0001421517
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0001421517
2024-05-01
2024-05-01
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):
May 1, 2024
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 Dr.
,
San Leandro
,
CA
94577
(Address of 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:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of each exchange on which registered
Common Stock, $0.001 par value per share ERII The Nasdaq Stock Market LLC
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.
..
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Item 2.02 Results of Operations and Financial Condition
On May 1, 2024, Energy Recovery, Inc. (the "Company") issued an earnings press
release announcing its financial results for the first quarter ended March 31,
2024. 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
Exhibit Number Description
99.1 Press release of Energy Recovery, Inc., dated
May 1, 2024,
to report its financial results for the
first quarter ended March 31, 2024.
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: May 1, 2024
Energy Recovery, Inc.
By: /s/ William Yeung
William Yeung
Chief Legal Officer
Exhibit 99.1
Energy Recovery Reports its First Quarter 2024 Financial Results
SAN LEANDRO, Calif. - May 1, 2024
- Energy Recovery, Inc. (Nasdaq:ERII) ("Energy Recovery" or the "Company")
today announced its financial results for the first quarter ended March 31,
2024.
First Quarter Highlights
.
Revenue of $12.1 million, which is in-line with our February 2024 guidance.
.
Gross margin of 59.0%, a decrease of 190 bps, as compared to Q1'2023, due
primarily to higher manufacturing costs and an increase in inventory scrap.
.
Operating expenses of $18.1 million, an increase of 11%, as compared to
Q1'2023, due primarily to increased investments within sales and marketing and
Executive transition costs.
.
Loss from operations of $10.9 million, mainly due to lower revenues and gross
margin as previously guided.
.
Net loss of $8.3 million and adjusted EBITDA
(1)
loss of $6.2 million.
.
Cash and investments of $129.5 million, which include cash, cash equivalents,
and short- and long-term investments.
David Moon, President and CEO, commented on the financial results: "The first
quarter was a busy one for us and played out as we expected. Q1 revenue of
$12.1 million was in line with our guidance of $10-$13 million, and based on
the visibility we have today, we expect to be in-line with our full year
revenue guidance of $140-$150 million. As of today, we have signed contracts
with potential revenue opportunity equal to 60% of the mid-point of our 2024
guidance, which represents an increase of 26% over the same period in 2023."
Mr. Moon added, "In our CO
2
business, we completed a successful 30-day field test in Europe of our next
generation PX G1300, as well as successful testing of our latest system
architecture with Vallarta, our partner in California. We are now in the
process of commissioning multiple new deployments at existing and new customer
sites for this summer, which will provide the key uninterrupted summer runtime
data that is vital for us to begin significant commercial adoption of the PX
G1300. As we look out to the remainder of the year, my top priority is to
execute on the goals and milestones laid out for this year."
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Financial Highlights
Year-to-Date
2024 2023 2024 vs.
2023
(In millions, except net loss per
share, percentages and basis points)
Revenue $12.1 $13.4 down 10%
Gross 59.0% 60.9% down 190
margin bps
Operating (90.4%) (60.5%) NM
margin
Net loss ($8.3) ($6.3) down 31%
Net loss ($0.14) ($0.11) down 27%
per share
Effective 13.5% 15.5%
tax rate
Cash provided $6.5 $8.7
by operations
Non-GAAP Financial Highlights
(1)
Year-to-Date
2024 2023 2024 vs.
2023
(In millions, except adjusted net loss
per share, percentages and basis points)
Adjusted (59.4%) (43.3%) NM
operating margin
Adjusted ($4.6) ($4.5) down 4%
net loss
Adjusted net ($0.08) ($0.08) no change
loss per share
Adjusted effective 19.8% 13.0%
tax rate
Adjusted ($6.2) ($4.8)
EBITDA
Free cash $5.7 $8.4
flow
(1)
Refer to the sections "Use of Non-GAAP Financial Measures" and "Reconciliation
of Non-GAAP Financial Measures" for definitions of our non-GAAP financial
measures and reconciliations of GAAP to non-GAAP amounts, respectively.
