|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF
1934
|
For the quarterly period ended June 30, 2019
|
|
OR
|
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
|
For the transition period from ____________ to
__________
|
Delaware
|
01-0616867
|
(State or Other Jurisdiction of Incorporation)
|
(I.R.S. Employer Identification No.)
|
Title of each class
|
Trading Symbol
|
Name of each exchange on which registered
|
Common
|
ERII
|
The Nasdaq Stock Market LLC
|
Large accelerated filer
o
|
Accelerated filer
x
|
Non-accelerated filer
o
|
Smaller reporting company
o
|
Emerging growth company
o
|
|
|
PART I
|
Page No.
|
Item 1.
|
Financial Statements
(Unaudited)
|
|
|
Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018
|
|
|
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2019 and 2018
|
|
|
Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2019 and 2018
|
|
|
Condensed Consolidated Statements of Stockholders' Equity for the Three and Six Months Ended June 30, 2019 and 2018
|
|
|
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018
|
|
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
|
|
|
PART II
|
||
Item 1.
|
||
Item 1A.
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
Item 5.
|
||
Item 6.
|
||
Exhibit Index
|
||
|
June 30,
2019 |
|
December 31,
2018 |
||||||
|
|
|
|
|
|
||||
|
(In thousands, except share data and par value)
|
||||||||
ASSETS
|
|
|
|
|
|
||||
Current assets:
|
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
23,331
|
|
|
|
$
|
21,955
|
|
Restricted cash
|
|
—
|
|
|
|
97
|
|
||
Short-term investments
|
|
71,854
|
|
|
|
73,338
|
|
||
Accounts receivable, net of allowance for doubtful accounts of $397 and $396 as of June 30, 2019 and December 31, 2018, respectively
|
15,197
|
|
|
|
10,212
|
|
|||
Contract assets
|
|
1,936
|
|
|
|
4,083
|
|
||
Inventories, net
|
|
7,763
|
|
|
|
7,138
|
|
||
Income taxes receivable
|
|
—
|
|
|
|
15
|
|
||
Prepaid expenses and other current assets
|
|
2,247
|
|
|
|
2,810
|
|
||
Total current assets
|
|
122,328
|
|
|
|
119,648
|
|
||
Restricted cash, non-current
|
|
88
|
|
|
|
86
|
|
||
Long-term investments
|
|
1,507
|
|
|
|
1,269
|
|
||
Deferred tax assets, non-current
|
|
17,033
|
|
|
|
18,318
|
|
||
Property and equipment, net
|
|
17,384
|
|
|
|
14,619
|
|
||
Operating lease, right of use asset
|
|
11,700
|
|
|
|
12,189
|
|
||
Goodwill
|
|
12,790
|
|
|
|
12,790
|
|
||
Other intangible assets, net
|
|
327
|
|
|
|
640
|
|
||
Other assets, non-current
|
|
308
|
|
|
|
282
|
|
||
Total assets
|
|
$
|
183,465
|
|
|
|
$
|
179,841
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
||||
Current liabilities:
|
|
|
|
|
|
||||
Accounts payable
|
|
$
|
1,459
|
|
|
|
$
|
1,439
|
|
Accrued expenses and other current liabilities
|
|
5,525
|
|
|
|
8,019
|
|
||
Lease liabilities
|
|
983
|
|
|
|
926
|
|
||
Income taxes payable
|
|
32
|
|
|
|
—
|
|
||
Accrued warranty reserve
|
|
599
|
|
|
|
478
|
|
||
Contract liabilities
|
|
15,447
|
|
|
|
16,270
|
|
||
Total current liabilities
|
|
24,045
|
|
|
|
27,132
|
|
||
Lease liabilities, non-current
|
|
12,050
|
|
|
|
12,556
|
|
||
Contract liabilities, non-current
|
|
19,632
|
|
|
|
26,539
|
|
||
Other non-current liabilities
|
|
278
|
|
|
|
236
|
|
||
Total liabilities
|
|
56,005
|
|
|
|
66,463
|
|
||
Commitments and contingencies (Note 8)
|
|
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
|
|
||||
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding at June 30, 2019 and December 31, 2018
|
—
|
|
|
|
—
|
|
|||
Common stock, $0.001 par value; 200,000,000 shares authorized; 60,359,930 shares issued and 54,903,995 shares outstanding at June 30, 2019 and 59,396,020 shares issued and 53,940,085 shares outstanding at December 31, 2018
|
60
|
|
|
|
59
|
|
|||
Additional paid-in capital
|
|
165,981
|
|
|
|
158,404
|
|
||
Accumulated other comprehensive loss
|
|
(2
|
)
|
|
|
(133
|
)
|
||
Treasury stock at cost, 5,455,935 shares repurchased at June 30, 2019 and December 31, 2018
|
|
(30,486
|
)
|
|
|
(30,486
|
)
|
||
Accumulated deficit
|
|
(8,093
|
)
|
|
|
(14,466
|
)
|
||
Total stockholders’ equity
|
|
127,460
|
|
|
|
113,378
|
|
||
Total liabilities and stockholders’ equity
|
|
$
|
183,465
|
|
|
|
$
|
179,841
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(In thousands, except per share data)
|
||||||||||||||
Product revenue
|
$
|
19,226
|
|
|
$
|
17,406
|
|
|
$
|
35,298
|
|
|
$
|
28,464
|
|
Product cost of revenue
|
5,483
|
|
|
5,976
|
|
|
10,418
|
|
|
9,290
|
|
||||
Product gross profit
|
13,743
|
|
|
11,430
|
|
|
24,880
|
|
|
19,174
|
|
||||
|
|
|
|
|
|
|
|
||||||||
License and development revenue
|
3,570
|
|
|
3,358
|
|
|
7,293
|
|
|
6,107
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
General and administrative
|
5,500
|
|
|
4,927
|
|
|
11,079
|
|
|
10,764
|
|
||||
Sales and marketing
|
2,181
|
|
|
1,858
|
|
|
4,343
|
|
|
3,770
|
|
||||
Research and development
|
5,480
|
|
|
3,605
|
|
|
9,734
|
|
|
7,522
|
|
||||
Amortization of intangible assets
|
157
|
|
|
158
|
|
|
313
|
|
|
316
|
|
||||
Total operating expenses
|
13,318
|
|
|
10,548
|
|
|
25,469
|
|
|
22,372
|
|
||||
Income from operations
|
3,995
|
|
|
4,240
|
|
|
6,704
|
|
|
2,909
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Other income (expense):
|
|
|
|
|
|
|
|
||||||||
