Energy Recovery Reports Record Financial Results for Revenue and Net Income in the Fourth Quarter of 2013
FOURTH QUARTER HIGHLIGHTS:
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Net revenue was
$23.2 million in the fourth quarter of 2013, up 54% from$15.1 million in the same period of 2012 and representing the strongest revenue quarter in the Company's history - Gross profit margin was 63% in the fourth quarter of 2013, increased from 43% in the same period of 2012 and demonstrating the third consecutive quarter at or above 60%
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Operating expenses decreased 10% from
$8.7 million in the fourth quarter of 2012 to$7.8 million in the fourth quarter of 2013 -
Reflecting the strongest profit quarter in the Company's history, net income was
$6.7 million , or$0.13 per share, compared to a net loss of$(2.2) million , or$(0.04) per share, in the same period of the prior year
FULL YEAR HIGHLIGHTS:
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In line with expectations, net revenue increased
$0.4 million from$42.6 million in 2012 to$43.0 million in 2013 on strong shipments in the fourth quarter - Gross profit margin increased from 47% in 2012 to 60% in 2013
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Operating expenses decreased
$0.3 million from$28.9 million in 2012 to$28.6 million in 2013 amid heavy investment tied to the commercialization of oil & gas solutions -
Net loss reduced by 62% from
$(8.3) million in 2012 to$(3.1) million in 2013 -
Loss per share improved from
$(0.16) in 2012 to$(0.06) in 2013 -
Cash flow from operations increased by
$6.5 million from a use of$(4.4) million in 2012 to$2.1 million in 2013
On significantly increased revenue in the fourth quarter of 2013, the Company recorded gross profit margin of 63% in the same period compared to 43% in the fourth quarter of 2012. The gross profit margin achieved in the current period demonstrates the third consecutive quarter of gross profit margins at or in excess of 60%. These strong and consistent levels of gross profit margin are a manifestation of the Company's success in driving out costs, which included the consolidation of production operations in
In the context of strong revenue and compelling gross profit margin, the Company demonstrated a reduction of 10% in operating expenses, decreasing from
With strong revenue realized through large shipments for mega-projects, compelling gross profit margin due primarily to manufacturing efficiencies, and controlled operating expenses, the Company reported net income of
Rooney remarked, "These bottom-line results were in line with our annual plan, but it is nice to observe such income generation during the fourth quarter of 2013, and it certainly speaks to the hard work and commitment of our employees in execution of our long-term strategy. We have accomplished much of what we set out to do: we have successfully reduced costs and expanded gross profit margins, restored our dominant market position and share, and are now moving rapidly to achieve full commercialization on the oil & gas front. It is my belief, therefore, that 2013 was a great year, proceeding as planned when viewed against financial and strategic milestones. I am very pleased with the current position of the Company, and while we still have much work to do, we are achieving our short- and long-term objectives."
Rooney continued, "specific to oil & gas, we are making noteworthy progress on our pilot projects—so much so in fact that we were willing to accelerate the sales and marketing investment based on initial observation and feedback. We are now proceeding rapidly toward full commercialization with the benefit of a global, dedicated direct sales force. Accordingly, we anticipate meaningful orders from oil & gas customers in 2014. As we think about projections for desalination in 2014, although we are not prepared to specify guidance due to the inherent difficulties in 'calendarizing' revenue from large projects prone to schedule movement, we do see the year shaping up much as 2013 did. That is, desalination revenue will likely be heavily weighted toward the back half of the year, with another acute concentration of revenue expected in the fourth quarter. Our sales pipeline is heavy, and we do see meaningful growth on the horizon, but we are not yet prepared to guide for 2014 until we have completed our internal market assessment."
In annual terms, the Company achieved growth of
For the full year of 2013, the Company generated cash flow from operating activities of
The following table depicts a summary of the Company's financial progress over the last three years:
Years Ended December 31, | |||
2013 | 2012 | 2011 | |
Net revenue |
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Gross profit margin | 60% | 47% | 28% |
Total operating expenses |
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Net loss |
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Loss per share – basic and diluted |
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Cash flow from operations |
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After substantial revenue growth in 2012, the Company experienced only modest growth for the full year of 2013 with the benefit of revenue in the fourth quarter. The desalination market is expected to grow, driven primarily by anticipated activity in emerging markets such as
The Company's Chief Financial Officer,
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. When used in this document, the words "anticipate," "believe," "continue," "expect," "hope," "likely," "will," and similar expressions are intended to identify forward-looking statements, but are not exclusive means of identifying such statements. 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 to be filed with the
Conference Call to Discuss Fourth Quarter and Fiscal Year Results for 2013
The conference call scheduled for tomorrow at
About
Unaudited Consolidated Financial Results | ||||
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CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
(in thousands, except per share data) | ||||
(unaudited) | ||||
Three Months Ended | Year Ended | |||
December 31, | December 31, | |||
2013 | 2012 | 2013 | 2012 | |
Net revenue |
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Cost of revenue | 8,708 | 8,583 | 17,323 | 22,419 |
Gross profit | 14,527 | 6,499 | 25,722 | 20,213 |
Operating expenses: | ||||
General and administrative | 4,071 | 4,247 | 15,192 | 15,146 |
Sales and marketing | 2,345 | 2,176 | 7,952 | 7,290 |
Research and development | 1,115 | 1,719 | 4,361 | 4,774 |
Amortization of intangible assets | 230 | 257 | 921 | 1,042 |
Restructuring charges | — | 92 | 184 | 369 |
Impairment of intangibles | — | 1,020 | — | 1,020 |
Proceeds from litigation settlement | — | (775) | — | (775) |
Total operating expenses | 7,761 | 8,736 | 28,610 | 28,866 |
Loss from operations | 6,766 | (2,237) | (2,888) | (8,653) |
Other income (expense): | ||||
Interest expense | — | — | — | (6) |
Other non-operating income | 30 | 44 | 109 | 143 |
Loss before income taxes | 6,796 | (2,193) | (2,779) | (8,516) |
(Benefit from) provision for income taxes | 69 | (9) | 327 | (262) |
Net loss |
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Income (loss) per share: | ||||
Basic |
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Diluted |
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Number of shares used in per share calculations: | ||||
Basic Shares | 51,200 | 50,900 | 51,066 | 51,452 |
Diluted Shares | 53,305 | 50,900 | 51,066 | 51,452 |
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CONSOLIDATED BALANCE SHEETS | ||
(unaudited) | ||
December 31, | ||
2013 | 2012 | |
(In thousands, except share data and par value) | ||
ASSETS | ||
Current assets: | ||
Cash and cash equivalents |
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Restricted cash | 4,311 | 5,235 |
Short-term investments | 5,856 | 9,497 |
Accounts receivable, net of allowance for doubtful accounts of |
15,483 | 13,240 |
Unbilled receivables, current | 5,442 | 5,020 |
Inventories | 4,955 | 5,135 |
Deferred tax assets, net | 698 | 500 |
Land and building held for sale | — | 1,345 |
Prepaid expenses and other current assets | 1,018 | 4,245 |
Total current assets | 52,134 | 60,859 |
Restricted cash, non-current | 4,468 | 4,366 |
Unbilled receivables, non-current | 1,197 | 868 |
Long-term investments | 13,694 | 4,773 |
Property and equipment, net | 13,903 | 15,967 |
Goodwill | 12,790 | 12,790 |
Other intangible assets, net | 4,008 | 4,929 |
Other assets, non-current | 2 | 2 |
Total assets |
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LIABILITIES AND STOCKHOLDERS' EQUITY | ||
Current liabilities: | ||
Accounts payable |
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Accrued expenses and other current liabilities | 8,224 | 8,555 |
Income taxes payable | 22 | 39 |
Accrued warranty reserve | 709 | 1,172 |
Deferred revenue | 779 | 918 |
Current portion of capital lease obligations | — | 18 |
Total current liabilities | 10,943 | 12,856 |
Deferred tax liabilities, non-current, net | 2,131 | 1,706 |
Deferred revenue, non-current | 130 | 411 |
Other non-current liabilities | 2,077 | 2,200 |
Total liabilities | 15,281 | 17,173 |
Commitments and Contingencies (Note 9) | ||
Stockholders' equity: | ||
Preferred stock, |
— | — |
Common stock, |
53 | 53 |
Additional paid-in capital | 119,932 | 117,264 |
Accumulated other comprehensive loss | (107) | (79) |
Treasury stock, at cost, 1,782,603 shares repurchased at |
(4,000) | (4,000) |
Accumulated deficit | (28,963) | (25,857) |
Total stockholders' equity | 86,915 | 87,381 |
Total liabilities and stockholders' equity |
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CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
(unaudited) | ||
Years Ended |
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2013 | 2012 | |
(In thousands) | ||
Cash Flows From Operating Activities | ||
Net loss |
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Adjustments to reconcile net loss to net cash (used in) provided by | ||
operating activities: | ||
Depreciation and amortization | 3,797 | 3,802 |
Non-cash restructuring charges | 184 | 314 |
Impairment of intangible assets | — | 1,020 |
Loss on disposal of fixed assets | 71 | 49 |
Amortization of premiums on investments | 409 | 507 |
Interest accrued on notes receivables from stockholders | — | (1) |
Share-based compensation | 2,177 | 2,615 |
Loss (gain) on foreign currency transactions | (27) | (5) |
Deferred income taxes | 227 | 150 |
Provision for doubtful accounts | 69 | 6 |
Provision for warranty claims | 126 | 601 |
Valuation adjustments for excess or obsolete inventory | 297 | 857 |
Release of accruals related to expired warranties | (340) | — |
Other non-cash adjustments | (123) | 113 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (2,303) | (6,779) |
Unbilled receivables | (751) | (4,830) |
Inventories | (117) | 1,832 |
Prepaid and other assets | 3,227 | 692 |
Accounts payable | (866) | 583 |
Accrued expenses and other liabilities | (425) | 2,068 |
Income taxes payable | (18) | 19 |
Deferred revenue | (420) | 209 |
Net cash provided by (used in) operating activities | 2,088 | (4,432) |
Cash Flows From Investing Activities | ||
Capital expenditures | (1,132) | (2,810) |
Proceeds from sale of capitalized assets | 1,163 | — |
Restricted cash | 822 | 1,318 |
Purchases of marketable securities | (15,278) | (4,961) |
Maturities of marketable securities | 9,573 | 13,116 |
Net cash (used in) provided by investing activities | (4,852) | 6,663 |
Cash Flows From Financing Activities | ||
Repayment of long-term debt | — | (85) |
Repayment of capital lease obligation | (18) | (82) |
Net proceeds from issuance of common stock | 504 | 30 |
Repurchase of common stock | — | (4,000) |
Repayment of notes receivable from stockholders | — | 24 |
Net cash provided by (used in) financing activities | 486 | (4,113) |
Effect of exchange rate differences on cash and cash equivalents | 7 | 17 |
Net change in cash and cash equivalents | (2,271) | (1,865) |
Cash and cash equivalents, beginning of year | 16,642 | 18,507 |
Cash and cash equivalents, end of year |
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CONTACT:Source:Alexander J. Buehler Chief Financial Officer (510) 483-7370