Earnings release
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August 5 , 2026 energy recovery® Energy Recovery Reports its Second Quarter 2026 Financial Results SAN LEANDRO , Calif .-- ( BUSINESS WIRE ) -- Energy Recovery , Inc. ( Nasdaq : ERII ) ( " Energy Recovery ” , “ Company ” , “ we ” , and “ our ” ) today announced its financial results for the second quarter and six months ended June 30 , 2026. Management has released a letter to shareholders reviewing business and financial updates from the second 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 ) . Second Quarter Highlights • Revenue of $ 12.0 million , a decrease of $ 16.1 million , as compared to Q2'2025 . • Gross margin of 74.7 % , as compared to gross margin of 64.0 % in Q2'2025 primarily due to indirect manufacturing costs and channel mix , partially offset by lower volume . • Operating expenses of $ 14.8 million , a decrease of 10.0 % , as compared to Q2'2025 , primarily due to lower employee compensation costs , including stock - based compensation expense , and lower consulting costs , partially offset by restructuring charges incurred in Q2'2026 . • Loss from operations of $ 5.9 million , a decrease of $ 7.4 million as compared to income from operations of $ 1.5 million during Q2'2025 , due primarily to lower revenue due to the war in Iran . • Net loss of $ 3.2 million and adjusted EBITDA ( 1 ) loss of $ 2.6 million . • Cash and investments of $ 98.1 million , which includes cash , cash equivalents , and short- and long - term investments . Financial Highlights Q2'2026 Quarter to Date Q2'2025 vs. Q2'2025 2026 Year to Date 2025 2026 vs. 2025 Revenue Gross margin down 57 % up 1070 bps Operating margin Net income ( loss ) ( $ 3.2 ) Diluted earnings ( loss ) per share ( $ 0.06 ) $ 2.1 $ 0.04 NM down 256 % down $ 0.10 down 40 % down 840 bps ( In millions , except net income ( loss ) per share , percentages and basis points ) $ 12.0 $ 28.1 74.7 % 64.0 % ( 49.0 % ) 5.3 % NM down 97 % $ 21.7 $ 36.1 53.7 % 62.1 % ( 95.6 % ) ( 30.7 % ) ( $ 15.4 ) ( $ 7.8 ) ( $ 0.30 ) ( $ 0.14 ) down $ 0.16 Effective tax rate Cash provided by operations $ 16.3 $ 4.1 19.1 % $ 37.3 14.0 % $ 14.8 Non - GAAP Financial Highlights ( 1 ) Quarter to Date Q2'2026 Q2'2025 vs. Q2'2025 2026 Year to Date 2025 2026 vs. 2025 ( In millions , except adjusted net income ( loss ) per share , percentages and basis points ) Adjusted operating margin ( 30.4 % ) 12.2 % down 4260 bps Adjusted net income ( loss ) ( $ 1.4 ) $ 3.7 down 136 % Adjusted earnings ( loss ) per share ( $ 0.03 ) $ 0.07 down $ 0.10 Adjusted EBITDA ( $ 2.6 ) $ 4.4 Free cash flow $ 15.4 $ 4.0 ( 54.0 % ) ( 17.4 % ) ( $ 7.1 ) ( $ 3.3 ) NM down 116 % ( $ 0.14 ) ( $ 0.06 ) down $ 0.08 ( $ 9.7 ) ( $ 4.4 ) $ 35.7 $ 14.5
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---------- (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, 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 income (loss), adjusted earnings (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 income (loss) from operations which excludes i) stock-based compensation; ii) restructuring charges, iii) restructuring - inventory reserve, iv) impairment of long-lived assets, and v) impairment of goodwill, divided by revenues. Adjusted net income (loss) is a non-GAAP financial measure that the Company defines
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as net income (loss) which excludes i) stock-based compensation; ii) restructuring charges; iii) restructuring - inventory reserve, iv) impairment of long-lived assets; v) impairment of goodwill and vi) the applicable tax effect of the excluded items including the stock-based compensation discrete tax item. Adjusted earnings (loss) per share is a non-GAAP financial measure that the Company defines as net income (loss), which excludes i) stock-based compensation; ii) restructuring charges; iii) restructuring - inventory reserve, iv) impairment of long-lived assets; v) impairment of goodwill and vi) 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 (loss) which excludes i) depreciation and amortization; ii) stock-based compensation; iii) restructuring charges; iv) restructuring - inventory reserve, v) impairment of long-lived assets; vi) impairment of goodwill vii) other income, net, such as interest income and other non-operating income (expense), net; and viii) provision for (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, August 5, 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, September 5, 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
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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) June 30, 2026 December 31, 2025 (In thousands) ASSETS Cash, cash equivalents and investments $ 98,074 $ 83,283 Accounts receivable and contract assets 14,237 78,286 Inventories, net 38,242 24,260 Prepaid expenses and other assets 3,888 3,416 Property, equipment and operating leases 19,298 20,635 Goodwill 11,128 12,790 Deferred tax assets and other assets 12,869 8,844 TOTAL ASSETS $ 197,736 $ 231,514 LIABILITIES AND STOCKHOLDERS’ EQUITY Liabilities Accounts payable, accrued expenses, and other liabilities, current $ 14,791 $ 13,784 Contract liabilities and other liabilities, non-current 2,234 2,109 Lease liabilities 8,233 9,429 Total liabilities 25,258 25,322 Stockholders’ equity 172,478 206,192 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 197,736 $ 231,514
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ENERGY RECOVERY, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (In thousands, except per share data) Revenue $ 11,996 $ 28,051 $ 21,702 $ 36,116 Cost of revenue 3,039 10,097 8,411 13,704 Restructuring - inventory reserve — — 1,632 — Gross profit 8,957 17,954 11,659 22,412 Operating expenses General and administrative 6,801 7,669 13,256 16,243 Sales and marketing 4,336 5,360 9,455 10,266 Research and development 2,849 3,451 5,638 6,452 Restructuring charges 855 — 2,391 539 Impairment of goodwill — — 1,662 — Total operating expenses 14,841 16,480 32,402 33,500 Income (loss) from operations (5,884 ) 1,474 (20,743 ) (11,088 ) Other income, net 802 914 1,635 1,993 Income (loss) before income taxes (5,082 ) 2,388 (19,108 ) (9,095 ) Provision for (benefit from) income taxes (1,884 ) 334 (3,659 ) (1,269 ) Net income (loss) $ (3,198 ) $ 2,054 $ (15,449 ) $ (7,826 ) Net income (loss) per share Basic $ (0.06 ) $ 0.04 $ (0.30 ) $ (0.14 ) Diluted $ (0.06 ) $ 0.04 $ (0.30 ) $ (0.14 ) Number of shares used in per share calculations Basic 51,463 54,257 52,058 54,578 Diluted 51,463 54,486 52,058 54,578
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ENERGY RECOVERY, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended June 30, 2026 2025 (In thousands) Cash flows from operating activities: Net loss $ (15,449 ) $ (7,826 ) Non-cash adjustments 4,979 4,706 Net cash provided by operating assets and liabilities 47,813 17,944 Net cash provided by operating activities 37,343 14,824 Cash flows from investing activities: Net investment in marketable securities (1,303 ) 33,882 Capital expenditures (1,689 ) (326 ) Proceeds from sales of fixed assets 13 10 Net cash (used in) provided by investing activities (2,979 ) 33,566 Cash flows from financing activities: Net proceeds from issuance of common stock 132 1,459 Tax payment for employee shares withheld (682 ) (476 ) Repurchase of common stock and net excise tax activity (20,432 ) (22,009 ) Net cash used in financing activities (20,982 ) (21,026 ) Effect of exchange rate differences (20 ) 60 Net change in cash, cash equivalents and restricted cash $ 13,362 $ 27,424 Cash, cash equivalents and restricted cash, end of period $ 61,438 $ 57,181 ENERGY RECOVERY, INC. SUPPLEMENTAL FINANCIAL INFORMATION (Unaudited) Channel Revenue Three Months Ended June 30, Six Months Ended June 30, 2026 2025 vs. 2025 2026 2025 vs. 2025 (In thousands, except percentages) Original equipment manufacturer $ 5,178 $ 8,357 down 38% $ 11,766 $ 12,358 down 5% Aftermarket 4,112 4,892 down 16% 6,866 8,920 down 23% Megaproject 2,706 14,802 down 82% 3,070 14,838 down 79% Total revenue $ 11,996 $ 28,051 down 57% $ 21,702 $ 36,116 down 40%
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Segment Activity Three Months Ended June 30, 2026 2025 Desalination Wastewater Corporate and Other Total Desalination Wastewater Corporate and Other Total (In thousands) Revenue $ 11,483 $ 513 $ — $ 11,996 $ 25,500 $ 2,339 $ 212 $ 28,051 Cost of revenue 2,781 258 — 3,039 9,259 667 171 10,097 Restructuring - inventory reserve — — — — — — — — Gross profit 8,702 255 — 8,957 16,241 1,672 41 17,954 Operating expenses General and administrative 1,025 872 4,904 6,801 788 535 6,346 7,669 Sales and marketing 2,453 1,209 674 4,336 2,183 1,097 2,080 5,360 Research and development 2,391 262 196 2,849 1,370 234 1,847 3,451 Restructuring charges — — 855 855 — — — — Total operating expenses 5,869 2,343 6,629 14,841 4,341 1,866 10,273 16,480 Operating income (loss) $ 2,833 $ (2,088 ) $ (6,629 ) (5,884 ) $ 11,900 $ (194 ) $ (10,232 ) 1,474 Other income, net 802 914 Income (loss) before income taxes $ (5,082 ) $ 2,388 ENERGY RECOVERY, INC. SUPPLEMENTAL FINANCIAL INFORMATION (Unaudited) Segment Activity Six Months Ended June 30, 2026 2025 Desalination Wastewater Corporate and Other Total Desalination Wastewater Corporate and Other Total (In thousands) Revenue $ 20,390 $ 1,114 $ 198 $ 21,702 $ 33,259 $ 2,644 $ 213 $ 36,116 Cost of revenue 7,723 628 60 8,411 12,641 846 217 13,704 Restructuring - inventory reserve — — 1,632 1,632 — — — — Gross profit (loss) 12,667 486 (1,494 ) 11,659 20,618 1,798 (4 ) 22,412 Operating expenses General and administrative 1,781 1,853 9,622 13,256 1,633 1,263 13,347 16,243 Sales and marketing 4,938 2,372 2,145 9,455 4,291 2,134 3,841 10,266 Research and development 4,007 398 1,233 5,638 2,219 563 3,670 6,452 Restructuring charges 335 18 2,038 2,391 107 103 329 539 Impairment of goodwill — — 1,662 1,662 — — — — Total operating expenses 11,061 4,641 16,700 32,402 8,250 4,063 21,187 33,500 Operating income (loss) $ 1,606 $ (4,155 ) $ (18,194 ) (20,743 ) $ 12,368 $ (2,265 ) $ (21,191 ) (11,088 ) Other income, net 1,635 1,993 Income before income taxes $ (19,108 ) $ (9,095 )
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Stock-based Compensation Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (In thousands) Stock-based compensation expense charged to: Cost of revenue $ 145 $ 148 $ 243 $ 296 General and administrative 429 728 1,398 1,598 Sales and marketing 582 701 1,253 1,380 Research and development 230 359 455 625 Total stock-based compensation expense $ 1,386 $ 1,936 $ 3,349 $ 3,899
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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 Q2'2026 Q2'2025 Q2'2026 Q2'2025 (In millions, except shares, per share and percentages) Operating margin (49.0 )% 5.3 % (95.6 )% (30.7 )% Stock-based compensation 11.6 6.9 15.4 10.8 Restructuring charges 7.1 — 11.0 1.5 Impairment of long-lived assets — — — 1.0 Restructuring - inventory reserve — — 7.5 — Impairment of goodwill — — 7.7 — Adjusted operating margin (30.4 )% 12.2 % (54.0 )% (17.4 )% Net income (loss) $ (3.2 ) $ 2.1 $ (15.4 ) $ (7.8 ) Stock-based compensation 1.4 1.9 3.3 3.9 Restructuring charges (2) 0.5 — 2.1 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 ) (0.3 ) 0.1 (0.2 ) Adjusted net income (loss) $ (1.4 ) $ 3.7 $ (7.1 ) $ (3.3 ) Net income (loss) per share $ (0.06 ) $ 0.04 $ (0.30 ) $ (0.14 ) Adjustments to net income (loss) per share (3) 0.03 0.03 0.16 0.08 Adjusted earnings (loss) per share $ (0.03 ) $ 0.07 $ (0.14 ) $ (0.06 ) Net income (loss) $ (3.2 ) $ 2.1 $ (15.4 ) $ (7.8 ) Stock-based compensation 1.4 1.9 3.3 3.9 Depreciation and amortization 1.0 0.9 2.0 1.9 Restructuring charges 0.9 — 2.4 0.5 Impairment of long-lived assets — — — 0.4 Restructuring - inventory reserve — — 1.6 — Impairment of goodwill — — 1.7 — Other income, net (0.8 ) (0.9 ) (1.6 ) (2.0 ) Provision for (benefit from) income taxes (1.9 ) 0.3 (3.7 ) (1.3 ) Adjusted EBITDA $ (2.6 ) $ 4.4 $ (9.7 ) $ (4.4 ) Free cash flow Net cash provided by operating activities $ 16.3 $ 4.1 $ 37.3 $ 14.8 Capital expenditures (0.9 ) (0.1 ) (1.7 ) (0.3 ) Free cash flow $ 15.4 $ 4.0 $ 35.7 $ 14.5 __________ (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. View source version on businesswire.com: https://www.businesswire.com/news/home/20260805275820/en/
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Investor Relations ir@energyrecovery.com Source: Energy Recovery, Inc.