Energy Recovery (NASDAQ: ERII) posts Q1 loss, OKs $25M share repurchase and CEO transition
Filing Impact
Filing Sentiment
Form Type
8-K
Rhea-AI Filing Summary
Energy Recovery, Inc. reported first quarter 2026 results showing revenue of $9.7 million, up 20% from Q1 2025, but a net loss of $12.3 million, compared with $9.9 million a year earlier. Gross margin declined to 27.8%, mainly due to restructuring charges tied to winding down the CO₂ retail grocery business.
The company generated strong cash from operations of $21.0 million and ended the quarter with $92.1 million in cash and investments. It announced a new share repurchase authorization of up to $25.0 million over 12 months, and disclosed CEO David Moon’s planned retirement plus a CFO transition, appointing Aidan Ryan as Interim CFO.
Positive
- Revenue growth and cash generation: Q1 2026 revenue rose 20% year over year to $9.7 million, while cash provided by operations reached $21.0 million and free cash flow was $20.2 million, increasing cash and investments to $92.1 million.
- Capital return via buybacks: The board authorized a new share repurchase program of up to $25.0 million over 12 months, bringing aggregate repurchase authorizations since November 2024 to $130.0 million.
- Improving non-GAAP profitability: Adjusted net loss improved to $6.0 million from $7.0 million, and adjusted EBITDA loss narrowed to $7.1 million from $8.7 million compared with Q1 2025.
Negative
- Margin compression and wider GAAP loss: Gross margin fell to 27.8% from 55.3%, and net loss increased to $12.3 million from $9.9 million, reflecting restructuring charges and goodwill impairment related to the CO₂ retail grocery business wind-down.
- Leadership transitions at CEO and CFO levels: CEO David Moon plans to retire after a successor is appointed, and CFO Mike Mancini resigned effective May 6, 2026, prompting an interim CFO appointment and adding management-transition risk.
Insights
Stronger cash and buybacks offset by wider loss and leadership changes.
Energy Recovery delivered Q1 2026 revenue of $9.7 million, up 20% year over year, but operating performance was pressured. Gross margin fell to 27.8% from 55.3%, driven by $1.6 million of restructuring inventory charges and a shift in mix and costs.
Loss from operations widened to $14.9 million, including goodwill impairment and restructuring tied to exiting the CO₂ retail grocery business. On a non-GAAP basis, adjusted net loss improved to $6.0 million and adjusted EBITDA loss to $7.1 million, indicating underlying cost actions are starting to show through.
Cash generation was a bright spot, with cash provided by operations of $21.0 million and free cash flow of $20.2 million, lifting cash and investments to $92.1 million. The new $25.0 million repurchase authorization and cumulative $130.0 million authorizations since November 2024, alongside CEO retirement plans and a CFO change, make future filings important for tracking execution and leadership stability.
8-K Event Classification
5 items: 0.1, 2.02, 5.02, 8.01, 9.01
5 items
Item 0.1
Item 0.1
Item 2.02
Results of Operations and Financial Condition
Financial
Disclosure of earnings results, typically an earnings press release or preliminary financials.
Item 5.02
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers
Governance
Key personnel changes including departures, elections, or appointments of directors and executive officers.
Item 8.01
Other Events
Other
Voluntary disclosure of events the company deems important to shareholders but not covered by other items.
Item 9.01
Financial Statements and Exhibits
Exhibits
Financial statements, pro forma financial information, and exhibit attachments filed with this report.
Key Figures
Q1 2026 revenue: $9.7 million
Q1 2026 gross margin: 27.8%
Q1 2026 net loss: $12.3 million
+5 more
8 metrics
Q1 2026 revenue
$9.7 million
Quarter ended March 31, 2026; up 20% vs Q1 2025
Q1 2026 gross margin
27.8%
Down from 55.3% in Q1 2025, impacted by restructuring inventory reserve
Q1 2026 net loss
$12.3 million
Compared with $9.9 million net loss in Q1 2025
Adjusted net loss
$6.0 million
Non-GAAP Q1 2026, improved from $7.0 million in Q1 2025
Adjusted EBITDA
($7.1) million
Q1 2026 non-GAAP, narrowed from ($8.7) million in Q1 2025
Cash and investments
$92.1 million
Balance at March 31, 2026, including cash, cash equivalents and investments
Share repurchase authorization
$25.0 million
New May 2026 program to buy back common stock over 12 months
Free cash flow
$20.2 million
Q1 2026 free cash flow, up from $10.5 million in Q1 2025
Key Terms
share repurchase program, adjusted EBITDA, restructuring - inventory reserve, impairment of goodwill, +1 more
5 terms
adjusted EBITDA financial
"Net loss of $12.3 million and adjusted EBITDA(1) loss of $7.1 million."
Adjusted EBITDA is a way companies measure how much money they make from their core operations, like running a business, by removing certain costs or income that aren’t part of regular business activities. It helps investors see how well a company is doing without distractions from unusual expenses or gains, making it easier to compare companies or track performance over time.
restructuring - inventory reserve financial
"Gross margin of 27.8%, a decrease of 2,750 bps, as compared to Q1’2025 due primarily to $1.6 million of restructuring charges booked to inventory associated with the wind down of the CO2 retail grocery business"
impairment of goodwill financial
"Operating expenses of $17.6 million, an increase of 3.2%, as compared to Q1’2025, due primarily to impairment of goodwill and restructuring charges"
An impairment of goodwill happens when the extra value a company recorded for purchases like brands, customer lists or reputation turns out to be worth less than originally thought, so accountants reduce that value on the books. It matters to investors because it signals that past acquisitions are not delivering expected benefits, like discovering a purchased car is less reliable than advertised, and can lower reported earnings and the company's perceived future cash-generating power.
non-GAAP financial measures financial
"This press release includes certain non-GAAP financial measures, including adjusted operating margin, adjusted net loss, adjusted loss per share, adjusted EBITDA and free cash flow."
Non-GAAP financial measures are numbers companies use to show their financial performance that exclude certain expenses or income. They help investors see how the company might perform without one-time costs or other unusual items, giving a different perspective from official reports. However, since they can be adjusted, they don’t always tell the full story and should be looked at alongside standard financial figures.
Earnings Snapshot
Revenue: $9.7 million
Q1 2026
Revenue
$9.7 million
+20% vs Q1 2025
Net loss
$12.3 million
-24% vs Q1 2025 (larger loss)
Gross margin
27.8%
-2750 bps vs Q1 2025
Adjusted EBITDA
($7.1) million
improved from ($8.7) million in Q1 2025
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 6, 2026
| (Exact Name of Registrant as Specified in its Charter) | ||||||||
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(Address of Principal Executive Offices) (Zip Code)
(Registrant’s telephone number, including area code)
Not applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 2.02 Results of Operations and Financial Condition
On May 6, 2026, Energy Recovery, Inc. (the “Company”) issued an earnings press release announcing its financial results for the first quarter ended March 31, 2026. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference in its entirety.
The information in this report (including Exhibit 99.1) is being furnished pursuant to Item 2.02 and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On May 6, 2026, the Company announced that David Moon, President and Chief Executive Officer of the Company, has notified the Board of Directors (the “Board”) of his intention to retire following the appointment of his replacement. Mr. Moon will remain as President and Chief Executive Officer until a successor is appointed and has committed to support the Company in an advisory capacity during the transition period for as long as is deemed necessary by the Board. The Company has begun a search for Mr. Moon’s successor.
On May 4, 2026, Mike Mancini, Chief Financial Officer of the Company, submitted his resignation to the Company effective as of May 6, 2026. His resignation was accepted by the Company. Mr. Mancini’s decision to resign is not related to any financial or accounting issue or any disagreement with the Company on any matter relating to the Company’s operations, policies, or practices.
On May 6, 2026, the Company announced that Aidan Ryan, 42, has been appointed as the Interim Chief Financial Officer. Mr. Ryan joined the Company in 2024 in his current role as Vice President of Finance. Prior to joining the Company, Mr. Ryan was Head of Finance for two years at Astranis Space Technologies Corp., a telecommunications satellite company where he was instrumental in long-term strategy development and execution to guide profitable growth. Previous roles include private equity and hedge fund investing. Mr. Ryan holds an MBA from the Wharton School at the University of Pennsylvania and a bachelors degree from the University of Michigan.
