Energy Recovery, Inc. (NASDAQ:ERII) ("Energy Recovery" or the "Company") today announced its financial results for the third quarter ended September 30, 2022
SAN LEANDRO, CA / ACCESSWIRE / November 2, 2022 / Energy Recovery, Inc. (NASDAQ:ERII) ("Energy Recovery" or the "Company") today announced its financial results for the third quarter ended September 30, 2022.
Third Quarter Highlights:
Sponsored
Revenue of $30.5 million. Full year revenue guidance of $121-$125 million, or 16%-20% year-on-year growth, within gross margin expectations guided last year.
Income from operations of $4.9 million and adjusted income from operations(1) of $6.8 million.
Net income of $4.8 million, or $0.08 per share, and adjusted net income per share(1) of $0.12.
Adjusted EBITDA(1) of $7.7 million.
Cash and investments of $86.6 million, which include cash, cash equivalents, and short-term and long-term investments.
We successfully installed and commissioned our PX G1300™ fully integrated with the CO2 refrigeration rack for Vallarta Supermarkets in California.
Robert Mao, Chairman, President and CEO, commented on the financial results, "We continue to make important strides in all three of our businesses, and believe we have the right products and strategy to deliver on our goals despite the challenging macro-economic environment. In our CO2 refrigeration business, we have gone live with the installation of our PX G1300 with Vallarta Supermarkets in California. This is the second installation in a grocery store for the PX G1300, and we are collecting valuable data and proving the efficiency gains the PX G1300 delivers in CO2 refrigeration racks."
Mr. Mao added, "In addition, the reference designs published on our website have piqued the interest of additional commercial and industrial refrigeration manufacturers. As a result of this, we will be shipping PX G1300 units to various customers for installation in the later part of this year, or early 2023. These units will be used for initial deployments in both commercial and industrial refrigeration applications."
"Sales in our industrial wastewater business continue to grow and we should exceed our full-year guidance of $3.0 million. In our water business we launched the PX Q400 pressure exchanger, which is the next evolution of our PX® Pressure Exchanger® technology. This new addition to our PX offering is our most efficient PX available for use in both SWRO and industrial wastewater applications."
Third Quarter (Quarter to Date)GAAPNon-GAAP(1)Q3 2022Q3 2021
vs. Q3 2021Q3 2022Q3 2021
vs. Q3 2021(In millions except for percentages, basis points and per share amounts)
Operating margin16.1%6.9%
Net income per share$0.08$0.02
Effective tax rate7.2%26.8%8.7%14.9%
Free cash flow$(1.6)$(6.7)
Fiscal Year (Year to Date)GAAPNon-GAAP(1)20222021
2022 vs. 2021(In millions, except net income per share, percentages and basis points)
Operating margin12.3%11.2%
Net income per share$0.18$0.15
Effective tax rate3.5%(12.4%)9.1%11.0%
Adjusted EBITDA$19.8$15.5
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 our expectations on full year revenue and gross margin guidance; our belief that the PX Q400 is the highest performing PX available for SWRO and industrial wastewater facilities; and our belief that the Company has the right products and strategy to survive the macro-economic environment and our goals. 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, 2021, 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.
Use of Non-GAAP Financial Measures
This press release includes certain non-GAAP financial measures, including adjusted income from operations, adjusted net income per share, adjusted EBITDA and free cash flow. 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 the United States of America, or GAAP. These non-GAAP financial measures do not reflect a comprehensive system of accounting, differ from GAAP measures with the same captions, and may differ from non-GAAP financial measures with the same or similar captions that are used by other companies. As such, these non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. The Company uses these non-GAAP financial measures to analyze its operating performance and future prospects, develop internal budgets and financial goals, and to facilitate period-to-period comparisons. The Company believes these non-GAAP financial measures reflect an additional way of viewing aspects of its operations that, when viewed with its GAAP results, provide a more complete understanding of factors and trends affecting its business.
