Energy Recovery Reports its First Quarter 2026 Financial Results and Organizational Updates
SAN LEANDRO, Calif.--( BUSINESS WIRE)--Energy Recovery, Inc. (Nasdaq:ERII) (“Energy Recovery”, “Company”, “we”, and “our”) today announced its financial results for the first quarter ended March 31, 2026. Management has released a letter to shareholders reviewing business and financial updates from the first 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).
Key Business Updates
First Quarter Highlights
Financial Highlights
Quarter-to-Date
Q1’2026
Q1’2025
vs. Q1’2025
(In millions, except net loss per share, percentages and basis points)
Revenue
$9.7
$8.1
up 20%
Gross margin
27.8%
55.3%
down 2750 bps
Operating margin
(153.1%)
(155.8%)
up 270 bps
Net loss
($12.3)
($9.9)
down 24%
Diluted loss per share
($0.23)
($0.18)
down $0.05
Effective tax rate
12.7%
14.0%
Cash provided by operations
$21.0
$10.7
Non-GAAP Financial Highlights (1)
Quarter-to-Date
Q1’2026
Q1’2025
vs. Q1’2025
(In millions, except adjusted net loss per share, percentages and basis points)
Adjusted operating margin
(83.1%)
(120.4%)
up 3730 bps
Adjusted net loss
($6.0)
($7.0)
up 15%
Adjusted loss per share
($0.11)
($0.13)
up $0.02
Adjusted EBITDA
($7.1)
($8.7)
Free cash flow
$20.2
$10.5
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, 2025, 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 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
Conference Call to Discuss Financial Results
LIVE CONFERENCE Q&A CALL:
Wednesday, May 6, 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: Saturday, June 6, 2026
US / Canada Toll-Free: +1 (877) 660-6853
Local / International Toll: +1 (201) 612-7415
Access code: 13760218
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)
March 31,
2026
December 31,
2025
(In thousands)
ASSETS
Cash, cash equivalents and investments
$
92,142
$
83,283
Accounts receivable and contract assets
40,642
78,286
Inventories, net
30,886
24,260
Prepaid expenses and other assets
3,383
3,416
Property, equipment and operating leases
19,955
20,635
Goodwill
11,128
12,790
Deferred tax assets and other assets
10,852
8,844
TOTAL ASSETS
$
208,988
$
231,514
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Accounts payable, accrued expenses, and other liabilities, current
$
13,680
$
13,784
Contract liabilities and other liabilities, non-current
2,178
2,109
Lease liabilities
8,845
9,429
Total liabilities
24,703
25,322
Stockholders’ equity
184,285
206,192
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
208,988
$
231,514
ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
2026
2025
(In thousands, except per share data)
Revenue
$
9,706
$
8,065
Cost of revenue
5,372
3,607
Restructuring - inventory reserve
1,632
—
Gross profit
2,702
4,458
Operating expenses
General and administrative
6,455
8,574
Sales and marketing
5,119
4,906
Research and development
2,789
3,001
Restructuring charges
1,536
539
Impairment of goodwill
1,662
—
Total operating expenses
17,561
17,020
Loss from operations
(14,859
)
(12,562
)
Other income, net
833
1,079
Loss before income taxes
(14,026
)
(11,483
)
Benefit from income taxes
(1,775
)
(1,603
)
Net loss
$
(12,251
)
$
(9,880
)
Net loss per share
Basic and diluted
$
(0.23
)
$
(0.18
)
Number of shares used in per share calculations
Basic and diluted
52,660
54,902
ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
2026
2025
(In thousands)
Cash flows from operating activities:
Net loss
$
(12,251
)
$
(9,880
)
Non-cash adjustments
4,269
1,427
Net cash provided by operating assets and liabilities
29,019
19,131
Net cash provided by operating activities
21,037
10,678
Cash flows from investing activities:
Net investment in marketable securities
(6,805
)
12,855
Capital expenditures
(814
)
(191
)
