Energy Recovery, Inc.: Q4 FY2025 earnings call

What management said about Q4 FY2025, from the documents filed with the SEC on 25 February 2026: press release. The quarter’s numbers.

Key takeaways

Q4 revenue flat on project timing: Q4 revenue was $66.9 million, down $0.2 million from Q4 2024. The company attributed the change to timing of revenue from contracted projects. Source
Operating income rose on lower costs: Q4 income from operations was $31.3 million, up 22.3%. The company attributed the increase mainly to lower operating expenses. Source
Megaproject revenue rose in Q4, fell for year: Megaproject revenue was $49.6 million in Q4, up 7%, and $82.9 million for the full year, down 13%. Source
Q4 gross margin fell on mix and tariffs: Q4 gross margin was 67.2%, down 300 basis points from 70.2%. The company attributed the decline primarily to product mix and tariff costs. Source
Operating expenses fell 36.5% in Q4: Operating expenses were $13.6 million, down 36.5%, mainly on lower employee, consulting and restructuring costs. Source
Cash and investments were $83.3 million: Cash, cash equivalents and investments were $83.3 million at December 31, 2025, against $99.9 million at December 31, 2024. Source
Full-year buybacks were $36.3 million: Repurchases of common stock and excise tax payments totaled $36.3 million for 2025, against $50.4 million for 2024. Source

“Income from operations of $31.3 million, an increase of 22.3%, as compared to Q4’2024, mainly due to lower operating expenses.”
Energy Recovery, Inc., press release

Quarter and full-year results

Q4 revenue flat on project timing: Q4 revenue was $66.9 million, down $0.2 million from Q4 2024. The company attributed the change to timing of revenue from contracted projects. Source
Full-year revenue fell 7%: Full-year 2025 revenue was $135.0 million against $144.9 million in 2024, down 7%. Source
Operating income rose on lower costs: Q4 income from operations was $31.3 million, up 22.3%. The company attributed the increase mainly to lower operating expenses. Source
Operating margin rose in both periods: Operating margin was 46.8% in Q4 against 38.2%, and 17.7% for the full year against 13.6%. Source
Net income and diluted EPS higher in Q4: Q4 net income was $26.9 million against $23.5 million, and diluted EPS was $0.50 against $0.41. Full-year net income was $23.0 million, essentially unchanged, with diluted EPS of $0.42 against $0.40. Source

Channel revenue by type

Megaproject revenue rose in Q4, fell for year: Megaproject revenue was $49.6 million in Q4, up 7%, and $82.9 million for the full year, down 13%. Source
Original equipment manufacturer sales fell in Q4: OEM revenue was $10.6 million in Q4, down 35%, and $31.9 million for the full year, up 1%. Source
Aftermarket revenue grew in both periods: Aftermarket revenue was $6.6 million in Q4, up 54%, and $20.2 million for the full year, up 12%. Source

“Gross margin of 67.2%, a decrease of 300 bps, as compared to Q4’2024, due primarily to costs related to product mix and tariffs.”
Energy Recovery, Inc., press release

Segment operating results

Water operating income level in Q4: Water operating income was $38.2 million in Q4 against $38.0 million. Emerging Technologies operating loss was $2.3 million against $6.5 million. Corporate costs were $4.6 million against $6.0 million. Source
Full-year Water operating income declined: Water operating income was $62.0 million for 2025 against $67.4 million in 2024. The Emerging Technologies loss narrowed to $14.4 million from $23.7 million. Source
Emerging Technologies revenue small: Emerging Technologies revenue was $0.3 million for 2025 against $0.6 million in 2024, and nil in Q4 2025. Water revenue was $134.7 million for 2025 against $144.3 million. Source

