Energy Recovery Reports First Quarter 2023 Financial Results
First Quarter Highlights
-
Revenue of
$13.4 million , and withinFebruary 2023 guidance. - Lower gross margin of 60.9%, as compared to Q1’2022, driven mainly by an increase in pump and hydraulic turbocharger revenue in the original equipment manufacturer and aftermarket channels, and a decrease PX® Pressure Exchanger® revenue in the megaproject channel.
- Operating expenses grew 6% in the first quarter, as compared to Q4’2022, from growing sales and marketing expenditures in support of new businesses, and some variability in the timing of research and development expenses.
-
Loss from operations of
$8.1 million primarily attributable to lower revenue and gross margin due to expected timing of megaproject shipments. -
Net loss of
$6.3 million and adjusted EBITDA of negative$4.8 million , primarily attributed to lower revenue and gross margin. -
Operating cash flow of
$8.7 million driven by strong collections.
Financial Highlights
|
Q1’2023 |
|
Q1’2022 |
|
vs. Q1’2022 |
|
(In millions, except net income (loss) per share, percentages and basis points) |
||||
Revenue |
|
|
|
|
down 59% |
Gross margin |
60.9% |
|
70.8% |
|
down 990 bps |
Operating margin |
(60.5%) |
|
25.3% |
|
NM |
Net (loss) income |
( |
|
|
|
down 180% |
Net (loss) income per share |
( |
|
|
|
down 179% |
Effective tax rate |
15.5% |
|
5.3% |
|
|
Cash provided by (used for) operations |
|
|
( |
|
|
Non-GAAP Financial Highlights
|
Q1’2023 |
|
Q1’2022 |
|
vs. Q1’2022 |
|
(In millions, except net income (loss) per share, percentages and basis points) |
||||
Adjusted operating margin |
(43.3%) |
|
31.0% |
|
NM |
Adjusted net (loss) income |
( |
|
|
|
down 149% |
Adjusted net (loss) income per share |
( |
|
|
|
down 150% |
Adjusted effective tax rate |
13.0% |
|
10.2% |
|
|
Adjusted EBITDA |
( |
|
|
|
|
Free cash flow |
|
|
( |
|
|
NM |
Not material |
|
(1) |
Refer to the sections “Use of Non-GAAP Financial Measures” and “Reconciliation of Non-GAAP Financial Measures” for definition of adjustment to GAAP presentation. |
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 our belief that desalination revenue for 2023 will be heavily weighted to the second half of this year; our expectation that our desalination business will grow between 3-7% this year; our expectation that we will grow our industrial wastewater sales team; our goal to double our wastewater business in 2023 and 2024; and our expectations for multiple PX G1300 commissions in multiple countries this year in
Use of Non-GAAP Financial Measures
This press release includes certain non-GAAP financial measures, including adjusted operating margin, adjusted net (loss) income, adjusted net (loss) income per share, adjusted effective tax rate, adjusted EBITDA and free cash flow. 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
Notes to the First Quarter Financial Results
- Adjusted operating margin is a non-GAAP financial measure that the Company defines as (loss) income from operations which excludes i) share-based compensation; and ii) non-core operational costs, such as VorTeq-related severance costs and accelerated depreciation, and litigation charges, divided by revenues.
- Adjusted net (loss) income is a non-GAAP financial measure that the Company defines as net income which excludes i) share-based compensation; ii) non-core operational costs, such as VorTeq-related severance costs and accelerated depreciation, and litigation charges; and iii) the applicable tax effect of the excluded items including the share-based compensation discrete tax item.
- Adjusted net (loss) income per share is a non-GAAP financial measure that the Company defines as net (loss) income, which excludes i) share-based compensation; and ii) non-core operational costs, such as VorTeq-related severance costs and accelerated depreciation, and litigation charges; and iii) the applicable tax effect of the excluded items including the share-based compensation discrete tax item, divided by basic shares outstanding.
- Adjusted effective tax rate reflects adjustments for share-based compensation discrete tax item, share-based compensation, VorTeq-related severance costs and accelerated depreciation, and litigation charges.
