ERII - Earnings call transcript Q1 2020

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Operator

Greetings and welcome to the Energy Recovery Quarter One Fiscal Year 2020 Earnings Call. At this time all participants are in a listen only mode. The question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to Jim Siccardi, Vice President of Investor Relations. you. Thank begin. Please

Jim Siccardi

remotely and and Earnings everyone, Vice Energy First Ballard. Executive I'm Recovery's of Interim Chairman Good and Chief President Call. welcome Financial My XXXX Chief here Recovery. Energy Conference Relations Bob Siccardi, with name Quarter our Investor and Mao; afternoon, Officer, of to today our is President Joshua Jim Officer,

These Litigation under Reform make performance, the the statements our milestones the we of cost strategy. structure financial and today's may projections new the and Private forward-looking licensing economic achieve future in under call, the commercialization future expectations, market Securities VorTeq Harbor and the Safe company. regarding business outlook, may statements discuss and agreement, Act provisions to XXXX their the company's events and contained During other or ability growth of business, products performance

Forward-looking statements management's information estimates on on assumptions, or available and us currently to are based projections. beliefs,

guarantees and Forward-looking of statements future factors. to are are certain uncertainties other performance not and risks, subject

actual from you the our identify the XX-K to or company with time time company's to the could specifically materially in forward-looking SEC, Form documents refer that cause factors XX-Q. differ These and to important those files documents contained on We statements. results projections Form

during call this circumstances any or during law. obligation intent subsequent made only as any and disclaims expressly statements otherwise of reflect are made unless statements this All made by events XXXX, to call company today, April required the XX, to forward-looking or update

financial some may during we non-GAAP this make addition, In measures to call. references

SEC today. reconciliations was released the company's furnished The in press non-GAAP press to to to of supplemental comparable measures the which and includes find the GAAP release, will data You release the newswires earlier results. the earnings

to and the Mao. our this I'd President over is Chief Executive the Bob floor like to Interim Bob, Officer, and Chairman point, yours. call At turn

Bob Mao

sincere with that to start listening hope are want and team Jim, happy and recovery joining us I respective energy today. well. and families call for you, healthy today's report and Thank their the everyone, the to safe that I'm remains thank you, well. everyone

professional rise presented. The turned of is proud challenge COVID-XX pandemic upside that to response us personal response. down. that any the do of can lives end, I'm in is our All team's To our tremendously has and

Our employees have uncertain remarkable these determination us times. navigate and displayed a has that calm to allowed

Two that we our livelihood business how have our the furlough do lives have protect report our extension, and is due response, guided our laid I we employees. can the off employee not of of while employees, COVID-XX. by pride great or It considerations with protecting to any

back, We're of being donating local also the to give to manufacturing employees in in equipment who to work has we healthcare beginning. from do Prior our place fortunate been position state from the our providers. focus remotely protective The including the all able our and employees of already safety the had orders, primary so. shelter personal could of implementation determined should facilities that

operate of XXth, San announced, fully assess On those elected impact As activities, efficiently, remotely headquarters of to we our suspend areas cases. to and our bay business of with all the a March temporarily sheltering manufacturing functional result, activities though the continue to orders. exception at most was place area in our manufacturing in nearly the when Leandro

by employees and at our our to to implement local, health measures protect that and be additional Review state guidance recommended facilities. are present required to officials health safety and federal

accordance facility manufacturing reopened in state We local and have Leandro our since full San regulations and federal, guidance. with partially

importantly, social stagger distancing cleaning and including Those each measures and personal shifts measures gloves, worker, ensure We include masks have of also our safety to for safety facilities. implemented the each employees, most at between smaller equipment between enhanced shifts. manufacturing

have not material did quarter. Fortunately company a on us, the those the impact measures first in for

a not orders. I Bay contractual industry, we a am supplier to happy PX global single report to have that desalination the and introduction missed Area of As critical delivery domestic the since the

ample inventory on an hand. We product had

We customer on continue time. orders shipping

based we fulfill will that In we of on existing able not today, know I of obligations if what for most delivery fact, year. expect to this the all remainder our be

of also is newly which In China, that the to new projects our we're an attempting to short, take the We're as all conduct including economic can, hopeful normal. new business mega Egypt as in this of products, light continuing me we to there and orders our for makes at awarded in end close usual tunnel.

