Energy Recovery, Inc. Reports Third Quarter 2009 Financial Results

"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 share  $0.03 to $0.04          $0.07 to $0.08

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         10,319             20,615
and $59 at September 30, 2009 and 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                 50
50,164,317 and 50,015,718 shares issued 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 (expense), net             30            217           59            841
Income before provision for income taxes             722           906           3,145         5,585
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.

Energy Recovery, Inc. 
Tom Willardson, 510-483-7370 
Chief Financial Officer