(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 | ||
Page No. | ||
September 30, 2020 | December 31, 2019 | ||||||
(In thousands) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | $ | |||||
Short-term investments | |||||||
Accounts receivable, net | |||||||
Inventories, net | |||||||
Prepaid expenses and other current assets | |||||||
Total current assets | |||||||
Long-term investments | |||||||
Deferred tax assets, non-current | |||||||
Property and equipment, net | |||||||
Operating lease, right of use asset | |||||||
Goodwill | |||||||
Other intangible assets, net | |||||||
Other assets, non-current | |||||||
Total assets | $ | $ | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | $ | |||||
Accrued expenses and other current liabilities | |||||||
Lease liabilities | |||||||
Contract liabilities | |||||||
Total current liabilities | |||||||
Lease liabilities, non-current | |||||||
Contract liabilities, non-current | |||||||
Other non-current liabilities | |||||||
Total liabilities | |||||||
Commitments and contingencies (Note 8) | |||||||
Stockholders’ equity: | |||||||
Common stock | |||||||
Additional paid-in capital | |||||||
Accumulated other comprehensive income (loss) | ( | ) | |||||
Treasury stock | ( | ) | ( | ) | |||
Accumulated earnings (deficit) | ( | ) | |||||
Total stockholders’ equity | |||||||
Total liabilities and stockholders’ equity | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
(In thousands, except per share data) | |||||||||||||||
Product revenue | $ | $ | $ | $ | |||||||||||
Product cost of revenue | |||||||||||||||
Product gross profit | |||||||||||||||
License and development revenue | |||||||||||||||
Operating expenses: | |||||||||||||||
General and administrative | |||||||||||||||
Sales and marketing | |||||||||||||||
Research and development | |||||||||||||||
Amortization of intangible assets | |||||||||||||||
Impairment of long-lived assets | |||||||||||||||
Total operating expenses | |||||||||||||||
Income from operations | |||||||||||||||
Other income (expense): | |||||||||||||||
Interest income | |||||||||||||||
Other non-operating expense, net | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Total other income, net | |||||||||||||||
Income before income taxes | |||||||||||||||
Provision for (benefit from) income taxes | ( | ) | |||||||||||||
Net income | $ | $ | $ | $ | |||||||||||
Earnings per share: | |||||||||||||||
Basic | $ | $ | $ | $ | |||||||||||
Diluted | $ | $ | $ | $ | |||||||||||
Number of shares used in per share calculations: | |||||||||||||||
Basic | |||||||||||||||
Diluted |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
(In thousands) | |||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||
Other comprehensive income (loss), net of tax | |||||||||||||||
Foreign currency translation adjustments | ( | ) | ( | ) | |||||||||||
Unrealized gain (loss) on investments | ( | ) | ( | ) | |||||||||||
Total other comprehensive income (loss), net of tax | ( | ) | ( | ) | |||||||||||
Comprehensive income | $ | $ | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
(In thousands) | |||||||||||||||
Common stock | |||||||||||||||
Beginning balance | $ | $ | $ | $ | |||||||||||
Issuance of common stock, net | |||||||||||||||
Ending balance | |||||||||||||||
Additional paid-in capital | |||||||||||||||
Beginning balance | |||||||||||||||
Issuance of common stock, net | |||||||||||||||
Stock-based compensation | |||||||||||||||
Ending balance | |||||||||||||||
Accumulated other comprehensive income (loss) | |||||||||||||||
Beginning balance | ( | ) | ( | ) | ( | ) | |||||||||
Other comprehensive income (loss) | |||||||||||||||
Foreign currency translation adjustments | ( | ) | ( | ) | |||||||||||
Unrealized gain (loss) on investments | ( | ) | ( | ) | |||||||||||
Total other comprehensive income (loss), net | ( | ) | ( | ) | |||||||||||
Ending balance | ( | ) | ( | ) | |||||||||||
Treasury stock | |||||||||||||||
Beginning and ending balance | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Accumulated earnings (deficit) | |||||||||||||||
Beginning balance | ( | ) | ( | ) | ( | ) | |||||||||
Net income | |||||||||||||||
Ending balance | ( | ) | ( | ) | |||||||||||
Total stockholders’ equity | $ | $ | $ | $ | |||||||||||
Common stock issued (number of shares) | |||||||||||||||
Beginning balance | |||||||||||||||
Issuance of common stock, net | |||||||||||||||
Ending balance | |||||||||||||||
Treasury stock (number of shares) | |||||||||||||||
Beginning and ending balance |
Nine Months Ended September 30, | |||||||
2020 | 2019 | ||||||
(In thousands) | |||||||
Cash flows from operating activities: | |||||||
Net income | $ | $ | |||||
Adjustments to reconcile net income to cash provided by operating activities | |||||||
Stock-based compensation | |||||||
Depreciation and amortization | |||||||
Amortization (accretion) of premiums and discounts on investments | ( | ) | |||||
Deferred income taxes | |||||||
Provision for warranty claims | |||||||
Impairment of long-lived assets | |||||||
Other non-cash adjustments | |||||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable, net | ( | ) | |||||
Contract assets | ( | ) | |||||
Inventories, net | ( | ) | ( | ) | |||
Prepaid and other assets | |||||||
Accounts payable | ( | ) | |||||
Accrued expenses and other liabilities | ( | ) | ( | ) | |||
Income taxes | ( | ) | |||||
Contract liabilities | ( | ) | ( | ) | |||
Net cash provided by operating activities | |||||||
Cash flows from investing activities: | |||||||
Sales of marketable securities | |||||||
Maturities of marketable securities | |||||||
Purchases of marketable securities | ( | ) | ( | ) | |||
Capital expenditures | ( | ) | ( | ) | |||
Net cash provided by investing activities | |||||||
Cash flows from financing activities: | |||||||
Net proceeds from issuance of common stock | |||||||
Tax payment for employee shares withheld | ( | ) | ( | ) | |||
Net cash provided by financing activities | |||||||
Effect of exchange rate differences on cash and cash equivalents | |||||||
Net change in cash, cash equivalents and restricted cash | |||||||
Cash, cash equivalents and restricted cash, beginning of year | |||||||
Cash, cash equivalents and restricted cash, end of period | $ | $ |
Three Months Ended September 30, 2020 | Nine Months Ended September 30, 2020 | ||||||||||||||||||||||
Water | Oil & Gas | Total | Water | Oil & Gas | Total | ||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
Primary geographical market | |||||||||||||||||||||||
Middle East and Africa | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Americas | |||||||||||||||||||||||
Asia | |||||||||||||||||||||||
Europe | |||||||||||||||||||||||
Total revenue | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Major product/service line | |||||||||||||||||||||||
PX Pressure Exchangers, pumps and turbo devices, and other | $ | $ | $ | $ | $ | ||||||||||||||||||
License and development | |||||||||||||||||||||||
Total revenue | $ | $ | $ | $ | $ | $ |
Three Months Ended September 30, 2019 | Nine Months Ended September 30, 2019 | ||||||||||||||||||||||
Water | Oil & Gas | Total | Water | Oil & Gas | Total | ||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
Primary geographical market | |||||||||||||||||||||||
Middle East and Africa | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Americas | |||||||||||||||||||||||
Asia | |||||||||||||||||||||||
Europe | |||||||||||||||||||||||
Total revenue | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Major product/service line | |||||||||||||||||||||||
PX Pressure Exchangers, pumps and turbo devices, and other | $ | $ | $ | $ | $ | $ | |||||||||||||||||
License and development | |||||||||||||||||||||||
Total revenue | $ | $ | $ | $ | $ | $ |
September 30, 2020 | December 31, 2019 | ||||||
(In thousands) | |||||||
Accounts receivable, net | $ | $ | |||||
Contract assets: | |||||||
Contract assets, current (included in prepaid expenses and other current assets) | $ | $ | |||||
Contract assets, non-current (included in other assets, non-current) | |||||||
Total contract assets | $ | $ | |||||
Current contract liabilities: | |||||||
Customer deposits | $ | $ | |||||
Deferred revenue: | |||||||
License and development | |||||||
Product | |||||||
Service | |||||||
Total deferred revenue | |||||||
Total current contract liabilities | |||||||
Non-current contract liabilities, deferred revenue: | |||||||
License and development | |||||||
Service | |||||||
Total non-current contract liabilities | |||||||
Total contract liabilities | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
(In thousands) | |||||||||||||||
Contract assets balance, beginning of period | $ | $ | $ | $ | |||||||||||
Transferred to trade receivables | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Additions to contract assets | |||||||||||||||
Contract assets balance, end of period | $ | $ | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
(In thousands) | |||||||||||||||
Contract liabilities balance, beginning of period | $ | $ | $ | $ | |||||||||||
Revenue recognized | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Cash received, excluding amounts recognized as revenue during the period | |||||||||||||||
Contract liabilities balance, end of period | $ | $ | $ | $ |
September 30, 2020 | |||
(In thousands) | |||
Year: | |||
2020 (remaining three months) | $ | ||
2021 | |||
2022 | |||
Total performance obligation | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
(In thousands, except per share amounts) | |||||||||||||||
Numerator: | |||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||
Denominator (weighted average shares): | |||||||||||||||
Basic common shares outstanding | |||||||||||||||
Dilutive stock awards | |||||||||||||||
Diluted common shares outstanding | |||||||||||||||
Earnings per share: | |||||||||||||||
Basic | $ | $ | $ | $ | |||||||||||
Diluted | $ | $ | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||
(In thousands) | |||||||||||
Anti-dilutive stock awards |
