Energy Recovery Reports its Fourth Quarter 2025 Financial Results

SAN LEANDRO, Calif.--( 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, 2025.

Fourth Quarter Highlights

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 2026. This letter is located under “News and Events” in the “Investors” section on the Energy Recovery website ( https://ir.energyrecovery.com/news-events/shareholder-letters).

Financial Highlights

Quarter-to-Date

Year to Date

Q4’2025

Q4’2024

vs. Q4’2024

2025

2024

2025 vs. 2024

(In millions, except net income per share, percentages and basis points)

Revenue

$66.9

$67.1

down %

$135.0

$144.9

down 7%

Gross margin

67.2%

70.2%

down 300 bps

65.1%

66.9%

down 180 bps

Operating margin

46.8%

38.2%

up 860 bps

17.7%

13.6%

up 410 bps

Net income

$26.9

$23.5

up 15%

$23.0

$23.1

down 0%

Diluted net income per share

$0.50

$0.41

up $0.09

$0.42

$0.40

up $0.02

Effective tax rate

16.8%

10.4%

Cash provided by operations

$7.1

$9.0

$18.8

$20.5

Non-GAAP Financial Highlights (1)

Quarter-to-Date

Year to Date

Q4’2025

Q4’2024

vs. Q4’2024

2025

2024

2025 vs. 2024

(In millions, except adjusted net income per share, percentages and basis points)

Adjusted operating margin

48.9%

45.2%

up 370 bps

23.9%

26.2%

down 230 bps

Adjusted net income

$28.2

$28.3

down 0%

$31.2

$40.7

down 23%

Adjusted net income per share

$0.53

$0.50

up $0.03

$0.58

$0.71

down $0.13

Adjusted EBITDA

$33.6

$31.3

$36.0

$42.0

Free cash flow

$6.4

$8.9

$17.4

$19.2

(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, 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 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

Restructuring charges are presented net of adjustments

Conference Call to Discuss Financial Results

LIVE CONFERENCE Q&A CALL:

Wednesday, February 25, 2026, 2:00 PM PT / 5:00 PM ET

US / Canada Toll-Free: +1 (877) 709-8150

Local / International Toll: +1 (201) 689-8354

CONFERENCE Q&A CALL REPLAY:

Available approximately three hours after conclusion of the live call.

Expiration: Wednesday, March 25, 2026

US / Canada Toll-Free: +1 (877) 660-6853

Local / International Toll: +1 (201) 612-7415

Access code: 13758280

Investors may also access the live call and the replay over the internet on the “Events” page of the Company’s website located at https://ir.energyrecovery.com/news-events/ir-calendar.

Disclosure Information

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) designs and manufactures world-class energy-saving technology for critical infrastructure that communities rely on every day, driving a more resilient and sustainable future. Grounded in more than 30 years of leadership in the desalination industry, today we use our proprietary pressure exchanger technology to help customers in multiple industries improve their operations and lower their emissions. Headquartered in the San Francisco Bay Area, we operate manufacturing and R&D facilities throughout California, with sales and on-site technical support available globally. For more information, please visit www.energyrecovery.com

ENERGY RECOVERY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

December 31,

2025

December 31,

2024

(In thousands)

ASSETS

Cash, cash equivalents and investments

83,283

99,851

Accounts receivable and contract assets

78,286

66,842

Inventories, net

24,260

24,906

Prepaid expenses and other assets

3,416

3,889

Property, equipment and operating leases

20,635

25,119

Goodwill

12,790

Deferred tax assets and other assets

8,844

9,395

TOTAL ASSETS

231,514

242,792

LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities

Accounts payable, accrued expenses, and other liabilities, current

13,784

20,837

Contract liabilities and other liabilities, non-current

2,109

628

Lease liabilities

9,429

11,317

Total liabilities

25,322

32,782

Stockholders’ equity

206,192

210,010

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

231,514

242,792

ENERGY RECOVERY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended December 31,

Years Ended December 31,

2025

2024

2025

2024

(In thousands, except per share data)

Revenue

66,871

67,075

134,987

144,948

Cost of revenue

21,910

19,955

47,056

48,015

Gross profit

44,961

47,120

87,931

96,933

Operating expenses

General and administrative

6,012

8,303

29,769

33,074

Sales and marketing

4,946

6,754

20,926

25,423

Research and development

2,914

3,972

13,034

16,236

Restructuring charges

(226

)

2,476

313

2,476

Total operating expenses

13,646

21,505

64,042

77,209

Income from operations

31,315

25,615

23,889

19,724

Other income, net

821

1,240

3,706

6,011

Income before income taxes

32,136

26,855

27,595

25,735

Provision for income taxes

5,222

3,384

4,633

2,685

Net income

26,914

23,471

22,962

23,050

Net income per share

Basic

0.51

0.41

0.43

0.40

Diluted

0.50

0.41

0.42

0.40

Number of shares used in per share calculations

Basic

52,915

56,629

53,802

57,213

Diluted

53,360

57,236

54,158

57,822

ENERGY RECOVERY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Years Ended December 31,

2025

2024

(In thousands)

Cash flows from operating activities:

Net income

22,962

23,050

Non-cash adjustments

11,945

16,214

Net cash used in operating assets and liabilities

(16,137

)

(18,742

)

Net cash provided by operating activities

18,770

20,522

Cash flows from investing activities:

Net investment in marketable securities

35,305

(14,489

)

Capital expenditures

(1,330

)

(1,298

)

Proceeds from sales of fixed assets

133

Net cash provided by (used in) investing activities

33,985

(15,654

)

Cash flows from financing activities:

Net proceeds from issuance of common stock

1,796

7,100

Repurchase of common stock and payment of excise tax

(36,330

)

(50,384

)

Net cash used in financing activities

(34,534

)

(43,284

)

Effect of exchange rate differences

(52

)

Net change in cash, cash equivalents and restricted cash

18,319

(38,468

)

Cash, cash equivalents and restricted cash, end of year

48,076

29,757

ENERGY RECOVERY, INC.