Interest income
|
528
|
|
|
373
|
|
|
1,051
|
|
|
674
|
|
||||
Interest expense
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
||||
Other non-operating (expense) income, net
|
(48
|
)
|
|
9
|
|
|
(72
|
)
|
|
(44
|
)
|
||||
Total other income, net
|
480
|
|
|
381
|
|
|
979
|
|
|
629
|
|
||||
Income before income taxes
|
4,475
|
|
|
4,621
|
|
|
7,683
|
|
|
3,538
|
|
||||
Provision for (benefit from) income taxes
|
756
|
|
|
(11,122
|
)
|
|
1,310
|
|
|
(11,479
|
)
|
||||
Net income
|
$
|
3,719
|
|
|
$
|
15,743
|
|
|
$
|
6,373
|
|
|
$
|
15,017
|
|
|
|
|
|
|
|
|
|
||||||||
Earnings per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$ 0.07
|
|
$ 0.29
|
|
$ 0.12
|
|
$ 0.28
|
||||||||
Diluted
|
$ 0.07
|
|
$ 0.28
|
|
$ 0.11
|
|
$ 0.27
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Number of shares used in per share calculations:
|
|
|
|
|
|
|
|
||||||||
Basic
|
54,681
|
|
|
53,747
|
|
|
54,400
|
|
|
53,747
|
|
||||
Diluted
|
56,110
|
|
|
55,406
|
|
|
55,764
|
|
|
55,437
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(In thousands)
|
||||||||||||||
Net income
|
$
|
3,719
|
|
|
$
|
15,743
|
|
|
$
|
6,373
|
|
|
$
|
15,017
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments
|
7
|
|
|
(33
|
)
|
|
(1
|
)
|
|
(12
|
)
|
||||
Unrealized gain (loss) on investments
|
64
|
|
|
7
|
|
|
132
|
|
|
(57
|
)
|
||||
Other comprehensive income (loss), net of tax
|
71
|
|
|
(26
|
)
|
|
131
|
|
|
(69
|
)
|
||||
Comprehensive income
|
$
|
3,790
|
|
|
$
|
15,717
|
|
|
$
|
6,504
|
|
|
$
|
14,948
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(In thousands)
|
||||||||||||||
Common stock
|
|
|
|
|
|
|
|
||||||||
Beginning balance
|
$
|
60
|
|
|
$
|
59
|
|
|
$
|
59
|
|
|
$
|
58
|
|
Issuance of common stock, net¹
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
||||
Ending balance
|
60
|
|
|
59
|
|
|
60
|
|
|
59
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Additional paid-in capital
|
|
|
|
|
|
|
|
||||||||
Beginning balance
|
162,231
|
|
|
152,850
|
|
|
158,404
|
|
|
149,006
|
|
||||
Issuance of common stock, net
|
2,362
|
|
|
716
|
|
|
4,518
|
|
|
2,313
|
|
||||
Stock-based compensation
|
1,388
|
|
|
958
|
|
|
3,059
|
|
|
3,205
|
|
||||
Ending balance
|
165,981
|
|
|
154,524
|
|
|
165,981
|
|
|
154,524
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Accumulated other comprehensive loss
|
|
|
|
|
|
|
|
||||||||
Beginning balance
|
(73
|
)
|
|
(168
|
)
|
|
(133
|
)
|
|
(125
|
)
|
||||
Other comprehensive income (loss)
|
71
|
|
|
(26
|
)
|
|
131
|
|
|
(69
|
)
|
||||
Ending balance
|
(2
|
)
|
|
(194
|
)
|
|
(2
|
)
|
|
(194
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Treasury stock
|
|
|
|
|
|
|
|
||||||||
Beginning balance
|
(30,486
|
)
|
|
(23,981
|
)
|
|
(30,486
|
)
|
|
(20,486
|
)
|
||||
Repurchase of common stock for treasury
|
—
|
|
|
(6,505
|
)
|
|
—
|
|
|
(10,000
|
)
|
||||
Ending balance
|
(30,486
|
)
|
|
(30,486
|
)
|
|
(30,486
|
)
|
|
(30,486
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Accumulated deficit
|
|
|
|
|
|
|
|
||||||||
Beginning balance
|
(11,812
|
)
|
|
(37,285
|
)
|
|
(14,466
|
)
|
|
(36,559
|
)
|
||||
Net income
|
3,719
|
|
|
15,743
|
|
|
6,373
|
|
|
15,017
|
|
||||
Ending balance
|
(8,093
|
)
|
|
(21,542
|
)
|
|
(8,093
|
)
|
|
(21,542
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Total stockholders' equity
|
$
|
127,460
|
|
|
$
|
102,361
|
|
|
$
|
127,460
|
|
|
$
|
102,361
|
|
|
|
|
|
|
|
|
|
||||||||
Common stock issued (number of shares)
|
|
|
|
|
|
|
|
||||||||
Beginning balance
|
59,919
|
|
|
58,700
|
|
|
59,396
|
|
|
58,168
|
|
||||
Issuance of common stock, net
|
441
|
|
|
251
|
|
|
964
|
|
|
783
|
|
||||
Ending balance
|
60,360
|
|
|
58,951
|
|
|
60,360
|
|
|
58,951
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Treasury stock (number of shares)
|
|
|
|
|
|
|
|
||||||||
Beginning balance
|
(5,456
|
)
|
|
(4,673
|
)
|
|
(5,456
|
)
|
|
(4,263
|
)
|
||||
Repurchase of common stock for treasury²
|
—
|
|
|
(783
|
)
|
|
—
|
|
|
(1,193
|
)
|
||||
Ending balance
|
(5,456
|
)
|
|
(5,456
|
)
|
|
(5,456
|
)
|
|
(5,456
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
¹ Amounts less than $500 rounded to zero
|
|
|
|
|
|
|
|
||||||||
² The March 2018 stock repurchase authorization expired in September 2018
|
|
Six Months Ended June 30,
|
||||||
|
2019
|
|
2018
|
||||
|
|
|
|
||||
|
(In thousands)
|
||||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
6,373
|
|
|
$
|
15,017
|
|
Adjustments to reconcile net income to cash provided by (used in) operating activities
|
|
|
|
||||
Stock-based compensation
|
3,071
|
|
|
3,184
|
|
||
Depreciation and amortization
|
1,952
|
|
|
2,040
|
|
||
(Accretion) amortization of premiums and discounts on investments
|
(30
|
)
|
|
267
|
|
||
Provision for warranty claims
|
242
|
|
|
135
|
|
||
Unrealized gain on foreign currency translation
|
(48
|
)
|
|
(51
|
)
|
||
Reversal of accruals related to expired warranties
|
(83
|
)
|
|
(84
|
)
|
||
Provision for doubtful accounts
|
1
|
|
|
328
|
|
||
Adjustments for excess or obsolete inventory
|
62
|
|
|
17
|
|
||
Deferred income taxes
|
1,285
|
|
|
(11,512
|
)
|
||
Loss on disposal of fixed assets
|
327
|
|
|
22
|
|
||
Other non-cash adjustments
|
—
|
|
|
2
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable, net
|
(4,986
|
)
|
|
833