Gross margin and operating costs

Q4 gross margin fell on mix and tariffs: Q4 gross margin was 67.2%, down 300 basis points from 70.2%. The company attributed the decline primarily to product mix and tariff costs. Source
Full-year gross margin lower: Full-year gross margin was 65.1% against 66.9%, down 180 basis points. Source
Operating expenses fell 36.5% in Q4: Operating expenses were $13.6 million, down 36.5%, mainly on lower employee, consulting and restructuring costs. Source
Tax provision rose in Q4: Provision for income taxes was $5.2 million in Q4 against $3.4 million a year earlier. Source

Cash flow and balance sheet

Cash and investments were $83.3 million: Cash, cash equivalents and investments were $83.3 million at December 31, 2025, against $99.9 million at December 31, 2024. Source
Operating cash flow lower in both periods: Cash from operations was $7.1 million in Q4 against $9.0 million, and $18.8 million for the full year against $20.5 million. Source
Free cash flow declined: Free cash flow was $6.4 million in Q4 against $8.9 million, and $17.4 million for the full year against $19.2 million. Full-year capital expenditures were $1.3 million. Source
Assets and equity declined: Total assets were $231.5 million and stockholders’ equity $206.2 million at year end, against $242.8 million and $210.0 million a year earlier. Source

Share repurchases and share count

Full-year buybacks were $36.3 million: Repurchases of common stock and excise tax payments totaled $36.3 million for 2025, against $50.4 million for 2024. Source
Nine-month repurchases were $32.8 million: In the third-quarter release, the same line was $32.8 million for the nine months ended September 30, 2025.
Diluted share count fell year on year: Diluted shares were 53.4 million in Q4 against 57.2 million, and 54.2 million for the full year against 57.8 million. Source
Stock issuance proceeds lower: Net proceeds from stock issuance were $1.8 million for 2025 against $7.1 million for 2024. Source

Adjusted measures

Adjusted EBITDA higher in Q4, lower for year: Adjusted EBITDA was $33.6 million in Q4 against $31.3 million, and $36.0 million for the full year against $42.0 million. Source
Adjusted operating margin rose in Q4: Adjusted operating margin was 48.9% in Q4 against 45.2%, and 23.9% for the full year against 26.2%. Source
Full-year adjusted earnings lower: Adjusted net income per share was $0.53 in Q4 against $0.50, and $0.58 for the full year against $0.71. Source
Stock-based compensation declined: Stock-based compensation expense was $1.6 million in Q4 against $1.8 million, and $7.7 million for the full year against $10.3 million. Source

Restructuring and executive costs

Restructuring credit in Q4: Restructuring was a credit of $0.2 million in Q4 against a charge of $2.5 million a year earlier. The full-year charge was $0.3 million against $2.5 million. Source
No executive transition costs in 2025: Executive transition costs were nil in Q4 and for 2025, against $0.7 million in Q4 2024 and $3.7 million for 2024, per the operating margin reconciliation. Source
Impairment charge of $0.3 million: Impairment of long-lived assets was $0.3 million for 2025, and nil in Q4 2025 and in 2024. Source

Change from third quarter

Q3 revenue was $32.0 million: The third-quarter release reported revenue of $32.0 million, down $6.6 million from Q3 2024. Q4 revenue was $66.9 million.
Receivables rose, inventories fell: Accounts receivable and contract assets were $78.3 million at year end, against $46.8 million at September 30, 2025. Inventories were $24.3 million, against $33.6 million. Source
Q3 operating income was $3.7 million: The third-quarter release reported income from operations of $3.7 million, down 48.1% from Q3 2024. Q4 income from operations was $31.3 million.

Coming up, as management said on 25 February 2026

Shareholder letter on 2026: A shareholder letter covering the fourth quarter and 2026 is referenced. Its content is not among the documents provided. Source

Risks management discussed

Operational: Timing of revenue from contracted projects reduced Q4 revenue compared with 2024. Source
External: Tariffs and product mix added cost, which lowered gross margin by 300 basis points in Q4. Source

Earlier plans management reported on

Met: The prior release said Q3 results were in line with internal expectations and consistent with communicated expectations for 2025 quarterly revenue cadence.

Other quarters

Summarised with AI from the documents the company filed with the SEC. Every point is checked against the filing before it is shown: management’s own words word for word, figures against the line or table row they come from. A point that fails the check is left out. Source opens the filing at that line.

As filed with the SEC

Open the filing on EDGAR

Energy Recovery Reports its Fourth Quarter 2025 Financial Results

SAN LEANDRO, Calif. - February 25, 2026 - Energy Recovery, Inc. (Nasdaq:ERII) (“Energy Recovery” or the “Company”) today announced its financial results for the fourth quarter and year ended December 31, 2025.

Fourth Quarter Highlights

Revenue of $66.9 million, a decrease of $0.2 million, as compared to Q4’2024, due to timing of revenue from contracted projects.
Gross margin of 67.2%, a decrease of 300 bps, as compared to Q4’2024, due primarily to costs related to product mix and tariffs.
Operating expenses of $13.6 million, a decrease of 36.5%, as compared to Q4’2024, due primarily to a decrease in employee costs, consulting costs and restructuring costs.
Income from operations of $31.3 million, an increase of 22.3%, as compared to Q4’2024, mainly due to lower operating expenses.
Net income of $26.9 million and adjusted EBITDA of $33.6 million.
Cash and investments of $83.3 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 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).

Financial Highlights

	Quarter-to-Date			Year to Date
	Q4’2025	Q4’2024	vs. Q4’2024	2025	2024	2025 vs. 2024
	(In millions, except net income per share, percentages and basis points)
Revenue	$66.9	$67.1	down %	$135.0	$144.9	down 7%
Gross margin	67.2%	70.2%	down 300 bps	65.1%	66.9%	down 180 bps
Operating margin	46.8%	38.2%	up 860 bps	17.7%	13.6%	up 410 bps
Net income	$26.9	$23.5	up 15%	$23.0	$23.1	down 0%
Diluted net income per share	$0.50	$0.41	up $0.09	$0.42	$0.40	up $0.02
Effective tax rate				16.8%	10.4%
Cash provided by operations	$7.1	$9.0		$18.8	$20.5

Non-GAAP Financial Highlights

	Quarter-to-Date			Year to Date
	Q4’2025	Q4’2024	vs. Q4’2024	2025	2024	2025 vs. 2024
	(In millions, except adjusted net income per share, percentages and basis points)
Adjusted operating margin	48.9%	45.2%	up 370 bps	23.9%	26.2%	down 230 bps
Adjusted net income	$28.2	$28.3	down 0%	$31.2	$40.7	down 23%
Adjusted net income per share	$0.53	$0.50	up $0.03	$0.58	$0.71	down $0.13
Adjusted EBITDA	$33.6	$31.3		$36.0	$42.0
Free cash flow	$6.4	$8.9		$17.4	$19.2

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

Forward-looking statements notice

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, 2024, 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; iii) restructuring charges, and iv) impairment of long-lived assets, 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; iv) impairment of long-lived assets; and v) 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; iv) impairment of long-lived assets; and v) 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) impairment of long-lived assets; vi) other income, net, such as interest income and other non-operating income (expense), net; and vii) 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.

Restructuring charges are presented net of adjustments

Conference Call to Discuss Financial Results

LIVE CONFERENCE Q&A CALL:

Wednesday, February 25, 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: Wednesday, March 25, 2026

US / Canada Toll-Free: +1 (877) 660-6853

Local / International Toll: +1 (201) 612-7415

Access code: 13758280

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

CONDENSED CONSOLIDATED BALANCE SHEETS

	December 31, 2025	December 31, 2024
	(In thousands)
ASSETS
Cash, cash equivalents and investments	$83,283	$99,851
Accounts receivable and contract assets	78,286	66,842
Inventories, net	24,260	24,906
Prepaid expenses and other assets	3,416	3,889
Property, equipment and operating leases	20,635	25,119
Goodwill	12,790	12,790
Deferred tax assets and other assets	8,844	9,395
TOTAL ASSETS	$231,514	$242,792
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Accounts payable, accrued expenses, and other liabilities, current	$13,784	$20,837
Contract liabilities and other liabilities, non-current	2,109	628
Lease liabilities	9,429	11,317
Total liabilities	25,322	32,782
Stockholders’ equity	206,192	210,010
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$231,514	$242,792

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended December 31,		Years Ended December 31,
	2025	2024	2025	2024
	(In thousands, except per share data)
Revenue	$66,871	$67,075	$134,987	$144,948
Cost of revenue	21,910	19,955	47,056	48,015
Gross profit	44,961	47,120	87,931	96,933
Operating expenses
General and administrative	6,012	8,303	29,769	33,074
Sales and marketing	4,946	6,754	20,926	25,423
Research and development	2,914	3,972	13,034	16,236
Restructuring charges	(226)	2,476	313	2,476
Total operating expenses	13,646	21,505	64,042	77,209
Income from operations	31,315	25,615	23,889	19,724
Other income, net	821	1,240	3,706	6,011
Income before income taxes	32,136	26,855	27,595	25,735
Provision for income taxes	5,222	3,384	4,633	2,685
Net income	$26,914	$23,471	$22,962	$23,050
Net income per share
Basic	$0.51	$0.41	$0.43	$0.40
Diluted	$0.50	$0.41	$0.42	$0.40
Number of shares used in per share calculations
Basic	52,915	56,629	53,802	57,213
Diluted	53,360	57,236	54,158	57,822

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2025	2024
	(In thousands)
Cash flows from operating activities:
Net income	$22,962	$23,050
Non-cash adjustments	11,945	16,214
Net cash used in operating assets and liabilities	(16,137)	(18,742)
Net cash provided by operating activities	18,770	20,522
Cash flows from investing activities:
Net investment in marketable securities	35,305	(14,489)
Capital expenditures	(1,330)	(1,298)
Proceeds from sales of fixed assets	10	133
Net cash provided by (used in) investing activities	33,985	(15,654)
Cash flows from financing activities:
Net proceeds from issuance of common stock	1,796	7,100
Repurchase of common stock and payment of excise tax	(36,330)	(50,384)
Net cash used in financing activities	(34,534)	(43,284)
Effect of exchange rate differences	98	(52)
Net change in cash, cash equivalents and restricted cash	$18,319	$(38,468)
Cash, cash equivalents and restricted cash, end of year	$48,076	$29,757

SUPPLEMENTAL FINANCIAL INFORMATION

Channel Revenue

	Three Months Ended December 31,			Years Ended December 31,
	2025	2024	vs. 2024	2025	2024	vs. 2024
	(In thousands, except percentages)
Megaproject	$49,647	$46,475	up 7%	$82,885	$95,399	down 13%
Original equipment manufacturer	10,620	16,315	down 35%	31,940	31,525	up 1%
Aftermarket	6,604	4,285	up 54%	20,162	18,024	up 12%
Total revenue	$66,871	$67,075	no change	$134,987	$144,948	down 7%

Segment Activity

	Three Months Ended December 31,
	2025				2024
	Water	Emerging Technologies	Corporate	Total	Water	Emerging Technologies	Corporate	Total
	(In thousands)
Revenue	$66,871	$ -	$ -	$66,871	$66,959	$116	$ -	$67,075
Cost of revenue	22,113	(203)	-	21,910	19,756	199	-	19,955
Gross profit (loss)	44,758	203	-	44,961	47,203	(83)	-	47,120
Operating expenses
General and administrative	1,372	355	4,285	6,012	2,490	913	4,900	8,303
Sales and marketing	3,535	1,053	358	4,946	4,324	1,856	574	6,754
Research and development	1,742	1,172	-	2,914	1,205	2,767	-	3,972
Restructuring charges	(105)	(76)	(45)	(226)	1,147	832	497	2,476
Total operating expenses	6,544	2,504	4,598	13,646	9,166	6,368	5,971	21,505
Operating income (loss)	$38,214	$(2,301)	$(4,598)	31,315	$38,037	$(6,451)	$(5,971)	25,615
Other income, net				821				1,240
Income before income taxes				$32,136				$26,855

	Years Ended December 31,
	2025				2024
	Water	Emerging Technologies	Corporate	Total	Water	Emerging Technologies	Corporate	Total
	(In thousands)
Revenue	$134,702	$285	$ -	$134,987	$144,310	$638	$ -	$144,948
Cost of revenue	46,923	133	-	47,056	47,389	626	-	48,015
Gross profit	87,779	152	-	87,931	96,921	12	-	96,933
Operating expenses
General and administrative	5,686	2,350	21,733	29,769	8,127	3,821	21,126	33,074
Sales and marketing	13,664	5,449	1,813	20,926	15,683	7,340	2,400	25,423
Research and development	6,344	6,690	-	13,034	4,523	11,713	-	16,236
Restructuring charges	105	47	161	313	1,147	832	497	2,476
Total operating expenses	25,799	14,536	23,707	64,042	29,480	23,706	24,023	77,209
Operating income (loss)	$61,980	$(14,384)	$(23,707)	23,889	$67,441	$(23,694)	$(24,023)	19,724
Other income, net				3,706				6,011
Income before income taxes				$27,595				$25,735

Stock-based Compensation

	Three Months Ended December 31,		Years Ended December 31,
	2025	2024	2025	2024
	(In thousands)
Stock-based compensation expense charged to:
Cost of revenue	$91	$96	$543	$1,076
General and administrative	841	641	3,307	4,013
Sales and marketing	651	722	2,859	3,489
Research and development	30	351	1,010	1,744
Total stock-based compensation expense	$1,613	$1,810	$7,719	$10,322

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

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
	Q4'2025	Q4'2024	2025	2024
	(In millions, except shares, per share and percentages)
Operating margin	46.8%	38.2%	17.7%	13.6%
Stock-based compensation	2.4	2.7	5.7	7.1
Executive transition costs	-	0.7	-	3.7
Restructuring charges	(0.3)	3.7	0.2	1.7
Impairment of long-lived assets	-	-	0.3	-
Adjusted operating margin	48.9%	45.2%	23.9%	26.2%
Net income	$26.9	$23.5	$23.0	$23.1
Stock-based compensation	1.6	1.8	7.7	10.3
Executive transition costs	-	0.4	-	4.8
Restructuring charges	(0.2)	2.2	0.3	2.2
Impairment of long-lived assets	-	-	0.3	-
Stock-based compensation discrete tax item	(0.2)	0.4	(0.1)	0.3
Adjusted net income	$28.2	$28.3	$31.2	$40.7
Net income per share	$0.51	$0.41	$0.43	$0.40
Adjustments to net income per share	0.02	0.09	0.15	0.31
Adjusted net income per share	$0.53	$0.50	$0.58	$0.71
Net income	$26.9	$23.5	$23.0	$23.1
Stock-based compensation	1.6	1.8	7.7	10.3
Depreciation and amortization	0.9	1.0	3.8	4.0
Executive transition costs	-	0.4	-	5.4
Restructuring charges	(0.2)	2.5	0.3	2.5
Impairment of long-lived assets	-	-	0.4	-
Other income, net	(0.8)	(1.2)	(3.7)	(6.0)
Provision for income taxes	5.2	3.4	4.6	2.7
Adjusted EBITDA	$33.6	$31.3	$36.0	$42.0
Free cash flow
Net cash provided by operating activities	$7.1	$9.0	$18.8	$20.5
Capital expenditures	(0.7)	(0.1)	(1.3)	(1.3)
Free cash flow	$6.4	$8.9	$17.4	$19.2

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.

Contacts
Investor Relations ir@energyrecovery.com