Energy Recovery Reports its First Quarter 2024 Financial Results
First Quarter Highlights
-
Revenue of
$12.1 million , which is in-line with ourFebruary 2024 guidance. - Gross margin of 59.0%, a decrease of 190 bps, as compared to Q1’2023, due primarily to higher manufacturing costs and an increase in inventory scrap.
-
Operating expenses of
$18.1 million , an increase of 11%, as compared to Q1’2023, due primarily to increased investments within sales and marketing and Executive transition costs. -
Loss from operations of
$10.9 million , mainly due to lower revenues and gross margin as previously guided. -
Net loss of
$8.3 million and adjusted EBITDA(1) loss of$6.2 million . -
Cash and investments of
$129.5 million , which include cash, cash equivalents, and short- and long-term investments.
Financial Highlights
|
Year-to-Date |
||||
|
2024 |
|
2023 |
|
2024 vs. 2023 |
|
(In millions, except net loss per share, percentages and basis points) |
||||
Revenue |
|
|
|
|
down 10% |
Gross margin |
59.0% |
|
60.9% |
|
down 190 bps |
Operating margin |
(90.4%) |
|
(60.5%) |
|
NM |
Net loss |
( |
|
( |
|
down 31% |
Net loss per share |
( |
|
( |
|
down 27% |
Effective tax rate |
13.5% |
|
15.5% |
|
|
Cash provided by operations |
|
|
|
|
|
Non-GAAP Financial Highlights (1)
|
Year-to-Date |
||||
|
2024 |
|
2023 |
|
2024 vs. 2023 |
|
(In millions, except adjusted net loss per share, percentages and basis points) |
||||
Adjusted operating margin |
(59.4%) |
|
(43.3%) |
|
NM |
Adjusted net loss |
( |
|
( |
|
down 4% |
Adjusted net loss per share |
( |
|
( |
|
no change |
Adjusted effective tax rate |
19.8% |
|
13.0% |
|
|
Adjusted EBITDA |
( |
|
( |
|
|
Free cash flow |
|
|
|
|
|
___________________ | |||||
(1) |
Refer to the sections “Use of Non-GAAP Financial Measures” and “Reconciliation of Non-GAAP Financial Measures” for definitions of our non-GAAP financial measures and reconciliations of GAAP to non-GAAP amounts, respectively. |
||||
NM |
Not Material |
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 expectations regarding revenue guidance for the year and potential new deployments. These forward-looking statements are based on information currently available to the Company and on management’s beliefs, assumptions, estimates, or projections and are not guarantees of future events or results. Potential risks and uncertainties include risks relating to the future demand for the Company’s products, risks relating to performance by our customers and third-party partners, risks relating to the timing of revenue, and 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 adjusted operating margin, adjusted net loss, adjusted net loss 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 Financial Results
- Adjusted operating margin is a non-GAAP financial measure that the Company defines as loss from operations which excludes i) share-based compensation; and ii) executive transition costs, divided by revenues.
- Adjusted net loss is a non-GAAP financial measure that the Company defines as net income which excludes i) share-based compensation; ii) executive transition costs; and iii) the applicable tax effect of the excluded items including the share-based compensation discrete tax item.
- Adjusted net loss per share is a non-GAAP financial measure that the Company defines as net loss, which excludes i) share-based compensation; ii) executive transition costs 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 i) share-based compensation discrete tax item; ii) share-based compensation; and iii) executive transition costs.
- Adjusted EBITDA is a non-GAAP financial measure that the Company defines as net loss which excludes i) depreciation and amortization; ii) share-based compensation; iii) executive transition costs; iv) other income, net, such as interest income and other non-operating income (expense), net; and v) benefit from income taxes.
- Free cash flow is a non-GAAP financial measure that the Company defines as net cash provided by operating activities less capital expenditures.
Conference Call to Discuss First Quarter 2024 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: 13745736
Investors may access the live call and the replay (approximately three hours after the live call concludes) over the internet on the “Events” page at: https://ir.energyrecovery.com/news-events/ir-calendar.
Disclosure Information
About
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) |
|||||
|
|
|
|
||
|
(In thousands) |
||||
ASSETS |
|
|
|
||
Cash, cash equivalents and investments |
$ |
129,495 |
|
$ |
122,375 |
Accounts receivable and contract assets |
|
25,647 |
|
|
47,529 |
Inventories, net |
|
31,671 |
|
|
26,149 |
Prepaid expenses and other assets |
|
3,696 |
|
|
3,251 |
Property, equipment and operating leases |
|
28,927 |
|
|
30,168 |
|
|
12,790 |
|
|
12,790 |
Deferred tax assets and other assets |
|
12,039 |
|
|
10,712 |
TOTAL ASSETS |
$ |
244,265 |
|
$ |
252,974 |
|
|
|
|
||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
||
Liabilities |
|
|
|
||
Accounts payable and accrued expenses |
$ |
11,834 |
|
$ |
18,583 |
Contract liabilities and other liabilities, non-current |
|
3,581 |
|
|
1,304 |
Lease liabilities |
|
12,813 |
|
|
13,279 |
Total liabilities |
|
28,228 |
|
|
33,166 |
|
|
|
|
||
Stockholders’ equity |
|
216,037 |
|
|
219,808 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ |
244,265 |
|
$ |
252,974 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) |
|||||||
|
Three Months Ended |
||||||
|
|
2024 |
|
|
|
2023 |
|
|
(In thousands, except per share data) |
||||||
Revenue |
$ |
12,090 |
|
|
$ |
13,401 |
|
Cost of revenue |
|
4,955 |
|
|
|
5,246 |
|
Gross profit |
|
7,135 |
|
|
|
8,155 |
|
|
|
|
|
||||
Operating expenses |
|
|
|
||||
General and administrative |
|
7,566 |
|
|
|
7,066 |
|
Sales and marketing |
|
6,152 |
|
|
|
4,894 |
|
Research and development |
|
4,351 |
|
|
|
4,306 |
|
Total operating expenses |
|
18,069 |
|
|
|
16,266 |
|
Loss from operations |
|
(10,934 |
) |
|
|
(8,111 |
) |
Other income, net |
|
1,389 |
|
|
|
656 |
|
Loss before income taxes |
|
(9,545 |
) |
|
|
(7,455 |
) |
Benefit from income taxes |
|
(1,285 |
) |
|
|
(1,159 |
) |
Net loss |
$ |
(8,260 |
) |
|
$ |
(6,296 |
) |
|
|
|
|
||||
Net loss per share |
|
|
|
||||
Basic |
$ |
(0.14 |
) |
|
$ |
(0.11 |
) |
Diluted |
$ |
(0.14 |
) |
|
$ |
(0.11 |
) |
|
|
|
|
||||
Number of shares used in per share calculations |
|
|
|
||||
Basic |
|
57,102 |
|
|
|
56,228 |
|
Diluted |
|
57,102 |
|
|
|
56,228 |
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) |
|||||||
|
Three Months Ended |
||||||
|
|
2024 |
|
|
|
2023 |
|
|
(In thousands) |
||||||
Cash flows from operating activities: |
|
|
|
||||
Net loss |
$ |
(8,260 |
) |
|
$ |
(6,296 |
) |
Non-cash adjustments |
|
3,300 |
|
|
|
2,539 |
|
Net cash provided by operating assets and liabilities |
|
11,457 |
|
|
|
12,414 |
|
Net cash provided by operating activities |
|
6,497 |
|
|
|
8,657 |
|
|
|
|
|
||||
Cash flows from investing activities: |
|
|
|
||||
Net investment in marketable securities |
|
(4,249 |
) |
|
|
1,364 |
|
Capital expenditures |
|
(824 |
) |
|
|
(279 |
) |
Proceeds from sales of fixed assets |
|
87 |
|
|
|
82 |
|
Net cash (used in) provided by investing activities |
|
(4,986 |
) |
|
|
1,167 |
|
|
|
|
|
||||
Cash flows from financing activities: |
|
|
|
||||
Net proceeds from issuance of common stock |
|
1,190 |
|
|
|
165 |
|
Net cash provided by financing activities |
|
1,190 |
|
|
|
165 |
|
|
|
|
|
||||
Effect of exchange rate differences |
|
(19 |
) |
|
|
8 |
|
Net change in cash, cash equivalents and restricted cash |
$ |
2,682 |
|
|
$ |
9,997 |
|
Cash, cash equivalents and restricted cash, end of period |
$ |
70,907 |
|
|
$ |
66,455 |
|
SUPPLEMENTAL FINANCIAL INFORMATION (Unaudited) |
|||||||
Channel Revenue |
|||||||
|
Three Months Ended |
||||||
|
|
2024 |
|
|
2023 |
|
vs. 2023 |
|
(In thousands, except percentages) |
||||||
Aftermarket |
$ |
4,644 |
|
$ |
3,322 |
|
up 40% |
Megaproject |
|
4,100 |
|
|
3,243 |
|
up 26% |
Original equipment manufacturer |
|
3,346 |
|
|
6,836 |
|
down 50% |
Total revenue |
$ |
12,090 |
|
$ |
13,401 |
|
down 9% |
Segment Activity |
|||||||||||||||||||||||||||||
|
Three Months Ended |
|
Three Months Ended |
||||||||||||||||||||||||||
|
Water |
|
Emerging
|
|
Corporate |
|
Total |
|
Water |
|
Emerging
|
|
Corporate |
|
Total |
||||||||||||||
|
(In thousands) |
||||||||||||||||||||||||||||
Revenue |
$ |
12,089 |
|
$ |
1 |
|
|
$ |
— |
|
|
$ |
12,090 |
|
|
$ |
13,296 |
|
$ |
105 |
|
|
$ |
— |
|
|
$ |
13,401 |
|
Cost of revenue |
|
4,954 |
|
|
1 |
|
|
|
— |
|
|
|
4,955 |
|
|
|
5,101 |
|
|
145 |
|
|
|
— |
|
|
|
5,246 |
|
Gross profit (loss) |
|
7,135 |
|
|
— |
|
|
|
— |
|
|
|
7,135 |
|
|
|
8,195 |
|
|
(40 |
) |
|
|
— |
|
|
|
8,155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
General and administrative |
|
1,922 |
|
|
1,018 |
|
|
|
4,626 |
|
|
|
7,566 |
|
|
|
1,938 |
|
|
968 |
|
|
|
4,160 |
|
|
|
7,066 |
|
Sales and marketing |
|
3,745 |
|
|
1,807 |
|
|
|
600 |
|
|
|
6,152 |
|
|
|
3,175 |
|
|
1,170 |
|
|
|
549 |
|
|
|
4,894 |
|
Research and development |
|
1,100 |
|
|
3,251 |
|
|
|
— |
|
|
|
4,351 |
|
|
|
1,180 |
|
|
3,126 |
|
|
|
— |
|
|
|
4,306 |
|
Total operating expenses |
|
6,767 |
|
|
6,076 |
|
|
|
5,226 |
|
|
|
18,069 |
|
|
|
6,293 |
|
|
5,264 |
|
|
|
4,709 |
|
|
|
16,266 |
|
Operating income (loss) |
$ |
368 |
|
$ |
(6,076 |
) |
|
$ |
(5,226 |
) |
|
$ |
(10,934 |
) |
|
$ |
1,902 |
|
$ |
(5,304 |
) |
|
$ |
(4,709 |
) |
|
$ |
(8,111 |
) |
Share-based Compensation |
|||||
|
Three Months Ended |
||||
|
|
2024 |
|
|
2023 |
|
(In thousands) |
||||
Stock-based compensation expense charged to: |
|
|
|
||
Cost of revenue |
$ |
343 |
|
$ |
249 |
General and administrative |
|
1,407 |
|
|
960 |
Sales and marketing |
|
1,010 |
|
|
698 |
Research and development |
|
523 |
|
|
397 |
Total stock-based compensation expense |
$ |
3,283 |
|
$ |
2,304 |
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. |
|||||||
|
Year-to-Date |
||||||
|
Q1'2024 |
|
Q1'2023 |
||||
|
(In millions, except shares, per share and percentages) |
||||||
Operating margin |
|
(90.4 |
%) |
|
|
(60.5 |
%) |
Share-based compensation |
|
27.2 |
|
|
|
17.2 |
|
Executive transition costs |
|
3.9 |
|
|
|
— |
|
Adjusted operating margin |
|
(59.4 |
%) |
|
|
(43.3 |
%) |
|
|
|
|
||||
Net loss |
$ |
(8.3 |
) |
|
$ |
(6.3 |
) |
Share-based compensation (2) |
|
3.3 |
|
|
|
2.3 |
|
Executive transition costs (2) |
|
0.4 |
|
|
|
— |
|
Share-based compensation discrete tax item |
|
(0.1 |
) |
|
|
(0.5 |
) |
Adjusted net loss |
$ |
(4.6 |
) |
|
$ |
(4.5 |
) |
|
|
|
|
||||
Net loss per share |
$ |
(0.14 |
) |
|
$ |
(0.11 |
) |
Adjustments to net loss per share (3) |
|
0.06 |
|
|
|
0.03 |
|
Adjusted net loss per share |
$ |
(0.08 |
) |
|
$ |
(0.08 |
) |
|
|
|
|
||||
Effective tax rate |
|
13.5 |
% |
|
|
15.5 |
% |
Adjustments to effective tax rate (3) |
|
6.4 |
|
|
|
(2.5 |
) |
Adjusted effective tax rate |
|
19.8 |
% |
|
|
13.0 |
% |
|
|
|
|
||||
Net loss |
$ |
(8.3 |
) |
|
$ |
(6.3 |
) |
Share-based compensation |
|
3.3 |
|
|
|
2.3 |
|
Depreciation and amortization |
|
1.0 |
|
|
|
1.0 |
|
Executive transition costs |
|
0.5 |
|
|
|
— |
|
Other income, net |
|
(1.4 |
) |
|
|
(0.7 |
) |
Benefit from income taxes |
|
(1.3 |
) |
|
|
(1.2 |
) |
Adjusted EBITDA |
$ |
(6.2 |
) |
|
$ |
(4.8 |
) |
|
|
|
|
||||
Free cash flow |
|
|
|
||||
Net cash provided by operating activities |
$ |
6.5 |
|
|
$ |
8.7 |
|
Capital expenditures |
|
(0.8 |
) |
|
|
(0.3 |
) |
Free cash flow |
$ |
5.7 |
|
|
$ |
8.4 |
|
_______________________ | ||
(1) |
Amounts may not total due to rounding. |
|
(2) |
Amounts 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/20240501610391/en/
Investor Relations
ir@energyrecovery.com
+1 (346) 382-6927
Source: