Earnings release
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November 4, 2026 Energy Recovery Reports its Third 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 third quarter and nine months ended September 30, 2026. Management has released a letter to shareholders reviewing business and financial updates from the third 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 ). Third Quarter Highlights Revenue of $11.2 million, a decrease of $20.8 million, as compared to Q3’2025. Gross margin of 37.5%, as compared to gross margin of 64.2% in Q3’2025 primarily due to lower volume as well as product mix and indirect manufacturing costs, partially offset by channel mix. Operating expenses of $14.0 million, a decrease of 17.2%, as compared to Q3’2025, primarily due to lower employee compensation costs, including stock-based compensation expense, and lower consulting costs. Loss from operations of $9.8 million, declined $13.5 million as compared to income from operations of $3.7 million during Q3’2025, due primarily to lower revenue due to the war in Iran. Net loss of $6.3 million and adjusted EBITDA (1) loss of $7.8 million. Cash and investments of $85.6 million, which includes cash, cash equivalents, and short- and long-term investments. Financial Highlights Quarter to Date Year to Date Q3’2026 Q3’2025 vs. Q3’2025 2026 2025 2026 vs. 2025 (In millions, except net income (loss) per share, percentages and basis points) Revenue $11.2 $32.0 down 65% $32.9 $68.1 down 52% Gross margin 37.5% 64.2% down 2670 bps 48.2% 63.1% down 1490 bps Operating margin (87.5%) 11.4% NM (92.8%) (10.9%) NM Net income (loss) ($6.3) $3.9 down 263% ($21.8) ($4.0) down 451% Diluted earnings (loss) per share ($0.12) $0.07 down $0.19 ($0.42) ($0.07) down $0.35 Effective tax rate 23.1% 13.0% Cash provided by (used for) operations ($9.8) ($3.1) $28.1 $11.7 Non-GAAP Financial Highlights (1)
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Quarter to Date Year to Date Q3’2026 Q3’2025 vs. Q3’2025 2026 2025 2026 vs. 2025 (In millions, except adjusted net income (loss) per share, percentages and basis points) Adjusted operating margin (78.7%) 18.3% down 9700 bps (62.4%) (0.6%) NM Adjusted net income (loss) ($5.0) $6.3 down 179% ($12.2) $3.0 NM Adjusted earnings (loss) per share ($0.10) $0.12 down $0.22 ($0.24) $0.06 down $0.30 Adjusted EBITDA ($7.8) $6.8 ($17.5) $2.4 Free cash flow ($10.1) ($3.5) $25.9 $11.0 (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.
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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 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 (used in) operating activities less capital expenditures. Conference Call to Discuss Financial Results LIVE CONFERENCE Q&A CALL: Wednesday, November 4, 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: Friday, December 4, 2026 US / Canada Toll-Free: +1 (877) 660-6853 Local / International Toll: +1 (201) 612-7415 Access code: 13763225 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.
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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) September 30, 2026 December 31, 2025 (In thousands) ASSETS Cash, cash equivalents and investments $ 85,605 $ 83,283 Accounts receivable and contract assets 10,657 78,286 Inventories, net 44,050 24,260 Prepaid expenses and other assets 5,879 3,416 Property, equipment and operating leases 18,879 20,635 Goodwill 11,128 12,790 Deferred tax assets and other assets 15,235 8,844 TOTAL ASSETS $ 191,433 $ 231,514 LIABILITIES AND STOCKHOLDERS’ EQUITY Liabilities Accounts payable, accrued expenses, and other liabilities, current $ 16,169 $ 13,784 Contract liabilities and other liabilities, non-current 2,014 2,109 Lease liabilities 8,493 9,429 Total liabilities 26,676 25,322 Stockholders’ equity 164,757 206,192 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 191,433 $ 231,514
