Energy Recovery (ERII) 30 Oct 242024 Q3 Earnings call transcript

Good day, ladies and gentlemen, and welcome to the Energy Recovery Third Quarter Earnings Call.

Our host for today's call is Lionel McBee. [Operator Instructions] I would like to now turn the call over to your host, Mr. McBee.

Good afternoon, everyone. XXXX earnings Recovery's call. Energy to third conference quarter Welcome us. We joining appreciate you is Chief Moon; the of I'm Mike available today the meant joined and I'm Lionel Mancini. The are by website and Investors quarter Officer, Investor President same at location. earnings posted today's McBee, news on Director prerecorded Relations remarks Energy in call Financial our release, and Chief the Recovery, third from and which our section accompany Executive Officer, our David are to here of

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

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

of materially our could is with for year our by this to update will or that the lastly, to that, Wednesday, the events call XXXX, earnings statements note Form forward-looking identify February those and October documents please to this reflect call are today, conference quarter And disclaims not required fourth documents statements intent performance important other from from during company projections refer during purposes, as made in differ company's XXXX. And law. unless you factors obligation the and actual only XX-K contained or These XXth, expressly specifically forward-looking Form subject call results planning uncertainties otherwise risks, circumstances, All the and time any future that and your files SEC, XX-Q. of David. any turn over or Forward-looking statements to the I time XX, made full to company certain with cause factors. We are scheduled to guarantees to and statements. made are call subsequent for

thank Thanks, Lionel, for and today. joining us you

the first Lionel started Xth. new earnings I As work CFO, and he say already by call done. on mentioned, Energy partnership has who Mancini, we quarterly Mike's to want for our on grateful joined how I time for am the today Recovery's August are Mike

As quarter, in engineering has across brings the wealth to of a in I executive mentioned finance, and and strategy high-growth where drive his last demonstrated leadership companies. enterprise. Mike experience he had roles He financial technology ability entire performance

which community asset the background him his to capital with him a a of leadership provides investment valuable our team. markets, with Additionally, makes institutional deep understanding

into or brief Now the Playbook results, I before strategic I get will third the planning our on process, it. call a we quarter as financial comment make

of into webinar a are Although of November where any investor specifics members desalination, call, our including of XXth, we won't live the be growth Playbook, this team hosting we plans COX. on senior my wastewater and leadership playbook the present getting for on will

approximately last We place will targets. will XXXX, hours, provide a.m. will XXXX as take financial as a for long-term XXXX including XX via Eastern X replay Time a be there. and provide The website, well IR at also also be guidance of webinar live the session. Energy will of the accessible archived The event section on Recovery's virtually will calendar IR and located Q&A event the and link

XXst. our found be in can press issued details release Additional on October

the third update. into move let's quarter Now,

guidance of deliver you and quarter. for the million, First, $XX.X our very to set saying another for of revenue helping total end another With our employees we upper thank quarterly quarter the by let record. me start achieved solid revenue

year the to the quarter company's what our the guidance deliver $XXX create sight performance million. our line million largest in still of to we work while stands $XXX third a quarter did full fourth have of considerable be Now in to history to do to achievement quarter, of

As Energy only team I've deliver said, projects With to the on deliver I quarters, that demands the growth these quarter are the mega and off XXth our biggest what history, to the last of our Recovery's share said of revenue be increasing. mega channel. what ability year will in consecutive capping couple the remain on another market strong projects be of will in confident in year

before high-level briefly Let me to about results. talk for Mike over our results segment turning financial the it

the water. continues in third growth $XX notable up demand were to East Let's end well strong of as like compared quarter second the at of of Results for in $XX.X quarter XXXX increase projects. desal and our compared to from X% million, came Africa, revenue in start several XX% quarter by North to Middle during This the Water solid guidance with and the million the demand million mega the driven highlight an and prior made of as third India. I'd the $XX continued quarter. high shipments of quarter's XXXX. reflects to

that meters XXX,XXX as for this project shipment several the second we the Perur of be desalination a India plant announced worth was cubic plants previously day. reminder, in Perur included the the million of just we Also, million, desalination earnings in $XX final delivering July completed in Once SWRO in India, in projects we and India. one the per contracts July largest call. First, the constructed, will our $X.X project mentioned as Chennai, during in

million remaining expect provide XXX,XXX each Altogether, cubic will the to in the under contracts, complete quarter. plants of shipped $X.X additional we fourth meters to and in million clean water projects over these India X of day. For the shipments drinking these communities $X.X

per will quarter, project largest -- third desalination the Dubai, on which the meters constructed progress in be in Dubai, made plant XXX,XXX day. providing also cubic once was the which UAE during IPP Hassyan We

the of As call our in we had shipped last July, first phase.

to final expect today, of total QX. million the I'm As ship million year-to-date $XX.X of in and that a pleased shipped to we $X.X report

These we over X signed months. contracts water also for water XXX,XXX projects agricultural use, August, potable for to Morocco. In more than totaling these meters In contracts addition desalination SWRO enough to supply cubic continue for shipments, desalination day in $XX.X of will which major million and million Moroccans. represents we projects in per municipal secure recent

have As currently of be order. to is in expected of shipped today, balance The filled total million $XX.X that of XXXX. the we order

and Based month, per in XXXX awards financial we projects to for However, Africa we X to made, fourth we capacity therefore, target and population in ongoing $XXX strong dates shipping monitoring date. improvements plans we The desalination for plants. Earlier are totaling all on day, demand end-of-December Arab meters per included our maintaining our and this our in contract an SWRO $XXX as point -- quarter, of United on their our close an given cubic a ship million nearly continuing were and over radar for this include desalination to are guidance as our contract to driver third additional with our X business Emirates. North totaling generate revenue timing growth, strong $XX fourth for water announced to to the these be our continues the is intent trends shipments for guidance. proof SWRO shipment of growth Both closely growth such day million important drought, cubics orders and industrial awards of secular the quarter in as manufacturing year. have the quarter. the expectations results million million

risk, approximately XXX% of quarters, XX% as midpoint previous yet the includes first underpins substantial water year. progress in to or full confidence recognized million and at in provided $XXX in or we guided said, guided third of slippage. With execution our our projects quarter, our cause in range for quarter end circumstances the the of reiterate the of totals XXXX. the in to of in X slippage strong XXXX like contract year, million compares I'd fourth XXXX. fourth delays current collaborate towards our recognized the at revenue quarter customers, rather year guidance. range be year range remain and our the continue customer-driven complete delivered, reaffirming end our of we as revenue would or be remaining event we associated XXXX of In control to the focused the be deliver towards full but that full for in the signed on year than with months to same revenue cannot the With that total which time We of This Now the closely guided roughly our XXXX. not $XXX the our would guidance under this to unforeseen to and shipments simply the

turning wastewater. to Now

XX% to continues grow, last by contracts period. increased pipeline year same the almost as compared wastewater and wastewater our signed during Our to we've

expansion. in water Our underway, is strategic making product diversification and for our portfolio progress we strategy are

guided Saudi provided This that's to the $XX a project, phased over range we our towards wastewater multiple year, the to revenue the of of expect Arabia $XX For is end longer-term previous lower NEOM generate a project the million years. to primarily project in result mega transitioned million. of

through that However, the offset to we this outperformance we channel. are seeing OEM continued expect in impact

activity demand solid the we concerns geopolitical to economic the see progress still November remain effects begun We rapidly trends Overall, water wastewater during around webinar and strategy investor rates, around by our and interest details to there our have for rising intact, the XXth. ahead. but Clearly, pocket the and concerns on that fresh economic moderate. and for global more will inflationary feel share on our globe, we long-term continue are growth air created

Now let's move to our business. COX

progress We make second of PX development commercialization G. generation the to continue in and our

the in during gating our which was item the lab second our successful for As completed we call, completion of XXXX, I first testing. last stated quarter,

to the we we initial am the report to least sites focus to quarter, XX third of our installation of pleased and XXXX. I across QX XX the operating which turned During U.S. Europe. of by sites installed second item, our the and reached our goal XX that gating at end having is

summer installation of XX now of goal total the collection the year-to-date. data. able complete a In were to fact, site critical reached, we've that completed of we With sites

