ERII - Earnings call transcript Q2 2024

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Operator

Greetings, and welcome to the Energy Recovery 2Q '24 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, James Siccardi, Vice President of Investor Relations.

James Siccardi

Hello, everyone, and welcome to Energy Recovery's 2024 Second Quarter Earnings Conference Call. My name is Jim Siccardi, Vice President of Investor Relations at Energy Recovery. our Young, Chief Chief our with Moon; Officer, Accounting today Brandon and Controller here President Executive and David Officer. I'm and Interim

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

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

Forward-looking statements results in These from documents time XX-K could with other subject and factors. XX-Q. are are We the that cause forward-looking and actual the refer Form materially SEC, our those time projections and to specifically differ documents not company's files of performance you Form identify certain company uncertainties contained future statements. to factors from risks, to to or important guarantees the

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

this At Chief Moon. point, Executive to call over turn the Officer I our will David and President,

David Moon

Brandon Chief financial years. today. Officer. joining our Jim, Interim for joined many today been I'm part Thanks, Accounting Brandon for by our thank us you team and and Young, Controller an leadership all of has integral

process. strategic we our quarter you planning CFO our results, and get I second Playbook want on Before what I process call or update into search the to

and us will which operational today went COX new new a of strengthen extensive shareholders. banking, become brings with our start-up CFO. expand to call and experience high-growth the we he that markets release experience Michael career, including regarding as served I'm equity X has announce and Financial leading new capital private work that I attention serve Officer. diverse from will your well out markets our to the effective companies, CFO relationships and X. Mancini and to our Michael's pleased First, August as engineering further our Michael press Chief want technology-focused to financial, He Wastewater into experience funds. hedge earlier

we you the financial Playbook foundation phase. and "How to from This our for in will Regarding to phase with to communicate phase process, progress form will years Play" have Play" that to the to the of our "Where Play" how all moved critical "How come. include the milestones targets we

still we form high-level a summary to While the intend a earnings webinar call, be I've that to appropriate to during details. share fourth of quarter third would share host decided a in the Playbook our quarter the more

the details for providing of end be We webinar the quarter. will by this third the

Now Water. move quarter the let us to second update. Beginning with

revenue There confident We of maintaining the $XXX this reasons million $XXX in to for guidance. guidance I remain are are X why million year.

large part calls. previous $X.X same better in we've strong and in noting worth last of First, to $XX.X second MEA Water that in which revenue discussed we million year, were quarter performance than several Europe. million, Megaproject in OEM the quarter There was shipments thanks achieved

in Chennai, pleased Perur are that shipment to the completed report We of we project India.

year. that As last this out December a reminder, the project was of slipped

this this We will million. project execution delivering in is to the desalination space, the are India, of per It risks immune XXX,XXX that shipment Once the largest position our the that could the remains we mega strong not case delays. important are while infrastructure control and cause in first out projects, $X.X with the shipment our meters $X.X cubic month constructed, day. these second be risks. plant delivered worth million, quarter worth to in that note is As large-scale are there second

We large-scale XXX,XXX Dubai, this in day in Once meter UAE also phase $X.X plant constructed per worth was but another shipped our phases: first million. this Dubai. throughout retendered slippage. case, example project was plant This largest execute remains X the adjusted, the cubic project process. desalination IPP timing project of and position of Hassyan will the project In this entire serves the as strong be the to

within phases the expect this remaining We X to year. ship calendar

cubic which India project. XXX,XXX signing will announced expected to included remaining drinking each Exchangers to the X Pressure clean day. The together, XXXX. million of projects these supply over in in plants the plants several desalination to water in ship $XX provide to we SWRO July contracts Perur meters in Second, are of in India, All communities

the one desalination India projects water-stressed water to invest continues countries of in the fresh its world, to As supplement most supply. in

X% continue to supply a freshwater India, but world's world's observed where the observe growing it's can demand, between this We home fresh divergence resources. of XX% and water the has in and be like countries the population of world's only trend to

approximately contracts. revenue, which revenue in range first projects half and a guided year. roughly guided XX% decrease the is the same to X% totals total yet by timing XXXX current includes or decrease closure of XXXX. time to million of or be the in for compares at project the This the our large-scale $XXX of Third, our recognized $XXX This of contract the million delivered, of driven signed year year-over-year. the several range under midpoint XX% the of reflects The

are finalizing we of approximately contracts that anticipating project currently to We that weeks several plan deliver million $XX this year. the draft mega next over have we

guidance in finalization underpins Our strong confidence of reaffirming activity contracted performance contracts and year. draft the our for this under our

by continues X% last at this contracts Wastewater we've increased year wastewater grow, and And time. fourth, as pipeline almost signed to compared our to our

start a had economic As the predicted, driven China. by in slow the year, we to primarily conditions

seen million. This third very quarter second we the fall in revenue the expect the plan and to of water and in a will of second on uptick QX. monitoring $XX have have at Based closely, current put in the projected revenue million schedules, at delivery are $XX We this half XX% bid to an $XX the that $XX in half XX% water situation already million to but would active quarter million activity year QX fourth into sector.