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ENERGY RECOVERY, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2026 2025 2026 2025 (In thousands, except per share data) Revenue $ 11,196 $ 32,000 $ 32,898 $ 68,116 Cost of revenue 6,999 11,442 15,410 25,146 Restructuring - inventory reserve — — 1,632 — Gross profit 4,197 20,558 15,856 42,970 Operating expenses General and administrative 6,712 7,514 19,968 23,757 Sales and marketing 4,165 5,714 13,620 15,980 Research and development 3,115 3,668 8,753 10,120 Restructuring charges — — 2,391 539 Impairment of goodwill — — 1,662 — Total operating expenses 13,992 16,896 46,394 50,396 Income (loss) from operations (9,795 ) 3,662 (30,538 ) (7,426 ) Other income, net 596 892 2,231 2,885 Income (loss) before income taxes (9,199 ) 4,554 (28,307 ) (4,541 ) Provision for (benefit from) income taxes (2,869 ) 680 (6,528 ) (589 ) Net income (loss) $ (6,330 ) $ 3,874 $ (21,779 ) $ (3,952 ) Net income (loss) per share Basic $ (0.12 ) $ 0.07 $ (0.42 ) $ (0.07 ) Diluted $ (0.12 ) $ 0.07 $ (0.42 ) $ (0.07 ) Number of shares used in per share calculations Basic 51,033 53,162 51,714 54,101 Diluted 51,033 53,466 51,714 54,101
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ENERGY RECOVERY, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30, 2026 2025 (In thousands) Cash flows from operating activities: Net loss $ (21,779 ) $ (3,952 ) Non-cash adjustments 4,923 8,747 Net cash provided by operating assets and liabilities 44,952 6,898 Net cash provided by operating activities 28,096 11,693 Cash flows from investing activities: Net investment in marketable securities (7,696 ) 37,670 Capital expenditures (2,148 ) (668 ) Proceeds from sales of fixed assets 13 10 Net cash (used in) provided by investing activities (9,831 ) 37,012 Cash flows from financing activities: Net proceeds from issuance of common stock 132 1,931 Tax payment for employee shares withheld (725 ) (567 ) Repurchase of common stock and net excise tax activity (23,246 ) (32,781 ) Net cash used in financing activities (23,839 ) (31,417 ) Effect of exchange rate differences (20 ) 58 Net change in cash, cash equivalents and restricted cash $ (5,594 ) $ 17,346 Cash and cash equivalents, end of period $ 42,482 $ 47,103 ENERGY RECOVERY, INC. SUPPLEMENTAL FINANCIAL INFORMATION ( Unaudited) Channel Revenue Three Months Ended September 30, Nine Months Ended September 30, 2026 2025 vs. 2025 2026 2025 vs. 2025 (In thousands, except percentages) Original equipment manufacturer $ 6,222 $ 8,962 down 31% $ 17,988 $ 21,320 down 16% Aftermarket 4,040 4,638 down 13% 10,906 13,558 down 20% Megaproject 934 18,400 down 95% 4,004 33,238 down 88% Total revenue $ 11,196 $ 32,000 down 65% $ 32,898 $ 68,116 down 52%
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Segment Activity Three Months Ended September 30, 2026 2025 Desalination Wastewater Corporate and Other Total Desalination Wastewater Corporate and Other Total (In thousands) Revenue $ 10,693 $ 476 $ 27 $ 11,196 $ 29,110 $ 2,818 $ 72 $ 32,000 Cost of revenue 6,625 321 53 6,999 10,119 1,204 119 11,442 Gross profit (loss) 4,068 155 (26 ) 4,197 18,991 1,614 (47 ) 20,558 Operating expenses General and administrative 1,621 208 4,883 6,712 719 699 6,096 7,514 Sales and marketing 2,678 1,051 436 4,165 2,539 1,165 2,010 5,714 Research and development 1,391 284 1,440 3,115 1,659 161 1,848 3,668 Restructuring