Mr. Ryan’s compensation as Interim Chief Financial Officer is set forth in that certain offer letter dated, May 4, 2026 (the “Employment Letter”). Pursuant to the terms of the Employment Letter, Mr. Ryan will (i) continue to receive his current base salary of $327,600 and continue to be eligible for an annual bonus from 0%-35%, (ii) receive an additional monthly stipend of $12,000 for the period during which Mr. Ryan serves in the position of Interim Chief Financial Officer, (iii) receive a one-time restricted stock unit award under the Energy Recovery, Inc. 2020 Incentive Plan (the “Incentive Plan”) with a fair value of $215,000. The restricted stock unit award will vest, if at all, over a ten-month period, with 60% vesting on the six-month anniversary of the vesting commencement date, and the remaining 40% vesting ratably on each of the 7, 8, 9, and 10 month anniversary of the vesting commencement date. The vesting commencement date will be May 5, 2026 and the restricted stock unit award will be subject to the terms and conditions of the Incentive Plan, award agreement and notice of grant. The Incentive Plan is filed as Exhibit 10.13 to the Company’s 2025 Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on February 25, 2026. Mr. Ryan will remain eligible to participate in the Company’s comprehensive benefits programs. Mr. Ryan’s employment with the Company remains “at will”.
A copy of the Employment Letter is filed hereto as Exhibit 10.1, and is incorporated by reference. The foregoing description of the Employment Letter is subject to, and qualified in its entirety by, the Employment Letter.
There are no family relationships between Mr. Ryan and any of the executive officers or directors of the Company, and there are no arrangements or understandings between Mr. Ryan and any other person pursuant to which he was appointed as an officer of the Company. There are no actual or proposed related party transactions with Mr. Ryan that are reportable under Item 5.02 of Form 8-K and Item 404(a) of Regulation S-K.
Item 8.01 Other Events
On May 6, 2026, the Company announced that the Board of the Company authorized the Company to repurchase up to $25.0 million of outstanding shares of its common stock, $0.001 par value per share, pursuant to a new share repurchase program (the “May 2026 Authorization”). Under the May 2026 Authorization, the Company may repurchase shares through open market trades, block trades and/or privately negotiated transactions, in compliance with applicable state and federal securities laws. The timing and amounts of any purchases will be at management’s discretion and depend on a variety of factors, including business, economic and market conditions, regulatory requirements, prevailing stock prices and other considerations. The share repurchase program does not obligate the Company to acquire any specific number of shares in any period, and may be expanded, extended, modified or discontinued at any time without prior notice. The Company will launch the May 2026 Authorization in the second quarter of fiscal year 2026 and purchases will occur over the next 12 months. The Company expects to fund the repurchases with cash on hand.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
Exhibit Number | Description | |||||||
10.1 | Offer Letter to Aidan Ryan | |||||||
99.1 | Press release of Energy Recovery, Inc., dated May 6, 2026, to report its financial results for the first quarter ended March 31, 2026. | |||||||
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: May 6, 2026
| Energy Recovery, Inc. | |||||||||||
| By: | /s/ William Yeung | ||||||||||
| William Yeung | |||||||||||
| Chief Legal Officer | |||||||||||
Exhibit 99.1
Energy Recovery Reports its First Quarter 2026 Financial Results and Organizational Updates
SAN LEANDRO, Calif. - May 6, 2026 – Energy Recovery, Inc. (Nasdaq:ERII) (“Energy Recovery”, “Company”, “we”, and “our”) today announced its financial results for the first quarter ended March 31, 2026. Management has released a letter to shareholders reviewing business and financial updates from the first 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).
Key Business Updates
•Today, Energy Recovery is announcing that David Moon, President and Chief Executive Officer of the Company, has notified the Board of Directors (the “Board”) of his intention to retire following the appointment of his replacement. Mr. Moon will remain as President and Chief Executive Officer until a successor is appointed and has committed to support the Company in an advisory capacity during the transition period for as long as is deemed necessary by the Board. The Company has begun a search for Mr. Moon’s successor.
•The Company is also announcing that Mike Mancini has resigned as Chief Financial Officer, effective today, to pursue a new professional opportunity. Aidan Ryan, current VP of Finance who joined in 2024, has been named Interim Chief Financial Officer. Please refer to the Company’s letter to shareholders and Form 8-K for additional information.
•The Board has authorized a new share repurchase plan to purchase up to $25.0 million of common stock over the next 12 months. Since November 2024, the Company has now announced $130.0 million of aggregate share repurchase authorizations.
First Quarter Highlights
•Revenue of $9.7 million, an increase of $1.6 million, as compared to Q1’2025.
•Gross margin of 27.8%, a decrease of 2,750 bps, as compared to Q1’2025 due primarily to $1.6 million of restructuring charges booked to inventory associated with the wind down of the CO2 retail grocery business, which reduced gross margin by 17%, as well as increased costs related to product and channel mix, pricing, tariffs and indirect manufacturing costs.
