Energy Recovery Reports Unaudited Financial Results for the Third Quarter Of 2014
THIRD QUARTER SUMMARY:
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Total revenue increased 10% to
$5.3 million in the third quarter of 2014, from$4.9 million in the third quarter of 2013 - Gross profit margin was 44% in the current period, compared to 60% in the third quarter of 2013, as a result of a product mix shift and lower production levels
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Operating expenses increased
$1.0 million , or 15%, from$6.8 million in the third quarter of 2013 to$7.8 million in the current period due to increased sales & marketing and research & development expenses -
Net loss of
$(5.5) million , or$(0.11) per share, in the third quarter of 2014, compared to$(3.9) million , or$(0.08) per share, in the third quarter of 2013, on decreased gross profit margin and higher operating expenses
Financial Review
Revenues
The Company generated net revenue of
Gross Margin
A shift in product sales mix and lower levels of production were the primary drivers to a gross profit margin decrease from 60% in the prior-year quarter to 44% in the current period. Lower levels of production commensurate with decreased revenue and demand in the current period, resulted in the Company's gross profit margin decrease in sequential terms from 48% in the second quarter of 2014 to 44% in the current period. Product mix in the third quarter of 2014 versus the prior-year quarter was as follows:
PX® devices and related products ("PX Devices") decreased to 44% from 73%, pumps and turbochargers ("P&T Devices") increased to 52% from 27%, and oil & gas increased to 4% from 0% for rental income tied to an operating lease of an IsoGenTM system to a customer in Saudi Arabia. This IsoGen system converts hydraulic pressure energy to electrical energy in a gas processing application. The product mix in the second quarter of 2014 was 63% of net revenue related to PX Devices, 34% for P&T Devices, and 3% for rental income tied to the aforementioned IsoGensystem.
Operating Expenses
The Company incurred an increase in operating expenses of
To summarize net income performance, the Company reported a net loss of
Cash Flow Highlights
In the nine months ending
Excluding current and non-current restricted cash of
Forward-Looking Statements
This press release includes "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. 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. When used in this document, the words "anticipate," "believe," "continue," "excited," "expect," "remain," "will," "probable" and similar expressions are intended to identify forward-looking statements, but are not exclusive means of identifying such statements. Because such forward-looking statements involve risks and uncertainties, the Company's actual results may differ materially from the predictions in these forward-looking statements. All forward-looking statements are made as of today, and the Company assumes no obligation to update such statements. In addition to any other factors that may have been discussed herein regarding the risks and uncertainties of our business, please see "Risk Factors" in our Form 10-K filed with the
Conference Call to Discuss First Quarter Results for 2014
The conference call scheduled for tomorrow at
About
Unaudited Consolidated Financial Results | |||||
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CONSOLIDATED STATEMENTS OF OPERATIONS | |||||
(in thousands, except per share data) | |||||
(unaudited) | |||||
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Three Months Ended September 30, |
Nine Months Ended September 30, |
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2014 | 2013 | 2014 | 2013 | ||
Net revenue | $ 5,342 | $ 4,868 | $ 15,646 | $ 19,810 | |
Cost of revenue | 3,007 | 1,966 | 7,991 | 8,615 | |
Gross profit | 2,335 | 2,902 | 7,655 | 11,195 | |
Operating expenses: | |||||
General and administrative | 3,078 | 3,625 | 8,112 | 11,121 | |
Sales and marketing | 2,351 | 1,737 | 7,548 | 5,607 | |
Research and development | 2,131 | 1,027 | 5,089 | 3,246 | |
Amortization of intangibles assets | 216 | 230 | 646 | 691 | |
Restructuring charges | — | 140 | — | 184 | |
Total operating expenses | 7,776 | 6,759 | 21,395 | 20,849 | |
Loss from operations | (5,441) | (3,857) | (13,740) | (9,654) | |
Other non-operating income, net of expenses | (2) | 27 | 127 | 79 | |
Loss before income taxes | (5,443) | (3,830) | (13,613) | (9,575) | |
Provision for income taxes | 63 | 36 | 187 | 258 | |
