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.”
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.
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 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) millionincrease 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. (Original Source)
Shares of Energy Recovery closed today at $2.64, down $0.18 or 6.38%. ERII has a 1-year high of $6.18 and a 1-year low of $2.49. The stock’s 50-day moving average is $3.08 and its 200-day moving average is $3.88.
On the ratings front, Ardour analyst Jinming Liu downgraded ERII to Hold, with a $3.50 price target, in a report issued on March 11. The current price target implies an upside of 21.1% from current levels.
According to TipRanks.com, Liu has a total average return of -3.8%, a 53.8% success rate, and is ranked #2992 out of 3594 analysts.
Energy Recovery Inc is engaged in designing, developing, and manufacturing of energy recovery devices that transform untapped energy into reusable energy from industrial fluid flows and pressure cycles.