SAN LEANDRO, Calif., February 26, 2025--(BUSINESS WIRE)--Energy Recovery, Inc. (Nasdaq:ERII) ("Energy Recovery" or the "Company") today announced its financial results for the fourth quarter and year ended December 31, 2024.
Fourth Quarter Highlights
Revenue of $67.1 million, an increase of 17% as compared to Q4’2023 and resulting in full-year revenue at the midpoint of guidance.
Gross margin of 70.2%, an increase of 110 bps, as compared to Q4’2023, due primarily to benefits from our manufacturing transformation.
Operating expenses of $21.5 million, an increase of 13.9%, as compared to Q4’2023, due primarily to $2.5 million of restructuring costs related to our announced workforce reduction and executive transition costs.
Income from operations of $25.6 million, an increase of 24.3%, as compared to Q4’2023, mainly due to higher revenue and higher gross margin.
Net income of $23.5 million and adjusted EBITDA(1) of $31.3 million.
Cash and investments of $99.9 million, which includes cash, cash equivalents, and short- and long-term investments.
In conjunction with these financial results, management has released a letter to shareholders reviewing business and financial updates from the fourth quarter and discussing our outlook for 2025. This letter is located under "Financial Info" in the "Investors" section on the Energy Recovery website (https://ir.energyrecovery.com/financial-information).
Financial Highlights
Quarter-to-Date
Year to Date
Q4’2024
Q4’2023
vs. Q4’2023
2024
2023
2024 vs. 2023
(In millions, except net income per share, percentages and basis points)
Revenue
$67.1
$57.2
up 17%
$144.9
$128.3
up 13%
Gross margin
70.2%
69.1%
up 110 bps
66.9%
67.8%
down 90 bps
Operating margin
38.2%
36.0%
up 220 bps
13.6%
14.8%
down 120 bps
Net income
$23.5
$19.8
up 19%
$23.1
$21.5
up 7%
Net income per share
$0.41
$0.34
up $0.07
$0.40
$0.37
up $0.03
Effective tax rate
10.4%
5.3%
Cash provided by operations
$9.0
$13.8
$20.5
$26.1
Non-GAAP Financial Highlights (1)
Quarter-to-Date
Year to Date
Q4’2024
Q4’2023
vs. Q4’2023
2024
2023
2024 vs. 2023
(In millions, except adjusted net income per share, percentages and basis points)
Adjusted operating margin
45.2%
39.9%
up 530 bps
26.2%
21.1%
up 510 bps
Adjusted net income
$28.3
$22.0
up 29%
$40.7
$28.9
up 41%
Adjusted net income per share
$0.50
$0.39
up $0.11
$0.71
$0.51
up $0.20
Adjusted EBITDA
$31.3
$23.9
$42.0
$31.2
Free cash flow
$8.9
$12.4
$19.2
$23.5
_______________
(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.
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, 2023, as well as other reports filed by the Company with the SEC from time to time. Because such forward-looking statements involve risks and uncertainties, the Company’s actual results may differ materially from the predictions in these forward-looking statements. All forward-looking statements are made as of today, and the Company assumes no obligation to update such statements.
Use of Non-GAAP Financial Measures
This press release includes certain non-GAAP financial measures, including adjusted operating margin, adjusted net income, adjusted net income per share, adjusted EBITDA and free cash flow. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows that either exclude or include amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles in the United States of America, or GAAP. These non-GAAP financial measures do not reflect a comprehensive system of accounting, differ from GAAP measures with the same captions, and may differ from non-GAAP financial measures with the same or similar captions that are used by other companies. As such, these non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. The Company uses these non-GAAP financial measures to analyze its operating performance and future prospects, develop internal budgets and financial goals, and to facilitate period-to-period comparisons. The Company believes these non-GAAP financial measures reflect an additional way of viewing aspects of its operations that, when viewed with its GAAP results, provide a more complete understanding of factors and trends affecting its business.
Notes to the Financial Results
Adjusted operating margin is a non-GAAP financial measure that the Company defines as income 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 income is a non-GAAP financial measure that the Company defines as net income which excludes i) stock-based compensation; ii) executive transition costs; iii) restructuring charges; and iv) the applicable tax effect of the excluded items including the stock-based compensation discrete tax item.
Adjusted net income per share is a non-GAAP financial measure that the Company defines as net income, which excludes i) stock-based compensation; ii) executive transition costs; iii) restructuring charges; and iv) the applicable tax effect of the excluded items including the stock-based compensation discrete tax item, divided by basic shares outstanding.
