Energy Recovery Reports Third Quarter and Year-to-Date 2016 Results
Schlumberger added, "The incorporation of the VorTeq hydraulic fracturing system in our next generation surface delivery systems is expected to help reduce fracturing pump wear, and increase wellsite equipment reliability and efficiency. Schlumberger looks forward to continuing its collaboration with
Third Quarter 2016 Summary
- Third quarter total revenue year-over-year increased 1% to
$12.3 million - Record product gross profit margins for the third consecutive quarter of 64%; a year-over-year increase of 490 basis points
- Record total gross profit margins(1) for the third consecutive quarter of 68%; a year-over-year increase of 860 basis points
YTD 2016 Summary
- Total revenue year-over-year increased 29% to
$36.8 million - Product gross margin was 64% for the period, an increase of 740 basis points year-over-year; total gross margin(2) climbed to 68%, a year-over-year increase of 1,100 basis points
Revenues
The Company generated total revenue of
Year-over-year, water segment mega project ("MPD") revenue as well as oil & gas revenue increased, however these gains were partially offset by decreases in OEM shipments, due to project timing, and Aftermarket revenue in the water segment.
The overall increase in revenues was driven by the recognition of
In addition, during the third quarter,
The Schlumberger exclusivity fee will continue to be amortized on a level basis through the duration of the 15-year agreement. Schlumberger will also pay two (2) separate
Gross Margin
Product gross margin increased by 490 basis points to 64% in the third quarter of 2016, compared to 59% in the third quarter of 2015. Including license and development revenue associated with the Schlumberger exclusivity fee, total gross margin([2]) increased by 860 basis points to 68%.
Operating Expenses
Operating expenses for the third quarter of 2016 increased to
Bottom Line Summary
To summarize financial performance, the Company reported a net loss of
Cash Flow Highlights
The Company ended the quarter with unrestricted cash of
During the nine months of 2016, the Company's net cash provided by operating activities was
1 Total gross margin is a Non-GAAP financial measure. Please refer to the discussion under headings "Use of Non-GAAP Financial Measures" and "Reconciliations of Non-GAAP Financial Measures."
2 Total gross profit, total gross margin, adjusted net income (loss), and adjusted basic and diluted net income (loss) per share are Non-GAAP financial measures. Please refer to the discussion under headings "Use of Non-GAAP Financial Measures" and "Reconciliations of Non-GAAP Financial Measures."
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 expectations for its financial performance in 2016 and the Company's ability to achieve the milestones under the Schlumberger licensing agreement and receive the related contractual payments. 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 our ability to achieve the milestones under the Schlumberger agreement, any other factors that may have been discussed herein regarding the risks and uncertainties of our business, and the risks discussed under "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, including 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 Third Quarter 2016 Results
LIVE CONFERENCE CALL: Listen-only, Toll-free: 800-895-1715 Listen-only, Local: 785-424-1059 Access code: 6802600 |
CONFERENCE CALL REPLAY: Expiration: Toll-free: 888-203-1112 Local: 719-457-0820 Access code: 6802600 |
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.
About
Contact
buhlmer@energyrecovery.com
(713) 858-2284
ENERGY RECOVERY, INC. | ||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
(in thousands, except share data and par value) | ||
(unaudited) | ||
|
| |
ASSETS | ||
Current assets: |
||
Cash and cash equivalents |
$ 80,691 |
$ 99,931 |
Restricted cash |
521 |
1,490 |
Short-term investments |
15,049 |
257 |
Accounts receivable, net of allowance for doubtful accounts of |
8,193 |
11,590 |
Unbilled receivables, current |
914 |
1,879 |
Cost and estimated earnings in excess of billings |
440 |
— |
Inventories |
5,839 |
6,503 |
Deferred tax assets, net |
— |
938 |
Prepaid expenses and other current assets |
1,507 |
943 |
Total current assets |
113,154 |
123,531 |
Restricted cash, non-current |
3,301 |
2,317 |
Unbilled receivables, non-current |
— |
6 |
Deferred tax assets, non-current |
1,021 |
— |
Property and equipment, net of accumulated depreciation of |
9,182 |
10,622 |
|
12,790 |
12,790 |
Other intangible assets, net |
2,058 |
2,531 |
Other assets, non-current |
4 |
2 |
Total assets |
$ 141,510 |
$ 151,799 |
LIABILITIES AND STOCKHOLDERS' EQUITY | ||
Current liabilities: |
||
Accounts payable |
$ 1,796 |
$ 1,865 |
Accrued expenses and other current liabilities |
6,272 |
7,808 |
Income taxes payable |
137 |
2 |
Accrued warranty reserve |
394 |
461 |
Deferred revenue |
6,455 |
5,878 |
Current portion of long-term debt |
11 |
10 |
Total current liabilities |
15,065 |
16,024 |
Long-term debt, net of current portion |
30 |
38 |
Deferred tax liabilities, non-current |
2,173 |
2,360 |
Deferred revenue, non-current |
65,231 |
69,000 |
Other non-current liabilities |
598 |
718 |
Total liabilities |
83,097 |
88,140 |
Commitments and Contingencies (Note 9) |
||
Stockholders' equity: |
||
Preferred stock, |
— |
— |
Common stock, |
56 |
55 |
Additional paid-in capital |
136,053 |
129,809 |
Accumulated other comprehensive loss |
(91) |
(64) |
|
(16,210) |
(6,835) |
Accumulated deficit |
(61,395) |
(59,306) |
Total stockholders' equity |
58,413 |
63,659 |
Total liabilities and stockholders' equity |
$ 141,510 |
$ 151,799 |
ENERGY RECOVERY, INC. | |||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||
(in thousands, except per share data) | |||||
(unaudited) | |||||
Three Months Ended |
Nine Months Ended | ||||
2016 |
2015 |
2016 |
2015 | ||
Product revenue |
$ 11,024 |
$ 12,112 |
$ 33,048 |
$ 28,460 | |
Product cost of revenue |
3,968 |
4,948 |
11,878 |
12,315 | |
Product gross profit |
7,056 |
7,164 |
21,170 |
16,145 | |
License and development revenue |
1,250 |
— |
3,750 |
— | |
Operating expenses: |
|||||
General and administrative |
3,971 |
3,590 |
12,847 |
15,230 | |
Sales and marketing |
2,512 |
2,195 |
6,517 |
6,622 | |
Research and development |
2,319 |
1,474 |
7,406 |
5,417 | |
Amortization of intangible assets |
158 |
159 |
473 |
476 | |
Total operating expenses |
8,960 |
7,418 |
27,243 |
27,745 | |
Loss from operations |
(654) |
(254) |
(2,323) |
(11,600) | |
Other expense: |
|||||
Interest expense |
(1) |
— |
(2) |
(40) | |
Other non-operating income (expense) |
79 |
(48) |
137 |
(130) | |
Loss before income taxes |
(576) |
(302) |
(2,188) |
(11,770) | |
Provision (benefit) for income taxes |
3 |
38 |
(99) |
180 | |
Net loss |
$ (579) |
$ (340) |
$ (2,089) |
| |
Net loss per share – basic and diluted |
$ (0.01) |
$ (0.01) |
$ (0.04) |
$ (0.23) | |
Weighted average shares outstanding – basic and diluted |
52,106 |
52,237 |
52,227 |
52,071 |
| ||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
(in thousands, unaudited) | ||
Nine Months Ended | ||
2016 |
2015 | |
Cash Flows From Operating Activities |
||
Net loss |
$ (2,089) |
|
Adjustments to reconcile net loss to net cash used in operating activities: |
||
Depreciation and amortization |
2,771 |
2,897 |
Stock-based compensation |
2,640 |
3,549 |
Provision for warranty claims |
134 |
91 |
Amortization of premiums on investments |
94 |
154 |
Provision for doubtful accounts |
68 |
88 |
Unrealized loss on foreign currency transactions |
65 |
54 |
Change in fair value of put options |
33 |
55 |
Other non-cash adjustments |
(120) |
11 |
Valuation adjustments for excess or obsolete inventory |
(175) |
(126) |
Reversal of accruals related to expired warranties |
(201) |
(213) |
Deferred income taxes |
(270) |
172 |
Changes in operating assets and liabilities: |
||
Accounts receivable |
3,330 |
2,810 |
Unbilled receivables |
971 |
509 |
Inventories |
839 |
(563) |
Deferred revenue, product |
557 |
449 |
Income taxes payable |
135 |
(10) |
Litigation settlement |
— |
(1,700) |
Accounts payable |
(69) |
(134) |
Costs and estimated earnings in excess of billings |
(440) |
— |
Prepaid and other assets |
(598) |
(242) |
Accrued expenses and other liabilities |
(1,598) |
(3,602) |
Deferred revenue, SLB license |
(3,750) |
— |
Net cash provided by (used in) operating activities |
2,327 |
(7,701) |
Cash Flows From Investing Activities |
||
Maturities of marketable securities |
1,000 |
11,845 |
Restricted cash |
(15) |
1,856 |
Capital expenditures |
(900) |
(557) |
Purchases of marketable securities |
(15,912) |
— |
Net cash (used in) provided by investing activities |
(15,827) |
13,144 |
Cash Flows From Financing Activities |
||
Net proceeds from issuance of common stock |
3,708 |
558 |
Proceeds from long-term debt |
— |
55 |
Repayment of long-term debt |
(7) |
(5) |
Repurchase of common stock |
(9,375) |
— |
Net cash (used in) provided by financing activities |
(5,674) |
608 |
Effect of exchange rate differences on cash and cash equivalents |
(66) |
(54) |
Net change in cash and cash equivalents |
(19,240) |
5,997 |
Cash and cash equivalents, beginning of period |
99,931 |
15,501 |
Cash and cash equivalents, end of period |
$ 80,691 |
$ 21,498 |
| |||||
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES | |||||
(in thousands, except per share data) | |||||
(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 Schlumberger exclusivity fee. |
Three Months Ended |
Nine Months Ended | ||||
2016 |
2015 |
2016 |
2015 | ||
Product revenue |
$ 11,024 |
$ 12,112 |
$ 33,048 |
$ 28,460 | |
License and development revenue |
1,250 |
— |
3,750 |
— | |
Total revenue |
$ 12,274 |
$ 12,112 |
$ 36,798 |
$ 28,460 | |
Product gross profit |
$ 7,056 |
$ 7,164 |
$ 21,170 |
$ 16,145 | |
License and development gross profit |
1,250 |
— |
3,750 |
— | |
Total gross profit (Non-GAAP) |
$ 8,306 |
$ 7,164 |
$ 24,920 |
$ 16,145 | |
Product gross margin |
64.0% |
59.1% |
64.1% |
56.7% | |
Total gross margin (Non-GAAP) |
67.7% |
59.1% |
67.7% |
56.7% | |
Net loss |
$ (579) |
$ (340) |
$ (2,089) |
| |
Non-recurring operating expenses |
— |
— |
1,008 |
5,719 | |
Adjusted net loss (Non-GAAP) |
$ (579) |
$ (340) |
$ (1,081) |
$ (6,231) | |
Basic and diluted net loss per share |
$ (0.01) |
$ (0.01) |
$ (0.04) |
$ (0.23) | |
Adjusted basic and diluted net loss per share (Non-GAAP) |
$ (0.01) |
$ (0.01) |
$ (0.02) |
$ (0.12) | |
Weighted average shares outstanding – basic and diluted |
52,106 |
52,237 |
52,227 |
52,071 |
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