Form 8-K Energy Recovery, Inc. For: Mar 08
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 7, 2018
ENERGY RECOVERY, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware | 001-34112 | 01-0616867 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||
1717 Doolittle Drive, San Leandro, California 94577 | ||||
(Address if Principal Executive Offices) (Zip Code) | ||||
510-483-7370 | ||||
(Registrant’s telephone number, including area code) | ||||
Not applicable | ||||
(Former Name or Former Address, if Changed Since Last Report) | ||||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 | Results of Operations and Financial Condition |
On March 7, 2018, Energy Recovery, Inc. issued an earnings press release announcing its financial results for its fourth quarter and fiscal year ended December 31, 2017. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference in its entirety.
The information in this report (including Exhibit 99.1) is being furnished pursuant to Item 2.02 and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act.
Item 9.01 | Financial Statements and Exhibits |
(d) Exhibits
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: March 8, 2018
Energy Recovery, Inc. | ||
By: | /s/ William Yeung | |
William Yeung | ||
General Counsel | ||
Exhibit 99.1
Energy Recovery Reports
Fiscal Year End 2017 Financial Results
SAN LEANDRO, Calif., March 7, 2018 - Energy Recovery Inc. (NASDAQ: ERII) (“Energy Recovery” or the “Company”), the leader in pressure energy technology for industrial fluid flows, today announced its financial results for the fiscal year and fourth quarter ended on December 31, 2017.
Full Year Summary:
• | Total revenue of $63.2 million, an increase of 15% year-over-year |
• | Product gross margin of 67.2% |
• | Total gross margin(1) of 69.8% |
• | Net income of $12.4 million, or $0.22 per diluted share |
Fourth Quarter Summary:
• | Total revenue of $22.4 million, an increase of 25% year-over-year |
• | Product gross margin of 68.5% |
• | Total gross margin(1) of 70.2% |
• | Net income of $11.6 million, or $0.21 per diluted share |
President and CEO Chris Gannon remarked, “2017 was a record year for the company, setting all-time highs in revenue in both our Water and Oil & Gas segments, as well as achieving record full year product and total gross margins(1). We believe that the current expansion phase in the desalination business cycle will continue throughout 2018. Cash-generation from our core business helps fund advanced R&D initiatives - the next platform for sustained growth for the company.”
Mr. Gannon continued, “The long-term strategy of Energy Recovery remains unchanged. Our primary goals are 1) desalination market leadership, 2) commercialization of VorTeqTM, 3) further development of MTeqTM, and 4) continuous innovation of our core PX technology. The dedicated efforts of our sales team continues to drive top line growth, while our operations team continues to maximize manufacturing efficiencies to generate increased profitability. Our engineering team is tirelessly and methodically improving the VorTeq and MTeq systems. Our balance sheet remains strong and the company has never been in a better position to deliver value to our shareholders.”
Mr. Gannon concluded, “Through the observations and lessons learned from testing to-date, we have identified specific enhancements to the VorTeq system and are working toward implementation. Based on the current component delivery, testing and assembly schedules, we expect to make material progress towards commercialization throughout 2018. We will provide further detail during our conference call on March 8th, 2018.”
Revenues
For the fiscal year ended December 31, 2017, the Company generated total revenue of $63.2 million. Total revenue for fiscal year ended December 31, 2017 increased by $8.4 million, or 15%, from $54.7 million in the fiscal year ended December 31, 2016. Of the $8.4 million increase in total revenue, $6.8 million was attributable to the Water segment and $1.7 million was attributable to the Oil & Gas segment.
The Water segment generated total product revenue of $54.3 million for fiscal year ended December 31, 2017, compared to $47.5 million for fiscal year ended December 31, 2016. The $6.8 million, or 14% increase in product revenue was due to higher Mega Project (“MPD”) and Original Equipment Manufacturer (“OEM”) shipments in 2017.
The Oil & Gas segment generated total revenue of $8.9 million for fiscal year ended December 31, 2017, compared to $7.2 million for fiscal year ended December 31, 2016. The $1.7 million, or 24% increase in revenue was due to higher percentage-of-completion (“PoC”) revenue recognition associated with the sale of multiple IsoBoost® systems as compared to 2016. License and development revenue of $5.0 million was recognized in both 2017 and 2016.
