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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Energy Recovery Inc | NASDAQ:ERII | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.06 | 0.43% | 13.96 | 12.89 | 16.00 | 14.70 | 13.91 | 14.24 | 592,341 | 23:31:28 |
Energy Recovery, Inc. (Nasdaq:ERII) (“Energy Recovery” or the “Company”) today announced its financial results for the fourth quarter and year ended December 31, 2023.
Fiscal Year 2023 Highlights
“We achieved record annual and fourth quarter revenue in 2023, which represents our ninth consecutive year of revenue growth despite a shift of $8 million revenue associated with a single project that was pushed from the fourth quarter into 2024,” commented David Moon, President and CEO.
“Our core desalination business is healthy, our wastewater business continues to grow rapidly, and we are making progress in our CO2 refrigeration business. This year, we expect to see our newest and most efficient product, the PX Q400, achieve roughly 50% of sales in our megaproject channel. Wastewater could reach up to 10% of our Water revenue in just three years and we are pushing hard to get our PX G1300 in multiple supermarket chains in the U.S. and Europe.”
Mr. Moon added, “Our focus in 2024, and beyond, is rebuilding shareholder value and trust within the market. We remain committed to our growth strategy of diversification into new markets, which is key to Energy Recovery’s future. In 2024, we will continue to defend our leadership position in our core desalination business, and invest in new market opportunities in CO2 and wastewater, while managing both expenses and cash with discipline and a focus on investing in the highest and best use of shareholder capital. I am excited by the long-term growth prospects and believe we are well-positioned to continue to grow.”
Financial Highlights
Quarter-to-Date
Year-to-Date
Q4’2023
Q4’2022
vs. Q4’2022
2023
2022
2023 vs. 2022
(In millions, except net income per share, percentages and basis points)
Revenue
$57.2
$42.3
up 35%
$128.3
$125.6
up 2%
Gross margin
69.1%
70.7%
down 160 bps
67.8%
69.6%
down 180 bps
Operating margin
36.0%
34.5%
up 150 bps
14.8%
19.8%
down 500 bps
Net income
$19.8
$13.7
up 44%
$21.5
$24.0
down 11%
Net income per share
$0.34
$0.24
up 42%
$0.37
$0.42
down 12%
Effective tax rate
5.3%
7.8%
Cash provided by operations
$13.8
$6.4
$26.1
$12.6
Non-GAAP Financial Highlights (1)
Quarter-to-Date
Year-to-Date
Q4’2023
Q4’2022
vs. Q4’2022
2023
2022
2023 vs. 2022
(In millions, except adjusted net income per share, percentages and basis points)
Adjusted operating margin
39.9%
37.9%
up 200 bps
21.1%
26.2%
down 510 bps
Adjusted net income
$22.0
$14.7
up 50%
$28.9
$30.5
down 5%
Adjusted net income per share
$0.39
$0.26
up 50%
$0.51
$0.54
down 6%
Adjusted effective tax rate
6.1%
10.6%
Adjusted EBITDA
$23.9
$17.0
$31.2
$36.8
Free cash flow
$12.4
$5.1
$23.5
$8.4
___________
(1)
Refer to the sections “Use of Non-GAAP Financial Measures” and “Reconciliation of Non-GAAP Financial Measures” for definition of adjustment to GAAP presentation.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 expectations regarding the shipment of projects; our belief that our core desalination business remains strong; our expectations regarding the growth of our wastewater business; our belief we are making progress in our CO2 business; our belief that we can defend our position in seawater desalination; our ability to build shareholder value; and our belief that the Company is well positioned to continue to grow. 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 risks relating to the future demand for our products, risks relating to performance by our customers and third-party partners, risks relating to the timing of revenue, and 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, 2022, as supplemented by the risks discussed under “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, 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 operating margin, adjusted net income, adjusted net income per share, adjusted effective tax rate, 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 Fourth Quarter and Fiscal 2023 Financial Results
Conference Call to Discuss Fourth Quarter and Fiscal 2023 Financial Results
LIVE CONFERENCE CALL: Wednesday, February 21, 2024, 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
CONFERENCE CALL REPLAY: Expiration: March 22, 2024 US / Canada Toll-Free: +1 (877) 660-6853 Local / International Toll: +1 (201) 612-7415 Access code: 13743738
Investors may access the live call and the replay (approximately three hours after the live call concludes) over the internet on the “Events” page at: https://ir.energyrecovery.com/news-events/ir-calendar.
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 (Nasdaq: ERII) is a trusted global leader in energy efficiency technology. Building on our pressure exchanger technology platform, we design and manufacture reliable, high-performance solutions that generate cost savings and increase energy efficiency across several industries. With a strong foundation in the desalination industry, Energy Recovery has delivered transformative solutions that optimize operations and deliver positive environmental impact to our customers worldwide for more than 30 years. 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/.
ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
2023
2022
(In thousands)
ASSETS
Cash, cash equivalents and investments
$
122,375
$
92,891
Accounts receivable and contract assets
47,529
35,782
Inventories, net
26,149
28,366
Prepaid expenses and other assets
3,251
3,886
Property, equipment and operating leases
30,168
32,695
Goodwill
12,790
12,790
Deferred tax assets and other assets
10,712
10,629
TOTAL ASSETS
$
252,974
$
217,039
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Accounts payable and accrued expenses
$
18,583
$
15,507
Contract liabilities and other liabilities, non-current
1,304
1,316
Lease liabilities
13,279
14,878
Total liabilities
33,166
31,701
Stockholders’ equity
219,808
185,338
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
252,974
$
217,039
ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended December 31,
Years Ended December 31,
2023
2022
2023
2022
(In thousands, except per share data)
Revenue
$
57,189
$
42,291
$
128,349
$
125,591
Cost of revenue
17,690
12,400
41,270
38,235
Gross profit
39,499
29,891
87,079
87,356
Operating expenses
General and administrative
7,160
7,186
28,864
28,341
Sales and marketing
6,767
4,361
22,164
16,277
Research and development
4,958
3,739
17,001
17,909
Total operating expenses
18,885
15,286
68,029
62,527
Income from operations
20,614
14,605
19,050
24,829
Other income, net
1,298
765
3,655
1,242
Income before income taxes
21,912
15,370
22,705
26,071
Provision for income taxes
2,107
1,645
1,201
2,022
Net income
$
19,805
$
13,725
$
21,504
$
24,049
Net income per share
Basic
$
0.35
$
0.25
$
0.38
$
0.43
Diluted
$
0.34
$
0.24
$
0.37
$
0.42
Number of shares used in per share calculations
Basic
56,735
56,014
56,444
56,221
Diluted
57,671
57,433
57,740
57,641
ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Years Ended December 31,
2023
2022
(In thousands)
Cash flows from operating activities:
Net income
$
21,504
$
24,049
Non-cash adjustments
13,889
14,447
Net cash used in operating assets and liabilities
(9,339
)
(25,865
)
Net cash provided by operating activities
26,054
12,631
Cash flows from investing activities:
Net investment in marketable securities
(16,634
)
(3,816
)
Capital expenditures
(2,567
)
(4,232
)
Proceeds from sales of fixed assets
87
1,102
Net cash used in investing activities
(19,114
)
(6,946
)
Cash flows from financing activities:
Net proceeds from issuance of common stock
4,794
2,986
Repurchase of common stock
—
(26,654
)
Net cash provided by (used in) financing activities
4,794
(23,668
)
Effect of exchange rate differences
33
(20
)
Net change in cash, cash equivalents and restricted cash
$
11,767
$
(18,003
)
Cash, cash equivalents and restricted cash, end of year
$
68,225
$
56,458
ENERGY RECOVERY, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(Unaudited)
Channel Revenue
Three Months Ended December 31,
Years Ended December 31,
2023
2022
vs. 2022
2023
2022
vs. 2022
(In thousands, except percentages)
Megaproject
$
41,382
$
30,631
up 35%
$
83,665
$
81,888
up 2%
Original equipment manufacturer
9,150
7,466
up 23%
25,995
28,858
down 10%
Aftermarket
6,657
4,194
up 59%
18,689
14,845
up 26%
Total revenue
$
57,189
$
42,291
up 35%
$
128,349
$
125,591
up 2%
Segment Activity
Three Months Ended December 31, 2023
Three Months Ended December 31, 2022
Water
Emerging Technologies
Corporate
Total
Water
Emerging Technologies
Corporate
Total
(In thousands)
Revenue
$
57,103
$
86
$
—
$
57,189
$
42,237
$
54
$
—
$
42,291
Cost of revenue
17,154
536
—
17,690
12,341
59
—
12,400
Gross profit (loss)
39,949
(450
)
—
39,499
29,896
(5
)
—
29,891
Operating expenses
General and administrative
1,914
951
4,295
7,160
2,027
964
4,195
7,186
Sales and marketing
4,124
1,882
761
6,767
2,868
927
566
4,361
Research and development
1,130
3,828
—
4,958
992
2,747
—
3,739
Total operating expenses
7,168
6,661
5,056
18,885
5,887
4,638
4,761
15,286
Operating income (loss)
$
32,781
$
(7,111
)
$
(5,056
)
$
20,614
$
24,009
$
(4,643
)
$
(4,761
)
$
14,605
Year Ended December 31, 2023
Year Ended December 31, 2022
Water
Emerging Technologies
Corporate
Total
Water
Emerging Technologies
Corporate
Total
(In thousands)
Revenue
$
127,725
$
624
$
—
$
128,349
$
125,428
$
163
$
—
$
125,591
Cost of revenue
40,290
980
—
41,270
38,158
77
—
38,235
Gross profit (loss)
87,435
(356
)
—
87,079
87,270
86
—
87,356
Operating expenses
General and administrative
7,751
3,927
17,186
28,864
6,936
4,104
17,301
28,341
Sales and marketing
13,691
6,053
2,420
22,164
11,065
3,047
2,165
16,277
Research and development
4,251
12,750
—
17,001
4,151
13,758
—
17,909
Total operating expenses
25,693
22,730
19,606
68,029
22,152
20,909
19,466
62,527
Operating income (loss)
$
61,742
$
(23,086
)
$
(19,606
)
$
19,050
$
65,118
$
(20,823
)
$
(19,466
)
$
24,829
Share-based Compensation
Three Months Ended December 31,
Years Ended December 31,
2023
2022
2023
2022
(In thousands)
Stock-based compensation expense charged to:
Cost of revenue
$
164
$
136
$
719
$
506
General and administrative
1,033
701
3,661
3,436
Sales and marketing
649
360
2,333
1,592
Research and development
381
210
1,325
977
Total stock-based compensation expense
$
2,227
$
1,407
$
8,038
$
6,511
ENERGY RECOVERY, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (1)
(Unaudited)
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-Date
Year-to-Date
Q4'2023
Q4'2022
2023
2022
(In millions, except shares, per share and percentages)
Operating margin
36.0
%
34.5
%
14.8
%
19.8
%
Share-based compensation
3.9
3.3
6.3
5.2
Severance
—
—
—
0.2
Accelerated depreciation
—
—
—
0.7
Litigation charges
—
—
—
0.3
Adjusted operating margin
39.9
%
37.9
%
21.1
%
26.2
%
Net income
$
19.8
$
13.7
$
21.5
$
24.0
Share-based compensation (2)
2.2
1.4
8.0
6.5
Severance (2)
—
—
—
0.3
Accelerated depreciation (2)
—
—
—
0.7
Litigation charges (2)
—
—
—
0.4
Share-based compensation discrete tax item
—
(0.4
)
(0.7
)
(1.4
)
Adjusted net income
$
22.0
$
14.7
$
28.9
$
30.5
Net income per share
$
0.34
$
0.24
$
0.37
$
0.42
Adjustments to net income per share (3)
0.05
0.02
0.14
0.12
Adjusted net income per share
$
0.39
$
0.26
$
0.51
$
0.54
Effective tax rate
5.3
%
7.8
%
Adjustments to effective tax rate (3)
0.8
2.9
Adjusted effective tax rate
6.1
%
10.6
%
Net income
$
19.8
$
13.7
$
21.5
$
24.0
Share-based compensation
2.2
1.4
8.0
6.5
Severance
—
—
—
0.3
Depreciation and amortization
1.0
1.0
4.1
4.8
Litigation charges
—
—
—
0.4
Other income, net
(1.3
)
(0.8
)
(3.7
)
(1.2
)
Provision for income taxes
2.1
1.6
1.2
2.0
Adjusted EBITDA
$
23.9
$
17.0
$
31.2
$
36.8
Free cash flow
Net cash provided by operating activities
$
13.8
$
6.4
$
26.1
$
12.6
Capital expenditures
(1.4
)
(1.2
)
(2.6
)
(4.2
)
Free cash flow
$
12.4
$
5.1
$
23.5
$
8.4
___________
(1)
Amounts may not total due to rounding.(2)
Amount presented are net of tax.(3)
Refer to the sections “Use of Non-GAAP Financial Measures” for description of items included in adjustments.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240221115867/en/
Investor Relations ir@energyrecovery.com +1 (346) 382-6927
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