NM
Not Material
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 revenue guidance for
the year and potential new deployments. These forward-looking statements are
based on information currently available to the Company 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 the Company's 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,
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.
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Use of Non-GAAP Financial Measures
This press release includes certain non-GAAP financial measures, including
adjusted operating margin, adjusted net loss, adjusted net loss 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 Financial Results
.
Adjusted operating margin
is a non-GAAP financial measure that the Company defines as loss from
operations which excludes i) share-based compensation; and ii) executive
transition costs, divided by revenues.
.
Adjusted net loss
is a non-GAAP financial measure that the Company defines as net income which
excludes i) share-based compensation; ii) executive transition costs; and iii)
the applicable tax effect of the excluded items including the share-based
compensation discrete tax item.
.
Adjusted net loss per share
is a non-GAAP financial measure that the Company defines as net loss, which
excludes i) share-based compensation; ii) executive transition costs and iii)
the applicable tax effect of the excluded items including the share-based
compensation discrete tax item, divided by basic shares outstanding.
.
Adjusted effective tax rate
reflects adjustments for i) share-based compensation discrete tax item; ii)
share-based compensation; and iii) executive transition costs.
.
Adjusted EBITDA
is a non-GAAP financial measure that the Company defines as net loss which
excludes i) depreciation and amortization; ii) share-based compensation; iii)
executive transition costs; iv) other income, net, such as interest income and
other non-operating income (expense), net; and v) benefit from income taxes.
.
Free cash flow
is a non-GAAP financial measure that the Company defines as net cash provided
by operating activities less capital expenditures.
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Conference Call to Discuss First Quarter 2024 Financial Results
LIVE CONFERENCE CALL:
Wednesday, May 1, 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: Friday, May 31, 2024
US / Canada Toll-Free: +1 (877) 660-6853
Local / International Toll: +1 (201) 612-7415
Access code: 13745736
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 the Company's pressure exchanger technology platform,
the Company designs and manufactures reliable, high-performance solutions that
generate cost savings and increase energy efficiency across several
industries. With a strong foundation in the desalination industry, the Company
has delivered transformative solutions that optimize operations and deliver
positive environmental impact to its customers worldwide for more than 30
years. Headquartered in the San Francisco Bay Area, the Company 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/.
Contact
Investor Relations
ir@energyrecovery.com
+1 (346) 382-6927
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ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
2024 2023
(In thousands)
ASSETS
Cash, cash equivalents and investments $ 129,495 $ 122,375
Accounts receivable and contract assets 25,647 47,529
Inventories, net 31,671 26,149
Prepaid expenses and other assets 3,696 3,251
Property, equipment and operating leases 28,927 30,168
Goodwill 12,790 12,790
Deferred tax assets and other assets 12,039 10,712
TOTAL ASSETS $ 244,265 $ 252,974
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses $ 11,834 $ 18,583
Contract liabilities and other liabilities, non-current 3,581 1,304
Lease liabilities 12,813 13,279
Total liabilities 28,228 33,166
Stockholders' equity 216,037 219,808
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 244,265 $ 252,974
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ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
2024 2023
(In thousands, except per share data)
Revenue $ 12,090 $ 13,401
Cost of revenue 4,955 5,246
Gross profit 7,135 8,155
Operating expenses
General and administrative 7,566 7,066
Sales and marketing 6,152 4,894
Research and development 4,351 4,306
Total operating expenses 18,069 16,266
Loss from operations (10,934) (8,111)
Other income, net 1,389 656
Loss before income taxes (9,545) (7,455)
Benefit from income taxes (1,285) (1,159)
Net loss $ (8,260) $ (6,296)
Net loss per share
Basic $ (0.14) $ (0.11)
Diluted $ (0.14) $ (0.11)
Number of shares used in per share calculations
Basic 57,102 56,228
Diluted 57,102 56,228
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ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
2024 2023
(In thousands)
Cash flows from operating activities:
Net loss $ (8,260) $ (6,296)
Non-cash adjustments 3,300 2,539
Net cash provided by operating assets and liabilities 11,457 12,414
Net cash provided by operating activities 6,497 8,657
Cash flows from investing activities:
Net investment in marketable securities (4,249) 1,364
Capital expenditures (824) (279)
Proceeds from sales of fixed assets 87 82
Net cash (used in) provided by investing activities (4,986) 1,167
Cash flows from financing activities:
Net proceeds from issuance of common stock 1,190 165
Net cash provided by financing activities 1,190 165
Effect of exchange rate differences (19) 8
Net change in cash, cash equivalents and restricted cash $ 2,682 $ 9,997
Cash, cash equivalents and restricted cash, end of period $ 70,907 $ 66,455
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ENERGY RECOVERY, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(Unaudited)
Channel Revenue
Three Months Ended March 31,
2024 2023 vs. 2023
(In thousands, except percentages)
Aftermarket $ 4,644 $ 3,322 up 40%
Megaproject 4,100 3,243 up 26%
Original equipment manufacturer 3,346 6,836 down 50%
Total revenue $ 12,090 $ 13,401 down 9%
Segment Activity
Three Months Ended March 31, 2024 Three Months Ended March 31, 2023
Water Emerging Corporate Total Water Emerging Corporate Total
Technologies Technologies
(In thousands)
Revenue $ 12,089 $ 1 $ - $ 12,090 $ 13,296 $ 105 $ - $ 13,40
Cost 4,954 1 - 4,955 5,101 145 - 5,24
of
revenue
Gross 7,135 - - 7,135 8,195 (40) - 8,15
profit
(loss)
Operating
expenses
General 1,922 1,018 4,626 7,566 1,938 968 4,160 7,06
and
administrative
Sales 3,745 1,807 600 6,152 3,175 1,170 549 4,89
and
marketing
Research 1,100 3,251 - 4,351 1,180 3,126 - 4,30
and
development
Total 6,767 6,076 5,226 18,069 6,293 5,264 4,709 16,26
operating
expenses
Operating $ 368 $ (6,076) $ (5,226) $ (10,934) $ 1,902 $ (5,304) $ (4,709) $ (8,111
income
(loss)
1
6
5
6
4
6
6
)
Share-based Compensation
Three Months Ended March 31,
2024 2023
(In thousands)
Stock-based compensation expense charged to:
Cost of revenue $ 343 $ 249
General and administrative 1,407 960
Sales and marketing 1,010 698
Research and development 523 397
Total stock-based compensation expense $ 3,283 $ 2,304
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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.
Year-to-Date
Q1'2024 Q1'2023
(In millions, except shares,
per share and percentages)
Operating (90.4 %) (60.5 %)
margin
Share-based 27.2 17.2
compensation
Executive 3.9 -
transition costs
Adjusted (59.4 %) (43.3 %)
operating margin
Net $ (8.3) $ (6.3)
loss
Share-based 3.3 2.3
compensation
(2)
Executive 0.4 -
transition costs
(2)
Share-based compensation (0.1) (0.5)
discrete tax item
Adjusted $ (4.6) $ (4.5)
net loss
Net loss $ (0.14) $ (0.11)
per share
Adjustments to net 0.06 0.03
loss per share
(3)
Adjusted net $ (0.08) $ (0.08)
loss per share
Effective 13.5% 15.5%
tax rate
Adjustments to 6.4 (2.5)
effective tax rate
(3)
Adjusted effective 19.8% 13.0%
tax rate
Net $ (8.3) $ (6.3)
loss
Share-based 3.3 2.3
compensation
Depreciation and 1.0 1.0
amortization
Executive 0.5 -
transition costs
Other (1.4) (0.7)
income, net
Benefit from (1.3) (1.2)
income taxes
Adjusted $ (6.2) $ (4.8)
EBITDA
Free cash
flow
Net cash provided by $ 6.5 $ 8.7
operating activities
Capital (0.8) (0.3)
expenditures
Free cash $ 5.7 $ 8.4
flow
(1)
Amounts may not total due to rounding.
(2)
Amounts presented are net of tax.
(3)
Refer to the sections "Use of Non-GAAP Financial Measures" for description of
items included in adjustments.
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