Energy Recovery Reports Product Revenue Growth of 26% for Fiscal Year 2020
Strong 2020 results combined with projected growth in 2021 and 2022 will likely increase
"We ended a difficult 2020 stronger than we started," said
Financial Results
Three Months Ended | Years Ended | |||||||||||||||||||||||
2020 | 2019 | Variance | 2020 | 2019 | Variance | |||||||||||||||||||
(in millions, except earnings per share, percentages and basis points) | ||||||||||||||||||||||||
Product revenue | $ | 26.4 | $ | 15.8 | 67 | % | $ | 92.1 | $ | 72.8 | 26 | % | ||||||||||||
License and development revenue | - | 3.7 | (100 | %) | 26.9 | 14.1 | 91 | % | ||||||||||||||||
Total revenue | $ | 26.4 | $ | 19.5 | 36 | % | $ | 119.0 | $ | 86.9 | 37 | % | ||||||||||||
Product gross profit | $ | 18.2 | $ | 11.3 | 61 | % | $ | 63.8 | $ | 52.5 | 22 | % | ||||||||||||
Product gross margin | 69.0 | % | 71.5 | % | (250)bps | 69.3 | % | 72.1 | % | (280) bps | ||||||||||||||
Operating Expense | $ | 14.4 | $ | 15.9 | (9 | %) | $ | 59.4 | $ | 56.2 | 6 | % | ||||||||||||
Operating income (loss) | $ | 3.8 | $ | (0.9 | ) | 519 | % | $ | 31.3 | $ | 10.4 | 202 | % | |||||||||||
Net income (loss) | $ | 3.5 | $ | (0.6 | ) | 667 | % | $ | 26.4 | $ | 10.9 | 142 | % | |||||||||||
Diluted earnings (deficit) per share | $ | 0.06 | $ | (0.01 | ) | $ | 0.07 | $ | 0.47 | $ | 0.19 | $ | 0.28 | |||||||||||
Operating cash flow | $ | 6.5 | $ | 4.8 | 37 | % | $ | 16.9 | $ | 5.3 | 220 | % | ||||||||||||
Cash and securities | $ | 114.7 | $ | 100.5 | 14 | % | $ | 114.7 | $ | 100.5 | 14 | % |
Product Channel Revenue
Three Months Ended | Years Ended | |||||||||||||||||||||||
2020 | 2019 | Variance | 2020 | 2019 | Variance | |||||||||||||||||||
(In millions, except percentages) | ||||||||||||||||||||||||
Megaproject | $ | 19.6 | $ | 6.2 | 215% | $ | 66.8 | $ | 38.2 | 75% | ||||||||||||||
Original equipment manufacturer | 4.1 | 6.8 | (39%) | 15.8 | 23.0 | (31%) | ||||||||||||||||||
Aftermarket | 2.7 | 2.7 | (3%) | 9.5 | 11.7 | (19%) | ||||||||||||||||||
Total product revenue | $ | 26.4 | $ | 15.8 | 67% | $ | 92.1 | $ | 72.8 | 26% |
"We beat our 2020 water guidance by more than 1%, a growth target that we first communicated in
Fiscal Year 2020
Revenues
For the year ended
For the 5th consecutive year, our Water segment achieved record revenue for the year ended
Our original equipment manufacturer ("OEM") and aftermarket ("AM") channels, which contain projects of shorter duration, were negatively affected by COVID-19 and the resulting decline in the economic conditions in fiscal year 2020, which ultimately delayed certain new installation and upgrade projects, as well as non-critical plant maintenance. Specifically, in our OEM channel, we sell into a number of industries, including tourism and hospitality, which were greatly affected by COVID-19.
In our Oil & Gas segment we accelerated revenue recognition from the termination of the license agreement between us and Schlumberger in the second quarter of 2020. No revenue was recognized in the second half of 2020, and there will be no future license revenue recognized associated with this contract.
Product Gross Margin
For the year ended
Operating Expenses
For the year ended
Sales and marketing ("S&M") expenses decreased as compared to prior year due primarily to COVID-19, as we temporarily reduced a majority of travel-related marketing events.
Research and development ("R&D") expenses were relatively flat as compared to prior year. Expenditures related to the development of the VorTeq peaked in the first half of 2020, but fell 17% for the fiscal year as compared to prior year. This decrease in spending was partially offset by costs to support other incubation initiatives.
Bottom Line Summary
On an annual basis, we reported a net income of
Fourth Quarter 2020
Revenues
For the fourth quarter ended
The Water desalination business growth in the fourth quarter ended
Product Gross Margin
For the fourth quarter ended
Operating Expenses
For the fourth quarter ended
G&A expenses increased as compared to the fourth quarter ended
S&M expenses decreased as compared to the fourth quarter ended
Bottom Line Summary
On a quarterly basis, we reported a net income of
Cash Flow Highlights
We finished the year 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 projected growth in 2021 and 2022 will increase the Company's cash balances; that the deployment of the VorTeq at a live well will help demonstrate the value proposition of the VorTeq; that the Company will ever commercialize the VorTeq; that the Company will be able to extend the service life of the VorTeq cartridges; that the Company will be able to develop the pressure exchanger's capabilities to handle gases; that the Company will be able to develop products to address challenges faced in industrial and commercial refrigeration; that the Company will be able to drive shareholder value; and that the Company will introduce new products in 2021. 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 Fourth Quarter and Fiscal Year End 2020 Financial Results
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Disclosure Information
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CONTACT:
Investor Relations
ir@energyrecovery.com
+1 (281) 962-8105
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 94,255 | $ | 26,387 | ||||
Short-term investments | 20,446 | 58,736 | ||||||
Accounts receivable, net | 11,792 | 12,979 | ||||||
Inventories, net | 11,748 | 10,317 | ||||||
Prepaid expenses and other current assets | 4,950 | 4,548 | ||||||
Total current assets | 143,191 | 112,967 | ||||||
Long-term investments | - | 15,419 | ||||||
Deferred tax assets, non-current | 11,030 | 16,897 | ||||||
Property and equipment, net | 20,176 | 18,843 | ||||||
Operating lease, right of use asset | 16,090 | 11,195 | ||||||
12,839 | 12,855 | |||||||
Other assets, non-current | 988 | 598 | ||||||
Total assets | $ | 204,314 | $ | 188,774 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,118 | $ | 1,192 | ||||
Accrued expenses and other current liabilities | 11,816 | 9,869 | ||||||
Lease liabilities | 1,243 | 1,023 | ||||||
Contract liabilities | 1,552 | 15,746 | ||||||
Total current liabilities | 15,729 | 27,830 | ||||||
Lease liabilities, non-current | 16,443 | 11,533 | ||||||
Contract liabilities, non-current | 88 | 13,120 | ||||||
Other non-current liabilities | 430 | 278 | ||||||
Total liabilities | 32,690 | 52,761 | ||||||
Stockholders' equity: | ||||||||
Common stock | 62 | 61 | ||||||
Additional paid-in capital | 179,161 | 170,028 | ||||||
Accumulated other comprehensive income (loss) | 53 | (37) | ||||||
(30,486) | (30,486) | |||||||
Retained earnings (accumulated deficit) | 22,834 | (3,553) | ||||||
Total stockholders' equity | 171,624 | 136,013 | ||||||
Total liabilities and stockholders' equity | $ | 204,314 | $ | 188,774 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended | Years Ended | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Product revenue | $ | 26,426 | $ | 15,784 | $ | 92,091 | $ | 72,834 | ||||||||
Product cost of revenue | 8,200 | 4,492 | 28,249 | 20,335 | ||||||||||||
Product gross profit | 18,226 | 11,292 | 63,842 | 52,499 | ||||||||||||
License and development revenue | - | 3,717 | 26,895 | 14,108 | ||||||||||||
Operating expenses: | ||||||||||||||||
General and administrative | 6,768 | 6,042 | 25,519 | 22,832 | ||||||||||||
Sales and marketing | 2,351 | 2,724 | 8,127 | 9,434 | ||||||||||||
Research and development | 5,290 | 7,048 | 23,449 | 23,402 | ||||||||||||
Amortization of intangible assets | 4 | 106 | 16 | 575 | ||||||||||||
Impairment of long-lived assets | - | - | 2,332 | - | ||||||||||||
Total operating expenses | 14,413 | 15,920 | 59,443 | 56,243 | ||||||||||||
Income (loss) from operations | 3,813 | (911) | 31,294 | 10,364 | ||||||||||||
Other income: | ||||||||||||||||
Interest income | 104 | 459 | 913 | 2,010 | ||||||||||||
Other non-operating expense, net | (15) | (41) | (74) | (118) | ||||||||||||
Total other income, net | 89 | 418 | 839 | 1,892 | ||||||||||||
Income (loss) before income taxes | 3,902 | (493) | 32,133 | 12,256 | ||||||||||||
Provision for income taxes | 449 | 116 | 5,746 | 1,343 | ||||||||||||
Net income (loss) | $ | 3,453 | $ | (609) | $ | 26,387 | $ | 10,913 | ||||||||
Earnings (deficit) per share: | ||||||||||||||||
Basic | $ | 0.06 | $ | (0.01) | $ | 0.47 | $ | 0.20 | ||||||||
Diluted | $ | 0.06 | $ | (0.01) | $ | 0.47 | $ | 0.19 | ||||||||
Number of shares used in per share calculations: | ||||||||||||||||
Basic | 56,113 | 55,201 | 55,709 | 54,740 | ||||||||||||
Diluted | 57,261 | 55,201 | 56,637 | 56,067 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Years Ended | ||||||||
2020 | 2019 | |||||||
(In thousands) | ||||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 26,387 | $ | 10,913 | ||||
Adjustments to reconcile net income to cash provided by operating activities | ||||||||
Stock-based compensation | 4,787 | 5,676 | ||||||
Depreciation and amortization | 5,299 | 4,395 | ||||||
Amortization of premiums and discounts on investments | 390 | 65 | ||||||
Deferred income taxes | 5,867 | 1,421 | ||||||
Provision for warranty claims | 403 | 402 | ||||||
Impairment of long-lived assets | 2,332 | - | ||||||
Other non-cash adjustments | (8) | 92 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable, net | 1,098 | (2,679) | ||||||
Contract assets | (1,200) | 3,391 | ||||||
Inventories, net | (1,622) | (3,256) | ||||||
Prepaid and other assets | 415 | (263) | ||||||
Accounts payable | (205) | (373) | ||||||
Accrued expenses and other liabilities | 164 | (600) | ||||||
Income taxes | (11) | 27 | ||||||
Contract liabilities | (27,226) | (13,943) | ||||||
Net cash provided by operating activities | 16,870 | 5,268 | ||||||
Cash flows from investing activities: | ||||||||
Sales of marketable securities | 10,573 | 7,608 | ||||||
Maturities of marketable securities | 55,667 | 78,100 | ||||||
Purchases of marketable securities | (12,855) | (85,207) | ||||||
Capital expenditures | (6,785) | (7,382) | ||||||
Net cash provided by (used in) investing activities | 46,600 | (6,881) | ||||||
Cash flows from financing activities: | ||||||||
Net proceeds from issuance of common stock | 4,397 | 6,073 | ||||||
Tax payment for employee shares withheld | (23) | (110) | ||||||
Net cash provided by (used in) financing activities | 4,374 | 5,963 | ||||||
Effect of exchange rate differences on cash and cash equivalents | 26 | - | ||||||
Net change in cash, cash equivalents, and restricted cash | 67,870 | 4,350 | ||||||
Cash, cash equivalents and restricted cash, beginning of year | 26,488 | 22,138 | ||||||
Cash, cash equivalents and restricted cash, end of year | $ | 94,358 | $ | 26,488 |
SUPPLEMENTAL FINANCIAL INFORMATION
(Unaudited)
Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||||
Water | Oil & Gas | Corporate | Total | Water | Oil & Gas | Corporate | Total | |||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Product revenue | $ | 26,396 | $ | 30 | $ | - | $ | 26,426 | $ | 15,784 | $ | - | $ | - | $ | 15,784 | ||||||||||||||||
Product cost of revenue | 8,190 | 10 | - | 8,200 | 4,493 | (1) | - | 4,492 | ||||||||||||||||||||||||
Product gross profit | 18,206 | 20 | - | 18,226 | 11,291 | 1 | - | 11,292 | ||||||||||||||||||||||||
License and development revenue | - | - | - | - | - | 3,717 | - | 3,717 | ||||||||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||||||||||
General and administrative | 729 | 457 | 5,582 | 6,768 | 45 | 369 | 5,628 | 6,042 | ||||||||||||||||||||||||
Sales and marketing | 1,651 | 6 | 694 | 2,351 | 2,014 | 67 | 643 | 2,724 | ||||||||||||||||||||||||
Research and development | 388 | 3,139 | 1,763 | 5,290 | 1,031 | 5,750 | 267 | 7,048 | ||||||||||||||||||||||||
Amortization of intangible assets | 4 | - | - | 4 | 106 | - | - | 106 | ||||||||||||||||||||||||
Total operating expenses | 2,772 | 3,602 | 8,039 | 14,413 | 3,196 | 6,186 | 6,538 | 15,920 | ||||||||||||||||||||||||
Operating income (loss) | $ | 15,434 | $ | (3,582) | $ | (8,039) | 3,813 | $ | 8,095 | $ | (2,468) | $ | (6,538) | (911) | ||||||||||||||||||
Other income, net | 89 | 418 | ||||||||||||||||||||||||||||||
Income before income taxes | $ | 3,902 | $ | (493) |
Year Ended | Year Ended | |||||||||||||||||||||||||||||||
Water | Oil & Gas | Corporate | Total | Water | Oil & Gas | Corporate | Total | |||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Product revenue | $ | 92,061 | $ | 30 | $ | - | $ | 92,091 | $ | 72,730 | $ | 104 | $ | - | $ | 72,834 | ||||||||||||||||
Product cost of revenue | 28,239 | 10 | - | 28,249 | 20,148 | 187 | - | 20,335 | ||||||||||||||||||||||||
Product gross profit (loss) | 63,822 | 20 | - | 63,842 | 52,582 | (83 | ) | - | 52,499 | |||||||||||||||||||||||
License and development revenue | - | 26,895 | - | 26,895 | - | 14,108 | - | 14,108 | ||||||||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||||||||||
General and administrative | 2,196 | 2,058 | 21,265 | 25,519 | 1,501 | 1,576 | 19,755 | 22,832 | ||||||||||||||||||||||||
Sales and marketing | 5,958 | 112 | 2,057 | 8,127 | 7,072 | 741 | 1,621 | 9,434 | ||||||||||||||||||||||||
Research and development | 2,973 | 15,859 | 4,617 | 23,449 | 3,825 | 19,085 | 492 | 23,402 | ||||||||||||||||||||||||
Amortization of intangible assets | 16 | - | - | 16 | 575 | - | - | 575 | ||||||||||||||||||||||||
Impairment of long-lived assets | - | 2,332 | - | 2,332 | - | - | - | - | ||||||||||||||||||||||||
Total operating expenses | 11,143 | 20,361 | 27,939 | 59,443 | 12,973 | 21,402 | 21,868 | 56,243 | ||||||||||||||||||||||||
Operating income (loss) | $ | 52,679 | $ | 6,554 | $ | (27,939 | ) | 31,294 | $ | 39,609 | $ | (7,377 | ) | $ | (21,868 | ) | 10,364 | |||||||||||||||
Other income, net | 839 | 1,892 | ||||||||||||||||||||||||||||||
Income before income taxes | $ | 32,133 | $ | 12,256 |
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