Energy Recovery(ERII)

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Energy Recovery Keeps Advancing On Its 3 Fronts, Waiting For Key Q3 And 1H26 On CO2
Seeking Alpha· 2025-08-07 17:24
Group 1 - Energy Recovery, Inc. (NASDAQ: ERII) reported positive Q2 '25 results across its three business segments, indicating strong operational performance [1] - The company signed contracts in the desalination sector, marking a significant development in its business activities [1] - ERII has resumed exports to China in the wastewater segment, reflecting a recovery in international operations [1] - The company has reached 50 locations for summer testing, showcasing its commitment to operational expansion and testing capabilities [1]
Energy Recovery(ERII) - 2025 Q2 - Earnings Call Transcript
2025-08-06 22:00
Financial Data and Key Metrics Changes - The company reiterated its 2025 guidance on all metrics and reinstated its wastewater guidance, indicating resilience in its core desalination business despite macroeconomic challenges [4][5] - An additional share repurchase program was announced, totaling $105 million over the past ten months, aiming to repurchase over 10% of outstanding shares while continuing to invest in growth [5] Business Line Data and Key Metrics Changes - The contracted desalination capacity, water reuse capacity, and CO2 refrigeration installations are all experiencing high growth rates, positioning the company to capture upside trends towards its 2029 goals [5][6] - The company reported shipping over $2 million in the quarter due to improved tariff conditions in China, which allowed previously stalled projects to proceed [24][25] Market Data and Key Metrics Changes - The company has broadened its wastewater footprint significantly, focusing on five key verticals: municipal, chemical, textile, manufacturing, and mining, which are expected to yield the largest market share [27][28] - The reduction in tariffs in China has positively impacted project execution, leading to better-than-expected results in that market [24][25] Company Strategy and Development Direction - The company is focused on long-term trends driving its business, including increasing water scarcity and the need for water reuse, which are expected to enhance growth opportunities [5][35] - The management emphasized the importance of regulatory drivers and economic factors in the increasing demand for wastewater treatment solutions [35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving higher revenue targets for desalination in 2026, citing a strong pipeline of contracted capacity [10][11] - The management noted that the current testing season for new products is progressing well, with ongoing engagement with OEMs and the addition of new testing sites [16][17] Other Important Information - The company is developing a business case for data center markets and heat pumps, with initial assessments indicating limited growth potential in the CO2 segment for data centers [18][19] - The management highlighted the importance of reliability testing for new products, which is crucial for converting testers into dedicated users [30][31] Q&A Session Summary Question: Confidence in achieving higher desalination revenue targets - Management indicated that while it's too early to tell, recent awards and contracted capacity give them confidence for 2026, with more guidance expected in the next earnings call [10][11][12] Question: Expectations for next-gen PX product pricing - The company expects to maintain or increase selling prices based on capacity, with fewer units needed to fill a plant [14] Question: Update on CO2 work with OEMs - Discussions with Hill Phoenix are ongoing, and the summer testing season is proceeding as expected with new sites being added [16][17] Question: Progress on data center market business case - Initial assessments suggest limited growth potential for CO2 in data centers, but heat pumps show promise [18][19] Question: Better-than-expected results in China - The reduction in tariffs allowed previously stalled projects to move forward, leading to improved results [24][25] Question: Broadened wastewater footprint - The company has successfully expanded its reference case list in key verticals, meeting its expectations [27][28] Question: Drivers for increasing water reuse - The motivations for increased water reuse are both economic and regulatory, driven by water scarcity issues [35]
Energy Recovery(ERII) - 2025 Q2 - Quarterly Report
2025-08-06 20:14
PART I FINANCIAL INFORMATION Presents the company's unaudited financial statements and management's discussion and analysis for the reporting period [Item 1 Financial Statements (Unaudited)](index=2&type=section&id=Item%201%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income (loss), stockholders' equity, and cash flows, along with their accompanying notes, for the periods ended June 30, 2025, and December 31, 2024 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20%E2%80%94%20June%2030%2C%202025%20and%20December%2031%2C%202024) Presents the company's financial position, including assets, liabilities, and equity, at specific reporting dates | Metric | Dec 31, 2024 (in thousands) | Jun 30, 2025 (in thousands) | Change (in thousands) | | :----------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Total Assets | $242,792 | $212,275 | $(30,517) | | Total Liabilities | $32,782 | $27,068 | $(5,714) | | Total Stockholders' Equity | $210,010 | $185,207 | $(24,803) | | Cash and cash equivalents | $29,627 | $57,050 | $27,423 | | Short-term investments | $48,392 | $22,467 | $(25,925) | | Accounts receivable, net | $64,066 | $32,587 | $(31,479) | | Inventories, net | $24,906 | $32,660 | $7,754 | - Total assets decreased by **$30.517 million** from December 31, 2024, to June 30, 2025, primarily due to reductions in short-term investments and accounts receivable, partially offset by an increase in cash and cash equivalents[18](index=18&type=chunk)[19](index=19&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20%E2%80%94%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) Details the company's revenues, expenses, and net income or loss over specific periods | Metric (in thousands) | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | Change (3M) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change (6M) | | :-------------------- | :-------------------------- | :-------------------------- | :---------- | :-------------------------- | :-------------------------- | :---------- | | Revenue | $28,051 | $27,199 | $852 | $36,116 | $39,289 | $(3,173) | | Gross profit | $17,954 | $17,566 | $388 | $22,412 | $24,701 | $(2,289) | | Operating expenses | $16,480 | $19,580 | $(3,100) | $33,500 | $37,649 | $(4,149) | | Income (loss) from operations | $1,474 | $(2,014) | $3,488 | $(11,088) | $(12,948) | $1,860 | | Net income (loss) | $2,054 | $(642) | $2,696 | $(7,826) | $(8,902) | $1,076 | | Basic EPS | $0.04 | $(0.01) | $0.05 | $(0.14) | $(0.16) | $0.02 | | Diluted EPS | $0.04 | $(0.01) | $0.05 | $(0.14) | $(0.16) | $0.02 | - Net income for the three months ended June 30, 2025, was **$2.054 million**, a significant improvement from a net loss of **$(0.642) million** in the prior year, while the six-month period saw a reduced net loss of **$(7.826) million** compared to **$(8.902) million**[20](index=20&type=chunk) [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)%20%E2%80%94%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) Reports net income or loss and other comprehensive income or loss for the specified periods | Metric (in thousands) | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | Change (3M) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change (6M) | | :-------------------- | :-------------------------- | :-------------------------- | :---------- | :-------------------------- | :-------------------------- | :---------- | | Net income (loss) | $2,054 | $(642) | $2,696 | $(7,826) | $(8,902) | $1,076 | | Foreign currency translation adjustments | $53 | $9 | $44 | $37 | $37 | $0 |\n| Unrealized loss on investments | $(91) | $(10) | $(81) | $(98) | $(54) | $(44) | | Total other comprehensive loss, net of tax | $(38) | $(1) | $(37) | $(61) | $(17) | $(44) | | Comprehensive income (loss) | $2,016 | $(643) | $2,659 | $(7,887) | $(8,919) | $1,032 | - Comprehensive income for the three months ended June 30, 2025, was **$2.016 million**, a significant improvement from a loss of **$(0.643) million** in the prior year, primarily influenced by net income/loss and foreign currency translation adjustments[22](index=22&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity%20%E2%80%94%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) Outlines changes in the company's equity accounts, including retained earnings and treasury stock | Metric (in thousands) | Dec 31, 2024 | Jun 30, 2025 | Change | | :-------------------- | :----------- | :----------- | :----- | | Total stockholders' equity | $210,010 | $185,207 | $(24,803) | | Treasury stock (6M) | $(130,870) | $(152,660) | $(21,790) | | Retained earnings (6M) | $105,706 | $97,880 | $(7,826) | - Total stockholders' equity decreased by **$24.803 million** from December 31, 2024, to June 30, 2025, primarily due to common stock repurchases totaling **$21.790 million** and a net loss of **$7.826 million** during the six months ended June 30, 2025[19](index=19&type=chunk)[23](index=23&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20%E2%80%94%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) Summarizes cash inflows and outflows from operating, investing, and financing activities | Metric (in thousands) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change | | :------------------------------------------ | :-------------------------- | :-------------------------- | :----- | | Net cash provided by operating activities | $14,824 | $14,570 | $254 | | Net cash provided by (used in) investing activities | $33,566 | $(43,830) | $77,396 | | Net cash (used in) provided by financing activities | $(21,026) | $1,502 | $(22,528) | | Net change in cash, cash equivalents and restricted cash | $27,424 | $(27,782) | $55,206 | | Cash, cash equivalents and restricted cash, end of period | $57,181 | $40,443 | $16,738 | - Net cash provided by investing activities significantly increased to **$33.566 million** from a net use of **$(43.830) million**, primarily due to less cash used for marketable debt instrument purchases[24](index=24&type=chunk)[129](index=129&type=chunk) - Net cash used in financing activities increased to **$(21.026) million** due to common stock repurchases under the February 2025 Authorization and associated excise tax payments[24](index=24&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations and additional information supporting the condensed consolidated financial statements [Note 1 — Description of Business and Significant Accounting Policies](index=9&type=section&id=Note1%20%E2%80%94Description%20of%20Business%20and%20Significant%20Accounting%20Policies) Describes the company's operations and the key accounting principles applied in its financial reporting - Energy Recovery, Inc. designs and manufactures high-performance solutions for energy efficiency and carbon emission reduction, primarily leveraging its pressure exchanger technology in fluid-flow and gas markets[25](index=25&type=chunk) - Key markets include seawater and wastewater desalination, natural gas, chemical-based refrigeration, and CO2 systems[25](index=25&type=chunk) - No material changes to significant accounting policies or newly issued accounting pronouncements not yet adopted were reported for the six months ended June 30, 2025[33](index=33&type=chunk)[34](index=34&type=chunk) [Note 2 — Revenue](index=10&type=section&id=Note2%20%E2%80%94Revenue) Details the company's revenue streams, segmented by channel and geographical market | Channel | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | Change (3M) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change (6M) | | :-------------------------- | :-------------------------- | :-------------------------- | :---------- | :-------------------------- | :-------------------------- | :---------- | | Megaproject | $14,802 | $15,815 | $(1,013) | $14,838 | $19,915 | $(5,077) | | Original equipment manufacturer | $8,357 | $6,945 | $1,412 | $12,358 | $10,291 | $2,067 | | Aftermarket | $4,892 | $4,439 | $453 | $8,920 | $9,083 | $(163) | | Total revenue | $28,051 | $27,199 | $852 | $36,116 | $39,289 | $(3,173) | | Geographical Market | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | Change (3M) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change (6M) | | :------------------ | :-------------------------- | :-------------------------- | :---------- | :-------------------------- | :-------------------------- | :---------- | | Middle East and Africa | $9,416 | $14,712 | $(5,296) | $12,297 | $19,498 | $(7,201) | | Asia | $8,073 | $7,998 | $75 | $11,511 | $9,977 | $1,534 | | Europe | $9,111 | $2,522 | $6,589 | $10,186 | $3,908 | $6,278 | | Americas | $1,451 | $1,967 | $(516) | $2,122 | $5,906 | $(3,784) | - Megaproject revenue decreased by **6%** for the three months and **25%** for the six months ended June 30, 2025, primarily due to lower shipments to MEA, Asia, and Americas markets[101](index=101&type=chunk)[102](index=102&type=chunk) - OEM revenue increased by **20%** for both the three and six months ended June 30, 2025, driven by higher shipments to Europe and Asia markets for wastewater and desalination[102](index=102&type=chunk)[103](index=103&type=chunk) - Remaining performance obligations as of June 30, 2025, totaled **$8.517 million**, expected to be recognized in the remaining six months of 2025[44](index=44&type=chunk) [Note 3 — Net Income (Loss) Per Share](index=12&type=section&id=Note3%20%E2%80%94Net%20Income%20(Loss)%20Per%20Share) Explains the calculation of basic and diluted earnings per share for the reported periods | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income (loss) | $2,054 | $(642) | $(7,826) | $(8,902) | | Basic common shares outstanding | 54,257 | 57,366 | 54,578 | 57,234 | | Diluted common shares outstanding | 54,486 | 57,366 | 54,578 | 57,234 | | Basic EPS | $0.04 | $(0.01) | $(0.14) | $(0.16) | | Diluted EPS | $0.04 | $(0.01) | $(0.14) | $(0.16) | - Anti-dilutive equity awards excluded from diluted EPS calculations were **1.992 million shares** for the three months and **3.038 million shares** for the six months ended June 30, 2025[48](index=48&type=chunk) [Note 4 — Other Financial Information](index=13&type=section&id=Note4%20%E2%80%94Other%20Financial%20Information) Presents supplementary financial details, including cash, receivables, and inventory breakdowns | Metric | Jun 30, 2025 | Dec 31, 2024 | | :------------------------------------------ | :----------- | :----------- | | Cash and cash equivalents | $57,050 | $29,627 | | Restricted cash, non-current | $131 | $130 | | Total cash, cash equivalents and restricted cash | $57,181 | $29,757 | | Metric | Jun 30, 2025 | Dec 31, 2024 | | :-------------------------- | :----------- | :----------- | | Accounts receivable, gross | $32,808 | $64,287 | | Allowance for doubtful accounts | $(221) | $(221) | | Accounts receivable, net | $32,587 | $64,066 | | Metric | Jun 30, 2025 | Dec 31, 2024 | | :------------------------------------ | :----------- | :----------- | | Raw materials | $9,119 | $8,829 | | Work in process | $7,989 | $6,417 | | Finished goods | $16,465 | $10,463 | | Inventories, gross | $33,573 | $25,709 | | Valuation adjustments for excess and obsolete inventory | $(913) | $(803) | | Inventories, net | $32,660 | $24,906 | - A restructuring charge of **$0.5 million** was recorded during the six months ended June 30, 2025, related to workforce reductions, with the plan substantially complete by the end of Q1 2025[57](index=57&type=chunk)[58](index=58&type=chunk) [Note 5 — Investments and Fair Value Measurements](index=15&type=section&id=Note5%20%E2%80%94Investments%20and%20Fair%20Value%20Measurements) Discusses the company's investment portfolio and fair value measurement methodologies | Metric | Jun 30, 2025 | Dec 31, 2024 | | :-------------------------------- | :----------- | :----------- | | Total short and long-term investments | $36,600 | $70,224 | | Total cash equivalents | $21,396 | $2,580 | - The company's total short and long-term investments decreased from **$70.224 million** at December 31, 2024, to **$36.600 million** at June 30, 2025, primarily due to reductions in short-term corporate notes and bonds and long-term municipal and agency notes and bonds[60](index=60&type=chunk) - As of June 30, 2025, available-for-sale investments with unrealized loss positions totaled **$3.811 million**, primarily in U.S. treasury securities and corporate notes and bonds[62](index=62&type=chunk) [Note 6 — Lines of Credit](index=17&type=section&id=Note6%20%E2%80%94Lines%20of%20Credit) Describes the company's available credit facilities and their utilization - The company has a committed revolving credit line of **$50.0 million** with JPMorgan Chase Bank, N.A., expiring December 21, 2026[63](index=63&type=chunk) - As of June 30, 2025, **$16.8 million** of the credit line was utilized for outstanding letters of credit (LCs) and stand-by letters of credit (SBLCs), with no revolving loans outstanding[64](index=64&type=chunk)[65](index=65&type=chunk) [Note 7 — Commitments and Contingencies](index=18&type=section&id=Note7%20%E2%80%94Commitments%20and%20Contingencies) Outlines the company's contractual commitments and potential contingent liabilities - The company entered into a sublease agreement for its Katy, Texas operating lease, resulting in an impairment charge of **$0.4 million** during the six months ended June 30, 2025[67](index=67&type=chunk)[69](index=69&type=chunk) - As of June 30, 2025, the company was not involved in any lawsuits, legal proceedings, or claims that would have a material effect on its financial position, results of operations, or cash flows[70](index=70&type=chunk) [Note 8 — Income Taxes](index=18&type=section&id=Note8%20%E2%80%94Income%20Taxes) Provides information on the company's income tax provision, effective tax rates, and related factors | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Provision for (benefit from) income taxes | $334 | $242 | $(1,269) | $(1,043) | | Effective tax rate | **14.0%** | **(60.5%)** | **14.0%** | **10.5%** | | Effective tax rate, excluding discrete items | **13.0%** | **(76.2%)** | **13.7%** | **9.1%** | - The effective tax rate for the six months ended June 30, 2025, differed from the prior year primarily due to lower projected R&D tax credits, increased non-deductible officer stock-based compensation, and lower projected foreign-derived intangible income (FDII) benefits[73](index=73&type=chunk)[121](index=121&type=chunk) - The company is currently assessing the impact of the recently signed One Big Beautiful Bill (OBBA) Act, which includes broad tax reform provisions, on its financial statements[73](index=73&type=chunk) [Note 9 — Segment Reporting](index=19&type=section&id=Note9%20%E2%80%94Segment%20Reporting) Presents financial data broken down by the company's operating segments | Segment | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Water | $11,706 | $10,751 | $10,103 | $11,119 | | Emerging Technologies | $(3,946) | $(5,562) | $(7,962) | $(11,638) | | Corporate | $(6,286) | $(7,203) | $(13,229) | $(12,429) | | Total Operating Income (Loss) | $1,474 | $(2,014) | $(11,088) | $(12,948) | - The company operates in two reportable segments: Water and Emerging Technologies, with the Water segment being the primary driver of operating income[74](index=74&type=chunk)[75](index=75&type=chunk) [Note 10 — Concentrations](index=20&type=section&id=Note10%E2%80%94Concentrations) Identifies significant concentrations of revenue from key customers | Customer | Segment | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :------- | :------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Customer A | Water | **21%** | ** | **17%** | ** | | Customer B | Water | **16%** | ** | **13%** | ** | | Customer C | Water | ** | **19%** | ** | **13%** | | Customer D | Water | ** | **18%** | ** | **12%** | | Customer E | Water | ** | **15%** | ** | **11%** | - Customer A and Customer B each accounted for over **10%** of total revenue for the three and six months ended June 30, 2025, both within the Water segment[77](index=77&type=chunk) - Revenue concentration among a limited number of customers is typical but shifts regularly, reflecting specific contracts rather than long-term trends[76](index=76&type=chunk) [Note 11 — Stockholders' Equity](index=21&type=section&id=Note11-Stockholders%27%20Equity) Details changes in stockholders' equity, including share repurchase programs - The company repurchased 1,557,208 shares for **$21.6 million** under the February 2025 Authorization during the six months ended June 30, 2025, with **$8.4 million** remaining[80](index=80&type=chunk)[81](index=81&type=chunk) - A new **$25.0 million** share repurchase program (August 2025 Authorization) was announced, expected to commence in Q3 2025[82](index=82&type=chunk)[126](index=126&type=chunk) - Cumulatively, the company has repurchased **13.0 million shares** for an aggregate cost of **$152.1 million** under all share repurchase programs[78](index=78&type=chunk)[125](index=125&type=chunk) [Note 12 — Stock-based Compensation](index=22&type=section&id=Note12-Stock-based%20Compensation) Explains the company's stock-based compensation plans and related expenses - New Performance Restricted Stock Unit (PRSU) awards were granted in Q2 2025, totaling **55 thousand** for the three months and **300.75 thousand** for the six months ended June 30, 2025[83](index=83&type=chunk) - PRSUs generally vest over three years, contingent on continued employment and meeting cumulative revenue and adjusted EBITDA targets[84](index=84&type=chunk) - No expense has been recognized for these PRSUs as the performance conditions are not yet considered probable[84](index=84&type=chunk) [Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations for the three and six months ended June 30, 2025, compared to the prior year periods, covering revenue, gross profit, operating expenses, other income, income taxes, and liquidity [Overview](index=23&type=section&id=Overview) Introduces the company's business model, core technologies, and strategic focus on efficiency and sustainability - Energy Recovery, Inc. designs and manufactures solutions that make industrial processes more efficient and sustainable, leveraging its pressure exchanger technology to lower costs, save energy, and reduce emissions[85](index=85&type=chunk) - The PX® Pressure Exchanger® technology, initially for seawater reverse osmosis desalination, is expanding into wastewater filtration and CO2 refrigeration markets[85](index=85&type=chunk) - Research and development (R&D) is an essential part of the company's strategy, focusing on the continual evolution of its pressure exchanger technology to enhance environmental sustainability and improve productivity[86](index=86&type=chunk) [Segments](index=23&type=section&id=Segments) Describes the company's operational segments and how corporate expenses are allocated - The company's reportable operating segments consist of the Water and Emerging Technologies segments, based on the industries served and the type of technology solutions sold[87](index=87&type=chunk) - Corporate operating expenses include expenditures in support of both the Water and Emerging Technologies segments[87](index=87&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) Analyzes the company's financial performance, including revenue, gross profit, and operating expenses [Revenue](index=24&type=section&id=Revenue) Provides a detailed analysis of revenue trends across different channels and geographical markets | Channel | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | Change (3M) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change (6M) | | :-------------------------- | :-------------------------- | :-------------------------- | :---------- | :-------------------------- | :-------------------------- | :---------- | | Megaproject | $14,802 | $15,815 | $(1,013) | $14,838 | $19,915 | $(5,077) | | Original equipment manufacturer | $8,357 | $6,945 | $1,412 | $12,358 | $10,291 | $2,067 | | Aftermarket | $4,892 | $4,439 | $453 | $8,920 | $9,083 | $(163) | | Total revenue | $28,051 | $27,199 | $852 | $36,116 | $39,289 | $(3,173) | | Geographical Market | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | Change (3M) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change (6M) | | :------------------ | :-------------------------- | :-------------------------- | :---------- | :-------------------------- | :-------------------------- | :---------- | | Middle East and Africa | $9,416 | $14,712 | $(5,296) | $12,297 | $19,498 | $(7,201) | | Asia | $8,073 | $7,998 | $75 | $11,511 | $9,977 | $1,534 | | Europe | $9,111 | $2,522 | $6,589 | $10,186 | $3,908 | $6,278 | | Americas | $1,451 | $1,967 | $(516) | $2,122 | $5,906 | $(3,784) | - Megaproject revenue decreased by **6%** for the three months and **25%** for the six months ended June 30, 2025, primarily due to lower shipments to MEA, Asia, and Americas markets[101](index=101&type=chunk)[102](index=102&type=chunk) - OEM revenue increased by **20%** for both the three and six months ended June 30, 2025, driven by higher shipments to Europe and Asia markets for wastewater and desalination[102](index=102&type=chunk)[103](index=103&type=chunk) [Gross Profit and Gross Margin](index=27&type=section&id=Gross%20Profit%20and%20Gross%20Margin) Examines the company's gross profit and margin performance, highlighting influencing factors | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | Change (3M) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change (6M) | | :----------- | :-------------------------- | :-------------------------- | :---------- | :-------------------------- | :-------------------------- | :---------- | | Gross profit | $17,954 | $17,566 | $388 | $22,412 | $24,701 | $(2,289) | | Gross margin | **64.0%** | **64.6%** | (60) bps | **62.1%** | **62.9%** | (80) bps | - The decrease in gross margin for both the three and six months ended June 30, 2025, was primarily due to costs related to product mix and tariffs[107](index=107&type=chunk) [Operating Expenses](index=27&type=section&id=Operating%20Expenses) Reviews the company's operating expenses, detailing changes and their underlying causes | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | Change (3M) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change (6M) | | :-------------------- | :-------------------------- | :-------------------------- | :---------- | :-------------------------- | :-------------------------- | :---------- | | Total operating expenses | $16,480 | $19,580 | $(3,100) | $33,500 | $37,649 | $(4,149) | - Overall operating expenses decreased by **$3.1 million** (**15.8%**) for the three months and **$4.1 million** (**11.0%**) for the six months ended June 30, 2025, primarily due to lower employee compensation costs and the non-recurrence of prior year severance charges[109](index=109&type=chunk)[113](index=113&type=chunk) - Corporate operating expenses for the six months ended June 30, 2025, increased due to higher consulting costs, restructuring charges, and impairment costs associated with the Katy, Texas sublease[115](index=115&type=chunk) - A restructuring charge of **$0.5 million** was recorded during the six months ended June 30, 2025, related to workforce reductions, with the plan substantially complete by the end of Q1 2025[116](index=116&type=chunk) [Other Income, Net](index=28&type=section&id=Other%20Income%2C%20Net) Discusses non-operating income and expenses, primarily focusing on interest income | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | Change (3M) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change (6M) | | :------------------------ | :-------------------------- | :-------------------------- | :---------- | :-------------------------- | :-------------------------- | :---------- | | Interest income | $940 | $1,663 | $(723) | $2,013 | $3,105 | $(1,092) | | Other non-operating expense, net | $(26) | $(49) | $23 | $(20) | $(102) | $82 | | Total other income, net | $914 | $1,614 | $(700) | $1,993 | $3,003 | $(1,010) | - Total other income, net, decreased for both the three and six months ended June 30, 2025, primarily due to a decrease in interest income from short-term and long-term investments[117](index=117&type=chunk) [Income Taxes](index=28&type=section&id=Income%20Taxes) Analyzes the company's income tax provisions and the factors affecting its effective tax rate | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Provision for (benefit from) income taxes | $334 | $242 | $(1,269) | $(1,043) | | Effective tax rate | **14.0%** | **(60.5%)** | **14.0%** | **10.5%** | | Effective tax rate, excluding discrete items | **13.0%** | **(76.2%)** | **13.7%** | **9.1%** | - The change in effective tax rate for the six months ended June 30, 2025, was primarily due to lower projected R&D tax credits, increased non-deductible officer stock-based compensation, and lower projected FDII benefits[121](index=121&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) Assesses the company's financial flexibility, cash position, and capital management strategies [Overview](index=29&type=section&id=Overview) Summarizes the company's current liquidity sources and its ability to meet future financial obligations - As of June 30, 2025, the company's primary liquidity sources included **$57.181 million** in unrestricted cash and cash equivalents, **$36.6 million** in short-term and long-term investments, and **$32.587 million** in net accounts receivable[122](index=122&type=chunk) - Management believes existing cash balances and future cash inflows will meet liquidity needs for at least the next 12 months, though additional financing may be sought for acquisitions or rapid market adoption of new technology[122](index=122&type=chunk)[132](index=132&type=chunk) [Credit Agreement](index=29&type=section&id=Credit%20Agreement) Details the company's revolving credit facility and its current utilization - The company maintains a **$50.0 million** revolving credit line with JPMorgan Chase Bank, N.A., expiring December 21, 2026[123](index=123&type=chunk) - As of June 30, 2025, no revolving loans were outstanding, but **$16.8 million** was utilized for letters of credit, and the company was in compliance with all covenants[124](index=124&type=chunk) [Share Repurchase Program](index=30&type=section&id=Share%20Repurchase%20Program) Reports on the company's share repurchase activities and remaining authorizations - The company repurchased 1,557,208 shares for **$21.6 million** under the February 2025 Authorization during the six months ended June 30, 2025, with **$8.4 million** remaining[125](index=125&type=chunk) - A new **$25.0 million** August 2025 Authorization for share repurchases was announced, expected to commence in Q3 2025[126](index=126&type=chunk) [Cash Flows](index=31&type=section&id=Cash%20Flows) Provides an analysis of cash generated and used in operating, investing, and financing activities | Metric | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change | | :------------------------------------------ | :-------------------------- | :-------------------------- | :----- | | Net cash provided by operating activities | $14,824 | $14,570 | $254 | | Net cash provided by (used in) investing activities | $33,566 | $(43,830) | $77,396 | | Net cash (used in) provided by financing activities | $(21,026) | $1,502 | $(22,528) | | Net change in cash, cash equivalents and restricted cash | $27,424 | $(27,782) | $55,206 | - Net cash provided by investing activities significantly increased due to less cash used for marketable debt instrument purchases and a decrease in capital expenditures[129](index=129&type=chunk) - Net cash used in financing