In This Article:
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Revenue: Q1 revenue was in line with expectations.
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Profitability: Profitability consistent with expectations for a back-end weighted year.
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Desalination Business: Remains strong and on track for the year.
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Tariff Impact: Initiatives in place to offset majority of net tariff impact.
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CO2 Business: On track with progress towards full commercialization.
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OEM Integration: Three OEMs integrating PX into rack designs with pilot test sites expected for summer.
Release Date: May 07, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Energy Recovery Inc (NASDAQ:ERII) reported Q1 results in line with expectations regarding revenue and profitability.
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The desalination business remains strong and on track for the year, with a robust pipeline in the Middle East and North Africa.
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The company is making clear progress towards full commercialization of its CO2 business, with three OEMs integrating the PX into their designs.
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Energy Recovery Inc (NASDAQ:ERII) has successfully mitigated most of the tariff impacts and is working on additional options to offset the rest.
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The collaboration with Hillphoenix is progressing well, with potential for multifaceted customer relationships in both retail and industrial spaces.
Negative Points
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Energy Recovery Inc (NASDAQ:ERII) is directly affected by tariffs, which have increased in scope and magnitude.
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A mega project order worth $2 million was shipped but not recognized as revenue in Q1, impacting the quarter's financial results.
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The company faces challenges in offsetting lost revenue from China due to tariffs, with efforts to find alternative markets still in progress.
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There is uncertainty regarding the establishment of international production facilities, with potential quality concerns if manufacturing is moved.
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The wastewater segment faces challenges, with guidance held steady despite potential revenue impacts from the Chinese market.
Q & A Highlights
Q: Could you provide some insights into the desalination market, particularly regarding geographies of interest and any macroeconomic impacts? A: David Moon, President and CEO, stated that despite a potentially tougher macro backdrop, the desalination market remains strong. The pipeline and quoting activities are robust, with a particular focus on the Middle East and North Africa.
Q: Regarding the mega project order shipped but not recognized as revenue in Q1, what was its impact on revenue and gross margin? A: Michael Mancini, CFO, clarified that the order was relatively small, amounting to about $2 million.