For the fourth quarter of 2017, the Company generated total revenue of $22.4 million. Revenue increased by $4.5 million, or 25%, from $17.9 million in the fourth quarter of 2016. Of the $4.5 million increase in revenue, $5.6 million was attributed to an increase in Water segment revenue due to higher MPD and OEM shipments in the fourth quarter of 2017, offset by a $1.1 million decrease in the Oil & Gas segment revenue due to lower PoC revenue recognition associated with the aforementioned sale of multiple IsoBoost systems. License and development revenue of $1.25 million was recognized in each of the fourth quarters of 2017 and 2016, respectively.
Gross Margin
For the fiscal year ended December 31, 2017, product gross margin was 67.2%. Product gross margin increased by 310 basis points from 64.1% in 2016. This increase was largely driven by, favorable price and product mix, manufacturing efficiencies, and higher production levels in the Water segment. Including license and development revenue, total gross margin(1) was 69.8% for fiscal year ended December 31, 2017. Total gross margin(1) increased 240 basis points from 67.4% in 2016.
The Water segment generated product gross margin of 70.5% for the fiscal year ended December 31, 2017. Water segment product gross margin increased by 490 basis points, compared to 65.6% in 2016. This increase was largely driven by favorable price and product mix, manufacturing efficiencies, and higher production levels in 2017.
The Oil & Gas segment generated product gross margin of 21.4% for the fiscal year ended December 31, 2017, compared to 31.1% in 2016. This decrease was attributable to higher project costs and revenue adjustments. Including license and development revenue, the Oil & Gas segment total gross margin(1) for fiscal year ended December 31, 2017 was 65.8%.
For the fourth quarter of 2017, product gross margin was 68.5%. Product gross margin increased by 430 basis points from 64.2% in the fourth quarter of 2016. This increase was largely driven by favorable price and product mix, and manufacturing efficiencies in the Water segment. Including license and development revenue, total gross margin(1) was 70.2% for the fourth quarter of 2017. Total gross margin(1) increased 350 basis points from 66.7% in the fourth quarter of 2016.
Operating Expenses
For the fiscal year ended December 31, 2017, operating expenses were $40.8 million, an increase of $4.3 million from $36.5 million for fiscal year ended December 31, 2016. The increase in operating expenses was primarily due to increases in the Oil & Gas and Water segments.
The Water segment operating expenses for fiscal year ended December 31, 2017 were $8.9 million, an increase of $0.8 million from $8.1 million for fiscal year ended December 31, 2016. This increase was driven by higher sales and marketing expenses associated with increased Water segment sales.
The Oil & Gas segment operating expenses for fiscal year ended December 31, 2017 were $16.0 million, an increase of $3.3 million from $12.7 million for fiscal year ended December 31, 2016. This increase was driven by the Company’s continued investment in research and development activities.
The Corporate segment operating expenses of $15.9 million for fiscal year ended December 31, 2017 were $200 thousand higher than the fiscal year ended December 31, 2016.
For the fourth quarter of 2017, operating expenses were $12.7 million, an increase of $3.4 million from $9.3 million for fourth quarter of 2016. This increase in operating expenses was primarily due to continued investment in research and development activities in the Oil & Gas segment and higher sales and marketing expenses in Water segment.
Bottom Line Summary
To summarize our financial performance, on a full year basis, the Company reported a net income of $12.4 million, or $0.22 per diluted share, compared to a net income of $1.0 million, or $0.02 per diluted share in 2016. This increase was driven by a tax benefit of $8.4 million, which included a net release of tax valuation allowance, a one-time tax expense related to the 2017 Tax Cuts and Jobs Act, and other tax adjustments. Excluding the tax benefit, net income for fiscal year ended December 31, 2017 was $0.07 per diluted share.
On a quarterly basis, the Company reported a net income of $11.6 million, or $0.21 per diluted share for the fourth quarter of 2017, compared to a net income of$3.1 million, or $0.06 per diluted share for the fourth quarter of 2016. As noted above, this increase was driven by a tax benefit of $8.4 million. Excluding the tax benefit, net income for the fourth quarter of 2017 was $0.06 per diluted share.
Cash Flow Highlights
The Company ended the quarter with unrestricted cash of $27.8 million, current and non-current restricted cash of $2.8 million, and short-term investments of $70.0 million, all of which represent a combined total of $100.6 million.
For the fiscal year ended December 31, 2017, the Company’s net cash provided by operating activities was $2.9 million driven by $12.4 million of net income, offset by $5.0 million amortization of the VorTeqTM License Agreement exclusivity fee, $4.1 million increase in working capital, and $0.4 million of non-cash adjustments, the largest of which were $8.9 million of income related to deferred income taxes, $4.1 million of share-based compensation, and $3.7 million of depreciation and amortization. Cash used in investing activities was $37.4 million driven by $31.5 million of net purchases of marketable securities and $7.4 million of capital expenditures, partially offset by a decrease in restricted cash of $1.5 million. Cash provided by financing activities was $0.9 million, driven by $5.5 million collected from the issuance of common stock related to option exercises, partially offset by $4.3 million in repurchases of common stock and $0.3 million in vested restricted shares withheld for tax withholdings
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 current expansion phase in the desalination business cycle will continue through 2018, and the Company’s belief that it will make material progress towards commercialization of the VorTeq system throughout 2018. 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 VorTeq license 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. Securities and Exchange Commission (“SEC”) for the year ended December 31, 2017 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 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 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.
(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.” |
Conference Call to Discuss Fourth Quarter and Fiscal Year 2017 Financial Results
LIVE CONFERENCE CALL: Thursday, March 8, 2018, 7:00 AM PST / 10:00 AM EST Listen-only, US / Canada Toll-free: 877-709-8150 Listen-only, Local / International Toll: (+1) 201-689-8354 Access code: 13676918 |
CONFERENCE CALL REPLAY: Expiration: Sunday, April 8, 2018 US / Canada Toll-free: 877-660-6853 Local / International Toll: (+1) 201-612-7415 Access code: 13676918 |
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 Inc.
Energy Recovery, Inc. (ERII) is an energy solutions provider to industrial fluid flow markets worldwide. Energy Recovery solutions recycle and convert wasted pressure energy into a usable asset and preserve pumps that are subject to hostile processing environments. With award-winning technology, Energy Recovery simplifies complex industrial systems while improving productivity, profitability, and efficiency within the oil & gas, chemical processing, and water industries. Energy Recovery products save clients more than $1.8 billion (USD) annually. Headquartered in the Bay Area, Energy Recovery has offices in Houston, Ireland, Shanghai, and Dubai. For more information about the Company, please visit www.energyrecovery.com.
Contact
Brian Uhlmer
(713) 858-2284
ENERGY RECOVERY, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data and par value)
(Unaudited)
December 31, | |||||||
2017 | 2016 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 27,780 | $ | 61,364 | |||
Restricted cash | 2,664 | 2,297 | |||||
Short-term investments | 70,020 | 39,073 | |||||
Accounts receivable, net of allowance for doubtful accounts of $103 and $130 at December 31, 2017 and 2016, respectively | 12,465 | 11,759 | |||||
Unbilled receivables, current | 1,413 | 190 | |||||
Cost and estimated earnings in excess of billings | 4,998 | 1,825 | |||||
Inventories | 5,514 | 4,550 | |||||
Prepaid expenses and other current assets | 1,342 | 1,311 | |||||
Total current assets | 126,196 | 122,369 | |||||
Restricted cash, non-current | 182 | 2,087 | |||||
Deferred tax assets, non-current | 7,902 | 1,270 | |||||
Property and equipment, net | 13,393 | 8,643 | |||||
Goodwill | 12,790 | 12,790 | |||||
Other intangible assets, net | 1,269 | 1,900 | |||||
Other assets, non-current | 12 | 4 | |||||