Net loss | $ (5,506) | $ (3,866) | $ (13,800) | $ (9,833) | |
Basic and diluted net loss per share | $ (0.11) | $ (0.08) | $ (0.27) | $ (0.19) | |
Shares used in basic and diluted per share calculation | 51,861 | 51,052 | 51,626 | 51,020 |
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CONSOLIDATED BALANCE SHEETS | ||
(unaudited) | ||
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2014 |
December 31, 2013 |
ASSETS | ||
Current assets: | ||
Cash and cash equivalents | $ 17,423 | $ 14,371 |
Restricted cash | 3,357 | 4,311 |
Short-term investments | 13,751 | 5,856 |
Accounts receivable, net of allowance for doubtful accounts of |
3,997 | 15,222 |
Unbilled receivables | 941 | 5,442 |
Inventories | 10,227 | 4,955 |
Deferred tax assets, net | 698 | 698 |
Prepaid expenses and other current assets | 2,107 | 1,018 |
Total current assets | 52,501 | 51,873 |
Restricted cash, non-current | 2,084 | 4,468 |
Unbilled receivables, non-current | — | 1,197 |
Long-term investments | 1,381 | 13,694 |
Property and equipment, net of accumulated depreciation of |
13,873 | 13,903 |
Goodwill | 12,790 | 12,790 |
Other intangible assets, net | 3,362 | 4,008 |
Other assets, non-current | 2 | 2 |
Total assets | $ 85,993 | $ 101,935 |
LIABILITIES AND STOCKHOLDERS' EQUITY | ||
Current liabilities: | ||
Accounts payable | $ 1,253 | $ 1,209 |
Accrued expenses and other current liabilities | 5,357 | 7,963 |
Income taxes payable | 15 | 22 |
Accrued warranty reserve | 689 | 709 |
Deferred revenue | 1,099 | 779 |
Total current liabilities | 8,413 | 10,682 |
Deferred tax liabilities, non-current, net | 2,300 | 2,131 |
Deferred revenue, non-current | 13 | 130 |
Other non-current liabilities | 898 | 2,077 |
Total liabilities | 11,624 | 15,020 |
Commitments and Contingencies (Note 9) | ||
Stockholders' equity: | ||
Preferred stock, |
— | — |
Common stock, |
54 | 53 |
Additional paid-in capital | 122,738 | 119,932 |
Accumulated other comprehensive loss | (27) | (107) |
Treasury stock, at cost, 2,150,203 and 1,782,603 shares repurchased at |
(5,633) | (4,000) |
Accumulated deficit | (42,763) | (28,963) |
Total stockholders' equity | 74,369 | 86,915 |
Total liabilities and stockholders' equity | $ 85,993 | $ 101,935 |
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CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
(unaudited) | ||
Nine Months Ended September 30, |
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2014 | 2013 | |
Cash Flows From Operating Activities | ||
Net loss |
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$ (9,833) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 3,025 | 2,801 |
Loss on disposal of fixed assets | — | 19 |
Non-cash restructuring charges | — | 184 |
Amortization of premiums/discounts on investments | 348 | 279 |
Share-based compensation | 1,628 | 1,717 |
(Gain) loss on foreign currency transactions | (10) | (5) |
Deferred income taxes | 169 | 167 |
Provision for doubtful accounts | 293 | 248 |
Provision for warranty claims | 87 | 177 |
Valuation adjustments for excess or obsolete inventory | 212 | 81 |
Other non-cash adjustments | (179) | (88) |
Changes in operating assets and liabilities: | ||
Accounts receivable | 10,935 | 6,869 |
Unbilled receivables | 5,698 | 4,848 |
Inventories | (5,484) | (3,906) |
Prepaid and other assets | (1,045) | 2,933 |
Accounts payable | 64 | (718) |
Accrued expenses and other liabilities | (2,256) | (2,635) |
Change in fair value of contingent consideration | (1,524) | — |
Income taxes payable | (7) | (17) |
Deferred revenue | 203 | (387) |
Net cash (used in) provided by operating activities | (1,643) | 2,734 |
Cash Flows From Investing Activities | ||
Capital expenditures | (2,301) | (1,077) |
Proceeds from sale of assets held for sale | — | 1,161 |
Purchase of marketable securities | (273) | (13,104) |
Maturities of marketable securities | 4,355 | 8,000 |
Release of restricted cash | 3,338 | 1,068 |
Net cash provided by (used in) investing activities | 5,119 | (3,952) |
Cash Flows From Financing Activities | ||
Repayment of capital lease obligation | — | (18) |
Net proceeds from issuance of common stock | 1,165 | 425 |
Repurchase of common stock for treasury | (1,633) | — |
Net cash (used in) provided by financing activities | (468) | 407 |
Effect of exchange rate differences on cash and cash equivalents | 44 | (16) |
Net change in cash and cash equivalents | 3,052 | (827) |
Cash and cash equivalents, beginning of period | 14,371 | 16,642 |
Cash and cash equivalents, end of period | $ 17,423 | $ 15,815 |
CONTACT:Source:Joel Gay Chief Financial Officer (510) 746-5034