charges — — — — — — — — Total operating expenses 5,690 1,543 6,759 13,992 4,917 2,025 9,954 16,896 Operating income (loss) $ (1,622 ) $ (1,388 ) $ (6,785 ) (9,795 ) $ 14,074 $ (411 ) $ (10,001 ) 3,662 Other income, net 596 892 Income (loss) before income taxes $ (9,199 ) $ 4,554 ENERGY RECOVERY, INC. SUPPLEMENTAL FINANCIAL INFORMATION (Unaudited) Segment Activity Nine Months Ended September 30, 2026 2025 Desalination Wastewater Corporate and Other Total Desalination Wastewater Corporate and Other Total (In thousands) Revenue $ 31,083 $ 1,590 $ 225 $ 32,898 $ 62,369 $ 5,462 $ 285 $ 68,116 Cost of revenue 14,348 949 113 15,410 22,760 2,050 336 25,146 Restructuring - inventory reserve — — 1,632 1,632 — — — — Gross profit (loss) 16,735 641 (1,520 ) 15,856 39,609 3,412 (51 ) 42,970 Operating expenses General and administrative 3,402 2,061 14,505 19,968 2,352 1,962 19,443 23,757 Sales and marketing 7,616 3,423 2,581 13,620 6,830 3,299 5,851 15,980 Research and development 5,398 682 2,673 8,753 3,878 724 5,518 10,120 Restructuring charges 335 18 2,038 2,391 107 103 329 539 Impairment of goodwill — — 1,662 1,662 — — — — Total operating expenses 16,751 6,184 23,459 46,394 13,167 6,088 31,141 50,396 Operating income (loss) $ (16 ) $ (5,543 ) $ (24,979 ) (30,538 ) $ 26,442 $ (2,676 ) $ (31,192 ) (7,426 ) Other income, net 2,231 2,885 Loss before income taxes $ (28,307 ) $ (4,541 )
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Stock-based Compensation Three Months Ended September 30, Nine Months Ended September 30, 2026 2025 2026 2025 (In thousands) Stock-based compensation expense charged to: Cost of revenue $ 129 $ 156 $ 372 $ 452 General and administrative 149 868 1,547 2,466 Sales and marketing 529 828 1,782 2,208 Research and development 240 355 695 980 Total stock-based compensation expense $ 1,047 $ 2,207 $ 4,396 $ 6,106
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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 Q3'2026 Q3'2025 Q3'2026 Q3'2025 (In millions, except shares, per share and percentages) Operating margin (87.5 )% 11.4 % (92.8 )% (10.9 )% Stock-based compensation 8.8 6.9 13.2 9.0 Restructuring charges — — 7.3 0.8 Impairment of long-lived assets — — — 0.5 Restructuring - inventory reserve — — 5.0 — Impairment of goodwill — — 5.1 — Adjusted operating margin (78.7 )% 18.3 % (62.4 )% (0.6 )% Net income (loss) $ (6.3 ) $ 3.9 $ (21.8 ) $ (4.0 ) Stock-based compensation 1.0 2.2 4.3 6.1 Restructuring charges (2) — — 2.0 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 0.3 0.3 0.4 0.1 Adjusted net income (loss) $ (5.0 ) $ 6.3 $ (12.2 ) $ 3.0 Net income (loss) per share $ (0.12 ) $ 0.07 $ (0.42 ) $ (0.07 ) Adjustments to net income (loss) per share (3) 0.02 0.05 0.18 0.13 Adjusted earnings (loss) per share $ (0.10 ) $ 0.12 $ (0.24 ) $ 0.06 Net income (loss) $ (6.3 ) $ 3.9 $ (21.8 ) $ (4.0 ) Stock-based compensation 1.0 2.2 4.3 6.1 Depreciation and amortization 1.0 0.9 3.0 2.8 Restructuring charges — — 2.4 0.5 Impairment of long-lived assets — — — 0.4 Restructuring - inventory reserve — — 1.6 — Impairment of goodwill — — 1.7 — Other income, net (0.6 ) (0.9 ) (2.2 ) (2.9 ) Provision for (benefit from) income taxes (2.9 ) 0.7 (6.5 ) (0.6 ) Adjusted EBITDA $ (7.8 ) $ 6.8 $ (17.5 ) $ 2.4 Free cash flow Net cash provided by (used in) operating activities $ (9.8 ) $ (3.1 ) $ 28.1 $ 11.7 Capital expenditures (0.3 ) (0.3 ) (2.1 ) (0.7 ) Free cash flow $ (10.1 ) $ (3.5 ) $ 25.9 $ 11.0 (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/20261104849732/en/
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Investor Relations ir@energyrecovery.com Source: Energy Recovery, Inc.