•Operating expenses of $17.6 million, an increase of 3.2%, as compared to Q1’2025, due primarily to impairment of goodwill and restructuring charges incurred as part of the wind down of the CO2 retail grocery business.
•Loss from operations of $14.9 million, a decrease of 18.3%, as compared to Q1’2025, due primarily to impairment of goodwill and restructuring charges incurred as part of the wind down of the CO2 retail grocery business.
•Net loss of $12.3 million and adjusted EBITDA(1) loss of $7.1 million.
•Cash and investments of $92.1 million, which includes cash, cash equivalents, and short- and long-term investments.
Financial Highlights
| Quarter-to-Date | |||||||||||||||||
Q1’2026 | Q1’2025 | vs. Q1’2025 | |||||||||||||||
| (In millions, except net loss per share, percentages and basis points) | |||||||||||||||||
| Revenue | $9.7 | $8.1 | up 20% | ||||||||||||||
| Gross margin | 27.8% | 55.3% | down 2750 bps | ||||||||||||||
| Operating margin | (153.1%) | (155.8%) | up 270 bps | ||||||||||||||
| Net loss | ($12.3) | ($9.9) | down 24% | ||||||||||||||
| Diluted loss per share | ($0.23) | ($0.18) | down $0.05 | ||||||||||||||
| Effective tax rate | 12.7% | 14.0% | |||||||||||||||
| Cash provided by operations | $21.0 | $10.7 | |||||||||||||||
Non-GAAP Financial Highlights (1)
| Quarter-to-Date | |||||||||||||||||
Q1’2026 | Q1’2025 | vs. Q1’2025 | |||||||||||||||
| (In millions, except adjusted net loss per share, percentages and basis points) | |||||||||||||||||
| Adjusted operating margin | (83.1%) | (120.4%) | up 3730 bps | ||||||||||||||
| Adjusted net loss | ($6.0) | ($7.0) | up 15% | ||||||||||||||
| Adjusted loss per share | ($0.11) | ($0.13) | up $0.02 | ||||||||||||||
| Adjusted EBITDA | ($7.1) | ($8.7) | |||||||||||||||
| Free cash flow | $20.2 | $10.5 | |||||||||||||||
(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.
NM Not Meaningful
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 loss, adjusted 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 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 loss is a non-GAAP financial measure that the Company defines as net 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 loss per share is a non-GAAP financial measure that the Company defines as net 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 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, net; and viii) 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, May 6, 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, June 6, 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 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
Contact
Investor Relations
ir@energyrecovery.com
ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| March 31, 2026 | December 31, 2025 | ||||||||||
| (In thousands) | |||||||||||
| ASSETS | |||||||||||
| Cash, cash equivalents and investments | $ | 92,142 | $ | 83,283 | |||||||
| Accounts receivable and contract assets | 40,642 | 78,286 | |||||||||
| Inventories, net | 30,886 | 24,260 | |||||||||
| Prepaid expenses and other assets | 3,383 | 3,416 | |||||||||
| Property, equipment and operating leases | 19,955 | 20,635 | |||||||||
| Goodwill | 11,128 | 12,790 | |||||||||
| Deferred tax assets and other assets | 10,852 | 8,844 | |||||||||
| TOTAL ASSETS | $ | 208,988 | $ | 231,514 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Liabilities | |||||||||||
| Accounts payable, accrued expenses, and other liabilities, current | $ | 13,680 | $ | 13,784 | |||||||
| Contract liabilities and other liabilities, non-current | 2,178 | 2,109 | |||||||||
| Lease liabilities | 8,845 | 9,429 | |||||||||
| Total liabilities | 24,703 | 25,322 | |||||||||
| Stockholders’ equity | 184,285 | 206,192 | |||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 208,988 | $ | 231,514 | |||||||
ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| (In thousands, except per share data) | |||||||||||
| Revenue | $ | 9,706 | $ | 8,065 | |||||||
| Cost of revenue | 5,372 | 3,607 | |||||||||
| Restructuring - inventory reserve | 1,632 | — | |||||||||
| Gross profit | 2,702 | 4,458 | |||||||||
| Operating expenses | |||||||||||
| General and administrative | 6,455 | 8,574 | |||||||||
| Sales and marketing | 5,119 | 4,906 | |||||||||
