Energy Recovery Reports its First Quarter 2025 Financial Results

About this update from Energy Recovery, Inc.

SAN LEANDRO, Calif. --(BUSINESS WIRE)-- Energy Recovery, Inc. (Nasdaq:ERII) (“Energy Recovery” or the “Company”) today announced its financial results for the first quarter ended March 31, 2025 . First Quarter Highlights Q1’25 financial results were in-line with internal expectations and consistent with our communicated expectations for quarterly revenue cadence in 2025. Revenue of $8.1 million , a decrease of $4.0 million as compared to Q1’2024 due to timing of revenue from contracted projects. Gross margin of 55.3%, a decrease of 370 bps, as compared to Q1’2024, due primarily to a decrease in revenue spread over fixed costs. Operating expenses of $17.0 million , a decrease of 5.8%, as compared to Q1’2024, due primarily to a decrease in employee costs, partially offset by $0.5 million of restructuring charges, $0.4 million of impairment costs, and an increase in costs related to our manufacturing transformation. Loss from operations of $12.6 million , a decrease of 14.9%, as compared to Q1’2024, mainly due to lower revenue and lower gross margin. Net loss of $9.9 million and adjusted EBITDA(1) loss of $8.7 million . Cash and investments of $106.7 million , which includes cash, cash equivalents, and short- and long-term investments. In conjunction with these financial results, management has released a letter to shareholders reviewing business and financial updates from the first quarter and discussing our outlook for 2025. This letter is located under “Financial Info” in the “Investors” section on the Energy Recovery website ( https://ir.energyrecovery.com/financial-information ). Financial Highlights Quarter to Date 2025 2024 2025 vs. 2024 (In millions, except net loss per share, percentages and basis points) Revenue $8.1 $12.1 down 33% Gross margin 55.3% 59.0% down 370 bps Operating margin (155.8%) (90.4%) NM Net loss ( $9.9 ) ( $8.3 ) down 20% Net loss per share ( $0.18 ) ( $0.14 ) down $0.04 Effective tax rate 14.0% 13.5% Cash provided by operations $10.7 $6.5 Non-GAAP Financial Highlights (1) Quarter to Date 2025 2024 2025 vs. 2024 (In millions, except adjusted net loss per share, percentages and basis points) Adjusted operating margin (120.4%) (59.4%) NM Adjusted net loss ( $7.0 ) ( $4.6 ) down 52% Adjusted net loss per share ( $0.13 ) ( $0.08 ) down $0.05 Adjusted EBITDA ( $8.7 ) ( $6.2 ) Free cash flow $10.5 $5.7 _______ (1) Refer to the sections “Use of Non-GAAP Financial Measures” and “Reconciliation of Non-GAAP Financial Measures” for definitions of our non-GAAP financial measures and reconciliations of GAAP to non-GAAP amounts, respectively. NM Not Meaningful Forward-Looking Statements Certain matters discussed in this press release and on the conference call are “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. These forward-looking statements are based on information currently available to the Company and on management’s beliefs, assumptions, estimates, or projections and are not guarantees of future events or results. Potential risks and uncertainties include risks relating to the future demand for the Company’s products, risks relating to performance by our customers and third-party partners, risks relating to the timing of revenue, and any other factors that may have been discussed herein regarding the risks and uncertainties of the Company’s business, and the risks discussed under “Risk Factors” in the Company’s Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) for the year ended December 31, 2024 , as well as other reports filed by the Company with the SEC from time to time. Because such forward-looking statements involve risks and uncertainties, the Company’s actual results may differ materially from the predictions in these forward-looking statements. All forward-looking statements are made as of today, and the Company assumes no obligation to update such statements. Use of Non-GAAP Financial Measures This press release includes certain non-GAAP financial measures, including adjusted operating margin, adjusted net loss, adjusted net loss per share, adjusted EBITDA and free cash flow. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows that either exclude or include amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles in the United States of America , or GAAP. These non-GAAP financial measures do not reflect a comprehensive system of accounting, differ from GAAP measures with the same captions, and may differ from non-GAAP financial measures with the same or similar captions that are used by other companies. As such, these non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. The Company uses these non-GAAP financial measures to analyze its operating performance and future prospects, develop internal budgets and financial goals, and to facilitate period-to-period comparisons. The Company believes these non-GAAP financial measures reflect an additional way of viewing aspects of its operations that, when viewed with its GAAP results, provide a more complete understanding of factors and trends affecting its business. Notes to the Financial Results Adjusted operating margin is a non-GAAP financial measure that the Company defines as loss from operations which excludes i) stock-based compensation; ii) executive transition costs, such as executive search costs, retention costs, one-time severance costs and one-time corporate growth strategy costs; and iii) restructuring charges, divided by revenues. Adjusted net loss is a non-GAAP financial measure that the Company defines as net loss which excludes i) stock-based compensation; ii) executive transition costs; iii) restructuring charges; iv) impairment of long-lived assets; and v) the applicable tax effect of the excluded items including the stock-based compensation discrete tax item. Adjusted net loss per share is a non-GAAP financial measure that the Company defines as net loss, which excludes i) stock-based compensation; ii) executive transition costs; iii) restructuring charges; iv) impairment of long-lived assets; and v) the applicable tax effect of the excluded items including the stock-based compensation discrete tax item, divided by basic shares outstanding. Adjusted EBITDA is a non-GAAP financial measure that the Company defines as net loss which excludes i) depreciation and amortization; ii) stock-based compensation; iii) executive transition costs; iv) restructuring charges; v) impairment of long-lived assets; vi) other income, net, such as interest income and other non-operating income (expense), net; and vii) benefit from income taxes. Free cash flow is a non-GAAP financial measure that the Company defines as net cash provided by operating activities less capital expenditures. Conference Call to Discuss Financial Results LIVE CONFERENCE Q&A CALL: Wednesday, May 7, 2025 , 2:00 PM PT / 5:00 PM ET US / Canada Toll-Free: +1 (888) 645-4404 Local / International Toll: +1 (862) 298-0702 CONFERENCE Q&A CALL REPLAY: Available approximately three hours after conclusion of the live call. Expiration: Saturday, June 7, 2025 US / Canada Toll-Free: +1 (877) 660-6853 Local / International Toll: +1 (201) 612-7415 Access code: 13753398 Investors may also access the live call and the replay over the internet on the “Events” page of the Company’s website located at https://ir.energyrecovery.com/news-events/ir-calendar . Disclosure Information Energy Recovery uses the investor relations section on its website as means of complying with its disclosure obligations under Regulation FD. Accordingly, investors should monitor Energy Recovery’s investor relations website in addition to following Energy Recovery’s press releases, SEC filings, and public conference calls and webcasts. About Energy Recovery Energy Recovery (Nasdaq: ERII) is a trusted global leader in energy efficiency technology. Building on the Company’s pressure exchanger technology platform, the Company designs and manufactures reliable, high-performance solutions that generate cost savings and increase energy efficiency across several industries. With a strong foundation in the desalination industry, the Company has delivered transformative solutions that optimize operations and deliver positive environmental impact to its customers worldwide for more than 30 years. Headquartered in the San Francisco Bay Area , the Company has manufacturing and research and development facilities across California with sales and on-site technical support available globally. To learn more, visit https://energyrecovery.com/ . ENERGY RECOVERY, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) March 31 , 2025 December 31 , 2024 (In thousands) ASSETS Cash, cash equivalents and investments $ 106,730 $ 99,851 Accounts receivable and contract assets 34,787 66,842 Inventories, net 32,410 24,906 Prepaid expenses and other assets 3,850 3,889 Property, equipment and operating leases 23,753 25,119 Goodwill 12,790 12,790 Deferred tax assets and other assets 11,074 9,395 TOTAL ASSETS $ 225,394 $ 242,792 LIABILITIES AND STOCKHOLDERS’ EQUITY Liabilities Accounts payable, accrued expenses, and other liabilities, current $ 14,676 $ 20,837 Contract liabilities and other liabilities, non-current 1,497 628 Lease liabilities 11,108 11,317 Total liabilities 27,281 32,782 Stockholders’ equity 198,113 210,010 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 225,394 $ 242,792 ENERGY RECOVERY, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended March 31 , 2025 2024 (In thousands, except per share data) Revenue $ 8,065 $ 12,090 Cost of revenue 3,607 4,955 Gross profit 4,458 7,135 Operating expenses General and administrative 8,574 7,566 Sales and marketing 4,906 6,152 Research and development 3,001 4,351 Restructuring charges 539 — Total operating expenses 17,020 18,069 Loss from operations (12,562 ) (10,934 ) Other income, net 1,079 1,389 Loss before income taxes (11,483 ) (9,545 ) Benefit from income taxes (1,603 ) (1,285 ) Net loss $ (9,880 ) $ (8,260 ) Net loss per share Basic $ (0.18 ) $ (0.14 ) Diluted $ (0.18 ) $ (0.14 ) Number of shares used in per share calculations Basic 54,902 57,102 Diluted 54,902 57,102 ENERGY RECOVERY, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 31 , 2025 2024 (In thousands) Cash flows from operating activities: Net loss $ (9,880 ) $ (8,260 ) Non-cash adjustments 1,891 3,300 Net cash provided by operating assets and liabilities 18,667 11,457 Net cash provided by operating activities 10,678 6,497 Cash flows from investing activities: Net investment in marketable securities 12,855 (4,249 ) Capital expenditures (191 ) (824 ) Proceeds from sales of fixed assets 10 87 Net cash provided by (used in) investing activities 12,674 (4,986 ) Cash flows from financing activities: Net proceeds from issuance of common stock 616 1,190 Repurchase of common stock (4,490 ) — Net cash (used in) provided by financing activities (3,874 ) 1,190 Effect of exchange rate differences 33 (19 ) Net change in cash, cash equivalents and restricted cash $ 19,511 $ 2,682 Cash, cash equivalents and restricted cash, end of period $ 49,268 $ 70,907 ENERGY RECOVERY, INC. SUPPLEMENTAL FINANCIAL INFORMATION (Unaudited) Channel Revenue Three Months Ended March 31 , 2025 2024 vs. 2024 (In thousands, except percentages) Aftermarket $ 4,028 $ 4,644 down 13% Original equipment manufacturer 4,001 3,346 up 20% Megaproject 36 4,100 down 99% Total revenue $ 8,065 $ 12,090 down 33% Segment Activity Three Months Ended March 31 , 2025 2024 Water Emerging Technologies Corporate Total Water Emerging Technologies Corporate Total (In thousands) Revenue $ 8,064 $ 1 $ — $ 8,065 $ 12,089 $ 1 $ — $ 12,090 Cost of revenue 3,561 46 — 3,607 4,954 1 — 4,955 Gross profit (loss) 4,503 (45 ) — 4,458 7,135 — — 7,135 Operating expenses General and administrative 1,573 755 6,246 8,574 1,922 1,018 4,626 7,566 Sales and marketing 3,145 1,270 491 4,906 3,745 1,807 600 6,152 Research and development 1,178 1,823 — 3,001 1,100 3,251 — 4,351 Restructuring charges 210 123 206 539 — — — — Total operating expenses 6,106 3,971 6,943 17,020 6,767 6,076 5,226 18,069 Operating income (loss) $ (1,603 ) $ (4,016 ) $ (6,943 ) (12,562 ) $ 368 $ (6,076 ) $ (5,226 ) (10,934 ) Other income, net 1,079 1,389 Income before income taxes $ (11,483 ) $ (9,545 ) Stock-based Compensation Three Months Ended March 31 , 2025 2024 (In thousands) Stock-based compensation expense charged to: Cost of revenue $ 148 $ 343 General and administrative 870 1,407 Sales and marketing 679 1,010 Research and development 266 523 Total stock-based compensation expense $ 1,963 $ 3,283 ENERGY RECOVERY, INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (1) (Unaudited) This press release includes certain non-GAAP financial information because we plan and manage our business using such information. The following table reconciles the GAAP financial information to the non-GAAP financial information. Quarter-to-Date Q1'2025 Q1'2024 (In millions, except shares, per share and percentages) Operating margin (155.8 )% (90.4 )% Stock-based compensation 24.3 27.2 Executive transition costs — 3.9 Restructuring charges 6.7 — Impairment of long-lived assets 4.4 — Adjusted operating margin (120.4 )% (59.4 )% Net loss $ (9.9 ) $ (8.3 ) Stock-based compensation 2.0 3.3 Executive transition costs (2) — 0.4 Restructuring charges (2) 0.5 — Impairment of long-lived assets (2) 0.3 — Stock-based compensation discrete tax item 0.1 (0.1 ) Adjusted net loss $ (7.0 ) $ (4.6 ) Net loss per share $ (0.18 ) $ (0.14 ) Adjustments to net loss per share (3) 0.05 0.06 Adjusted net loss per share $ (0.13 ) $ (0.08 ) Net loss $ (9.9 ) $ (8.3 ) Stock-based compensation 2.0 3.3 Depreciation and amortization 1.0 1.0 Executive transition costs — 0.5 Restructuring charges 0.5 — Impairment of long-lived assets 0.4 — Other income, net (1.1 ) (1.4 ) Benefit from income taxes (1.6 ) (1.3 ) Adjusted EBITDA $ (8.7 ) $ (6.2 ) Free cash flow Net cash provided by operating activities $ 10.7 $ 6.5 Capital expenditures (0.2 ) (0.8 ) Free cash flow $ 10.5 $ 5.7 _______ (1) Amounts may not total due to rounding. (2) Amounts presented are net of tax. (3) Refer to the sections “Use of Non-GAAP Financial Measures” for description of items included in adjustments. View source version on businesswire.com : https://www.businesswire.com/news/home/20250507599240/en/ Investor Relations [email protected] Source: Energy Recovery, Inc.

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