I think you are right, the new product is not related to pumps, it's related to IsoPro or Isogen technology. Those are energy recovery devices that appear to work according to the turbocharger principle.
I assume this because I read the 2014 proxy and the incentives of the Director of research point in that direction. FWIW, the proxy is an interesting read - the top execs combined salary is ~3.6M$, which is a huge chunk for a company making 45M$. This is one of the reasons why G&A expensive is roughly 35% of the revenues, while I think 20% is a more typical number. R&D expensive is almost 10% of the revenues (also very high). Roughly the expense basis of this company would be more typical of the company twice ERII size.
Also noticable in the proxy statement is the lack of qualitative objectives, imo. For example the CEO has an objective to write a 2014 business plan. The R&D director needs to "witness test and deliver Isogen to the customer". I am working on my own review and objectives for next year and I think they have more detail than that and unfortunately I am not pulling anything close to their salary :-(.
I think their energy recovery technology has probably quite a bit of competition, as far as I understand it, the devices are called Turbo expander and have been around for a while (GE and other companies build these).
It's not clear what the edge of ERII technology is, my guess is that they probably are build with in a small formfactor (fit on a skid), so they are easier to implement.
Would be a great assignment for a junior analyst to scope this company out. I am passing - no real red flags, but many yellow ones. The valuation is not compelling either, although I do need to give current management credit for executing somewhat of a turnaround since 2011. |