Total assets | $ | 161,744 | $ | 149,063 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 4,091 | $ | 1,505 | |||
Accrued expenses and other current liabilities | 9,322 | 9,019 | |||||
Income taxes payable | 432 | 16 | |||||
Accrued warranty reserve | 366 | 406 | |||||
Deferred revenue, current | 5,611 | 6,201 | |||||
Current portion of long-term debt | 11 | 11 | |||||
Total current liabilities | 19,833 | 17,158 | |||||
Long-term debt, less current portion | 16 | 27 | |||||
Deferred tax liabilities, non-current | — | 2,233 | |||||
Deferred revenue, non-current | 59,006 | 63,958 | |||||
Other non-current liabilities | 358 | 554 | |||||
Total liabilities | 79,213 | 83,930 | |||||
Commitments and Contingencies (Note 8) | |||||||
Stockholders’ equity: | |||||||
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding at December 31, 2017 and 2016 | — | — | |||||
Common stock, $0.001 par value; 200,000,000 shares authorized; 58,168,433 shares issued and 53,905,600 shares outstanding at December 31, 2017 and 56,884,207 shares issued and 53,162,551 shares outstanding at December 31, 2016 | 58 | 57 | |||||
Additional paid-in capital | 149,006 | 139,676 | |||||
Accumulated comprehensive loss | (125 | ) | (118 | ) | |||
Treasury stock, at cost, 4,262,833 shares repurchased at December 31, 2017 and 3,721,656 shares repurchased at December 31, 2016 | (20,486 | ) | (16,210 | ) | |||
Accumulated deficit | (45,922 | ) | (58,272 | ) | |||
Total stockholders’ equity | 82,531 | 65,133 | |||||
Total liabilities and stockholders’ equity | $ | 161,744 | $ | 149,063 | |||
ENERGY RECOVERY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Years Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Product revenue | $ | 58,156 | $ | 49,715 | $ | 43,671 | |||||
Product cost of revenue | 19,061 | 17,849 | 19,111 | ||||||||
Product gross profit | 39,095 | 31,866 | 24,560 | ||||||||
License and development revenue | 5,000 | 5,000 | 1,042 | ||||||||
Operating expenses: | |||||||||||
General and administrative | 17,354 | 16,626 | 19,773 | ||||||||
Sales and marketing | 9,391 | 9,116 | 9,326 | ||||||||
Research and development | 13,443 | 10,136 | 7,659 | ||||||||
Amortization of intangible assets | 631 | 631 | 635 | ||||||||
Total operating expenses | 40,819 | 36,509 | 37,393 | ||||||||
Income (loss) from operations | 3,276 | 357 | (11,791 | ) | |||||||
Other income (expense): | |||||||||||
Interest income | 870 | 309 | 53 | ||||||||
Interest expense | (2 | ) | (3 | ) | (42 | ) | |||||
Other non-operating expense, net | (188 | ) | (19 | ) | (192 | ) | |||||
Total other income (expense), net | 680 | 287 | (181 | ) | |||||||
Income (loss) before income taxes | 3,956 | 644 | (11,972 | ) | |||||||
Benefit from income taxes | (8,394 | ) | (390 | ) | (334 | ) | |||||
Net income (loss) | $ | 12,350 | $ | 1,034 | $ | (11,638 | ) | ||||
Income (loss) per share: | |||||||||||
Basic | $ | 0.23 | $ | 0.02 | $ | (0.22 | ) | ||||
Diluted | $ | 0.22 | $ | 0.02 | $ | (0.22 | ) | ||||
Number of shares used in per share calculations: | |||||||||||
Basic | 53,701 | 52,341 | 52,151 | ||||||||
Diluted | 55,612 | 55,451 | 52,151 | ||||||||
ENERGY RECOVERY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Years Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Cash Flows From Operating Activities: | |||||||||||
Net income (loss) | $ | 12,350 | $ | 1,034 | $ | (11,638 | ) | ||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||
Stock-based compensation | 4,087 | 3,263 | 4,059 | ||||||||
Depreciation and amortization | 3,666 | 3,680 | 3,838 | ||||||||
Amortization of premiums on investments | 460 | 174 | 162 | ||||||||
Provision for warranty claims | 246 | 208 | 135 | ||||||||
Reversal of accruals related to expired warranties | (200 | ) | (236 | ) | (395 | ) | |||||
Unrealized loss on foreign currency translation | 144 | 13 | 1 | ||||||||
Provision for doubtful accounts | 55 | 76 | 112 | ||||||||
Adjustments for excess or obsolete inventory | 201 | (361 | ) | (250 | ) | ||||||
Deferred income taxes | (8,865 | ) | (459 | ) | (326 | ) | |||||
Other non-cash adjustments | (196 | ) | (131 | ) | 23 | ||||||
Changes in operating assets and liabilities: | |||||||||||
Accounts receivable | (761 | ) | (244 | ) | (743 | ) | |||||
Unbilled receivables | (1,223 | ) | 1,695 | (128 | ) | ||||||
Costs and estimated earnings in excess of billings | (3,173 | ) | (1,825 | ) | — | ||||||
Inventories | (1,250 | ) | 2,287 | 1,951 | |||||||
Prepaid and other assets | (39 | ) | (402 | ) | 316 | ||||||
Accounts payable | 2,118 | (360 | ) | 48 | |||||||
Accrued expenses and other liabilities | 364 | 1,259 | (708 | ) | |||||||
Income taxes payable | 416 | 14 | (3 | ) | |||||||
Litigation settlement | — | — | (1,700 | ) | |||||||
Deferred revenue, product | (505 | ) | 280 | 343 | |||||||
Deferred revenue, license and development | (5,000 | ) | (5,000 | ) | 73,958 | ||||||
Net cash provided by operating activities | 2,895 | 4,965 | 69,055 | ||||||||
Cash Flows From Investing Activities: | |||||||||||
Restricted cash | 1,538 | (577 | ) | 1,665 | |||||||
Maturities of marketable securities | 49,106 | 7,535 | 12,925 | ||||||||
Purchases of marketable securities | (80,641 | ) | (46,552 | ) | — | ||||||
Capital expenditures | (7,376 | ) | (1,112 | ) | (572 | ) | |||||
Net cash (used in) provided by investing activities | (37,373 | ) | (40,706 | ) | 14,018 | ||||||
Cash Flows From Financing Activities: | |||||||||||
Net proceeds from issuance of common stock | 5,508 | 6,600 | 1,326 | ||||||||
Tax payment for employee shares withheld | (270 | ) | — | — | |||||||
Proceeds from long-term debt | — | — | 55 | ||||||||
Repayment of long-term debt | (11 | ) | (10 | ) | (7 | ) | |||||
Repurchase of common stock | (4,276 | ) | (9,375 | ) | — | ||||||
Net cash provided by (used in) financing activities | 951 | (2,785 | ) | 1,374 | |||||||
Effect of exchange rate differences on cash and cash equivalents | (57 | ) | (41 | ) | (17 | ) | |||||
Net change in cash and cash equivalents | (33,584 | ) | (38,567 | ) | 84,430 | ||||||
Cash and cash equivalents, beginning of year | 61,364 | 99,931 | 15,501 | ||||||||
Cash and cash equivalents, end of year | $ | 27,780 | $ | 61,364 | $ | 99,931 | |||||
ENERGY RECOVERY, INC.
FINANCIAL INFORMATION BY SEGMENT
(In thousands)
(Unaudited)
Three Months Ended December 31, 2017 | Three Months Ended December 31, 2016 | ||||||||||||||||||||||
Water | Oil &Gas | Total | Water | Oil &Gas | Total | ||||||||||||||||||
Product revenue | $ | 20,594 | $ | 545 | $ | 21,139 | $ | 14,953 | $ | 1,714 | $ | 16,667 | |||||||||||
Product cost of revenue | 6,029 | 638 | 6,667 | 4,797 | 1,174 | 5,971 | |||||||||||||||||
Product gross profit | 14,565 | (93 | ) | 14,472 | 10,156 | 540 | 10,696 | ||||||||||||||||
License and development revenue | — | 1,250 | 1,250 | — | 1,250 | 1,250 | |||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
General and administrative | 436 | 480 | 916 | 253 | 350 | 603 | |||||||||||||||||
Sales and marketing | 1,748 | 593 | 2,341 | 1,413 | 852 | 2,265 | |||||||||||||||||
Research and development | 254 | 4,483 | 4,737 | 377 | 2,311 | 2,688 | |||||||||||||||||
Amortization of intangibles | 158 | — | 158 | 158 | — | 158 | |||||||||||||||||
Operating expenses | 2,596 | 5,556 | 8,152 | 2,201 | 3,513 | 5,714 | |||||||||||||||||
Operating income (loss) | $ | 11,969 | $ | (4,399 | ) | 7,570 | $ | 7,955 | $ | (1,723 | ) | 6,232 | |||||||||||
Less: Corporate operating expenses | 4,513 | 3,552 | |||||||||||||||||||||
Consolidated operating income | 3,057 | 2,680 | |||||||||||||||||||||
Non-operating income | 220 | 152 | |||||||||||||||||||||
Income before income taxes | $ | 3,277 | $ | 2,832 | |||||||||||||||||||
Year Ended December 31, 2017 | |||||||||||
Water | Oil &Gas | Total | |||||||||
Product revenue | $ | 54,301 | $ | 3,855 | $ | 58,156 | |||||
Product cost of revenue | 16,032 | 3,029 | 19,061 | ||||||||
Product gross profit | 38,269 | 826 | 39,095 | ||||||||
