Energy Recovery, Inc. (Nasdaq:ERII), a leader in the design and
development of energy recovery devices for desalination, announced
today the unaudited results of its fourth quarter and fiscal year
ended December 31, 2009. In the fourth quarter of 2009, ERI
achieved net revenue of $15.7 million, a 28% decrease over the same
period last year and within the Company’s guidance range of $14.5
million to $16.5 million. For the twelve months ended December 31,
2009, net revenue was $47.0 million, which represented a decrease
of 10% over net revenue of $52.1 million for the twelve months
ended December 31, 2008. ERI reported net income of $1.7 million,
or $0.3 per diluted share, for the three months ended December 31,
2009 compared to $5.3 million, or $0.10 per diluted share, for the
same period last year. Full year net income was $3.7 million, or
$0.07 per diluted share, compared to $8.7 million, or $0.18 per
diluted share, for the same period last year.
“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.
Outlook
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
www.energyrecovery.com. The replay will be available approximately
three hours after the live call concludes.
About ERI®
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
www.energyrecovery.com.
Unaudited Consolidated Financial Results
ENERGY RECOVERY, INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(in thousands, except per share
data)
(unaudited)
Three Months Ended
December
31,
Years Ended
December
31,
2009 2008
2009 2008 Net
revenue $ 15,734 $ 21,994 $ 47,014 $ 52,119 Cost of revenue
6,344 7,811
17,595 18,933 Gross
profit 9,390 14,183 29,419 33,186 Operating expenses: 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 expense (12 ) (17 ) (46 ) (79 ) 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 Net
income
$ 1,653 $
5,264 $ 3,686
$ 8,663 Earnings per share: Basic
$ 0.03 $
0.11 $ 0.07
$ 0.19 Diluted
$
0.03 $ 0.10
$ 0.07 $
0.18 Number of shares used in per share
calculations: Basic
50,303
50,009 50,166
44,848 Diluted
52,725
52,584 52,644
47,392
ENERGY RECOVERY, INC.
CONSOLIDATED BALANCE
SHEETS
(in thousands, except share
data and par value)
(unaudited)
December
31,2009
December
31,2008
ASSETS Current assets: Cash and cash equivalents $
59,115 $ 79,287 Restricted cash 5,271 246 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 Inventories 10,359 8,493 Deferred tax assets
1,466
1,755 Prepaid expenses and other current assets
1,741 984 Total
current assets
96,179
116,328 Unbilled receivables, non-current — 1,929 Restricted cash,
non-current 5,555 19 Property and equipment, net 16,958 1,845
Goodwill 12,790 — Other intangible assets, net 10,987 321 Deferred
tax assets, non-current
447
119 Other assets, non-current
53
51 Total assets $
142,969
$ 120,612 LIABILITIES
AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts
payable $ 1,952 $ 2,270 Accrued expenses and other current
liabilities 9,492 4,787 Income taxes payable 350 1,657 Accrued
warranty reserve 605 270 Deferred revenue 4,628 4,000 Current
portion of long-term debt 265 172 Current portion of capital lease
obligations
203 37
Total current liabilities
17,495
13,193 Long-term debt 246 385 Capital lease obligations,
non-current 369 27 Other non-current liabilities
3,890 8 Total
liabilities
22,000
13,613 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; 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 ) Retained earnings
12,448 8,762
Total stockholders’ equity 120,969
106,999 Total liabilities and
stockholders’ equity $
142,969
$ 120,612
Energy Recovery Non-GAAP
Financial Reconciliation
Q4 2009
FY 2009 (in thousands)
Reconciliation of Estimated
Adjusted EBITDA
Net Income
$ 1,653 $ 3,686
Plus:
Interest 1 (56 ) Taxes 1,360 2,472 Depreciation of property and
equipment 335 942 Amortization of intangible assets 222 241
Stock-based Compensation
594
2,409 Purchase Adjustment of Acquired Inventory
47
47
Adjusted EBITDA
$ 4,212 $ 9,741
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