Energy Recovery Reports Third Quarter Financial Results
"2021 is playing out as expected, and we are well positioned to end the year in record fashion. Our desalination business continues to demonstrate strength, and we are building our pipeline of new industrial wastewater orders, two sides of our commitment to helping to address the growing global need for freshwater. We believe the solution to the rapidly increasing freshwater gap requires both increasing supply and better stewardship of water we already have," said
Financial Results
Three Months Ended | Nine Months Ended | ||||||||||||||||
2021 | 2020 | Variance | 2021 | 2020 | Variance | ||||||||||||
(In millions, except net income per share, percentages and basis points) | |||||||||||||||||
Product revenue | $ | 20.8 | $ | 27.4 | (24%) | $ | 70.3 | $ | 65.7 | 7% | |||||||
License and development revenue (1) | - | - | -% | - | 26.9 | (100%) | |||||||||||
Total revenue | $ | 20.8 | $ | 27.4 | (24%) | $ | 70.3 | $ | 92.6 | (24%) | |||||||
Product gross profit | $ | 14.7 | $ | 19.6 | (25%) | $ | 48.1 | $ | 45.6 | 5% | |||||||
Product gross margin | 70.6% | 71.5% | (90) bps | 68.4% | 69.5% | (110) bps | |||||||||||
Operating expense | $ | 13.3 | $ | 13.5 | (2%) | $ | 40.2 | $ | 45.0 | (11%) | |||||||
Operating income | $ | 1.4 | $ | 6.1 | (77%) | $ | 7.9 | $ | 27.5 | (71%) | |||||||
Net income | $ | 1.1 | $ | 5.4 | (80%) | $ | 9.0 | $ | 22.9 | (61%) | |||||||
Diluted net income per share | $ | 0.02 | $ | 0.10 | $ | (0.08) | $ | 0.15 | $ | 0.41 | $ | (0.26) | |||||
Operating cash flow | $ | (4.2) | $ | 10.6 | $ | (14.9) | $ | 7.3 | $ | 10.4 | $ | (3.1) | |||||
Cash and investments | $ | 108.4 | $ | 105.9 | 2% | $ | 108.4 | $ | 105.9 | 2% |
(1) In
Product Channel Revenue
Three Months Ended | Nine Months Ended | |||||||||||||||||
2021 | 2020 | Variance | 2021 | 2020 | Variance | |||||||||||||
(In millions, except percentages) | ||||||||||||||||||
Megaproject | $ | 13.3 | $ | 20.7 | (36%) | $ | 50.3 | $ | 47.2 | 7% | ||||||||
Original equipment manufacturer | 4.8 | 4.1 | 19% | 11.9 | 11.7 | 2% | ||||||||||||
Aftermarket | 2.7 | 2.6 | 2% | 8.1 | 6.8 | 19% | ||||||||||||
Total product revenue | $ | 20.8 | $ | 27.4 | (24%) | $ | 70.3 | $ | 65.7 | 7% |
"We remain on track to finish our year with strong revenue results as we have guided since October last year, with the fourth quarter expected to be a historic revenue quarter," said
Third Quarter 2021 Business Highlights
Water Segment
- Product revenue of
$20.8 million was in-line with management's guidance. We continued to experience rebounding sales in the original equipment manufacturer channel and saw growth in the aftermarket channel. The megaproject channel saw an expected decrease but is projected to rebound strongly in the fourth quarter. - A sixth purchase order was received in our industrial wastewater business, further strengthening our first full year in this market.
- Our gross margin increased to 70.6% from our low in the second quarter. We have largely avoided raw material cost increases due to our timely build up of raw material inventory starting in 2020, as well as internal cost optimization efforts.
Emerging Technologies Segment
- Our outreach efforts in the commercial refrigeration space have generated a positive response from industry leaders. In late October, we entered into an agreement to deploy the PX G1300 in a grocery store in
California . We are targeting first commercial deployments of the PX G1300 in the first half of 2022. - During the quarter, we joined the
North American Sustainable Refrigeration Council (the "NASRC"). The NASRC is an action-oriented non-profit charity, as defined under theU.S. Internal Revenue Code 501(c)(3), working in partnership with the supermarket industry to create a climate-friendly future for refrigeration by eliminating the barriers to natural refrigerant adoption in supermarkets. Natural refrigerants, such as CO 2 , have near-zero Global Warming Potential ("GWP"), making it the safest climate-friendly alternative to hydrofluorocarbons which have a GWP into the thousands. - Operating expenses in this segment decreased quarter-over-quarter, due primarily to reduced research and development expenditures related to the VorTeq.
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's PX G1300 has the potential to maximize the savings offered by the next generation CO 2 system; that the Company's technology can transform the multi-billion dollar refrigeration market by making CO 2 refrigeration systems more financially attractive versus incumbent CO 2 solutions; the Company's belief that the fourth quarter revenue will be historic and that the Company will meet its revenue guidance; the Company's belief that the Company will be able to manufacture and deliver products to its customers in 2022; and the Company's expectation that the Company will deploy its PX G1300 in the first half of 2022. 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 Third Quarter 2021 Financial Results
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CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands) | ||||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 65,745 | $ | 94,255 | ||
Short-term investments | 41,900 | 20,446 | ||||
Accounts receivable, net | 13,066 | 11,792 | ||||
Inventories, net | 20,557 | 11,748 | ||||
Prepaid expenses and other assets | 5,541 | 4,950 | ||||
Total current assets | 146,809 | 143,191 | ||||
Long-term investments | 765 | - | ||||
Deferred tax assets, net | 12,093 | 11,030 | ||||
Property and equipment, net | 20,905 | 20,176 | ||||
Operating lease, right of use asset | 15,021 | 16,090 | ||||
12,830 | 12,839 | |||||
Other assets | 365 | 988 | ||||
Total assets | $ | 208,788 | $ | 204,314 | ||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 3,663 | $ | 1,118 | ||
Accrued expenses and other liabilities | 9,582 | 11,816 | ||||
Lease liabilities | 1,518 | 1,243 | ||||
Contract liabilities | 1,452 | 1,552 | ||||
Total current liabilities | 16,215 | 15,729 | ||||
Lease liabilities | 15,284 | 16,443 | ||||
Other liabilities | 550 | 518 | ||||
Total liabilities | 32,049 | 32,690 | ||||
Stockholders' equity: | ||||||
Common stock | 63 | 62 | ||||
Additional paid-in capital | 192,564 | 179,161 | ||||
Accumulated other comprehensive (loss) income | (86 | ) | 53 | |||
(47,642 | ) | (30,486) | ||||
Retained earnings | 31,840 | 22,834 | ||||
Total stockholders' equity | 176,739 | 171,624 | ||||
Total liabilities and stockholders' equity | $ | 208,788 | $ | 204,314 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||
(In thousands, except per share data) | ||||||||||||||
Product revenue | $ | 20,781 | $ | 27,408 | $ | 70,328 | $ | 65,665 | ||||||
Product cost of revenue | 6,089 | 7,816 | 22,251 | 20,049 | ||||||||||
Product gross profit | 14,692 | 19,592 | 48,077 | 45,616 | ||||||||||
License and development revenue | - | - | - | 26,895 | ||||||||||
Operating expenses: | ||||||||||||||
General and administrative | 5,851 | 6,271 | 18,632 | 18,751 | ||||||||||
Sales and marketing | 2,996 | 2,141 | 8,236 | 5,776 | ||||||||||
Research and development | 4,416 | 5,098 | 13,342 | 18,159 | ||||||||||
Amortization of intangible assets | 2 | 4 | 9 | 12 | ||||||||||
Impairment of long-lived assets | - | - | - | 2,332 | ||||||||||
Total operating expenses | 13,265 | 13,514 | 40,219 | 45,030 | ||||||||||
Income from operations | 1,427 | 6,078 | 7,858 | 27,481 | ||||||||||
Other income (expense): | ||||||||||||||
Interest income | 36 | 134 | 179 | 809 | ||||||||||
Other non-operating (expense) income, net | 1 | (29 | ) | (21 | ) | (59) | ||||||||
Total other income, net | 37 | 105 | 158 | 750 | ||||||||||
Income before income taxes | 1,464 | 6,183 | 8,016 | 28,231 | ||||||||||
(Benefit from) provision for income taxes | 393 | 796 | (990 | ) | 5,297 | |||||||||
Net income | $ | 1,071 | $ | 5,387 | $ | 9,006 | $ | 22,934 | ||||||
Net income per share: | ||||||||||||||
Basic | $ | 0.02 | $ | 0.10 | $ | 0.16 | $ | 0.41 | ||||||
Diluted | $ | 0.02 | $ | 0.10 | $ | 0.15 | $ | 0.41 | ||||||
Number of shares used in per share calculations: | ||||||||||||||
Basic | 57,026 | 55,692 | 57,053 | 55,573 | ||||||||||
Diluted | 58,709 | 56,471 | 58,785 | 56,443 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended | |||||||
2021 | 2020 | ||||||
(In thousands) | |||||||
Cash flows from operating activities: | |||||||
Net income | $ | 9,006 | $ | 22,934 | |||
Adjustments to reconcile net income to cash provided by (used in) operating activities | |||||||
Stock-based compensation | 4,574 | 3,672 | |||||
Depreciation and amortization | 4,141 | 3,963 | |||||
Amortization of premiums and discounts on investments | 340 | 311 | |||||
Deferred income taxes | (1,063 | ) | 5,443 | ||||
Impairment of long-lived assets | - | 2,332 | |||||