September 30, 2020 | December 31, 2019 | September 30, 2019 | |||||||||
(In thousands) | |||||||||||
Cash and cash equivalents | $ | $ | $ | ||||||||
Restricted cash, non-current (included in other assets, non-current) | |||||||||||
Total cash, cash equivalents and restricted cash | $ | $ | $ |
September 30, 2020 | December 31, 2019 | ||||||
(In thousands) | |||||||
Accounts receivable, gross | $ | $ | |||||
Allowance for doubtful accounts | ( | ) | ( | ) | |||
Accounts receivable, net | $ | $ |
September 30, 2020 | December 31, 2019 | ||||||
(In thousands) | |||||||
Raw materials | $ | $ | |||||
Work in process | |||||||
Finished goods | |||||||
Inventories, net | $ | $ |
September 30, 2020 | December 31, 2019 | ||||||
(In thousands) | |||||||
Payroll, incentives and commissions payable | $ | $ | |||||
Warranty reserve | |||||||
Other accrued expenses and current liabilities | |||||||
Total accrued expenses and other current liabilities | $ | $ |
Level 1 — | Quoted prices (unadjusted) in active markets for identical assets or liabilities; |
Level 2 — | Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and |
Level 3 — | Unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions that market participants would use in pricing. |
September 30, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||||||
Pricing Category | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||||
Cash equivalents | |||||||||||||||||||||||||||||||||
Money market securities | Level 1 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
U.S. treasury securities | Level 2 | ||||||||||||||||||||||||||||||||
Total cash equivalents | |||||||||||||||||||||||||||||||||
Short-term investments | |||||||||||||||||||||||||||||||||
U.S. treasury securities | Level 2 | ||||||||||||||||||||||||||||||||
Corporate notes and bonds | Level 2 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
Total short-term investments | ( | ) | ( | ) | |||||||||||||||||||||||||||||
Long-term investments | |||||||||||||||||||||||||||||||||
Corporate notes and bonds | Level 2 | ( | ) | ||||||||||||||||||||||||||||||
Total long-term investments | ( | ) | |||||||||||||||||||||||||||||||
Total | $ | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ |
September 30, 2020 | December 31, 2019 | ||||||||||||||
Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | ||||||||||||
(In thousands) | |||||||||||||||
U.S. treasury securities | $ | $ | $ | $ | |||||||||||
Corporate notes and bonds | ( | ) | ( | ) | |||||||||||
Total available-for-sale investments with unrealized loss positions | $ | $ | ( | ) | $ | $ | ( | ) |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
(In thousands) | |||||||||||||||
U.S. treasury securities | $ | $ | $ | $ | |||||||||||
Corporate notes and bonds | |||||||||||||||
Total sales of securities | $ | $ | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
(In thousands) | |||||||||||||||
Operating lease expense | $ | $ | $ | $ | |||||||||||
Cash payments | |||||||||||||||
Non-cash lease liabilities arising from obtaining right-of-use assets |
Weighted average remaining lease term | |
Weighted average discount rate |
Lease Amounts | |||
(In thousands) | |||
Year: | |||
2020 (remaining three months) | $ | ||
2021 | |||
2022 | |||
2023 | |||
2024 | |||
2025 and thereafter | |||
Total | |||
Less imputed lease interest | ( | ) | |
Total lease liabilities | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
(In thousands) | |||||||||||||||
Warranty reserve balance, beginning of period | $ | $ | $ | $ | |||||||||||
Warranty costs charged to cost of revenue | |||||||||||||||
Utilization charges against reserve | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Release of accrual related to expired warranties | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Warranty reserve balance, end of period | $ | $ | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
(In thousands, except percentages) | |||||||||||||||
Provision for (benefit from) income taxes | $ | $ | ( | ) | $ | $ | |||||||||
Effective tax rate | % | ( | %) | % | % | ||||||||||
Effective tax rate, excluding discrete items | % | % | % | % |
Three Months Ended September 30, 2020 | Nine Months Ended September 30, 2020 | ||||||||||||||||||||||
Water | Oil & Gas | Total | Water | Oil & Gas | Total | ||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
Product revenue | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Product cost of revenue | |||||||||||||||||||||||
Product gross profit | |||||||||||||||||||||||
License and development revenue(1) | |||||||||||||||||||||||
Operating expenses | |||||||||||||||||||||||
General and administrative | |||||||||||||||||||||||
Sales and marketing | |||||||||||||||||||||||
Research and development | |||||||||||||||||||||||
Amortization of intangible assets | |||||||||||||||||||||||
Impairment of long-lived assets(2) | |||||||||||||||||||||||
Total operating expenses | |||||||||||||||||||||||
Operating income (loss) | $ | $ | ( | ) | $ | $ | |||||||||||||||||
Less: Corporate operating expenses | |||||||||||||||||||||||
Income from operations | |||||||||||||||||||||||
Other income, net | |||||||||||||||||||||||
Income before income taxes | $ | $ |
(1) | See Note 12, “VorTeq Partnership and License Agreement,” for additional discussion regarding the termination of the VorTeq License Agreement. |
(2) | See Note 4, “Other Financial Information – Property and Equipment,” for additional discussion regarding the impairment of certain VorTeq long-lived assets that were directly related to obligations under the VorTeq License Agreement. |
Three Months Ended September 30, 2019 | Nine Months Ended September 30, 2019 | ||||||||||||||||||||||
Water | Oil & Gas | Total | Water | Oil & Gas | Total | ||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
Product revenue | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Product cost of revenue | |||||||||||||||||||||||
Product gross profit (loss) | ( | ) | |||||||||||||||||||||
License and development revenue | |||||||||||||||||||||||
Operating expenses | |||||||||||||||||||||||
General and administrative | |||||||||||||||||||||||
Sales and marketing | |||||||||||||||||||||||
Research and development | |||||||||||||||||||||||
Amortization of intangible assets | |||||||||||||||||||||||
Total operating expenses | |||||||||||||||||||||||
Operating income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||
Less: Corporate operating expenses | |||||||||||||||||||||||
Income from operations | |||||||||||||||||||||||
Other income, net | |||||||||||||||||||||||
Income before income taxes | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||
Segment | 2020 | 2019 | 2020 | 2019 | |||||
Customer A | Water | ** | ** | ||||||
Customer B | Water | ** | |||||||
Customer C | Water | ** | ** | ||||||
Customer D | Water | ** | ** |
** | Zero or less than 10%. |
• | our belief that the integration of Environmental, Social and Governance (“ESG”) principles into our corporate and risk management strategies can strengthen our existing business as well as our efforts to develop new applications of pressure exchanger technology for high-pressure fluid-flow environments; |
• | our belief that the marketable securities in the form of cash equivalents, and short and long-term investments and ongoing cash generated from operations should be sufficient to cover our capital requirements for the next 12 months; |
• | our belief that we will be able to fulfill our existing delivery obligations in fiscal year 2020; |
• | our belief that the cyber-attack will not have a long-term material adverse impact on our business, results of operations or financial condition; |
• | our belief that our manufacturing and warehouse space in Tracy, California will produce at the levels we forecast; |
• | 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 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 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; |
• | the impact of changes in internal control over financial reporting; and |
• | the development of major public health concerns, including the COVID-19 outbreak or other pandemics arising globally, and the future impact of such major public health concerns, and specifically in the short-term the COVID-19 pandemic, on our business and operations. |
• | 89% of our total fiscal year 2019 product revenue came from renewable energy and energy efficiency-related products. |
• | Our water products lowered energy expenses for desalination customers by $2 billion per year. |
• | Deployment of our PX avoided consumption of 21.0 terawatt hours in fiscal year 2019, an amount associated with preventing approximately 12.4 million metric tons of carbon emissions – equivalent to removing more than 2.5 million passenger vehicles from the road annually. |
• | 96% of PXs shipped to our customers in fiscal year 2019 contained components made from recycled materials. |
• | We retained 93% of our employees in fiscal year 2019, while growing our headcount by 38%. |
• | Third quarter product revenue was the highest in our history. |
• | We opened our new manufacturing and warehousing facility in Tracy, California. Our new Tracy facility supplements the existing manufacturing, warehousing and distribution of our PX, turbochargers and pumps located in San Leandro, California. Commissioning of our Tracy facility occurred in July 2020. |
• | In July 2020, we announced the award of projects to supply several hundred PXs, related equipment and services totaling $20.9 million, including a contract for the 400,000 cubic meters per day (“m3/day”) Al Jubail II Seawater Reverse Osmosis (“SWRO”) facility (“Jubail II”). Jubail II will replace the thermal capacity of the 136,000 m3/day Jubail I thermal desalination facility. |