Adjusted EBITDA is a non-GAAP financial measure that the Company defines as net income which excludes i) depreciation and amortization; ii) stock-based compensation; iii) executive transition costs; iv) restructuring charges; v) other income, net, such as interest income and other non-operating income (expense), net; and vi) provision for 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, February 26, 2025, 2:00 PM PT / 5:00 PM ET US / Canada Toll-Free: +1 (866) 682-6100 Local / International Toll: +1 (862) 298-0702
CONFERENCE Q&A CALL REPLAY: Available approximately three hours after conclusion of the live call. Expiration: Tuesday, March 25, 2025 US / Canada Toll-Free: +1 (877) 660-6853 Local / International Toll: +1 (201) 612-7415 Access code: 13749222
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)
December 31,
2024
December 31,
2023
(In thousands)
ASSETS
Cash, cash equivalents and investments
$
99,851
$
122,375
Accounts receivable and contract assets
66,842
47,529
Inventories, net
24,906
26,149
Prepaid expenses and other assets
3,889
3,251
Property, equipment and operating leases
25,119
30,168
Goodwill
12,790
12,790
Deferred tax assets and other assets
9,395
10,712
TOTAL ASSETS
$
242,792
$
252,974
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Accounts payable, accrued expenses, and other liabilities, current
$
20,837
$
18,583
Contract liabilities and other liabilities, non-current
628
1,304
Lease liabilities
11,317
13,279
Total liabilities
32,782
33,166
Stockholders’ equity
210,010
219,808
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
242,792
$
252,974
ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended December 31,
Years Ended December 31,
2024
2023
2024
2023
(In thousands, except per share data)
Revenue
$
67,075
$
57,189
$
144,948
$
128,349
Cost of revenue
19,955
17,690
48,015
41,270
Gross profit
47,120
39,499
96,933
87,079
Operating expenses
General and administrative
8,303
7,160
33,074
28,864
Sales and marketing
6,754
6,767
25,423
22,164
Research and development
3,972
4,958
16,236
17,001
Restructuring charges
2,476
—
2,476
—
Total operating expenses
21,505
18,885
77,209
68,029
Income from operations
25,615
20,614
19,724
19,050
Other income, net
1,240
1,298
6,011
3,655
Income before income taxes
26,855
21,912
25,735
22,705
Provision for income taxes
3,384
2,107
2,685
1,201
Net income
$
23,471
$
19,805
$
23,050
$
21,504
Net income per share
Basic
$
0.41
$
0.35
$
0.40
$
0.38
Diluted
$
0.41
$
0.34
$
0.40
$
0.37
Number of shares used in per share calculations
Basic
56,629
56,735
57,213
56,444
Diluted
57,236
57,671
57,822
57,740
ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Years Ended December 31,
2024
2023
(In thousands)
Cash flows from operating activities:
Net income
$
23,050
$
21,504
Non-cash adjustments
16,214
13,889
Net cash used in operating assets and liabilities
(18,742
)
(9,339
)
Net cash provided by operating activities
20,522
26,054
Cash flows from investing activities:
Net investment in marketable securities
(14,489
)
(16,634
)
Capital expenditures
(1,298
)
(2,567
)
Proceeds from sales of fixed assets
133
87
Net cash used in investing activities
(15,654
)
(19,114
)
Cash flows from financing activities:
Net proceeds from issuance of common stock
7,100
4,794
Repurchase of common stock
(50,384
)
—
Net cash (used in) provided by financing activities
(43,284
)
4,794
Effect of exchange rate differences
(52
)
33
Net change in cash, cash equivalents and restricted cash
$
(38,468
)
$
11,767
Cash, cash equivalents and restricted cash, end of year
$
29,757
$
68,225
ENERGY RECOVERY, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(Unaudited)
Channel Revenue
Three Months Ended December 31,
Years Ended December 31,
2024
2023
vs. 2023
2024
2023
vs. 2023
(In thousands, except percentages)
Megaproject
$
46,475
$
41,382
up 12%
$
95,399
$
83,665
up 14%
Original equipment manufacturer
16,315
9,150
up 78%
31,525
25,995
