Energy Recovery, Inc. · NASDAQ:ERII
Energy Recovery — Investor Presentation (February 2019)
30 slides from Energy Recovery's investor presentation, Feb 4, 2019
Slide 1: Energy Recovery Investor Presentation
ENERGY RECOVERY INVESTOR PRESENTATION (NASDAQ: ERII) February 2019
Slide 2: Forward Looking Statement
FORWARD LOOKING STATEMENT This presentation contains forward-looking statements within the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements in this report include, but are not limited to, statements about our expectations, objectives, antic
Slide 3: Strategic and Commercial Update
STRATEGIC AND COMMERCIAL UPDATE Water o Robust pipeline and backlog driving expected water segment growth in 2019 and 2020 o Industry trends leading to longer-term optimism ▪ Pursuing organic and inorganic growth initiatives ▪ Leveraging global sales and distribution channel to support product portf
Slide 4: Q3 2018 Financial Update
Q3 2018 FINANCIAL UPDATE Strong Year to Date Growth Revenue o 30% growth in Q3 2018 vs. Q3 2017 Q3 2017 vs. Q3 2018 YTD 2017 vs. 2018 o 25% growth 2018 YTD driven by water segment $22.2M $56.8M o Generated $9.7M in operating cash YTD vs. $45.5M $17.1M net spend of $2.2M in 2017 o Net cash (and secur
Slide 5: Energy Recovery Snapshot
ENERGY RECOVERY SNAPSHOT Who Are We o A global, engineering-driven technology company delivering solutions for industrial fluid flow processes o We drive meaningful, immediate cost savings and operational efficiencies for customers Our Approach o Convert wasted pressure energy into a reusable asset
Slide 6: Our Products and Solutions
OUR PRODUCTS AND SOLUTIONS Water Oil & Gas Energy Recovery Devices Hydraulic Fracturing Solution PX® Pressure AT™ Turbocharger VorTeq™ Exchanger® Pumps Mud Pumping Solution AquaBold™ High Vertical Horizontal MTeq™ Pressure Pump Circulation Pump Circulation Pump 5
Slide 7: Engineering Is in Our DNA
ENGINEERING IS IN OUR DNA o Energy Recovery is anchored by world-class R&D Spend as % of OPEX engineers o One-third of our company holds 34.7% engineering degrees 32.9% 27.8% ▪ 9 Ph.Ds and 14 Masters Degrees 20.5% ▪ Over 45% increase in R&D headcount since 2013 o Advanced testing capabilities in CA
Slide 8: State of the Art Manufacturing: A Prerequisite for Industry Leadership
STATE OF THE ART MANUFACTURING: A PREREQUISITE FOR INDUSTRY LEADERSHIP Advanced Ceramics Manufacturing Capabilities Help Drive Water Success o Vertically integrated ceramics manufacturing facility located in-house in CA ▪ Creates potential competitive barrier to entry o Best practices ensure high-qu
Slide 9: Distribution Strategy Leverages Our Strengths in Each Market
DISTRIBUTION STRATEGY LEVERAGES OUR STRENGTHS IN EACH MARKET Seasoned Water Salesforce and Global Oil & Gas Sales Strategy Differs Due to Distribution Channel Our Position o Salesforce’s tenure delivers strategic o Licensing model is more effective for a advantages in a relationship-driven market ne
Slide 10: Our Core Technology Is the PX Pressure Exchanger
OUR CORE TECHNOLOGY IS THE PX PRESSURE EXCHANGER Pressure Exchanger Key Components Fluid Flows in PX Pressure Exchanger Transfers energy with only one moving part (rotor) Housing End cover Sleeve Rotor Cartridge How the PX Pressure Exchanger Works Two fluids on opposite sides of the PX; Rotor duct r
Slide 11: Near-Term Business Objectives
NEAR-TERM BUSINESS OBJECTIVES Further execute on two business units to make capital allocation Commission Commercial decisions based on opportunity Development Center Build infrastructure Grow and expand existing Commercialize VorTeq for growth market presence in Further Develop MTeq seawater desali
Slide 12: Financial Results
FINANCIAL RESULTS Revenue: 31% CAGR 2014-2017 Product Gross Margin Strength 67.1% 69.6% $69.1M 64.1% 56.2% $57.8M 54.9% $44.7M $30.4M 2014 2015 2016 2017 2014 2015 2016 2017 2018 YTD Net Cash Position of over $100M o We are positioned to make critical investments in our business ▪ Organic or inorgan
Slide 13: Water – Our First Market Transformed
Water – Our First Market Transformed 12
Slide 14: Helping Make SWRO Desalination Economical
HELPING MAKE SWRO DESALINATION ECONOMICAL o Thermal desalination was the norm before our PX Pressure Exchanger technology o Our PX Pressure Exchanger reduces energy costs by up to 60%, making seawater reverse osmosis (SWRO) desalination plants more economically viable o Our solutions deliver meaning
Slide 15: Our PX Recycles Hydraulic Energy, Reduces Energy Costs
OUR PX RECYCLES HYDRAULIC ENERGY, REDUCES ENERGY COSTS Without Energy Recovery Devices (ERDs) With PX Pressure Exchanger Incoming seawater routed to pump and PX Seawater Low pressure Low pressure potable water potable water PX transfers energy Energy wasted as from high pressure Pump pushes high hig
