Full Year Highlights
- Net revenues of $47 million
- Gross margin of 63%
- Net income of $3.7 million
- Fully diluted earnings per share of $0.07
- Net cash generated from operations of $13.1 million
- Adjusted EBITDA (described below) of $9.7 million, representing a 21% margin
Fourth Quarter Highlights
- Fourth quarter net revenues of $15.7 million
- Gross margin of 60% Net Income of $1.7 million
- Fully diluted earnings per share of $0.03
- Adjusted EBITDA (described below) of $4.2 million, representing a 27% margin
- Closed the purchase of Pump Engineering on December 21, 2009
"We experienced some softness in net revenues in 2009 due to delays in desalination project financing. However, in September when the turmoil in the financial markets began to stabilize, business began to pick up and we had a record year in terms of new order bookings," said G.G. Pique, President and CEO of Energy Recovery, Inc. "On December 21, we closed the acquisition of Pump Engineering and we are already hard at work with the integration of our two companies. The acquisition of Pump Engineering broadens our product for desalination, opens up the pump market for us, and allows us to provide energy-efficient solutions to industries outside of desalination like gas processing."
Non-GAAP Financial Measures
In evaluating the operating performance of Energy Recovery's business, Energy Recovery management utilizes financial measures described in this press release that exclude certain non-cash charges and charges related to the purchase of Pump Engineering required by U.S. generally accepted accounting principles, or GAAP. Energy Recovery believes this additional information provides investors and management with additional insight into its underlying core operating performance.
For the calculation of Adjusted EBITDA, net income was adjusted for depreciation and amortization expense of $557,000 and $1.2 million, interest (income) expense of $1,000 and ($56,000), taxes of $1.4 million and $2.5 million, stock-based compensation expense of $594,000 and $2.4 million and a purchase accounting adjustment for sale of acquired inventory of $47,000 for the fourth quarter and year end fiscal 2009 respectively.
In the guidance estimates below for the first quarter and full year 2010, net income and earnings are adjusted for the purchase accounting required under GAAP for the acquisition of Pump Engineering. For the full year, the estimates assume adjustments of a purchase accounting adjustment for sale of acquired inventory of $870,000, $2.5 million in amortization of intangibles, and a tax benefit of approximately $1.0 million that will be nullified as a result of eliminating the intangible amortization and purchase accounting expense.
A reconciliation of Energy Recovery's non-GAAP financial measures for the fourth quarter and full year 2009 to the most directly comparable GAAP measures can be found under the heading "Energy Recovery Non-GAAP Financial Reconciliation" below.
ERI provides the following guidance on a GAAP basis for the first quarter of 2010 and the full year:
|Q1 2010||Fiscal Year 2010|
|Estimated Net Revenue||$11 to $12 million||$70 to $75 million|
|Estimated Net Income (Loss)||($.5) to ($1) million||$4 to $6 million|
|Estimated Earnings (Loss) Per Diluted Share||($0.01) to ($0.02)||$0.07 to $0.11|
ERI provides the following non-GAAP guidance for the first quarter of 2010 and the full year:
|Q1 2010||Fiscal Year 2010|
|Estimated Adjusted Net Income (Loss) (1)||($.4) million to $0||$6 to $8 million|
|Estimated Adjusted Earnings (Loss) Per Fully Diluted Share (2)||($0.01) to $0.00||$0.11 to $0.15|
Estimated Adjusted EBITDA (3)
|$.1 to $.6 million||$15 to $18 million|
(1) Estimated Adjusted Net Income is defined as GAAP net income adjusted for the purchase accounting for the acquisition of Pump Engineering. The purchase accounting includes a purchase accounting adjustment for sale of acquired inventory, the amortization of intangible assets that were booked as a result of the acquisition, and the tax benefit generated as a result of the purchase accounting expense.
(2) Estimated Adjusted Earnings Per Fully Diluted Share is defined as Estimated Adjusted Net Income divided by the fully diluted shares.
(3) Estimated Adjusted EBITDA is defined net income adjusted for interest expense (income), taxes, depreciation, amortization, stock-based compensation, and a purchase accounting adjustment for sale of acquired inventory.
Forward Looking Statements
This press release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include statements about ERI's estimated net revenue, GAAP and non-GAAP net income and earnings per diluted share, and estimated adjusted EBITDA for the first quarter of 2010 and for the 2010 fiscal year and statements about the growth of the reverse osmosis sector of the desalination industry, possible future opportunities from our acquisition of Pump Engineering, status of projects, and our competitive product positioning. Because such forward-looking statements involve risks and uncertainties, the Company's actual results may differ materially from the predictions in those forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, delays in, or cancellation of, the construction of desalination plants, the inability of our customers to obtain project financing, delays in governmental approvals, changes in end users' budgets for desalination plants or the timing of their purchasing decisions, our inability to integrate Pump Engineering's business into ERI's operations successfully, our ability to ship new products to meet scheduled delivery times; our inability to broaden the market opportunities for our energy recovery devices, the world economic crisis and other risks detailed in the Company's filings with the Securities and Exchange Commission ("SEC"). All forward-looking statements are made as of today, and the Company assumes no obligation to update such statements. For more details relating to the risks and uncertainties that could cause actual results to differ materially from those anticipated in our forward-looking statements, please refer to the Company's SEC filings.
Conference Call to Discuss Fourth Quarter 2009 Results
The conference call scheduled today at 1:30 p.m. PDT will be in a "listen-only" mode for all participants other than the investment professionals who regularly follow the Company. The toll-free phone number for the call is 1-877-941-9205 or +1-480-629-9835 and the access code is 4226967. Callers should dial in approximately 15 minutes prior to the scheduled start time. A telephonic replay will be available at 1-800-406-7325 or +1-303-590-3030, Access Code: 4226967, until Thursday, March 18, 2010. Investors may also access the live call or the replay over the internet at http://www.energyrecovery.com. The replay will be available approximately three hours after the live call concludes.
Energy Recovery, Inc. (NASDAQ:ERII) designs and develops energy recovery devices that help make desalination affordable by significantly reducing energy consumption. Energy Recovery technologies include the PX Pressure Exchanger(TM) (PX(TM)) device for desalination and the Turbocharger hydraulic turbine energy recovery device and pump for desalination, gas and liquid processing applications. In total, Energy Recovery helps reduce CO2 emissions by more than 4.7 million tons per year and produce 1.6 billion gallons of potable water per day. The company is headquartered in the San Francisco Bay Area with offices in Detroit and in key desalination centers worldwide, including Madrid, Shanghai, Florida and the United Arab Emirates. For more information about Energy Recovery, Inc. please visit http://www.energyrecovery.com.
Unaudited Consolidated Financial Results
ENERGY RECOVERY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
|Three Months Ended
|Cost of revenue||6,344||7,811||17,595||18,933|
|General and administrative||4,051||3,110||13,756||11,321|
|Sales and marketing||1,677||2,286||6,472||6,549|
|Research and development||632||692||3,041||2,415|
|Total operating expenses||6,360||6,088||23,269||20,285|
|Income from operations||3,030||8,095||6,150||12,901|
|Other income (expense):|
|Interest and other (expense) income||(5||)||32||54||873|
|Income before provision for income taxes||3,013||8,110||6,158||13,695|
|Provision for income taxes||1,360||2,846||2,472||5,032|
|Earnings per share:|
|Number of shares used in per share calculations:|
ENERGY RECOVERY, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data and par value)
|Cash and cash equivalents||$||59,115||$||79,287|
|Accounts receivable, net of allowance for doubtful accounts of $262 and $59 at December 31, 2009 and 2008, respectively||12,683||20,615|
|Unbilled receivables, current||5,544||4,948|
|Deferred tax assets||
|Prepaid expenses and other current assets||1,741||984|
|Total current assets||
|Unbilled receivables, non-current||--||1,929|
|Restricted cash, non-current||5,555||19|
|Property and equipment, net||16,958||1,845|
|Other intangible assets, net||10,987||321|
|Deferred tax assets, non-current||
|Other assets, non-current||53||51|
|LIABILITIES AND STOCKHOLDERS' EQUITY|
|Accrued expenses and other current liabilities||9,492||4,787|
|Income taxes payable||350||1,657|
|Accrued warranty reserve||605||270|
|Current portion of long-term debt||265||172|
|Current portion of capital lease obligations||203||37|
|Total current liabilities||
|Capital lease obligations, non-current||369||27|
|Other non-current liabilities||3,890||8|
|Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding||--||--|
|Common stock, $0.001 par value; 200,000,000 shares authorized; 51,215,653 and 50,015,718 shares issued and outstanding at December 31, 2009 and 2008, respectively||51||50|
|Additional paid-in capital||108,626||98,527|
|Notes receivable from stockholders||(90||)||(296||)|
|Accumulated other comprehensive loss||(66||)||(44||)|
|Total stockholders' equity||120,969||106,999|
|Total liabilities and stockholders' equity||$||
Energy Recovery Non-GAAP Financial Reconciliation
Reconciliation of Estimated Adjusted EBITDA
|Depreciation of property and equipment||335||942|
|Amortization of intangible assets||222||241|
|Purchase Adjustment of Acquired Inventory||
SOURCE: Energy Recovery, Inc.
Energy Recovery, Inc.
Tom Willardson, 510-483-7370
Chief Financial Officer