License and development revenue | — | 5,000 | 5,000 | ||||||||
Operating expenses: | |||||||||||
General and administrative | 1,401 | 1,565 | 2,966 | ||||||||
Sales and marketing | 5,787 | 2,228 | 8,015 | ||||||||
Research and development | 1,064 | 12,217 | 13,281 | ||||||||
Amortization of intangibles | 631 | — | 631 | ||||||||
Operating expenses | 8,883 | 16,010 | 24,893 | ||||||||
Operating income (loss) | $ | 29,386 | $ | (10,184 | ) | 19,202 | |||||
Less: Corporate operating expenses | 15,926 | ||||||||||
Consolidated operating income | 3,276 | ||||||||||
Non-operating income | 680 | ||||||||||
Income before income taxes | $ | 3,956 | |||||||||
Year Ended December 31, 2016 | |||||||||||
Water | Oil &Gas | Total | |||||||||
Product revenue | $ | 47,545 | $ | 2,170 | $ | 49,715 | |||||
Product cost of revenue | 16,353 | 1,496 | 17,849 | ||||||||
Product gross profit | 31,192 | 674 | 31,866 | ||||||||
License and development revenue | — | 5,000 | 5,000 | ||||||||
Operating expenses: | |||||||||||
General and administrative | 1,081 | 1,000 | 2,081 | ||||||||
Sales and marketing | 5,076 | 2,985 | 8,061 | ||||||||
Research and development | 1,331 | 8,705 | 10,036 | ||||||||
Amortization of intangibles | 631 | — | 631 | ||||||||
Operating expenses | 8,119 | 12,690 | 20,809 | ||||||||
Operating income (loss) | $ | 23,073 | $ | (7,016 | ) | 16,057 | |||||
Less: Corporate operating expenses | 15,700 | ||||||||||
Consolidated operating income | 357 | ||||||||||
Non-operating income | 287 | ||||||||||
Income before income taxes | $ | 644 | |||||||||
Year Ended December 31, 2015 | |||||||||||
Water | Oil &Gas | Total | |||||||||
Product revenue | $ | 43,530 | $ | 141 | $ | 43,671 | |||||
Product cost of revenue | 19,045 | 66 | 19,111 | ||||||||
Product gross profit | 24,485 | 75 | 24,560 | ||||||||
License and development revenue | — | 1,042 | 1,042 | ||||||||
Operating expenses: | |||||||||||
General and administrative | 936 | 1,797 | 2,733 | ||||||||
Sales and marketing | 4,918 | 4,070 | 8,988 | ||||||||
Research and development | 1,126 | 6,552 | 7,678 | ||||||||
Amortization of intangibles | 635 | — | 635 | ||||||||
Operating expenses | 7,615 | 12,419 | 20,034 | ||||||||
Operating income (loss) | $ | 16,870 | $ | (11,302 | ) | 5,568 | |||||
Less: Corporate operating expenses | 17,359 | ||||||||||
Consolidated operating loss | (11,791 | ) | |||||||||
Non-operating expense | (181 | ) | |||||||||
Loss before income taxes | $ | (11,972 | ) | ||||||||
ENERGY RECOVERY, INC.
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 VorTeq exclusivity fee. Our non-GAAP Adjusted Net Income or Loss is determined by adding back non-recurring operating expenses.
Three Months Ended December 31, | Years Ended December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Product revenue | $ | 21,139 | $ | 16,667 | $ | 58,156 | $ | 49,715 | |||||||
License and development revenue | 1,250 | 1,250 | 5,000 | 5,000 | |||||||||||
Total revenue | $ | 22,389 | $ | 17,917 | $ | 63,156 | $ | 54,715 | |||||||
Product gross profit | $ | 14,472 | $ | 10,696 | $ | 39,095 | $ | 31,866 | |||||||
License and development revenue | 1,250 | 1,250 | 5,000 | 5,000 | |||||||||||
Total gross profit (non-GAAP) | $ | 15,722 | $ | 11,946 | $ | 44,095 | $ | 36,866 | |||||||
Product gross margin | 68.5 | % | 64.2 | % | 67.2 | % | 64.1 | % | |||||||
Total gross margin (non-GAAP) | 70.2 | % | 66.7 | % | 69.8 | % | 67.4 | % | |||||||
Net income (loss) | $ | 11,625 | $ | 3,123 | $ | 12,350 | $ | 1,034 | |||||||
Reversal of non-recurring expense (benefit) (non-GAAP) | (8,348 | ) | — | (8,394 | ) | 1,008 | |||||||||
Adjusted net income (loss) (non-GAAP) | $ | 3,277 | $ | 3,123 | $ | 3,956 | $ | 2,042 | |||||||
Income (loss) per share: | |||||||||||||||
Diluted | $ | 0.21 | $ | 0.06 | $ | 0.22 | $ | 0.02 | |||||||
Diluted (non-GAAP) | $ | 0.06 | $ | 0.06 | $ | 0.07 | $ | 0.04 | |||||||
Number of diluted shares used in per share calculations | 55,715 | 55,947 | 55,612 | 55,451 | |||||||||||