Energy Recovery(US:ERII)2020-03-06 02:32Financial Data and Key Metrics Changes - The company reported total revenue of $19.5 million for Q4 2019, representing a 10% year-over-year growth, and total revenues of $86.9 million for the full fiscal year, a 17% increase over 2018 [25] - The GAAP net loss for Q4 was $0.6 million or $0.01 per diluted share, primarily due to a one-time expense related to the resignation of the CEO, while the diluted EPS for the year was $0.19, a decrease of $0.02 from 2018 [29] - Product gross margin ended the year at 72.1%, an increase of 60 basis points year-over-year, although it decreased by 300 basis points in Q4 compared to Q4 2018 due to a larger percentage of non-PX sales [30] Business Line Data and Key Metrics Changes - The Water business generated $16 million in revenue during Q4 2019, a 14% year-over-year growth, and $73 million for the full fiscal year, a 20% increase over 2018 [25] - The mega-project channel led annual growth, increasing by 40% in 2019, contributing to 52% of water sales, up from 45% in 2018 [26] - The Oil & Gas business recognized $3.7 million in revenue for Q4, returning to normalized levels after a decline in Q3, with total license revenue for 2019 at $14.1 million [27][28] Market Data and Key Metrics Changes - The majority of water growth occurred in the Middle East, with over 20% of the 2019 increase coming from Latin America, driven by increased project activity in industrial sectors [26] - The company expects to recognize between $12 million to $14 million in license revenue for 2020, with a focus on live well testing in the first half of the year [28] Company Strategy and Development Direction - The company aims for 20% to 25% revenue growth in 2020, with an additional 10% to 15% in 2021, driven by the mega-project channel and the transition of thermal desalination capacity to seawater reverse osmosis [9][10] - A reorganization of the team has been completed to strengthen business unit execution and enable a disciplined approach to long-term growth, focusing on new Water products and advancing the VorTeq towards commercialization [21][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to generate significant revenue growth despite the challenges posed by the coronavirus, noting no significant effects on revenue outlook or supplies as of the call date [14] - The company ended 2019 with strong momentum and is excited about the growth opportunities in 2020, emphasizing the importance of their technology and market position [23] Other Important Information - The company completed the second phase of manufacturing capacity expansion in 2019, with a new facility in Tracy, California, expected to produce about 20% of Pressure Exchangers in its first year [13] - The overall operating expenditures grew by 21% in 2019, primarily due to R&D spending related to VorTeq and new product developments [32] Q&A Session Summary Question: Water revenue guidance and its cadence - The company anticipates a revenue weighting of approximately 40% in the first half and 60% in the second half of 2020 [37] Question: VorTeq testing progress and milestones - Management confirmed commitment to reach at least step M1 before the end of 2020, citing successful testing results [38] Question: Live well testing and partnerships - The product partner for VorTeq is Liberty, and live testing will occur at a customer site, with both live testing and M1 completion expected this year [42]