Now let's COX move business. our to

during quarter. I the last stated PX G call in completion second second-generation lab the after our of successful our testing, As

first by that August. the G the data Our sites planned August XX paper for X sites have XX now start have our I the XXXX. XXXX, we with Europe XX U.S. now to have as We is PX gate operating of moved which quarter. capture end XX the of towards by critical installation then QX these that of to the in of installed of the would gate, we sites XXth publish form summer second am second-generation to and a foundation in up the fourth will white to for to report in pleased July site we end

measure processing with highly assist savings and PX paper which sites engineering, firm, They engineering X Delhaize; the plant. will is XX white Vallarta development. verify X to and contracted and will a by have third-party be large provided is us our in second-generation the also food sites. DC The respected Ohio, we Additionally, energy ELDA in a Foods. G Spain at of which These are Grocery site is in California, Belgium, which are Kroger; Spain, which Outlet;

DC and management industry compliance services. industrial an in Engineering design, is leader and refrigeration commercial

large third-party as engineers fact, retailers. In In paramount. their have retail, is food conservative of technology a for such worked of a industry verification many new

a In you setting. your fact, are respected DC This verify you do, faith in technology independently a with your Engineering. field if to proactively we in claims third-party have university exactly engage as we is what will or doing

I with new the a time refrigeration them on a system last ammonia chain in for carbon dioxide worked cascade was The supermarket Southeast.

end awarded supermarket EPA's environmentally and Greenchill an well advanced Platinum certification stakes received. users. when systems. exercise fact, sitting were becomes In were the results customer our refrigeration front so in table Such We our for of

will DC currently our become Engineering's white paper the to accelerate phase. with in measuring catalyst adoption assistance, for Engineering the With DC users. and us is the PX partners end G OEM our

sites behalf is in Additionally, which and of and respectively. data be located our OEM which our Canada, will Hillphoenix is on X Loblaws partners, the Epta, at XX collecting Auchan, Hungary,

sites. including pipeline in We will the already operating. And be we data XX remaining XXXX, sites our X X sites finally, collecting for the at have

move let's the to financial Now update.

margin quarter quarter of second first in the year the from coming gross with the rebounded at Our approximately XX%.

to Our XX% gross expectation is ramp-up XX% continue margin we to production third manage QXXX as quarter the for challenges.

quarter, We behind of challenges, in are confident these which additional of the the adding most QXXX year. end of including are we the have the capacity end handling will third us material largely by by nature

QX year. XX% that the comprise expected would water but it's have under our demand XXXX, towards had of PX about the XX% for only been pleasantly surprised for trending We

XX%. to full gross year at XX% margin remains guidance Our

second XX% increased of onetime due to expenses operating Our year, over the last quarter expenses. primarily

we our long-term impact these with quarter costs the well continue of second expected, experience The to growth our onetime costs. Playbook transition the last quarter. mentioned million as some as executive totaled strategy, combined expenses Now and onetime in of support $X work as as in associated

expense first the quarter million onetime incurred the recap in operating and cost and in To we date, to $X second $XXX,XXX quarter.

$X.X transition follows: The recruiting for and second cost. million as quarter Playbook for consulting is $X.X executive and breakdown million

We onetime includes million are $XX $XX maintaining costs. estimated in to of operating year $X which the expense million our for million, the guidance

expect $XX fourth million approximately quarter. Of in of $X.X million the in third expense We costs, quarter. to we spent XX% come million remaining third the XX% to in be quarter operating expect onetime to at $XX for the the and

sequential we putting of the and these a large quarter, experienced previous a loss improvement though very close As income net items, from the to with a breakeven. in quarter onetime us result small

year to track on as of the are remainder We the operating positive to moving income progresses.