- Adjusted EBITDA is a non-GAAP financial measure that the Company defines as net (loss) income which excludes i) depreciation and amortization; ii) share-based compensation; iii) non-core operational costs, such as VorTeq-related severance costs, and litigation charges; iv) other income, net, such as interest income and other non-operating income, net; and v) (benefit from) provision for income taxes.
- Free cash flow is a non-GAAP financial measure that the Company defines as net cash provided by (used in) operating activities less capital expenditures.
Conference Call to Discuss First Quarter 2023 Financial Results
LIVE CONFERENCE CALL:
Listen-only, US / Canada Toll-Free: +1 (877) 709-8150
Listen-only, Local / International Toll: +1 (201) 689-8354
CONFERENCE CALL REPLAY:
Expiration:
US / Canada Toll-Free: +1 (877) 660-6853
Local / International Toll: +1 (201) 612-7415
Access code: 13737005
Investors may access the live call and the replay (approximately three hours after the live call concludes) over the internet at: ir.energyrecovery.com/websites/energyrecover/English/2200/calendar.html
Disclosure Information
About
|
|||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
|||||
(Unaudited) |
|||||
|
2023 |
|
2022 |
||
|
(In thousands) |
||||
ASSETS |
|
|
|
||
Cash, cash equivalents and investments |
$ |
101,689 |
|
$ |
92,891 |
Accounts receivable and contract assets |
|
12,711 |
|
|
35,782 |
Inventories, net |
|
33,119 |
|
|
28,366 |
Prepaid expenses and other assets |
|
3,442 |
|
|
3,886 |
Property, equipment and operating leases |
|
32,416 |
|
|
32,695 |
|
|
12,790 |
|
|
12,790 |
Deferred tax assets and other assets |
|
11,800 |
|
|
10,629 |
TOTAL ASSETS |
$ |
207,967 |
|
$ |
217,039 |
|
|
|
|
||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
||
Liabilities |
|
|
|
||
Accounts payable and accrued expenses |
$ |
10,144 |
|
$ |
15,507 |
Contract liabilities and other liabilities, non-current |
|
1,705 |
|
|
1,316 |
Lease liabilities |
|
14,615 |
|
|
14,878 |
Total liabilities |
|
26,464 |
|
|
31,701 |
|
|
|
|
||
Stockholders’ equity |
|
181,503 |
|
|
185,338 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ |
207,967 |
|
$ |
217,039 |
|
||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
||||||
(Unaudited) |
||||||
|
|
|||||
|
Three Months Ended |
|||||
|
|
2023 |
|
|
|
2022 |
|
(In thousands, except per share data) |
|||||
Revenue |
$ |
13,401 |
|
|
$ |
32,546 |
Cost of revenue |
|
5,246 |
|
|
|
9,498 |
Gross profit |
|
8,155 |
|
|
|
23,048 |
|
|
|
|
|||
Operating expenses |
|
|
|
|||
General and administrative |
|
7,066 |
|
|
|
6,551 |
Sales and marketing |
|
4,894 |
|
|
|
3,364 |
Research and development |
|
4,306 |
|
|
|
4,911 |
Total operating expenses |
|
16,266 |
|
|
|
14,826 |
(Loss) income from operations |
|
(8,111 |
) |
|
|
8,222 |
Other income, net |
|
656 |
|
|
|
117 |
(Loss) income before income taxes |
|
(7,455 |
) |
|
|
8,339 |
(Benefit from) provision for income taxes |
|
(1,159 |
) |
