Energy Recovery, Inc. · NASDAQ:ERII
Energy Recovery — Investor Presentation (May 2019)
32 slides from Energy Recovery's investor presentation, May 6, 2019
Slide 1: Energy Recovery Investor Presentation
ENERGY RECOVERY INVESTOR PRESENTATION (NASDAQ; ERI) May 2019 oS 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 UPDATE: Seawater Reverse Osmosis (SWRO) Desalination Continues to Drive Growth © Record first quarter revenue of $16M, 45% growth year on year © 20,000th PX Pressure Exchanger shipped during Q1 2019 © Increasing global water demand provides positive outlook for 2019 and beyo
Slide 4: Q1 2019 Financial Update
Q1 2019 FINANCIAL UPDATE eg it © 43% revenue growth year-over-year driven “ai dhie wh a0ls by water segment 20m © Water demand outlook continues to strengthen © Net cash (and securities) position of over sum $91M ave aris Compelling Product Gross Margins Product Gross Margins © Profitability driven
Slide 5: About Energy Recovery
ABOUT ENERGY RECOVERY oS energy recovery:
Slide 6: Energy Recovery Snapshot
ENERGY RECOVERY SNAPSHOT Who Are We © Aglobal, engineering-driven technology company delivering solutions for industrial fluid flow processes © We drive meaningful, immediate cost savings and operational efficiencies for customers R & % Our Approach o Convert wasted pressure energy into a reusable a
Slide 7: Engineering Is in Our DNA
ENGINEERING IS IN O} A © Energy Recovery is anchored by world-class R&D Spend as % of OPEX 365% engineers © One-third of our company holds engineering degrees = 9 Ph.Ds and 14 Masters Degrees = Over 45% increase in R&D headcount since 2013 © Advanced testing capabilities in CA and at-scale in TX © R
Slide 8: Our Core Technology Is the PX Pressure Exchanger
IR CORE TECHNOLOGY IS THE PX PRESSURE EXCHANGE! Pressure Exchanger Key Components Fluid) lows in| PX Pressure Exchanger ‘Transfers energy with only one moving part (rotor) Housing <— horor cantidge How the PX Pressure Exchanger Works Two fluids on opposite sides of the Px: Rotor duct rotates to pres
Slide 9: Our Products and Solutions
UR PRODUCTS AND SOLUTIONS Energy Recovery Devices ae, Che Oil & Gas Hydraulic Fracturing Solution PX® Pressure AT™ Turbocharger Vorteq™ Exchanger® Pumps Mud Pumping Solution AquaBold™ High Vertical Horizontal Pressure Pump Circulation Pump Circulation Pump SH enerey recovery
Slide 10: State of the Art Manufacturing: A Prerequisite for Success
STATE OF THE ART MANUFACTURING: A PREREQUISITE F Advanced Ceramics Manufacturing Capabilities Help Drive Water Success © Vertically integrated ceramics manufacturing facility located in-house in CA * Creates potential competitive barrier to entry © Best practices ensure high-quality production proce
Slide 11: Seasoned Water Salesforce and Global Distribution Channel
Seasoned Water Salesforce and Global Distribution Channel © Salesforce’s tenure delivers strategic advantages in a relationship-driven market = Business unit leader Rodney Clemente, a 20 year industry veteran, has overseen rapid water growth = Entrenched, stable global water team © Strong relationsh
Slide 12: Strategic growth priorities
Build and enhance Commission Commercial infrastructure for growth Development Center Grow and expand existing Commercialize VorTeq market presence in seawater desalination and beyond © energy recovery: n
Slide 13: Historical Financial Results
HISTORICAL FINANCIAL RESULTS Revenue: 25% CAGR 2014-2018 Product Gross Margin Strength goom — S75M 70.7% $s8m aay «871% 54.9% 36.2% $30M 2014 $45M_ 2014 2015 2016 2017 2018 2015 2016S 2017-2018 Net Cash and|Securities Position of over 91M © Weare positioned to make critical investments in our busine
Slide 14: Water: Our History Transformed
Water— Our Hist Mane Iiranstormed
Slide 15: We Maintain a Strong Market Share in SWRO Energy Recovery Devices
WE MAINTAIN A STRONG MARKET SHARE IN|SWRO ENERGY RECOVERY DEVICES) © The PX Pressure Exchanger, our flagship desalination solution, delivers meaningful benefits = Reduces energy costs by up to 60%, SWRO Desalination Cumulative Capacity? ani " i delivering nearly $2B savings/year Poe * Lowers project
Slide 16: PX Pressure Exchanger Recycles Hydraulic Energy, Reduces Energy Costs
