Energy Recovery Reports First Quarter 2018 Financial Results
First Quarter Summary:
- Total revenue of
$13.8 million - Product gross margin of 70%
- Total gross margin(1) of 76%
- Net loss of
$0.7 million , or ($0.01 ) per share - Adjusted net income(1) of
$0.3 million , or$0.01 per share
President and CEO
Revenues
For the first quarter ended
The Water segment generated total product revenue of
Gross Margin
For the first quarter ended
The Water segment generated product gross margin of 70.8% for the first quarter ended
Operating Expenses
For the first quarter ended
The Water segment operating expenses for the first quarter ended
The Corporate operating expenses for the first quarter ended
Bottom Line Summary
To summarize the Company's financial performance, on a quarterly basis, the Company reported a net loss of
Cash Flow Highlights
The Company finished the first 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's Water business will remain robust throughout the balance of 2018 and into 2019; the Company's belief that focusing on the 1) the commercialization of VorTeq, 2) continued growth and reinvestment in our Water business, and 3) the further development of MTeq, will maximize the Company's ability to deliver value to our Shareholders, the Company's belief that we may achieve success in the upcoming VorTeq milestone test. 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 the Company's ability to achieve the milestones under the VorTeq license agreement, 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 U.S.
Use of Non-GAAP Financial Measures
This press release includes certain non-GAAP financial measures, including total gross margin. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that either exclude or include amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles in
(1) |
"Total gross margin" and "Adjusted net income" are non-GAAP financial measures. Please refer to the discussion under headings "Use of Non-GAAP Financial Measures" and "Reconciliations of Non-GAAP Financial Measures." |
Conference Call to Discuss First Quarter 2018 Financial Results
LIVE CONFERENCE CALL:
Listen-only, US / Canada Toll-free: +1 877-709-8150
Listen-only, Local / International Toll: +1 201-689-8354
Access code: 13679038
CONFERENCE CALL REPLAY:
Expiration:
US / Canada Toll-free: +1 877-660-6853
Local / International Toll: +1 201-612-7415
Access code: 13679038
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
About
Contact
esmith@energyrecovery.com
(510) 697-3105
CONSOLIDATED BALANCE SHEETS (In thousands, except share data and par value) (Unaudited) | |||||||
|
| ||||||
(In thousands, except share data and par value) | |||||||
ASSETS |
|||||||
Current assets: |
|||||||
Cash and cash equivalents |
$ |
32,153 |
$ |
27,780 |
|||
Restricted cash |
1,205 |
2,664 |
|||||
Short-term investments |
58,108 |
70,020 |
|||||
Accounts receivable, net of allowance for doubtful accounts of |
12,754 |
12,465 |
|||||
Contract assets |
4,948 |
6,278 |
|||||
Inventories |
7,328 |
5,514 |
|||||
Prepaid expenses and other current assets |
1,545 |
1,342 |
|||||
Total current assets |
118,041 |
126,063 |
|||||
Restricted cash, non-current |
85 |
182 |
|||||
Deferred tax assets, non-current |
8,309 |
7,933 |
|||||
Property and equipment, net |
12,742 |
13,393 |
|||||
Operating lease, right of use asset |
2,511 |
2,843 |
|||||
|
12,790 |
12,790 |
|||||
Other intangible assets, net |
1,112 |
1,269 |
|||||
Other assets, non-current |
267 |
12 |
|||||
Total assets |
$ |
155,857 |
$ |
164,485 |
|||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||||
Current liabilities: |
|||||||
Accounts payable |
$ |
2,341 |
$ |
4,091 |
|||
Accrued expenses and other current liabilities |
3,990 |
7,948 |
|||||
Lease liabilities |
1,641 |
1,603 |
|||||
Income taxes payable |
429 |
432 |
|||||
Accrued warranty reserve |
359 |
366 |
|||||
Contract liabilities |
16,831 |
15,909 |
|||||
Current portion of long-term debt |
12 |
11 |
|||||
Total current liabilities |
25,603 |
30,360 |
|||||
Long-term debt, less current portion |
13 |
16 |
|||||
Lease liabilities, non-current |
1,273 |
1,698 |
|||||
Contract liabilities, non-current |
37,239 |
40,517 |
|||||
Other non-current liabilities |
255 |
— |
|||||
Total liabilities |
64,383 |
72,591 |
|||||
Commitments and Contingencies (Note 9) |
|||||||
Stockholders' equity: |
|||||||
Preferred stock, |
— |
— |
|||||
Common stock, |
59 |
58 |
|||||
Additional paid-in capital |
152,850 |
149,006 |
|||||
Accumulated comprehensive loss |
(168) |
(125) |
|||||
|
(23,981) |
(20,486) |
|||||
Accumulated deficit |
(37,286) |
(36,559) |
|||||
Total stockholders' equity |
91,474 |
91,894 |
|||||
Total liabilities and stockholders' equity |
$ |
155,857 |
$ |
164,485 |
*Prior-period information has been retrospectively adjusted due to our adoption of ASU 2014-09, Revenue from Contracts with Customers (Topic 606) and ASU No. 2016-02, Leases (Topic 842) on |
CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) | |||||||
Three Months Ended | |||||||
2018 |
2017* | ||||||
(In thousands, except per share data) | |||||||
Product revenue |
$ |
11,058 |
$ |
12,245 |
|||
Product cost of revenue |
3,314 |
4,612 |
|||||
Product gross profit |
7,744 |
7,633 |
|||||
License and development revenue |
2,749 |
2,248 |
|||||
Operating expenses: |
|||||||
General and administrative |
5,837 |
4,408 |
|||||
Sales and marketing |
1,912 |
2,453 |
|||||
Research and development |
3,917 |
2,509 |
|||||
Amortization of intangible assets |
158 |
158 |
|||||
Total operating expenses |
11,824 |
9,528 |
|||||
(Loss) income from operations |
(1,331) |
353 |
|||||
Other income (expense): |
|||||||
Interest income |
301 |
171 |
|||||
Interest expense |
— |
(1) |
|||||
Other non-operating expense, net |
(53) |
(53) |
|||||
Total other income, net |
248 |
117 |
|||||
(Loss) income before income taxes |
(1,083) |
470 |
|||||
(Benefit from) provision for income taxes |
(357) |
48 |
|||||
Net (loss) income |
$ |
(726) |
$ |
422 |
|||
(Loss) income per share: |
|||||||
Basic |
$ |
(0.01) |
$ |
0.01 |
|||
Diluted |
$ |
(0.01) |
$ |
0.01 |
|||
Number of shares used in per share calculations: |
|||||||
Basic |
53,987 |
53,825 |
|||||
Diluted |
53,987 |
56,056 |
*Prior-period information has been retrospectively adjusted due to our adoption of ASU 2014-09, Revenue from Contracts with Customers (Topic 606) on |
CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) | |||||||
Three Months Ended | |||||||
2018 |
2017* | ||||||
(In thousands) | |||||||
Cash Flows From Operating Activities: |
|||||||
Net (loss) income |
$ |
(726) |
$ |
422 |
|||
Adjustments to reconcile net income (loss) to net cash used in operating activities: |
|||||||
Stock-based compensation |
2,242 |
1,113 |
|||||
Depreciation and amortization |
1,124 |
881 |
|||||
Amortization of premiums on investments |
90 |
113 |
|||||
Provision for warranty claims |
48 |
55 |
|||||
Reversal of accruals related to expired warranties |
(50) |
(63) |
|||||
Unrealized loss (gain) on foreign currency translation |
113 |
(15) |
|||||
Provision for doubtful accounts |
8 |
4 |
|||||
Adjustments for excess or obsolete inventory |
4 |
71 |
|||||
Deferred income taxes |
(376) |
(93) |
|||||
Loss on disposal of fixed assets |
21 |
— |
|||||
Other non-cash adjustments |
3 |
(31) |
|||||
Changes in operating assets and liabilities: |
|||||||
Accounts receivable |
(297) |
2,581 |
|||||
Contract assets |
1,330 |
(3,556) |
|||||
Inventories |
(1,824) |
(343) |
|||||
Prepaid and other assets |
(127) |
(553) |
|||||
Accounts payable |
(1,467) |
189 |
|||||
Accrued expenses and other liabilities |
(4,092) |
(3,566) |
|||||
Income taxes payable |
(3) |
124 |
|||||
Contract liabilities |
(2,354) |
(2,157) |
|||||
Net cash used in operating activities |
(6,333) |
(4,824) |
|||||
Cash Flows From Investing Activities: |
|||||||
Maturities of marketable securities |
25,623 |
9,646 |
|||||
Purchases of marketable securities |
(13,935) |
(9,355) |
|||||
Capital expenditures |
(626) |
(532) |
|||||
Net cash provided by (used in) investing activities |
11,062 |
(241) |
|||||
Cash Flows From Financing Activities: |
|||||||
Net proceeds from issuance of common stock |