• | In August 2020, we announced the award of projects to supply PXs, related equipment and services totaling $4.7 million, to Saline Water Conversion Corporation (“SWCC”), a Saudi government corporation responsible for power production and the supply of fresh water to various regions in the Kingdom. The project consists of three floating desalination stations with a cumulative water production capacity of 150,000 m3/day. The project is expected to be operational by the end of 2020. |
Three Months Ended September 30, | ||||||||||||||||||||
2020 | 2019 | Change | ||||||||||||||||||
$ | % of Total Revenue | $ | % of Total Revenue | $ | % | |||||||||||||||
(In thousands, except percentages) | ||||||||||||||||||||
Product revenue - Water | $ | 27,408 | 100 | % | $ | 21,752 | 88 | % | $ | 5,656 | 26 | % | ||||||||
License and development revenue | — | — | % | 3,098 | 12 | % | (3,098 | ) | (100 | %) | ||||||||||
Total revenue | $ | 27,408 | 100 | % | $ | 24,850 | 100 | % | $ | 2,558 | 10 | % |
Nine Months Ended September 30, | ||||||||||||||||||||
2020 | 2019 | Change | ||||||||||||||||||
$ | % of Total Revenue | $ | % of Total Revenue | $ | % | |||||||||||||||
(In thousands, except percentages) | ||||||||||||||||||||
Product revenue | ||||||||||||||||||||
Water | $ | 65,665 | 71 | % | $ | 56,946 | 85 | % | $ | 8,719 | 15 | % | ||||||||
Oil & Gas | — | — | % | 104 | — | % | (104 | ) | (100 | %) | ||||||||||
Total product revenue | 65,665 | 71 | % | 57,050 | 85 | % | 8,615 | 15 | % | |||||||||||
License and development revenue | 26,895 | 29 | % | 10,391 | 15 | % | 16,504 | 159 | % | |||||||||||
Total revenue | $ | 92,560 | 100 | % | $ | 67,441 | 100 | % | $ | 25,119 | 37 | % |
Three Months Ended September 30, | ||||||||||||||||||||
2020 | 2019 | Gross Profit Change | ||||||||||||||||||
Gross Profit | Gross Margin | Gross Profit | Gross Margin | $ | % | |||||||||||||||
(In thousands, except percentages) | ||||||||||||||||||||
Product gross profit and gross margin | $ | 19,592 | 71.5 | % | $ | 16,327 | 75.1 | % | $ | 3,265 | 20.0 | % |
Nine Months Ended September 30, | ||||||||||||||||||||
2020 | 2019 | Gross Profit Change | ||||||||||||||||||
Gross Profit | Gross Margin | Gross Profit | Gross Margin | $ | % | |||||||||||||||
(In thousands, except percentages) | ||||||||||||||||||||
Product gross profit and gross margin | $ | 45,616 | 69.5 | % | $ | 41,207 | 72.2 | % | $ | 4,409 | 10.7 | % |
Three Months Ended September 30, | ||||||||||||||||||||
2020 | 2019 | Change | ||||||||||||||||||
$ | % of Total Revenue | $ | % of Total Revenue | $ | % | |||||||||||||||
(In thousands, except percentages) | ||||||||||||||||||||
General and administrative | $ | 6,271 | 23 | % | $ | 5,711 | 23 | % | $ | 560 | 10 | % | ||||||||
Sales and marketing | 2,141 | 8 | % | 2,367 | 10 | % | (226 | ) | (10 | %) | ||||||||||
Research and development | 5,098 | 19 | % | 6,620 | 27 | % | (1,522 | ) | (23 | %) | ||||||||||
Amortization of intangible assets | 4 | — | % | 156 | 1 | % | (152 | ) | (97 | %) | ||||||||||
Total operating expenses | $ | 13,514 | 49 | % | $ | 14,854 | 60 | % | $ | (1,340 | ) | (9 | %) |
Nine Months Ended September 30, | ||||||||||||||||||||
2020 | 2019 | Change | ||||||||||||||||||
$ | % of Total Revenue | $ | % of Total Revenue | $ | % | |||||||||||||||
(In thousands, except percentages) | ||||||||||||||||||||
General and administrative | $ | 18,751 | 20 | % | $ | 16,790 | 25 | % | $ | 1,961 | 12 | % | ||||||||
Sales and marketing | 5,776 | 6 | % | 6,710 | 10 | % | (934 | ) | (14 | %) | ||||||||||
Research and development | 18,159 | 20 | % | 16,354 | 24 | % | 1,805 | 11 | % | |||||||||||
Amortization of intangible assets | 12 | — | % | 469 | 1 | % | (457 | ) | (97 | %) | ||||||||||
Impairment of long-lived assets | 2,332 | 3 | % | — | — | % | 2,332 | — | % | |||||||||||
Total operating expenses | $ | 45,030 | 49 | % | $ | 40,323 | 60 | % | $ | 4,707 | 12 | % |
Three Months Ended September 30, 2020 | Three Months Ended September 30, 2019 | ||||||||||||||||||||||||||||||
Water | Oil & Gas | Corporate | Total | Water | Oil & Gas | Corporate | Total | ||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||
Operating expenses | |||||||||||||||||||||||||||||||
General and administrative | $ | 606 | $ | 439 | $ | 5,226 | $ | 6,271 | $ | 359 | $ | 431 | $ | 4,921 | $ | 5,711 | |||||||||||||||
Sales and marketing | 1,507 | 30 | 604 | 2,141 | 1,850 | 92 | 425 | 2,367 | |||||||||||||||||||||||
Research and development | 723 | 2,956 | 1,419 | 5,098 | 886 | 5,667 | 67 | 6,620 | |||||||||||||||||||||||
Amortization of intangible assets | 4 | — | — | 4 | 156 | — | — | 156 | |||||||||||||||||||||||
Total operating expenses | $ | 2,840 | $ | 3,425 | $ | 7,249 | 13,514 | $ | 3,251 | $ | 6,190 | $ | 5,413 | $ | 14,854 |
Nine Months Ended September 30, 2020 | Nine Months Ended September 30, 2019 | ||||||||||||||||||||||||||||||
Water | Oil & Gas | Corporate | Total | Water | Oil & Gas | Corporate | Total | ||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||
Operating expenses | |||||||||||||||||||||||||||||||
General and administrative | $ | 1,467 | $ | 1,601 | $ | 15,683 | $ | 18,751 | $ | 1,456 | $ | 1,207 | $ | 14,127 | $ | 16,790 | |||||||||||||||
Sales and marketing | 4,307 | 106 | 1,363 | 5,776 | 5,058 | 674 | 978 | 6,710 | |||||||||||||||||||||||
Research and development | 2,585 | 12,720 | 2,854 | 18,159 | 2,794 | 13,335 | 225 | 16,354 | |||||||||||||||||||||||
Amortization of intangible assets | 12 | — | — | 12 | 469 | — | — | 469 | |||||||||||||||||||||||
Impairment of long-lived assets | — | 2,332 | — | 2,332 | — | — | — | — | |||||||||||||||||||||||
Total operating expenses | $ | 8,371 | $ | 16,759 | $ | 19,900 | 45,030 | $ | 9,777 | $ | 15,216 | $ | 15,330 | $ | 40,323 |
Three Months Ended June 30, | Nine Months Ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
(In thousands, except percentages) | ||||||||||||||||
Interest income | $ | 134 | $ | 500 | $ | 809 | $ | 1,551 | ||||||||
Other non-operating expense, net | (29 | ) | (5 | ) | (59 | ) | (77 | ) | ||||||||
Total other income, net | $ | 105 | $ | 495 | $ | 750 | $ | 1,474 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
(In thousands, except percentages) | |||||||||||||||
Provision for (benefit from) income taxes | $ | 796 | $ | (83 | ) | $ | 5,297 | $ | 1,227 | ||||||
Effective tax rate | 12.9 | % | (1.6 | %) | 18.8 | % | 9.6 | % | |||||||
Effective tax rate, excluding discrete items | 13.4 | % | 11.8 | % | 18.6 | % | 17.7 | % |
Nine Months Ended September 30, | |||||||
2020 | 2019 | ||||||
(In thousands) | |||||||
Net cash provided by operating activities | $ | 10,350 | $ | 503 | |||
Net cash provided by investing activities | 42,166 | 1,821 | |||||
Net cash provided by financing activities | 1,237 | 5,335 | |||||
Effect of exchange rate differences on cash and cash equivalents | 11 | — | |||||
Net change in cash, cash equivalents and restricted cash | $ | 53,764 | $ | 7,659 |
Payments Due by Period | |||||||||||||||||||
Total | 1 Year (remaining three months of 2020) | 2-3 Years (2021-2022) | 3-4 Years (2023-2024) | 5 Years + (2025 and thereafter) | |||||||||||||||
(In thousands) | |||||||||||||||||||
Operating lease obligations | $ | 24,305 | $ | 635 | $ | 5,081 | $ | 5,392 | $ | 13,197 | |||||||||
Purchase obligations(1) | 5,167 | 3,080 | 2,087 | — | — | ||||||||||||||
Total contractual obligations | $ | 29,472 | $ | 3,715 | $ | 7,168 | $ | 5,392 | $ | 13,197 |
(1) | Purchase obligations are related to open purchase orders for raw material, component parts and capital equipment. |
Exhibit Number | Exhibit Description | Incorporated by Reference | Filed Herewith | |||||||||
Form | File No. | Exhibit | Filing Date | |||||||||
X | ||||||||||||
X | ||||||||||||
101 | Inline XBRL Document Set for the consolidated financial statements and accompanying notes in Part I, “Financial Information” of this Quarterly Report on Form 10-Q. | |||||||||||
104 | Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set. |
* | The certifications furnished in Exhibits 32.1 are deemed to accompany this Form 10-Q and are not deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall they be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act. |
ENERGY RECOVERY, INC. | |||||
Date: | October 30, 2020 | By: | /s/ ROBERT YU LANG MAO | ||
Robert Yu Lang Mao | |||||
President and Chief Executive Officer | |||||
(Principal Executive Officer) | |||||
Date: | October 30, 2020 | By: | /s/ JOSHUA BALLARD | ||
Joshua Ballard | |||||
Chief Financial Officer | |||||
(Principal Financial and Accounting Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of Energy Recovery, Inc. for the period ended September 30, 2020; |
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: October 30, 2020 | /s/ ROBERT YU LANG MAO | ||
Name: | Robert Yu Lang Mao | ||
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 September 30, 2020; |
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: October 30, 2020 | /s/ JOSHUA BALLARD | ||
Name: | Joshua Ballard | ||
Title: | Chief Financial Officer | ||
(Principal Financial and Accounting Officer) |
1. | The Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2020, 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: October 30, 2020 | /s/ ROBERT YU LANG MAO | ||
Robert Yu Lang Mao | |||
President and Chief Executive Officer | |||
Date: October 30, 2020 | /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. |
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Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Revenue, Product and Service [Extensible List] | us-gaap:ProductMember | |||
Cost, Product and Service [Extensible List] | us-gaap:ProductMember | |||
Revenue | $ 27,408 | $ 24,850 | $ 92,560 | $ 67,441 |
Operating expenses: | ||||
General and administrative | 6,271 | 5,711 | 18,751 | 16,790 |
Sales and marketing | 2,141 | 2,367 | 5,776 | 6,710 |
Research and development | 5,098 | 6,620 | 18,159 | 16,354 |
Amortization of intangible assets | 4 | 156 | 12 | 469 |
Impairment of long-lived assets | 0 | 0 | 2,332 | 0 |
Total operating expenses | 13,514 | 14,854 | 45,030 | 40,323 |
Income from operations | 6,078 | 4,571 | 27,481 | 11,275 |
Other income (expense): | ||||
Interest income | 134 | 500 | 809 | 1,551 |
Other non-operating expense, net | (29) | (5) | (59) | (77) |
Total other income, net | 105 | 495 | 750 | 1,474 |
Income before income taxes | 6,183 | 5,066 | 28,231 | 12,749 |
Provision for (benefit from) income taxes | 796 | (83) | 5,297 | 1,227 |
Net income | $ 5,387 | $ 5,149 | $ 22,934 | $ 11,522 |
Earnings per share: | ||||
Basic (in dollars per share) | $ 0.10 | $ 0.09 | $ 0.41 | $ 0.21 |
Diluted (in dollars per share) | $ 0.10 | $ 0.09 | $ 0.41 | $ 0.21 |
Number of shares used in per share calculations: | ||||
Basic (in shares) | 55,692 | 54,975 | 55,573 | 54,594 |
Diluted (in shares) | 56,471 | 56,384 | 56,443 | 55,971 |
Product | ||||
Revenue | $ 27,408 | $ 21,752 | $ 65,665 | $ 57,050 |
Product cost of revenue | 7,816 | 5,425 | 20,049 | 15,843 |
Product gross profit | 19,592 | 16,327 | 45,616 | 41,207 |
License and development revenue | ||||
Revenue | $ 0 | $ 3,098 | $ 26,895 | $ 10,391 |
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 5,387 | $ 5,149 | $ 22,934 | $ 11,522 |
Other comprehensive income (loss), net of tax | ||||
Foreign currency translation adjustments | 26 | (19) | 11 | (20) |
Unrealized gain (loss) on investments | (45) | (5) | 126 | 127 |
Total other comprehensive income (loss), net of tax | (19) | (24) | 137 | 107 |
Comprehensive income | $ 5,368 | $ 5,125 | $ 23,071 | $ 11,629 |
Description of Business and Significant Accounting Policies |
9 Months Ended |
---|---|
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Description of Business and Significant Accounting Policies | Description of Business and Significant Accounting Policies Energy Recovery, Inc. and its wholly-owned subsidiaries (the “Company” or “Energy Recovery”) has, for more than 20 years, created technologies that solve complex challenges for industrial fluid flow markets worldwide. The Company designs and manufactures solutions that reduce waste, improve operational efficiency, and lower the production costs of clean water and oil & gas. The Company’s solutions are marketed and sold in fluid flow markets such as water, oil & gas and chemical processing under the trademarks ERI®, Ultra PX™, PX®, Pressure Exchanger®, PX Pressure Exchanger®, Powertrain™, VorTeq™, IsoBoost®, IsoGen®, AT™ and AquaBold™. The Company owns, manufactures and/or develops its solutions, in whole or in part, in the United States of America (“U.S.”). Basis of Presentation The Company’s Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation. The accompanying Condensed Consolidated Financial Statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in the financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. The December 31, 2019 Condensed Consolidated Balance Sheet was derived from audited financial statements and may not include all disclosures required by GAAP; however, the Company believes that the disclosures are adequate to make the information presented not misleading. The September 30, 2020 unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the notes thereto for the fiscal year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 6, 2020, as amended on June 10, 2020 (the “2019 Annual Report”). All adjustments consisting of normal recurring adjustments that are necessary to present fairly the financial position, results of operations and cash flows for the interim periods have been made. The results of operations for the interim periods are not necessarily indicative of the operating results for the full fiscal year or any future periods. Use of Estimates The preparation of Condensed Consolidated Financial Statements, in conformity with U.S. GAAP, requires the Company’s management to make judgments, assumptions and estimates that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. The accounting policies that reflect the Company’s more significant estimates and judgments and that the Company believes are the most critical to aid in fully understanding and evaluating its reported financial results are revenue recognition; capitalization of research and development (“R&D”) assets; valuation of stock options; valuation and impairment of goodwill and acquired intangible assets; valuation adjustments for excess and obsolete inventory; deferred taxes and valuation allowances on deferred tax assets; and evaluation and measurement of contingencies. Those estimates could change, and as a result, actual results could differ materially from those estimates. Due to the novel coronavirus (“COVID-19”) pandemic, and the impact on our customers due to the reduced demand for oil and gas, as well as the oversupply of oil, there has been uncertainty and disruption in the global economy and financial markets. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of October 30, 2020, the date of issuance of this Quarterly Report on Form 10-Q. These estimates may change, as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions. The Company undertakes no obligation to update publicly these estimates for any reason after the date of this Quarterly Report on Form 10-Q, except as required by law. Significant Accounting PoliciesExcept for adopting new accounting pronouncements, as noted under “Recently Adopted Accounting Pronouncements,” there have been no material changes to the Company’s significant accounting policies in Note 1, “Description of Business and Significant Accounting Policies,” of the Notes to Consolidated Financial Statements included in the 2019 Annual Report. Recently Adopted Accounting Pronouncements In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which amends Accounting Standards Codification (“ASC”) No. 326, Financial Instruments-Credit Losses (“ASC 326”). Subsequent to the issuance of ASU 2016-13, ASC 326 was amended by various updates that amend and clarify the impact and implementation of the aforementioned update. The new guidance introduces the current expected credit loss (“CECL”) model, which requires an entity to record an allowance for credit losses for certain financial instruments and financial assets, including trade receivables, based on expected losses rather than incurred losses. Under this update, on initial recognition and at each reporting period, an entity is required to recognize an allowance that reflects the entity’s current estimate of credit losses expected to be incurred over the life of the financial instrument. In February 2020, the FASB issued ASU No. 2020-02, Financial Instruments-Credit Losses (Topic 326) and Leases (Topic 842)-Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842) (“ASU 2020-02”), which amended the language in Subtopic 326-20 and addressed questions primarily regarding documentation and company policies. ASU 2016-13 and its amendments are effective for the Company for interim and annual periods in fiscal years beginning after December 15, 2019, on a modified retrospective basis. The adoption of ASU 2016-13 and its amendments on January 1, 2020 did not have a material impact on the Company’s Condensed Consolidated Financial Statements and related disclosures. The Company will continue to actively monitor the impact of the recent COVID-19 pandemic, and the impact on our customers due to the reduced demand for oil and gas, as well as the oversupply of oil, on expected credit losses. In March 2020, the FASB issued ASU No. 2020-03, Codification Improvements to Financial Instruments (“ASU 2020-03”). This ASU improves and clarifies various financial instruments topics, including the CECL standard issued in 2016. ASU 2020-03 included seven different issues that describe the areas of improvement and the related amendments to GAAP, intended to make the standards easier to understand and apply by eliminating inconsistencies and providing clarifications. The adoption of ASU 2020-03 on January 1, 2020 did not have a material impact on the Company’s Condensed Consolidated Financial Statements and related disclosures. Recently Issued Accounting Pronouncements Not Yet Adopted In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”), which provided optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. Entities may apply the provisions of the new standard as of the beginning of the reporting period when the election is made (i.e., as early as the first quarter of 2020). Unlike other topics, the provisions of this update are only available until December 31, 2022, when the reference rate replacement activity is expected to have been completed. The Company is currently evaluating the impact of the provisions of ASU 2020-04 on its financial condition, results of operation, and cash flows.
|
Revenue |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | Revenue On June 24, 2020, the Company entered into an agreement with Schlumberger Technology Corporation (“Schlumberger”) to terminate the existing agreement to license the VorTeq technology (the “VorTeq License Agreement”). Pursuant to the terms of the agreement, each party’s rights, duties and obligations under the VorTeq License Agreement have been terminated effective June 1, 2020. Accordingly, the Company (i) is entitled to retain all of the non-refundable upfront exclusivity payment, (ii) is not entitled to any further payments from Schlumberger, and (iii) has no future performance obligations under the VorTeq License Agreement. The Company accounted for the termination as a contract modification, which resulted in the Company recognizing the remaining amounts of the original $75.0 million non-refundable upfront exclusivity payment of $24.4 million during the second quarter of fiscal year 2020 as license and development revenue in the Condensed Consolidated Statements of Operations for such quarter. See Note 12, “VorTeq Partnership and License Agreement,” for additional discussion regarding the termination of the VorTeq License Agreement. Disaggregation of Revenue The following tables present the Company’s revenues disaggregated by geography based on the “shipped to” addresses of the Company’s customers and by major product/service line. Sales and usage-based taxes are excluded from revenues.
Contract Balances The following table presents contract balances by category.
The Company records unbilled receivables as contract assets. The following table presents significant changes in contract assets during the period.
The Company records contract liabilities when cash payments are received in advance of the Company’s performance. The following table presents significant changes in contract liabilities during the period.
Transaction Price Allocated to the Remaining Performance Obligation The following table presents the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied.
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Earnings per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per Share | Earnings per Share Net income for the reported period is divided by the weighted average number of common shares outstanding during the reported period to calculate basic earnings per common share. Basic earnings per share exclude any dilutive effect of stock options and restricted stock units (“RSU”). Diluted earnings per common share reflects the potential dilution that would occur if outstanding stock options to purchase common stock were exercised for shares of common stock, using the treasury stock method, and the shares of common stock underlying each outstanding RSU were issued (outstanding stock options to purchase common stock and RSUs collectively referred to as, “stock awards”). Certain shares of common stock issuable under stock awards have been omitted from the diluted earnings per share calculations because their inclusion is considered anti-dilutive. The following table presents the computation of basic and diluted earnings per share.
The following table presents the potential common shares issuable under stock awards that were excluded from the computation of diluted earnings per share, as their effect would have been anti-dilutive.
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Other Financial Information |
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Other Financial Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Financial Information | Other Financial Information Cash, Cash Equivalents and Restricted Cash The Company’s Condensed Consolidated Statements of Cash Flows explain the changes in the total of cash, cash equivalents and restricted cash. The following table presents a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of such amounts presented.
The Company pledged cash in connection with the Company’s credit cards. The Company deposited corresponding amounts into restricted accounts at several financial institutions. Accounts Receivable, net
Inventories
Inventories are stated at the lower of cost or net realizable value, using the first-in, first-out method. Valuation adjustments for excess and obsolete inventory reflected as a reduction of inventory was $0.5 million and $0.4 million at September 30, 2020 and December 31, 2019, respectively. During the three and nine months ended September 30, 2020, due to the COVID-19 pandemic, the Company expensed $0.3 million and $1.5 million, respectively, to product cost of revenue related to the reduced utilization of the Company’s manufacturing facilities. Property and Equipment Estimated useful lives are periodically reviewed, and when appropriate, changes are made prospectively. When certain events or changes in operating conditions occur, asset lives may be adjusted and an impairment assessment may be performed on the recoverability of the carrying amounts. The Company evaluates the recoverability of long-lived assets by comparing the carrying amount of an asset to estimated future net undiscounted cash flows generated by the asset (asset group). If such assets are considered to be impaired, the impairment recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. The evaluation of recoverability involves estimates of future operating cash flows based upon certain forecasted assumptions, including, but not limited to, revenue growth rates, gross profit margins, and operating expenses. On June 24, 2020, the Company entered into an agreement with Schlumberger to terminate the existing VorTeq License Agreement effective June 1, 2020. As a result, the Company conducted an analysis on certain VorTeq long-lived assets that were directly related to obligations under the VorTeq License Agreement and determined that certain of those assets were impaired. The net carrying value of the impaired long-lived assets of $2.3 million was recognized in the nine months ended September 30, 2020 as impairment of long-lived assets in the Condensed Consolidated Statements of Operations. See Note 12, “VorTeq Partnership and License Agreement,” for additional discussion regarding the termination of the VorTeq License Agreement. Accrued Expenses and Other Current Liabilities
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Investments and Fair Value Measurements |
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Investments and Fair Value Measurements | Investments and Fair Value Measurements Available-for-Sale Investments The Company’s investments in U.S. treasury securities and corporate notes and bonds are classified as available-for-sale. As of September 30, 2020 and December 31, 2019, all available-for-sale investments were either classified as cash equivalents with contractual maturities less than or equal to 90 days, short-term with contractual maturities over 90 days but less than or equal to 12 months, or long-term with contractual maturities over 12 months. Expected maturities can differ from contractual maturities because borrowers may have the right to prepay obligations without prepayment penalties. The Company generally holds available-for-sale investments until maturity; however, from time-to-time, the Company may elect to sell certain available-for-sale investments prior to contractual maturity. The Company monitors investments for impairment. It was determined that unrealized gains and losses at September 30, 2020 and December 31, 2019, were temporary in nature, because the changes in market value for these securities resulted from fluctuating interest rates, rather than a deterioration of the credit worthiness of the issuers. The Company is unlikely to experience gains or losses if these securities are held to maturity. In the event that the Company disposes of these securities before contractual maturity, it is expected that the realized gains or losses, if any, will be immaterial. Fair Value of Financial Instruments All of the Company’s financial assets and liabilities are remeasured and reported at fair value at each reporting period; and are classified and disclosed in one of the following three pricing category levels:
The following table presents the Company’s financial assets measured on a recurring basis by contractual maturity, including their pricing category, amortized cost, gross unrealized holding gains and losses, and fair value, as of September 30, 2020 and December 31, 2019.
As of September 30, 2020 and December 31, 2019, the Company had no financial liabilities and no Level 3 financial assets. During the nine months ended September 30, 2020 and year ended December 31, 2019, the Company had no transfers of financial assets between any levels. The following table presents a summary of the fair value and gross unrealized holding losses on the available-for-sale securities that have been in a continuous unrealized loss position, aggregated by type of investment instrument as of September 30, 2020 and December 31, 2019. The available-for-sale for investments that were in an unrealized gain position have been excluded from the table.
Sales of Available-for-Sale Investments The following table presents the sales of available-for-sale investments.
Realized gain on sales of securities was immaterial during the three and nine months ended September 30, 2020 and 2019.
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Goodwill Goodwill |
9 Months Ended |
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Sep. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill | Goodwill The net carrying amount of goodwill as of September 30, 2020 and December 31, 2019 was $12.8 million. Goodwill is tested for impairment annually in the third quarter (July 1) of the Company’s fiscal year or more frequently if indicators of potential impairment exist. The recoverability of goodwill is measured at the reporting unit level, which represents the operating segment. On July 1, 2020, the Company estimated the fair value of its reporting units using both the discounted cash flow and market approaches. The forecast of future cash flows, which is the result of the Company’s best estimates of future net sales and operating expenses, are based primarily on expected category expansion, pricing, market segment, and general economic conditions. The Company incorporated other significant inputs to its fair value calculations, including discount rate and market multiples, to reflect current market conditions, and also considered the impact of the COVID-19 pandemic and the termination of the VorTeq License Agreement in its calculations. The analysis performed indicated that the fair value of each reporting unit that is allocated to goodwill significantly exceeded its carrying value. As a result, no impairment charge was recorded during the quarter ended September 30, 2020. The Company continues to actively monitor the industries in which it operates and its businesses’ performance for indicators of potential impairment.
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Lines of Credit |
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Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Lines of Credit | Lines of Credit Loan and Pledge Agreement The Company entered into a loan and pledge agreement with a financial institution on January 27, 2017. Since inception, this loan and pledge agreement has been amended multiple times to accommodate the growth of the Company (the as amended loan and pledge agreement is hereinafter referred to as the “Loan and Pledge Agreement”). The Loan and Pledge Agreement, which will expire on June 30, 2022, currently provides for a committed revolving credit line of $16.0 million and an uncommitted revolving credit line of $4.0 million. The covenants of the Loan and Pledge Agreement allow the Company to incur indebtedness owed to a foreign subsidiary in an aggregate amount not to exceed $66.0 million, which amount is subordinated to any amounts outstanding under the Loan and Pledge Agreement. As of September 30, 2020 and December 31, 2019, there was no debt outstanding under the Loan and Pledge Agreement. Stand-By Letters of Credit Under the Loan and Pledge Agreement, the Company is allowed to issue stand-by letters of credit (“SBLCs”) up to one year past the expiration date of the Loan and Pledge Agreement and to hold SBLCs with other financial institutions up to $5.1 million. SBLCs have a term limit of three years, are secured by pledged U.S. investments, and do not have any cash collateral balance requirements. SBLCs are deducted from the total revolving credit line under the Loan and Pledge Agreement and are subject to a non-refundable quarterly fee that is in an amount equal to 0.7% per annum of the face amount of the outstanding SBLCs. As of September 30, 2020 and December 31, 2019, there were $12.5 million and $11.8 million, respectively, of outstanding SBLCs.
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Commitments and Contingencies |
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Commitments and Contingencies | Commitments and Contingencies Operating Lease Obligations The Company leases office facilities and equipment under operating leases that expire on various dates through fiscal year 2030. On January 10, 2019, the Company entered into an industrial lease agreement, which commenced on January 1, 2020. This lease for a commercial development center for oil & gas field testing, manufacturing, and training, located in Katy, Texas (the “Katy Lease”), included an office and warehouse space of approximately 25,200 square feet (“sqft.”) and land of approximately 4.5 acres. The Company’s annual base rent obligation, paid monthly, is approximately $0.3 million with an increase of approximately 3% annually thereafter, totaling approximately $3.6 million, over the term of the lease. The initial term of the Katy Lease is 120 months after the commencement date, and the Company has two options to extend the lease by an additional five-year term per option, which must be exercised by written notice by the Company at least six months prior to the end of the relevant term. On February 10, 2020, the Company entered into a lease agreement, that commenced on March 1, 2020, for an additional manufacturing and warehousing space of approximately 54,429 sqft., located in Tracy, California (the “Tracy Lease”). This lease supplements the existing manufacturing, warehousing and distribution of the Company’s energy recovery devices (“ERDs”) and other products. The Company’s annual base rent obligation, paid monthly, is approximately $0.4 million, with an increase of approximately 3% annually thereafter, totaling approximately $5.0 million, over the term of the lease. The initial term of the Tracy Lease is 122 months after the commencement date, and the Company has one option to extend the lease by an additional five-year term, which must be exercised by written notice by the Company at least nine months prior to the end of the original lease term. The following table presents operating lease activities related to all leased properties.
The following table presents other information related to outstanding operating leases as of September 30, 2020.
The following table presents the minimum lease payments under noncancelable operating leases, exclusive of executory costs as of September 30, 2020.
Warranty The following table presents the changes in the Company’s accrued product warranty reserve.
Purchase Obligations The Company has purchase order arrangements with its vendors for which the Company has not received the related goods or services as of September 30, 2020. These arrangements are subject to change based on the Company’s sales demand forecasts. The Company has the right to cancel the arrangements prior to the date of delivery. The purchase order arrangements are related to various raw materials and component parts, as well as capital equipment. As of September 30, 2020, the Company had approximately $5.2 million of such open cancellable purchase order arrangements. Litigation The Company is named in and subject to various proceedings and claims in connection with its business. The outcome of matters the Company has been, and currently is, involved in cannot be determined at this time, and the results cannot be predicted with certainty. There can be no assurance that these matters will not have a material adverse effect on the Company’s results of operations in any future period, and a significant judgment could have a material impact on the Company’s financial condition, results of operations and cash flows. The Company may in the future become involved in additional litigation in the ordinary course of business, including litigation that could be material to its business. The Company considers all claims on a quarterly basis and, based on known facts, assesses whether potential losses are considered reasonably possible, probable and estimable. Based upon this assessment, the Company then evaluates disclosure requirements and whether to accrue for such claims in its consolidated financial statements. The Company records a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and are adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Other than matters discussed below, as of September 30, 2020, there were no material losses which were probable or reasonably possible. On July 21, 2020, a purported securities class action lawsuit was filed in the United States District Court for the Southern District of New York (Visser, et al. v. Energy Recovery, Inc., et al., Case No. 1:20-cv-05647-VM (S.D.N.Y.)), naming as defendants the Company and certain of the Company’s present and former executive officers. The Complaint alleges that the defendants violated Section 10(b) and 20 (a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder, by making materially false and misleading statements, and failed to disclose material adverse facts concerning, the commercialization of VorTeq and expectations of future license revenue. The Complaint further alleges unspecified damages based on a decline in the market price of the Company’s shares following the announcement of the termination of the VorTeq License Agreement. The Company believes the complaint is without merit and intends to defend the case vigorously. At this time, the Company is not able to estimate any reasonable possible loss, if any, due to the early state of this matter.
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Income Taxes |
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Income Taxes | Income Taxes
The Company’s tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each quarter, the Company updates its estimate of the annual effective tax rate, and if the estimated annual effective tax rate changes, the Company makes a cumulative adjustment in such period. The Company’s quarterly tax provision and estimate of its annual effective tax rate are subject to variation due to several factors, including variability in accurately predicting its pre-tax income or loss and the mix of jurisdictions to which they relate, intercompany transactions, the applicability of special tax regimes, and changes in how the Company does business. For the nine months ended September 30, 2020, the recognized income tax expense included a discrete tax charge due primarily to the termination of the VorTeq License Agreement, partially offset by a discrete tax benefit related to stock-based compensation windfalls. For the nine months ended September 30, 2019, the recognized income tax expense included a discrete tax benefit related to an increase in prior year U.S. federal research and development credits and a discrete tax benefit related to tax deductions from stock-based compensation windfalls, partially offset by deferred tax charge primarily related to a remeasurement of the Company’s state deferred tax assets due to an adjustment to the Company’s estimated blended state effective tax rate. The effective tax rate, excluding the discrete items, for the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019, was consistent year over year.
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Segment Reporting |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting | Segment Reporting The Company’s chief operating decision-maker (“CODM”) is its chief executive officer. The Company’s reportable segments consist of the Water segment and the Oil & Gas segment. These segments are based on the industries in which the products are sold, the type of products sold and the related products and services. The Water segment consists of revenue associated with products sold for use in reverse osmosis desalination as well as the related identifiable expenses. The Oil & Gas segment consists of revenue associated with products sold for use in gas processing, chemical processing and hydraulic fracturing as well as license and development revenue associated therewith. Operating income (loss) for each segment excludes other income and expenses and certain corporate expenses managed outside the operating segment such as income taxes and other separately managed general and administrative expenses not related to the identified segments. Assets and liabilities are reviewed at the consolidated level by the CODM and are not accounted for by segment. The CODM allocates resources to and assesses the performance of each operating segment using information about its revenue and operating income. The following tables present a summary of the Company’s financial information by segment and corporate operating expenses.
(2) See Note 4, “Other Financial Information – Property and Equipment,” for additional discussion regarding the impairment of certain VorTeq long-lived assets that were directly related to obligations under the VorTeq License Agreement.
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Concentrations |
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Risks and Uncertainties [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Concentrations | Concentrations Product Revenue The following table presents customers accounting for 10% or more of the Company’s product revenue by segment. Although certain customers might account for greater than 10% of the Company’s revenue at any one point in time, the concentration of revenue between a limited number of large engineering, procurement and construction (“EPC”) firms shifts regularly, depending on contract negotiations. The percentages by customer reflect specific relationships or contracts that would concentrate the Company’s revenue for the periods presented and does not indicate a trend specific to any one customer.
License and Development Revenue One international Oil & Gas segment customer accounted for 100% of the Company’s license and development revenue for the nine months ended September 30, 2020 and the three and nine months ended September 30, 2019.
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VorTeq Partnership and License Agreement |
9 Months Ended |
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Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
VorTeq Partnership and License Agreement | VorTeq Partnership and License Agreement On October 14, 2015, the Company and Schlumberger entered into the VorTeq License Agreement, which provided Schlumberger with exclusive worldwide rights to the Company’s VorTeq technology for use in hydraulic fracturing onshore applications. In performing the obligations under the agreement, the Company provided research and development services to commercialize the technology in accordance with the Key Performance Indicators (“KPIs”), as defined in the VorTeq License Agreement. The VorTeq License Agreement included up to $125.0 million in upfront consideration paid in the following stages: (i) a $75.0 million non-refundable upfront exclusivity payment; and (ii) two non-refundable milestone payments of $25.0 million each made upon achievement of successful tests in accordance with the KPIs specified in the VorTeq License Agreement (“M1” and “M2”). |
Description of Business and Significant Accounting Policies (Policies) |
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Sep. 30, 2020 | |||||||||
Accounting Policies [Abstract] | |||||||||
Basis of Presentation | Basis of Presentation The Company’s Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation. The accompanying Condensed Consolidated Financial Statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in the financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. The December 31, 2019 Condensed Consolidated Balance Sheet was derived from audited financial statements and may not include all disclosures required by GAAP; however, the Company believes that the disclosures are adequate to make the information presented not misleading. The September 30, 2020 unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the notes thereto for the fiscal year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 6, 2020, as amended on June 10, 2020 (the “2019 Annual Report”). All adjustments consisting of normal recurring adjustments that are necessary to present fairly the financial position, results of operations and cash flows for the interim periods have been made. The results of operations for the interim periods are not necessarily indicative of the operating results for the full fiscal year or any future periods. |
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Use of Estimates | Use of Estimates The preparation of Condensed Consolidated Financial Statements, in conformity with U.S. GAAP, requires the Company’s management to make judgments, assumptions and estimates that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. The accounting policies that reflect the Company’s more significant estimates and judgments and that the Company believes are the most critical to aid in fully understanding and evaluating its reported financial results are revenue recognition; capitalization of research and development (“R&D”) assets; valuation of stock options; valuation and impairment of goodwill and acquired intangible assets; valuation adjustments for excess and obsolete inventory; deferred taxes and valuation allowances on deferred tax assets; and evaluation and measurement of contingencies. Those estimates could change, and as a result, actual results could differ materially from those estimates. Due to the novel coronavirus (“COVID-19”) pandemic, and the impact on our customers due to the reduced demand for oil and gas, as well as the oversupply of oil, there has been uncertainty and disruption in the global economy and financial markets. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of October 30, 2020, the date of issuance of this Quarterly Report on Form 10-Q. These estimates may change, as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions. The Company undertakes no obligation to update publicly these estimates for any reason after the date of this Quarterly Report on Form 10-Q, except as required by law.
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New Accounting Pronouncements | Recently Adopted Accounting Pronouncements In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which amends Accounting Standards Codification (“ASC”) No. 326, Financial Instruments-Credit Losses (“ASC 326”). Subsequent to the issuance of ASU 2016-13, ASC 326 was amended by various updates that amend and clarify the impact and implementation of the aforementioned update. The new guidance introduces the current expected credit loss (“CECL”) model, which requires an entity to record an allowance for credit losses for certain financial instruments and financial assets, including trade receivables, based on expected losses rather than incurred losses. Under this update, on initial recognition and at each reporting period, an entity is required to recognize an allowance that reflects the entity’s current estimate of credit losses expected to be incurred over the life of the financial instrument. In February 2020, the FASB issued ASU No. 2020-02, Financial Instruments-Credit Losses (Topic 326) and Leases (Topic 842)-Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842) (“ASU 2020-02”), which amended the language in Subtopic 326-20 and addressed questions primarily regarding documentation and company policies. ASU 2016-13 and its amendments are effective for the Company for interim and annual periods in fiscal years beginning after December 15, 2019, on a modified retrospective basis. The adoption of ASU 2016-13 and its amendments on January 1, 2020 did not have a material impact on the Company’s Condensed Consolidated Financial Statements and related disclosures. The Company will continue to actively monitor the impact of the recent COVID-19 pandemic, and the impact on our customers due to the reduced demand for oil and gas, as well as the oversupply of oil, on expected credit losses. In March 2020, the FASB issued ASU No. 2020-03, Codification Improvements to Financial Instruments (“ASU 2020-03”). This ASU improves and clarifies various financial instruments topics, including the CECL standard issued in 2016. ASU 2020-03 included seven different issues that describe the areas of improvement and the related amendments to GAAP, intended to make the standards easier to understand and apply by eliminating inconsistencies and providing clarifications. The adoption of ASU 2020-03 on January 1, 2020 did not have a material impact on the Company’s Condensed Consolidated Financial Statements and related disclosures. Recently Issued Accounting Pronouncements Not Yet Adopted In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”), which provided optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. Entities may apply the provisions of the new standard as of the beginning of the reporting period when the election is made (i.e., as early as the first quarter of 2020). Unlike other topics, the provisions of this update are only available until December 31, 2022, when the reference rate replacement activity is expected to have been completed. The Company is currently evaluating the impact of the provisions of ASU 2020-04 on its financial condition, results of operation, and cash flows.
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Fair Value of Financial Instruments | Fair Value of Financial Instruments All of the Company’s financial assets and liabilities are remeasured and reported at fair value at each reporting period; and are classified and disclosed in one of the following three pricing category levels:
Level 3 — Unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions that market participants would use in pricing.
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Property and Equipment | Property and Equipment Estimated useful lives are periodically reviewed, and when appropriate, changes are made prospectively. When certain events or changes in operating conditions occur, asset lives may be adjusted and an impairment assessment may be performed on the recoverability of the carrying amounts. The Company evaluates the recoverability of long-lived assets by comparing the carrying amount of an asset to estimated future net undiscounted cash flows generated by the asset (asset group). If such assets are considered to be impaired, the impairment recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. The evaluation of recoverability involves estimates of future operating cash flows based upon certain forecasted assumptions, including, but not limited to, revenue growth rates, gross profit margins, and operating expenses. |
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Goodwill | Goodwill is tested for impairment annually in the third quarter (July 1) of the Company’s fiscal year or more frequently if indicators of potential impairment exist. The recoverability of goodwill is measured at the reporting unit level, which represents the operating segment. On July 1, 2020, the Company estimated the fair value of its reporting units using both the discounted cash flow and market approaches. The forecast of future cash flows, which is the result of the Company’s best estimates of future net sales and operating expenses, are based primarily on expected category expansion, pricing, market segment, and general economic conditions. The Company incorporated other significant inputs to its fair value calculations, including discount rate and market multiples, to reflect current market conditions, and also considered the impact of the COVID-19 pandemic and the termination of the VorTeq License Agreement in its calculations. The analysis performed indicated that the fair value of each reporting unit that is allocated to goodwill significantly exceeded its carrying value. As a result, no impairment charge was recorded during the quarter ended September 30, 2020. The Company continues to actively monitor the industries in which it operates and its businesses’ performance for indicators of potential impairment.
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Litigation | The Company considers all claims on a quarterly basis and, based on known facts, assesses whether potential losses are considered reasonably possible, probable and estimable. Based upon this assessment, the Company then evaluates disclosure requirements and whether to accrue for such claims in its consolidated financial statements. The Company records a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and are adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. | ||||||||
Income Taxes | The Company’s tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each quarter, the Company updates its estimate of the annual effective tax rate, and if the estimated annual effective tax rate changes, the Company makes a cumulative adjustment in such period. The Company’s quarterly tax provision and estimate of its annual effective tax rate are subject to variation due to several factors, including variability in accurately predicting its pre-tax income or loss and the mix of jurisdictions to which they relate, intercompany transactions, the applicability of special tax regimes, and changes in how the Company does business.
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Revenue (Tables) |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue |
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Contract with Customer, Asset and Liability | The following table presents contract balances by category.
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Contract With Customer, Contract Asset, Contract Liability, Activity | The Company records unbilled receivables as contract assets. The following table presents significant changes in contract assets during the period.
The Company records contract liabilities when cash payments are received in advance of the Company’s performance. The following table presents significant changes in contract liabilities during the period.
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Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | The following table presents the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied.
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Earnings per Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | The following table presents the computation of basic and diluted earnings per share.
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Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | The following table presents the potential common shares issuable under stock awards that were excluded from the computation of diluted earnings per share, as their effect would have been anti-dilutive.
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Other Financial Information (Tables) |
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Other Financial Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restrictions on Cash and Cash Equivalents | The Company’s Condensed Consolidated Statements of Cash Flows explain the changes in the total of cash, cash equivalents and restricted cash. The following table presents a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of such amounts presented.
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Schedule of Accounts, Notes, Loans and Financing Receivable | Accounts Receivable, net
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Schedule of Inventory, Current | Inventories
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Schedule of Accrued Liabilities | Accrued Expenses and Other Current Liabilities
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Investments and Fair Value Measurements (Tables) |
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Investments, Fair Value Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Amortized Cost And Fair Value Of Available For Sale Securities | The following table presents the Company’s financial assets measured on a recurring basis by contractual maturity, including their pricing category, amortized cost, gross unrealized holding gains and losses, and fair value, as of September 30, 2020 and December 31, 2019.
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Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value | The following table presents a summary of the fair value and gross unrealized holding losses on the available-for-sale securities that have been in a continuous unrealized loss position, aggregated by type of investment instrument as of September 30, 2020 and December 31, 2019. The available-for-sale for investments that were in an unrealized gain position have been excluded from the table.
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Debt Securities, Available-For-Sale, Proceeds From Sale | The following table presents the sales of available-for-sale investments.
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Commitments and Contingencies (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lease, Cost | The following table presents operating lease activities related to all leased properties.
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Lease, Term And Discount Rate | The following table presents other information related to outstanding operating leases as of September 30, 2020.
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Lessee, Operating Lease, Liability, Maturity | The following table presents the minimum lease payments under noncancelable operating leases, exclusive of executory costs as of September 30, 2020.
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Schedule of Product Warranty Liability | The following table presents the changes in the Company’s accrued product warranty reserve.
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Income Taxes (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Components of Income Tax Expense (Benefit) |
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Segment Reporting (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Operating Profit (Loss) from Segments to Consolidated | The following tables present a summary of the Company’s financial information by segment and corporate operating expenses.
(2) See Note 4, “Other Financial Information – Property and Equipment,” for additional discussion regarding the impairment of certain VorTeq long-lived assets that were directly related to obligations under the VorTeq License Agreement.
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Concentrations (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Risks and Uncertainties [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedules of Concentration of Risk, by Risk Factor | The following table presents customers accounting for 10% or more of the Company’s product revenue by segment. Although certain customers might account for greater than 10% of the Company’s revenue at any one point in time, the concentration of revenue between a limited number of large engineering, procurement and construction (“EPC”) firms shifts regularly, depending on contract negotiations. The percentages by customer reflect specific relationships or contracts that would concentrate the Company’s revenue for the periods presented and does not indicate a trend specific to any one customer.