|
|
445 |
Net (loss) income |
$ |
(6,296 |
) |
|
$ |
7,894 |
|
|
|
|
|||
Net (loss) income per share |
|
|
|
|||
Basic |
$ |
(0.11 |
) |
|
$ |
0.14 |
Diluted |
$ |
(0.11 |
) |
|
$ |
0.14 |
|
|
|
|
|||
Number of shares used in per share calculations |
|
|
|
|||
Basic |
|
56,228 |
|
|
|
56,783 |
Diluted |
|
56,228 |
|
|
|
58,181 |
|
|||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||||||
(Unaudited) |
|||||||
|
|
||||||
|
Three Months Ended |
||||||
|
|
2023 |
|
|
|
2022 |
|
|
(In thousands) |
||||||
Cash flows from operating activities: |
|
|
|
||||
Net (loss) income |
$ |
(6,296 |
) |
|
$ |
7,894 |
|
Non-cash adjustments |
|
2,539 |
|
|
|
3,964 |
|
Net cash provided by (used in) operating assets and liabilities |
|
12,414 |
|
|
|
(13,460 |
) |
Net cash provided by (used in) operating activities |
|
8,657 |
|
|
|
(1,602 |
) |
|
|
|
|
||||
Cash flows from investing activities: |
|
|
|
||||
Net investment in marketable securities |
|
1,364 |
|
|
|
(18,956 |
) |
Capital expenditures and proceeds from sales of fixed assets |
|
(197 |
) |
|
|
(1,976 |
) |
Net cash provided by (used in) investing activities |
|
1,167 |
|
|
|
(20,932 |
) |
|
|
|
|
||||
Cash flows from financing activities: |
|
|
|
||||
Net proceeds from issuance of common stock |
|
165 |
|
|
|
763 |
|
Repurchase of common stock |
|
— |
|
|
|
(8,056 |
) |
Net cash provided by (used in) financing activities |
|
165 |
|
|
|
(7,293 |
) |
|
|
|
|
||||
Effect of exchange rate differences |
|
8 |
|
|
|
(11 |
) |
Net change in cash, cash equivalents and restricted cash |
$ |
9,997 |
|
|
$ |
(29,838 |
) |
Cash, cash equivalents and restricted cash, end of period |
$ |
66,455 |
|
|
$ |
44,623 |
|
|
|||||
SUPPLEMENTAL FINANCIAL INFORMATION |
|||||
(Unaudited) |
|||||
Channel Revenue |
|||||
|
Three Months Ended |
||||
|
2023 |
|
2022 |
|
vs. 2022 |
|
(In thousands, except percentages) |
||||
Original equipment manufacturer |
|
|
|
|
up 46% |
Aftermarket |
3,322 |
|
4,035 |
|
down 18% |
Megaproject |
3,243 |
|
23,840 |
|
down 86% |
Total revenue |
|
|
|
|
down 59% |
Segment Activity |
||||||||||||||||||||||||||||
|
Three Months Ended |
|
Three Months Ended |
|||||||||||||||||||||||||
|
Water |
|
Emerging Technologies |
|
Corporate |
|
Total |
|
Water |
|
Emerging Technologies |
|
Corporate |
|
Total |
|||||||||||||
|
(In thousands) |
|||||||||||||||||||||||||||
Revenue |
$ |
13,296 |
|
$ |
105 |
|
|
$ |
— |
|
|
$ |
13,401 |
|
|
$ |
32,516 |
|
$ |
30 |
|
|
$ |
— |
|
|
$ |
32,546 |
Cost of revenue |
|
5,101 |
|
|
145 |
|
|
|
— |
|
|
|
5,246 |
|
|
|
9,480 |
|
|
18 |
|
|
|
— |
|
|
|
9,498 |
Gross profit (loss) |
|
8,195 |
|
|
(40 |
) |
|
|
— |
|
|
|
8,155 |
|
|
|
23,036 |
|
|
12 |
|
|
|
— |
|
|
|
23,048 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
General and administrative |
|
1,938 |
|
|
968 |
|
|
|
4,160 |
|
|
|
7,066 |
|
|
|
1,464 |
|
|
908 |
|
|
|
4,179 |
|
|
|
6,551 |
Sales and marketing |
|
3,175 |
|
|
1,170 |
|
|
|
549 |
|
|
|
4,894 |
|
|
|
2,301 |
|
|
527 |
