FIRST QUARTER HIGHLIGHTS:
- Total revenue increased by 50% to $5.9 million in the current period, from $3.9 million in the first quarter of 2014
- Gross profit margin was 57% in the current period, compared to 58% in the first quarter of 2014, as a result of lower production levels offset by a favorable shift in mix
- Operating expenses increased by $5.4 million, or 91%, from $6.0 million in the first quarter of 2014 to $11.4 million in the current period primarily due to non-recurring legal and CEO transition expenses and to a lesser extent, higher research & development expenses
- Net loss of $(8.3) million, or $(0.16) per share, in the current period, compared to net loss of $(3.7) million, or $(0.07) per share, in the first quarter of 2014, as a result of higher operating expenses and lower production levels, offset by higher volume
SAN LEANDRO, Calif., May 7, 2015 (GLOBE NEWSWIRE) -- Energy Recovery Inc. (Nasdaq:ERII), the leader in pressure energy technology for industrial fluid flows, today announced its unaudited financial results for the first quarter ended March 31, 2015.
Joel Gay, President and Chief Executive Officer, remarked, "Our performance in the first quarter was encouraging from a revenue and gross profit standpoint. In the fourth quarter of 2014, we observed a slight improvement in the overall desalination pipeline and this trend has continued into the current year. This, coupled with the quarterly improvement in revenue, supports a cautious degree of optimism for desalination opportunities in 2015."
Mr. Gay further commented, "We continue to execute on a reloaded strategy for Energy Recovery, including the rationalization of our markets and geographic focus, the overhauling of our go-to-market strategy and the implementation of austerity measures. While we are still in early phases of execution, we expect that our efforts will position the Company to produce quantifiably meaningful results in the coming quarters. Although our cost structure benefited from austerity, a number of non-recurring expenses offset the impact of otherwise healthy revenue and gross margins during the period."
Mr. Gay concluded, "We continue to make progress in an ongoing effort to commercialize our products in larger addressable markets such as oil & gas and chemical processing. The recent installation of our first energy recovery device into a Saudi Aramco gas processing plant, and the initiation of field trials for the VorTeq™ fracing solution with our partner Liberty Oilfield Services are examples to this end. I am excited to lead Energy Recovery ahead and look forward to unlocking the potential of our solutions and delivering results to our shareholders."
Revenues
The Company generated net revenue of $5.9 million in the first quarter of 2015, reflecting an increase of 50% when compared to the same period of the prior year. The increase in revenue was primarily due to increased OEM shipments of $1.9 million, slightly higher aftermarket shipments, and slightly higher oil & gas revenue attributable to the commissioning of the IsoGen™ turbo-generator for Saudi Aramco, the Company's first commercial installation of an energy recovery device in the Oil & Gas industry. Neither the first quarter of 2015 nor the first quarter of 2014 included any mega-project revenue.
Gross Margins
Lower production was the primary driver to a gross profit margin decline from 58% in the prior-year quarter to 57% in the current period. Offsetting the negative impact of lower production on gross margins was a favorable shift in mix and manufacturing efficiencies. The Company reduced the average manufacturing headcount from 45 in the first quarter of 2014 to 38 in the current period.
The Company's gross profit margin decreased sequentially from 61% in the fourth quarter of 2014 mainly due to an unfavorable shift in mix attributed to a lack of mega-project shipments.
Operating Expenses
Operating expenses for the quarter ended March 31, 2015 increased from $6.0 million in the first quarter of 2014 to $11.4 million in the current period. Contributing factors included non-recurring legal and CEO transition expenses as well as continued investment in research & development related to growth initiatives.
To summarize financial performance in first quarter of 2015, the Company reported a net loss of $(8.3) million, or $(0.16) per share; largely due to non-recurring legal and CEO transition expenses as well as continued research & development investment in growth initiatives. Comparatively, the Company reported a net loss of $(3.7) million, or $(0.07) per share, in the first quarter of 2014.
Cash Flow Highlights
For the first quarter ended March 31, 2015, the Company generated net cash flow of $4.9 million. The net loss of $(8.3) million included non-cash expenses of $2.8 million, the largest of which were: share-based compensation of $1.1 million and depreciation and amortization of $1.0 million.
Cash used by operating activities was $(1.0) million; favorably impacting cash from operating activities by $5.5 million was the monetization of receivables, chiefly offset by a $(1.1) million increase in inventory due to project delays and a $(1.2) million increase in accrued expenses and liabilities. Cash generated from investing activities was $5.6 million; favorably impacting cash from investing activities by $4.7 million and $1.1 million were maturities of marketable securities and the release of restricted cash, respectively; offset by $0.2 million of capital expenditures. Cash generated from financing activities was $0.3 million attributed to the issuance of common stock related to option exercises.
Excluding current and non-current restricted cash of $4.4 million, the Company reported unrestricted cash of $20.4 million, short-term investments of $8.3 million, and long-term investments of $0.3 million, all of which represent a combined total of $29.0 million.
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 such as "continue," "excited," "optimism", 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 filed with the U.S. Securities and Exchange Commission ("SEC") on March 6, 2015 as well as other reports filed by the Company with the SEC from time to time.
CONFERENCE CALL TO DISCUSS FIRST QUARTER RESULTS FOR 2015
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Live Conference Call Webcast: Thursday, May 7, 2015, 5:30 pm EDT / 2:30pm PDT Listen-only, Toll-free: 888-417-8465 Listen-only, Local: 719-325-2323 Conference ID: 1256107 |
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Conference Call Replay: Toll-free: 888-203-1112 Local: 719-457-0820 Access code: 12356107 Expiration: May 21, 2015 |
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 ENERGY RECOVERY, INC
Energy Recovery (Nasdaq:ERII) develops award-winning solutions to improve productivity, profitability, and energy efficiency within the oil & gas, chemical, and water industries. Our products simplify complex systems and protect vulnerable equipment. By recycling fluid pressure that would otherwise be lost in critical processes, we save clients more than $1.4 billion (USD) annually. Headquartered in the Bay Area, Energy Recovery has offices in Shanghai and Dubai. For more information about the Company, please visit our website at www.energyrecovery.com.
| Unaudited Consolidated Financial Results | ||
| ENERGY RECOVERY, INC. | ||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||
| (in thousands, except per share data) | ||
| (unaudited) | ||
|
|
Three Months Ended March 31, |
|
| 2015 | 2014 | |
| Net revenue | $ 5,864 | $ 3,897 |
| Cost of revenue | 2,531 | 1,652 |
| Gross profit | 3,333 | 2,245 |
| Operating expenses: | ||
| General and administrative | 6,278 | 2,039 |
| Sales and marketing | 2,433 | 2,495 |
| Research and development | 2,533 | 1,234 |
| Amortization of intangible assets | 159 | 215 |
| Total operating expenses | 11,403 | 5,983 |
| Loss from operations | (8,070) | (3,738) |
| Interest expense | (40) | — |
| Other non-operating (expense) income | (102) | 121 |
| Loss before income taxes | (8,212) | (3,617) |
| Provision for income taxes | 71 | 66 |
| Net loss | $ (8,283) | $ (3,683) |
| Basic and diluted net loss per share | $ (0.16) | $ (0.07) |
| Shares used in basic and diluted per share calculation | 51,948 | 51,446 |
| ENERGY RECOVERY, INC. | ||
| CONSOLIDATED BALANCE SHEETS | ||
| (unaudited) | ||
| March 31, 2015 | December 31, 2014 | |
| ASSETS | ||
| Current assets: | ||
| Cash and cash equivalents | $ 20,391 | $ 15,501 |
| Restricted cash | 2,263 | 2,623 |
| Short-term investments | 8,323 | 13,072 |
| Accounts receivable, net of allowance for doubtful accounts of $110 and $155 at March 31, 2015 and December 31, 2014, respectively | 5,333 | 10,941 |
| Unbilled receivables, current | 1,023 | 1,343 |
| Inventories | 9,334 | 8,204 |
| Deferred tax assets, net | 240 | 240 |
| Prepaid expenses and other current assets | 1,163 | 1,317 |
| Total current assets | 48,070 | 53,241 |
| Restricted cash, non-current | 2,126 | 2,850 |
| Unbilled receivables, non-current | 420 | 414 |
| Long-term investments | 265 | 267 |
| Property and equipment, net of accumulated depreciation of $15,961 and $15,143 at March 31, 2015 and December 31, 2014, respectively. | 12,574 | 13,211 |
| Goodwill | 12,790 | 12,790 |
| Other intangible assets, net | 3,007 | 3,166 |
| Other assets, non-current | 2 | 2 |
| Total assets | $ 79,254 | $ 85,941 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| Current liabilities: | ||
| Accounts payable | $ 2,032 | $ 1,817 |
| Accrued expenses and other current liabilities | 7,242 | 8,427 |
| Income taxes payable | 6 | 4 |
| Accrued warranty reserve | 756 | 755 |
| Deferred revenue | 1,134 | 519 |
| Current portion of long-term debt | 11 | — |
| Total current liabilities | 11,181 | 11,522 |
| Long-term debt, net of current portion | 44 | — |
| Deferred tax liabilities, non-current, net | 2,054 | 1,989 |
| Deferred revenue, non-current | 18 | 59 |
| Other non-current liabilities | 2,881 | 2,453 |
| Total liabilities | 16,178 | 16,023 |
| Commitments and Contingencies | ||
| Stockholders' equity: | ||
| Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding | — | — |
| Common stock, $0.001 par value; 200,000,000 shares authorized; 54,494,813 shares issued and 52,015,357 shares outstanding at March 31, 2015, and 54,398,421 shares issued and 51,918,965 shares outstanding at December 31, 2014 | 54 | 54 |
| Additional paid-in capital | 125,847 | 124,440 |
| Accumulated other comprehensive loss | (39) | (73) |
| Treasury stock, at cost 2,479,456 shares repurchased at both March 31, 2015 and December 31, 2014 | (6,835) | (6,835) |
| Accumulated deficit | (55,951) | (47,668) |
| Total stockholders' equity | 63,076 | 69,918 |
| Total liabilities and stockholders' equity | $ 79,254 | $ 85,941 |
| ENERGY RECOVERY, INC. | ||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (unaudited) | ||
| Three Months Ended | ||
| March 31, | ||
| 2015 | 2014 | |
| Cash Flows From Operating Activities | ||
| Net loss | $ (8,283) | $ (3,683) |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||
| Share-based compensation | 1,140 | 581 |
| Depreciation and amortization | 979 | 983 |
| Unrealized loss on foreign currency transactions | 124 | 10 |
| Amortization of premiums/discounts on investments | 79 | 125 |
| Deferred income taxes | 65 | 56 |
| Provision for warranty claims | 21 | 3 |
| Provision for doubtful accounts | 2 | 72 |
| Valuation adjustments for excess or obsolete inventory | (10) | 40 |
| Other non-cash adjustments | 428 | (125) |
| Changes in operating assets and liabilities: | ||
| Accounts receivable | 5,524 | (2,052) |
| Deferred revenue | 574 | 15 |
| Unbilled receivables | 314 | 4,696 |
| Accounts payable | 215 | 448 |
| Prepaid and other assets | 154 | (1,112) |
| Income taxes payable | 2 | 7 |
| Accrued expenses and other liabilities | (1,192) | (2,638) |
| Inventories | (1,120) | (3,361) |
| Net cash used in operating activities | (984) | (5,935) |
| Cash Flows From Investing Activities | ||
| Maturities of marketable securities | 4,675 | 2,600 |
| Restricted cash | 1,084 | 412 |
| Capital expenditures | (179) | (38) |
| Net cash provided by investing activities | 5,580 | 2,974 |
| Cash Flows From Financing Activities | ||
| Net proceeds from issuance of common stock | 250 | 604 |
| Proceeds from borrowings | 55 | — |
| Repurchase of common stock for treasury | — | (633) |
| Net cash provided by (used in) financing activities | 305 | (29) |
| Effect of exchange rate differences on cash and cash equivalents | (11) | 56 |
| Net change in cash and cash equivalents | 4,890 | (2,934) |
| Cash and cash equivalents, beginning of period | 15,501 | 14,371 |
| Cash and cash equivalents, end of period | $ 20,391 | $ 11,437 |