expect be a here new We for normal while. this to

for adjusting effort. So that facing and Energy is strength gives planning But I believe else, everyone Recovery, do us safely uncertainties. sheet balance our we more of flexibility can navigate are confidence like we in The and these the term. long events. some

they lives With turning on these to name many so Now water to our trust. large produced turned depending segment. the the plants, operators water by

value with and remains the for lifetime and operators quality, Our demand reputation choice proposition strong of flagship its the reliability. who efficiency PX proven technology unmatched

revenue first quarter of company's history. XXXX was in the the first The generating quarter highest

project impacts but volatility backlog a to in COVID-XX sales lack could guide drive oil the activity project a mega we still and is XXXX. to channel continues the mega change, impact environment, tend if recent markets, today's our in market Our downturns. our seen history to or this Despite on significant have in growth. not This

have have we only in that we schedule times. encouraged later We financed in project. construction have delay realized, Because phone significant these suspensions. that ship away But customers being project project project a delays our a of the remain or yet typically call communicated uncertain mega and from not are backlog already projecting

pipeline There XXXX potential projects in beyond. is for and impacts greater a negative to

recent in as publications, Saudi represent the volatility significant future in in a markets, our source according example, such despite the which oil industry appear recent near For projects to dependent term, stable the revenue. Arabia, of countries, oil mega

relative caters tourism, to diverse downturn. a impact is likely COVID-XX. of impact of and channel business industries on dependent from pandemic the of including project The degree largest which our see other channel smaller the subsequent duration Of the OEM source our economic may

be of on overall our minor. effect should guidance we believe OEM any However,

Overall, I remain optimistic. cautiously

As and XXXX is guided industry as our quarter. outlook are showing in some of last today, XXXX we stability desalination therefore the maintaining

Finally, gross quarter. prepare our launches product comments continue move our initiatives from I to from on my for to forward want the this water And we year. last to challenges. continuing despite follow-up uncertainties Despite water segment on COVID-XX are today's later

our segment, points I for oil two now to are to VorTeq. would on like where focused gas we proof delivering and turn the

product a well achieving and our one. milestone partner second First frac life was

last has oil the know, since spoke. you As market changed we dramatically

well Texas with to before negative sudden led scheduled the conduct identify in market a frac In well frac. hours the a Liberty to changes live of we mere in late that March oil Unfortunately commencement. the cancellation

but a real disappointed literally, Liberty toward a live cancellations, to VorTeq by mid-April, these canceled world to we second oversupply to to other In well our work as oil. was critical Admit of conditions, with is which were opportunity identify commercialization. system a in conduct result life of continue the step to test opportunities our

when focused remain live parallel, technology of term, to milestone we the near Due one. deploy to passing on our at state the In market, be our we're for but the limited the ready may will oil well opportunities arises. opportunity the

have during is in and high. achieving As call, our been our cleared earning certification the of we we mentioned MX last confidence hurdles believe technical

While our attend third-party. licensee second is during the at goal MX, or on we and with had licensee site, our MX discussions, product quarter, with document recent regarding have the our not whether own product to our

substantive results of with the We licensee commercial to operational provide look with and near review also longer on will MX that respective for you a updating basis our plants. forward and A product documented our test. term a

in with continue our government health KT to tests facility meantime, the accordance guidance. and and In we at manufacture safety

on the extending useful fuel VorTeq's improving operation, further is focus reliability enhancing cartridges. Our of our life the and

effective have our they settled As support model and a on life eventual production and well mentioned during more those will simplified we the decision. expect last call,

at is confidence Our high all-time an today.

gas oversupplied headwinds do nature. in cyclical today's in environment, face oil and is we While

cycle. can than believe ultimately We potentially a cycle down the during VorTeq an value more up deliver

to meaningful outlining boundaries we our our can platform market initiatives, successfully which technology may cost new relative I address our peers. comment technical upon it customers incubation last within With while their verticals. allow As on savings PX that touched realize would to the like quarter, to which

and identified two have We perspective. appear technological promising commercial three or a from potential verticals that

our priorities our these in protecting during remain VorTeq. business While uncertain base water commercializing the times and

on transparency. quarters. resources these devoting forward to expand also subsequent efforts our are color more look We providing reach in discipline financial to with market We and

In summary, normal. to our successfully safe, adjusting our employees our business new is are

secure are our commercially and tour forward. competence viable core vertical moving is of new and evolution into finances plan Our technologically our

to over financials. will that the Josh to I call discuss With turn the

Joshua Ballard

a generate We year-over-year As this $XX.X Bob good representing of quarter. was million growth. X% very a revenue mentioned, total

aftermarket XX% $XX and water million growth. decreases grew so year-over-year Mega-project OEM or Our revenue generated and of XX% XX% experienced respectively. business XX% revenue in both

The not we're quarter. our in to in due orders aftermarket any and OEM fluctuations. value challenge, to other normal decreases COVID-XX channels were of any and but or were first simply delayed attributed macroeconomic mega be delay No COVID-XX other projects the should quarter-to-quarter immaterial the and

guidance up gas was is of over lower million first nearly made quarter but last XX% for for sales, year. business. Given aftermarket revenue our is quarter, oil XX% these X%. of line This OEM this our water our with and $X.X decreases We of XX% recognized mega-projects in the by and the

As this year the for directly which in million recognition revenue we the a of live my is reminder, our this changed. revenue. frac planned license time, ASC product as guidance a not well with extended more At related to $XX of partner, achieving $XX on was decrease the has license to resources million VorTeq XXX not

live license more use likely $X.X test the our in recognition to increase directly to Therefore, second with quarter. resources related typical on billion of revenue. [ph] one dependent well our our highly revenue level is VorTeq on However, tests partner revenue and on will

pivot live to tests we well and away back one. from milestone Assuming

good of be a will coming target months. in This moving the

over guidance XXXX quarter and XX upper gross product quarters. margin the was of I in provided the points end that's increase the Our prior an first of XX%, basis of

on within experience guidance, a negative effect landing to gross our margin despite COVID-XX. we However, due did

underutilized our goods March for that the workforce, period, of decreased experienced margin and X.X% cost by an of plan our during quarter. increased to the at end not we we Because shows gross approximately which furlough

would we guidance get have not COVID-XX we by by affected amount. that exceeded Do

continue margin, to likely will gross feel while drag on underutilized. this we We remain our

full we're to portion do producing. the that during we now should be effects muted a second to However, to back the back the this margin assuming get of more opportunity loss of that back we of half the call year. production QX, in Note have

of potential a our a products. COVID-XX, may will which in to to In due pumps year are positive mix that this our margin sales experience is product the well. mean bump as revenues lower turbos margin change addition and mix that OEM of in higher gross

The increasing of sale in of guidance coming see of within and our percentage the a thereby make COVID-XX, months. have to in for may higher pressure chance margin. of reasonable We'll the have OEM year. XXXX a wait channel the effect despite this exchanges out how But plays decrease we our up sales, staying

release as in a Overall promised our quarter corporate our expanded well segmented of operating breakout the for when XX% guidance relatively QX compared as quarter, to year. press the we in include last $XX.X last well have filing, flat operating as that first in our disclosure were Please expenditures million note quarter, and spend. reflecting growth of within our year expenditures against last to

you spend diluted new incubation or will of reported reflects in per a work for share. net number, GAAP on our that income $XXX,XXX We $X.XX significant Within quarter which initiatives. R&D see corporate year-on-year the increase

a good and position. From remain liquidity a in cash perspective, we

for quarter COVID-XX. negative Our flow has with the to cash operating do nothing

typically The reflective levels, and XXXk. such and as negative first payments quarter large is at is this these industrial bonuses of

months cash the $XX a in corporate the our is term in $XX million liquid another remaining between funds, market to next $XX money XX or of million three and securities maturing in four in short duration. securities largely months $XX million Of cash securities XX corporate million and in longer term to is

diverse invested grade highly We portfolio investment securities. have only a very rated in

we to effect current our securities the these markets have crisis of any the need trade in had are therefore, weeks operations. experienced no illiquidity sufficient for this our no few operations, We as cash on of first and reserves the of

available where we So, drawn we debt, feel in laws taken credit recently liquidity, not have stand made lines Congress. by any of nor on comfortable our advantage today, the the we of by passed

we've balance fact, for healthy of these such is In in it uncertain part times as liquidity kept that a sheet. on amount our

balance our personnel off others paying today. that are many health and the sheet desalination that financial is difficult has the us currently to And forego It allowed the prudence decisions that I is to industry the think of so in resiliency date, facing.