the continue million. $XXX investment the end $XXX second between year million. from increasing currently expect to to grow in position $XXX in quarter, $XXX million our and We cash lastly, we second and the to quarter cash million And

of delivered quarter to us in in growing to we year full $XXX backlog, which $XX We anticipate a million a Wastewater million to revenue. up, So million. confidence guidance supported to generate gives sum our $XX our revenue $XXX by business million strong

PX We to $XX of And G sites are operating to we the installed $XX maintaining million expect to of expense year. to the with margin by have XX XX% XX and guidance our our million. PX to end gross second-generation XX%

Q&A. now to move that, let's With

Operator

James. Our line from [Operator of Pavel Raymond Instructions] question Molchanov comes first with the

Pavel Molchanov

-- just other to you targets you specific will will revenue, start want towards kind the provide product year. know you earnings, not of Probably do it the any by Playbook. that kind the run of And line? the front of end will metrics? with conceptually, unveil I But be

David Moon

hear is Nice today. voice this Moon. to your David Pavel,

guidance ago, So we'll the of as release part we'll that Playbook the the -- also level. provide high few then years we revenue X-year in that QX, I provide for also get break a out, we'll be more -- we look, as QX, And on 'XX by few minutes earnings provide as -- well. be we're out the when just going but milestones, actual into a just to have guidance maybe have of the detail will and call around we'll but also of will break we'll and in -- but said earnings unit business not will later only so the pretty to 'XX we'll revenue a terms It when not a out. years webinar look it

Pavel Molchanov

savings for Okay. about measured? measuring is or refrigeration Is the the energy talk relates to else? in When it the as That's phase too. exactly you engineering it something being forward us what something product, to look DC

David Moon

Yes.

calls there's load so how -- think I specific segments. high the One that validated metrics by being energy were capacity capacity are provides DC extension. X engineering. And extension And just there's measured specific well the talked is purely second we've is -- X or that previous about heat So G PX in dates. then and

so And those. confirming is both and measuring engineering of DC

Pavel Molchanov

you target a refrigeration as the in prospective that they see system? to or improvement they with have want customers, And in the speak terms threshold of do particular

David Moon

has Largely, first so. think feedback conscious I around -- been very cost industry. the it's a

And has the been years period. to that largely, pay anything X X acceptable. feedback so is from around And

period. then users capacity very energy certain so end that's saving you'd the extension And roll of in roll looking primary payback we under feedback that. But the that's for. sort and what that's part that, short can be very, a so of can you you way supermarkets in as And get -- been or

Pavel Molchanov

hindering Okay. bit Last rate evidence interest more Is of currency, is desalination any interest East? that question, structurally anything Middle the high price rates, -- macro. there oil little or development a else the in

David Moon

customers And close None. I'd to that as can see nothing as is this and as say as team we it at gets our point. any. good field

And ahead. steam so full far,

Operator

the of from comes Ryan Securities. line The Pfingst Riley next question with B.

Ryan Pfingst

bit around want you generation? in to G's the recently the quarter prior talk I update the COX. seeing maybe know compared and get webinar were they the you of and a fourth to little how maybe you don't But ahead performed PX can XQ deployed from about what

David Moon

So I about solve think gen they're running important issues we saw the G just we've second X we what vibration, No that nonstop. sound seen gen. PX that is -- wanted which better what's out the second levels most are of they're gen the to developed the first were when not for than

And so in clockwork so like field. far, time field they're running the

I some mean thus areas the we're the Southern last XXX-plus like our the California, Southern so in so seen test, with starting stress month of get far had for so starting we've in and far So in California very, stress several field. performance or G most degree very get days we've good. And PX to we're right? really pleased test, to

with happy we're performance. the So

Ryan Pfingst

Great. And terms there? today theme the consumers are side. then desalination obviously or wastewater Water of of and hearing super over is huge data RO you and turning to centers AI anything water. in participating The Are topical

David Moon

discussion to on starting that push we're side. So our

capture been in this a so or the we terms of are X talking so last a our opportunity. something about we -- can of months There's is PXs data-rich And data. how lot lot we've of about --

not potentially and operators we we're pulled we're this and our doing at front. moment. talking so faster pushing pushing, and And can about to we're on that ideas all go the EPCs AI lines We're how have some we getting

Ryan Pfingst

for Okay. Interesting. you in the you just of are about the terms just little on XXXX? what And and guys? I visibility potentially a the bit know desalination projects really wasn't said one then growth Could forward. more. XXXX talk today But seeing you you potential maybe macro hindering have you moving

David Moon

Yes.

