Energy Recovery Sets Product Revenue Record in the First Quarter
"Today,
Financial Results
Three Months Ended | |||||||||||
2021 | 2020 | Variance | |||||||||
(In millions, except net income per share, percentages and basis points) | |||||||||||
Product revenue | $ | 28.9 | $ | 19.0 | 52% | ||||||
License and development revenue | - | 2.5 | (100%) | ||||||||
Total revenue | $ | 28.9 | $ | 21.5 | 34% | ||||||
Product gross profit | $ | 20.0 | $ | 13.3 | 50% | ||||||
Product gross margin | 69.0% | 70.1% | (110) | bps | |||||||
Operating expense | $ | 13.8 | $ | 15.7 | (12%) | ||||||
Operating income | $ | 6.1 | $ | 0.1 | 4700% | ||||||
Net income | $ | 6.9 | $ | 0.6 | 1006% | ||||||
Diluted net income per share | $ | 0.12 | $ | 0.01 | $ | 0.11 | |||||
Operating cash flow | $ | 0.1 | $ | (5.9) | $ | 5.9 | |||||
Cash and investments | $ | 120.0 | $ | 93.2 | 29% | ||||||
Product Channel Revenue
Three Months Ended | ||||||||||||
2021 | 2020 | Variance | ||||||||||
(In millions, except percentages) | ||||||||||||
Megaproject | $ | 23.7 | $ | 14.4 | 64% | |||||||
Original equipment manufacturer | 2.8 | 3.6 | (22%) | |||||||||
Aftermarket | 2.4 | 1.0 | 142% | |||||||||
Total product revenue | $ | 28.9 | $ | 19.0 | 52% | |||||||
"Our desalination business drove significant growth in the first quarter, and we continue to work towards a more diversified revenue stream for the future," said
Segment Reporting
To reflect
Water segment: Includes seawater desalination and industrial wastewater sales and service, SWRO and industrial wastewater R&D and sales & marketing ("S&M") efforts, other water-related R&D activities, and certain water-related S&
Emerging Technologies segment: Includes R&D efforts in continued development of the VorTeq, sales and support of the IsoBoost® in natural gas processing which lowers the energy needed for sour gas treatment, and R&D efforts for new product development outside of desalination and industrial wastewater, and certain emerging technologies-related S&
Corporate operating expense: Includes certain operating expenses related to corporate activities outside of the operating segments, such as audit and accounting, some corporate legal, Board, and other separately managed general expenses not related to the identified segments.
First Quarter 2021 Business Highlights
Water Segment
- Megaproject and aftermarket channels contributed to strong sales growth while original equipment manufacturer sales remain affected by the global slowdown in tourism and hospitality.
- Product gross margin came within guidance and in-line with recent quarters, primarily due to reduction in average sales prices that began in 2020.
- We announced a joint marketing effort with DuPont Water Solutions, a global leader in purification and specialty-separation technologies, to build awareness of the benefits of pairing our Ultra PX™ energy recovery devices with DuPont membranes in industrial wastewater treatment systems. Our focus remains on marketing and further developing our industrial wastewater customer pipeline in
China andIndia . - Operating expenses in this segment decreased year-over-year primarily due to lower G&A expenses, in part due to Covid-19 related slowdown in travel and lower other office expenditures. In addition R&D expenses fell year-over-year, but are expected to increase as PX development for industrial wastewater picks up.
Emerging Technologies Segment
- We completed our first live well field trials of the VorTeq™ technology alongside Liberty Oilfield Services and one of the largest independent oil producers in
the United States . The VorTeq took part in more than 25 stages on a multi-well pad inNew Mexico in the first quarter. Our focus remains on extending the service life of the VorTeq cartridges, a critical hurdle for profitable commercialization. - Investments continue in pressure exchanger-based incubation initiatives, most notably in our CO2 commercial refrigeration efforts. Our testing indicates that our new PX can process CO2 within the refrigeration cycle more efficiently than existing technologies and the product is undergoing design and testing in preparation for beta tests.
- Operating expenses in this segment decreased year-over-year, primarily due to reduced development expenditures related to the VorTeq, which were partially offset by a shift of R&D investment to our CO2 activities and lower employee-related costs.
