Energy Recovery (ERII) 15th Annual Midwest IDEAS Investor Conference summary

Financial performance and operational efficiency

• Achieved consistent revenue growth over the past decade, with only two years of single-digit growth.

• Gross margins have averaged close to 70%, with last year at 68%.

• Operating expenses as a percent of revenue have dropped from 77% in 2018 to below 50%, with a target of mid to high 30% in the next few years.

• Maintains a strong balance sheet with $138 million in cash and no debt, expected to rise to $170 million by next year.

• Automation and AI are being implemented to further reduce costs and maintain high margins.

Core technology and market leadership

• The pressure exchanger (PX) is the core product, delivering 98% efficiency in desalination and significant energy savings.

• Holds a 99.9% market share in large-scale desalination plants globally.

• Devices require no maintenance and last the life of the plant, displacing competitors reliant on recurring sales.

• All products are patent-protected, with ongoing innovation extending patent life.

• The same core PX design is used across desalination, wastewater, and CO2 applications.

Growth strategy and market expansion

• Expanding beyond desalination into industrial wastewater, CO2 refrigeration, and future verticals like heat pumps and data centers.

• Wastewater revenue has grown from $1 million four years ago to an expected $12–$15 million this year.

• Targeting $200 million in desalination revenue by 2026, with 70% confidence in achieving this.

• Wastewater total addressable market estimated at $1 billion, with potential to replicate desalination success.

• CO2 refrigeration market entry leverages regulatory phase-down of HFCs, with PXG device showing superior efficiency, especially in high temperatures.