| Research and development | 2,789 | 3,001 | |||||||||
| Restructuring charges | 1,536 | 539 | |||||||||
| Impairment of goodwill | 1,662 | — | |||||||||
| Total operating expenses | 17,561 | 17,020 | |||||||||
| Loss from operations | (14,859) | (12,562) | |||||||||
| Other income, net | 833 | 1,079 | |||||||||
| Loss before income taxes | (14,026) | (11,483) | |||||||||
| Benefit from income taxes | (1,775) | (1,603) | |||||||||
| Net loss | $ | (12,251) | $ | (9,880) | |||||||
| Net loss per share | |||||||||||
| Basic and diluted | $ | (0.23) | $ | (0.18) | |||||||
| Number of shares used in per share calculations | |||||||||||
| Basic and diluted | 52,660 | 54,902 | |||||||||
ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| (In thousands) | |||||||||||
| Cash flows from operating activities: | |||||||||||
| Net loss | $ | (12,251) | $ | (9,880) | |||||||
| Non-cash adjustments | 4,269 | 1,427 | |||||||||
| Net cash provided by operating assets and liabilities | 29,019 | 19,131 | |||||||||
| Net cash provided by operating activities | 21,037 | 10,678 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Net investment in marketable securities | (6,805) | 12,855 | |||||||||
| Capital expenditures | (814) | (191) | |||||||||
| Proceeds from sales of fixed assets | 13 | 10 | |||||||||
| Net cash (used in) provided by investing activities | (7,606) | 12,674 | |||||||||
| Cash flows from financing activities: | |||||||||||
| Net proceeds from issuance of common stock | — | 1,092 | |||||||||
| Tax payment for employee shares withheld | (682) | (476) | |||||||||
| Repurchase of common stock and payment of excise tax | (10,694) | (4,490) | |||||||||
| Net cash used in financing activities | (11,376) | (3,874) | |||||||||
| Effect of exchange rate differences | (15) | 33 | |||||||||
| Net change in cash, cash equivalents and restricted cash | $ | 2,040 | $ | 19,511 | |||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 50,116 | $ | 49,268 | |||||||
ENERGY RECOVERY, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(Unaudited)
Channel Revenue
| Three Months Ended March 31, | |||||||||||||||||
| 2026 | 2025 | vs. 2025 | |||||||||||||||
| (In thousands, except percentages) | |||||||||||||||||
| Original equipment manufacturer | $ | 6,588 | $ | 4,001 | up 65% | ||||||||||||
| Aftermarket | 2,754 | 4,028 | down 32% | ||||||||||||||
| Megaproject | 364 | 36 | up 911% | ||||||||||||||
| Total revenue | $ | 9,706 | $ | 8,065 | up 20% | ||||||||||||
Segment Activity
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Desalination | Wastewater | Emerging Technologies | Corporate | Total | Desalination | Wastewater | Emerging Technologies | Corporate | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 8,907 | $ | 601 | $ | 198 | $ | — | $ | 9,706 | $ | 7,759 | $ | 305 | $ | 1 | $ | — | $ | 8,065 | |||||||||||||||||||||||||||||||||||||||
| Cost of revenue | 4,942 | 370 | 60 | — | 5,372 | 3,382 | 179 | 46 | — | 3,607 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Restructuring - inventory reserve | — | — | 1,632 | — | 1,632 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Gross profit (loss) | 3,965 | 231 | (1,494) | — | 2,702 | 4,377 | 126 | (45) | — | 4,458 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| General and administrative | 756 | 981 | 348 | 4,370 | 6,455 | 845 | 728 | 755 | 6,246 | 8,574 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Sales and marketing | 2,485 | 1,163 | 858 | 613 | 5,119 | 2,108 | 1,037 | 1,270 | 491 | 4,906 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Research and development | 1,616 | 136 | 1,037 | — | 2,789 | 849 | 329 | 1,823 | — | 3,001 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Restructuring charges | 335 | 18 | 1,140 | 43 | 1,536 | 107 | 103 | 123 | 206 | 539 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Impairment of goodwill | — | — | 1,662 | — | 1,662 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total operating expenses | 5,192 | 2,298 | 5,045 | 5,026 | 17,561 | 3,909 | 2,197 | 3,971 | 6,943 | 17,020 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Operating income (loss) | $ | (1,227) | $ | (2,067) | $ | (6,539) | $ | (5,026) | (14,859) | $ | 468 | $ | (2,071) | $ | (4,016) | $ | (6,943) | (12,562) | |||||||||||||||||||||||||||||||||||||||||