XXXX I would today, be year we're we'll understanding say growth will -- sort for mean, that year no that XXth at I say, would I be XXth think should ERI. the that looking we're where I be so this confident growth looking So -- of be consecutive had. of And we've should XXXX that of different. the

So see come part when continues we I quarter, of webinar, talk macro as certainly trends, third look growth to good. story to in the the more the but

we're and way. to that continue -- So going to ride

good XXXX. looks So I think for it

Operator

ISI. line Bandel of with next comes question the The from Jason Evercore

Jason Bandel

remarks and know going COX mentioned I First question you on the refrigeration refrigeration system test announcement that Kroger side. in I recent year. saw next G our prepared to in their PX your about the they're start starting using

your typically typical useful for on is store based transition far, life so they would new systems? the curious, look Do distribution what Just older end they openings of and start how the centers? typically of that with rollout experience wait kind happen? Like supermarket a for Do like?

David Moon

It's going depend. to really

this their call and in or So -- there we then space, first adopters what followers. are first movers

I right? that a out doing see you this would how It's way, store Cincinnati. lot And really. And an headquarters. it's nobody exposure, fall adopter, of between by so the And as X because those one play will Kroger so early we're sort sort call of with announced Kroger, camps, in supermarkets of in their the those getting someone

system of a just that there be running at stores equipment real older, is plans. be faster. expiration chance next And well its day. plans be that a to problem. they'll the to we leaks, And or for may go those begins not with go it's as rolling are where on over And the well sort most have I part COX work older, continues And start out believe of years. and a capital X that some likely their might The to may be capital are Kroger they'll

start the obviously they I list they'll are from so but of where start be older bottom problematic would built, start. will then their And they'll And the most be those their stores with first. as new and think stores COX, stores certainly the

Jason Bandel

it. Got

more time with they order want then And performance comfortable time amount real-world in with the sense. with OEMs, the the white paper? in makes the of see PX white G? data some paper, data Or even get the run comfortable That run to Okay. to of the will feel will

David Moon

Yes.

it's a So very question. good

run that as largely given has to been we've time DC this the out by part Engineering work laid So of the OEMs. with us

This And comfortable so they're this to is with able next what they're what in is users mandating. and to order be have with end this sit discussion.

summer time. are And what's period, the And following so we run this is nothing to nothing and it more, less. is when direction comes critical their

And the take enough the be so level. to discussion results, will good summer to period come if next we then that with our out of

Jason Bandel

it. Got

know gears year despite the switching revenue I year. a little to slower full Now guidance start Wastewater. the the reiterated bit to you

Just little will come will in color. more guidance. curious full if that half give you can to second you provide meet the your I the revenue a year confidence

David Moon

Yes.

So we what which did we did about this last at year. was $XXX,XXX quarter, time in wastewater this equal to

Our a I over backlog, by while, talked that seeing hadn't -- in real X we're the growing we weeks, earlier, as China. seen uptick for driven last uptick we've an is largely about a quoting seen

And China the is haven't so in for we're to starting that we see increased of seen that just seeing activity an China. year level

rest of of already that to of quality what And at for so plus backlog, started we And and books $XX we think the the count XX% even though uptick we're we've I the comfortable on if look year. still guidance, in million terms with well bodes the the slow.

Jason Bandel

one me. for one And last Understood.

CFO prepared Michael's -- on kind you of the process. background search went went Just know remarks. through the I in

overlap an with details you I little how then not you decided And him. to a more Josh share can picked curious guess, having Just you if regret on, if starts?

David Moon

a would work. He knows overlap. He'll But is Michael his start-up perfect how set world, knows with work great. experienced his to think brings been work Look, the If I running. given ground have background. in some to we have investors. CFO. He under hit pressure an have skill I doubt. how previous with He had a no

good, would And been Monday. but so yes, next where he yes, he'll starts the have nearly ground hit

make he and kind has -- to that Josh needed. will himself been so say And if enough available

happy ground that. I'm about So I'm running. not the pretty that we hit worried

Operator

Instructions] I Siccardi the questions to remarks. to call closing this for would at no like There time. James back are [Operator further turn

James Siccardi

take as to call you, evening. We look the forward third Thank webinar. a for Please everyone, us you and again to joining in this speaking quarter care.

Operator

This concludes today's conference.

You this your the Enjoy your time. at may rest of day. disconnect lines

Energy Recovery (ERII) 31 Jul 242024 Q2 Earnings call transcript