Energy Recovery Reports Product Revenue Growth of 26% for Fiscal Year 2020
Energy Recovery, Inc. (NASDAQ:ERII) reported strong financial results for Q4 and fiscal year 2020, with total revenue increasing by 37% to $119 million. Product revenue for the year grew by 26%, driven by a 27% increase in the seawater desalination business. The company announced a $50 million share buyback program, aimed at enhancing shareholder value. Despite challenges from COVID-19, ERII achieved a net income of $26.4 million, or $0.47 per diluted share. Looking ahead, the deployment of the VorTeq technology and the development of new applications signal promising growth in 2021 and beyond.
- 26% product revenue growth in 2020, driven by seawater desalination segment.
- $50 million share buyback program to enhance shareholder value.
- Net income of $26.4 million for 2020, a 142% increase year-over-year.
- Strong growth in operating cash flow, up 220% to $16.9 million.
- Deployment of VorTeq technology at a live well enhances future revenue potential.
- Product gross margin decreased by 280 basis points due to COVID-19 related costs.
- OEM and aftermarket revenue segments negatively impacted by COVID-19, with declines of 39% and 19% respectively.
SAN LEANDRO, CA / ACCESSWIRE / March 11, 2021 / Energy Recovery, Inc. (NASDAQ:ERII) today announced its financial results for the fourth quarter and fiscal year ended December 31, 2020. The Company achieved
Strong 2020 results combined with projected growth in 2021 and 2022 will likely increase Energy Recovery's cash balances. As a result, the Board of Directors of the Company approved a share repurchase program on March 9, 2021. Under this program, the Company may repurchase up to
"We ended a difficult 2020 stronger than we started," said Bob Mao, Chairman of the Board, President, and Chief Executive Officer of Energy Recovery. "We kept our employees safe while keeping our production running, grew our base water business and achieved record revenue despite the pandemic, launched our new Ultra PX™ energy recovery device for industrial wastewater treatment, and issued our first Environmental, Social and Governance ("ESG") report."
Mr. Mao continued, "I believe 2021 is going to be an even more exciting year for Energy Recovery. In early March, we deployed the VorTeq at a live well with one of the largest independent oil producers in the U.S., a key step towards demonstrating the value proposition of the product and ensuring readiness for commercial deployment. We continue to work on the other critical hurdle for profitable commercialization - extending the service life of the VorTeq cartridges."
Mr. Mao concluded, "We also continue to push the boundaries of our core technology, the pressure exchanger, to handle new operating environments and industrial applications, including actively developing capabilities to handle gases. With this broader operating range, our first target is to address the challenges faced in industrial and commercial refrigeration. We are taking a disciplined approach to incubating new products, with clear financial and time bounds on each of our initiatives, which we believe will enable us to more rapidly drive shareholder value."
Financial Results
| Three Months Ended December 31, | Years Ended December 31, | |||||||||||||||||||||||
| 2020 | 2019 | Variance | 2020 | 2019 | Variance | |||||||||||||||||||
| (in millions, except earnings per share, percentages and basis points) | ||||||||||||||||||||||||
Product revenue | $ | 26.4 | $ | 15.8 | 67 | % | $ | 92.1 | $ | 72.8 | 26 | % | ||||||||||||
License and development revenue | - | 3.7 | (100 | %) | 26.9 | 14.1 | 91 | % | ||||||||||||||||
Total revenue | $ | 26.4 | $ | 19.5 | 36 | % | $ | 119.0 | $ | 86.9 | 37 | % | ||||||||||||
Product gross profit | $ | 18.2 | $ | 11.3 | 61 | % | $ | 63.8 | $ | 52.5 | 22 | % | ||||||||||||
Product gross margin | 69.0 | % | 71.5 | % | (250)bps | 69.3 | % | 72.1 | % | (280) bps | ||||||||||||||
Operating Expense | $ | 14.4 | $ | 15.9 | (9 | %) | $ | 59.4 | $ | 56.2 | 6 | % | ||||||||||||
Operating income (loss) | $ | 3.8 | $ | (0.9 | ) | 519 | % | $ | 31.3 | $ | 10.4 | 202 | % | |||||||||||
Net income (loss) | $ | 3.5 | $ | (0.6 | ) | 667 | % | $ | 26.4 | $ | 10.9 | 142 | % | |||||||||||
Diluted earnings (deficit) per share | $ | 0.06 | $ | (0.01 | ) | $ | 0.07 | $ | 0.47 | $ | 0.19 | $ | 0.28 | |||||||||||
Operating cash flow | $ | 6.5 | $ | 4.8 | 37 | % | $ | 16.9 | $ | 5.3 | 220 | % | ||||||||||||
Cash and securities | $ | 114.7 | $ | 100.5 | 14 | % | $ | 114.7 | $ | 100.5 | 14 | % | ||||||||||||
Product Channel Revenue
| Three Months Ended December 31, 2020 | Years Ended December 31, | |||||||||||||||||||||||
| 2020 | 2019 | Variance | 2020 | 2019 | Variance | |||||||||||||||||||
| (In millions, except percentages) | ||||||||||||||||||||||||
Megaproject | $ | 19.6 | $ | 6.2 | $ | 66.8 | $ | 38.2 | ||||||||||||||||
Original equipment manufacturer | 4.1 | 6.8 | ( | 15.8 | 23.0 | ( | ||||||||||||||||||
Aftermarket | 2.7 | 2.7 | ( | 9.5 | 11.7 | ( | ||||||||||||||||||
Total product revenue | $ | 26.4 | $ | 15.8 | $ | 92.1 | $ | 72.8 | ||||||||||||||||
"We beat our 2020 water guidance by more than
Fiscal Year 2020
Revenues
For the year ended December 31, 2020, our total revenue increased
For the 5th consecutive year, our Water segment achieved record revenue for the year ended December 31, 2020, with the megaproject ("MPD") channel as the main driver of our revenue growth. In 2020, large scale desalination projects were generally unaffected by COVID-19 and the decline in economic conditions. Strong growth in our MPD channel is indicative of the growing demand for potable water globally, as well as the technological conversion occurring within the industry as thermal desalination plants begin to be decommissioned and replaced with reverse osmosis plants.
Our original equipment manufacturer ("OEM") and aftermarket ("AM") channels, which contain projects of shorter duration, were negatively affected by COVID-19 and the resulting decline in the economic conditions in fiscal year 2020, which ultimately delayed certain new installation and upgrade projects, as well as non-critical plant maintenance. Specifically, in our OEM channel, we sell into a number of industries, including tourism and hospitality, which were greatly affected by COVID-19.
In our Oil & Gas segment we accelerated revenue recognition from the termination of the license agreement between us and Schlumberger in the second quarter of 2020. No revenue was recognized in the second half of 2020, and there will be no future license revenue recognized associated with this contract.
Product Gross Margin
For the year ended December 31, 2020 product gross margin decreased 280 basis points as compared to prior year. This decrease was primarily a result of costs associated with reduced utilization of our manufacturing facilities due to COVID-19, increased costs related to COVID-19 safety protocols, and overhead costs of our Tracy, California facility. The increasing size and volume of MPD customer projects has also exerted downward pressure on our average per unit selling price, which contributed to product gross margin reductions.
Operating Expenses
For the year ended December 31, 2020, operating expenses increased
Sales and marketing ("S&M") expenses decreased as compared to prior year due primarily to COVID-19, as we temporarily reduced a majority of travel-related marketing events.
Research and development ("R&D") expenses were relatively flat as compared to prior year. Expenditures related to the development of the VorTeq peaked in the first half of 2020, but fell
Bottom Line Summary
On an annual basis, we reported a net income of
Fourth Quarter 2020
Revenues
For the fourth quarter ended December 31, 2020, total revenue increased
The Water desalination business growth in the fourth quarter ended December 31, 2020 was driven by strong performance of our MPD channel. We continued to observe COVID-19 related slowdowns in our OEM and AM channels as industries such as tourism and hospitality deferred reverse osmosis projects. In our AM channel, some customers sought to delay non-critical maintenance.
Product Gross Margin
For the fourth quarter ended December 31, 2020, product gross margin decreased 250 basis points as compared to the fourth quarter ended December 31, 2019. The decrease in product gross margin was primarily related to lower average selling price of our PX as the growing magnitude of MPD projects exerted downward pressure on per unit pricing.
Operating Expenses
For the fourth quarter ended December 31, 2020 operating expenses decreased
G&A expenses increased as compared to the fourth quarter ended December 31, 2019, due primarily to higher personnel and facility-related costs and partially offset by lower travel and professional services expenditures.
S&M expenses decreased as compared to the fourth quarter ended December 31, 2019, due primarily to COVID-19 related slowdowns in marketing and travel related activities.
Bottom Line Summary
On a quarterly basis, we reported a net income of
Cash Flow Highlights
We finished the year ended December 31, 2020 with cash and cash equivalents 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 belief that the projected growth in 2021 and 2022 will increase the Company's cash balances; that the deployment of the VorTeq at a live well will help demonstrate the value proposition of the VorTeq; that the Company will ever commercialize the VorTeq; that the Company will be able to extend the service life of the VorTeq cartridges; that the Company will be able to develop the pressure exchanger's capabilities to handle gases; that the Company will be able to develop products to address challenges faced in industrial and commercial refrigeration; that the Company will be able to drive shareholder value; and that the Company will introduce new products in 2021. 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 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 U.S. Securities and Exchange Commission ("SEC") for the year ended December 31, 2019 as well as other reports filed by the Company with the SEC from time to time. 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.
Conference Call to Discuss Fourth Quarter and Fiscal Year End 2020 Financial Results
LIVE CONFERENCE CALL:
Thursday, March 11, 2021, 2:00 PM PST / 5:00 PM EST
Listen-only, US / Canada Toll-Free: +1 (877) 709-8150
Listen-only, Local / International Toll: +1 (201) 689-8354
Access code: 13714951
CONFERENCE CALL REPLAY:
Expiration: Sunday, April 11, 2021
US / Canada Toll-Free: +1 (877) 660-6853
Local / International Toll: +1 (201) 612-7415
Access code: 13714951
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.
Disclosure Information
Energy Recovery uses the investor relations section on its website as means of complying with its disclosure obligations under Regulation FD. Accordingly, investors should monitor Energy Recovery's investor relations website in addition to following Energy Recovery's press releases, SEC filings, and public conference calls and webcasts.
About Energy Recovery
Energy Recovery creates technologies that solve complex challenges for industrial fluid-flow markets worldwide. Building on our pressure exchanger technology platform, we design and manufacture solutions that make industrial processes more efficient and sustainable. What began as a game-changing invention for desalination has grown into a global business advancing the environmental sustainability of customers' operations in multiple industries. Headquartered in the San Francisco Bay Area, Energy Recovery has manufacturing, research and development facilities across California and Texas with sales and on-site technical support available globally. For more information, please visit www.energyrecovery.com.
CONTACT:
Investor Relations
ir@energyrecovery.com
+1 (281) 962-8105
ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| December 31, 2020 | December 31, 2019 | |||||||
| (In thousands) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 94,255 | $ | 26,387 | ||||
Short-term investments | 20,446 | 58,736 | ||||||
Accounts receivable, net | 11,792 | 12,979 | ||||||
Inventories, net | 11,748 | 10,317 | ||||||
Prepaid expenses and other current assets | 4,950 | 4,548 | ||||||
Total current assets | 143,191 | 112,967 | ||||||
Long-term investments | - | 15,419 | ||||||
Deferred tax assets, non-current | 11,030 | 16,897 | ||||||
Property and equipment, net | 20,176 | 18,843 | ||||||
Operating lease, right of use asset | 16,090 | 11,195 | ||||||
Goodwill and other intangible assets | 12,839 | 12,855 | ||||||
Other assets, non-current | 988 | 598 | ||||||
Total assets | $ | 204,314 | $ | 188,774 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,118 | $ | 1,192 | ||||
Accrued expenses and other current liabilities | 11,816 | 9,869 | ||||||
Lease liabilities | 1,243 | 1,023 | ||||||
Contract liabilities | 1,552 | 15,746 | ||||||
Total current liabilities | 15,729 | 27,830 | ||||||
Lease liabilities, non-current | 16,443 | 11,533 | ||||||
Contract liabilities, non-current | 88 | 13,120 | ||||||
Other non-current liabilities | 430 | 278 | ||||||
Total liabilities | 32,690 | 52,761 | ||||||
Stockholders' equity: | ||||||||
Common stock | 62 | 61 | ||||||
Additional paid-in capital | 179,161 | 170,028 | ||||||
Accumulated other comprehensive income (loss) | 53 | (37) | ||||||
Treasury stock | (30,486) | (30,486) | ||||||
Retained earnings (accumulated deficit) | 22,834 | (3,553) | ||||||
Total stockholders' equity | 171,624 | 136,013 | ||||||
Total liabilities and stockholders' equity | $ | 204,314 | $ | 188,774 | ||||
ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended December 31, | Years Ended December 31, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| (In thousands, except per share data) | ||||||||||||||||
Product revenue | $ | 26,426 | $ | 15,784 | $ | 92,091 | $ | 72,834 | ||||||||
Product cost of revenue | 8,200 | 4,492 | 28,249 | 20,335 | ||||||||||||
Product gross profit | 18,226 | 11,292 | 63,842 | 52,499 | ||||||||||||
License and development revenue | - | 3,717 | 26,895 | 14,108 | ||||||||||||
Operating expenses: | ||||||||||||||||
General and administrative | 6,768 | 6,042 | 25,519 | 22,832 | ||||||||||||
Sales and marketing | 2,351 | 2,724 | 8,127 | 9,434 | ||||||||||||
Research and development | 5,290 | 7,048 | 23,449 | 23,402 | ||||||||||||
Amortization of intangible assets | 4 | 106 | 16 | 575 | ||||||||||||
Impairment of long-lived assets | - | - | 2,332 | - | ||||||||||||
Total operating expenses | 14,413 | 15,920 | 59,443 | 56,243 | ||||||||||||
Income (loss) from operations | 3,813 | (911) | 31,294 | 10,364 | ||||||||||||
Other income: | ||||||||||||||||
Interest income | 104 | 459 | 913 | 2,010 | ||||||||||||
Other non-operating expense, net | (15) | (41) | (74) | (118) | ||||||||||||
Total other income, net | 89 | 418 | 839 | 1,892 | ||||||||||||
Income (loss) before income taxes | 3,902 | (493) | 32,133 | 12,256 | ||||||||||||
Provision for income taxes | 449 | 116 | 5,746 | 1,343 | ||||||||||||
Net income (loss) | $ | 3,453 | $ | (609) | $ | 26,387 | $ | 10,913 | ||||||||
Earnings (deficit) per share: | ||||||||||||||||
Basic | $ | 0.06 | $ | (0.01) | $ | 0.47 | $ | 0.20 | ||||||||
Diluted | $ | 0.06 | $ | (0.01) | $ | 0.47 | $ | 0.19 | ||||||||
Number of shares used in per share calculations: | ||||||||||||||||
Basic | 56,113 | 55,201 | 55,709 | 54,740 | ||||||||||||
Diluted | 57,261 | 55,201 | 56,637 | 56,067 | ||||||||||||
ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Years Ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| (In thousands) | ||||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 26,387 | $ | 10,913 | ||||
Adjustments to reconcile net income to cash provided by operating activities | ||||||||
Stock-based compensation | 4,787 | 5,676 | ||||||
Depreciation and amortization | 5,299 | 4,395 | ||||||
Amortization of premiums and discounts on investments | 390 | 65 | ||||||
Deferred income taxes | 5,867 | 1,421 | ||||||
Provision for warranty claims | 403 | 402 | ||||||
Impairment of long-lived assets | 2,332 | - | ||||||
Other non-cash adjustments | (8) | 92 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable, net | 1,098 | (2,679) | ||||||
Contract assets | (1,200) | 3,391 | ||||||
Inventories, net | (1,622) | (3,256) | ||||||
Prepaid and other assets | 415 | (263) | ||||||
Accounts payable | (205) | (373) | ||||||
Accrued expenses and other liabilities | 164 | (600) | ||||||
Income taxes | (11) | 27 | ||||||
Contract liabilities | (27,226) | (13,943) | ||||||
Net cash provided by operating activities | 16,870 | 5,268 | ||||||
Cash flows from investing activities: | ||||||||
Sales of marketable securities | 10,573 | 7,608 | ||||||
Maturities of marketable securities | 55,667 | 78,100 | ||||||
Purchases of marketable securities | (12,855) | (85,207) | ||||||
Capital expenditures | (6,785) | (7,382) | ||||||
Net cash provided by (used in) investing activities | 46,600 | (6,881) | ||||||
Cash flows from financing activities: | ||||||||
Net proceeds from issuance of common stock | 4,397 | 6,073 | ||||||
Tax payment for employee shares withheld | (23) | (110) | ||||||
Net cash provided by (used in) financing activities | 4,374 | 5,963 | ||||||
Effect of exchange rate differences on cash and cash equivalents | 26 | - | ||||||
Net change in cash, cash equivalents, and restricted cash | 67,870 | 4,350 | ||||||
Cash, cash equivalents and restricted cash, beginning of year | 26,488 | 22,138 | ||||||
Cash, cash equivalents and restricted cash, end of year | $ | 94,358 | $ | 26,488 | ||||
SUPPLEMENTAL FINANCIAL INFORMATION
(Unaudited)
| Three Months Ended December 31, 2020 | Three Months Ended December 31, 2019 | |||||||||||||||||||||||||||||||
| Water | Oil & Gas | Corporate | Total | Water | Oil & Gas | Corporate | Total | |||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||
Product revenue | $ | 26,396 | $ | 30 | $ | - | $ | 26,426 | $ | 15,784 | $ | - | $ | - | $ | 15,784 | ||||||||||||||||
Product cost of revenue | 8,190 | 10 | - | 8,200 | 4,493 | (1) | - | 4,492 | ||||||||||||||||||||||||
Product gross profit | 18,206 | 20 | - | 18,226 | 11,291 | 1 | - | 11,292 | ||||||||||||||||||||||||
License and development revenue | - | - | - | - | - | 3,717 | - | 3,717 | ||||||||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||||||||||
General and administrative | 729 | 457 | 5,582 | 6,768 | 45 | 369 | 5,628 | 6,042 | ||||||||||||||||||||||||
Sales and marketing | 1,651 | 6 | 694 | 2,351 | 2,014 | 67 | 643 | 2,724 | ||||||||||||||||||||||||
Research and development | 388 | 3,139 | 1,763 | 5,290 | 1,031 | 5,750 | 267 | 7,048 | ||||||||||||||||||||||||
Amortization of intangible assets | 4 | - | - | 4 | 106 | - | - | 106 | ||||||||||||||||||||||||
Total operating expenses | 2,772 | 3,602 | 8,039 | 14,413 | 3,196 | 6,186 | 6,538 | 15,920 | ||||||||||||||||||||||||
Operating income (loss) | $ | 15,434 | $ | (3,582) | $ | (8,039) | 3,813 | $ | 8,095 | $ | (2,468) | $ | (6,538) | (911) | ||||||||||||||||||
Other income, net | 89 | 418 | ||||||||||||||||||||||||||||||
Income before income taxes | $ | 3,902 | $ | (493) | ||||||||||||||||||||||||||||
| Year Ended December 31, 2020 | Year Ended December 31, 2019 | |||||||||||||||||||||||||||||||
| Water | Oil & Gas | Corporate | Total | Water | Oil & Gas | Corporate | Total | |||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||
Product revenue | $ | 92,061 | $ | 30 | $ | - | $ | 92,091 | $ | 72,730 | $ | 104 | $ | - | $ | 72,834 | ||||||||||||||||
Product cost of revenue | 28,239 | 10 | - | 28,249 | 20,148 | 187 | - | 20,335 | ||||||||||||||||||||||||
Product gross profit (loss) | 63,822 | 20 | - | 63,842 | 52,582 | (83 | ) | - | 52,499 | |||||||||||||||||||||||
License and development revenue | - | 26,895 | - | 26,895 | - | 14,108 | - | 14,108 | ||||||||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||||||||||
General and administrative | 2,196 | 2,058 | 21,265 | 25,519 | 1,501 | 1,576 | 19,755 | 22,832 | ||||||||||||||||||||||||
Sales and marketing | 5,958 | 112 | 2,057 | 8,127 | 7,072 | 741 | 1,621 | 9,434 | ||||||||||||||||||||||||
Research and development | 2,973 | 15,859 | 4,617 | 23,449 | 3,825 | 19,085 | 492 | 23,402 | ||||||||||||||||||||||||
Amortization of intangible assets | 16 | - | - | 16 | 575 | - | - | 575 | ||||||||||||||||||||||||
Impairment of long-lived assets | - | 2,332 | - | 2,332 | - | - | - | - | ||||||||||||||||||||||||
Total operating expenses | 11,143 | 20,361 | 27,939 | 59,443 | 12,973 | 21,402 | 21,868 | 56,243 | ||||||||||||||||||||||||
Operating income (loss) | $ | 52,679 | $ | 6,554 | $ | (27,939 | ) | 31,294 | $ | 39,609 | $ | (7,377 | ) | $ | (21,868 | ) | 10,364 | |||||||||||||||
Other income, net | 839 | 1,892 | ||||||||||||||||||||||||||||||
Income before income taxes | $ | 32,133 | $ | 12,256 | ||||||||||||||||||||||||||||
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https://www.accesswire.com/635051/Energy-Recovery-Reports-Product-Revenue-Growth-of-26-for-Fiscal-Year-2020
FAQ
What were Energy Recovery's Q4 2020 financial results for ERII?
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