Energy Recovery Reports Third Quarter 2019 Financial Results
Third Quarter Summary:
- Total revenue of
$24.9 million , an increase of 12% year-over-year - Product gross margin of 75.1%, an increase of 210 basis points year-over-year
- Total gross margin(1) of 78.2%, an increase of 80 basis points year-over-year
- Net income of
$5.1 million with a diluted earnings per share of$0.09 , an increase of$0.01 year-over-year - Adjusted net income(1) of
$4.2 million with a non-GAAP diluted earnings per share(1) of$0.07 , a decrease of$0.01 year-over-year
Year-to-Date Summary:
- Total revenue of
$67.4 million , an increase of 19% year-over-year - Product gross margin of 72.2%, an increase of 260 basis points year-over-year
- Total gross margin(1) of 76.5%, an increase of 170 basis points year-over-year
- Net income of
$11.5 million with a diluted earnings per share of$0.21 , a decrease of$0.15 year-over-year - Adjusted net income(1) of
$10.6 million with a non-GAAP diluted earnings per share(1) of$0.19 , an increase of$0.03 year-over-year
President and CEO
Revenues
For the third quarter ended
The Water segment generated total product revenue of
Gross Margin
For the third quarter ended
The Water segment generated product gross margin of 75.1% for the third quarter ended
Operating Expenses
For the third quarter ended
The Water segment operating expenses for the third quarter ended
The Corporate operating expenses for the third quarter 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 optimism for the long-term health of our Water business, the Company's belief that the Company will successfully commercialize the VorTeq system, and the Company's belief that our business will continue to grow over the next several years. 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
Use of Non-GAAP Financial Measures
This press release includes certain non-GAAP financial measures, including total gross margin, adjusted net income and non-GAAP earnings per share. 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," "Adjusted net income" and "Non-GAAP earnings per share" 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 Third Quarter 2019 Financial Results
LIVE CONFERENCE CALL:
|
CONFERENCE CALL REPLAY: Expiration: |
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
Investor Relations
ir@energyrecovery.com
(281) 962-8105
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
2019 | 2018 | |||||||
(In thousands, except share data and par value) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash, cash equivalents and restricted cash | $ | 29,696 | $ | 22,052 | ||||
Short-term investments | 59,905 | 73,338 | ||||||
Accounts receivable, net of allowance for doubtful accounts of | 20,848 | 10,212 | ||||||
Contract assets | 1,090 | 4,083 | ||||||
Inventories, net | 8,977 | 7,138 | ||||||
Prepaid expenses and other current assets | 3,148 | 2,825 | ||||||
Total current assets | 123,664 | 119,648 | ||||||
Long-term investments | 7,549 | 1,269 | ||||||
Deferred tax assets, non-current | 17,120 | 18,318 | ||||||
Property and equipment, net | 17,442 | 14,619 | ||||||
Operating lease, right of use asset | 11,449 | 12,189 | ||||||
12,790 | 12,790 | |||||||
Other intangible assets, net | 171 | 640 | ||||||
Other assets, non-current | 402 | 368 | ||||||
Total assets | $ | 190,587 | $ | 179,841 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,559 | $ | 1,439 | ||||
Accrued expenses and other current liabilities | 8,519 | 8,497 | ||||||
Lease liabilities | 1,019 | 926 | ||||||
Contract liabilities | 17,507 | 16,270 | ||||||
Total current liabilities | 28,604 | 27,132 | ||||||
Lease liabilities, non-current | 11,777 | 12,556 | ||||||
Contract liabilities, non-current | 15,175 | 26,539 | ||||||
Other non-current liabilities | 277 | 236 | ||||||
Total liabilities | 55,833 | 66,463 | ||||||
Stockholders' equity: | ||||||||
Preferred stock, | - | - | ||||||
Common stock, | 60 | 59 | ||||||
Additional paid-in capital | 168,150 | 158,404 | ||||||
Accumulated other comprehensive loss | (26 | ) | (133 | ) | ||||
(30,486 | ) | (30,486 | ) | |||||
Accumulated deficit | (2,944 | ) | (14,466 | ) | ||||
Total stockholders' equity | 134,754 | 113,378 | ||||||
Total liabilities and stockholders' equity | $ | 190,587 | $ | 179,841 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Product revenue | $ | 21,752 | $ | 18,578 | $ | 57,050 | $ | 47,042 | ||||||||