|
|
|
536 |
|
|
|
3,364 |
Research and development |
|
1,180 |
|
|
3,126 |
|
|
|
— |
|
|
|
4,306 |
|
|
|
800 |
|
|
4,111 |
|
|
|
— |
|
|
|
4,911 |
Total operating expenses |
|
6,293 |
|
|
5,264 |
|
|
|
4,709 |
|
|
|
16,266 |
|
|
|
4,565 |
|
|
5,546 |
|
|
|
4,715 |
|
|
|
14,826 |
Operating income (loss) |
$ |
1,902 |
|
$ |
(5,304 |
) |
|
$ |
(4,709 |
) |
|
$ |
(8,111 |
) |
|
$ |
18,471 |
|
$ |
(5,534 |
) |
|
$ |
(4,715 |
) |
|
$ |
8,222 |
Share-based Compensation |
|||||
|
Three Months Ended |
||||
|
|
2023 |
|
|
2022 |
|
(In thousands) |
||||
Stock-based compensation expense charged to: |
|
|
|
||
Cost of revenue |
$ |
249 |
|
$ |
146 |
General and administrative |
|
960 |
|
|
968 |
Sales and marketing |
|
698 |
|
|
433 |
Research and development |
|
397 |
|
|
335 |
Total stock-based compensation expense |
$ |
2,304 |
|
$ |
1,882 |
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (1)
(Unaudited)
This press release includes certain non-GAAP financial information because we plan and manage our business using such information. The following table reconciles the GAAP financial information to the non-GAAP financial information.
|
Quarter-to-Date |
||||||
|
Q1'2023 |
|
Q1'2022 |
||||
|
(In millions, except shares, per share and percentages) |
||||||
Operating margin |
|
(60.5 |
%) |
|
|
25.3 |
% |
Share-based compensation |
|
17.2 |
% |
|
|
5.8 |
% |
Adjusted operating margin |
|
(43.3 |
%) |
|
|
31.0 |
% |
|
|
|
|
||||
Net (loss) income |
$ |
(6.3 |
) |
|
$ |
7.9 |
|
Share-based compensation (2) |
|
2.3 |
|
|
|
1.9 |
|
Share-based compensation discrete tax item |
|
(0.5 |
) |
|
|
(0.6 |
) |
Adjusted net (loss) income |
$ |
(4.5 |
) |
|
$ |
9.2 |
|
|
|
|
|
||||
Net (loss) income per share |
$ |
(0.11 |
) |
|
$ |
0.14 |
|
Adjustments to net (loss) income per share (3) |
|
0.03 |
|
|
|
0.02 |
|
Adjusted net (loss) income per share |
$ |
(0.08 |
) |
|
$ |
0.16 |
|
|
|
|
|
||||
Effective tax rate |
|
15.5 |
% |
|
|
5.3 |
% |
Adjustments to effective tax rate (3) |
|
(2.5 |
%) |
|
|
4.9 |
% |
Adjusted effective tax rate |
|
13.0 |
% |
|
|
10.2 |
% |
|
|
|
|
||||
Net (loss) income |
$ |
(6.3 |
) |
|
$ |
7.9 |
|
Share-based compensation |
|
2.3 |
|
|
|
1.9 |
|
Depreciation and amortization |
|
1.0 |
|
|
|
1.0 |
|
Other income, net |
|
(0.7 |
) |
|
|
(0.1 |
) |
(Benefit from) provision for income taxes |
|
(1.2 |
) |
|
|
0.4 |
|
Adjusted EBITDA |
$ |
(4.8 |
) |
|
$ |
11.1 |
|
|
|
|
|
||||
Free cash flow |
|
|
|
||||
Net cash provided by (used in) operating activities |
$ |
8.7 |
|
|
$ |
(1.6 |
) |
Capital expenditures |
|
(0.3 |
) |
|
|
(2.0 |
) |
Free cash flow |
$ |
8.4 |
|
|
$ |
(3.6 |
) |
(1) | Amounts may not total due to rounding. |
|
(2) | Amount presented are net of tax. |
|
(3) |
Refer to the sections “Use of Non-GAAP Financial Measures” for description of items included in adjustments. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20230503005808/en/
Investor Relations
ir@energyrecovery.com
+1 (346) 382-6927
Source: