Energy Recovery, Inc. (NASDAQ:ERII) Q2 2020 Earnings Conference Call - Final Transcript

Jul 30, 2020 • 05:00 pm ET

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Energy Recovery, Inc. (NASDAQ:ERII) Q2 2020 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

Thank you. We will now be conducting the question-and-answer session. [Operator Instructions] Thank you. Our first question comes from the line of Pavel Molchanov with Raymond James. Please proceed with your question.

Analyst
Pavel Molchanov

Thanks for taking the question. Lots of new information today. First, about this 12-month timetable for VorTeq. So confirm if this is correct. Within the next 12 months, you will make a final decision, either commercialize the product or you're canceling the program permanently. Is that right?

Executive
Robert Mao

Yes.

Analyst
Pavel Molchanov

And will that hinge on the three -- two to three live well fracs with Liberty? Or are there additional kind of operational milestones beyond those well fracs to inform your decision?

Executive
Robert Mao

No, there is no additional ones. And yes, it'd be great if we do the two to three with Liberty, but we -- now we can contact everybody. And as I said in my earlier remarks, we are also contacting others. But Liberty is our primary partner.

Analyst
Pavel Molchanov

Okay. And Josh, if I can ask about the comments about Water in '21. You said that current backlog supports revenue flat to up 5%. Does that imply that you're guiding to revenue flat to up 5%? Or is it pretty mature, since, obviously, you can build up backlog presumably in the next six months?

Executive
Joshua Ballard

Yeah. No, I think, today, that's certainly where we're comfortable. So I think that you should feel comfortable using that. We'll certainly update you as well next quarter, without a doubt, because what will change that number, as we mentioned, is the OEM business, which we can't see that far out. So -- but otherwise, we're pretty comfortable with that number right now.

Analyst
Pavel Molchanov

So that should be kind of a minimum baseline for '21, hopefully, with an upside?

Executive
Joshua Ballard

That's how we're looking at it. That's right.

Analyst
Pavel Molchanov

Okay. Thank you very much.

Operator
Operator

Thank you. Our next question comes from the line of Ryan Pfingst with B. Riley. Please proceed with your question.

Analyst
Ryan Pfingst

Hi. Good evening, guys. Josh, can you please provide the 2Q breakdown for Water's revenue by segment, MPD, OEM and aftermarket?

Executive
Joshua Ballard

You bet. It is -- for mega project, it's 62%; for OEM, it's 21%; and aftermarket, it is 17% for the quarter.

Analyst
Ryan Pfingst

Great. Thank you. And Bob, coming out of a simulated well field test you conducted with Liberty, can you expound upon the nature of the latest technical improvements you've made to the new VorTeq skid?

Executive
Robert Mao

The -- you mean the technical improvements that have allowed us to have the successful simulated test?

Analyst
Ryan Pfingst

Correct.

Executive
Robert Mao

Well, the most important one is we switched to this simple -- the single PX skid, which made the product easier to control, to change, to manage. And looking back, you could see that 10, 12 PX in a huge missile was imposing, for lack of a better word. So the most important change was that since last October, we started moving to this elegant, single PX configuration.

Analyst
Ryan Pfingst

Great. And then just last one for me. How is the thermal