Notes to the Third Quarter and Year to Date 2022 Financial Results
Conference Call to Discuss Third Quarter 2022 Financial Results
Wednesday, November 2, 2022, 2:00 PM PT / 5:00 PM ET
Listen-only, US / Canada Toll-Free: +1 (877) 709-8150
Listen-only, Local / International Toll: +1 (201) 689-8354
Expiration: Friday, December 2, 2022
US / Canada Toll-Free: +1 (877) 660-6853
Local / International Toll: +1 (201) 612-7415
Investors may access the live call and the replay (approximately three hours after the live call concludes) over the internet at:
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.
Energy Recovery, Inc., creates technologies that solve complex challenges for commercial and industrial fluid-flow markets worldwide. Building on an innovative pressure exchanger technology platform, they design and manufacture solutions that make commercial and industrial processes more efficient and sustainable. What began as a game-changing invention for desalination has grown into a global business accelerating the environmental sustainability of customers' operations in multiple industries. Headquartered in the San Francisco Bay Area, Energy Recovery has manufacturing and research and development facilities across California and Texas with sales and on-site technical support available globally. To learn more, visit https://energyrecovery.com/.
CONDENSED CONSOLIDATED BALANCE SHEETS
Cash, cash equivalents and investments$86,558$107,988
Accounts receivable and contract assets19,31321,108
Inventories, net32,13220,383
Prepaid expenses and other assets5,4864,582
Property, equipment and operating leases32,23435,014
Goodwill and other intangible assets12,81912,827
Deferred tax assets and other assets11,57911,788
TOTAL ASSETS$200,121$213,690
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses$13,250$14,903
Contract liabilities2,2093,406
Lease liabilities15,28416,443
Other liabilities, non-current75159
Total liabilities30,81834,911
Stockholders' equity169,303178,779
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$200,121$213,690
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)Three Months Ended September 30,Nine Months Ended September 30,2022202120222021(In thousands, except per share data)
Revenue$30,462$20,781$83,300$70,328
Cost of revenue9,4176,08925,83522,251
Gross profit21,04514,69257,46548,077
General and administrative7,6085,85321,15518,641
Sales and marketing4,7032,99611,9168,236
Research and development3,8284,41614,17013,342
Total operating expenses16,13913,26547,24140,219
Income from operations4,9061,42710,2247,858
Other income, net25437477158
Income before income taxes5,1601,46410,7018,016
Provision for (benefit from) income taxes371393377(990)
Net income$4,789$1,071$10,324$9,006
Basic$0.09$0.02$0.18$0.16
Diluted$0.08$0.02$0.18$0.15
Number of shares used in per share calculations
Basic55,88157,02656,29157,053
Diluted57,37258,70957,70858,785
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)Nine Months Ended September 30,20222021(In thousands)
Cash flows from operating activities:
Non-cash adjustments11,1368,153
Net cash used in operating assets and liabilities(15,192)(9,865)
Net cash provided by operating activities6,2687,294
Cash flows from investing activities:
Net investment in marketable securities(1,857)(22,653)
Capital expenditures, net(2,265)(4,894)
Net cash used in investing activities(4,122)(27,547)
Cash flows from financing activities:
Net proceeds from issuance of common stock2,2448,939
Repurchase of common stock(26,654)(17,156)
Net cash used in financing activities(24,410)(8,217)
Effect of exchange rate differences38(40)
Net change in cash, cash equivalents and restricted cash$(22,226)$(28,510)
Cash, cash equivalents and restricted cash, end of period$52,235$65,848
SUPPLEMENTAL FINANCIAL INFORMATION
Channel RevenueThree Months Ended September 30,Nine Months Ended September 30,20222021
vs. 2021(In thousands, except percentages)
Megaproject$17,347$13,275
Original equipment manufacturer9,0324,844
Total Revenues$30,462$20,781
Segment ActivityThree Months Ended September 30, 2022Three Months Ended September 30, 2021WaterEmerging TechnologiesCorporateTotalWaterEmerging TechnologiesCorporateTotal(In thousands)
Revenue$30,462$-$-$30,462$20,767$14$-$20,781
Cost of revenue9,417--9,4176,089--6,089
Gross profit21,045--21,04514,67814-14,692
General and administrative1,9118784,8197,6081,4371,3733,0435,853
Sales and marketing3,2429605014,7032,2503274192,996
Research and development1,2162,612-3,8287623,654-4,416
Total operating expenses6,3694,4505,32016,1394,4495,3543,46213,265
Operating income (loss)$14,676$(4,450)$(5,320)$4,906$10,229$(5,340)$(3,462)$1,427Nine Months Ended September 30, 2022Nine Months Ended September 30, 2021WaterEmerging TechnologiesCorporateTotalWaterEmerging TechnologiesCorporateTotal(In thousands)
Revenue$83,191$109$-$83,300$70,275$53$-$70,328
Cost of revenue25,81718-25,83522,251--22,251
Gross profit57,37491-57,46548,02453-48,077
General and administrative4,9093,14013,10621,1554,7773,85410,01018,641
Sales and marketing8,1972,1201,59911,9166,5357359668,236
Research and development3,15911,011-14,1701,85811,484-13,342
Total operating expenses16,26516,27114,70547,24113,17016,07310,97640,219
Operating income (loss)$41,109$(16,180)$(14,705)$10,224$34,854$(16,020)$(10,976)$7,858
Share-based CompensationThree Months Ended September 30,Nine Months Ended September 30,2022202120222021(In thousands)
Stock-based compensation expense charged to:
Cost of revenue$124$86$370$314
General and administrative7436282,7352,235
Sales and marketing4262711,2321,048
Research and development205248767979
Total stock-based compensation expense$1,498$1,233$5,104$4,576
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (1)
This press release includes certain non-GAAP financial information because we plan and manage our business using such information. The following table reconciles the GAAP financial information to the non-GAAP financial information.Quarter-to-DateYear-to-DateQ3'2022Q3'202120222021(In millions, except shares, per share and percentages)
Gross margin (GAAP)69.1%70.6%69.0%68.4%
Share-based compensation0.4%0.5%0.4%0.4%
Adjusted gross margin (non-GAAP)69.5%71.1%69.4%68.8%
Income from operations (GAAP)$4.9$1.4$10.2$7.9
Share-based compensation1.51.25.14.6
Accelerated depreciation--0.9-
Litigation charges0.4-0.4-
Adjusted income from operations (non-GAAP)$6.8$2.7$16.9$12.4
Operating margin (GAAP)16.1%6.9%12.3%11.2%
Share-based compensation4.9%5.9%6.1%6.5%
Accelerated depreciation-%-%1.0%-%
Litigation charges1.4%-%0.5%-%
Adjusted operating margin (non-GAAP)22.4%12.8%20.3%17.7%
Net income (GAAP)$4.8$1.1$10.3$9.0
Share-based compensation (2)1.51.25.14.6
Accelerated depreciation (2)--0.7-
Litigation charges (2)0.4-0.4-
Share-based compensation discrete tax item(0.2)-(1.0)(2.4)
Adjusted net income (non-GAAP)$6.5$2.3$15.8$11.2
Net income per share (GAAP)$0.08$0.02$0.18$0.15
Adjustments to net income per share (3)0.040.020.100.05
Adjusted net income per share (non-GAAP)$0.12$0.04$0.28$0.20
Shares used in calculating adjusted net income per share (in thousands)
Diluted shares (GAAP)57,37258,70957,70858,785
Less: Dilutive equity awards1,4911,6831,4171,732
Diluted shares (non-GAAP)55,88157,02656,29157,053
Effective tax rate (GAAP)7.2%26.8%3.5%(12.4%)
Adjustments to effective tax rate (4)1.5%(11.9%)5.6%23.3%
Adjusted effective tax rate (non-GAAP)8.7%14.9%9.1%11.0%
Net income (GAAP)$4.8$1.1$10.3$9.0
Share-based compensation1.51.25.14.6
Depreciation and amortization0.91.03.83.1
Litigation charges0.4-0.4-
Other income, net(0.3)-(0.5)(0.2)
Provision for (benefit from) income taxes0.40.40.4(1.0)
Adjusted EBITDA (non-GAAP)$7.7$3.7$19.8$15.5
Net cash provided by (used in) operating activities$(1.2)$(4.2)$6.3$7.3
Capital expenditures(0.4)(2.5)(3.0)(4.9)
Free cash flow (non-GAAP)$(1.6)$(6.7)$3.3$2.4
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