Product cost of revenue | 5,425 | 5,022 | 15,843 | 14,312 | ||||||||||||
Product gross profit | 16,327 | 13,556 | 41,207 | 32,730 | ||||||||||||
License and development revenue | 3,098 | 3,661 | 10,391 | 9,768 | ||||||||||||
Operating expenses: | ||||||||||||||||
General and administrative | 5,711 | 5,266 | 16,790 | 16,030 | ||||||||||||
Sales and marketing | 2,367 | 1,873 | 6,710 | 5,643 | ||||||||||||
Research and development | 6,620 | 4,270 | 16,354 | 11,792 | ||||||||||||
Amortization of intangible assets | 156 | 158 | 469 | 474 | ||||||||||||
Total operating expenses | 14,854 | 11,567 | 40,323 | 33,939 | ||||||||||||
Income from operations | 4,571 | 5,650 | 11,275 | 8,559 | ||||||||||||
Other income (expense): | ||||||||||||||||
Interest income | 500 | 369 | 1,551 | 1,043 | ||||||||||||
Interest expense | - | - | - | (1 | ) | |||||||||||
Other non-operating expense, net | (5 | ) | (22 | ) | (77 | ) | (66 | ) | ||||||||
Total other income, net | 495 | 347 | 1,474 | 976 | ||||||||||||
Income before income taxes | 5,066 | 5,997 | 12,749 | 9,535 | ||||||||||||
Provision for (benefit from) income taxes | (83 | ) | 1,339 | 1,227 | (10,140 | ) | ||||||||||
Net income | $ | 5,149 | $ | 4,658 | $ | 11,522 | $ | 19,675 | ||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 0.09 | $ | 0.09 | $ | 0.21 | $ | 0.37 | ||||||||
Diluted | $ | 0.09 | $ | 0.08 | $ | 0.21 | $ | 0.36 | ||||||||
Number of shares used in per share calculations: | ||||||||||||||||
Basic | 54,975 | 53,665 | 54,594 | 53,719 | ||||||||||||
Diluted | 56,384 | 55,295 | 55,971 | 55,382 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended | ||||||||
2019 | 2018 | |||||||
Cash flows from operating activities: | (In thousands) | |||||||
Net income | $ | 11,522 | $ | 19,675 | ||||
Adjustments to reconcile net income to cash provided by operating activities | ||||||||
Stock-based compensation | 4,425 | 4,226 | ||||||
Depreciation and amortization | 3,440 | 2,898 | ||||||
(Accretion) amortization of premiums and discounts on investments | (37 | ) | 380 | |||||
Provision for warranty claims | 339 | 213 | ||||||
Unrealized gain on foreign currency translation | (18 | ) | - | |||||
Realized gain on sale of investments | (5 | ) | - | |||||
Reversal of accruals related to expired warranties | (131 | ) | (171 | ) | ||||
Provision for doubtful accounts | (19 | ) | 336 | |||||
Adjustments for excess or obsolete inventory | (7 | ) | 132 | |||||
Deferred income taxes | 1,198 | (10,150 | ) | |||||
Loss on disposal of fixed assets | 377 | 58 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable, net | (10,617 | ) | 4,463 | |||||
Contract assets, costs and estimated earnings in excess of billings | 2,993 | 2,934 | ||||||
Inventories, net | (1,885 | ) | (894 | ) | ||||
Prepaid and other assets | 383 | (445 | ) | |||||
Accounts payable | (94 | ) | (2,198 | ) | ||||
Accrued expenses and other liabilities | (1,264 | ) | (1,270 | ) | ||||
Income taxes | 30 | (638 | ) | |||||
Contract liabilities, cost in excess of billings | (10,127 | ) | (9,800 | ) | ||||
Net cash provided by operating activities | 503 | 9,749 | ||||||
Cash flows from investing activities: | ||||||||
Sales of marketable securities | 3,535 | - | ||||||
Maturities of marketable securities | 70,040 | 62,213 | ||||||
Purchases of marketable securities | (66,253 | ) | (60,334 | ) | ||||
Capital expenditures | (5,501 | ) | (2,029 | ) | ||||
Net cash provided by (used in) investing activities | 1,821 | (150 | ) | |||||
Cash flows from financing activities: | ||||||||
Net proceeds from issuance of common stock | 5,424 | 3,873 | ||||||
Tax payment for employee shares withheld | (89 | ) | (115 | ) | ||||
Repayment of long-term debt | - | (8 | ) | |||||
Repurchase of common stock | - | (10,000 | ) | |||||
Net cash provided by (used in) financing activities | 5,335 | (6,250 | ) | |||||
Effect of exchange rate differences on cash and cash equivalents | - | 14 | ||||||
Net change in cash, cash equivalents and restricted cash | 7,659 | 3,363 | ||||||
Cash, cash equivalents and restricted cash, beginning of year | 22,138 | 30,626 | ||||||
Cash, cash equivalents and restricted cash, end of period | $ | 29,797 | $ | 33,989 |
FINANCIAL INFORMATION BY SEGMENT
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
