Energy Recovery(US:ERII)2021-05-07 17:59Financial Data and Key Metrics Changes - The company reported a record quarterly product revenue of $28.9 million, which is 52% higher than the previous year [8] - Gross margin for Q1 was 69%, within the guidance range of 68% to 70% for the year [20] - Operating expenditures decreased by 12% compared to Q1 last year [21] Business Line Data and Key Metrics Changes - The desalination business continues to show strong growth, with a projected growth outlook of 10% for 2021 and up to 25% for 2022 [8] - Initial sales of the Ultra PX energy recovery device are expected to reduce energy consumption in industrial wastewater applications [10] Market Data and Key Metrics Changes - The company is seeing strong demand for large-scale desalination projects due to the global need for more water [8] - The company has successfully integrated the VorTeq technology in live frac conditions, demonstrating its effectiveness [11] Company Strategy and Development Direction - The company aims to diversify its revenue streams while protecting its strong position in desalination [32] - There is a focus on sustainability and reducing energy costs across various industries, including oil and gas and refrigeration [32] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth in the desalination market and the potential for increased infrastructure spending in the U.S. [40] - The company plans to provide updates on the VorTeq commercialization decision by June 10 [12] Other Important Information - The company has launched a share buyback program with a commitment to utilize the entire $50 million for repurchases [27] - The U.S. Environmental Protection Agency's announcement to phase down hydrofluorocarbons is expected to create significant demand for CO2 refrigeration systems [25] Q&A Session Summary Question: Discuss the company's vision for diversification while protecting its desalination position - Management emphasized the importance of investing in the desalination business while also diversifying to reduce revenue concentration [32] Question: Are there opportunities in the aftermarket business? - Management confirmed that the aftermarket business has bounced back and is included in current guidance [34] Question: How will the company educate the market about Ultra PX capabilities? - Management indicated that securing initial commercial projects will be key to demonstrating the value of Ultra PX [36] Question: Will field tests occur outside the Permian Basin? - Management acknowledged the potential for future tests outside the Permian but emphasized the current focus on sufficient data collection in the region [39] Question: Anticipation of desalination projects in the U.S. infrastructure program? - Management expressed hope for increased desalination initiatives due to the infrastructure push but noted state-level requirements will play a significant role [40] Question: What drives the high gross margins? - Management highlighted the significant energy savings and low lifecycle costs of their products as key factors for high margins [43] Question: Can the company sustain margins as it grows into adjacent markets? - Management is confident that similar margins can be achieved in industrial wastewater and refrigeration if value is maintained [44]