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2019 Technology & Telecom Winner: Evoqua Water Technologies Corp

Luca Mattia Gelsomino

date: November 28, 2019

The entry of Evoqua Water Technologies Corp, the Winner of the 2019 SCF Awards Technology & telecoms category.

Category: Technology & telecoms

Winner:  Evoqua Water Technologies Corp

Partner: PrimeRevenue

Summing upA programme designed to improve DPO ratios and unlock liquidity for an expansion strategy built on acquisitions.

What the judges said: “Great DPO step-up and proven inclusion of all key internal stakeholders in the decision-making process.” “A well-executed programme.”

Key Facts:

  • A total cash flow gain of $20.5 million since the programme started in early 2019.
  • DPOs pushed out from 50 days to 90-120 days depending on type of spend
  • 63 out of a targeted 330 suppliers are already live on platform with 72 percent actively trading invoices

The entry:

Evoqua Water Technologies is a $1.4 billion company with extensive global operations and a growth strategy fuelled by acquisitions.

The water and wastewater treatment company operates around the world including in the US, Canada, the UK, the Netherlands, Italy, Germany and Singapore. Since April 2016 it has pursued 13 acquisitions and continues to look for new opportunities. With that in mind, the company needs to have close control over its working capital position and to be able to free up cash when potential M&A deals appear.

Evoqua was looking for a supply chain finance solution to unlock the most capital with the least amount of risk to fund its expansion. The company partnered with PrimeRevenue and together they set out a strategy that incorporated the company’s key goals.

Evoqua wanted to extend payment terms and improve its DPO metric. It also wanted to simultaneously strengthen cash flow for itself and its suppliers. The programme needed to support its growth strategy which included a potential five further acquisitions.

It wanted a programme to be financed by multiple funders and that can support multiple currencies.

The SCF programme has now been running for less than a year and has already grown substantially. There are four funders offering more than $85 million in liquidity and the programme covers $412 million in spend across more than 330 targeted suppliers.

Out of the 330 targeted suppliers, 63 are live on the platform and 20 are to be on-boarded. Around 72 percent of those live on the platform are actively trading invoices, with 25 percent enrolled in auto-trade.

Since April this year, Evoqua has significantly improved its DPO ratio. It has extended its payment terms from an average of 50 days to 90 days for indirect spend and 120 days for direct spend, which falls in line with industry norms.

Evoqua has managed to unlock $20.5 million in cash flow to use to fund acquisitions and its planned expansion in Europe.

At the same time as pushing out DPO, Evoqua gave suppliers the opportunity to take early payment for invoices as soon as they are approved which is typically around day 10.

As of the third quarter of this year, Evoqua has improved its free cash flow from around 17 percent in the full year 2017 to around 80 percent in the full year 2018.

The programme is open to all suppliers from large firms to smaller companies with spend of around $250,000 a year, though the average size of a supplier active on the platform is $1.2 million.

Luca Mattia Gelsomino

Assistant Professor at University of Groningen.

Luca Gelsomino is an Assistant Professor at the University of Groningen and the Academic Director of the SCF Community. In this role, he oversees the Community’s research projects, international network and publication strategy. His teaching interests include supply chain management, financial analysis and Supply Chain Finance. He holds a Ph.D. with merit from the School of Management of Politecnico di Milano (Italy), on the topic of measuring the financial performance of supply chains. While working for the School of Management, he directed the School’s permanent research program on Supply Chain Finance. His research focuses on the relationship between physical and financial supply chains.