activities was primarily due to common stock repurchases and associated excise tax payments[130](index=130&type=chunk)[131](index=131&type=chunk) [Liquidity and Capital Resource Requirements](index=32&type=section&id=Liquidity%20and%20Capital%20Resource%20Requirements) Outlines the company's anticipated capital needs and potential future financing strategies - The company believes its existing resources and cash generated from operations will be sufficient to meet anticipated capital requirements for at least the next 12 months[132](index=132&type=chunk) - Additional capital or indebtedness may be needed in the future to fund operations, support acquisitions, or invest in new technology, depending on market acceptance, revenue growth, and R&D/market expansion[132](index=132&type=chunk) [Recent Accounting Pronouncements](index=32&type=section&id=Recent%20Accounting%20Pronouncements) Discusses any recent changes in accounting standards and their impact on the company - There were no material changes to the company's significant accounting policies or newly issued accounting pronouncements not yet adopted that apply to the company during the six months ended June 30, 2025[133](index=133&type=chunk) [Item 3 Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to market risks, primarily focusing on foreign currency fluctuations and interest rate changes affecting its investment portfolio [Foreign Currency Risk](index=33&type=section&id=Foreign%20Currency%20Risk) Assesses the company's exposure to fluctuations in foreign exchange rates and their potential impact - The company's foreign currency exposure is due to fluctuations in exchange rates of the USD versus currencies such as the British pound, Saudi riyal, European euro, Chinese yuan, and Indian rupee[135](index=135&type=chunk) - While revenue contracts are USD-denominated, international customers may face difficulties obtaining USD, increasing collection risk; the company also incurs foreign currency expenses for vendors and international operations[136](index=136&type=chunk)[137](index=137&type=chunk) - The company has not hedged its foreign currency exposure, as expenses in foreign currencies have been insignificant to date, and exchange rate fluctuations have had little impact on operating results and cash flows[138](index=138&type=chunk) [Interest Rate and Credit Risks](index=33&type=section&id=Interest%20Rate%20and%20Credit%20Risks) Evaluates the company's exposure to interest rate changes and counter-party credit risks in its investment portfolio - The company's investment portfolio of **$40.6 million** in investment-grade marketable debt instruments is subject to interest rate and counter-party credit risks[140](index=140&type=chunk) - Risk mitigation strategies include investing in investment-grade securities, adhering to an investment policy with high credit rating requirements and concentration limits, and maintaining a weighted average maturity of approximately 18 months[139](index=139&type=chunk)[140](index=140&type=chunk) - A hypothetical **1%** increase in interest rates would result in a less than **$0.3 million** decrease in the fair value of the company's marketable debt investments[140](index=140&type=chunk) [Item 4 Controls and Procedures](index=34&type=section&id=Item%204%20Controls%20and%20Procedures) This section details the evaluation of the company's disclosure controls and procedures and reports on any changes in internal controls over financial reporting [Evaluation of Disclosure Controls and Procedures](index=34&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Reports on management's assessment of the effectiveness of the company's disclosure controls and procedures - The company's management, including the President, CEO, and CFO, concluded that its disclosure controls and procedures were effective as of June 30, 2025[142](index=142&type=chunk) [Changes in Internal Controls](index=34&type=section&id=Changes%20in%20Internal%20Controls) Discloses any material changes in the company's internal control over financial reporting during the period - There were no material changes in the company's internal control over financial reporting during the period covered by this report[143](index=143&type=chunk) PART II OTHER INFORMATION Provides additional disclosures including legal proceedings, risk factors, and other relevant corporate information [Item 1 Legal Proceedings](index=35&type=section&id=Item%201%20Legal%20Proceedings) This section reports on any legal proceedings the company is involved in and assesses their potential material impact on its financial condition or operations - The company is not currently a party to any legal proceedings that are believed to have a material adverse effect on its financial condition or operating results[145](index=145&type=chunk) - As of June 30, 2025, no material losses from litigation were considered probable or reasonably possible[70](index=70&type=chunk)[145](index=145&type=chunk) [Item 1A Risk Factors](index=35&type=section&id=Item%201ARisk%20Factors) This section updates the risk factors previously disclosed, specifically addressing the potential impact of changes in U.S. trade policy - No material changes in risk factors were reported from the 2024 Annual Report, except for an updated discussion on U.S. trade policy changes[146](index=146&type=chunk) - Changes in U.S. trade policy, including the imposition of or increases in tariffs, particularly with regard to China, could have a material adverse impact on the company's business, results of operations, or financial condition[146](index=146&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk) - While recent tariffs have not had a significant impact due to prior efforts to accumulate and maintain inventories, there is no guarantee that the company can avoid the impact of tariffs and related economic effects in the future[148](index=148&type=chunk) [Item 2 Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=Item%202%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports on any unregistered sales of equity securities and the use of proceeds from such sales - No unregistered sales of equity securities or use of proceeds were reported[150](index=150&type=chunk) [Item 3 Defaults Upon Senior Securities](index=35&type=section&id=Item%203%20Defaults%20Upon%20Senior%20Securities) Discloses any defaults upon senior securities - No defaults upon senior securities were reported[151](index=151&type=chunk) [Item 4 Mine Safety Disclosures](index=35&type=section&id=Item%204%20Mine%20Safety%20Disclosures) Provides disclosures related to mine safety - Mine Safety Disclosures are not applicable to the company[152](index=152&type=chunk) [Item 5 Other Information](index=35&type=section&id=Item%205%20Other%20Information) This section provides other relevant information not covered in previous items, including details on 10b5-1 trading plans [10b5-1 Plans](index=35&type=section&id=10b5-1%20Plans) Discloses details of Rule 10b5-1 trading arrangements adopted by company insiders - During the three months ended June 30, 2025, William W. Yeung, Chief Legal Officer, adopted a Rule 10b5-1 trading arrangement on June 12, 2025[154](index=154&type=chunk) - The adopted plan covers the sale of **100 thousand shares** of the company's common stock and is scheduled to expire on February 5, 2027, or upon the completion of all sales thereunder[155](index=155&type=chunk) [Item 6 Exhibits](index=37&type=section&id=Item%206%20Exhibits) This section lists the exhibits filed or furnished with the report, including certifications and XBRL documents [Exhibit Index](index=37&type=section&id=Exhibit%20Index) Lists all documents filed as exhibits to the report, including certifications and XBRL data - The report includes certifications from the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1)[156](index=156&type=chunk) - Inline XBRL documents for the consolidated financial statements and accompanying notes, as well as for the cover page, are provided (Exhibits 101, 104)[157](index=157&type=chunk) [Signatures](index=37&type=section&id=Signatures) Confirms the official signing of the quarterly report by authorized executive officers - The report was signed on August 6, 2025, by David W. Moon, President and Chief Executive Officer, and Michael S. Mancini, Chief Financial Officer[162](index=162&type=chunk)
Energy Recovery(ERII) - 2025 Q2 - Quarterly Results
2025-08-06 20:10
[Second Quarter 2025 Financial Results Overview](index=1&type=section&id=Item%201.%20Second%20Quarter%202025%20Financial%20Results%20Overview) [Key Financial Highlights (GAAP)](index=1&type=section&id=Item%201.1%20Key%20Financial%20Highlights%20(GAAP)) Energy Recovery reported Q2 2025 GAAP financial results aligned with internal expectations, with revenue up 3% to $28.1 million, primarily due to contract project revenue timing. Gross margin slightly decreased by 60 basis points to 64.0%, but operating expenses significantly reduced by 15.8%, leading to substantial improvement in operating income and a net profit of $2.1 million, a 420% increase from Q2 2024's net loss - Q2 2025 financial results met internal expectations and aligned with the company's previously announced quarterly revenue pacing expectations for 2025[5](index=5&type=chunk) - Revenue growth of **3%** was primarily attributed to the timing of contract project revenue recognition[5](index=5&type=chunk) - Gross margin decreased by **60 basis points** mainly due to product mix and tariff costs[5](index=5&type=chunk) - Operating expenses decreased by **15.8%** primarily due to reduced personnel and consulting costs[5](index=5&type=chunk) 2025 Q2 and H1 GAAP Financial Highlights (in millions of dollars, except percentages and per share data) | Metric | Q2 2025 | Q2 2024 | Y-o-Y Change | H1 2025 | H1 2024 | Y-o-Y Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue ($M) | $28.1M | $27.2M | Growth 3% | $36.1M | $39.3M | Decrease 8% | | Gross Margin | 64.0% | 64.6% | Decrease 60 bps | 62.1% | 62.9% | Decrease 80 bps | | Operating Margin | 5.3% | (7.4%) | NM | (30.7%) | (33.0%) | Growth 230 bps | | Net Income (Loss) ($M) | $2.1M | ($0.6M) | Growth 420% | ($7.8M) | ($8.9M) | Growth 12% | | Net Income (Loss) Per Share | $0.04 | ($0.01) | Growth $0.05 | ($0.14) | ($0.16) | Growth $0.02 | | Net Cash Provided by Operating Activities ($M) | $4.1M | $8.1M | | $14.8M | $14.6M | | [Non-GAAP Financial Highlights](index=2&type=section&id=Item%201.2%20Non-GAAP%20Financial%20Highlights) Energy Recovery's Q2 2025 non-GAAP financial highlights show an adjusted operating margin of 12.2%, a 310 basis point year-over-year decrease. Adjusted net income was $3.7 million, down 25% from Q2 2024, with adjusted diluted EPS at $0.07. Adjusted EBITDA for the quarter was $4.4 million, and free cash flow was $4.0 million 2025 Q2 and H1 Non-GAAP Financial Highlights (in millions of dollars, except percentages and per share data) | Metric | Q2 2025 | Q2 2024 | Y-o-Y Change | H1 2025 | H1 2024 | Y-o-Y Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Adjusted Operating Margin | 12.2% | 15.3% | Decrease 310 bps | (17.4%) | (7.7%) | Decrease 970 bps | | Adjusted Net Income (Loss) ($M) | $3.7M | $5.0M | Decrease 25% | ($3.3M) | $0.5M | NM | | Adjusted Net Income (Loss) Per Share | $0.07 | $0.09 | Decrease $0.02 | ($0.06) | $0.01 | Decrease $0.07 | | Adjusted EBITDA ($M) | $4.4M | $5.2M | | ($4.4M) | ($1.0M) | | | Free Cash Flow ($M) | $4.0M | $7.9M | | $14.5M | $13.5M | | [Corporate Information and Disclosures](index=2&type=section&id=Item%202.%20Corporate%20Information%20and%20Disclosures) [Forward-Looking Statements](index=2&type=section&id=Item%202.1%20Forward-Looking%20Statements) This section contains standard forward-looking statements, cautioning investors that actual results may differ materially from projections due to various risks and uncertainties, including future product demand, customer and third-party partner performance, revenue recognition timing, and other factors detailed in SEC filings. The company undertakes no obligation to update these statements - Forward-looking statements are based on the company's current information and management's beliefs, assumptions, estimates, or projections, and are not guarantees of future events or results[7](index=7&type=chunk) - Potential risks and uncertainties include future demand for the company's products, performance of customers and third-party partners, timing of revenue recognition, and other risk factors for the company's business[7](index=7&type=chunk) - The company undertakes no obligation to update forward-looking statements[7](index=7&type=chunk) [Use of Non-GAAP Financial Measures](index=3&type=section&id=Item%202.2%20Use%20of%20Non-GAAP%20Financial%20Measures) Energy Recovery utilizes non-GAAP financial measures such as adjusted operating margin, adjusted net income (loss), adjusted diluted EPS, adjusted EBITDA, and free cash flow to analyze operational performance, set budgets, and facilitate period-over-period comparisons. These metrics supplement GAAP, aiming to provide a more comprehensive understanding of business trends - The company uses non-GAAP financial measures to analyze operating performance and future prospects, set internal budgets and financial goals, and facilitate period-over-period comparisons[8](index=8&type=chunk) - Non-GAAP financial measures do not reflect a comprehensive accounting system and should be considered as a supplement to, not a substitute for or superior to, GAAP results[8](index=8&type=chunk) [Definitions of Non-GAAP Financial Measures](index=3&type=section&id=Item%202.2.1%20Definitions%20of%20Non-GAAP%20Financial%20Measures) This section defines key non-GAAP financial metrics, including adjusted operating margin, adjusted net income (loss), adjusted EBITDA, and free cash flow, detailing the specific adjustments made to GAAP figures for each calculation - Adjusted operating margin is defined as operating income (loss) excluding stock-based compensation, executive transition costs, and restructuring charges, divided by revenue[11](index=11&type=chunk) - Adjusted net income (loss) is defined as net income (loss) excluding stock-based compensation, executive transition costs, restructuring charges, long-lived asset impairment, and related tax impacts[11](index=11&type=chunk) - Adjusted EBITDA is defined as net income (loss) excluding depreciation and amortization, stock-based compensation, executive transition costs, restructuring charges, long-lived asset impairment, other income (expense) net, and provision (benefit) for income taxes[11](index=11&type=chunk) - Free cash flow is defined as net cash provided by operating activities less capital expenditures[11](index=11&type=chunk) [Disclosure Information](index=4&type=section&id=Item%202.3%20Disclosure%20Information) Energy Recovery fulfills its Regulation FD disclosure obligations through the investor relations section of its website, advising investors to monitor this site in addition to news releases, SEC filings, and public conference calls and webcasts - Energy Recovery uses the investor relations section of its website to comply with its Regulation FD disclosure obligations[12](index=12&type=chunk) - Investors should monitor the company's investor relations website, as well as news releases, SEC filings, and public conference calls and webcasts[12](index=12&type=chunk) [About Energy Recovery](index=4&type=section&id=Item%202.4%20About%20Energy%20Recovery) Energy Recovery is a global leader in energy efficiency technology, specializing in pressure exchanger platforms, designing and manufacturing high-performance solutions that deliver cost savings and energy efficiency across multiple industries, with over 30 years of experience in desalination - Energy Recovery is a global leader in energy efficiency technology, built on its pressure exchanger technology platform[13](index=13&type=chunk) - The company designs and manufactures high-performance solutions that deliver cost savings and energy efficiency across multiple industries[13](index=13&type=chunk) - The company has over **30 years** of experience in the desalination industry, providing solutions that optimize operations and positively impact the environment[13](index=13&type=chunk) [Investor Contact](index=4&type=section&id=Item%202.5%20Investor%20Contact) This section provides the email contact information for investor relations - Investor Relations contact email: ir@energyrecovery.com[14](index=14&type=chunk) [Condensed Consolidated Financial Statements (Unaudited)](index=5&type=section&id=Item%203.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) [Condensed Consolidated Balance Sheets](index=5&type=section&id=Item%203.1%20Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, Energy Recovery's total assets were $212,275 thousand, down from $242,792 thousand on December 31, 2024, primarily due to decreases in cash, cash equivalents, investments, and accounts receivable. Total liabilities also decreased to $27,068 thousand, while stockholders' equity stood at $185,207 thousand Condensed Consolidated Balance Sheets (June 30, 2025 vs. December 31, 2024) (thousand dollars) | Metric | June 30, 2025 (thousand dollars) | December 31, 2024 (thousand dollars) | | :--- | :--- | :--- | | Cash, Cash Equivalents, and Investments | $93,650 | $99,851 | | Accounts Receivable and Contract Assets | $35,548 | $66,842 | | Inventories, Net | $32,660 | $24,906 | | **Total Assets** | **$212,275** | **$242,792** | | Total Liabilities | $27,068 | $32,782 | | Stockholders' Equity | $185,207 | $210,010 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Item%203.2%20Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2025 revenue increased 3% year-over-year to $28,051 thousand, while revenue for the six months ended June 30, 2025, decreased 8% year-over-year to $36,116 thousand. The company achieved a net profit of $2,054 thousand in Q2 2025, a significant improvement from a $642 thousand net loss in Q2 2024. Half-year net loss narrowed to $7,826 thousand from $8,902 thousand in the prior year, with operating expenses decreasing in both periods Condensed Consolidated Statements of Operations (Q2 and H1 2025 vs. Prior Year Periods) (thousand dollars) | Metric | Q2 2025 (thousand dollars) | Q2 2024 (thousand dollars) | H1 2025 (thousand dollars) | H1 2024 (thousand dollars) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $28,051 | $27,199 | $36,116 | $39,289 | | Cost of Sales | $10,097 | $9,633 | $13,704 | $14,588 | | Gross Profit | $17,954 | $17,566 | $22,412 | $24,701 | | Total Operating Expenses | $16,480 | $19,580 | $33,500 | $37,649 | | Operating Income (Loss) | $1,474 | ($2,014) | ($11,088) | ($12,948) | | Net Income (Loss) | $2,054 | ($642) | ($7,826) | ($8,902) | | Basic Net Income (Loss) Per Share | $0.04 | ($0.01) | ($0.14) | ($0.16) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Item%203.3%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash provided by operating activities was $14,824 thousand, a slight increase from $14,570 thousand in the prior year. Investing activities generated a net cash inflow of $33,566 thousand, primarily from net investments in marketable securities, a significant contrast to a $43,830 thousand net outflow in 2024. Financing activities resulted in a $21,026 thousand net cash outflow, mainly due to common stock repurchases. Overall, cash, cash equivalents, and restricted cash increased by $27,424 thousand, reaching $57,181 thousand at period-end Condensed Consolidated Statements of Cash Flows (H1 2025 vs. H1 2024) (thousand dollars) | Metric | H1 2025 (thousand dollars) | H1 2024 (thousand dollars) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $14,824 | $14,570 | | Net Cash Provided by (Used in) Investing Activities | $33,566 | ($43,830) | | Net Cash Provided by (Used in) Financing Activities | ($21,026) | $1,502 | | Net Change in Cash, Cash Equivalents, and Restricted Cash | $27,424 | ($27,782) | | Cash, Cash Equivalents, and Restricted Cash at End of Period | $57,181 | $40,443 | [Supplemental Financial Data (Unaudited)](index=8&type=section&id=Item%204.