up 21%
Aftermarket
4,285
6,657
down 36%
18,024
18,689
down 4%
Total revenue
$
67,075
$
57,189
up 17%
$
144,948
$
128,349
up 13%
Segment Activity
Three Months Ended December 31,
2024
2023
Water
Emerging
Technologies
Corporate
Total
Water
Emerging
Technologies
Corporate
Total
(In thousands)
Revenue
$
66,959
$
116
$
—
$
67,075
$
57,103
$
86
$
—
$
57,189
Cost of revenue
19,756
199
—
19,955
17,154
536
—
17,690
Gross profit (loss)
47,203
(83
)
—
47,120
39,949
(450
)
—
39,499
Operating expenses
General and administrative
2,490
913
4,900
8,303
1,914
951
4,295
7,160
Sales and marketing
4,324
1,856
574
6,754
4,124
1,882
761
6,767
Research and development
1,205
2,767
—
3,972
1,130
3,828
—
4,958
Restructuring charges
1,147
832
497
2,476
—
—
—
—
Total operating expenses
9,166
6,368
5,971
21,505
7,168
6,661
5,056
18,885
Operating income (loss)
$
38,037
$
(6,451
)
$
(5,971
)
25,615
$
32,781
$
(7,111
)
$
(5,056
)
20,614
Other income, net
1,240
1,298
Income before income taxes
$
26,855
$
21,912
Years Ended December 31,
2024
2023
Water
Emerging
Technologies
Corporate
Total
Water
Emerging
Technologies
Corporate
Total
(In thousands)
Revenue
$
144,310
$
638
$
—
$
144,948
$
127,725
$
624
$
—
$
128,349
Cost of revenue
47,389
626
—
48,015
40,290
980
—
41,270
Gross profit (loss)
96,921
12
—
96,933
87,435
(356
)
—
87,079
Operating expenses
General and administrative
8,127
3,821
21,126
33,074
7,751
3,927
17,186
28,864
Sales and marketing
15,683
7,340
2,400
25,423
13,691
6,053
2,420
22,164
Research and development
4,523
11,713
—
16,236
4,251
12,750
—
17,001
Restructuring charges
1,147
832
497
2,476
—
—
—
—
Total operating expenses
29,480
23,706
24,023
77,209
25,693
22,730
19,606
68,029
Operating income (loss)
$
67,441
$
(23,694
)
$
(24,023
)
19,724
$
61,742
$
(23,086
)
$
(19,606
)
19,050
Other income, net
6,011
3,655
Income before income taxes
$
25,735
$
22,705
Stock-based Compensation
Three Months Ended December 31,
Years Ended December 31,
2024
2023
2024
2023
(In thousands)
Stock-based compensation expense charged to:
Cost of revenue
$
96
$
164
$
1,076
$
719
General and administrative
641
1,033
4,013
3,661
Sales and marketing
722
649
3,489
2,333
Research and development
351
381
1,744
1,325
Total stock-based compensation expense
$
1,810
$
2,227
$
10,322
$
8,038
ENERGY RECOVERY, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (1)
(Unaudited)
This press release includes certain non-GAAP financial information because we plan and manage our business using such information. The following table reconciles the GAAP financial information to the non-GAAP financial information.
Quarter-to-Date
Year to Date
Q4'2024
Q4'2023
2024
2023
(In millions, except shares, per share and percentages)
Operating margin
38.2
%
36.0
%
13.6
%
14.8
%
Stock-based compensation
2.7
3.9
7.1
6.3
Executive transition costs
0.7
—
3.7
—
Restructuring charges
3.7
—
1.7
—
Adjusted operating margin
45.2
%
39.9
%
26.2
%
21.1
%
Net income
$
23.5
$
19.8
$
23.1
$
21.5
Stock-based compensation
1.8
2.2
10.3
8.0
Executive transition costs (2)
0.4
—
4.8
—
Restructuring charges (2)
2.2
—
2.2
—
Stock-based compensation discrete tax item
0.4
—
0.3
(0.7
)
Adjusted net income
$
28.3
$
22.0
$
40.7
$
28.9
Net income per share
$
0.41
$
0.34
$
0.40
$
0.37
Adjustments to net income per share (3)
0.09
0.05
0.31
0.14
Adjusted net income per share
$
0.50
$
0.39
$
0.71
$
0.51
Net income
$
23.5
$
19.8
$
23.1
$
21.5
Stock-based compensation
1.8
2.2
10.3
8.0
Depreciation and amortization
1.0
1.0
4.0
4.1
Executive transition costs
0.4
—
5.4
—
Restructuring charges
2.5
—
2.5
—
Other income, net
(1.2
)
(1.3
)
(6.0
)
(3.7
)
Provision for income taxes
3.4
2.1
2.7
1.2
Adjusted EBITDA
$
31.3
$
23.9
$
42.0
$
31.2
Free cash flow
Net cash provided by operating activities
$
9.0
$
13.8
$
20.5
$
26.1
Capital expenditures
(0.1
)
(1.4
)
(1.3
)
(2.6
)
Free cash flow
$
8.9
$
12.4
$
19.2
$
23.5
_______________
(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.