R PX PRESSURE EXCHANGER RECYCLES HYDRAULIC ENERGY, REDUCES ENERGY GOSi: Incoming seawater routed to pump and PX seater Loin inuees potable water foe imimions petal ter Pk wanterenerny 1 4 from high pressure pera wd = re pushes igh f oe 1) in pupsoe + rn otewater ErSees ease I hisvalve |) reduced by
Slide 17: Energy Recovery Devices
Energy Recovery Devices PX Pressure Exchanger co Unmatched efficiencies for desalination up to 98% © Highest uptime in the market (99.8%) © Designed for up to 25+ years of useful life hg, AT Turbocharger © Efficiencies up to 80% © Volute insert technology for best efficiency range © Lower initial ca
Slide 18: Global Reach of Energy Recovery Products
OBAL REACH OF ENERGY RECOVERY PROD! ~20,000 device installec rid SH enerey recovery ‘single dees veneer acme »
Slide 19: Fresh Water Scarcity Is Increasing
FRESH WATER SCARCITY IS INCREASING Fresh water demand is increasing, creating global demand gaps © The world will only have 60% of the water it needs by 2030! © Potable water demand expected to increase by roughly 30 percent by 20507 © Water demand for agriculture is growing as salinity intrusion ne
Slide 20: Thermal Desalination Decommissioning Creating Incremental Opportunity
THERMAL DESALINATION DECOMMISSIONING CREATING INCREMENT? © Thermal seawater desalination was the dominant technology before the PX © Operational savings from devices like the PX made SWRO more economic than thermal © Thermal plants being replaced by SWRO, creating incremental opportunity for Energy
Slide 21: Consistent Revenue Growth
Consistent Revenue Growth © Mega projects continue to drive 2019 revenues © Owing to our robust pipeline and backlog, we expect strong growth to continue into 2020 and beyond Extended Growth Cycle o Upward revenue trend since 2014 © Evidence of extended cycle and upward shift in global demand curve
Slide 22: 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 Spend! Project’s Capital Spend © Energy recovery devices are critical to make plant operations affordable Pretreatment 6% intake/Outfalls ™% = We dominate this market eps ngineering © C
Slide 23: Oil & Gas: Our Next Market to Transform
” a = — - > etl Oil & Gas — Our Next Market to Transform (&)- energy recovery"
Slide 24: We Are Applying Our Water Expertise to Oil & Gas
WE ARE APPLYING OUR WATER EXPERTISE TO OIL & GAS © 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 ©
Slide 25: Oil & Gas Solutions
R SOLUTIONS Hydraulic fracturing technology solution Houses 12 PX Pressure Exchangers Designed to isolate and save frac pumps Addresses pump failure at frac sites Re-routes hostile frac fluid away from critical and costly pumps Currently in R&D stage ooo0°0 ° SH enerey recovery Mud pumping technolog
Slide 26: VorTeq Protects High Pressure Pumps, Reduces Costs
VORTEQ PROTECTS HIGH PRESSURE PUMPS, RE ES COSTS ost is proceed S&S... panes ae * pumpsere ‘anda | ted en | Sr km ose vs met © Pumps process water, chemicals and sand > Pump assets quickly destroyed Longer-term it may be possible to pair VorTeq with centrifugal pumps Further decreases need for pumps
Slide 27: We Have Invested to Accelerate the Commercialization of VorTeq
WE HAVE INVESTED TO ACCELERATE THE COMMERC! We are accumulating runtime in the testing yard at our Commercial Development Center o Energy Recovery personnel and equipment moved to our center in Q1 2019 © Rigorous VorTeq system testing and validation ongoing = Investing in additional personnel to exp
Slide 28: VorTeq Agreement & Commercialization Path
VORTEQ AGREEMENT & COMMERCIALIZATION| PAI i Entered into a 15 year license agreement with Schlumberger Technology Corporation © 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
Slide 29: VorTeq Replaces Positive Displacement Pumps, Reduces Costs
MITEQ REPLACES POSITIVE DIS Status Quo EMENT, Positive displacement pumps process drilling fluid today, wearing down and destroying pump assets IMPS, REDUCES COSTS With Mi
Slide 30: Strategic Summary
STRATEGIC SUMMARY oS energy recovery:
Slide 31: Energy Recovery: A Balanced Risk/Reward Approach
ENERGY RECOVERY — A BALANCED RISK/REWARD APPROAC! Water: Steady, Visible Growth © Global water demand outlook continues to improve and leads to further optimism © Robust backlog and pipeline driving expected water segment growth in 2019 and beyond © Thermal to SWRO transition adds to potential long
Slide 32: Thank You
THANK YOU oS energy recovery: