SAN LEANDRO, Calif., May 07, 2025--(BUSINESS WIRE)--Energy Recovery, Inc. (Nasdaq:ERII) ("Energy Recovery" or the "Company") today announced its financial results for the first quarter ended March 31, 2025.
First Quarter Highlights
Q1’25 financial results were in-line with internal expectations and consistent with our communicated expectations for quarterly revenue cadence in 2025.
Revenue of $8.1 million, a decrease of $4.0 million as compared to Q1’2024 due to timing of revenue from contracted projects.
Gross margin of 55.3%, a decrease of 370 bps, as compared to Q1’2024, due primarily to a decrease in revenue spread over fixed costs.
Operating expenses of $17.0 million, a decrease of 5.8%, as compared to Q1’2024, due primarily to a decrease in employee costs, partially offset by $0.5 million of restructuring charges, $0.4 million of impairment costs, and an increase in costs related to our manufacturing transformation.
Loss from operations of $12.6 million, a decrease of 14.9%, as compared to Q1’2024, mainly due to lower revenue and lower gross margin.
Net loss of $9.9 million and adjusted EBITDA(1) loss of $8.7 million.
Cash and investments of $106.7 million, which includes cash, cash equivalents, and short- and long-term investments.
In conjunction with these financial results, management has released a letter to shareholders reviewing business and financial updates from the first quarter and discussing our outlook for 2025. This letter is located under "Financial Info" in the "Investors" section on the Energy Recovery website (https://ir.energyrecovery.com/financial-information).
Financial Highlights
Quarter to Date
2025
2024
2025 vs. 2024
(In millions, except net loss per share, percentages and basis points)
Revenue
$8.1
$12.1
down 33%
Gross margin
55.3%
59.0%
down 370 bps
Operating margin
(155.8%)
(90.4%)
NM
Net loss
($9.9)
($8.3)
down 20%
Net loss per share
($0.18)
($0.14)
down $0.04
Effective tax rate
14.0%
13.5%
Cash provided by operations
$10.7
$6.5
Non-GAAP Financial Highlights (1)
Quarter to Date
2025
2024
2025 vs. 2024
(In millions, except adjusted net loss per share, percentages and basis points)
Adjusted operating margin
(120.4%)
(59.4%)
NM
Adjusted net loss
($7.0)
($4.6)
down 52%
Adjusted net loss per share
($0.13)
($0.08)
down $0.05
Adjusted EBITDA
($8.7)
($6.2)
Free cash flow
$10.5
$5.7
_______
(1)
Refer to the sections "Use of Non-GAAP Financial Measures" and "Reconciliation of Non-GAAP Financial Measures" for definitions of our non-GAAP financial measures and reconciliations of GAAP to non-GAAP amounts, respectively.
NM
Not Meaningful
Forward-Looking Statements
Certain matters discussed in this press release and on the conference call are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on information currently available to the Company and on management’s beliefs, assumptions, estimates, or projections and are not guarantees of future events or results. Potential risks and uncertainties include risks relating to the future demand for the Company’s products, risks relating to performance by our customers and third-party partners, risks relating to the timing of revenue, and any other factors that may have been discussed herein regarding the risks and uncertainties of the Company’s business, and the risks discussed under "Risk Factors" in the Company’s Form 10-K filed with the U.S. Securities and Exchange Commission ("SEC") for the year ended December 31, 2024, as well as other reports filed by the Company with the SEC from time to time. Because such forward-looking statements involve risks and uncertainties, the Company’s actual results may differ materially from the predictions in these forward-looking statements. All forward-looking statements are made as of today, and the Company assumes no obligation to update such statements.
Use of Non-GAAP Financial Measures
This press release includes certain non-GAAP financial measures, including adjusted operating margin, adjusted net loss, adjusted net loss per share, adjusted EBITDA and free cash flow. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows that either exclude or include amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles in the United States of America, or GAAP. These non-GAAP financial measures do not reflect a comprehensive system of accounting, differ from GAAP measures with the same captions, and may differ from non-GAAP financial measures with the same or similar captions that are used by other companies. As such, these non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. The Company uses these non-GAAP financial measures to analyze its operating performance and future prospects, develop internal budgets and financial goals, and to facilitate period-to-period comparisons. The Company believes these non-GAAP financial measures reflect an additional way of viewing aspects of its operations that, when viewed with its GAAP results, provide a more complete understanding of factors and trends affecting its business.
Notes to the Financial Results
Adjusted operating margin is a non-GAAP financial measure that the Company defines as loss from operations which excludes i) stock-based compensation; ii) executive transition costs, such as executive search costs, retention costs, one-time severance costs and one-time corporate growth strategy costs; and iii) restructuring charges, divided by revenues.
Adjusted net loss is a non-GAAP financial measure that the Company defines as net loss which excludes i) stock-based compensation; ii) executive transition costs; iii) restructuring charges; iv) impairment of long-lived assets; and v) the applicable tax effect of the excluded items including the stock-based compensation discrete tax item.
Adjusted net loss per share is a non-GAAP financial measure that the Company defines as net loss, which excludes i) stock-based compensation; ii) executive transition costs; iii) restructuring charges; iv) impairment of long-lived assets; and v) the applicable tax effect of the excluded items including the stock-based compensation discrete tax item, divided by basic shares outstanding.
Adjusted EBITDA is a non-GAAP financial measure that the Company defines as net loss which excludes i) depreciation and amortization; ii) stock-based compensation; iii) executive transition costs; iv) restructuring charges; v) impairment of long-lived assets; vi) other income, net, such as interest income and other non-operating income (expense), net; and vii) benefit from income taxes.
Free cash flow is a non-GAAP financial measure that the Company defines as net cash provided by operating activities less capital expenditures.
Conference Call to Discuss Financial Results
LIVE CONFERENCE Q&A CALL: Wednesday, May 7, 2025, 2:00 PM PT / 5:00 PM ET US / Canada Toll-Free: +1 (888) 645-4404 Local / International Toll: +1 (862) 298-0702
CONFERENCE Q&A CALL REPLAY: Available approximately three hours after conclusion of the live call. Expiration: Saturday, June 7, 2025 US / Canada Toll-Free: +1 (877) 660-6853 Local / International Toll: +1 (201) 612-7415 Access code: 13753398
Energy Recovery uses the investor relations section on its website as means of complying with its disclosure obligations under Regulation FD. Accordingly, investors should monitor Energy Recovery’s investor relations website in addition to following Energy Recovery’s press releases, SEC filings, and public conference calls and webcasts.
About Energy Recovery
Energy Recovery (Nasdaq: ERII) is a trusted global leader in energy efficiency technology. Building on the Company’s pressure exchanger technology platform, the Company designs and manufactures reliable, high-performance solutions that generate cost savings and increase energy efficiency across several industries. With a strong foundation in the desalination industry, the Company has delivered transformative solutions that optimize operations and deliver positive environmental impact to its customers worldwide for more than 30 years. Headquartered in the San Francisco Bay Area, the Company has manufacturing and research and development facilities across California with sales and on-site technical support available globally. To learn more, visit https://energyrecovery.com/.
ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, 2025
December 31, 2024
(In thousands)
ASSETS
Cash, cash equivalents and investments
$
106,730
$
99,851
Accounts receivable and contract assets
34,787
66,842
Inventories, net
32,410
24,906
Prepaid expenses and other assets
3,850
3,889
Property, equipment and operating leases
23,753
25,119
Goodwill
12,790
12,790
Deferred tax assets and other assets
11,074
9,395
TOTAL ASSETS
$
225,394
$
242,792
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Accounts payable, accrued expenses, and other liabilities, current
$
14,676
$
20,837
Contract liabilities and other liabilities, non-current
1,497
628
Lease liabilities
11,108
11,317
Total liabilities
27,281
32,782
Stockholders’ equity
198,113
210,010
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
225,394
$
242,792
ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
2025
2024
(In thousands, except per share data)
Revenue
$
8,065
$
12,090
Cost of revenue
3,607
4,955
Gross profit
4,458
7,135
Operating expenses
General and administrative
8,574
7,566
Sales and marketing
4,906
6,152
Research and development
3,001
4,351
Restructuring charges
539
—
Total operating expenses
17,020
18,069
Loss from operations
(12,562
)
(10,934
)
Other income, net
1,079
1,389
Loss before income taxes
(11,483
)
(9,545
)
Benefit from income taxes
(1,603
)
(1,285
)
Net loss
$
(9,880
)
$
(8,260
)
Net loss per share
Basic
$
(0.18
)
$
(0.14
)
Diluted
$
(0.18
)
$
(0.14
)
Number of shares used in per share calculations
Basic
54,902
57,102
Diluted
54,902
57,102
ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
2025
2024
(In thousands)
Cash flows from operating activities:
Net loss
$
(9,880
)
$
(8,260
)
Non-cash adjustments
1,891
3,300
Net cash provided by operating assets and liabilities
18,667
11,457
Net cash provided by operating activities
10,678
6,497
Cash flows from investing activities:
Net investment in marketable securities
12,855
(4,249
)
Capital expenditures
(191
)
(824
)
Proceeds from sales of fixed assets
10
87
Net cash provided by (used in) investing activities
12,674
(4,986
)
Cash flows from financing activities:
Net proceeds from issuance of common stock
616
1,190
Repurchase of common stock
(4,490
)
—
Net cash (used in) provided by financing activities
(3,874
)
1,190
Effect of exchange rate differences
33
(19
)
Net change in cash, cash equivalents and restricted cash
$
19,511
$
2,682
Cash, cash equivalents and restricted cash, end of period
$
49,268
$
70,907
ENERGY RECOVERY, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(Unaudited)
Channel Revenue
Three Months Ended March 31,
2025
2024
vs. 2024
(In thousands, except percentages)
Aftermarket
$
4,028
$
4,644
down 13%
Original equipment manufacturer
4,001
3,346
up 20%
Megaproject
36
4,100
down 99%
Total revenue
$
8,065
$
12,090
down 33%
Segment Activity
Three Months Ended March 31,
2025
2024
Water
Emerging Technologies
Corporate
Total
Water
Emerging Technologies
Corporate
Total
(In thousands)
Revenue
$
8,064
$
1
$
—
$
8,065
$
12,089
$
1
$
—
$
12,090
Cost of revenue
3,561
46
—
3,607
4,954
1
—
4,955
Gross profit (loss)
4,503
(45
)
—
4,458
7,135
—
—
7,135
Operating expenses
General and administrative
1,573
755
6,246
8,574
1,922
1,018
4,626
7,566
Sales and marketing
3,145
1,270
491
4,906
3,745
1,807
600
6,152
Research and development
1,178
1,823
—
3,001
1,100
3,251
—
4,351
Restructuring charges
210
123
206
539
—
—
—
—
Total operating expenses
6,106
3,971
6,943
17,020
6,767
6,076
5,226
18,069
Operating income (loss)
$
(1,603
)
$
(4,016
)
$
(6,943
)
(12,562
)
$
368
$
(6,076
)
$
(5,226
)
(10,934
)
Other income, net
1,079
1,389
Income before income taxes
$
(11,483
)
$
(9,545
)
Stock-based Compensation
Three Months Ended March 31,
2025
2024
(In thousands)
Stock-based compensation expense charged to:
Cost of revenue
$
148
$
343
General and administrative
870
1,407
Sales and marketing
679
1,010
Research and development
266
523
Total stock-based compensation expense
$
1,963
$
3,283
ENERGY RECOVERY, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (1)
(Unaudited)
This press release includes certain non-GAAP financial information because we plan and manage our business using such information. The following table reconciles the GAAP financial information to the non-GAAP financial information.
Quarter-to-Date
Q1'2025
Q1'2024
(In millions, except shares, per share and percentages)
Operating margin
(155.8
)%
(90.4
)%
Stock-based compensation
24.3
27.2
Executive transition costs
—
3.9
Restructuring charges
6.7
—
Impairment of long-lived assets
4.4
—
Adjusted operating margin
(120.4
)%
(59.4
)%
Net loss
$
(9.9
)
$
(8.3
)
Stock-based compensation
2.0
3.3
Executive transition costs (2)
—
0.4
Restructuring charges (2)
0.5
—
Impairment of long-lived assets (2)
0.3
—
Stock-based compensation discrete tax item
0.1
(0.1
)
Adjusted net loss
$
(7.0
)
$
(4.6
)
Net loss per share
$
(0.18
)
$
(0.14
)
Adjustments to net loss per share (3)
0.05
0.06
Adjusted net loss per share
$
(0.13
)
$
(0.08
)
Net loss
$
(9.9
)
$
(8.3
)
Stock-based compensation
2.0
3.3
Depreciation and amortization
1.0
1.0
Executive transition costs
—
0.5
Restructuring charges
0.5
—
Impairment of long-lived assets
0.4
—
Other income, net
(1.1
)
(1.4
)
Benefit from income taxes
(1.6
)
(1.3
)
Adjusted EBITDA
$
(8.7
)
$
(6.2
)
Free cash flow
Net cash provided by operating activities
$
10.7
$
6.5
Capital expenditures
(0.2
)
(0.8
)
Free cash flow
$
10.5
$
5.7
_______
(1)
Amounts may not total due to rounding.
(2)
Amounts presented are net of tax.
(3)
Refer to the sections "Use of Non-GAAP Financial Measures" for description of items included in adjustments.
