Energy Recovery Reports its Fourth Quarter 2024 Financial Results

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

Non-GAAP Financial Highlights ⁽¹⁾

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/.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250226400707/en/

Investor Relations

[email protected]