%20Supplemental%20Financial%20Data%20(Unaudited)) [Channel Revenue](index=8&type=section&id=Item%204.1%20Channel%20Revenue) Total revenue for Q2 2025 increased 3% year-over-year, driven by a 20% growth in OEM revenue and a 10% increase in aftermarket revenue, offsetting a 6% decline in large project revenue. For the six months ended June 30, 2025, total revenue decreased 8%, primarily due to a 25% drop in large project revenue, despite a 20% growth in OEM revenue Channel Revenue (Q2 and H1 2025 vs. Prior Year Periods) (thousand dollars) | Channel | Q2 2025 (thousand dollars) | Q2 2024 (thousand dollars) | Y-o-Y Change (Q2) | H1 2025 (thousand dollars) | H1 2024 (thousand dollars) | Y-o-Y Change (YTD) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Large Projects | $14,802 | $15,815 | Decrease 6% | $14,838 | $19,915 | Decrease 25% | | Original Equipment Manufacturer | $8,357 | $6,945 | Growth 20% | $12,358 | $10,291 | Growth 20% | | Aftermarket | $4,892 | $4,439 | Growth 10% | $8,920 | $9,083 | Decrease 2% | | **Total Revenue** | **$28,051** | **$27,199** | **Growth 3%** | **$36,116** | **$39,289** | **Decrease 8%** | [Segment Activity](index=8&type=section&id=Item%204.2%20Segment%20Activity) In Q2 2025, the Water segment reported $27,839 thousand in revenue, $17,913 thousand in gross profit, and operating income increased to $11,706 thousand from $10,800 thousand in Q2 2024. The Emerging Technologies segment reported $212 thousand in revenue and $41 thousand in gross profit, while corporate expenses significantly impacted overall operating loss. For the six months, the Water segment's operating income was $10,103 thousand, with Emerging Technologies and Corporate segments contributing to the overall operating loss Segment Activity (Q2 2025 vs. Q2 2024) (thousand dollars) | Metric | Water (thousand dollars) | Emerging Water Technologies (thousand dollars) | Corporate (thousand dollars) | Total (thousand dollars) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $27,839 | $212 | $0 | $28,051 | | Gross Profit (Loss) | $17,913 | $41 | $0 | $17,954 | | Operating Income (Loss) | $11,706 | ($3,946) | ($6,286) | $1,474 | Segment Activity (H1 2025 vs. H1 2024) (thousand dollars) | Metric | Water (thousand dollars) | Emerging Technologies (thousand dollars) | Corporate (thousand dollars) | Total (thousand dollars) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $35,903 | $213 | $0 | $36,116 | | Gross Profit (Loss) | $22,416 | ($4) | $0 | $22,412 | | Operating Income (Loss) | $10,103 | ($7,962) | ($13,229) | ($11,088) | [Stock-based Compensation Expense](index=9&type=section&id=Item%204.3%20Stock-based%20Compensation) Total stock-based compensation expense for Q2 2025 was $1,936 thousand, down from $2,817 thousand in Q2 2024. For the six months ended June 30, 2025, the expense was $3,899 thousand, lower than $6,100 thousand in the prior year, with reductions across cost of sales, general and administrative, sales and marketing, and research and development categories Stock-based Compensation Expense (Q2 and H1 2025 vs. Prior Year Periods) (thousand dollars) | Category | Q2 2025 (thousand dollars) | Q2 2024 (thousand dollars) | H1 2025 (thousand dollars) | H1 2024 (thousand dollars) | | :--- | :--- | :--- | :--- | :--- | | Cost of Sales | $148 | $461 | $296 | $804 | | General and Administrative | $728 | $1,011 | $1,598 | $2,418 | | Sales and Marketing | $701 | $912 | $1,380 | $1,922 | | Research and Development | $359 | $433 | $625 | $956 | | **Total Stock-based Compensation Expense** | **$1,936** | **$2,817** | **$3,899** | **$6,100** | [Reconciliation of Non-GAAP Financial Measures](index=10&type=section&id=Item%204.4%20Reconciliation%20of%20Non-GAAP%20Financial%20Measures) This section provides a detailed reconciliation of GAAP to non-GAAP financial measures for both quarterly and half-year periods, illustrating specific adjustments made for stock-based compensation, executive transition costs, restructuring charges, long-lived asset impairment, and their tax impacts to derive adjusted operating margin, adjusted net income (loss), adjusted diluted EPS, adjusted EBITDA, and free cash flow Reconciliation of Non-GAAP Financial Measures (Q2 and H1 2025 vs. Prior Year Periods) (in millions of dollars, except percentages and per share data) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Operating Margin (GAAP) | 5.3% | (7.4%) | (30.7%) | (33.0%) | | Stock-based Compensation Adjustment | 6.9% | 10.4% | 10.8% | 15.5% | | Executive Transition Costs Adjustment | — | 12.3% | — | 9.7% | | Restructuring Charges Adjustment | — | — | 1.5% | — | | Long-lived Asset Impairment Adjustment | — | — | 1.0% | — | | **Adjusted Operating Margin** | **12.2%** | **15.3%** | **(17.4%)** | **(7.7%)** | | Net Income (Loss) (GAAP) ($M) | $2.1M | ($0.6M) | ($7.8M) | ($8.9M) | | Net Income (Loss) Adjustment ($M) | $1.6M | $5.6M | $4.5M | $9.4M | | **Adjusted Net Income (Loss) ($M)** | **$3.7M** | **$5.0M** | **($3.3M)** | **$0.5M** | | Net Income (Loss) Per Share (GAAP) | $0.04 | ($0.01) | ($0.14) | ($0.16) | | Net Income (Loss) Per Share Adjustment | $0.03 | $0.10 | $0.08 | $0.17 | | **Adjusted Net Income (Loss) Per Share** | **$0.07** | **$0.09** | **($0.06)** | **$0.01** | | Adjusted EBITDA ($M) | $4.4M | $5.2M | ($4.4M) | ($1.0M) | | Free Cash Flow ($M) | $4.0M | $7.9M | $14.5M | $13.5M | [Conference Call Details](index=3&type=section&id=Item%205.%20Conference%20Call%20Details) [Conference Call to Discuss Financial Results](index=3&type=section&id=Item%205.1%20Conference%20Call%20to%20Discuss%20Financial%20Results) Energy Recovery announced details for a live conference call and Q&A session to discuss financial results, scheduled for Wednesday, August 6, 2025, at 2:00 PM PT / 5:00 PM ET. Replay information is also provided, accessible until Saturday, September 6, 2025. Investors can access the call and replay via the company's investor relations website - A live conference call and Q&A session is scheduled for Wednesday, August 6, 2025, at **2:00 PM PT / 5:00 PM ET**[10](index=10&type=chunk) - Toll-free dial-in for US/Canada: **+1 (888) 645-4404**; Local/International dial-in: **+1 (862) 298-0702**[10](index=10&type=chunk) - A replay of the conference call will be available approximately three hours after the live call, accessible until Saturday, September 6, 2025, with access code **13755031**[10](index=10&type=chunk)
Energy Recovery (ERII) Earnings Call Presentation
2025-06-24 10:06
Growth Strategy & Vision - Energy Recovery will focus on desalination, wastewater, and CO2 refrigeration markets[14, 183] - The company aims for disciplined and profitable growth, focusing on core strength in pressure exchangers[16, 185] - Energy Recovery projects a revenue CAGR of 12%-15% from 2024 to 2029[30, 172] Financial Targets & Projections - The company anticipates total revenue between $140 million and $150 million for 2024[163] - Energy Recovery forecasts total revenue between $152 million and $164 million for 2025, representing 9%-10% growth over 2024[164] - The company targets total revenue between $166 million and $183 million for 2026, a 10% growth[165] - By 2029, Energy Recovery aims for total revenue between $255 million and $295 million, with a gross margin of 68%+[47, 172] Key Initiatives - Energy Recovery is executing a 30% reduction in salaried staff focused on non-growth related roles, representing $5 million in net annual savings[44, 45] - The company is launching a $50 million open market share repurchase program[178] - Energy Recovery aims to reduce Q400 desalination product costs by 10% annually from 2025 to 2027[46, 74, 79]
Energy Recovery's Tariff Impact Is Minimal Post U.S.-China Agreement
Seeking Alpha· 2025-05-31 05:18
Group 1 - Energy Recovery (NASDAQ: ERII) reported 1Q25 results, indicating operations were within guidelines but expressed significant concerns regarding the China business, which generated $9 million [1] - The company has removed guidance on its Wastewater segment, suggesting potential uncertainty in future performance [1] Group 2 - The investment approach focuses on long-only strategies, evaluating companies from an operational and buy-and-hold perspective, rather than market-driven dynamics [2] - The articles emphasize understanding the long-term earnings power of companies and the competitive dynamics within their industries [2] - Most recommendations are holds, reflecting a cautious stance in a bullish market environment [2]
Energy Recovery (ERII) Reports Q1 Loss, Misses Revenue Estimates
ZACKS· 2025-05-07 22:30
Financial Performance - Energy Recovery (ERII) reported a quarterly loss of $0.13 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.01, and compared to a loss of $0.08 per share a year ago, indicating a significant earnings surprise of -1,200% [1] - The company posted revenues of $8.07 million for the quarter ended March 2025, missing the Zacks Consensus Estimate by 56.31%, and down from $12.09 million in the same quarter last year [2] - Over the last four quarters, Energy Recovery has surpassed consensus EPS estimates three times and topped consensus revenue estimates two times [2] Market Performance - Energy Recovery shares have increased by approximately 1.2% since the beginning of the year, contrasting with the S&P 500's decline of -4.7% [3] - The current consensus EPS estimate for the upcoming quarter is $0.12 on revenues of $31.6 million, while for the current fiscal year, it is $0.80 on revenues of $159.56 million [7] Industry Outlook - The Pollution Control industry, to which Energy Recovery belongs, is currently ranked in the bottom 18% of over 250 Zacks industries, suggesting potential challenges ahead [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact Energy Recovery's stock performance [5]
Energy Recovery(ERII) - 2025 Q1 - Earnings Call Transcript
2025-05-07 22:02
Financial Data and Key Metrics Changes - Q1 performance was in line with expectations regarding revenue and profitability, consistent with a heavily back-end weighted year [4] - A small order of approximately $2 million was shipped but not recognized as revenue in Q1, impacting revenue and gross margin [12] Business Line Data and Key Metrics Changes - The desalination business remains strong and on track for the year, with a robust pipeline and active contracted projects [5][11] - The CO2 business is progressing towards full commercialization, with three OEMs working to integrate the PX into their designs [5][6] Market Data and Key Metrics Changes - The company remains bullish on the desalination market, particularly in the Middle East and North Africa, despite a tougher macro backdrop [11][25] - There is a small presence in India, with plans to double resources, and North America is seen as a significant market opportunity, especially in water reuse [27][28] Company Strategy and Development Direction - The company prefers to establish a 100% owned and operated energy recovery facility, but is open to partnerships for short-term solutions [13] - The focus is on mitigating tariff impacts and rightsizing the cost structure while aiming for margin expansion in 2025 [37] Management Comments on Operating Environment and Future Outlook - Management is confident in desalination and CO2 revenue guidance, with visibility into more than 80% of expected 2025 revenue from contracted projects and high-probability pipeline [37] - The company is actively working on additional options to mitigate tariff impacts [37] Other Important Information - The collaboration with Hill Phoenix is seen as a positive development, with potential for multifaceted customer relationships in both retail and industrial spaces [32] Q&A Session Summary Question: Insights on the desalination market and geographical enthusiasm - Management remains optimistic about the desalination market, particularly in the Middle East and North Africa, with a strong pipeline and active projects [11] Question: Revenue impact from a mega project order not recognized in Q1 - The order was approximately $2 million, which provides context for Q1 revenue and gross margin [12] Question: International footprint strategy regarding manufacturing - The preference is to establish a fully owned facility, but partnerships may be considered to navigate tariffs [13] Question: Opportunities to offset lost revenue from China - Management believes there are opportunities to offset some of the $9 million lost revenue from China through sales in other geographies [14] Question: Progress with Hill Phoenix and future milestones - Key milestones include finalizing a commercial agreement and establishing a test site for the PXG integrated into Hill Phoenix systems [16][17] Question: Long-term advantages of developing an international production presence - Closer proximity to customers in key regions like the Middle East and North Africa could enhance service and support [25][26] Question: Alternative markets for ERI Solutions beyond China - India and North America are identified as markets with significant upside potential, with plans to increase resources in both regions [27][28] Question: Gross margin guidance amidst various factors - Management is comfortable with the gross margin guidance and remains focused on both gross and EBITDA margins [30] Question: Potential upside from collaborations with Hill Phoenix - Hill Phoenix is viewed as a diverse customer with opportunities in both retail and industrial applications, potentially leading to increased activity by the end of 2025 [32]
Energy Recovery(ERII) - 2025 Q1 - Quarterly Report
2025-05-07 20:09
PART I - FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The unaudited condensed consolidated financial statements for the three months ended March 31, 2025, show a significant decrease in revenue and a wider net loss compared to the same period in 2024, with total assets decreasing from year-end 2024 primarily due to reduced accounts receivable and short-term investments. Condensed Consolidated Statements of Operations (Q1 2025 vs Q1 2024) | Metric | Q1 2025 (In thousands) | Q1 2024 (In thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $8,065 | $12,090 | -33.3% | | Gross Profit | $4,458 | $7,135 | -37.5% | | Loss from Operations | $(12,562) | $(10,934) | +14.9% | | Net Loss | $(9,880) | $(8,260) | +19.6% | | Diluted Net Loss per Share | $(0.18) | $(0.14) | +28.6% | Condensed Consolidated Balance Sheets (As of March 31, 2025) | Metric | March 31, 2025 (In thousands) | December 31, 2024 (In thousands) | | :--- | :--- | :--- | | Total Current Assets | $154,592 | $173,656 | | Total Assets | $225,394 | $242,792 | | Total Current Liabilities | $18,434 | $23,428 | | Total Liabilities | $27,281 | $32,782 | | Total Stockholders' Equity | $198,113 | $210,010 | Condensed Consolidated Statements of Cash Flows (Q1 2025 vs Q1 2024) | Metric | Q1 2025 (In thousands) | Q1 2024 (In thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $10,678 | $6,497 | | Net cash provided by (used in) investing activities | $12,674 | $(4,986) | | Net cash (used in) provided by financing activities | $(3,874) | $1,190 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail key accounting policies and financial data, with the Water segment generating nearly all revenue, a restructuring plan substantially completed in Q1 2025, and a new share repurchase program initiated in February 2025. - The Water Technologies segment accounted for **$8.064 million** of the total **$8.065 million** revenue in Q1 2025[37](index=37&type=chunk) - A restructuring plan initiated in Q4 2024 resulted in **$0.5 million** of charges in Q1 2025 and is now substantially complete, with total restructuring expenses recognized at **$3.015 million**[55](index=55&type=chunk) - In February 2025, the Board authorized a new **$30.0 million** share repurchase program, under which the company had repurchased **279,295 shares** for **$4.5 million** as of March 31, 2025[73](index=73&type=chunk)[74](index=74&type=chunk) - In Q1 2025, the company granted **287,298 Performance Restricted Stock Units (PRSUs)** that vest over 3 years based on cumulative revenue and adjusted EBITDA targets, with no expense recognized as performance conditions are not yet considered probable[75](index=75&type=chunk)[76](index=76&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the 33% year-over-year revenue decline in Q1 2025 primarily to a **$4.1 million (99%)** drop in megaproject shipments, leading to a gross margin contraction from 59.0% to 55.3% due to lower sales volume over fixed costs, while operating expenses decreased by **$1.0 million** driven by lower employee costs, partially offset by restructuring charges and consulting fees. [Results of Operations](index=23&type=section&id=Results%20of%20Operations) Total revenue for Q1 2025 was **$8.1 million**, a 33% decrease from **$12.1 million** in Q1 2024, driven by a 99% decline in Megaproject revenue, partially offset by a 20% increase in Original Equipment Manufacturer (OEM) revenue, leading to a **$2.7 million** drop in gross profit and a 370 basis point contraction in gross margin to 55.3%. Revenue by Channel (Q1 2025 vs Q1 2024) | Channel | Q1 2025 Revenue (thousands) | Q1 2024 Revenue (thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Aftermarket | $4,028 | $4,644 | (13%) | | Original equipment manufacturer | $4,001 | $3,346 | 20% | | Megaproject | $36 | $4,100 | (99%) | | **Total revenue** | **$8,065** | **$12,090** | **(33%)** | - The decrease in gross profit and margin was primarily due to lower sales volume spread over fixed manufacturing costs[87](index=87&type=chunk) - Operating expenses in the Emerging Technologies segment decreased by **$2.1 million (34.6%)** due to lower development costs and employee-related expenses[89](index=89&type=chunk) - Corporate operating expenses increased by **$1.7 million (32.9%)** due to higher consulting, restructuring, and recruiting costs, as well as impairment costs from a sublease[90](index=90&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2025, the company's principal liquidity sources included **$49.1 million** in cash and cash equivalents and **$57.6 million** in marketable securities, with a **$50.0 million** revolving credit facility having no outstanding loans but **$15.7 million** utilized for letters of credit. - Principal sources of liquidity as of March 31, 2025, consist of **$49.1 million** in cash and cash equivalents, **$57.6 million** in short- and long-term investments, and **$32.4 million** in net accounts receivable[95](index=95&type=chunk) - The company has a **$50.0 million** credit agreement expiring in December 2026, with no revolving loans outstanding and **$15.7 million** of a **$30.0 million** sub-limit for Letters of Credit utilized as of Q1 2025[96](index=96&type=chunk) - Cash flow from investing activities provided **$12.7 million**, a significant shift from a **$5.0 million** use of cash in the prior year, driven by lower purchases and higher maturities of marketable securities[99](index=99&type=chunk)[102](index=102&type=chunk) - Cash flow from financing activities was a use of **$3.9 million**, compared to a source of **$1.2 million** in the prior year, mainly due to **$4.5 million** spent on common stock repurchases[100](index=100&type=chunk)[103](index=103&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are foreign currency exchange rates and interest rates, with foreign currency risk arising from expenses denominated in various foreign currencies, though revenue contracts are in USD, and interest rate risk affecting its **$63.1 million** investment portfolio, which is mitigated by a weighted average maturity of approximately nine months. - Revenue contracts are denominated in USD, but the company incurs expenses in foreign currencies, creating exposure to fluctuations in the British pound, Saudi riyal, Emirati dirham, European euro, Chinese yuan, Indian rupee, and Canadian dollar[108](index=108&type=chunk)[110](index=110&type=chunk) - The investment portfolio of **$63.1 million** is subject to interest rate risk, where a hypothetical 1% increase in interest rates would cause a fair value decrease of less than **$0.3 million** as of March 31, 2025[114](index=114&type=chunk) [Item 4. Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded that they were effective as of March 31, 2025, with no material changes in internal control over financial reporting during the quarter. - Based on an evaluation, the President and CEO and the CFO concluded that as of March 31, 2025, the company's disclosure controls and procedures were effective[116](index=116&type=chunk) - No material changes to internal control over financial reporting occurred during the first quarter of 2025[117](index=117&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=31&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any legal proceedings that it believes are likely to have a material adverse effect on its financial condition or operating results. - As of the report date, the company is not involved in any legal proceedings expected to have a material adverse effect on its business[119](index=119&type=chunk) [Item 1A. Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to risk factors from the 2024 Annual Report, except for an updated risk concerning U.S. trade policy, highlighting that changes in U.S. policy, particularly regarding tariffs and trade relations with China, could increase costs or reduce global access to its products, potentially having a material adverse impact on the business. - A specific risk factor has been updated to address the potential material adverse impact of changes in U.S. trade policy, including tariffs and trade relations, particularly with China[120](index=120&type=chunk)[121](index=121&type=chunk)[123](index=123&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) None reported for the period. - The company reported no unregistered sales of equity securities during the period[124](index=124&type=chunk) [Item 5. Other Information](index=32&type=section&id=Item%205.%20Other%20Information) During the first quarter of 2025, no director or officer adopted or terminated a Rule 10b5-1 trading arrangement, and on January 23, 2025, the Compensation Committee adopted a new form of Performance Restricted Stock Unit (PRSU) award agreement under the 2020 Equity Incentive Plan. - No directors or officers adopted or terminated a Rule 10b5-1 trading plan in Q1 2025[126](index=126&type=chunk) - On January 23, 2025, the Compensation Committee adopted a new form of PRSU award agreement to define performance metrics and periods[127](index=127&type=chunk) [Item 6. Exhibits](index=33&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the report, including employment agreements and officer certifications.
