0001421517false00014215172024-10-302024-10-30



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): October 30, 2024
erilogoh4c.jpg
Energy Recovery, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware001-34112
01-0616867
(State or Other Jurisdiction of Incorporation)(Commission File Number)
(I.R.S. Employer Identification No.)

1717 Doolittle Dr., San Leandro, CA 94577
(Address of Principal Executive Offices) (Zip Code)

510-483-7370
(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:

☐    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $0.001 par value per shareERIIThe Nasdaq Stock Market LLC

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 October 30, 2024, Energy Recovery, Inc. (the “Company”) issued an earnings press release announcing its financial results for the third quarter and nine months ended September 30, 2024. 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 9.01    Financial Statements and Exhibits

(d)    Exhibits
Exhibit Number
Description
Press release of Energy Recovery, Inc., dated October 30, 2024, to report its financial results for the third quarter and nine months ended September 30, 2024.


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:    October 30, 2024
Energy Recovery, Inc.
By:/s/ William Yeung
William Yeung
Chief Legal Officer



Exhibit 99.1
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Energy Recovery Reports its Third Quarter 2024 Financial Results

SAN LEANDRO, Calif. - October 30, 2024 – Energy Recovery, Inc. (Nasdaq:ERII) (“Energy Recovery” or the “Company”) today announced its financial results for the third quarter and nine months ended September 30, 2024.

Third Quarter Highlights
•Revenue of $38.6 million, reaching the upper end of our guidance of $35 - $39 million.
•Gross margin of 65.1%, a decrease of 480 bps, as compared to Q3’2023, due primarily to higher manufacturing costs and higher costs related to product mix.
•Operating expenses of $18.1 million, an increase of 7.8%, as compared to Q3’2023, due primarily to higher consulting costs related to enhancement of our corporate growth strategy and higher employee costs.
•Income from operations of $7.1 million, a decrease of 22.7%, as compared to Q3’2023, mainly due to higher operating expenses and lower gross margin.
•Net income of $8.5 million and adjusted EBITDA(1) of $11.6 million.
•Cash and investments of $139.9 million, which include cash, cash equivalents, and short- and long-term investments.


David Moon, President and CEO, commented on the financial results, “We delivered strong third quarter results, hitting the upper end of our guidance for the quarter and, although there is still work to be done, we believe we are well-positioned in this quarter to deliver on our guidance for the full year. Our core desalination business continues to demonstrate durability of growth, our wastewater business continues to expand, and we are making real progress this year in our CO2 refrigeration business.”

Mr. Moon continued, “With our PX G1300 summer data collection complete, we just issued a white paper with the measurement and verification results, provided by a third party engineering firm, that we believe will be an important next step to getting the PX G1300 integrated into OEM systems designs and ultimately specified by supermarkets. Finally, we concluded our strategic work on what I have termed our Playbook. This Playbook outlines our five-year plan to grow all three of Energy Recovery’s businesses. It is an ambitious and I believe achievable blueprint for growth that I, along with Mike Mancini, CFO, and our business unit leads, are excited to lay out next month on a live investor webinar we are hosting on November 18, 2024.”


Financial Highlights
Quarter-to-DateYear to Date
Q3’2024
Q3’2023
vs. Q3’2023202420232024 vs. 2023
(In millions, except net income (loss) per share, percentages and basis points)
Revenue$38.6$37.0up 4%$77.9$71.2up 9%
Gross margin65.1%69.9%down 480 bps64.0%66.9%down 290 bps
Operating margin18.3%24.7%down 640 bps(7.6%)(2.2%)down 540 bps
Net income (loss)$8.5$9.7down 12%($0.4)$1.7down 125%
Net income (loss) per share$0.15$0.17down $0.02($0.01)$0.03down $0.04
Effective tax rate62.4%(114.2%)
Cash provided by (used for) operations($3.0)$7.7$11.6$12.3


Non-GAAP Financial Highlights (1)
Quarter-to-DateYear to Date
Q3’2024
Q3’2023
vs. Q3’2023202420232024 vs. 2023
(In millions, except adjusted net income per share, percentages and basis points)
Adjusted operating margin27.5%29.5%down 200 bps9.7%6.0%up 370 bps
Adjusted net income$12.0$11.4up 5%$12.4$6.8up 81%
Adjusted net income per share$0.21$0.20up $0.01$0.22$0.12up $0.10
Adjusted EBITDA$11.6$12.0$10.6$7.3
Free cash flow($3.2)$7.4$10.4$11.1
(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, including the belief that the Company is well-positioned in the fourth quarter to deliver on our guidance for the full year, the belief that the Company is making real progress this year in its CO2 refrigeration business, the belief that the Company’s recently published white paper is an important next step to getting the PX G1300 integrated into original equipment manufacturers’ systems designs and ultimately specified by supermarkets, and the belief that the Company’s Playbook is an achievable blueprint for growth. 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 (loss) from operations which excludes i) share-based compensation; and ii) executive transition costs, such as executive search costs, retention costs, one-time severance costs and one-time corporate growth strategy costs, divided by revenues.
•Adjusted net income is a non-GAAP financial measure that the Company defines as net income which excludes i) share-based compensation; ii) executive transition costs; and iii) the applicable tax effect of the excluded items including the share-based compensation discrete tax item.
•Adjusted net income per share is a non-GAAP financial measure that the Company defines as net income (loss), which excludes i) share-based compensation; ii) executive transition costs and iii) the applicable tax effect of the excluded items including the share-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) share-based compensation; iii) executive transition costs; iv) other income, net, such as interest income and other non-operating income (expense), net; and v) 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 CALL:
Wednesday, October 30, 2024, 2:00 PM PT / 5:00 PM ET
US / Canada Toll-Free: +1 (866) 682-6100
Local / International Toll: +1 (862) 298-0702

CONFERENCE CALL REPLAY:
Available approximately three hours after conclusion of the live call.
Expiration: Friday, November 29, 2024
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 and Texas with sales and on-site technical support available globally. To learn more, visit https://energyrecovery.com/.


Contact
Investor Relations
ir@energyrecovery.com



ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30,
2024		December 31,
2023
(In thousands)
ASSETS
Cash, cash equivalents and investments$139,911 $122,375 
Accounts receivable and contract assets33,319 47,529 
Inventories, net33,464 26,149 
Prepaid expenses and other assets5,295 3,251 
Property, equipment and operating leases26,504 30,168 
Goodwill12,790 12,790 
Deferred tax assets and other assets11,422 10,712 
TOTAL ASSETS$262,705 $252,974 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Accounts payable and accrued expenses$13,938 $18,583 
Contract liabilities and other liabilities, non-current3,069 1,304 
Lease liabilities11,825 13,279 
Total liabilities28,832 33,166 
Stockholders’ equity233,873 219,808 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$262,705 $252,974 




ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 Three Months Ended September 30,Nine Months Ended September 30,
 2024202320242023
 (In thousands, except per share data)
Revenue$38,584 $37,036 $77,873 $71,160 
Cost of revenue13,472 11,154 28,060 23,580 
Gross profit25,112 25,882 49,813 47,580 
Operating expenses
General and administrative7,673 7,369 24,771 21,704 
Sales and marketing6,413 5,411 18,669 15,397 
Research and development3,969 3,969 12,264 12,043 
Total operating expenses18,055 16,749 55,704 49,144 
Income (loss) from operations7,057 9,133 (5,891)(1,564)
Other income, net1,768 1,045 4,771 2,357 
Income (loss) before income taxes8,825 10,178 (1,120)793 
Provision for (benefit from) income taxes344 518 (699)(906)
Net income (loss)$8,481 $9,660 $(421)$1,699 
Net income (loss) per share
Basic$ 0.15 $ 0.17 $ (0.01)$ 0.03 
Diluted$ 0.15 $ 0.17 $ (0.01)$ 0.03 
Number of shares used in per share calculations
Basic57,756 56,443 57,409 56,346 
Diluted58,290 57,969 57,409 57,761 




ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30,
20242023
(In thousands)
Cash flows from operating activities:
Net (loss) income$(421)$1,699 
Non-cash adjustments11,432 8,817 
Net cash provided by (used in) operating assets and liabilities556 1,756 
Net cash provided by operating activities11,567 12,272 
Cash flows from investing activities:
Net investment in marketable securities(21,067)(17,278)
Capital expenditures(1,194)(1,179)
Proceeds from sales of fixed assets90 82 
Net cash used in investing activities(22,171)(18,375)
Cash flows from financing activities:
Net proceeds from issuance of common stock5,795 1,184 
Net cash provided by financing activities5,795 1,184 
Effect of exchange rate differences(23)27 
Net change in cash, cash equivalents and restricted cash$(4,832)$(4,892)
Cash, cash equivalents and restricted cash, end of period$63,393 $51,566 



ENERGY RECOVERY, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(Unaudited)