1,636 |
2,992 |
|||||
Tax payment for employee shares withheld |
(37) |
(153) |
|||||
Repayment of long-term debt |
(2) |
(2) |
|||||
Repurchase of common stock |
(3,495) |
— |
|||||
Net cash (used in) provided by financing activities |
(1,898) |
2,837 |
|||||
Effect of exchange rate differences on cash and cash equivalents |
(14) |
15 |
|||||
Net change in cash, cash equivalents and restricted cash |
2,817 |
(2,213) |
|||||
Cash, cash equivalents and restricted cash, beginning of year |
30,626 |
65,748 |
|||||
Cash, cash equivalents and restricted cash, end of period |
$ |
33,443 |
$ |
63,535 |
*Prior-period information has been retrospectively adjusted due to our adoption of ASU 2014-09, Revenue from Contracts with Customers (Topic 606) and ASU No. 2016-18, Statement of Cash Flows, Restricted Cash (Topic 230) on |
FINANCIAL INFORMATION BY SEGMENT (In thousands) (Unaudited) | |||||||||||||||||||||||
Three Months Ended |
Three Months Ended | ||||||||||||||||||||||
Water |
Oil & Gas |
Total |
Water |
Oil & Gas |
Total | ||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
Product revenue |
$ |
11,048 |
$ |
10 |
$ |
11,058 |
$ |
10,716 |
$ |
1,529 |
$ |
12,245 |
|||||||||||
Product cost of revenue |
3,228 |
86 |
3,314 |
3,524 |
1,088 |
4,612 |
|||||||||||||||||
Product gross profit |
7,820 |
(76) |
7,744 |
7,192 |
441 |
7,633 |
|||||||||||||||||
License and development revenue |
— |
2,749 |
2,749 |
— |
2,248 |
2,248 |
|||||||||||||||||
Operating expenses: |
|||||||||||||||||||||||
General and administrative |
305 |
651 |
956 |
318 |
349 |
667 |
|||||||||||||||||
Sales and marketing |
1,445 |
344 |
1,789 |
1,499 |
641 |
2,140 |
|||||||||||||||||
Research and development |
244 |
3,665 |
3,909 |
262 |
2,246 |
2,508 |
|||||||||||||||||
Amortization of intangibles |
158 |
— |
158 |
158 |
— |
158 |
|||||||||||||||||
Operating expenses |
2,152 |
4,660 |
6,812 |
2,237 |
3,236 |
5,473 |
|||||||||||||||||
Operating income (loss) |
$ |
5,668 |
$ |
(1,987) |
3,681 |
$ |
4,955 |
$ |
(547) |
4,408 |
|||||||||||||
Less: Corporate operating expenses |
5,012 |
4,055 |
|||||||||||||||||||||
Consolidated operating loss |
(1,331) |
353 |
|||||||||||||||||||||
Non-operating income |
248 |
117 |
|||||||||||||||||||||
Loss before income taxes |
$ |
(1,083) |
$ |
470 |
*Prior-period information has been retrospectively adjusted due to our adoption of ASU 2014-09, Revenue from Contracts with Customers (Topic 606) on |
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (In thousands, except per share data) (Unaudited) | |||||||
This press release includes non-GAAP financial information because we plan and manage our business using such information. Our non-GAAP Total Gross Margin is determined by adding back the license and development revenue associated with the amortization of the VorTeq exclusivity fee. Our non-GAAP Adjusted Net Income or Loss is determined by adding back non-recurring operating expenses. | |||||||
Three Months Ended | |||||||
2018 |
2017* | ||||||
Product revenue |
$ |
11,058 |
$ |
12,245 |
|||
License and development revenue |
2,749 |
2,248 |
|||||
Total revenue |
$ |
13,807 |
$ |
14,493 |
|||
Product gross profit |
$ |
7,744 |
$ |
7,633 |
|||
License and development revenue |
2,749 |
2,248 |
|||||
Total gross profit (non-GAAP) |
$ |
10,493 |
$ |
9,881 |
|||
Product gross margin |
70.0 |
% |
62.3 |
% | |||
Total gross margin (non-GAAP) |
76.0 |
% |
68.2 |
% | |||
Net (loss) income |
$ |
(726) |
$ |
422 |
|||
Reversal of non-recurring expense (benefit) |
1,011 |
— |
|||||
Adjusted net income (loss) (non-GAAP) |
$ |
285 |
$ |
422 |
|||
(Loss) income per share: |
|||||||
Diluted |
$ |
(0.01) |
$ |
0.01 |
|||
Diluted (non-GAAP) |
$ |
0.01 |
$ |
0.01 |
|||
Number of diluted shares used in per share calculations |
|||||||
Diluted shares |
53,987 |
56,056 |
|||||
Diluted shares (non-GAAP) |
55,675 |
56,056 |
*Prior-period information has been retrospectively adjusted due to our adoption of ASU 2014-09, Revenue from Contracts with Customers (Topic 606) on |
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