Energy Recovery(ERII) - 2025 Q1 - Quarterly Results
2025-05-07 20:07
Energy Recovery First Quarter 2025 Financial Results [Financial Highlights](index=1&type=section&id=First%20Quarter%20Highlights) Q1 2025 results showed a 33% revenue decrease to $8.1 million and a $9.9 million net loss, with strong cash Q1 2025 vs. Q1 2024 Financial Highlights | | 2025 | 2024 | 2025 vs. 2024 | | :--- | :--- | :--- | :--- | | **Revenue** | $8.1M | $12.1M | down 33% | | **Gross margin** | 55.3% | 59.0% | down 370 bps | | **Operating margin** | (155.8%) | (90.4%) | NM | | **Net loss** | ($9.9M) | ($8.3M) | down 20% | | **Net loss per share** | ($0.18) | ($0.14) | down $0.04 | | **Cash provided by operations** | $10.7M | $6.5M | up 65% | - The **$4.0 million** decrease in revenue compared to Q1 2024 was attributed to the timing of revenue recognition from contracted projects[5](index=5&type=chunk) - Operating expenses decreased by **5.8%** to **$17.0 million**, mainly due to lower employee costs, partially offset by **$0.5 million** in restructuring charges and **$0.4 million** in impairment costs[5](index=5&type=chunk) - The company maintained a solid liquidity position with **$106.7 million** in cash, cash equivalents, and short- and long-term investments[5](index=5&type=chunk) [Consolidated Financial Statements](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) Q1 2025 consolidated financials show total assets decreased, net loss widened to $9.9 million, and operating cash flow improved [Condensed Consolidated Balance Sheets](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) Total assets decreased to $225.4 million by Q1 2025 due to lower receivables, while cash and investments increased Balance Sheet Summary (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Cash, cash equivalents and investments** | $106,730 | $99,851 | | **Accounts receivable and contract assets** | $34,787 | $66,842 | | **Inventories, net** | $32,410 | $24,906 | | **Total Assets** | $225,394 | $242,792 | | **Total Liabilities** | $27,281 | $32,782 | | **Total Stockholders' Equity** | $198,113 | $210,010 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) Q1 2025 revenue decreased 33% to $8.1 million, widening net loss to $9.9 million despite lower expenses Statement of Operations Summary (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Revenue** | $8,065 | $12,090 | | **Gross Profit** | $4,458 | $7,135 | | **Total Operating Expenses** | $17,020 | $18,069 | | **Loss from Operations** | ($12,562) | ($10,934) | | **Net Loss** | ($9,880) | ($8,260) | | **Net Loss Per Share (Basic & Diluted)** | ($0.18) | ($0.14) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Q1 2025 operating cash flow increased to $10.7 million, with overall cash and equivalents increasing by $19.5 million Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $10,678 | $6,497 | | **Net cash provided by (used in) investing activities** | $12,674 | ($4,986) | | **Net cash (used in) provided by financing activities** | ($3,874) | $1,190 | | **Net change in cash, cash equivalents and restricted cash** | $19,511 | $2,682 | [Supplemental Financial Information](index=8&type=section&id=SUPPLEMENTAL%20FINANCIAL%20INFORMATION) Supplemental data details the 33% revenue decline, segment performance shifts, and a significant decrease in stock-based compensation [Channel Revenue](index=8&type=section&id=Channel%20Revenue) Channel revenue breakdown shows a 99% decrease in Megaproject revenue, offset by a 20% increase in OEM revenue Channel Revenue (in thousands) | Channel | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | **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](index=8&type=section&id=Segment%20Activity) The Water segment recorded an operating loss of $1.6 million, while Emerging Technologies narrowed its operating loss Segment Operating Income (Loss) (in thousands) | Segment | Q1 2025 Revenue | Q1 2025 Operating (Loss) | Q1 2024 Revenue | Q1 2024 Operating Income (Loss) | | :--- | :--- | :--- | :--- | :--- | | **Water** | $8,064 | ($1,603) | $12,089 | $368 | | **Emerging Technologies** | $1 | ($4,016) | $1 | ($6,076) | [Stock-based Compensation](index=8&type=section&id=Stock-based%20Compensation) Total stock-based compensation expense decreased by 40% to $2.0 million in Q1 2025 across all categories Stock-based Compensation Expense (in thousands) | Expense Category | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Cost of revenue** | $148 | $343 | | **General and administrative** | $870 | $1,407 | | **Sales and marketing** | $679 | $1,010 | | **Research and development** | $266 | $523 | | **Total** | $1,963 | $3,283 | [Non-GAAP Financial Measures and Reconciliation](index=2&type=section&id=RECONCILIATION%20OF%20NON-GAAP%20FINANCIAL%20MEASURES) Non-GAAP metrics show Q1 2025 adjusted net loss widened to $7.0 million, adjusted EBITDA loss to $8.7 million, but free cash flow improved Q1 2025 vs. Q1 2024 Non-GAAP Highlights | | 2025 | 2024 | 2025 vs. 2024 | | :--- | :--- | :--- | :--- | | **Adjusted operating margin** | (120.4%) | (59.4%) | NM | | **Adjusted net loss** | ($7.0M) | ($4.6M) | down 52% | | **Adjusted net loss per share** | ($0.13) | ($0.08) | down $0.05 | | **Adjusted EBITDA** | ($8.7M) | ($6.2M) | down 40% | | **Free cash flow** | $10.5M | $5.7M | up 84% | - Non-GAAP adjustments to net loss in Q1 2025 totaled **$2.9 million** and included stock-based compensation (**$2.0M**), restructuring charges (**$0.5M**), and impairment of long-lived assets (**$0.3M**)[25](index=25&type=chunk) - The company defines its non-GAAP measures to exclude items such as stock-based compensation, executive transition costs, restructuring charges, and impairment of long-lived assets to facilitate period-to-period comparisons of its core business[8](index=8&type=chunk)[11](index=11&type=chunk) [Other Information](index=2&type=section&id=Other%20Information) This section covers forward-looking statements, a May 7, 2025 conference call, and Energy Recovery's leadership in energy efficiency technology - A conference call and Q&A session to discuss the financial results is scheduled for **May 7, 2025**, at **2:00 PM PT / 5:00 PM ET**[10](index=10&type=chunk) - The press release contains forward-looking statements based on currently available information and management's beliefs, which are not guarantees of future performance and are subject to risks[7](index=7&type=chunk) - Energy Recovery is a global leader in energy efficiency technology, specializing in high-performance solutions built on its pressure exchanger technology platform, with a strong foundation in the desalination industry[13](index=13&type=chunk)