Water | Oil & Gas | Total | Water | Oil & Gas | Total | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Product revenue | $ | 21,752 | $ | - | $ | 21,752 | $ | 56,946 | $ | 104 | $ | 57,050 | ||||||||||||
Product cost of revenue | 5,425 | - | 5,425 | 15,655 | 188 | 15,843 | ||||||||||||||||||
Product gross profit (loss) | 16,327 | - | 16,327 | 41,291 | (84 | ) | 41,207 | |||||||||||||||||
License and development revenue | - | 3,098 | 3,098 | - | 10,391 | 10,391 | ||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||
General and administrative | 359 | 431 | 790 | 1,456 | 1,207 | 2,663 | ||||||||||||||||||
Sales and marketing | 1,850 | 92 | 1,942 | 5,058 | 674 | 5,732 | ||||||||||||||||||
Research and development | 886 | 5,667 | 6,553 | 2,794 | 13,335 | 16,129 | ||||||||||||||||||
Amortization of intangibles | 156 | - | 156 | 469 | - | 469 | ||||||||||||||||||
Total operating expenses | 3,251 | 6,190 | 9,441 | 9,777 | 15,216 | 24,993 | ||||||||||||||||||
Operating income (loss) | $ | 13,076 | $ | (3,092 | ) | 9,984 | $ | 31,514 | $ | (4,909 | ) | 26,605 | ||||||||||||
Less: Corporate operating expenses | 5,413 | 15,330 | ||||||||||||||||||||||
Income from operations | 4,571 | 11,275 | ||||||||||||||||||||||
Other income | 495 | 1,474 | ||||||||||||||||||||||
Income before income taxes | $ | 5,066 | $ | 12,749 | ||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
Water | Oil & Gas | Total | Water | Oil & Gas | Total | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Product revenue | $ | 18,464 | $ | 114 | $ | 18,578 | $ | 46,628 | $ | 414 | $ | 47,042 | ||||||||||||
Product cost of revenue | 4,851 | 171 | 5,022 | 13,719 | 593 | 14,312 | ||||||||||||||||||
Product gross profit (loss) | 13,613 | (57 | ) | 13,556 | 32,909 | (179 | ) | 32,730 | ||||||||||||||||
License and development revenue | - | 3,661 | 3,661 | - | 9,768 | 9,768 | ||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||
General and administrative | 470 | 373 | 843 | 1,441 | 1,395 | 2,836 | ||||||||||||||||||
Sales and marketing | 1,435 | 335 | 1,770 | 4,243 | 997 | 5,240 | ||||||||||||||||||
Research and development | 545 | 3,713 | 4,258 | 1,019 | 10,753 | 11,772 | ||||||||||||||||||
Amortization of intangibles | 158 | - | 158 | 474 | - | 474 | ||||||||||||||||||
Total operating expenses | 2,608 | 4,421 | 7,029 | 7,177 | 13,145 | 20,322 | ||||||||||||||||||
Operating income (loss) | $ | 11,005 | $ | (817 | ) | 10,188 | $ | 25,732 | $ | (3,556 | ) | 22,176 | ||||||||||||
Less: Corporate operating expenses | 4,538 | 13,617 | ||||||||||||||||||||||
Income from operations | 5,650 | 8,559 | ||||||||||||||||||||||
Other income | 347 | 976 | ||||||||||||||||||||||
Income before income taxes | $ | 5,997 | $ | 9,535 | ||||||||||||||||||||
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Product revenue | $ | 21,752 | $ | 18,578 | $ | 57,050 | $ | 47,042 | ||||||||
License and development revenue | 3,098 | 3,661 | 10,391 | 9,768 | ||||||||||||
Total revenue | $ | 24,850 | $ | 22,239 | $ | 67,441 | $ | 56,810 | ||||||||
Product gross profit | $ | 16,327 | $ | 13,556 | $ | 41,207 | $ | 32,730 | ||||||||
License and development revenue | 3,098 | 3,661 | 10,391 | 9,768 | ||||||||||||
Total gross profit (non-GAAP) | $ | 19,425 | $ | 17,217 | $ | 51,598 | $ | 42,498 | ||||||||
Product gross margin | 75.1 | % | 73.0 | % | 72.2 | % | 69.6 | % | ||||||||
Total gross margin (non-GAAP) | 78.2 | % | 77.4 | % | 76.5 | % | 74.8 | % | ||||||||
Net income | $ | 5,149 | $ | 4,658 | $ | 11,522 | $ | 19,675 | ||||||||
Reversal of non-recurring tax benefit | - | - | - | (10,763 | ) | |||||||||||
Reversal of federal research and development tax credits | (971 | ) | - | (971 | ) | - | ||||||||||
Adjusted net income (non-GAAP) | $ | 4,178 | $ | 4,658 | $ | 10,551 | $ | 8,912 | ||||||||
Income per share: | ||||||||||||||||
Diluted | $ | 0.09 | $ | 0.08 | $ | 0.21 | $ | 0.36 | ||||||||
Diluted (non-GAAP) | $ | 0.07 | $ | 0.08 | $ | 0.19 | $ | 0.16 | ||||||||
Number of diluted shares used in per share calculations: | ||||||||||||||||
Diluted shares | 56,384 | 55,295 | 55,971 | 55,382 |
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 and non-GAAP earnings per share is determined by adding back non-recurring operating and tax expenses/(benefits).
SOURCE:
View source version on accesswire.com:
https://www.accesswire.com/564801/Energy-Recovery-Reports-Third-Quarter-2019-Financial-Results