Proceeds from sales of fixed assets
13
10
Net cash (used in) provided by investing activities
(7,606
)
12,674
Cash flows from financing activities:
Net proceeds from issuance of common stock
—
1,092
Tax payment for employee shares withheld
(682
)
(476
)
Repurchase of common stock and payment of excise tax
(10,694
)
(4,490
)
Net cash used in financing activities
(11,376
)
(3,874
)
Effect of exchange rate differences
(15
)
33
Net change in cash, cash equivalents and restricted cash
$
2,040
$
19,511
Cash, cash equivalents and restricted cash, end of period
$
50,116
$
49,268
ENERGY RECOVERY, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(Unaudited)
Channel Revenue
Three Months Ended March 31,
2026
2025
vs. 2025
(In thousands, except percentages)
Original equipment manufacturer
$
6,588
$
4,001
up 65%
Aftermarket
2,754
4,028
down 32%
Megaproject
364
36
up 911%
Total revenue
$
9,706
$
8,065
up 20%
Segment Activity
Three Months Ended March 31,
2026
2025
Desalination
Wastewater
Emerging
Technologies
Corporate
Total
Desalination
Wastewater
Emerging
Technologies
Corporate
Total
(In thousands)
Revenue
$
8,907
$
601
$
198
$
—
$
9,706
$
7,759
$
305
$
1
$
—
$
8,065
Cost of revenue
4,942
370
60
—
5,372
3,382
179
46
—
3,607
Restructuring - inventory reserve
—
—
1,632
—
1,632
—
—
—
—
—
Gross profit (loss)
3,965
231
(1,494
)
—
2,702
4,377
126
(45
)
—
4,458
Operating expenses
General and administrative
756
981
348
4,370
6,455
845
728
755
6,246
8,574
Sales and marketing
2,485
1,163
858
613
5,119
2,108
1,037
1,270
491
4,906
Research and development
1,616
136
1,037
—
2,789
849
329
1,823
—
3,001
Restructuring charges
335
18
1,140
43
1,536
107
103
123
206
539
Impairment of goodwill
—
—
1,662
—
1,662
—
—
—
—
—
Total operating expenses
5,192
2,298
5,045
5,026
17,561
3,909
2,197
3,971
6,943
17,020
Operating income (loss)
$
(1,227
)
$
(2,067
)
$
(6,539
)
$
(5,026
)
(14,859
)
$
468
$
(2,071
)
$
(4,016
)
$
(6,943
)
(12,562
)
Other income, net
833
1,079
Loss before income taxes
$
(14,026
)
$
(11,483
)
Stock-based Compensation
Three Months Ended March 31,
2026
2025
(In thousands)
Stock-based compensation expense charged to:
Cost of revenue
$
98
$
148
General and administrative
969
870
Sales and marketing
671
679
Research and development
225
266
Total stock-based compensation expense
$
1,963
$
1,963
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
Q1'2026
Q1'2025
(In millions, except shares, per share and percentages)
Operating margin
(153.1
)%
(155.8
)%
Stock-based compensation
20.2
24.3
Restructuring charges
15.8
6.7
Impairment of long-lived assets
—
4.4
Restructuring - inventory reserve
16.8
—
Impairment of goodwill
17.1
—
Adjusted operating margin
(83.1
)%
(120.4
)%
Net loss
$
(12.3
)
$
(9.9
)
Stock-based compensation
2.0
2.0
Restructuring charges (2)
1.3
0.5
Impairment of long-lived assets (2)
—
0.3
Restructuring - inventory reserve (2)
1.4
—
Impairment of goodwill (2)
1.4
—
Stock-based compensation discrete tax item
0.1
0.1
Adjusted net loss
$
(6.0
)
$
(7.0
)
Net loss per share
$
(0.23
)
$
(0.18
)
Adjustments to net loss per share (3)
0.12
0.05
Adjusted loss per share
$
(0.11
)
$
(0.13
)
Net loss
$
(12.3
)
$
(9.9
)
Stock-based compensation
2.0
2.0
Depreciation and amortization
1.0
1.0
Restructuring charges
1.5
0.5
Impairment of long-lived assets
—
0.4
Restructuring - inventory reserve
1.6
—
Impairment of goodwill
1.7
—
Other income, net
(0.8
)
(1.1
)
Benefit from income taxes
(1.8
)
(1.6
)
Adjusted EBITDA
$
(7.1
)
$
(8.7
)
Free cash flow
Net cash provided by operating activities
$
21.0
$
10.7
Capital expenditures
(0.8
)
(0.2
)
Free cash flow
$
20.2
$
10.5
Amounts may not total due to rounding.
Amounts presented are net of tax.
Refer to the sections “Use of Non-GAAP Financial Measures” for description of items included in adjustments.