Energy Recovery Reports Third Quarter Financial Results
Third Quarter 2020 Highlights:
- Product revenue of
$27.4 million , an all-time quarterly record and an increase of 26% year-over-year - Product gross margin of 71.5%, a decrease of 360 basis points year-over-year and in-line with expectations for the year
- Net income of
$5.4 million , or diluted earnings per share of$0.10 , an increase of$0.01 year-over-year
Year-to-Date 2020 Highlights:
- Product revenue of
$65.7 million , an increase of 15% year-over-year - Total revenue of
$92.6 million , an increase of 37% year-over-year, of which$24.4 million is related to accelerated revenue recognition from the termination of the license agreement between the Company and Schlumberger - Product gross margin of 69.5%, a decrease of 270 basis points year-over-year, of which 230 basis points are due to COVID-19 temporary reductions in manufacturing
- Net income of
$22.9 million , or diluted earnings per share of$0.41 , an increase of$0.20 year-over-year in part related to accelerated revenue recognition from the termination of the license agreement between the Company and Schlumberger
"We surpassed our previous year's quarterly product revenue record by 26 percent this quarter, which is a testament to our singular focus on meeting customer demand while keeping our employees safe. We remain on pace to achieve 25 percent year-over-year revenue growth in our water division this year, and we are preparing for further growth in 2021 and beyond. The desalination industry remains robust despite global economic uncertainty because affordable desalination is critical to meet growing water demand for people around the world. We are proud of the impact our technology has in making desalination more energy efficient and sustainable and believe the time has come to introduce pressure exchanger technology to other industries where we can drive efficiency improvements," said
COVID-19 Pandemic
The Company's production remained strong during the third quarter, with minimal impacts on production outputs due to the COVID-19 pandemic ("COVID-19"). COVID-19 has similarly had a limited effect on
The Company successfully overcame challenges posed by COVID-19 to commission its
Third Quarter 2020
Revenues
For the third quarter ended
For the third quarter ended
Product Gross Margin
For the third quarter ended
Operating Expenses
For the third quarter ended
COVID-19 did not have a material effect on operating expenditures during the three months ended
Bottom Line Summary
To summarize the Company's financial performance, on a quarterly basis, the Company reported a net income of
Cash Flow Highlights
The Company finished the third quarter ended
Forward-Looking Statements
Certain matters discussed in this press release and on the conference call are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including the Company's belief that the Company will achieve 25 percent year-over-year revenue growth in its water division in 2020; that the Company will achieve further growth in 2021 and beyond; and that the Company will be able to clear the hurdles that remain before full commercial deployment of the VorTeq. These forward-looking statements are based on information currently available to us and on management's beliefs, assumptions, estimates, or projections and are not guarantees of future events or results. Potential risks and uncertainties include any other factors that may have been discussed herein regarding the risks and uncertainties of the Company's business, and the risks discussed under "Risk Factors" in the Company's Form 10-K filed with the
Conference Call to Discuss Third Quarter 2020 Financial Results
LIVE CONFERENCE CALL:
Listen-only, US / Canada Toll-Free: +1 (877) 709-8150
Listen-only, Local / International Toll: +1 (201) 689-8354
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CONFERENCE CALL REPLAY:
Expiration:
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Local / International Toll: +1 (201) 612-7415
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Investors may also access the live call or the replay over the internet at ir.energyrecovery.com. The replay will be available approximately three hours after the live call concludes.
Disclosure Information
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For more than 20 years,
Contact
Investor Relations
ir@energyrecovery.com
(281) 962-8105
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 80,149 | $ | 26,387 | ||||
Short-term investments | 24,373 | 58,736 | ||||||
Accounts receivable, net | 11,055 | 12,979 | ||||||
Inventories, net | 10,662 | 10,317 | ||||||
Prepaid expenses and other current assets | 4,959 | 4,548 | ||||||
Total current assets | 131,198 | 112,967 | ||||||
Long-term investments | 1,418 | 15,419 | ||||||
Deferred tax assets, non-current | 11,454 | 16,897 | ||||||
Property and equipment, net | 20,535 | 18,843 | ||||||
Operating lease, right of use asset | 16,444 | 11,195 | ||||||
12,790 | 12,790 | |||||||
Other intangible assets, net | 53 | 65 | ||||||
Other assets, non-current | 645 | 598 | ||||||
Total assets | $ | 194,537 | $ | 188,774 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,951 | $ | 1,192 | ||||
Accrued expenses and other current liabilities | 8,654 | 9,869 | ||||||
Lease liabilities | 1,209 | 1,023 | ||||||
Contract liabilities | 1,160 | 15,746 | ||||||
Total current liabilities | 12,974 | 27,830 | ||||||
Lease liabilities, non-current | 16,802 | 11,533 | ||||||
Contract liabilities, non-current | 104 | 13,120 | ||||||
Other non-current liabilities | 672 | 278 | ||||||
Total liabilities | 30,552 | 52,761 | ||||||
Stockholders' equity: | ||||||||
Common stock | 61 | 61 | ||||||
Additional paid-in capital | 174,929 | 170,028 | ||||||
Accumulated other comprehensive income (loss) | 100 | (37 | ) | |||||
(30,486 | ) | (30,486 | ) | |||||
Accumulated earnings (deficit) | 19,381 | (3,553 | ) | |||||
Total stockholders' equity | 163,985 | 136,013 | ||||||
Total liabilities and stockholders' equity | $ | 194,537 | $ | 188,774 | ||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Product revenue | $ | 27,408 | $ | 21,752 | $ | 65,665 | $ | 57,050 | ||||||||
Product cost of revenue | 7,816 | 5,425 | 20,049 | 15,843 | ||||||||||||
Product gross profit | 19,592 | 16,327 | 45,616 | 41,207 | ||||||||||||
License and development revenue | - | 3,098 | 26,895 | 10,391 | ||||||||||||
Operating expenses: | ||||||||||||||||
General and administrative | 6,271 | 5,711 | 18,751 | 16,790 | ||||||||||||
Sales and marketing | 2,141 | 2,367 | 5,776 | 6,710 | ||||||||||||
Research and development | 5,098 | 6,620 | 18,159 | 16,354 | ||||||||||||
Amortization of intangible assets | 4 | 156 | 12 | 469 | ||||||||||||
Impairment of long-lived assets | - | - | 2,332 | - | ||||||||||||
Total operating expenses | 13,514 | 14,854 | 45,030 | 40,323 | ||||||||||||
Income from operations | 6,078 | 4,571 | 27,481 | 11,275 | ||||||||||||
Other income (expense): | ||||||||||||||||
Interest income | 134 | 500 | 809 | 1,551 | ||||||||||||
Other non-operating expense, net | (29 | ) | (5 | ) | (59 | ) | (77 | ) | ||||||||
Total other income, net | 105 | 495 | 750 | 1,474 | ||||||||||||
Income before income taxes | 6,183 | 5,066 | 28,231 | 12,749 | ||||||||||||
Provision for (benefit from) income taxes | 796 | (83 | ) | 5,297 | 1,227 | |||||||||||
Net income | $ | 5,387 | $ | 5,149 | $ | 22,934 | $ | 11,522 | ||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 0.10 | $ | 0.09 | $ | 0.41 | $ | 0.21 | ||||||||
Diluted | $ | 0.10 | $ | 0.09 | $ | 0.41 | $ | 0.21 | ||||||||
Number of shares used in per share calculations: | ||||||||||||||||
Basic | 55,692 | 54,975 | 55,573 | 54,594 | ||||||||||||
Diluted | 56,471 | 56,384 | 56,443 | 55,971 | ||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended | ||||||||
2020 | 2019 | |||||||
(In thousands) | ||||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 22,934 | $ | 11,522 | ||||
Adjustments to reconcile net income to cash provided by operating activities | ||||||||
Stock-based compensation | 3,672 | 4,425 | ||||||
Depreciation and amortization | 3,963 | 3,440 | ||||||
Amortization (accretion) of premiums and discounts on investments | 311 | (37 | ) | |||||
Deferred income taxes | 5,443 | 1,198 | ||||||
Provision for warranty claims | 316 | 339 | ||||||
Impairment of long-lived assets | 2,332 | - | ||||||
Other non-cash adjustments | - | 197 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable, net | 1,862 | (10,617 | ) | |||||
Contract assets | (747 | ) | 2,993 | |||||
Inventories, net | (506 | ) | (1,885 | ) | ||||
Prepaid and other assets | 295 | 383 | ||||||
Accounts payable | 656 | (94 | ) | |||||