SUPPLEMENTAL FINANCIAL INFORMATION

(Unaudited)

Channel Revenue

Three Months Ended December 31,

Years Ended December 31,

2025

2024

vs. 2024

2025

2024

vs. 2024

(In thousands, except percentages)

Megaproject

49,647

46,475

up 7%

82,885

95,399

down 13%

Original equipment manufacturer

10,620

16,315

down 35%

31,940

31,525

up 1%

Aftermarket

6,604

4,285

up 54%

20,162

18,024

up 12%

Total revenue

66,871

67,075

no change

134,987

144,948

down 7%

Segment Activity

Three Months Ended December 31,

2025

2024

Water

Emerging

Technologies

Corporate

Total

Water

Emerging

Technologies

Corporate

Total

(In thousands)

Revenue

66,871

—

66,871

66,959

116

—

67,075

Cost of revenue

22,113

(203

)

—

21,910

19,756

199

—

19,955

Gross profit (loss)

44,758

203

—

44,961

47,203

(83

)

—

47,120

Operating expenses

General and administrative

1,372

355

4,285

6,012

2,490

913

4,900

8,303

Sales and marketing

3,535

1,053

358

4,946

4,324

1,856

574

6,754

Research and development

1,742

1,172

—

2,914

1,205

2,767

—

3,972

Restructuring charges

(105

)

(76

)

(45

)

(226

)

1,147

832

497

2,476

Total operating expenses

6,544

2,504

4,598

13,646

9,166

6,368

5,971

21,505

Operating income (loss)

38,214

(2,301

)

(4,598

)

31,315

38,037

(6,451

)

(5,971

)

25,615

Other income, net

821

1,240

Income before income taxes

32,136

26,855

ENERGY RECOVERY, INC.

SUPPLEMENTAL FINANCIAL INFORMATION

(Unaudited)

Segment Activity

Years Ended December 31,

2025

2024

Water

Emerging

Technologies

Corporate

Total

Water

Emerging

Technologies

Corporate

Total

(In thousands)

Revenue

134,702

285

—

134,987

144,310

638

—

144,948

Cost of revenue

46,923

133

—

47,056

47,389

626

—

48,015

Gross profit

87,779

152

—

87,931

96,921

—

96,933

Operating expenses

General and administrative

5,686

2,350

21,733

29,769

8,127

3,821

21,126

33,074

Sales and marketing

13,664

5,449

1,813

20,926

15,683

7,340

2,400

25,423

Research and development

6,344

6,690

—

13,034

4,523

11,713

—

16,236

Restructuring charges

105

161

313

1,147

832

497

2,476

Total operating expenses

25,799

14,536

23,707

64,042

29,480

23,706

24,023

77,209

Operating income (loss)

61,980

(14,384

)

(23,707

)

23,889

67,441

(23,694

)

(24,023

)

19,724

Other income, net

3,706

6,011

Income before income taxes

27,595

25,735

Stock-based Compensation

Three Months Ended December 31,

Years Ended December 31,

2025

2024

2025

2024

(In thousands)

Stock-based compensation expense charged to:

Cost of revenue

543

1,076

General and administrative

841

641

3,307

4,013

Sales and marketing

651

722

2,859

3,489

Research and development

351

1,010

1,744

Total stock-based compensation expense

1,613

1,810

7,719

10,322

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

Q4'2025

Q4'2024

2025

2024

(In millions, except shares, per share and percentages)

Operating margin

46.8

38.2

17.7

13.6

Stock-based compensation

2.4

2.7

5.7

7.1

Executive transition costs

—

0.7

—

3.7

Restructuring charges

(0.3

)

3.7

0.2

1.7

Impairment of long-lived assets

—

0.3

—

Adjusted operating margin

48.9

45.2

23.9

26.2

Net income

26.9

23.5

23.0

23.1

Stock-based compensation

1.6

1.8

7.7

10.3

Executive transition costs (2)

—

0.4

—

4.8

Restructuring charges (2)

(0.2

)

2.2

0.3

2.2

Impairment of long-lived assets (2)

—

0.3

—

Stock-based compensation discrete tax item

(0.2

)

0.4

(0.1

)

0.3

Adjusted net income

28.2

28.3

31.2

40.7

Net income per share

0.51

0.41

0.43

0.40

Adjustments to net income per share (3)

0.02

0.09

0.15

0.31

Adjusted net income per share

0.53

0.50

0.58

0.71

Net income

26.9

23.5

23.0

23.1

Stock-based compensation

1.6

1.8

7.7

10.3

Depreciation and amortization

0.9

1.0

3.8

4.0

Executive transition costs

—

0.4

—

5.4

Restructuring charges

(0.2

)

2.5

0.3

2.5

Impairment of long-lived assets

—

0.4

—

Other income, net

(0.8

)

(1.2

)

(3.7

)

(6.0

)

Provision for income taxes

5.2

3.4

4.6

2.7

Adjusted EBITDA

33.6

31.3

36.0

42.0

Free cash flow

Net cash provided by operating activities

7.1

9.0

18.8

20.5

Capital expenditures

(0.7

)

(0.1

)

(1.3

)

(1.3

)

Free cash flow

6.4

8.9

17.4

19.2

(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.