Financial Data and Key Metrics Changes - The company generated $20 million in revenue for Q2 2022, which is relatively flat compared to Q2 2021, driven by the timing of mega project shipments [35] - Year-to-date mega project revenues are down 9%, but a strong second half is anticipated, with full-year growth expected in the range of 10% to 15% [36] - Overall, OEM revenues are up 75% year-to-date, with industrial wastewater sales contributing $1.6 million [37] - Operating expenses grew about 24% year-over-year, including a one-time expense of $1.3 million related to the cessation of VorTeq activities [42] Business Line Data and Key Metrics Changes - The industrial wastewater segment exceeded 2021 revenue by 60% by the end of Q2 2022, on track to meet the forecast of $3 million for the fiscal year [13] - Desalination OEM revenues have grown closer to 50% year-to-date, expected to hold through the end of the fiscal year [37] - The company expects gross margin to moderate this year, maintaining guidance of 66% to 68% gross margin [40] Market Data and Key Metrics Changes - The company’s core market of desalination continues to provide water to millions, with a guidance of 25% revenue growth for 2022 [11] - The total addressable market (TAM) for the lithium battery sector is estimated to exceed $200 million this decade, with significant opportunities identified [18] - The textile industry, a major water-wasting sector, presents a potential TAM of about $75 million in China and India, growing to over $100 million by 2026 [21] Company Strategy and Development Direction - The company remains focused on industrial wastewater and CO2 markets, with a strategy to leverage distribution networks established by existing manufacturers [33] - The company is well-positioned to execute its strategy in desalination and industrial wastewater, driven by increasing global water scarcity [12] - The company is prioritizing the lithium market and has identified numerous projects in various planning stages through 2030 [18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged negative global economic conditions but emphasized the resilience of operations and robust profitability [9] - The company believes the need for water will weather current global economic uncertainties, maintaining a strong investment motivation in the sector [11] - Management expects to see increased savings from energy costs in the coming years, enhancing the value proposition of reverse osmosis processes [16] Other Important Information - The company closed the quarter with a cash and securities balance of $87 million, with a $10 million reduction due to a share repurchase program [45] - The repurchase program completed on July 1st involved $50 million of stock at an average price of $18.67 [46] - VorTeq operations were shut down, resulting in a one-time expense of $1.3 million, with ongoing discussions for potential partnerships [48] Q&A Session Summary Question: Capital allocation and CapEx requirements - Management indicated that CapEx is in line with last year, with future increases driven by CO2 refrigeration developments [50] Question: Cost comparison for new CO2 refrigeration sites - Management stated that new construction costs for CO2 refrigeration are not expected to be dramatically higher than previous desalination sites [51] Question: Updates on CO2 business and TAM - Management noted that the TAM for CO2 refrigeration remains large, with more specific numbers expected in the next earnings call [55]
Energy Recovery(ERII) - 2022 Q2 - Earnings Call Transcript