Current portion of long-term debt (10) |
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$ |
6,494 |
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$ |
6,483 |
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$ |
27,963 |
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$ |
19,347 |
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$ |
8,265 |
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Long-term debt (10) |
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$ |
313,215 |
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$ |
167,772 |
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$ |
115,753 |
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$ |
118,013 |
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$ |
76,102 |
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Total shareholders’/members' equity (11) |
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$ |
336,598 |
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$ |
344,196 |
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$ |
358,655 |
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$ |
265,160 |
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$ |
271,969 |
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3
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(1) |
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Includes the operations of Quench USA, Inc. and Atlas Watersystems, Inc. (“Atlas”) from the respective dates of acquisition of June 6, 2014 and June 16, 2014. |
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(2) |
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Includes the operations of our bulk water business in the BVI from the date of acquisition of June 11, 2015. In addition, the Company recorded a goodwill impairment charge of $27.4 million related to the Quench reporting unit during 2015. The tax benefit associated with this impairment charge was $716 thousand. |
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(3) |
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Includes the operations acquired in the Peru Acquisition from the date of acquisition of October 31, 2016. In addition, we recorded a $1.4 million gain on bargain purchase, net of deferred taxes, from the Peru Acquisition in the Seven Seas Water reportable segment. |
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(4) |
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Includes IPO triggered cash compensation and associated payroll taxes of $6.1 million which was paid during the fourth quarter of 2016. |
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(5) |
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Includes a gain of $1.6 million on early extinguishment of a note payable on December 1, 2016. |
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(6) |
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Includes a loss of $1.4 million on early extinguishment of debt on August 4, 2017. |
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(7) |
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Includes the operations of Pure Water Innovations, Inc. (“PWI”), Quench Water Canada, Inc. (“Quench Canada”), and Wellsys USA Corporation (“Wellsys”) from their respective dates of acquisition of June 1, 2017, August 2, 2017 and September 8, 2017. |
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(8) |
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Includes operations acquired in the Clarus and Watermark Acquisitions, Wa-2 Acquisition, Aqua Coolers Acquisition, Avalon Acquisition, Alpine Acquisition, Quality Water Services Acquisition, AUC Acquisition, Bluline Acquisition and PHSI Acquisition from their respective dates of acquisition of January 15, 2018, March 1, 2018, April 2, 2018, June 4, 2018, August 6, 2018, October 2, 2018, November 1, 2018, December 3, 2018 and December 18, 2018, respectively. |
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(9) |
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Represents loss per share and weighted-average shares outstanding for the period following the Corporate Reorganization and IPO. There were no ordinary shares outstanding prior to October 6, 2016 and, therefore, no loss per share information has been presented for any period prior to that date. |
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(10) |
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Long-term debt was refinanced in conjunction with a Corporate Credit Agreement which was entered into on August 4, 2017. In addition, there was one amendment to the Corporate Credit Agreement during the year ended December 31, 2017 and three amendments to the Corporate Credit Agreement during the year ended December 31, 2018, which included, among other things, incremental borrowings. See further discussion within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this Annual Report on Form 10-K. |
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(11) |
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As a result of the Adopted Revenue Guidance, the Company recorded a cumulative net increase of $8.4 million to accumulated deficit as of January 1, 2016. |
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I tem 15. Exhibits, Financial Statement Schedules.
(b) Exhibits.
The exhibits listed on the accompanying Exhibit Index are filed, furnished or incorporated by reference as part of this report, and such Exhibit Index is incorporated herein by reference.
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6
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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AquaVenture Holdings Limited |
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Date: April 26, 2019 |
By: |
/s/ LEE S. MULLER |
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Lee S. Muller |
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Chief Financial Officer
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EXHIBIT 31.1
CERTIFICATION
I, Anthony Ibarguen, certify that:
1. I have reviewed this Annual Report on Form 10-K/A of AquaVenture Holdings Limited;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements and other financial information included in this report fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared ;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation ; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting ; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Date: |
April 26, 2019 |
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/s/ Anthony Ibarguen |
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Anthony Ibarguen |
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Chief Executive Officer |
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Principal Executive Officer |
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EXHIBIT 31.2
CERTIFICATION
I, Lee S. Muller, certify that:
1. I have reviewed this Annual Report on Form 10-K/A of AquaVenture Holdings Limited;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements and other financial information included in this report fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared ;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation ; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting ; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Date: |
April 26, 2019 |
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/s/ Lee S. Muller |
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Lee S. Muller |
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Chief Financial Officer |
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Principal Financial Officer |
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EXHIBIT 32.1
CERTIFICATIONS OF CEO AND CFO PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this Annual Report on Form 10-K/A of AquaVenture Holdings Limited (the “Company”) for the year ended December 31, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned, Anthony Ibarguen, Chief Executive Officer of the Company, and Lee S. Muller, Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:
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(1) |
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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(2) |
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
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/s/ |
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Dated: April 26, 2019 |
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/s/ Anthony Ibarguen |
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Anthony Ibarguen |
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Chief Executive Officer |
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Principal Executive Officer |
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Dated: April 26, 2019 |
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/s/ Lee S. Muller |
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Lee S. Muller |
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Chief Financial Officer |
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Principal Financial Officer |