Energy Recovery, Inc. Reports Third Quarter 2009 Financial Results

SAN LEANDRO, Calif.--(BUSINESS WIRE)-- Energy Recovery, Inc. (Nasdaq:ERII), a leader in the design and development of energy recovery devices for desalination, announced today the results of its third quarter ended September 30, 2009. In the third quarter, ERI achieved net revenue of $9.5 million and a net profit of $550,000 or $0.01 per diluted share. Both the net revenue and net profit were in line with the Company's guidance.

"Our third quarter results were in line with our expectations and we are preparing for a busy fourth quarter," said GG Pique, President and CEO of Energy Recovery, Inc. "In addition, we are starting to book orders for delivery in 2010 and, with the credit markets beginning to stabilize, we believe the stage is being set for improvement in top line growth in 2010 and even more growth in 2011 as pent-up demand is satisfied."

ERI provides the following guidance for the fourth quarter of 2009 and the full year:


                                Q4 2009                 Fiscal Year 2009

Estimated net revenue           $14.5 to $16.5 million  $46 to $48 million

Estimated net income            $1.4 to $2.1 million    $3.5 to $4.0 million

Estimated earnings per diluted  $0.03 to $0.04          $0.07 to $0.08
share



ERI estimates that for 2010, its net revenue will improve by 25% over 2009.

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, net income and earnings per diluted share for the fourth quarter of 2009 and for the 2009 and 2010 fiscal years. 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, 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 Third 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 888-549-7750 or 480-629-9866 and the access code is 4171252. Callers should dial in approximately 15 minutes prior to the scheduled start time. A telephonic replay will be available at 800-406-7325 or 303-590-3030, Access Code: 4171252, until Thursday, November 19, 2009. Investors may also access the live call or the replay over the internet at www.energyrecovery.com. The replay will be available approximately three hours after the live call concludes.

About ERI(R)

Energy Recovery, Inc. (NASDAQ:ERII) designs and develops energy recovery devices that help make desalination affordable by significantly reducing energy consumption. ERI's PX Pressure Exchanger(TM) (PX(TM)) device is a rotary positive displacement pump that recovers energy from the high pressure reject stream of seawater reverse osmosis systems at up to 98% efficiency. The company is headquartered in the San Francisco Bay Area with offices in key desalination centers worldwide, including Madrid, Shanghai, Florida and the United Arab Emirates. For more information on ERI and PX technology, please visit www.energyrecovery.com.

Unaudited Financial Results


ENERGY RECOVERY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

                                                     September 30,  December 31,
                                                     2009           2008

ASSETS

Current assets:

Cash and cash equivalents                            $ 74,725       $ 79,287

Restricted cash                                        2,938          246

Accounts receivable, net of allowance for doubtful
accounts of $28 and $59 at September 30, 2009 and      10,319         20,615
December 31, 2008, respectively

Unbilled receivables, current                          6,315          4,948

Inventories                                            10,510         8,493

Deferred tax assets, net                               1,950          1,755

Prepaid income taxes                                   749            -

Prepaid expenses and other current assets              1,515          984

Total current assets                                   109,021        116,328

Unbilled receivables, non-current                      229            1,929

Restricted cash, non-current                           2,588          19

Property and equipment, net                            7,031          1,845

Intangible assets, net                                 309            321

Deferred tax assets, non-current, net                  106            119

Other assets, non-current                              52             51

Total assets                                         $ 119,336      $ 120,612

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable                                     $ 803          $ 2,270

Accrued expenses and other current liabilities         4,778          4,787

Income taxes payable                                   38             1,657

Accrued warranty reserve                               312            270

Deferred revenue                                       1,549          4,000

Current portion of long-term debt                      128            172

Current portion of capital lease obligations           36             37

Total current liabilities                              7,644          13,193

Long-term debt                                         245            385

Capital lease obligations, non-current                 -              27

Other non-current liabilities                          4              8

Total liabilities                                      7,893          13,613

Commitments and Contingencies (Note 6)

Stockholders' equity:

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; 50,164,317 and 50,015,718 shares issued    50             50
and outstanding at September 30, 2009 and December
31, 2008, respectively

Additional paid-in capital                             100,749        98,527

Notes receivable from stockholders                     (88     )      (296    )

Accumulated other comprehensive loss                   (63     )      (44     )

Retained earnings                                      10,795         8,762

Total stockholders' equity                             111,443        106,999

Total liabilities and stockholders' equity           $ 119,336      $ 120,612




ENERGY RECOVERY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

                              Three Months Ended      Nine Months Ended

                              September 30,           September 30,

                                2009        2008        2009        2008

Net revenue                   $ 9,545     $ 9,044     $ 31,280    $ 30,125

Cost of revenue                 3,387       3,497       11,251      11,122

Gross profit                    6,158       5,547       20,029      19,003

Operating expenses:

General and administrative      3,043       2,696       9,705       8,211

Sales and marketing             1,634       1,467       4,795       4,263

Research and development        779         678         2,409       1,723

Total operating expenses        5,456       4,841       16,909      14,197

Income from operations          702         706         3,120       4,806

Other income (expense):

Interest expense                (10    )    (17    )    (34    )    (62    )

Interest and other income       30          217         59          841
(expense), net

Income before provision for     722         906         3,145       5,585
income taxes

Provision for income taxes      172         283         1,112       2,186

Net income                    $ 550       $ 623       $ 2,033     $ 3,399

Earnings per share:

Basic                         $ 0.01      $ 0.01      $ 0.04      $ 0.08

Diluted                       $ 0.01      $ 0.01      $ 0.04      $ 0.07

Number of shares used in per
share calculations:

Basic                           50,160      49,646      50,120      43,114

Diluted                         52,584      52,396      52,614      45,647




    Source: Energy Recovery, Inc.