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Revenue - Schlumberger Technology Corporation (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Oct. 14, 2015 |
Sep. 30, 2020 |
Jun. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Revenue from External Customer [Line Items] | ||||||
Revenue | $ 27,408 | $ 24,850 | $ 92,560 | $ 67,441 | ||
License and development revenue | ||||||
Revenue from External Customer [Line Items] | ||||||
Revenue | $ 0 | $ 3,098 | 26,895 | $ 10,391 | ||
VorTeq License Agreement | Affiliated Entity | License and development revenue | Schlumberger Technology Corporation | ||||||
Revenue from External Customer [Line Items] | ||||||
Up front non-refundable payment | $ 75,000 | |||||
Revenue | $ 24,400 | $ 24,400 |
Revenue - Contract Assets and Liabilities (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Jun. 30, 2020 |
Dec. 31, 2019 |
Sep. 30, 2019 |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|---|---|---|---|
Revenue from Contract with Customer [Abstract] | ||||||
Accounts receivable, net | $ 11,055 | $ 12,979 | ||||
Contract assets, current (included in prepaid expenses and other current assets) | 1,198 | 501 | ||||
Contract assets, non-current (included in other assets, non-current) | 241 | 191 | ||||
Total contract assets | 1,439 | $ 890 | 692 | $ 1,090 | $ 1,936 | $ 4,083 |
Current contract liabilities: | ||||||
Customer deposits | 792 | 1,506 | ||||
Deferred revenue: | ||||||
License and development | 0 | 13,846 | ||||
Product | 78 | 78 | ||||
Service | 290 | 316 | ||||
Total deferred revenue | 368 | 14,240 | ||||
Total current contract liabilities | 1,160 | 15,746 | ||||
Non-current contract liabilities, deferred revenue: | ||||||
License and development | 0 | 13,048 | ||||
Service | 104 | 72 | ||||
Total non-current contract liabilities | 104 | 13,120 | ||||
Total contract liabilities | $ 1,264 | $ 1,077 | $ 28,866 | $ 32,682 | $ 35,079 | $ 42,809 |
Revenue - Significant Changes in Contract Assets and Liabilities (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Change In Contract With Customer, Asset [Roll Forward] | ||||
Contract assets balance, beginning of period | $ 890 | $ 1,936 | $ 692 | $ 4,083 |
Transferred to trade receivables | (9,619) | (4,773) | (19,464) | (8,371) |
Additions to contract assets | 10,168 | 3,927 | 20,211 | 5,378 |
Contract assets balance, end of period | 1,439 | 1,090 | 1,439 | 1,090 |
Change In Contract With Customer, Liability [Roll Forward] | ||||
Contract liabilities balance, beginning of period | 1,077 | 35,079 | 28,866 | 42,809 |
Revenue recognized | (19) | (3,582) | (29,750) | (10,901) |
Increase due to cash received, excluding amounts recognized as revenue during the period | 206 | 1,185 | 2,148 | 774 |
Contract liabilities balance, end of period | $ 1,264 | $ 32,682 | $ 1,264 | $ 32,682 |
Earnings per Share - Computation of Basic and Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Numerator: | ||||
Net income | $ 5,387 | $ 5,149 | $ 22,934 | $ 11,522 |
Denominator (weighted average shares): | ||||
Basic common shares outstanding (in shares) | 55,692 | 54,975 | 55,573 | 54,594 |
Dilutive stock awards (in shares) | 779 | 1,409 | 870 | 1,377 |
Diluted common shares outstanding (in shares) | 56,471 | 56,384 | 56,443 | 55,971 |
Earnings per share - Basic (in dollars per share) | $ 0.10 | $ 0.09 | $ 0.41 | $ 0.21 |
Earnings per share - Diluted (in dollars per share) | $ 0.10 | $ 0.09 | $ 0.41 | $ 0.21 |
Earnings per Share - Antidilutive Securities Excluded From Computation of Diluted Earnings Per Share (Details) - shares shares in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Earnings Per Share [Abstract] | ||||
Anti-dilutive shares excluded from net income per share calculation (in shares) | 3,033 | 1,610 | 2,700 | 1,964 |
Other Financial Information - Cash and Restricted Cash (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
Sep. 30, 2019 |
Dec. 31, 2018 |
---|---|---|---|---|
Other Financial Information [Abstract] | ||||
Cash and cash equivalents | $ 80,149 | $ 26,387 | $ 29,696 | |
Restricted cash, non-current | 103 | 101 | 101 | |
Total cash, cash equivalents and restricted cash | $ 80,252 | $ 26,488 | $ 29,797 | $ 22,138 |
Other Financial Information - Accounts Receivable (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Other Financial Information [Abstract] | ||
Accounts receivable, gross | $ 11,425 | $ 13,287 |
Allowance for doubtful accounts | (370) | (308) |
Accounts receivable, net | $ 11,055 | $ 12,979 |
Other Financial Information - Inventories (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Other Financial Information [Abstract] | ||
Raw materials | $ 4,345 | $ 3,742 |
Work in process | 2,877 | 2,141 |
Finished goods | 3,440 | 4,434 |
Inventories, net | $ 10,662 | $ 10,317 |
Other Financial Information - Inventory Valuation Reserves (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2020 |
Dec. 31, 2019 |
|
Loss Contingencies [Line Items] | |||
Inventory valuation reserves | $ 0.5 | $ 0.5 | $ 0.4 |
COVID-19 | |||
Loss Contingencies [Line Items] | |||
Expense to product cost of revenue | $ 0.3 | $ 1.5 |
Other Financial Information - Property and Equipment (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Property, Plant and Equipment [Line Items] | ||||
Impairment of long-lived assets | $ 0 | $ 0 | $ 2,332 | $ 0 |
Schlumberger Technology Corporation | VorTeq License Agreement | Affiliated Entity | ||||
Property, Plant and Equipment [Line Items] | ||||
Impairment of long-lived assets | $ 2,300 |
Other Financial Information - Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Jun. 30, 2020 |
Dec. 31, 2019 |
Sep. 30, 2019 |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|---|---|---|---|
Other Financial Information [Abstract] | ||||||
Payroll, incentives and commissions payable | $ 6,270 | $ 6,040 | ||||
Warranty reserve | 747 | $ 673 | 631 | $ 633 | $ 599 | $ 478 |
Other accrued expenses and current liabilities | 1,637 | 3,198 | ||||
Total accrued expenses and other current liabilities | $ 8,654 | $ 9,869 |
Investments and Fair Value Measurements - Gross Unrealized Losses and Fair Values of Investments (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Debt Securities, Available-for-sale [Line Items] | ||
Fair Value | $ 938 | $ 20,781 |
Gross Unrealized Losses | (2) | (16) |
U.S. Treasury securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Fair Value | 0 | 2,027 |
Gross Unrealized Losses | 0 | 0 |
Corporate notes and bonds | ||
Debt Securities, Available-for-sale [Line Items] | ||
Fair Value | 938 | 18,754 |
Gross Unrealized Losses | $ (2) | $ (16) |
Goodwill - Goodwill (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Dec. 31, 2019 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Goodwill | $ 12,790,000 | $ 12,790,000 |
Goodwill impairment charge | $ 0 |
Commitments and Contingencies - Lease Cost and Terms (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Commitments and Contingencies Disclosure [Abstract] | ||||
Operating lease expense | $ 669 | $ 471 | $ 1,940 | $ 1,421 |
Cash payments | 655 | 459 | 1,763 | 1,365 |
Non-cash lease liabilities arising from obtaining right-of-use assets | $ 0 | $ 0 | $ 6,384 | $ 0 |
Weighted average remaining lease term | 8 years 8 months 12 days | 8 years 8 months 12 days | ||
Weighted average discount rate | 7.00% | 7.00% |
Commitments and Contingencies - Maturities of Lease Liabilities (Details) $ in Thousands |
Sep. 30, 2020
USD ($)
|
---|---|
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | |
2020 (remaining three months) | $ 635 |
2021 | 2,431 |
2022 | 2,650 |
2023 | 2,580 |
2024 | 2,812 |
2025 and thereafter | 13,197 |
Total | 24,305 |
Less imputed lease interest | (6,294) |
Total lease liabilities | $ 18,011 |
Commitments and Contingencies - Product Warranty Liability (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Commitments and Contingencies Disclosure [Abstract] | ||||
Provision for warranty claims | $ 316 | $ 339 | ||
Movement in Standard Product Warranty Accrual [Roll Forward] | ||||
Warranty reserve balance, beginning of period | $ 673 | $ 599 | 631 | 478 |
Warranty costs charged to cost of revenue | 143 | 97 | 316 | 339 |
Utilization charges against reserve | (5) | (15) | (7) | (53) |
Release of accrual related to expired warranties | (64) | (48) | (193) | (131) |
Warranty reserve balance, end of period | $ 747 | $ 633 | $ 747 | $ 633 |
Commitments and Contingencies - Purchase Obligations (Details) $ in Millions |
9 Months Ended |
---|---|
Sep. 30, 2020
USD ($)
| |
Commitments and Contingencies Disclosure [Abstract] | |
Long-term purchase commitment | $ 5.2 |
Income Taxes - Provision and Effective Tax Rate (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Income Tax Disclosure [Abstract] | ||||
Provision for (benefit from) income taxes | $ 796 | $ (83) | $ 5,297 | $ 1,227 |
Effective tax rate | 12.90% | (1.60%) | 18.80% | 9.60% |
Effective tax rate, excluding discrete items | 13.40% | 11.80% | 18.60% | 17.70% |
Concentrations - Product Revenue Concentrations (Details) - Product Revenue - Customer Concentration Risk |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Water | Customer A | ||||
Concentration Risk [Line Items] | ||||
Percentage of product revenue | 30.00% | 27.00% | ||
Water | Customer B | ||||
Concentration Risk [Line Items] | ||||
Percentage of product revenue | 28.00% | 24.00% | 17.00% | |
Water | Customer C | ||||
Concentration Risk [Line Items] | ||||
Percentage of product revenue | 11.00% | 12.00% | ||
Water | Customer D | ||||
Concentration Risk [Line Items] | ||||
Percentage of product revenue | 26.00% | 10.00% | ||
License and Development Revenue | One Customer | ||||
Concentration Risk [Line Items] | ||||
Percentage of product revenue | 100.00% | 100.00% | 100.00% |
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