Energy Recovery Reports First Quarter Financial Results
First Quarter 2020 Highlights:
- Total product revenue of
$19.0 million , an increase of 18% year-over-year - Total revenue of
$21.5 million , an increase of 9% year-over-year - Product gross margin of 70.1%, an increase of 80 basis points year-over-year
- Net income of
$0.6 million , or diluted earnings per share of$0.01 , a decrease of$0.04 year-over-year
Chairman and Interim President and Chief Executive Officer
COVID-19 Pandemic
In response to measures taken in mid-March by the
While we cannot accurately predict COVID-19's long-term impact on our financial condition, result of operations, liquidity, and cash flows due to uncertainties, our compliance with these measures did not have a material adverse impact on our financial results for the first quarter of fiscal year 2020. However, to mitigate potential adverse impacts to our business and to conserve cash, we are managing our resources conservatively by reducing and/or deferring capital expenditures and operating expenses. Based on our current projections, which are subject to numerous uncertainties, including the duration and severity of the pandemic and containment measures, and the effect of these on the industries in which we compete, we believe our cash on hand and marketable securities, as well as ongoing cash generated from our operations, should be sufficient to cover our capital requirements for the next 12 months. We believe our gross margins, which were negatively affected in the first quarter, will likely continue to be impacted until such time that we can operate our manufacturing facilities as originally planned.
Our available product inventory combined with our current rate of production leads us to believe that we can fulfill most, if not all, of our existing delivery obligations in fiscal year 2020. We are also closely monitoring the pandemic's impact on the industries in which we compete. While we believe the desalination industry appears to be showing some stability in fiscal year 2020, it is possible that future COVID-19 restrictions could cause reduced demand for our products if they result in a global recessionary economic environment or impact the construction of large desalination projects. For a discussion of the key trends and uncertainties that have affected our revenues, income and liquidity, see Part II, Item 1A, "Risk Factors," of our Q1'2020 Form 10-Q and Part I, Item 1A, "Risk Factors," in our Annual Report on Form 10‑K for the year ended
First Quarter 2020
Revenues
For the first quarter ended
The Water segment generated total product revenue of
Product Gross Margin
For the first quarter ended
Operating Expenses
For the first quarter ended
COVID-19 did not have a material effect on operating expenditures during the three months ended
Bottom Line Summary
To summarize our financial performance, on a quarterly basis, we reported a GAAP net income of
Cash Flow Highlights
We finished the three months 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 cash on hand, marketable securities and ongoing cash generated from operations should be sufficient to cover the Company's capital requirements for the next 12 months; our belief that our gross margins will continue to be negatively affected until we are able to operate our manufacturing facilities as originally planned prior to the COVID-19 pandemic; and our belief that we will be able to fulfill most, if not all, of our existing delivery obligations in fiscal year 2020. 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 the Company's ability to achieve the milestones under the VorTeq license agreement, 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
Use of Non-GAAP Financial Measures
This press release includes certain non-GAAP financial measures, including Total gross profit and Total gross margin. 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
Conference Call to Discuss First Quarter 2020 Financial Results
LIVE CONFERENCE CALL:
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Investors may also access the live call or the replay over the internet at ir.energyrecovery.com. The replay will be available approximately three hours after the live call concludes.
Disclosure Information
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For more than 20 years,
Contact
Investor Relations
ir@energyrecovery.com
(281) 962-8105
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
2020 | 2019 | |||||||
(In thousands, except share data and par value) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 32,842 | $ | 26,387 | ||||
Short-term investments | 40,995 | 58,736 | ||||||
Accounts receivable, net | 13,841 | 12,979 | ||||||
Inventories, net | 10,938 | 10,317 | ||||||
Prepaid expenses and other current assets | 5,187 | 4,548 | ||||||
Total current assets | 103,803 | 112,967 | ||||||
Long-term investments | 19,361 | 15,419 | ||||||
Deferred tax assets, non-current | 16,932 | 16,897 | ||||||
Property and equipment, net | 19,780 | 18,843 | ||||||
Operating lease, right of use asset | 17,253 | 11,195 | ||||||
12,790 | 12,790 | |||||||
Other intangible assets, net | 61 | 65 | ||||||
Other assets, non-current | 632 | 598 | ||||||
Total assets | $ | 190,612 | $ | 188,774 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,868 | $ | 1,192 | ||||
Accrued expenses and other current liabilities | 6,156 | 9,869 | ||||||
Lease liabilities | 1,209 | 1,023 | ||||||
Contract liabilities | 16,509 | 15,746 | ||||||
Total current liabilities | 25,742 | 27,830 | ||||||
Lease liabilities, non-current | 17,523 | 11,533 | ||||||
Contract liabilities, non-current | 8,805 | 13,120 | ||||||
Other non-current liabilities | 277 | 278 | ||||||
Total liabilities | 52,347 | 52,761 | ||||||
Commitments and contingencies (Note 8) | ||||||||
Stockholders' equity: | ||||||||
Common stock | 61 | 61 | ||||||
Additional paid-in capital | 171,954 | 170,028 | ||||||
Accumulated other comprehensive loss | (332 | ) | (37 | ) | ||||
(30,486 | ) | (30,486 | ) | |||||
Accumulated deficit | (2,932 | ) | (3,553 | ) | ||||
Total stockholders' equity | 138,265 | 136,013 | ||||||
Total liabilities and stockholders' equity | $ | 190,612 | $ | 188,774 | ||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended | ||||||||
2020 | 2019 | |||||||
(In thousands, except per share data) | ||||||||
Product revenue | $ | 19,001 | $ | 16,072 | ||||
Product cost of revenue | 5,684 | 4,935 | ||||||
Product gross profit | 13,317 | 11,137 | ||||||
License and development revenue | 2,543 | 3,723 | ||||||
Operating expenses: | ||||||||
General and administrative | 6,881 | 5,579 | ||||||
Sales and marketing | 2,138 | 2,162 | ||||||
Research and development | 6,709 | 4,254 | ||||||
Amortization of intangible assets | 4 | 156 | ||||||
Total operating expenses | 15,732 | 12,151 | ||||||
Income from operations | 128 | 2,709 | ||||||
Other income (expense): | ||||||||
Interest income | 420 | 523 | ||||||
Other non-operating expense, net | (12 | ) | (24 | ) | ||||
Total other income, net | 408 | 499 | ||||||
Income before income taxes | 536 | 3,208 | ||||||
(Benefit from) provision for income taxes | (85 | ) | 554 | |||||
Net income | $ | 621 | $ | 2,654 | ||||
Earnings per share: | ||||||||
Basic | $ | 0.01 | $ | 0.05 | ||||
Diluted | $ | 0.01 | $ | 0.05 | ||||
Number of shares used in per share calculations: | ||||||||
Basic | 55,412 | 54,116 | ||||||
Diluted | 56,542 | 55,368 | ||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended | ||||||||
2020 | 2019 | |||||||
(In thousands) | ||||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 621 | $ | 2,654 | ||||
Adjustments to reconcile net income to cash used in operating activities | ||||||||
Stock-based compensation | 1,503 | 1,678 | ||||||
Depreciation and amortization | 1,258 | 900 | ||||||
Amortization (accretion) of premiums and discounts on investments | 220 | (26 | ) | |||||
Deferred income taxes | (35 | ) | 549 | |||||
Provision for warranty claims | 98 | 152 | ||||||
Other non-cash adjustments | 47 | (68 | ) | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable, net | (902 | ) | (7,162 | ) | ||||
Contract assets | (244 | ) | 2,977 | |||||
Inventories, net | (692 | ) | (218 | ) | ||||
Prepaid and other assets | (428 | ) | (140 | ) | ||||
Accounts payable | 745 | 18 | ||||||
Accrued expenses and other liabilities | (4,514 | ) | (3,353 | ) | ||||
Income taxes | 3 | 10 | ||||||
Contract liabilities | (3,552 | ) | (3,922 | ) | ||||
Net cash used in operating activities | (5,872 | ) | (5,951 | ) | ||||
Cash flows from investing activities: | ||||||||
Sales of marketable securities | 4,974 | - | ||||||
Maturities of marketable securities | 21,195 | 19,599 | ||||||
Purchases of marketable securities | (12,855 | ) | (19,198 | ) | ||||
Capital expenditures | (1,380 | ) | (1,566 | ) | ||||
Net cash provided by (used in) investing activities | 11,934 | (1,165 | ) | |||||
Cash flows from financing activities: | ||||||||
Net proceeds from issuance of common stock | 440 | 2,191 | ||||||
Tax payment for employee shares withheld | (22 | ) | (34 | ) | ||||
Net cash provided by financing activities | 418 | 2,157 | ||||||
Effect of exchange rate differences on cash and cash equivalents | (25 | ) | (4 | ) | ||||
Net change in cash, cash equivalents and restricted cash | 6,455 | (4,963 | ) | |||||
Cash, cash equivalents and restricted cash, beginning of year | 26,488 | 22,138 | ||||||
Cash, cash equivalents and restricted cash, end of period | $ | 32,943 | $ | 17,175 | ||||
SUPPLEMENTAL FINANCIAL INFORMATION
(Unaudited)
Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||||
Water | Oil & Gas | Corporate | Total | Water | Oil & Gas | Corporate | Total | |||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Product revenue | $ | 19,001 | $ | - | $ | - | $ | 19,001 | $ | 15,968 | $ | 104 | $ | - | $ | 16,072 | ||||||||||||||||
Product cost of revenue | 5,684 | - | - | 5,684 | 4,747 | 188 | - | 4,935 | ||||||||||||||||||||||||
Product gross profit (loss) | 13,317 | - | - | 13,317 | 11,221 | (84 | ) | - | 11,137 | |||||||||||||||||||||||
License and development revenue | - | 2,543 | - | 2,543 | - | 3,723 | - | 3,723 | ||||||||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||||||||||
General and administrative | 405 | 741 | 5,735 | 6,881 | 535 | 364 | 4,680 | 5,579 | ||||||||||||||||||||||||
Sales and marketing | 1,676 | 58 | 404 | 2,138 | 1,649 | 263 | 250 | 2,162 | ||||||||||||||||||||||||
Research and development | 902 | 5,247 | 560 | 6,709 | 804 | 3,363 | 87 | 4,254 | ||||||||||||||||||||||||
Amortization of intangibles | 4 | - | - | 4 | 156 | - | - | 156 | ||||||||||||||||||||||||
Total operating expenses | 2,987 | 6,046 | 6,699 | 15,732 | 3,144 | 3,990 | 5,017 | 12,151 | ||||||||||||||||||||||||
Operating income (loss) | $ | 10,330 | $ | (3,503 | ) | $ | (6,699 | ) | 128 | $ | 8,077 | $ | (351 | ) | $ | (5,017 | ) | 2,709 | ||||||||||||||
Other income, net | 408 | 499 | ||||||||||||||||||||||||||||||
Income before income taxes | $ | 536 | $ | 3,208 | ||||||||||||||||||||||||||||
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited)
This press release includes non-GAAP financial information because we plan and manage our business using such information. Our non-GAAP Total Gross Margin is determined by adding back the license and development revenue associated with the amortization of the VorTeq exclusivity fee.
Three Months Ended | ||||||||
2020 | 2019 | |||||||
(In thousands, except per share data) | ||||||||
Product revenue | $ | 19,001 | $ | 16,072 | ||||
License and development revenue | 2,543 | 3,723 | ||||||
Total revenue | $ | 21,544 | $ | 19,795 | ||||
Product gross profit | $ | 13,317 | $ | 11,137 | ||||
License and development revenue | 2,543 | 3,723 | ||||||
Total gross profit (non-GAAP) | $ | 15,860 | $ | 14,860 | ||||
Product gross margin | 70.1 | % | 69.3 | % | ||||
Total gross margin (non-GAAP) | 73.6 | % | 75.1 | % |
SOURCE:
View source version on accesswire.com:
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