ERII Energy Recovery Inc

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

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) 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.

 

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