|
|
||
Contract assets, costs and estimated earnings in excess of billings
|
2,147
|
|
|
186
|
|
||
Inventories, net
|
(725
|
)
|
|
(907
|
)
|
||
Prepaid and other assets
|
1,026
|
|
|
(10,477
|
)
|
||
Accounts payable
|
14
|
|
|
(1,976
|
)
|
||
Accrued expenses and other liabilities
|
(2,942
|
)
|
|
7,532
|
|
||
Income taxes
|
47
|
|
|
(577
|
)
|
||
Contract liabilities, cost in excess of billings
|
(7,730
|
)
|
|
(5,649
|
)
|
||
Net cash provided by (used in) operating activities
|
3
|
|
|
(1,670
|
)
|
||
Cash flows from investing activities:
|
|
|
|
||||
Maturities of marketable securities
|
47,993
|
|
|
40,638
|
|
||
Purchases of marketable securities
|
(46,549
|
)
|
|
(43,117
|
)
|
||
Capital expenditures
|
(4,685
|
)
|
|
(1,536
|
)
|
||
Net cash used in investing activities
|
(3,241
|
)
|
|
(4,015
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Net proceeds from issuance of common stock
|
4,581
|
|
|
2,390
|
|
||
Tax payment for employee shares withheld
|
(62
|
)
|
|
(76
|
)
|
||
Repayment of long-term debt
|
—
|
|
|
(5
|
)
|
||
Repurchase of common stock
|
—
|
|
|
(10,000
|
)
|
||
Net cash provided by (used in) financing activities
|
4,519
|
|
|
(7,691
|
)
|
||
Effect of exchange rate differences on cash and cash equivalents
|
—
|
|
|
22
|
|
||
Net change in cash, cash equivalents and restricted cash
|
1,281
|
|
|
(13,354
|
)
|
||
Cash, cash equivalents and restricted cash, beginning of year
|
22,138
|
|
|
30,626
|
|
||
Cash, cash equivalents and restricted cash, end of period
|
$
|
23,419
|
|
|
$
|
17,272
|
|
|
Three Months Ended June 30, 2019
|
|
Six Months Ended June 30, 2019
|
||||||||||||||||||||
|
Water
|
|
Oil and Gas
|
|
Total
|
|
Water
|
|
Oil and Gas
|
|
Total
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Primary geographical market
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Middle East and Africa
|
$
|
10,805
|
|
|
$
|
—
|
|
|
$
|
10,805
|
|
|
$
|
19,502
|
|
|
$
|
104
|
|
|
$
|
19,606
|
|
Americas
|
1,728
|
|
|
3,570
|
|
|
5,298
|
|
|
5,751
|
|
|
7,293
|
|
|
13,044
|
|
||||||
Asia
|
5,042
|
|
|
—
|
|
|
5,042
|
|
|
7,176
|
|
|
—
|
|
|
7,176
|
|
||||||
Europe
|
1,651
|
|
|
—
|
|
|
1,651
|
|
|
2,765
|
|
|
—
|
|
|
2,765
|
|
||||||
Total revenue
|
$
|
19,226
|
|
|
$
|
3,570
|
|
|
$
|
22,796
|
|
|
$
|
35,194
|
|
|
$
|
7,397
|
|
|
$
|
42,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Major product/service line
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
PX, pumps and turbo devices
|
$
|
19,226
|
|
|
$
|
—
|
|
|
$
|
19,226
|
|
|
$
|
35,194
|
|
|
104
|
|
|
$
|
35,298
|
|
|
License and development
|
—
|
|
|
3,570
|
|
|
3,570
|
|
|
—
|
|
|
7,293
|
|
|
7,293
|
|
||||||
Total revenue
|
$
|
19,226
|
|
|
$
|
3,570
|
|
|
$
|
22,796
|
|
|
$
|
35,194
|
|
|
$
|
7,397
|
|
|
$
|
42,591
|
|
|
Three Months Ended June 30, 2018
|
|
Six Months Ended June 30, 2018
|
||||||||||||||||||||
|
Water
|
|
Oil and Gas
|
|
Total
|
|
Water
|
|
Oil and Gas
|
|
Total
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Primary geographical market
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Middle East and Africa
|
$
|
9,289
|
|
|
$
|
290
|
|
|
$
|
9,579
|
|
|
$
|
15,391
|
|
|
$
|
300
|
|
|
$
|
15,691
|
|
Americas
|
1,604
|
|
|
3,358
|
|
|
4,962
|
|
|
2,705
|
|
|
6,107
|
|
|
8,812
|
|
||||||
Asia
|
4,657
|
|
|
—
|
|
|
4,657
|
|
|
7,330
|
|
|
—
|
|
|
7,330
|
|
||||||
Europe
|
1,566
|
|
|
—
|
|
|
1,566
|
|
|
2,738
|
|
|
—
|
|
|
2,738
|
|
||||||
Total revenue
|
$
|
17,116
|
|
|
$
|
3,648
|
|
|
$
|
20,764
|
|
|
$
|
28,164
|
|
|
$
|
6,407
|
|
|
$
|
34,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Major product/service line
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
PX, pumps and turbo devices
|
$
|
17,116
|
|
|
$
|
—
|
|
|
$
|
17,116
|
|
|
$
|
28,164
|
|
|
$
|
—
|
|
|
$
|
28,164
|
|
License and development
|
—
|
|
|
3,358
|
|
|
3,358
|
|
|
—
|
|
|
6,107
|
|
|
6,107
|
|
||||||
Oil & gas products
|
—
|
|
|
290
|
|
|
290
|
|
|
—
|
|
|
300
|
|
|
300
|
|
||||||
Total revenue
|
$
|
17,116
|
|
|
$
|
3,648
|
|
|
$
|
20,764
|
|
|
$
|
28,164
|
|
|
$
|
6,407
|
|
|
$
|
34,571
|
|
|
June 30,
2019 |
|
December 31,
2018 |
||||
|
|
|
|
||||
|
(In thousands)
|
||||||
Contract assets balance, beginning of year
|
$
|
4,083
|
|
|
$
|
6,278
|
|
Transferred to receivables
|
(3,598
|
)
|
|
(8,865
|
)
|
||
Additional unbilled receivables
|
1,451
|
|
|
6,670
|
|
||
Contract assets balance, end of period
|
$
|
1,936
|
|
|
$
|
4,083
|
|
|
June 30,
2019 |
|
December 31,
2018 |
||||
|
|
|
|
||||
|
(In thousands)
|
||||||
Contract liabilities balance, beginning of year
|
$
|
42,809
|
|
|
$
|
56,426
|
|
Revenue recognized
|
(7,319
|
)
|
|
(13,493
|
)
|
||
Cash received
|
(411
|
)
|
|
(124
|
)
|
||
Contract liabilities balance, end of period
|
$
|
35,079
|
|
|
$
|
42,809
|
|
|
June 30,
2019 |
||
|
(In thousands)
|
||
Year:
|
|
||
2019 (remaining six months)
|
$
|
7,304
|
|
2020
|
14,558
|
|
|
2021
|
6,770
|
|
|
2022
|
661
|
|
|
2023 and thereafter
|
5,031
|
|
|
Total performance obligation
|
$
|
34,324
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(In thousands, except per share amounts)
|
||||||||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net income
|
$
|
3,719
|
|
|
$
|
15,743
|
|
|
$
|
6,373
|
|
|
$
|
15,017
|
|
|
|
|
|
|
|
|
|
||||||||
Denominator:
|
|
|
|
|
|
|
|
||||||||
Basic weighted average common shares outstanding
|
54,681
|
|
|
53,747
|
|
|
54,400
|
|
|
53,747
|
|
||||
Weighted average effect of dilutive stock awards
|
1,429
|
|
|
1,659
|
|
|
1,364
|
|
|
1,690
|
|
||||
Diluted weighted average common shares outstanding
|
56,110
|
|
|
55,406
|
|
|
55,764
|
|
|
55,437
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Earnings per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$ 0.07
|
|
$ 0.29
|
|
$ 0.12
|
|
$ 0.28
|
||||||||
Diluted
|
$ 0.07
|
|
$ 0.28
|
|
$ 0.11
|
|
$ 0.27
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||
|
|
|
|
|
|
|
|
||||
|
(In thousands)
|
||||||||||
Anti-dilutive shares excluded from earnings per share calculation
|
1,650
|
|
|
1,990
|
|
|
2,197
|
|
|
2,015
|
|
|
June 30,
2019 |
|
December 31,
2018 |
||||
|
|
|
|
||||
|
(In thousands)
|
||||||
Raw materials
|
$
|
3,175
|
|
|
$
|
2,238
|
|
Work in process
|
2,157
|
|
|
2,689
|
|
||
Finished goods
|
2,431
|
|
|
2,211
|
|
||
Inventories, net
|
$
|
7,763
|
|
|
$
|
7,138
|
|
|
June 30,
2019 |
|
December 31,
2018 |
||||
|
|
|
|
||||
|
(In thousands)
|
||||||
Payroll and commissions payable
|
$
|
4,000
|
|
|
$
|
5,843
|
|
Accrued legal expenses
|
142
|
|
|
574
|
|
||
Other accrued expenses and current liabilities
|
1,383
|
|
|
1,602
|
|
||
Total accrued expenses and other current liabilities
|
$
|
5,525
|
|
|
$
|
8,019
|
|
|
June 30,
2019 |
|
December 31,
2018 |
||||
|
|
|
|
||||
|
(In thousands)
|
||||||
Cash and cash equivalents
|
$
|
23,331
|
|
|
$
|
21,955
|
|
Short-term investments
|
71,854
|
|
|
73,338
|
|
||
Long-term investments
|
1,507
|
|
|
1,269
|
|
||
Total cash, cash equivalents and marketable securities
|
$
|
96,692
|
|
|
$
|
96,562
|
|
|
June 30, 2019
|
||||||||||||||
|
Amortized
Cost
|
|
Gross
Unrealized
Holding Gains
|
|
Gross
Unrealized
Holding Losses
|
|
Fair Value
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(In thousands)
|
||||||||||||||
Short-term investments
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury securities
|
$
|
8,829
|
|
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
8,838
|
|
Corporate notes and bonds
|
62,949
|
|
|
73
|
|
|
(6
|
)
|
|
63,016
|
|
||||
Total short-term investments
|
71,778
|
|
|
82
|
|
|
(6
|
)
|
|
71,854
|
|
||||
Long-term investments
|
|
|
|
|
|
|
|
||||||||
Corporate notes and bonds
|
1,502
|
|
|
5
|
|
|
—
|
|
|
1,507
|
|
||||
Total long-term investments
|
1,502
|
|
|
5
|
|
|
—
|
|
|
1,507
|
|
||||
Total available-for-sale investments
|
$
|
73,280
|
|
|
$
|
87
|
|
|
$
|
(6
|
)
|
|
$
|
73,361
|
|
|
December 31, 2018
|
||||||||||||||
|
Amortized
Cost
|
|
Gross
Unrealized
Holding Gains
|
|
Gross
Unrealized
Holding Losses
|
|
Fair Value
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(In thousands)
|
||||||||||||||
Short-term investments
|
|
|
|
|
|
|
|
||||||||
U.S. treasury securities
|
$
|
8,102
|
|
|
$
|
1
|
|
|
$
|
(2
|
)
|
|
$
|
8,101
|
|
Corporate notes and bonds
|
65,324
|
|
|
1
|
|
|
(88
|
)
|
|
65,237
|
|
||||
Total short-term investments
|
73,426
|
|
|
2
|
|
|
(90
|
)
|
|
73,338
|
|
||||
Long-term investments
|
|
|
|
|
|
|
|
||||||||
Corporate notes and bonds
|
1,269
|
|
|
—
|
|
|
—
|
|
|
1,269
|
|
||||
Total long-term investments
|
1,269
|
|
|
—
|
|
|
—
|
|
|
1,269
|
|
||||
Total available-for-sale investments
|
$
|
74,695
|
|
|
$
|
2
|
|
|
$
|
(90
|
)
|
|
$
|
74,607
|
|
|
June 30, 2019
|
|
December 31, 2018
|
||||||||||||
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(In thousands)
|
||||||||||||||
Due in one year or less
|
$
|
71,778
|
|
|
$
|
71,854
|
|
|
$
|
73,426
|
|
|
$
|
73,338
|
|
Due in greater than one year
|
1,502
|
|
|
1,507
|
|
|
1,269
|
|
|
1,269
|
|
||||
Total available-for-sale investments
|
$
|
73,280
|
|
|
$
|
73,361
|
|
|
$
|
74,695
|
|
|
$
|
74,607
|
|
|
June 30, 2019
|
||||||||||||||
|
Total
|
|
Level 1
Inputs
|
|
Level 2
Inputs
|
|
Level 3
Inputs
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(In thousands)
|
||||||||||||||
Cash equivalents
|
|
|
|
|
|
|
|
||||||||
Money market securities
|
$
|
5,004
|
|
|
$
|
5,004
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total cash equivalents
|
5,004
|
|
|
5,004
|
|
|
—
|
|
|
—
|
|
||||
Short-term investments
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury securities
|
8,838
|
|
|
—
|
|
|
8,838
|
|
|
—
|
|
||||
Corporate notes and bonds
|
63,016
|
|
|
—
|
|
|
63,016
|
|
|
—
|
|
||||
Total short-term investments
|
71,854
|
|
|
—
|
|
|
71,854
|
|
|
—
|
|
||||
Long-term investments
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate notes and bonds
|
1,507
|
|
|
—
|
|
|
1,507
|
|
|
—
|
|
||||
Total long-term investments
|
1,507
|
|
|
—
|
|
|
1,507
|
|
|
—
|
|
||||
Total fair value of financial assets
|
$
|
78,365
|
|
|
$
|
5,004
|
|
|
$
|
73,361
|
|
|
$
|
—
|
|
|
December 31, 2018
|
||||||||||||||
|
Total
|
|
Level 1
Inputs
|
|
Level 2
Inputs
|
|
Level 3
Inputs
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(In thousands)
|
||||||||||||||
Cash equivalents
|
|
|
|
|
|
|
|
||||||||
Money market securities
|
$
|
6,661
|
|
|
$
|
6,661
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total cash equivalents
|
6,661
|
|
|
6,661
|
|
|
—
|
|
|
—
|
|
||||
Short-term investments
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury securities
|
8,101
|
|
|
—
|
|
|
8,101
|
|
|
—
|
|
||||
Corporate notes and bonds
|
65,237
|
|
|
—
|
|
|
65,237
|
|
|
—
|
|
||||
Total short-term investments
|
73,338
|
|
|
—
|
|
|
73,338
|
|
|
—
|
|
||||
Long-term investments
|
|
|
|
|
|
|
|
||||||||
Corporate notes and bonds
|
1,269
|
|
|
—
|
|
|
1,269
|
|
|
—
|
|
||||
Total long-term investments
|
1,269
|
|
|
—
|
|
|
1,269
|
|
|
—
|
|
||||
Total fair value of financial assets
|
$
|
81,268
|
|
|
$
|
6,661
|
|
|
$
|
74,607
|
|
|
$
|
—
|
|
|
June 30, 2019
|
|
December 31, 2018
|
||||||||||||
|
Fair Value
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
|
Gross Unrealized Losses
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(In thousands)
|
||||||||||||||
U.S. Treasury securities¹
|
$
|
802
|
|
|
$
|
—
|
|
|
$
|
8,101
|
|
|
$
|
(2
|
)
|
Corporate notes and bonds
|
10,213
|
|
|
(6
|
)
|
|
61,809
|
|
|
(88
|
)
|
||||
Total available-for-sale investments with unrealized loss positions
|
$
|
11,015
|
|
|
$
|
(6
|
)
|
|
$
|
69,910
|
|
|
$
|
(90
|
)
|
|
|
|
|
|
|
|
|
||||||||
¹ Amounts less than $500 rounded to zero
|
|
|
|
|
|
|
|
|
June 30,
2019 |
|
December 31,
2018 |
||||
|
|
|
|
||||
|
(In thousands)
|
||||||
Finite-lived intangible assets
|
$
|
6,643
|
|
|
$
|
6,643
|
|
Accumulated amortization
|
(6,316
|
)
|
|
(6,003
|
)
|
||
Intangible assets, net
|
$
|
327
|
|
|
$
|
640
|
|
|
Lease Amounts
|
||
|
(In thousands)
|
||
Year:
|
|
||
2019 (remaining six months)
|
$
|
918
|
|
2020
|
1,856
|
|
|
2021
|
1,653
|
|
|
2022
|
1,812
|
|
|
2023
|
1,714
|
|
|
2024 and thereafter
|
10,043
|
|
|
Total
|
17,996
|
|
|
Less imputed lease interest
|
(4,963
|
)
|
|
Total lease liabilities
|
$
|
13,033
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(In thousands)
|
||||||||||||||
Warranty reserve balance, beginning of period
|
$
|
571
|
|
|
$
|
359
|
|
|
$
|
478
|
|
|
$
|
366
|
|
Warranty costs charged to cost of revenue
|
89
|
|
|
87
|
|
|
242
|
|
|
135
|
|
||||
Utilization charges against reserve
|
(25
|
)
|
|
(23
|
)
|
|
(38
|
)
|
|
(28
|
)
|
||||
Release of accrual related to expired warranties
|
(36
|
)
|
|
(34
|
)
|
|
(83
|
)
|
|
(84
|
)
|
||||
Warranty reserve balance, end of period
|
$
|
599
|
|
|
$
|
389
|
|
|
$
|
599
|
|
|
$
|
389
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(In thousands)
|
||||||||||||||
Stock-based compensation expense charged to:
|
|
|
|
|
|
|
|
||||||||
Cost of revenue
|
$
|
32
|
|
|
$
|
16
|
|
|
$
|
66
|
|
|
$
|
40
|
|
General and administrative
1
|
815
|
|
|
455
|
|
|
1,774
|
|
|
2,131
|
|
||||
Sales and marketing
|
174
|
|
|
157
|
|
|
377
|
|
|
419
|
|
||||
Research and development
|
372
|
|
|
313
|
|
|
854
|
|
|
594
|
|
||||
Total stock-based compensation expense
|
$
|
1,393
|
|
|
$
|
941
|
|
|
$
|
3,071
|
|
|
$
|
3,184
|
|
|
|
|
|
|
|
|
|
||||||||
Stock-based compensation expense by type of award:
|
|
|
|
|
|
|
|
||||||||
Options
1
|
$
|
1,003
|
|
|
$
|
680
|
|
|
$
|
2,136
|
|
|
$
|
2,344
|
|
RSUs
1
|
390
|
|
|
261
|
|
|
935
|
|
|
840
|
|
||||
Total stock-based compensation expense
|
$
|
1,393
|
|
|
$
|
941
|
|
|
$
|
3,071
|
|
|
$
|
3,184
|
|
|
|
|
|
|
|
|
|
||||||||
1
2019 Amounts include modifications of equity awards held by the Company’s former Chairman of the Board. 2018 Amounts include modifications of equity awards held by the Company’s former Chief Executive Officer.
|
|
Unamortized Compensation Costs
|
|
Weighted Average Service Period
|
||
|
(In thousands)
|
|
|
(In years)
|
|
Stock options
|
$
|
5,896
|
|
|
2.53
|
RSUs
|
3,733
|
|
|
2.92
|
|
Total unamortized compensation costs, net of adjusted forfeitures
|
$
|
9,629
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(In thousands)
|
||||||||||||||
Stock options
|
$
|
1,126
|
|
|
$
|
1,256
|
|
|
$
|
2,493
|
|
|
$
|
2,517
|
|
RSUs
|
75
|
|
|
116
|
|
|
999
|
|
|
625
|
|
||||
Total grant date fair value of stock options and RSUs vested during the period
|
$
|
1,201
|
|
|
$
|
1,372
|
|
|
$
|
3,492
|
|
|
$
|
3,142
|
|
|
Number
of Shares |
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Life
|
|
Aggregate
Intrinsic
Value
1
|
|||
|
(In thousands)
|
|
|
(Per share)
|
|
(In years)
|
|
(In thousands)
|
|
|
Balance, December 31, 2018
|
4,982
|
|
|
$6.36
|
|
6.56
|
|
$
|
6,572
|
|
Granted
|
551
|
|
|
$8.24
|
|
|
|
|
||
Exercised
|
(855
|
)
|
|
$5.36
|
|
|
|
$
|
3,548
|
|
Forfeited
|
(366
|
)
|
|
$8.63
|
|
|
|
|
||
Balance, June 30, 2019
|
4,312
|
|
|
$6.60
|
|
6.90
|
|
$
|
16,489
|
|
|
|
|
|
|
|
|
|
|||
Vested and exercisable as of June 30, 2019
|
2,840
|
|
|
$5.69
|
|
5.88
|
|
$
|
13,463
|
|
Vested and exercisable as of June 30, 2019 and expected to vest thereafter
|
4,110
|
|
|
$6.53
|
|
6.79
|
|
$
|
16,037
|
|
|
|
|
|
|
|
|
|
|||
¹ The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the fair value of the Company’s common stock at the time of exercise. The aggregate intrinsic value at June 30, 2019 is calculated as the difference between the exercise price of the underlying options and the fair value of the Company’s common stock as of June 30, 2019 or the last trading day prior to June 30, 2019. The aggregate intrinsic value at December 31, 2018 is calculated as the difference between the exercise price of the underlying options and the fair value of the Company’s common stock as of December 31, 2018 or the last trading day prior to December 31, 2018.
|
|
Number
of Shares |
|
Weighted
Average Grant-Date Fair Value |
|
|
(In thousands)
|
|
|
(Per share)
|
Balance, December 31, 2018
|
463
|
|
|
$8.49
|
Awarded
|
409
|
|
|
$7.77
|
Vested
|
(116
|
)
|
|
$8.63
|
Forfeited
|
(88
|
)
|
|
$8.38
|
Balance, June 30, 2019
|
668
|
|
|
$8.04
|
|
Three Months Ended June 30, 2019
|
|
Six Months Ended June 30, 2019
|
||||||||||||||||||||
|
Water
|
|
Oil & Gas
|
|
Total
|
|
Water
|
|
Oil & Gas
|
|
Total
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Product revenue
|
$
|
19,226
|
|
|
$
|
—
|
|
|
$
|
19,226
|
|
|
$
|
35,194
|
|
|
$
|
104
|
|
|
$
|
35,298
|
|
Product cost of revenue
|
5,483
|
|
|
—
|
|
|
5,483
|
|
|
10,230
|
|
|
188
|
|
|
10,418
|
|
||||||
Product gross profit (loss)
|
13,743
|
|
|
—
|
|
|
13,743
|
|
|
24,964
|
|
|
(84
|
)
|
|
24,880
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
License and development revenue
|
—
|
|
|
3,570
|
|
|
3,570
|
|
|
—
|
|
|
7,293
|
|
|
7,293
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Operating expenses - segment
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
General and administrative
|
563
|
|
|
412
|
|
|
975
|
|
|
1,097
|
|
|
776
|
|
|
1,873
|
|
||||||
Sales and marketing
|
1,559
|
|
|
319
|
|
|
1,878
|
|
|
3,208
|
|
|
582
|
|
|
3,790
|
|
||||||
Research and development
|
1,103
|
|
|
4,305
|
|
|
5,408
|
|
|
1,908
|
|
|
7,668
|
|
|
9,576
|
|
||||||
Amortization of intangibles
|
157
|
|
|
—
|
|
|
157
|
|
|
313
|
|
|
—
|
|
|
313
|
|
||||||
Total operating expenses - segment
|
3,382
|
|
|
5,036
|
|
|
8,418
|
|
|
6,526
|
|
|
9,026
|
|
|
15,552
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Operating income (loss) - segment
|
$
|
10,361
|
|
|
$
|
(1,466
|
)
|
|
8,895
|
|
|
$
|
18,438
|
|
|
$
|
(1,817
|
)
|
|
16,621
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Less: Corporate operating expenses
|
|
|
|
4,900
|
|
|
|
|
|
|
|
|
9,917
|
|
|||||||||
Income from operations
|
|
|
|
|
3,995
|
|
|
|
|
|
|
|
|
6,704
|
|
||||||||
Other income
|
|
|
|
|
480
|
|
|
|
|
|
|
|
|
979
|
|
||||||||
Income before income taxes
|
|
|
|
|
$
|
4,475
|
|
|
|
|
|
|
|
|
$
|
7,683
|
|
|
Three Months Ended June 30, 2018
|
|
Six Months Ended June 30, 2018
|
||||||||||||||||||||
|
Water
|
|
Oil & Gas
|
|
Total
|
|
Water
|
|
Oil & Gas
|
|
Total
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Product revenue
|
$
|
17,116
|
|
|
$
|
290
|
|
|
$
|
17,406
|
|
|
$
|
28,164
|
|
|
$
|
300
|
|
|
$
|
28,464
|
|
Product cost of revenue
|
5,640
|
|
|
336
|
|
|
5,976
|
|
|
8,868
|
|
|
422
|
|
|
9,290
|
|
||||||
Product gross profit (loss)
|
11,476
|
|
|
(46
|
)
|
|
11,430
|
|
|
19,296
|
|
|
(122
|
)
|
|
19,174
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
License and development revenue
|
—
|
|
|
3,358
|
|
|
3,358
|
|
|
—
|
|
|
6,107
|
|
|
6,107
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Operating expenses - segment:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
General and administrative
|
666
|
|
|
371
|
|
|
1,037
|
|
|
971
|
|
|
1,022
|
|
|
1,993
|
|
||||||
Sales and marketing
|
1,363
|
|
|
318
|
|
|
1,681
|
|
|
2,808
|
|
|
662
|
|
|
3,470
|
|
||||||
Research and development
|
230
|
|
|
3,375
|
|
|
3,605
|
|
|
474
|
|
|
7,040
|
|
|
7,514
|
|
||||||
Amortization of intangibles
|
158
|
|
|
—
|
|
|
158
|
|
|
316
|
|
|
—
|
|
|
316
|
|
||||||
Total operating expenses - segment
|
2,417
|
|
|
4,064
|
|
|
6,481
|
|
|
4,569
|
|
|
8,724
|
|
|
13,293
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Operating income (loss) - segment
|
$
|
9,059
|
|
|
$
|
(752
|
)
|
|
8,307
|
|
|
$
|
14,727
|
|
|
$
|
(2,739
|
)
|
|
11,988
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Less: Corporate operating expenses
|
|
|
|
4,067
|
|
|
|
|
|
|
|
|
9,079
|
|
|||||||||
Income from operations
|
|
|
|
|
4,240
|
|
|
|
|
|
|
|
|
2,909
|
|
||||||||
Other income
|
|
|
|
|
381
|
|
|
|
|
|
|
|
|
629
|
|
||||||||
Income before income taxes
|
|
|
|
|
$
|
4,621
|
|
|
|
|
|
|
|
|
$
|
3,538
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||
|
|
|
|
|
|
|
|
||||
|
(In percent of total revenue)
|
||||||||||
Product revenue by geographic location:
|
|
|
|
|
|
|
|
||||
United States
|
2
|
%
|
|
4
|
%
|
|
2
|
%
|
|
4
|
%
|
International
|
98
|
%
|
|
96
|
%
|
|
98
|
%
|
|
96
|
%
|
Total product revenue
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
|
|
|
|
|
|
|
||||
Product revenue by country:
1
|
|
|
|
|
|
|
|
||||
United Arab Emirates
|
—
|
|
|
—
|
|
|
15
|
%
|
|
—
|
|
Chile
|
—
|
|
|
—
|
|
|
12
|
%
|
|
—
|
|
Saudi Arabia
|
28
|
%
|
|
39
|
%
|
|
21
|
%
|
|
29
|
%
|
Egypt
|
—
|
|
|
—
|
|
|
—
|
|
|
17
|
%
|
Oman
|
13
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
Singapore
|
13
|
%
|
|
14
|
%
|
|
—
|
|
|
—
|
|
Others
2
|
46
|
%
|
|
47
|
%
|
|
52
|
%
|
|
54
|
%
|
Total
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
|
|
|
|
|
|
|
||||
1
Countries representing more than 10% of total revenue
|
|||||||||||
2
Includes remaining countries not separately disclosed
|
|||||||||||
— Less than 10%
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||
|
Segment
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
(In percent of total revenue)
|
||||||||||
Customer A
|
Water
|
|
27
|
%
|
|
—
|
|
|
28
|
%
|
|
—
|
|
Customer B
|
Water
|
|
13
|
%
|
|
—
|
|
|
12
|
%
|
|
—
|
|
Customer C
|
Water
|
|
12
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
Customer D
|
Water
|
|
—
|
|
|
31
|
%
|
|
—
|
|
|
19
|
%
|
Customer E
|
Water
|
|
—
|
|
|
12
|
%
|
|
—
|
|
|
—
|
|
Customer F
|
Water
|
|
—
|
|
|
12
|
%
|
|
—
|
|
|
21
|
%
|
|
|
|
|
|
|
|
|
|
|
||||
— Less than 10%
|
|
|
|
|
|
|
|
|
|
|
Segment
|
|
|
June 30,
2019 |
|
December 31,
2018 |
||
|
|
|
|
|
|
|
||
|
|
(In percent of total accounts receivable)
|
||||||
Customer A
|
Water
|
|
33
|
%
|
|
—
|
|
|
Customer G
|
Oil & Gas
|
|
17
|
%
|
|
26
|
%
|
|
Customer H
|
Water
|
|
14
|
%
|
|
20
|
%
|
|
Customer I
|
Water
|
|
—
|
|
|
11
|
%
|
|
|
|
|
|
|
|
|
||
— Less than 10%
|
|
|
|
|
|
|
•
|
our belief that levels of gross profit margin are sustainable to the extent that volume grows, we experience a favorable product mix, pricing remains stable and we continue to realize cost savings through production efficiencies and enhanced yields;
|
•
|
our plan to improve our existing energy recovery devices and to develop and manufacture new and enhanced versions of these devices;
|
•
|
our belief that our PX
®
energy recovery devices are the most cost-effective energy recovery devices over time and will result in low life-cycle costs;
|
•
|
our belief that our turbocharger devices have long operating lives;
|
•
|
our objective of finding new applications for our technology and developing new products for use outside of desalination, including oil & gas applications;
|
•
|
our expectation that our expenses for research and development
and sales and marketing
may increase as a result of diversification into markets outside of desalination;
|
•
|
our expectation that we will continue to rely on sales of our energy recovery devices in the desalination market for a substantial portion of our revenue, and that new desalination markets, including the U.S., will provide revenue opportunities to us;
|
•
|
our ability to meet projected new product development dates, anticipated cost reduction targets or revenue growth objectives for new products;
|
•
|
our belief that we can commercialize the VorTeq
™
hydraulic fracturing system;
|
•
|
our belief that the VorTeq enables oilfield services (“OFS”) companies to migrate to more efficient pumping technology;
|
•
|
our belief that we will be able to enter into a long-term licensing agreement to bring the MTeq
TM
solution to market;
|
•
|
our belief that customers will accept and adopt our new products;
|
•
|
our belief that our current facilities will be adequate for the foreseeable future;
|
•
|
our expectation that sales outside of the U.S. will remain a
significant portion of our revenue;
|
•
|
the timing of our receipt of payment for products or services from our customers;
|
•
|
our belief that our existing cash balances and cash generated from our operations will be sufficient to meet our anticipated liquidity needs for the foreseeable future, with the exception of a decision to enter into an acquisition and/or fund investments in our latest technology arising from rapid market adoption that could require us to seek additional equity or debt financing;
|
•
|
our expectation that, as we expand our international sales, a portion of our revenue could be denominated in foreign currencies and the impact of changes in exchange rates on our cash and cash equivalents and operating results;
|
•
|
our expectations of the impact of the U.S. Tax Cuts and Jobs Act (“Tax Act”);
|
•
|
our belief that new markets will grow in the water desalination market;
|
•
|
our expectation that we will be able to enforce our intellectual property rights;
|
•
|
our expectation that the adoption of new accounting standards will not have a material impact on our financial position or results of operations;
|
•
|
the outcome of proceedings, lawsuits, disputes and claims;
|
•
|
the impact of losses due to indemnification obligations; and
|
•
|
the impact of changes in internal control over financial reporting.
|
|
Three Months Ended June 30,
|
|
|
|
|
|||||||||||||||
|
2019
|
|
2018
|
|
Change
|
|||||||||||||||
|
$
|
|
% of Total Revenue
|
|
$
|
|
% of Total Revenue
|
|
$
|
|
%
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
(In thousands, except percentages)
|
|||||||||||||||||||
Water
|
$
|
19,226
|
|
|
84
|
%
|
|
$
|
17,116
|
|
|
83
|
%
|
|
$
|
2,110
|
|
|
12
|
%
|
Oil & Gas
|
0
|
|
|
0
|
%
|
|
290
|
|
|
1
|
%
|
|
(290
|
)
|
|
(100
|
)%
|
|||
Product revenue
|
19,226
|
|
|
84
|
%
|
|
17,406
|
|
|
84
|
%
|
|
1,820
|
|
|
10
|
%
|
|||
License and development revenue
|
3,570
|
|
|
16
|
%
|
|
3,358
|
|
|
16
|
%
|
|
212
|
|
|
6
|
%
|
|||
Total revenue
|
$
|
22,796
|
|
|
100
|
%
|
|
$
|
20,764
|
|
|
100
|
%
|
|
$
|
2,032
|
|
|
10
|
%
|
|
Six Months Ended June 30,
|
|
|
|
|
|||||||||||||||
|
2019
|
|
2018
|
|
Change
|
|||||||||||||||
|
$
|
|
% of Total Revenue
|
|
$
|
|
% of Total Revenue
|
|
$
|
|
%
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
(In thousands, except percentages)
|
|||||||||||||||||||
Water
|
$
|
35,194
|
|
|
83
|
%
|
|
$
|
28,164
|
|
|
81
|
%
|
|
$
|
7,030
|
|
|
25
|
%
|
Oil & Gas
|
104
|
|
|
0
|
%
|
|
300
|
|
|
1
|
%
|
|
(196
|
)
|
|
(65
|
)%
|
|||
Product revenue
|
35,298
|
|
|
83
|
%
|
|
28,464
|
|
|
82
|
%
|
|
6,834
|
|
|
24
|
%
|
|||
License and development revenue
|
7,293
|
|
|
17
|
%
|
|
6,107
|
|
|
18
|
%
|
|
1,186
|
|
|
19
|
%
|
|||
Total revenue
|
$
|
42,591
|
|
|
100
|
%
|
|
$
|
34,571
|
|
|
100
|
%
|
|
$
|
8,020
|
|
|
23
|
%
|
|
Three Months Ended June 30,
|
|
|
||||||||||||||
|
2019
|
|
2018
|
|
Change
|
||||||||||||
|
Gross Profit
|
|
Gross Margin
|
|
Gross Profit
|
|
Gross Margin
|
|
Gross Profit
|
||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
(In thousands, except percentages)
|
||||||||||||||||
Water
|
$
|
13,743
|
|
|
71.5
|
%
|
|
$
|
11,476
|
|
|
67.0
|
%
|
|
$
|
2,267
|
|
Oil & Gas
|
0
|
|
|
0
|
%
|
|
(46
|
)
|
|
(15.9
|
)%
|
|
46
|
|
|||
Product gross profit and gross margin
|
$
|
13,743
|
|
|
71.5
|
%
|
|
$
|
11,430
|
|
|
65.7
|
%
|
|
$
|
2,313
|
|
|
Six Months Ended June 30,
|
|
|
||||||||||||||
|
2019
|
|
2018
|
|
Change
|
||||||||||||
|
Gross Profit
|
|
Gross Margin
|
|
Gross Profit
|
|
Gross Margin
|
|
Gross Profit
|
||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
(In thousands, except percentages)
|
||||||||||||||||
Water
|
$
|
24,964
|
|
|
70.9
|
%
|
|
$
|
19,296
|
|
|
68.5
|
%
|
|
$
|
5,668
|
|
Oil & Gas
|
(84
|
)
|
|
(80.8
|
)%
|
|
(122
|
)
|
|
(40.7
|
)%
|
|
38
|
|
|||
Product gross profit and gross margin
|
$
|
24,880
|
|
|
70.5
|
%
|
|
$
|
19,174
|
|
|
67.4
|
%
|
|
$
|
5,706
|
|
|
Three Months Ended June 30, 2019
|
|
Three Months Ended June 30, 2018
|
||||||||||||||||||||
|
Water
|
|
Oil & Gas
|
|
Total
|
|
Water
|
|
Oil & Gas
|
|
Total
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Operating expenses - segment:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
General and administrative
|
$
|
563
|
|
|
$
|
412
|
|
|
$
|
975
|
|
|
$
|
666
|
|
|
$
|
371
|
|
|
$
|
1,037
|
|
Sales and marketing
|
1,559
|
|
|
319
|
|
|
1,878
|
|
|
1,363
|
|
|
318
|
|
|
1,681
|
|
||||||
Research and development
|
1,103
|
|
|
4,305
|
|
|
5,408
|
|
|
230
|
|
|
3,375
|
|
|
3,605
|
|
||||||
Amortization of intangibles
|
157
|
|
|
0
|
|
|
157
|
|
|
158
|
|
|
0
|
|
|
158
|
|
||||||
Total operating expenses - segment
|
$
|
3,382
|
|
|
$
|
5,036
|
|
|
8,418
|
|
|
$
|
2,417
|
|
|
$
|
4,064
|
|
|
6,481
|
|
||
Corporate operating expenses
|
|
|
|
|
4,900
|
|
|
|
|
|
|
4,067
|
|
||||||||||
Total operating expenses
|
|
|
|
|
$
|
13,318
|
|
|
|
|
|
|
$
|
10,548
|
|
|
Six Months Ended June 30, 2019
|
|
Six Months Ended June 30, 2018
|
||||||||||||||||||||
|
Water
|
|
Oil & Gas
|
|
Total
|
|
Water
|
|
Oil & Gas
|
|
Total
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Operating expenses - segment:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
General and administrative
|
$
|
1,097
|
|
|
$
|
776
|
|
|
$
|
1,873
|
|
|
$
|
971
|
|
|
$
|
1,022
|
|
|
$
|
1,993
|
|
Sales and marketing
|
3,208
|
|
|
582
|
|
|
3,790
|
|
|
2,808
|
|
|
662
|
|
|
3,470
|
|
||||||
Research and development
|
1,908
|
|
|
7,668
|
|
|
9,576
|
|
|
474
|
|
|
7,040
|
|
|
7,514
|
|
||||||
Amortization of intangibles
|
313
|
|
|
0
|
|
|
313
|
|
|
316
|
|
|
0
|
|
|
316
|
|
||||||
Total operating expenses - segment
|
$
|
6,526
|
|
|
$
|
9,026
|
|
|
15,552
|
|
|
$
|
4,569
|
|
|
$
|
8,724
|
|
|
13,293
|
|
||
Corporate operating expenses
|
|
|
|
|
9,917
|
|
|
|
|
|
|
9,079
|
|
||||||||||
Total operating expenses
|
|
|
|
|
$
|
25,469
|
|
|
|
|
|
|
$
|
22,372
|
|
|
Three Months Ended June 30,
|
||||||||||||
|
2019
|
|
2018
|
||||||||||
|
$
|
|
% of Total Revenue
|
|
$
|
|
% of Total Revenue
|
||||||
|
|
|
|
|
|
|
|
||||||
|
(In thousands, except percentages)
|
||||||||||||
Other income:
|
|
|
|
|
|
|
|
||||||
Interest income
|
$
|
528
|
|
|
2.3
|
%
|
|
$
|
373
|
|
|
1.8
|
%
|
Interest expense
|
0
|
|
|
0.0
|
%
|
|
(1
|
)
|
|
0.0
|
%
|
||
Other non-operating (expense) income, net
|
(48
|
)
|
|
(0.2
|
)%
|
|
9
|
|
|
0.0
|
%
|
||
Total other income, net
|
$
|
480
|
|
|
2.1
|
%
|
|
$
|
381
|
|
|
1.8
|
%
|
|
Six Months Ended June 30,
|
||||||||||||
|
2019
|
|
2018
|
||||||||||
|
$
|
|
% of Total Revenue
|
|
$
|
|
% of Total Revenue
|
||||||
|
|
|
|
|
|
|
|
||||||
|
(In thousands, except percentages)
|
||||||||||||
Other income:
|
|
|
|
|
|
|
|
||||||
Interest income
|
$
|
1,051
|
|
|
2.5
|
%
|
|
$
|
674
|
|
|
1.9
|
%
|
Interest expense
|
0
|
|
|
0.0
|
%
|
|
(1
|
)
|
|
0.0
|
%
|
||
Other non-operating expense, net
|
(72
|
)
|
|
(0.2
|
)%
|
|
(44
|
)
|
|
(0.1
|
)%
|
||
Total other income, net
|
$
|
979
|
|
|
2.3
|
%
|
|
$
|
629
|
|
|
1.8
|
%
|
|
Six Months Ended June 30,
|
||||||
|
2019
|
|
2018
|
||||
|
|
|
|
||||
|
(In thousands)
|
||||||
Net cash provided by (used in) operating activities
|
$
|
3
|
|
|
$
|
(1,670
|
)
|
Net cash used in investing activities
|
(3,241
|
)
|
|
(4,015
|
)
|
||
Net cash provided by (used in) financing activities
|
4,519
|
|
|
(7,691
|
)
|
||
Effect of exchange rate differences on cash and cash equivalents
|
—
|
|
|
22
|
|
||
Net change in cash, cash equivalents and restricted cash
|
$
|
1,281
|
|
|
$
|
(13,354
|
)
|
•
|
the necessity of coordinating geographically disparate organizations;
|
•
|
implementing common systems and controls;
|
•
|
integrating personnel with diverse business and cultural backgrounds;
|
•
|
integrating acquired research and manufacturing facilities, technology and products;
|
•
|
combining different corporate cultures and legal systems;
|
•
|
unanticipated expenses related to integration, including technical and operational integration;
|
•
|
increased costs and unanticipated liabilities, including with respect to registration, environmental, health and safety matters that may affect sales and operating results;
|
•
|
retaining key employees;
|
•
|
obtaining required government and third-party approvals;
|
•
|
legal limitations in new jurisdictions;
|
•
|
installing effective internal controls and audit procedures;
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•
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issuing common stock that could dilute the interests of our existing stockholders;
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•
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spending cash and incurring debt;
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•
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assuming contingent liabilities; and
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•
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creating additional expenses.
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•
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authorize our Board of Directors to issue, without further action by the stockholders, up to 10,000,000 shares of undesignated preferred stock;
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•
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require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent;
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•
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specify that special meetings of our stockholders can be called only by our Board of Directors, the chairman of the board, the chief executive officer or the president;
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•
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establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our Board of Directors;
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•
|
establish that our Board of Directors is divided into three classes, Class I, Class II and Class III, with each class serving staggered terms;
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•
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provide that our directors may be removed only for cause;
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•
|
provide that vacancies on our Board of Directors may be filled only by a majority vote of directors then in office, even though less than a quorum;
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•
|
specify that no stockholder is permitted to cumulate votes at any election of directors; and
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•
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require a super-majority of votes to amend certain of the above-mentioned provisions.
|
|
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ENERGY RECOVERY, INC.
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Date:
|
August 2, 2019
|
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By:
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/s/ CHRIS GANNON
|
|
|
|
|
Chris Gannon
|
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|
|
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President and Chief Executive Officer
|
|
|
|
|
(Principal Executive Officer)
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Date:
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August 2, 2019
|
|
By:
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/s/ JOSHUA BALLARD
|
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Joshua Ballard
|
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Chief Financial Officer
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(Principal Financial and Accounting Officer)
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1.
|
I have reviewed this
quarterly
report on Form
10-Q
of Energy Recovery, Inc. for the period ended
June 30, 2019
;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: August 2, 2019
|
/s/ CHRIS GANNON
|
|
|
|
Name:
|
Chris Gannon
|
|
|
Title:
|
President and Chief Executive Officer
(Principal Executive Officer)
|
|
1.
|
I have reviewed this
quarterly
report on Form
10-Q
of Energy Recovery, Inc. for the period ended
June 30, 2019
;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: August 2, 2019
|
/s/ JOSHUA BALLARD
|
|
|
|
Name:
|
Joshua Ballard
|
|
|
Title:
|
Chief Financial Officer
(Principal Financial Officer)
|
|
1.
|
The Company’s
Quarterly
Report on Form
10-Q
for the period ended
June 30, 2019
, to which this Certification is attached as Exhibit 32.1 (the “
Quarterly
Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act, and
|
2.
|
The information contained in the
Quarterly
Report fairly presents, in all material respects, the financial condition of the Company at the end of the period covered by the
Quarterly
Report and results of operations of the Company for the period covered by the
Quarterly
Report.
|
Date: August 2, 2019
|
|
/s/ CHRIS GANNON
|
|
|
Chris Gannon
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
Date: August 2, 2019
|
|
/s/JOSHUA BALLARD
|
|
|
Joshua Ballard
|
|
|
Chief Financial Officer
|
*
|
This certification accompanies the Form
10-Q
to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Energy Recovery, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form
10-Q
), irrespective of any general incorporation language contained in such filing.
|