Other non-cash adjustments | 161 | 316 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable, net | (1,274 | ) | 1,862 | ||||
Contract assets | 1,892 | (747 | ) | ||||
Inventories, net | (8,874 | ) | (506 | ) | |||
Prepaid and other assets | (1,097 | ) | 295 | ||||
Accounts payable | 2,739 | 656 | |||||
Accrued expenses and other liabilities | (3,132 | ) | (2,579 | ) | |||
Contract liabilities | (119 | ) | (27,602 | ) | |||
Net cash provided by operating activities | 7,294 | 10,350 | |||||
Cash flows from investing activities: | |||||||
Sales of marketable securities | - | 10,573 | |||||
Maturities of marketable securities | 20,686 | 50,467 | |||||
Purchases of marketable securities | (43,339 | ) | (12,855 | ) | |||
Capital expenditures | (4,899 | ) | (6,019 | ) | |||
Other | 5 | - | |||||
Net cash (used in) provided by investing activities | (27,547 | ) | 42,166 | ||||
Cash flows from financing activities: | |||||||
Net proceeds from issuance of common stock | 8,939 | 1,260 | |||||
Tax payment for employee shares withheld | - | (23 | ) | ||||
Repurchase of common stock | (17,156 | ) | - | ||||
Net cash (used in) provided by financing activities | (8,217 | ) | 1,237 | ||||
Effect of exchange rate differences on cash and cash equivalents | (40 | ) | 11 | ||||
Net change in cash, cash equivalents and restricted cash | (28,510 | ) | 53,764 | ||||
Cash, cash equivalents and restricted cash, beginning of year | 94,358 | 26,488 | |||||
Cash, cash equivalents and restricted cash, end of period | $ | 65,848 | $ | 80,252 |
SUPPLEMENTAL FINANCIAL INFORMATION
(Unaudited)
Three Months Ended | Three Months Ended | |||||||||||||||||||||||
Water | Emerging Technologies | Corporate | Total | Water | Emerging Technologies | Corporate | Total | |||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Product revenue | $ | 20,767 | $ | 14 | $ | - | $ | 20,781 | $ | 27,408 | $ | - | $ | - | $ | 27,408 | ||||||||
Product cost of revenue | 6,089 | - | - | 6,089 | 7,816 | - | - | 7,816 | ||||||||||||||||
Product gross profit | 14,678 | 14 | - | 14,692 | 19,592 | - | - | 19,592 | ||||||||||||||||
Operating expenses | ||||||||||||||||||||||||
General and administrative | 1,435 | 1,373 | 3,043 | 5,851 | 2,371 | 1,359 | 2,541 | 6,271 | ||||||||||||||||
Sales and marketing | 2,250 | 327 | 419 | 2,996 | 1,507 | 327 | 307 | 2,141 | ||||||||||||||||
Research and development | 762 | 3,654 | - | 4,416 | 723 | 4,375 | - | 5,098 | ||||||||||||||||
Amortization of intangible assets | 2 | - | - | 2 | 4 | - | - | 4 | ||||||||||||||||
Total operating expenses | 4,449 | 5,354 | 3,462 | 13,265 | 4,605 | 6,061 | 2,848 | 13,514 | ||||||||||||||||
Operating income (loss) | $ | 10,229 | $ | (5,340 | ) | $ | (3,462 | ) | 1,427 | $ | 14,987 | $ | (6,061 | ) | $ | (2,848 | ) | 6,078 | ||||||
Other income, net | 37 | 105 | ||||||||||||||||||||||
Income before income taxes | $ | 1,464 | $ | 6,183 |
Nine Months Ended | Nine Months Ended | ||||||||||||||||||||||||||
Water | Emerging Technologies | Corporate | Total | Water | Emerging Technologies | Corporate | Total | ||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||
Product revenue | $ | 70,275 | $ | 53 | $ | - | $ | 70,328 | $ | 65,665 | $ | - | $ | - | $ | 65,665 | |||||||||||
Product cost of revenue | 22,251 | - | - | 22,251 | 20,049 | - | - | 20,049 | |||||||||||||||||||
Product gross profit | 48,024 | 53 | - | 48,077 | 45,616 | - | - | 45,616 | |||||||||||||||||||
License and development revenue | - | - | - | - | - | 26,895 | - | 26,895 | |||||||||||||||||||
Operating expenses | |||||||||||||||||||||||||||
General and administrative | 4,768 | 3,854 | 10,010 | 18,632 | 6,417 | 4,001 | 8,333 | 18,751 | |||||||||||||||||||
Sales and marketing | 6,535 | 735 | 966 | 8,236 | 4,307 | 901 | 568 | 5,776 | |||||||||||||||||||
Research and development | 1,858 | 11,484 | - | 13,342 | 2,585 | 15,574 | - | 18,159 | |||||||||||||||||||
Amortization of intangible assets | 9 | - | - | 9 | 12 | - | - | 12 | |||||||||||||||||||
Impairment of long-lived assets | - | - | - | - | - | 2,332 | - | 2,332 | |||||||||||||||||||
Total operating expenses | 13,170 | 16,073 | 10,976 | 40,219 | 13,321 | 22,808 | 8,901 | 45,030 | |||||||||||||||||||
Operating income (loss) | $ | 34,854 | $ | (16,020 | ) | $ | (10,976 | ) | 7,858 | $ | 32,295 | $ | 4,087 | $ | (8,901 | ) | 27,481 | ||||||||||
Other income, net | 158 | 750 | |||||||||||||||||||||||||
Income before income taxes | $ | 8,016 | $ | 28,231 |
SOURCE:
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https://www.accesswire.com/671274/Energy-Recovery-Reports-Third-Quarter-Financial-Results