Energy Recovery, Inc. · NASDAQ:ERII
Energy Recovery — Q3 2018 Earnings Presentation
24 slides from Energy Recovery's earnings presentation, Nov 5, 2018
Slide 1: ERI Investor Presentation Q3 2018
ERI INVESTOR PRESENTATION (NASDAQ: ERII) Q3 2018
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: Q3 Financial Update
Q3 FINANCIAL UPDATE ERII - Total Revenue (2014 - 2017) ERII - Total Revenue (YTD Q3''17 vs. YTD Q3'18) $2000 $80,000 $7000 $09,129 $7090 J 60,000 $57,788 F seo — 50000 $45,003 2 $50,000 $45,468 E s1000 & saooo0 z $30,426 5 s20000 & 30,000 5 $20,000 B $20,000 10,000 $1000 so so 2014 2015 2016 2017 yr
Slide 4: Q3 Strategic and Commercial Update
Q3 STRATEGIC AND COMMERCIAL UPDATE o Water Update . All segments of water business remain strong Robust backlog and pipeline driving positive 2019 outlook Pressure exchanger remains desalination’s premier energy recovery technology . Market activity and trends leading to longer-term optimism C
Slide 5: Energy Recovery Snapshot
ENERGY RECOVERY SNAPSHOT Who We Are An energy solutions provider and technology leader in applying fluid dynamics and advanced materials science Pressure Energy is our Arbitrage What We Do/Product Strategy . Preserve or eliminate pumps that are subject to and destroyed by hostile process fluids . Co
Slide 6: Energy Recovery: Past, Present and Future
ENERGY RECOVERY: PAST, PRESENT AND FUTURE Present: Future: 1992 - 2014 2015 - 2017 Near-Term Strategy Long-Term Strategy Developed Signed 15-year Grow and Continued Pressure VorTeq license, expand existing market Exchanger commenced market presence leadership & Technology collaborative in SWRO growt
Slide 7: Core Technology – The Pressure Exchanger
CORE TECHNOLOGY – THE PRESSURE EXCHANGER Hydraulic Piston Concept Fluid Flows in Pressure Exchanger Pressure Exchange Snapshot Page 7
Slide 8: Value Arbitrage via the Pressure Exchanger
VALUE ARBITRAGE VIA THE PRESSURE EXCHANGER Status Quo Challenge Pressure Exchanger Advantage Value Arbitrage Less specific We recycle energy consumed Pressure energy otherwise wasted Less pumping is being needlessly pressure energy and capacity required wasted = wasted utilize it to pressurize R
Slide 9: Water Business Unit Long-Term Growth Strategy
. Click to edit Master text styles − Second level • Third level Water Business Unit Long-Term Growth Strategy Page 9
Slide 10: Water Pressure Energy Recycling
WATER PRESSURE ENERGY RECYCLING Dominating the Energy Recycling Market in Desalination – Our First Market Disrupted Before ERDs With Pressure Exchanger 60% reduction in size and subsequent energy reduction Wasted Pressure Energy Toward Geologic Mass Investment Highlights . From first sale to 90% mar
Slide 11: Reinvestment and Focus on Water Growth
REINVESTMENT AND FOCUS ON WATER GROWTH Steady Forecast for Capacity Additions in Opportunity for Growth & Desalination Over Next Several Years Expansion Beyond ERDs & Pumps Average Capital Spend by Product 4,500,000 Pretreatment 4,000,000 6% Intake/Outfalls 3,500,000 7% Engineering & Design 22% 3,00
Slide 12: Oil & Gas Business Unit VorTeq & MTeq Commercialization
Oil & Gas Business Unit VorTeq & MTeq Commercialization Page12 12
Slide 13: VorTeq for Pressure Pumping
VORTEQ FOR PRESSURE PUMPING Status Quo With VorTeq NO SAND OR CHEMICALS ENTER THE PUMPS Page 13
Slide 14: VorTeq Creates Significant Value
VORTEQ CREATES SIGNIFICANT VALUE Status Quo With VorTeq Centrifugal Pump Model Existing Pumping Model New Pumping Model with 4 to 5 with 15 to 20 PD Pumps Centrifugal Pumps 1 Reduced Maintenance: 3 Centrifugal Pump Model $3M to $4M p/yr p/fleet* $8M to $12M p/yr p/fleet* 2 Decreased Pump Redundancy
Slide 15: VorTeq Agreement & Commercialization Path
VORTEQ AGREEMENT & COMMERCIALIZATION PATH o VorTeq Commercialization is twofold: . ERII entered into a license agreement with Schlumberger Technology Corporation – one of the industry’s most respected oil-field services companies Exclusive rights to ERII’s VorTeq for on-shore hydraulic fracturing
Slide 16: MTeq Mud Pumping Solution
MTEQ MUD PUMPING SOLUTION Status Quo With MTeq NO MUD PASSES THROUGH THE PUMPS Page 16
Slide 17: MTeq Unlocks Value for Operators
MTEQ UNLOCKS VALUE FOR OPERATORS Drilling Configuration with MTeq & Centrifugal Pumps Reduced Logistics Increased Productivity Lower load requirements Less rig-up and rig-down Reduction in planned and time unplanned rig downtime Reduced Operating Cost Higher Reliability & Safety Reduced R&M
Slide 18: Future PX Development Continuous Innovation
Future PX Development Continuous Innovation Page 18
Slide 19: Industry Agnostic R&D Allocation Process
INDUSTRY AGNOSTIC R&D ALLOCATION PROCESS What criteria qualifies a Fracing market opportunity? High rates of flow Upstream Drilling High pressure differentials High capital intensity Hostile process fluids Desalination Page 19
Slide 20: Execution of Strategic R&D
EXECUTION OF STRATEGIC R&D Evaluation Criteria to Determine Funding Value to Customer Market Size Net Present Value IP Potential Technical Difficulty Strategic Fit Internal Competency Time to Market Ease of Entry Concept Uniqueness Page 20
Slide 21: Disrupting Global Pumping Market
DISRUPTING GLOBAL PUMPING MARKET Global Pumping Market Significant Arbitrage Opportunity Exceeded $53B in 2017 in the Pumping Market US dollars in millions in dollars US . Pump aftermarket components cost industries $9 billion in 2017 . Replacement pump sales exceed $25 billion in 2017 PUMP PRESERVA
Slide 22: Wasted Pressure Energy Market Opportunity
WASTED PRESSURE ENERGY MARKET OPPORTUNITY Energy Recovery Devices Target Wasted Pressure Energy Opportunity in Control Valve and High Performance Excess of $5.5B in 2017 Pump Applications TOTAL MARKET OPPORTUNITY IS SEVERAL ORDERS OF MAGNITUDE GREATER THAN COMPANY REVENUES Source: McIlvaine Pump Rep
Slide 23: Ubiquitous Technology → Growth
UBIQUITOUS TECHNOLOGY → GROWTH Future Derivative Applications Water Business Provides Funding Mechanism for Future R&D Annual R&D Spend: . 27.5% of OPEX in 2014 . 20.5% of OPEX in 2015 . 27.8% of OPEX in 2016 . 32.9% of OPEX in 2017 Page 23
Slide 24: Energy Recovery
energy recovery”