Energy Recovery Reports First Quarter 2016 Results
FIRST QUARTER SUMMARY:
- Record quarter total gross margin of 67.5%(1)
- Total revenue increased 93% year-over-year to
$11.3 million - Product gross margin increased to 63.4% from 56.8%, an increase of 660 basis points year-over-year
- Operating expenses decreased 14% year-over-year to
$9.8 million - Net loss of
$(2.0) million , or$(0.04) per share compared to net loss of$(8.3) million , or$(0.16) per share, in the prior year quarter - Adjusted net loss of
$(1.0) million , or$(0.02) per share compared to adjusted net loss of$(5.2) million , or$(0.10) per share, in the prior year quarter(1)
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
GROSS MARGIN
Product gross margin increased by 660 basis points to 63.4% in the first quarter of 2016, compared to 56.8% in the first quarter of 2015. This increase was primarily due to higher MPD volume and production as well as a favorable price and mix.
Including the revenue associated with the Schlumberger exclusivity fee, total gross margin increased by more than 1,000 basis points to 67.5% in the first quarter of 2016(1).
OPERATING EXPENSES
Operating expenses for the first quarter of 2016 decreased by
BOTTOM LINE SUMMARY
To summarize financial performance for the first quarter of 2016, the Company reported a net loss of
Excluding non-recurring items, the Company incurred an adjusted net loss of
CASHFLOW HIGHLIGHTS
For the first quarter ended on
Cash used by operating activities was
The Company ended the quarter with unrestricted cash of
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 profit, total gross margin, adjusted net income (loss), and adjusted basic and diluted net income (loss) per share. 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 2016 Results
LIVE CONFERENCE CALL WEBCAST: | CONFERENCE CALL REPLAY: |
Expiration: May 19, 2016 | |
Listen-only, Toll-free: 888-427-9419 | Toll-free: 888-203-1112 |
Listen-only, Local: 719-325-2315 | Local: 719-457-0820 |
Access code: 3651614 | Access code: 3651614 |
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
1 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.”
CONSOLIDATED BALANCE SHEETS | ||||||
(in thousands, except share data and par value) | ||||||
(unaudited) | ||||||
March 31, 2016 | December 31, 2015 | |||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 96,527 | $ | 99,931 | ||
Restricted cash | 1,232 | 1,490 | ||||
Short-term investments | 255 | 257 | ||||
Accounts receivable, net of allowance for doubtful accounts of | 7,683 | 11,590 | ||||
Unbilled receivables, current | 1,804 | 1,879 | ||||
Inventories | 6,725 | 6,503 | ||||
Income tax receivable | 2 | — | ||||
Deferred tax assets, net | 1,145 | 938 | ||||
Prepaid expenses and other current assets | 1,299 | 943 | ||||
Total current assets | 116,672 | 123,531 | ||||
Restricted cash, non-current | 2,911 | 2,317 | ||||
Unbilled receivables, non-current | — | 6 | ||||
Property and equipment, net of accumulated depreciation of | 9,956 | 10,622 | ||||
12,790 | 12,790 | |||||
Other intangible assets, net | 2,374 | 2,531 | ||||
Other assets, non-current | 2 | 2 | ||||
Total assets | $ | 144,705 | $ | 151,799 | ||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 2,592 | $ | 1,865 | ||
Accrued expenses and other current liabilities | 4,984 | 7,808 | ||||
Income taxes payable | — | 2 | ||||
Accrued warranty reserve | 428 | 461 | ||||
Deferred revenue | 5,619 | 5,878 | ||||
Current portion of long-term debt | 10 | 10 | ||||
Total current liabilities | 13,633 | 16,024 | ||||
Long-term debt, net of current portion | 36 | 38 | ||||
Deferred tax liabilities, non-current, net | 2,360 | 2,360 | ||||
Deferred revenue, non-current | 67,766 | 69,000 | ||||
Other non-current liabilities | 674 | 718 | ||||
Total liabilities | 84,469 | 88,140 | ||||
Commitments and Contingencies (Note 9) | ||||||
Stockholders’ equity: | ||||||
Preferred stock, | — | — | ||||
Common stock, | 55 | 55 | ||||
Additional paid-in capital | 132,469 | 129,809 | ||||
Accumulated other comprehensive loss | (75 | ) | (64 | ) | ||
(10,941 | ) | (6,835 | ) | |||
Accumulated deficit | (61,272 | ) | (59,306 | ) | ||
Total stockholders’ equity | 60,236 | 63,659 | ||||
Total liabilities and stockholders’ equity | $ | 144,705 | $ | 151,799 |
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||
(in thousands, except per share data) | ||||||
(unaudited) | ||||||
Three Months Ended | ||||||
2016 | 2015 | |||||
Product revenue | $ | 10,051 | $ | 5,864 | ||
Product cost of revenue | 3,674 | 2,531 | ||||
Product gross profit | 6,377 | 3,333 | ||||
License and development revenue | 1,250 | — | ||||
Operating expenses: | ||||||
General and administrative | 4,884 | 6,278 | ||||
Sales and marketing | 2,070 | 2,433 | ||||
Research and development | 2,665 | 2,533 | ||||
Amortization of intangible assets | 157 | 159 | ||||
Total operating expenses | 9,776 | 11,403 | ||||
Loss from operations | (2,149 | ) | (8,070 | ) | ||
Other expense: | ||||||
Interest expense | (1 | ) | (40 | ) | ||
Other non-operating expense | (21 | ) | (102 | ) | ||
Loss before income taxes | (2,171 | ) | (8,212 | ) | ||
(Benefit) provision for income taxes | (205 | ) | 71 | |||
Net income (loss) | $ | (1,966 | ) | $ | (8,283 | ) |
Basic and diluted net income (loss) per share | $ | (0.04 | ) | $ | (0.16 | ) |
Shares used in basic and diluted per share calculation | 52,207 | 51,948 |
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
(in thousands) | ||||||
(unaudited) | ||||||
Three Months Ended | ||||||
2016 | 2015 | |||||
Cash Flows From Operating Activities | ||||||
Net loss | $ | (1,966 | ) | $ | (8,283 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||
Share-based compensation | 1,188 | 1,140 | ||||
Depreciation and amortization | 932 | 979 | ||||
Unrealized loss on foreign currency transactions | 53 | 124 | ||||
Change in fair value of put options | 29 | — | ||||
Valuation adjustments for excess or obsolete inventory | 12 | (10 | ) | |||
Provision for doubtful accounts | 4 | 2 | ||||
Amortization of premiums on investments | 3 | 79 | ||||
Provision for warranty claims | — | 21 | ||||
Deferred income taxes | (207 | ) | 65 | |||
Reversal of accruals related to expired warranties | (33 | ) | — | |||
Other non-cash adjustments | (44 | ) | 428 | |||
Changes in operating assets and liabilities: | ||||||
Accounts receivable | 3,904 | 5,524 | ||||
Accounts payable | 727 | 215 | ||||
Unbilled receivables | 81 | 314 | ||||
Income taxes payable | (4 | ) | 2 | |||
Inventories | (234 | ) | (1,120 | ) | ||
Deferred revenue, product | (245 | ) | 574 | |||
Prepaid and other assets | (385 | ) | 154 | |||
Deferred revenue, SLB license | (1,250 | ) | — | |||
Accrued expenses and other liabilities | (2,825 | ) | (1,192 | ) | ||
Net cash used in operating activities | (260 | ) | (984 | ) | ||
Cash Flows From Investing Activities | ||||||
Maturities of marketable securities | — | 4,675 | ||||
Capital expenditures | (152 | ) | (179 | ) | ||
Restricted cash | (335 | ) | 1,084 | |||
Net cash (used in) provided by investing activities | (487 | ) | 5,580 | |||
Cash Flows From Financing Activities | ||||||
Net proceeds from issuance of common stock | 1,515 | 250 | ||||
Proceeds from long-term debt | — | 55 | ||||
Repayment of long-term debt | (2 | ) | — | |||
Repurchase of common | (4,106 | ) | — | |||
Net cash (used in) provided by financing activities | (2,593 | ) | 305 | |||
Effect of exchange rate differences on cash and cash equivalents | (64 | ) | (11 | ) | ||
Net change in cash and cash equivalents | (3,404 | ) | 4,890 | |||
Cash and cash equivalents, beginning of period | 99,931 | 15,501 | ||||
Cash and cash equivalents, end of period | $ | 96,527 | $ | 20,391 | ||
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 Profit, Total Gross Margin are determined by adding back the license and development revenue associated with the amortization of the Schlumberger exclusivity fee. Our non-GAAP Adjusted Net Income and per share information also exclude non-recurring expenses. | ||||||
Three Months Ended | ||||||
2016 | 2015 | |||||
Product revenue | $ | 10,051 | $ | 5,864 | ||
License and development revenue | 1,250 | — | ||||
Total revenue | 11,301 | 5,864 | ||||
Product gross profit | 6,377 | 3,333 | ||||
License and development revenue | 1,250 | — | ||||
Total gross profit (Non-GAAP) | 7,627 | 3,333 | ||||
Product gross margin | 63.4 | % | 56.8 | % | ||
Total gross margin (Non-GAAP) | 67.5 | % | 56.8 | % | ||
Net income (loss) | $ | (1,966 | ) | $ | (8,283 | ) |
Non-recurring operating expenses | 1,008 | 3,045 | ||||
Adjusted net income (loss) (Non-GAAP) | $ | (958 | ) | $ | (5,238 | ) |
Basic and diluted net income (loss) per share | $ | (0.04 | ) | $ | (0.16 | ) |
Adjusted basic and diluted net income (loss) per share (Non-GAAP) | $ | (0.02 | ) | $ | (0.10 | ) |
Shares used in basic and diluted per share calculation | 52,207 | 51,948 |
Contact:Source:Chris Gannon Chief Financial Officer 510-483-7370