Channel Revenue
Three Months Ended September 30,Nine Months Ended September 30,
20242023vs. 202320242023vs. 2023
(In thousands, except percentages)
Megaproject$29,009$26,829up 8%$48,924$42,283up 16%
Original equipment manufacturer4,9195,307down 7%15,21016,845down 10%
Aftermarket4,6564,900down 5%13,73912,032up 14%
Total revenue$38,584$37,036up 4%$77,873$71,160up 9%
Segment Activity
Three Months Ended September 30,
20242023
WaterEmerging TechnologiesCorporateTotalWaterEmerging TechnologiesCorporateTotal
(In thousands)
Revenue$38,344 $240 $— $38,584 $36,812 $224 $— $37,036 
Cost of revenue13,334 138 — 13,472 11,114 40 — 11,154 
Gross profit25,010 102 — 25,112 25,698 184 — 25,882 
Operating expenses
General and administrative1,803 906 4,964 7,673 2,039 1,061 4,269 7,369 
Sales and marketing3,777 1,977 659 6,413 3,272 1,560 579 5,411 
Research and development1,145 2,824 — 3,969 1,098 2,871 — 3,969 
Total operating expenses6,725 5,707 5,623 18,055 6,409 5,492 4,848 16,749 
Operating income (loss)$18,285 $(5,605)$(5,623)$7,057 $19,289 $(5,308)$(4,848)$9,133 

Nine Months Ended September 30,
20242023
WaterEmerging TechnologiesCorporateTotalWaterEmerging TechnologiesCorporateTotal
(In thousands)
Revenue$77,351 $522 $— $77,873 $70,622 $538 $— $71,160 
Cost of revenue27,633 427 — 28,060 23,136 444 — 23,580 
Gross profit49,718 95 — 49,813 47,486 94 — 47,580 
Operating expenses
General and administrative5,637 2,908 16,226 24,771 5,837 2,976 12,891 21,704 
Sales and marketing11,359 5,484 1,826 18,669 9,567 4,171 1,659 15,397 
Research and development3,318 8,946 — 12,264 3,121 8,922 — 12,043 
Total operating expenses20,314 17,338 18,052 55,704 18,525 16,069 14,550 49,144 
Operating income (loss)$29,404 $(17,243)$(18,052)$(5,891)$28,961 $(15,975)$(14,550)$(1,564)


Share-based Compensation
 Three Months Ended September 30,Nine Months Ended September 30,
 2024202320242023
(In thousands)
Stock-based compensation expense charged to:
Cost of revenue$176 $158 $980 $555 
General and administrative954 905 3,372 2,628 
Sales and marketing845 436 2,767 1,684 
Research and development437 292 1,393 944 
Total stock-based compensation expense$2,412 $1,791 $8,512 $5,811 




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-DateYear to Date
Q3'2024Q3'2023Q3'2024Q3'2023
(In millions, except shares, per share and percentages)
Operating margin
18.3 %24.7 %(7.6)%(2.2)%
Share-based compensation6.3 4.8 10.9 8.2 
Executive transition costs2.9 — 6.4 — 
Adjusted operating margin
27.5 %29.5 %9.7 %6.0 %
Net income (loss)
$8.5 $9.7 $(0.4)$1.7 
Share-based compensation
2.4 1.8 8.5 5.8 
Executive transition costs (2)
1.0 — 4.4 — 
Share-based compensation discrete tax item0.1 (0.1)(0.1)(0.7)
Adjusted net income
$12.0 $11.4 $12.4 $6.8 
Net income (loss) per share
$0.15 $0.17 $(0.01)$0.03 
Adjustments to net income (loss) per share (3)
0.06 0.03 0.23 0.09 
Adjusted net income per share
$0.21 $0.20 $0.22 $0.12 
Net income (loss)
$8.5 $9.7 $(0.4)$1.7 
Share-based compensation2.4 1.8 8.5 5.8 
Depreciation and amortization1.0 1.1 3.1 3.1 
Executive transition costs1.1 — 5.0 — 
Other income, net
(1.8)(1.0)(4.8)(2.4)
Provision for (benefit from) income taxes0.3 0.5 (0.7)(0.9)
Adjusted EBITDA
$11.6 $12.0 $10.6 $7.3 
Free cash flow
Net cash provided by (used in) operating activities$(3.0)$7.7 $11.6 $12.3 
Capital expenditures(0.2)(0.3)(1.2)(1.2)
Free cash flow$(3.2)$7.4 $10.4 $11.1 
(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.


v3.24.3
Cover Page
Oct. 30, 2024
Cover [Abstract]  
Document Type 8-K
Document Period End Date Oct. 30, 2024
Entity Registrant Name Energy Recovery, Inc.
Entity Incorporation, State or Country Code DE
Entity File Number 001-34112
Entity Tax Identification Number 01-0616867
Entity Address, Address Line One 1717 Doolittle Dr.
Entity Address, City or Town San Leandro
Entity Address, State or Province CA
Entity Address, Postal Zip Code 94577
City Area Code 510
Local Phone Number 483-7370
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Title of 12(b) Security Common Stock, $0.001 par value per share
Trading Symbol ERII
Security Exchange Name NASDAQ
Entity Emerging Growth Company false
Entity Central Index Key 0001421517
Amendment Flag false
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