Accrued expenses and other liabilities | (2,561 | ) | (1,264 | ) | ||||
Income taxes | (18 | ) | 30 | |||||
Contract liabilities | (27,602 | ) | (10,127 | ) | ||||
Net cash provided by operating activities | 10,350 | 503 | ||||||
Cash flows from investing activities: | ||||||||
Sales of marketable securities | 10,573 | 3,535 | ||||||
Maturities of marketable securities | 50,467 | 70,040 | ||||||
Purchases of marketable securities | (12,855 | ) | (66,253 | ) | ||||
Capital expenditures | (6,019 | ) | (5,501 | ) | ||||
Net cash provided by investing activities | 42,166 | 1,821 | ||||||
Cash flows from financing activities: | ||||||||
Net proceeds from issuance of common stock | 1,260 | 5,424 | ||||||
Tax payment for employee shares withheld | (23 | ) | (89 | ) | ||||
Net cash provided by financing activities | 1,237 | 5,335 | ||||||
Effect of exchange rate differences on cash and cash equivalents | 11 | - | ||||||
Net change in cash, cash equivalents and restricted cash | 53,764 | 7,659 | ||||||
Cash, cash equivalents and restricted cash, beginning of year | 26,488 | 22,138 | ||||||
Cash, cash equivalents and restricted cash, end of period | $ | 80,252 | $ | 29,797 | ||||
SUPPLEMENTAL FINANCIAL INFORMATION
(Unaudited)
Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||||
Water | Oil & Gas | Corporate | Total | Water | Oil & Gas | Corporate | Total | |||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Product revenue | $ | 27,408 | $ | - | $ | - | $ | 27,408 | $ | 21,752 | $ | - | $ | - | $ | 21,752 | ||||||||||||||||
Product cost of revenue | 7,816 | - | - | 7,816 | 5,425 | - | - | 5,425 | ||||||||||||||||||||||||
Product gross profit | 19,592 | - | - | 19,592 | 16,327 | - | - | 16,327 | ||||||||||||||||||||||||
License and development revenue | - | - | - | - | - | 3,098 | - | 3,098 | ||||||||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||||||||||
General and administrative | 606 | 439 | 5,226 | 6,271 | 359 | 431 | 4,921 | 5,711 | ||||||||||||||||||||||||
Sales and marketing | 1,507 | 30 | 604 | 2,141 | 1,850 | 92 | 425 | 2,367 | ||||||||||||||||||||||||
Research and development | 723 | 2,956 | 1,419 | 5,098 | 886 | 5,667 | 67 | 6,620 | ||||||||||||||||||||||||
Amortization of intangible assets | 4 | - | - | 4 | 156 | - | - | 156 | ||||||||||||||||||||||||
Total operating expenses | 2,840 | 3,425 | 7,249 | 13,514 | 3,251 | 6,190 | 5,413 | 14,854 | ||||||||||||||||||||||||
Operating income (loss) | $ | 16,752 | $ | (3,425 | ) | $ | (7,249 | ) | 6,078 | $ | 13,076 | $ | (3,092 | ) | $ | (5,413 | ) | 4,571 | ||||||||||||||
Other income, net | 105 | 495 | ||||||||||||||||||||||||||||||
Income before income taxes | $ | 6,183 | $ | 5,066 | ||||||||||||||||||||||||||||
Nine Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
Water | Oil & Gas | Corporate | Total | Water | Oil & Gas | Corporate | Total | |||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Product revenue | $ | 65,665 | $ | - | $ | - | $ | 65,665 | $ | 56,946 | $ | 104 | $ | - | $ | 57,050 | ||||||||||||||||
Product cost of revenue | 20,049 | - | - | 20,049 | 15,655 | 188 | - | 15,843 | ||||||||||||||||||||||||
Product gross profit (loss) | 45,616 | - | - | 45,616 | 41,291 | (84 | ) | - | 41,207 | |||||||||||||||||||||||
License and development revenue | - | 26,895 | - | 26,895 | - | 10,391 | - | 10,391 | ||||||||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||||||||||
General and administrative | 1,467 | 1,601 | 15,683 | 18,751 | 1,456 | 1,207 | 14,127 | 16,790 | ||||||||||||||||||||||||
Sales and marketing | 4,307 | 106 | 1,363 | 5,776 | 5,058 | 674 | 978 | 6,710 | ||||||||||||||||||||||||
Research and development | 2,585 | 12,720 | 2,854 | 18,159 | 2,794 | 13,335 | 225 | 16,354 | ||||||||||||||||||||||||
Amortization of intangible assets | 12 | - | - | 12 | 469 | - | - | 469 | ||||||||||||||||||||||||
Impairment of long-lived assets | - | 2,332 | - | 2,332 | - | - | - | - | ||||||||||||||||||||||||
Total operating expenses | 8,371 | 16,759 | 19,900 | 45,030 | 9,777 | 15,216 | 15,330 | 40,323 | ||||||||||||||||||||||||
Operating income (loss) | $ | 37,245 | $ | 10,136 | $ | (19,900 | ) | 27,481 | $ | 31,514 | $ | (4,909 | ) | $ | (15,330 | ) | 11,275 | |||||||||||||||
Other income, net | 750 | 1,474 | ||||||||||||||||||||||||||||||
Income before income taxes | $ | 28,231 | $ | 12,749 |
SOURCE:
View source version on accesswire.com:
https://www.accesswire.com/613356/Energy-Recovery-Reports-Third-Quarter-Financial-Results