The capacity our PX showing G near-term. the system increases adoption our in cooling report on G firm, collaboration the than As better I with us website, our users white be last consumption, reduces were paper improves the with and the XX third-party energy in the showed on can to at sites. I'm results with savings in to white we catalyst of energy Engineering, accelerate PX for discussed measure paper a by and which PX for DC during pleased respected results, DC recently highly much these that and improved that as end partners OEM XX% energy as Engineering, or that believe of to the by coefficient expected, be that with provided we we annual engineering the findings of will metric published to XX% stability. The generation performance efficiency energy the savings. leading X G verify our PX projected peaks partnered initial G a up found second call,

to verification began centigrade, to degrees success G on XX% G the energy of or This the quarter the third refrigeration COX transcritical findings up systems ongoing capacity in process full operational heat to a the for their that of cooling efficiency, Fahrenheit OEMs and addition against XX important XX of degrees G. In processes, COX providing towards estimate racks. PX waves. Based increased integrating to measurement its step PX is necessary flexibility multiple during safeguard the and commercialization into the PX by

are integration by clear in our installed and target for this sites the path of additional to the already operating, and have test to partners. Adding we're installed XX resulting sites towards XX coming by a sites meeting months. XX we the end our year. momentum, We the commissioned by on OEM currently installation highly of the be encouraged end the to of low XX results our Including

the G has as additional meaningfully of the of PX sites pipeline gained our industry Additionally, grown awareness has technology.

during Europe. our We to to sharing results additional new sites discuss PX and discussions financial sites look the forward to G for our like over Mike on quarter. to webinar. With strategy clearly it and OEMs the with for and details the Momentum expand upcoming I'd progress COX our U.S. to hand new in wastewater accelerating. customers existing I that, and with is installed across for are for

at by you, Thank and saying let Energy thanks you to Recovery. in confidence me the And to start for here your lead me to Board function the David. trust and finance

of discuss was I'm the and gross for I to I the position, to in margin our ability profitability by about like and drive core flow. grow and mix. After with its reach the shareholders, income our and revenue, business expectations forward year confident on opportunity driving job, technology, expense, working cash I'll full arriving, and cash well on X for the the value Then the months PX XXXX. product look operating financial the create exciting almost to to to company's our Before excited team expand and the opportunities the discussing prospects, begin company's now as as net results. I'd

to solid mega been quite $XX project As our evident David revenue, upper here. QX million time guidance. between there mentioned, year the have shipment we even over full a intrinsic represent project-driven lumpy quarter single of delays at Any generating The revenue, business of had our on be year fourth impact $XX an revenue a to XX%. the approximately end the such $XX.X the be the the projects channel have In XX% of represent me alone, of will at to projects million impact revenue nature over expected I our and has in with become which the our is of of on million, short revenue, delays. of midpoint. minimal XX% although project in a those full X would would value quarter dates representing

margins. to Moving

fourth our Our when compared we've and manage third guided quarter the XX%, production basis resolve gross and full and our for year, gross XX% range ramp-up guidance XX within to margin coming expectation of to efforts of quarter year to the QXXX, third of which challenges XX%. corner our the range margin our related the to put margin guided would of to believe in for XX% in our XX% improved at gross is turned second in We the above previously the XX% XX.X%, points quarter. our the with quarter

XX%. that Regarding on we Water stated our mix, was of call, XX% XXXX, product of for demand QXXX last up from trending the our original towards PX our expectation

leadership faster-than-expected approximately quarter, Water the our highlights XX% comprised the of PX This with the XX% QXXX the product desalination our adoption full mega our align reinforcing our ability year. the for needs. in of customers' evolving During space to position for product third mix our demand, underscores solutions project QXXX and expectation

previously for expenses $XX operating quarter which million guided the range Our came the million. quarter. quarter million, for costs our were below One-time $XX.X the were $X.X third of to $XX in for million

a As was million, last X% the base for a period quarter from OpEx year. $XX result, increase same the

to count will support of and associated our focus and guidance are be the implies the capture while previous to some our to to $X work from million, with million full support fourth XXXX we expense which operating estimated continue we working, approximately are for added to to we one-time $XX million growth. Still, of operating have growth million million. before. $XX in includes million million expected and efficiency costs still to of expense one-time long-term do year reducing So the base $XX the million able the This indicated our on full $XX cost $XX year expect $XX capital OpEx our quarter and million, $XX some in $XX costs to experience of strategy to employee benefit cost efforts our

with as progresses. we to of a for expectation move in $X.X third quarter income to last year from line our million, the on provided call our the operations operating positive Additionally, income reported

also million, net for increase the a $X.X of We compared reflecting the reported second quarter quarter. income to substantial

it to closing very to to strong David million back of $XXX for at in the Lastly, $XXX quarter end year like on the financial depending during a end and at a investments million that, We we $XXX few third position, I'd as cash, compared with of the remarks. end second the million collections. With million balance over maintained our the quarter. of quarter between and of and to cash $XXX of we remain expect the turn cash

sum $XXX towards while will million come Mike. anticipate quarter, track of our on to up, record this $XXX. and of wastewater you, $XX $XX in guidance there still end delivered remain million that fourth revenue to To million to us year is to we we our execute of We in lower the range. a full in ahead confident generate although third business, the quarter, work from remain revenue Thank we

of second the with XX year. sites on track by PX the the our installed end are to XX to deliver low of end G generation We

our of million $XX We we from million. With guidance gross $XX are maintaining to our let's guidance Q&A. now XX% to reducing are margin operating and XX%, -- expense move to that, to

[Operator from with Instructions] first Pfingst Ryan comes question Your Riley. B.

with to Not webinar, in PX you to doing get do guys ahead are the the of was if but talk else anyone wondering you about attempting I landscape could Is G? COX. the competitive what

No, other exchanger no pressure we today. that competition see

applications pressure no against the you as with other exchanger. Now space, but the in we technologies or one compete know,

the second And strong your the the early strategy, maybe there David. requirements I know wondering how the potential Got ramps? about needed any you helpful, us of if it. balance with remind That's And stage, my you as repurchases COX allocation then you're needed have is on capital I still share now? thinking for could opportunity capital guess that question, opportunity. for cash it's for meaningful cash but

is this Ryan, Mike.

get that lay So, I our capital plans, going out needs think strategy into we're webinar. growth capital policy. and roll allocation of the out to We'll all on a

on about So be talking will XX. we that November

with comes Pavel question Raymond next Your James. Molchanov from

markets? of high-level customer your Are the Middle any kind mix diversification away me towards about observing geographic start from Let one and East of you newer desal. desal with a

from really Pavel, to is still Africa -- East, David. all as this you. of this quarter Middle is the third to done in Nice No, favoring from year, the about -- talk concentration still the from of first it's of for MEA. came the came XX% quarter then revenue the our X for up year months the we're came XX% over MEA and

look on be that and that. to part of to reliant we'll very continue still So we're world, the

part to mix Middle over will hear years. X Africa and you'll of important the a continue very East our the next As play the in webinar,

the I side, ago, in years On signed with partnership now a the you of is a remember, refrigeration strategic Netherlands couple this [indiscernible]

going Still strong.

Group, any have been other European up? partners with that signed Italy, And Yes. in there [ ] Aetna you've

we've to, it's moment No, But a at number got sort moment. it's we're talking official at of terms partnerships, Europe. of in that's Epta new Pavel, the -- in few the that faces of and

And going a you'll around is I'm few strategy partners? that this there the a touch centered of word approach of about is -- refrigeration, the to on list go-to-market but guess, kind out sure it select is I product? weeks for to a better remain here, in Or the getting

It mean directly. officially not the end we're get specked Ultimately ultimately, to the PX to users. where ourselves supermarket. -- a within into end specked is doesn't to get have integrated talking OEMs our and get G thus their systems users But to we

to so OEMs. to And go we've do that, the got through

November We'll All XX. the rest right. save until

forward Looking to it.

Your comes with Jason ISI. Evercore from next Bandel question

one for first Mike. My is

what been now seat You've you the attracted X the months, said. you on in touched almost the prepared you to CFO for in And company. remarks, like

curious, inside some in the what Just focusing impressions being on, of addition so you've the work? initiatives initial some Playbook course, far? were of been And company to of your are the what that

Yes. Jason. Thanks question, the for

other can for in I almost my efficiency me of things And here for -- really largely growth think and months finance new in has here There's what been and focus to lot on that opportunity. opportunity we to you've X cost. efficiency the expertise it, the for think along I So a There's opportunity forward. with bring we been coming executives capital, true. word growth. now. really key just where is allocate for I going profitable opportunity There how opportunity team, is There's expected is and for the manufacturing. in And

looking working Makes sense. forward you. Got to it. I'm with

X performance consistent I'm of just by were refrigeration, paper, the monitored David, PX DC that curious, the in in sites the across white the Engineering? G Next was

variation, Yes, on Canada right, whether consistent versus temperature Southern depending California.

the bit was there's But of a that what So and energy capacity variation. savings the was consistent increase.

savings Now the those that we differed of out of depending all it we've been on and both locations location. differed tracking. energy of increase the got amount But capacity

remaining now you the In white there year, performance you the how paper, sites deployment hand are prioritizing this for sites? terms of the in remaining data in the that the for have

Yes.

be Europe, customers the versus remaining combination going of OEM sites existing a So customers. OEM new are to U.S.,

got the with site ensure use And we a that so, the that we've tool work sites to optimize OEMs selecting. selection on we that we

on. selection so, tool we get sites ensuring using And sure site for that the we're optimization make we're that to right early

got use we've But continue so we'll So -- remainder capacity other the do sites to that XX process. for or of year. it's otherwise, these to the the

me Understood. costs? how cost spend And And much there kind here just in of third is good that at in of control the there. to one for last drove the left OpEx, anything Was one-time performance quarter? particular one quick this point the on

This Mike. Yes. is

areas was largest So driver a in in more cost that of of for. of I'd coming non-core was not avoidance the say planned growing cost certain growth

for also some do I'd cost and we expect So the And and non-cash million already million cost avoidance. done. in but costs, year, $X cash one-time then $X cutting, we to the total that just, about say, of in have

So about $X million left.

Your question Partners. Jeffrey next Seaport Campbell with from Research comes

question. is first paper white My a one

paper white and increased require transcritical that recent did cooling. savings GXXXX Your capacity not any cooling system energy water the PX noted

this dry So avoid choose wondering to I the a an and PX G was instead. be ] that cooler system cooler able adiabatic might a using [ suggested if

a question. good good David. this It's it's -- Yes, is a

load across So even California, Europe certain there that a Southern there number days. sites adiabatic or high of heat for U.S., and especially refers of the that what sites -- -- are require a of are number parts to in across is, cooling

load is reduce worst the savings PX energy can the on. reducing thus thus or a during and that increased what case water on as adiabatic days, goes location given its so And cooler can usage, so depending replace high the of best cooling a G heat reducing the adiabatic does amount that cooling capacity, on either case

PX no require if if adiabatic you longer that. a what you're got so you've put have adiabatic, greenfield going in G, site that, putting to And in an put you're an is this you where longer before, no -- the would cooler means you

the well. [ nor the ] $XX,XXX of operating cooler have the to adiabatic putting to, as you $X,XXX through can year expense don't in a costs $XX,XXX of go do have the to putting $XX,XXX forego You in you of to

nice adiabatic we're So cooling replacement a system. for that

That Yes. G pretty argument as the out from... good for stuck a PX

users. hope We as especially case We others that's it, the so. read hope end

So...

And can get of at we expander time. rid same the the

the at excuse time. me, ejector, the or -- same that's So

it's pretty a argument. good So

right. That's

I wanted one you these decision to refrigerants in The ask real of of think continued HFO designed blends HFO, kind equipment other a SNAP June and in for EPA's recent [ HFC new use allows question. ] in the U.S.

are you're Just refrigeration, with maybe animal thoughts your what competition as we are continued wondering and what HFO or on strengthen COX what spirits PX hearing to discussed. the just particularly ability or between the COX case G's

Yes.

I is the think winner. outright COX still

some full have COX, the might ahead But HFO it's our been will that can with we're hearing store even stand-alone around from OEM in and maybe that choose on that, that cases speed we've in full the speed that working move the you U.S. freely. is blends, You our outliers ahead. everything OEMs, customers

Miriam from ] the for call are comes further with Instructions] questions remarks. I'd this no BMO at turn to to question [Operator like Your back any next there time. [ Martin further appears our presenters Capital. It

[Technical Difficulty]

and today's concludes Third a have you Thank call. Recovery earnings for your of rest wonderful This Quarter Energy day. attending,