Energy Recovery(ERII) - 2025 Q1 - Quarterly Results

Energy Recovery First Quarter 2025 Financial Results Financial Highlights 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] - 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] - The company maintained a solid liquidity position with $106.7 million in cash, cash equivalents, and short- and long-term investments[5] Consolidated Financial Statements Q1 2025 consolidated financials show total assets decreased, net loss widened to $9.9 million, and operating cash flow improved Condensed Consolidated Balance Sheets 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 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 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 Supplemental data details the 33% revenue decline, segment performance shifts, and a significant decrease in stock-based compensation Channel Revenue 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 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 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 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] - 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][11] Other Information 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] - 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] - 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]