Corporate Operating Expenses
- Operating expenses increased year-over-year due primarily to higher employee-related costs largely related to higher share-based compensation expense and legal costs, partially offset by lower recruiting costs related to
Energy Recovery 's chief executive officer search in the first quarter of fiscal year 2020.
Bottom Line Summary
On a quarterly basis, we reported a net income 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 is embarking on a path of sustainable, disciplined and diversified growth; our ability to develop pressure exchanged-based solutions for new industries; our belief that our carbon dioxide commercial refrigeration solution excels in warmer climates as compared to the market-leading technology; our belief that the Company's future is bright; our belief that the Company can work towards a more diversified revenue stream for the future; and our belief that the Company is making significant progress in our emerging technology projects. 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 First Quarter 2021 Financial Results
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Disclosure Information
About
Contact:
Investor Relations
ir@energyrecovery.com
+1 (281) 962-8105
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
2021 | 2020 | |||||||
(In thousands) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 105,431 | $ | 94,255 | ||||
Short-term investments | 14,617 | 20,446 | ||||||
Accounts receivable, net | 16,397 | 11,792 | ||||||
Inventories, net | 11,925 | 11,748 | ||||||
Prepaid expenses and other current assets | 4,470 | 4,950 | ||||||
Total current assets | 152,840 | 143,191 | ||||||
Deferred tax assets, non-current | 11,699 | 11,030 | ||||||
Property and equipment, net | 20,734 | 20,176 | ||||||
Operating lease, right of use asset | 15,739 | 16,090 | ||||||
12,835 | 12,839 | |||||||
Other assets, non-current | 1,371 | 988 | ||||||
Total assets | $ | 215,218 | $ | 204,314 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,957 | $ | 1,118 | ||||
Accrued expenses and other current liabilities | 7,756 | 11,816 | ||||||
Lease liabilities, current | 1,428 | 1,243 | ||||||
Contract liabilities, current | 1,136 | 1,552 | ||||||
Total current liabilities | 12,277 | 15,729 | ||||||
Lease liabilities, non-current | 16,074 | 16,443 | ||||||
Contract liabilities, non-current | 96 | 88 | ||||||
Other non-current liabilities | 431 | 430 | ||||||
Total liabilities | 28,878 | 32,690 | ||||||
Stockholders' equity: | ||||||||
Common stock | 63 | 62 | ||||||
Additional paid-in capital | 187,083 | 179,161 | ||||||
Accumulated other comprehensive (loss) income | (20) | 53 | ||||||
(30,486) | (30,486) | |||||||
Retained earnings | 29,700 | 22,834 | ||||||
Total stockholders' equity | 186,340 | 171,624 | ||||||
Total liabilities and stockholders' equity | $ | 215,218 | $ | 204,314 | ||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended | ||||||||
2021 | 2020 | |||||||
(In thousands, except per share data) | ||||||||
Product revenue | $ | 28,940 | $ | 19,001 | ||||
Product cost of revenue | 8,981 | 5,684 | ||||||
Product gross profit | 19,959 | 13,317 | ||||||
License and development revenue | - | 2,543 | ||||||
Operating expenses: | ||||||||
General and administrative | 6,606 | 6,881 | ||||||
Sales and marketing | 2,703 | 2,138 | ||||||
Research and development | 4,502 | 6,709 | ||||||
Amortization of intangible assets | 4 | 4 | ||||||
Total operating expenses | 13,815 | 15,732 | ||||||
Income from operations | 6,144 | 128 | ||||||
Other income (expense): | ||||||||
Interest income | 92 | 420 | ||||||
Other non-operating expense, net | (10) | (12) | ||||||
Total other income, net | 82 | 408 | ||||||
Income before income taxes | 6,226 | 536 | ||||||
Benefit from income taxes | (640) | (85) | ||||||
Net income | $ | 6,866 | $ | 621 | ||||
Net income per share: | ||||||||
Basic | $ | 0.12 | $ | 0.01 | ||||
Diluted | $ | 0.12 | $ | 0.01 | ||||
Number of shares used in per share calculations: | ||||||||
Basic | 56,877 | 55,412 | ||||||
Diluted | 58,597 | 56,542 | ||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended | ||||||||
2021 | 2020 | |||||||
(In thousands) | ||||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 6,866 | $ | 621 | ||||
Adjustments to reconcile net income to cash provided by (used in) operating activities | ||||||||
Stock-based compensation | 1,913 | 1,503 | ||||||
Depreciation and amortization | 1,347 | 1,258 | ||||||
Amortization of premiums and discounts on investments | 71 | 220 | ||||||
Deferred income taxes | (669) | (35) | ||||||
Other non-cash adjustments | (12) | 145 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable, net | (4,605) | (902) | ||||||
Contract assets | (183) | (244) | ||||||
Inventories, net | (186) | (692) | ||||||
Prepaid and other assets | 281 | (428) | ||||||
Accounts payable | 821 | 745 | ||||||
Accrued expenses and other liabilities | (5,182) | (4,511) | ||||||
Contract liabilities | (408) | (3,552) | ||||||
Net cash provided by (used in) operating activities | 54 | (5,872) | ||||||
Cash flows from investing activities: | ||||||||
Sales of marketable securities | - | 4,974 | ||||||
Maturities of marketable securities | 5,710 | 21,195 | ||||||
Purchases of marketable securities | - | (12,855) | ||||||
Proceeds from sale of assets | 5 | - | ||||||
Capital expenditures | (627) | (1,380) | ||||||
Net cash provided by investing activities | 5,088 | 11,934 | ||||||
Cash flows from financing activities: | ||||||||
Net proceeds from issuance of common stock | 6,059 | 440 | ||||||
Tax payment for employee shares withheld | - | (22) | ||||||
Net cash provided by financing activities | 6,059 | 418 | ||||||
Effect of exchange rate differences on cash and cash equivalents | (25) | (25) | ||||||
Net change in cash, cash equivalents and restricted cash | 11,176 | 6,455 | ||||||
Cash, cash equivalents and restricted cash, beginning of year | 94,358 | 26,488 | ||||||
Cash, cash equivalents and restricted cash, end of period | $ | 105,534 | $ | 32,943 | ||||
SUPPLEMENTAL FINANCIAL INFORMATION
(Unaudited)
Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||||
Water | Emerging Technologies | Corporate | Total | Water | Emerging Technologies | Corporate | Total | |||||||||||||||||||||||||
Product revenue | $ | 28,940 | $ | - | $ | - | $ | 28,940 | $ | 19,001 | $ | - | $ | - | $ | 19,001 | ||||||||||||||||
Product cost of revenue | 8,981 | - | - | 8,981 | 5,684 | - | - | 5,684 | ||||||||||||||||||||||||
Product gross profit | 19,959 | - | - | 19,959 | 13,317 | - | - | 13,317 | ||||||||||||||||||||||||
License and development revenue | - | - | - | - | - | 2,543 | - | 2,543 | ||||||||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||||||||||
General and administrative | 1,557 | 1,166 | 3,883 | 6,606 | 2,079 | 1,492 | 3,310 | 6,881 | ||||||||||||||||||||||||
Sales and marketing | 2,164 | 179 | 360 | 2,703 | 1,676 | 312 | 150 | 2,138 | ||||||||||||||||||||||||
Research and development | 501 | 4,001 | - | 4,502 | 902 | 5,807 | - | 6,709 | ||||||||||||||||||||||||
Amortization of intangible assets | 4 | - | - | 4 | 4 | - | - | 4 | ||||||||||||||||||||||||
Total operating expenses | 4,226 | 5,346 | 4,243 | 13,815 | 4,661 | 7,611 | 3,460 | 15,732 | ||||||||||||||||||||||||
Operating income (loss) | $ | 15,733 | $ | (5,346 | ) | $ | (4,243 | ) | 6,144 | $ | 8,656 | $ | (5,068 | ) | $ | (3,460 | ) | 128 | ||||||||||||||
Other income, net | 82 | 408 | ||||||||||||||||||||||||||||||
Income before income taxes | $ | 6,226 | $ | 536 | ||||||||||||||||||||||||||||
SOURCE:
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