is flexible strong, position cash and these balance remains sheet times. Our in challenging our

with spend. prudent been are our We

have not these clear Although possible situation contingency Due capital furloughed operating plans putting in were global have to we for any the were deteriorate, need expenditures time scaled as plans see to we're employees, implement uncertainty however, the we today. if to we being. of back no today,

let's answer of And question to call. and move the with that, portion our

Operator

this time, of At conducting session. Our the Raymond proceed questions. you. with first instructions] Molchanov Thank will is line Please coming a James. [Operator we question your be question-and-answer of from Pavel

Pavel Molchanov

Thank you for question. taking the

case, and year's targeting very segment just guidance want revenue be to water still correct? to remains March, versus levels, XX% the last this. I You reaffirm on of you and clear growth that were In XX%

Bob Mao

Pavel. correct, That's

Pavel Molchanov

the even demand gives the Leandro, And all of San or accommodate pandemic. you what that can the to pace the levels utilization manufacturing you customer the with in the reduced slower prior confidence of at

Bob Mao

of inventory. a First have we all, healthy

also facility we expect before. Secondly, the second we one online the our year. half also on And Tracy working shift to were come of [ph]

Pavel Molchanov

that you last aware construction social other slowed decell of lockdowns because delayed question, are or One been or any regulations? have Understood. distancing of projects

Bob Mao

not are have we will we deliver why guidance. any. the No, that aware That's of the we confidence

Pavel Molchanov

Thank you again. clear. Very

Operator

next questions. Thompson Our Mills comes with [Operator the question Instructions] proceed [indiscernible]. line Please [ph] from of of your

Unidentified Analyst

Hi, Thank taking my you Josh and for Bob. question.

revenue guided make growth XX% earnings clear, the segment. to for last in it water call Just XX% to because XXXX you

that officially your you're retracting does now, revenues? XXXX anything mean mentioning not for guidance you're that Given

Bob Mao

not retracting some the of delay We time, are Because in we months bidding. reconfirming. two at not we're the do yes, same see three to some announced

cancellation the any Although we seen bidding. not of announced have

should picture better at have call. we So the July a

Unidentified Analyst

Okay, thank you.

Operator

Our Please next Molchanov line questions. of questions proceed with James. of your Pavel Raymond come from the

Pavel Molchanov

ask to relationship. the wanted just I about Schlumberger one

but not you having to days recently, said planning dialogue one them are any you in XX You next mentioned QX. think with the Schlumberger attempt I

what are now lows. Is right a happen there as cancellation prices oil with Where of risk Liberty? was happened same may that Given the that obviously frac canceled? MX XX-year kind that with

Bob Mao

Schlum to do after this First live facilities. our is can request the us all do and of not MX MX We one own document that will we documented And can that we own Schlum. also MX a And frac. MX. at do is presented to our Schlum's with the

oil. contribute of it therefore, So not oversupply does to the

Pavel Molchanov

Okay.

So --

Bob Mao

Pavel, we will do MX first ourselves.

per that all sure contract, requirements. Just then in we to the MX -- to be will fact will per And we we do pass request was Schlum.

but of we MX MX dependent to need not Although that the is one. completion on Schlum the document win have to we

Pavel Molchanov

And who $XX determines whether you get million? the

Bob Mao

it who has pay to it. course Schlum Of eventually is

that the demonstrate recent Pavel. that has MX. accomplished have thing been much it's much says changed Schlum and there, So, document in I since a have time determine But we have long changed, contract said, weeks. first we with is to as now really, Then, they particularly just signed we that original

or two next the for outlook or the year maybe affects that And longer.

that operational actually plans. comprehensive respective commercialization go into So, therefore, will discussion review we a our I expect

context. be overall So in will viewed MX that

Pavel Molchanov

Okay.

Bob Mao

But first done demonstrate have them. have we we thing to

Pavel Molchanov

Alright, thank you again.

Operator

have of the turn the reached now We management call any to back closing I session. instructions] remarks. the over [Operator question-and-answer end for will

Bob Mao

this I will you Well, for this Mao. is all joining Bob thank afternoon. us

yourself keep we meantime, July. speaking see fact, joining Have website We a in evening. look you. IR safe. Please day In the the us this our families updates. you and please to participants to check In with Thank good also XX forward and afternoon. for close your

Operator

today's concludes conference. This

your participation great a Thank You day. your this may time. at and you disconnect lines for have

Energy Recovery (ERII) 30 Apr 202020 Q1 Earnings call transcript