Slide 16: Our Water Product Line
OUR WATER PRODUCT LINE Energy Recovery Devices Pump Products PX Pressure Exchanger AquaBold High Pressure Pump o Unmatched efficiencies for desalination up o Water lubricated bearing for long life and to 98% low maintenance o Highest uptime in the market (99.8%) o Cast, duplex stainless steel hydrau
Slide 17: Global Reach of Energy Recovery Products
GLOBAL REACH OF ENERGY RECOVERY PRODUCTS 17M cubic meters/day of >19,000 devices $1.9B/year saved potable water produced1 installed worldwide for customers2 1Assuming all deployed devices are in operation; 2ERI estimates 16
Slide 18: Demand for Clean Water Is Expected to Grow at Increasing Rates
DEMAND FOR CLEAN WATER IS EXPECTED TO GROW AT INCREASING RATES Water scarcity is increasing o According to the OECD1, the world will only have 60% of the water it needs by 2030 o Desalination can help build a resilient, diversified water system We are positioned to benefit from the ongoing secular s
Slide 19: Our IP and Global Footprint Have Driven Growth and Profitability
OUR IP AND GLOBAL FOOTPRINT HAVE DRIVEN GROWTH AND PROFITABILITY Consistent Revenue Growth Q3 YTD Water Revenues o Mega projects are driving 2018 revenues YTD +38% $47M o Owing to our pipeline backlog and $34M continued demand for desalination, we expect strong growth to continue into 2017 2018 2019
Slide 20: We Are Focused on Expanding Our Water Business
WE ARE FOCUSED ON EXPANDING OUR WATER BUSINESS We Currently Focus on Only 1-2% of a Average Desal Project Capital Spend1 Project’s Capital Spend o Energy recovery devices are critical to make plant operations affordable Intake/Outfalls ▪ 7% Pretreatment We dominate this market 6% Engineering o Curre
Slide 21: Oil & Gas – Our Next Market to Transform
Oil & Gas – Our Next Market to Transform 20
Slide 22: We Are Applying Our Water Expertise to Oil & Gas
WE ARE APPLYING OUR WATER EXPERTISE TO OIL & GAS o Our PX Pressure Exchanger technology can add strategic value to the Oil & Gas industry o Water and Oil & Gas have similarities ▪ High pressure fluid environments ▪ Transference of hydraulic energy from a high pressure fluid to a low pressure fluid o
Slide 23: Our Solutions: VorTeq and MTeq
OUR SOLUTIONS VorTeq MTeq o Hydraulic fracturing technology solution o Mud pumping technology solution o Houses 12 PX Pressure Exchangers o Houses three PX Pressure Exchangers o Designed to isolate and save frac pumps o Designed to isolate and save mud pumps o Addresses pump failure at frac sites o
Slide 24: VorTeq Protects High Pressure Pumps, Reduces Costs
VORTEQ PROTECTS HIGH PRESSURE PUMPS, REDUCES COSTS Status Quo With VorTeq Hostile fluids processed by pumps VorTeq processes water, Pumps are sand and isolated, clean chemicals water fed to pumps o Maintenance savings ($3M - $4M1) o Pumps process water, chemicals and sand o Lower pump redundancy and
Slide 25: MTeq Replaces Positive Displacement Pumps, Reduces Costs
MTEQ REPLACES POSITIVE DISPLACEMENT PUMPS, REDUCES COSTS Status Quo With MTeq Positive displacement pumps process Highly efficient centrifugal pumps process drilling fluid today, wearing down clean water, reduce/preserve pump and destroying pump assets assets, lengthen life and reduce costs 24
Slide 26: VorTeq Agreement & Commercialization Path
VORTEQ AGREEMENT & COMMERCIALIZATION PATH Entered into a 15 year license agreement with Schlumberger Technology Corporation o Exclusive rights to VorTeq for on-shore hydraulic fracturing ▪ Upfront $75M exclusivity fee ▪ Two separate $25M milestone payments (for a total of $50M) subject to certain KP
Slide 27: We Are Taking Control of the Commercialization Process
WE ARE TAKING CONTROL OF THE COMMERCIALIZATION PROCESS In 2018, we invested in critical human and capital resources o We purchased our own high pressure pumps and ancillary equipment to execute testing ▪ Already shown dividends when utilized at partner facility in 2018 o We hired field service perso
Slide 28: Strategic Summary
STRATEGIC SUMMARY GO energy recovery’
Slide 29: Energy Recovery – A Balanced Risk/Reward Approach
ENERGY RECOVERY – A BALANCED RISK/REWARD APPROACH Water: Steady, Visible Growth o Global demand for potable water leads to further optimism o Robust backlog and pipeline driving expected water segment growth in 2019 and 2020 o Looking to leverage our current desalination position ▪ Sales and distrib
Slide 30: Thank You
THANK YOU GS energy recovery’
Energy Recovery — Investor Presentation (February 2019) on 6ix