Energy Recovery Reports Fourth Quarter and Full Year 2015 Results
FULL YEAR SUMMARY:
- Signed 15-year deal with Schlumberger to provide exclusive rights to VorTeq® hydraulic fracturing technology which included a
$75 million payment amortized over the term of the agreement (see details below) - Total revenue increased 47% compared to a year ago to
$44.7 million driven primarily by strengthening demand in the global water desalination industry - Gross profit margin improved to 56% from 55%, an increase of 100 basis point year-over-year
- Net loss of
$(11.6) million , or$(0.22) per share compared to$(18.7) million , or$(0.36) per share in 2014 - Net cash flow of
$84.4 million in 2015 primarily attributable to$75 million exclusivity fee received from Schlumberger - Total non-recurring expenses of
$6.2 million , offset by$(0.6) million of tax credit inIreland - Adjusted net loss of
$(6.0) million , or$(0.11) per share in 2015
FOURTH QUARTER SUMMARY:
- Total revenue increased 10% compared to a year ago to
$16.3 million - Gross profit margin decreased to 55% from 61%, a decrease of 600 basis points year-over-year
- Operating expenses decreased 30% year-over-year to
$9.6 million - Net income of
$0.3 million , or$0.01 per share compared to net loss of$(4.9) million , or$(0.09) per share, in the prior year quarter
REVENUES
The Company generated total revenue of
During the fourth quarter of 2015, the Company executed an exclusive worldwide licensing agreement with Schlumberger for the use of the VorTeq technology which includes
For the year ended
GROSS MARGIN
Product gross margin decreased by 600 basis points to 55% in the fourth quarter of 2015, compared to 61% in the fourth quarter of 2014. This decrease was primarily due to the impact of manufacturing overhead resulting from a slower than anticipated production ramp-up throughout the year. Non-recurring expenses associated with property taxes also contributed to the decrease in gross margin, however were offset by favorable price and mix.
For the full year 2015, product gross margin increased to 56% in 2015 from 55% in 2014 due to higher sales volume and favorable shift in product and channel mix.
Including the revenue associated with the Schlumberger exclusivity fee, total gross margin increased by 200 basis points to 57% in 2015.
OPERATING EXPENSES
Operating expenses for the fourth quarter of 2015 decreased by
For the full year 2015, operating expenses increased by
Total non-recurring expenses were
Bottom Line Summary
To summarize financial performance on a full-year basis, the Company reported a net loss of
Excluding non-recurring items, the Company incurred a net loss of
CASHFLOW HIGHLIGHTS
For the fiscal year ended in 2015, the Company generated net cash flow of
Operating activities generated cash of
The Company ended the year with unrestricted cash of
Forward-Looking Statements
This press release includes “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. 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. Because such forward-looking statements involve risks and uncertainties, the Company's actual results may differ materially from the predictions in these forward-looking statements. All forward-looking statements are made as of today, and the Company assumes no obligation to update such statements. In addition to any other factors that may have been discussed herein regarding the risks and uncertainties of our business, please see “Risk Factors” in our Form 10-K filed with the U.S.
Use of Non-GAAP Financial Measures
This press release includes certain non-GAAP financial measures. 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 Fourth Quarter and Full Year Results for 2015
LIVE CONFERENCE CALL WEBCAST: | CONFERENCE CALL REPLAY: |
Expiration: | |
Listen-only, Toll-free: 877-876-9177 | Toll-free: 888-203-1112 |
Listen-only, Local: 785-424-1666 | Local: 719-457-0820 |
Access code: 3164008 | Access code: 3164008 |
Investors may also access the live call or the replay over the internet at www.streetevents.com or www.energyrecovery.com. The replay will be available approximately three hours after the live call concludes.
About
CONSOLIDATED BALANCE SHEETS
December 31, | ||||||
2015 | 2014 | |||||
(In thousands, except share data and par value) | ||||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 99,931 | $ | 15,501 | ||
Restricted cash | 1,490 | 2,623 | ||||
Short-term investments | 257 | 13,072 | ||||
Accounts receivable, net of allowance for doubtful accounts of | 11,590 | 10,941 | ||||
Unbilled receivables, current | 1,879 | 1,343 | ||||
Inventories | 6,503 | 8,204 | ||||
Deferred tax assets, net | 938 | 240 | ||||
Prepaid expenses and other current assets | 943 | 1,317 | ||||
Total current assets | 123,531 | 53,241 | ||||
Restricted cash, non-current | 2,317 | 2,850 | ||||
Unbilled receivables, non-current | 6 | 414 | ||||
Long-term investments | — | 267 | ||||
Property and equipment, net | 10,622 | 13,211 | ||||
12,790 | 12,790 | |||||
Other intangible assets, net | 2,531 | 3,166 | ||||
Other assets, non-current | 2 | 2 | ||||
Total assets | $ | 151,799 | $ | 85,941 | ||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 1,865 | $ | 1,817 | ||
Accrued expenses and other current liabilities | 7,808 | 8,427 | ||||
Income taxes payable | 2 | 4 | ||||
Accrued warranty reserve | 461 | 755 | ||||
Deferred revenue, current | 5,878 | 519 | ||||
Current portion long-term debt | 10 | — | ||||
Total current liabilities | 16,024 | 11,522 | ||||
Long-term debt, net of current portion | 38 | — | ||||
Deferred tax liabilities, non-current, net | 2,360 | 1,989 | ||||
Deferred revenue, non-current | 69,000 | 59 | ||||
Other non-current liabilities | 718 | 2,453 | ||||
Total liabilities | 88,140 | 16,023 | ||||
Commitments and Contingencies (Note 9) | ||||||
Stockholders’ equity: | ||||||
Preferred stock, | — | — | ||||
Common stock, | 55 | 54 | ||||
Additional paid-in capital | 129,809 | 124,440 | ||||
Accumulated other comprehensive loss | (64 | ) | (73 | ) | ||
(6,835 | ) | (6,835 | ) | |||
Accumulated deficit | (59,306 | ) | (47,668 | ) | ||
Total stockholders’ equity | 63,659 | 69,918 | ||||
Total liabilities and stockholders’ equity | $ | 151,799 | $ | 85,941 |
CONSOLIDATED STATEMENTS OF OPERATIONS
| Years Ended December 31, | ||||||||
2015 | 2014 | 2013 | |||||||
(In thousands, except per share data) | |||||||||
Product revenue | $ | 43,671 | $ | 30,426 | $ | 43,045 | |||
Product cost of revenue | 19,111 | 13,713 | 17,323 | ||||||
Product gross profit | 24,560 | 16,713 | 25,722 | ||||||
License and development revenue | 1,042 | — | — | ||||||
Operating expenses: | |||||||||
General and administrative | 19,773 | 14,139 | 15,192 | ||||||
Sales and marketing | 9,326 | 10,525 | 7,952 | ||||||
Research and development | 7,659 | 9,690 | 4,361 | ||||||
Amortization of intangible assets | 635 | 842 | 921 | ||||||
Restructuring charges | — | — | 184 | ||||||
Total operating expenses | 37,393 | 35,196 | 28,610 | ||||||
Loss from operations | (11,791 | ) | (18,483 | ) | (2,888 | ) | |||
Other (expense) income: | |||||||||
Interest (expense) | (42 | ) | — | — | |||||
Other non-operating (expense) income | (139 | ) | 69 | 109 | |||||
Loss before income taxes | (11,972 | ) | (18,414 | ) | (2,779 | ) | |||
(Benefit from) provision for income taxes | (334 | ) | 291 | 327 | |||||
Net loss | $ | (11,638 | ) | $ | (18,705 | ) | $ | (3,106 | ) |
Loss per share: | |||||||||
Basic and diluted | $ | (0.22 | ) | $ | (0.36 | ) | $ | (0.06 | ) |
Number of shares used in per share calculations: | |||||||||
Basic and diluted | 52,151 | 51,675 | 51,066 |
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended | |||||||||
2015 | 2014 | 2013 | |||||||
(In thousands) | |||||||||
Cash Flows From Operating Activities | |||||||||
Net loss | $ | (11,638 | ) | $ | (18,705 | ) | $ | (3,106 | ) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | |||||||||
Stock-based compensation | 4,059 | 2,104 | 2,177 | ||||||
Depreciation and amortization | 3,838 | 4,028 | 3,797 | ||||||
Amortization of premiums on investments | 162 | 453 | 409 | ||||||
Provision for warranty claims | 135 | 156 | 126 | ||||||
Provision for doubtful accounts | 112 | 299 | 69 | ||||||
Loss on fair value of put options | 58 | — | — | ||||||
Loss (gain) on foreign currency transactions | 1 | (153 | ) | (27 | ) | ||||
Loss on disposal of fixed assets | — | 38 | 71 | ||||||
Gain on fair value remeasurement of contingent consideration | — | (149 | ) | — | |||||
Non-cash restructuring charges | — | — | 184 | ||||||
Reversal of accruals related to expired warranties | (395 | ) | — | (340 | ) | ||||
Deferred income taxes | (326 | ) | 315 | 227 | |||||
Valuation adjustments for excess or obsolete inventory | (250 | ) | 320 | 297 | |||||
Other non-cash adjustments | (35 | ) | 375 | (123 | ) | ||||
Changes in operating assets and liabilities: | |||||||||
Deferred revenue, license and development | 73,958 | — | — | ||||||
Deferred revenue, product | 343 | (331 | ) | (420 | ) | ||||
Inventories | 1,951 | (3,569 | ) | (117 | ) | ||||
Prepaid and other assets | 316 | (254 | ) | 3,227 | |||||
Accounts payable | 48 | 628 | (866 | ) | |||||
Litigation settlement | (1,700 | ) | — | — | |||||
Accounts receivable | (743 | ) | 4,002 | (2,042 | ) | ||||
Unbilled receivables | (128 | ) | 4,882 | (751 | ) | ||||
Accrued expenses and other liabilities | (708 | ) | 1,864 | (686 | ) | ||||
Income taxes payable | (3 | ) | (18 | ) | (18 | ) | |||
Net cash provided by (used in) operating activities | 69,055 | (3,715 | ) | 2,088 | |||||
Cash Flows From Investing Activities | |||||||||
Maturities of marketable securities | 12,925 | 6,027 | 9,573 | ||||||
Restricted cash | 1,665 | 3,306 | 822 | ||||||
Capital expenditures | (572 | ) | (2,562 | ) | (1,132 | ) | |||
Purchases of marketable securities | — | (273 | ) | (15,278 | ) | ||||
Proceeds from sale of capitalized assets | — | — | 1,163 | ||||||
Net cash provided by (used in) investing activities | 14,018 | 6,498 | (4,852 | ) | |||||
Cash Flows From Financing Activities | |||||||||
Net proceeds from issuance of common stock | 1,326 | 2,405 | 504 | ||||||
Proceeds from long-term debt | 55 | — | — | ||||||
Repayment of long-term debt | (7 | ) | — | — | |||||
Repurchase of common stock | — | (2,835 | ) | — | |||||
Payment of contingent consideration | — | (1,375 | ) | — | |||||
Repayment of capital lease obligation | — | — | (18 | ) | |||||
Net cash provided by (used in) financing activities | 1,374 | (1,805 | ) | 486 | |||||
Effect of exchange rate differences on cash and cash equivalents | (17 | ) | 152 | 7 | |||||
Net change in cash and cash equivalents | 84,430 | 1,130 | (2,271 | ) | |||||
Cash and cash equivalents, beginning of year | 15,501 | 14,371 | 16,642 | ||||||
Cash and cash equivalents, end of year | $ | 99,931 | $ | 15,501 | $ | 14,371 | |||
Supplemental disclosure of cash flow information: | |||||||||
Cash paid for interest | $ | 42 | $ — | $ | 1 | ||||
Cash received for income tax refunds | $ | 4 | $ | 1 | $ | 3,123 | |||
Cash paid for income taxes | $ | 24 | $ | 35 | $ | 22 | |||
Supplemental disclosure of non-cash transactions: | |||||||||
Purchases of property and equipment in trade accounts payable and accrued expenses and other liabilities | $ | 43 | $ | 1 | $ | 31 |
Source:Chris Gannon Chief Financial Officer 510-483-7370