Energy Recovery, Inc. · NASDAQ:ERII
Energy Recovery — Investor Presentation (March 2019)
30 slides from Energy Recovery's investor presentation, Mar 13, 2019
Slide 1: Energy Recovery Investor Presentation
ENERGY RECOVERY INVESTOR PRESENTATION (NASDAQ; ERII) March 2019 2) energy recovery’
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 UPDA\ Investing in Critical Infrastructure for Near-Term Execution and Long-Term Growth Water o Record levels of revenue, gross profit, and operating income o Strong global water demand provides optimism for 2019 and beyond = Historically high backlog and most robust project
Slide 4: Year End 2018 Financial Update
YEAR END 2018 FINANCIAL UPDATE o 7.8% total revenue growth (42017 s.042018 FY 2017 vs.FY 2018 o 11% water revenue growth o Generated $7.6M in operating cash vs. $2.9M in 2017 o Net cash and securities position of over S96M a7 ans eva7 Fy Record Product Gross Margins o Steady rise in product gross ma
Slide 5: Energy Recovery Snapshot
ENERGY RECOVERY SNAPSHOT, Who Are We o Aglobal, 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
UR PRODUCTS AND SOLUTIONS Energy Recovery Devices Hydraulic Fracturing Solution PX® Pressure AT™ Turbocharger Exchanger® ‘AquaBold™ High Vertical Horizontal Pressure Pump Circulation Pump Circulation Pump Sf} energy recovery" 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 36.5% engineering degrees = 9 Ph.Ds and 14 Masters Degrees = Over 45% increase in R&D headcount since 2013 o Advanced testing capabilities in CA and at-scale in TX
Slide 8: State of the Art Manufacturing: A Prerequisite for Leadership
STATE OF THE ART MANUFACTURING: A PREREQUISITE FOR RY LEADERSHIP) Advanced Ceramics Manufacturing Capabilities Help Drive Water Success Lin o Vertically integrated ceramics manufacturing facility located in-house in CA = Creates potential competitive barrier to entry o Best practices ensure high-qua
Slide 9: Distribution Strategy Leverages Our Strengths in Each Market
DISTRIBUTION STRATEGY LEVERAGES OUR STRENGTHSIN EAGH MARKE 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 ina relationship-driven market newco
Slide 10: Our Core Technology Is the PX Pressure Exchanger
UR CORE TECHN: GY IS THE PX PRESSURE EXCHANGER Pressure Exchanger Key Gomponents Fluid Flows in PX Pressure Exchanger Transfersenergy with only one moving part (rotor) Housing <4 Endcover <— Sleeve <— Rotor cartidge Siete How the PX Pressure Exchanger Works ‘Two fluids on opposite sides of the PX; R
Slide 11: ERI Business Objectives
ERM BUSINESS OBJECTIVES Further execute on two business units to make capital allocation Commission Commercial decisions based on opportunity Development Center i) ® Build infrastructure Grow and expand existing Commercialize VorTeq for growth market presence in Further Develop MTeq seawater desalin
Slide 12: Financial Results
FINANCIAL RESULTS Revenue: 25% GAGR 2014-2018 Product Gross Margin Strength $75M ba o7a% 707% Sam 64.1% E $a5M 549% 536.2% $30M 2014 2015 2016 2017 2018 2014 «2015-2016 2017-2018 Net Cas! o We are positioned to make critical investments in our business = Organic or inorganic opportunities to expand
Slide 13: Water — Our First Vertical
Wrejtse— Our First Vier<ae Vreinsroranetel
Slide 14: Helping Make SWRO Desalination Economical
HELPING MAKE SWRO DESALINATION ECONOMICAI 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
UR PX RECYCLES HYDRAULIC ENERGY, REDUCES ENERGY GOSTS) Without Energy Recovery Devices (ERDs) With PX Pressure Incoming seawater routed topumpand Px Seawater Low pressure 4 Low pressure i ae potablewater \ potablewater l! {233-25 (ibs333935 i a See —— isso o p y Mina neat ad i Px transfers energy \
Slide 16: Our Water Product Line
UR WATER PRODUGT LINE Energy Recovery Devices PX Pressure Exchanger o Unmatched efficiencies for desalination up to 98% o Highest uptime in the market (99.8%) © Designed for up to 25+ years of useful life Rg, AT Turbocharger o Efficiencies up to 80% o Volute insert technology for best efficiency ran
Slide 17: Global Reach of Energy Recovery Products
OBAL REACH OF ENERGY RECOVERY PROD! 17M cubic meters/day of >19,000 devices $1.9B/year saved produced? installed worldwide or customers? Assuming all deployed devices are in operation; 7ERI estimates
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 OECD}, 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
Slide 19: Our IP and Global Footprint Have Driven Growth and Profitability
UR IP AN) OBAL FOOTPRINT HAVE DRIVEN GROWTH AND PROFITABILITY, Consistent Revenue Growth FY Water Revenues o Mega projects drove growth in 2018 411% o Owing to our strong backlog, robust pipeline and continued demand for desalination, we expect strong growth to continue into 2019 and 2020 —_ corm $s
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% ofa Project’s Capital Spend o Energy recovery devices are critical to make plant operations affordable = We dominate this market o Current standing serves as competitive barrier to entry o Limited exposure to other areas
Slide 21: Oil & Gas — Our Next Market to Transform
~ = - — 7 a ——— Oil & Gas — Our Next Market to Transform ey Vey, energy recovery"
Slide 22: Leveraging Our Water Expertise to Oil & Gas
IG 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 We have leve
Slide 23: Our Solutions
UR SOLUTIONS Hydraulic fracturing technology solution Houses 12 PX Pressure Exchangers Designed to isolate and save frac pumps Addresses pump failure at frac sites 00000 Re-routes hostile frac fluid away from critical and costly pumps ° Currently in R&D stage o Annual royalty of $1.5M/VorTeq or $80-
Slide 24: VorTeq Protects High Pressure Pumps, Reduces Costs
VORTEQ PROTECTS HIGH PRESSURE PUMPS, REI ES COSTS Status Quo With ) precescooy . a eS Bx Pumpsare rare - ‘ isolated, clean 1 chemicals kaw waterfedto: — iii . somone l alias. Ki y o Pumps process water, chemicals and sand o Pump assets quickly destroyed Longer-term it may be possible to pair VorTeq
Slide 25: MTeq Replaces Positive Displacement Pumps, Reduces Costs
TEQ REPLACES POSITIVE DISPLACEMENT PUMPS, REDUCES COSTS: With Mieq | H CENTRIFUGAL POMP wprocrcome —e Positive displacement pumps process drilling fluid today, wearing down and destroying pump assets energy recovery" 28
Slide 26: VorTeq Agreement & Commercialization Plan
VORTEQ AGREEMENT & COMMERCIALIZATION Pi 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 KPls
Slide 27: We Are Taking Control of the Commercialization Process
WE ARE TAKING CONTROL OF THE COMMERCIALIZATION PROGESS) 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 pers
Slide 28: Strategic Summary
STRATEGIC SUMMARY 2) energy recovery’
Slide 29: Energy Recovery: A Balanced Risk/Reward Approach
ENERGY RECOVERY A BAI RISK/REWARD APPROA\ 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 distribution ch
Slide 30: Thank You
THANK YOU 2) energy recovery’