Energy Recovery Reports its Third 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 third quarter and nine months ended September 30, 2025 . Third Quarter Highlights Q3’2025 financial results were in-line with internal expectations and consistent with our communicated expectations for quarterly revenue cadence in 2025. Revenue of $32.0 million , a decrease of $6.6 million , as compared to Q3’2024, due to timing of revenue from contracted projects. Gross margin of 64.2%, a decrease of 90 bps, as compared to Q3’2024, due primarily to costs related to product mix and tariffs, partially offset by a decrease in indirect manufacturing costs. Operating expenses of $16.9 million , a decrease of 6.4%, as compared to Q3’2024, due primarily to a decrease in employee costs and Emerging Technologies segment development costs, partially offset by an increase in consulting costs. Income from operations of $3.7 million , an decrease of 48.1%, as compared to Q3’2024, mainly due to lower revenue, offset by lower operating expenses. Net income of $3.9 million and adjusted EBITDA(1) of $6.8 million . Cash and investments of $79.9 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 third 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 Year to Date Q3’2025 Q3’2024 vs. Q3’2024 2025 2024 2025 vs. 2024 (In millions, except net income (loss) per share, percentages and basis points) Revenue $32.0 $38.6 down 17% $68.1 $77.9 down 13% Gross margin 64.2% 65.1% down 90 bps 63.1% 64.0% down 90 bps Operating margin 11.4% 18.3% down 690 bps (10.9%) (7.6%) down 330 bps Net income (loss) $3.9 $8.5 down 54% ( $4.0 ) ( $0.4 ) NM Net income (loss) per share $0.07 $0.15 down $0.08 ( $0.07 ) ( $0.01 ) down $0.06 Effective tax rate 13.0% 62.4% Cash provided by (used for) operations ( $3.1 ) ( $3.0 ) $11.7 $11.6 Non-GAAP Financial Highlights (1) Quarter-to-Date Year to Date Q3’2025 Q3’2024 vs. Q3’2024 2025 2024 2025 vs. 2024 (In millions, except adjusted net income per share, percentages and basis points) Adjusted operating margin 18.3% 27.5% down 920 bps (0.6%) 9.7% NM Adjusted net income $6.3 $12.0 down 47% $3.0 $12.4 down 75% Adjusted net income per share $0.12 $0.21 down $0.09 $0.06 $0.22 down $0.16 Adjusted EBITDA $6.8 $11.6 $2.4 $10.6 Free cash flow ( $3.5 ) ( $3.2 ) $11.0 $10.4 __________ (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 income, adjusted net income 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 income (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; iii) restructuring charges, and iv) impairment of long-lived assets, divided by revenues. Adjusted net income is a non-GAAP financial measure that the Company defines as net income (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 income per share is a non-GAAP financial measure that the Company defines as net income (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 income (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) provision for (benefit from) income taxes. Free cash flow is a non-GAAP financial measure that the Company defines as net cash provided by (used in) operating activities less capital expenditures. Conference Call to Discuss Financial Results LIVE CONFERENCE Q&A CALL: Wednesday, November 5, 2025 , 2:00 PM PT / 5:00 PM ET US / Canada Toll-Free: +1 (877) 709-8150 Local / International Toll: +1 (201) 689-8354 CONFERENCE Q&A CALL REPLAY: Available approximately three hours after conclusion of the live call. Expiration: Friday, December 5, 2025 US / Canada Toll-Free: +1 (877) 660-6853 Local / International Toll: +1 (201) 612-7415 Access code: 13756564 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) designs and manufactures world-class energy-saving technology for critical infrastructure that communities rely on every day, driving a more resilient and sustainable future. Grounded in more than 30 years of leadership in the desalination industry, today we use our proprietary pressure exchanger technology to help customers in multiple industries improve their operations and lower their emissions. Headquartered in the San Francisco Bay Area , we operate manufacturing and R&D facilities throughout California , with sales and on-site technical support available globally. For more information, please visit www.energyrecovery.com ENERGY RECOVERY, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) September 30 , 2025 December 31 , 2024 (In thousands) ASSETS Cash, cash equivalents and investments $ 79,937 $ 99,851 Accounts receivable and contract assets 46,809 66,842 Inventories, net 33,566 24,906 Prepaid expenses and other assets 4,865 3,889 Property, equipment and operating leases 21,539 25,119 Goodwill 12,790 12,790 Deferred tax assets and other assets 10,139 9,395 TOTAL ASSETS $ 209,645 $ 242,792 LIABILITIES AND STOCKHOLDERS’ EQUITY Liabilities Accounts payable, accrued expenses, and other liabilities, current $ 16,812 $ 20,837 Contract liabilities and other liabilities, non-current 2,002 628 Lease liabilities 9,999 11,317 Total liabilities 28,813 32,782 Stockholders’ equity 180,832 210,010 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 209,645 $ 242,792 ENERGY RECOVERY, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended September 30 , Nine Months Ended September 30 , 2025 2024 2025 2024 (In thousands, except per share data) Revenue $ 32,000 $ 38,584 $ 68,116 $ 77,873 Cost of revenue 11,442 13,472 25,146 28,060 Gross profit 20,558 25,112 42,970 49,813 Operating expenses General and administrative 7,514 7,673 23,757 24,771 Sales and marketing 5,714 6,413 15,980 18,669 Research and development 3,668 3,969 10,120 12,264 Restructuring charges — — 539 — Total operating expenses 16,896 18,055 50,396 55,704 Income (loss) from operations 3,662 7,057 (7,426 ) (5,891 ) Other income, net 892 1,768 2,885 4,771 Income (loss) before income taxes 4,554 8,825 (4,541 ) (1,120 ) Provision for (benefit from) income taxes 680 344 (589 ) (699 ) Net income (loss) $ 3,874 $ 8,481 $ (3,952 ) $ (421 ) Net income (loss) per share Basic $ 0.07 $ 0.15 $ (0.07 ) $ (0.01 ) Diluted $ 0.07 $ 0.15 $ (0.07 ) $ (0.01 ) Number of shares used in per share calculations Basic 53,162 57,756 54,101 57,409 Diluted 53,466 58,290 54,101 57,409 ENERGY RECOVERY, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30 , 2025 2024 (In thousands) Cash flows from operating activities: Net loss $ (3,952 ) $ (421 ) Non-cash adjustments 10,181 11,432 Net cash provided by operating assets and liabilities 5,464 556 Net cash provided by operating activities 11,693 11,567 Cash flows from investing activities: Net investment in marketable securities 37,670 (21,067 ) Capital expenditures (668 ) (1,194 ) Proceeds from sales of fixed assets 10 90 Net cash provided by (used in) investing activities 37,012 (22,171 ) Cash flows from financing activities: Net proceeds from issuance of common stock 1,364 5,795 Repurchase of common stock and payment of excise tax (32,781 ) — Net cash (used in) provided by financing activities (31,417 ) 5,795 Effect of exchange rate differences 58 (23 ) Net change in cash, cash equivalents and restricted cash $ 17,346 $ (4,832 ) Cash, cash equivalents and restricted cash, end of period $ 47,103 $ 63,393 ENERGY RECOVERY, INC. SUPPLEMENTAL FINANCIAL INFORMATION (Unaudited) Channel Revenue Three Months Ended September 30 , Nine Months Ended September 30 , 2025 2024 vs. 2024 2025 2024 vs. 2024 (In thousands, except percentages) Megaproject $ 18,400 $ 29,009 down 37% $ 33,238 $ 48,924 down 32% Original equipment manufacturer 8,962 4,919 up 82% 21,320 15,210 up 40% Aftermarket 4,638 4,656 no change 13,558 13,739 down 1% Total revenue $ 32,000 $ 38,584 down 17% $ 68,116 $ 77,873 down 13% Segment Activity Three Months Ended September 30 , 2025 2024 Water Emerging Technologies Corporate Total Water Emerging Technologies Corporate Total (In thousands) Revenue $ 31,928 $ 72 $ — $ 32,000 $ 38,344 $ 240 $ — $ 38,584 Cost of revenue 11,323 119 — 11,442 13,334 138 — 13,472 Gross profit (loss) 20,605 (47 ) — 20,558 25,010 102 — 25,112 Operating expenses General and administrative 1,418 669 5,427 7,514 1,803 906 4,964 7,673 Sales and marketing 3,704 1,557 453 5,714 3,777 1,977 659 6,413 Research and development 1,820 1,848 — 3,668 1,145 2,824 — 3,969 Total operating expenses 6,942 4,074 5,880 16,896 6,725 5,707 5,623 18,055 Operating income (loss) $ 13,663 $ (4,121 ) $ (5,880 ) 3,662 $ 18,285 $ (5,605 ) $ (5,623 ) 7,057 Other income, net 892 1,768 Income before income taxes $ 4,554 $ 8,825 Nine Months Ended September 30 , 2025 2024 Water Emerging Technologies Corporate Total Water Emerging Technologies Corporate Total (In thousands) Revenue $ 67,831 $ 285 $ — $ 68,116 $ 77,351 $ 522 $ — $ 77,873 Cost of revenue 24,810 336 — 25,146 27,633 427 — 28,060 Gross profit (loss) 43,021 (51 ) — 42,970 49,718 95 — 49,813 Operating expenses General and administrative 4,314 1,995 17,448 23,757 5,637 2,908 16,226 24,771 Sales and marketing 10,129 4,396 1,455 15,980 11,359 5,484 1,826 18,669 Research and development 4,602 5,518 — 10,120 3,318 8,946 — 12,264 Restructuring charges 210 123 206 539 — — — — Total operating expenses 19,255 12,032 19,109 50,396 20,314 17,338 18,052 55,704 Operating income (loss) $ 23,766 $ (12,083 ) $ (19,109 ) (7,426 ) $ 29,404 $ (17,243 ) $ (18,052 ) (5,891 ) Other income, net 2,885 4,771 Income before income taxes $ (4,541 ) $ (1,120 ) Stock-based Compensation Three Months Ended September 30 , Nine Months Ended September 30 , 2025 2024 2025 2024 (In thousands) Stock-based compensation expense charged to: Cost of revenue $ 156 $ 176 $ 452 $ 980 General and administrative 868 954 2,466 3,372 Sales and marketing 828 845 2,208 2,767 Research and development 355 437 980 1,393 Total stock-based compensation expense $ 2,207 $ 2,412 $ 6,106 $ 8,512 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 Year to Date Q3'2025 Q3'2024 Q3'2025 Q3'2024 (In millions, except shares, per share and percentages) Operating margin 11.4 % 18.3 % (10.9 )% (7.6 )% Stock-based compensation 6.9 6.3 9.0 10.9 Executive transition costs — 2.9 — 6.4 Restructuring charges — — 0.8 — Impairment of long-lived assets — — 0.5 — Adjusted operating margin 18.3 % 27.5 % (0.6 )% 9.7 % Net income (loss) $ 3.9 $ 8.5 $ (4.0 ) $ (0.4 ) Stock-based compensation 2.2 2.4 6.1 8.5 Executive transition costs (2) — 1.0 — 4.4 Restructuring charges (2) — — 0.5 — Impairment of long-lived assets (2) — — 0.3 — Stock-based compensation discrete tax item 0.3 0.1 0.1 (0.1 ) Adjusted net income $ 6.3 $ 12.0 $ 3.0 $ 12.4 Net income (loss) per share $ 0.07 $ 0.15 $ (0.07 ) $ (0.01 ) Adjustments to net income (loss) per share (3) 0.05 0.06 0.13 0.23 Adjusted net income per share $ 0.12 $ 0.21 $ 0.06 $ 0.22 Net income (loss) $ 3.9 $ 8.5 $ (4.0 ) $ (0.4 ) Stock-based compensation 2.2 2.4 6.1 8.5 Depreciation and amortization 0.9 1.0 2.8 3.1 Executive transition costs — 1.1 — 5.0 Restructuring charges — — 0.5 — Impairment of long-lived assets — — 0.4 — Other income, net (0.9 ) (1.8 ) (2.9 ) (4.8 ) Provision for (benefit from) income taxes 0.7 0.3 (0.6 ) (0.7 ) Adjusted EBITDA $ 6.8 $ 11.6 $ 2.4 $ 10.6 Free cash flow Net cash provided by (used in) operating activities $ (3.1 ) $ (3.0 ) $ 11.7 $ 11.6 Capital expenditures (0.3 ) (0.2 ) (0.7 ) (1.2 ) Free cash flow $ (3.5 ) $ (3.2 ) $ 11.0 $ 10.4 __________ (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/20251105935297/en/ Investor Relations [email protected] Source: Energy Recovery, Inc.

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