| Other income, net | 833 | 1,079 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loss before income taxes | $ | (14,026) | $ | (11,483) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based Compensation
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| (In thousands) | |||||||||||
| Stock-based compensation expense charged to: | |||||||||||
| Cost of revenue | $ | 98 | $ | 148 | |||||||
| General and administrative | 969 | 870 | |||||||||
| Sales and marketing | 671 | 679 | |||||||||
| Research and development | 225 | 266 | |||||||||
| Total stock-based compensation expense | $ | 1,963 | $ | 1,963 | |||||||
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 | |||||||||||
| Q1'2026 | Q1'2025 | ||||||||||
| (In millions, except shares, per share and percentages) | |||||||||||
Operating margin | (153.1) | % | (155.8) | % | |||||||
| Stock-based compensation | 20.2 | 24.3 | |||||||||
| Restructuring charges | 15.8 | 6.7 | |||||||||
| Impairment of long-lived assets | — | 4.4 | |||||||||
| Restructuring - inventory reserve | 16.8 | — | |||||||||
| Impairment of goodwill | 17.1 | — | |||||||||
Adjusted operating margin | (83.1) | % | (120.4) | % | |||||||
Net loss | $ | (12.3) | $ | (9.9) | |||||||
Stock-based compensation | 2.0 | 2.0 | |||||||||
Restructuring charges (2) | 1.3 | 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 | 0.1 | |||||||||
Adjusted net loss | $ | (6.0) | $ | (7.0) | |||||||
Net loss per share | $ | (0.23) | $ | (0.18) | |||||||
Adjustments to net loss per share (3) | 0.12 | 0.05 | |||||||||
Adjusted loss per share | $ | (0.11) | $ | (0.13) | |||||||
Net loss | $ | (12.3) | $ | (9.9) | |||||||
| Stock-based compensation | 2.0 | 2.0 | |||||||||
| Depreciation and amortization | 1.0 | 1.0 | |||||||||
| Restructuring charges | 1.5 | 0.5 | |||||||||
| Impairment of long-lived assets | — | 0.4 | |||||||||
| Restructuring - inventory reserve | 1.6 | — | |||||||||
| Impairment of goodwill | 1.7 | — | |||||||||
Other income, net | (0.8) | (1.1) | |||||||||
| Benefit from income taxes | (1.8) | (1.6) | |||||||||
Adjusted EBITDA | $ | (7.1) | $ | (8.7) | |||||||
| Free cash flow | |||||||||||
| Net cash provided by operating activities | $ | 21.0 | $ | 10.7 | |||||||
| Capital expenditures | (0.8) | (0.2) | |||||||||
| Free cash flow | $ | 20.2 | $ | 10.5 | |||||||
(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.
FAQ
How did Energy Recovery (ERII) perform financially in Q1 2026?
Energy Recovery reported Q1 2026 revenue of $9.7 million, up 20% from Q1 2025, but a larger net loss of $12.3 million versus $9.9 million. Gross margin dropped to 27.8%, mainly due to restructuring charges and costs tied to winding down its CO₂ retail grocery business.
What leadership changes did Energy Recovery (ERII) announce in this filing?
The company disclosed that CEO David Moon intends to retire after a successor is appointed and will support the transition in an advisory role. It also announced CFO Mike Mancini’s resignation effective May 6, 2026, and appointed Aidan Ryan as Interim Chief Financial Officer.
How strong is Energy Recovery’s (ERII) cash position after Q1 2026?
At March 31, 2026, Energy Recovery held $92.1 million in cash, cash equivalents, and investments. During Q1 2026, it generated $21.0 million in cash from operations and $20.2 million in free cash flow, while also repurchasing common stock and paying related excise tax.
What were Energy Recovery’s key non-GAAP results for Q1 2026?
Non-GAAP metrics showed improvement: adjusted net loss was $6.0 million versus $7.0 million a year earlier, and adjusted EBITDA loss narrowed to $7.1 million from $8.7 million. Adjusted operating margin improved to (83.1%) from (120.4%), excluding specified charges.
How did restructuring and impairments affect Energy Recovery’s Q1 2026 results?
Restructuring and impairment related to the CO₂ retail grocery business significantly weighed on results. The company recorded a $1.6 million restructuring inventory reserve, $1.5 million in restructuring charges, and a $1.7 million goodwill impairment, all contributing to weaker gross margin and a larger net loss.