Energy Recovery (ERII) Investor Day 2024 summary

Strategic vision and market focus

• Pursuing growth in desalination, wastewater, and CO2 markets, leveraging core pressure exchanger technology and market leadership in ceramics.

• New playbook targets $255-$295 million revenue by 2029, with a 12%-15% CAGR, focusing on disciplined, profitable growth and cost reduction.

• Shifted 2026 revenue target to $166-$183 million, down from $310-$570 million, due to project timing shifts and refined market focus.

• CO2 commercialization strategy now prioritizes OEM integration over end-user focus, reflecting slower U.S. adoption and improved product validation.

• ESG and sustainability are central, with 100% of revenue addressing environmental challenges and a focus on transparency and accountability.

Business unit execution and milestones

• Desalination: Dominant market share, especially in MENA, with a robust $550M five-year pipeline and double-digit CAGR expected.

• Wastewater: Focused on China, India, Americas, and Southeast Asia, targeting five key verticals and aiming for double-digit million revenue by year-end.

• CO2: Targeting supermarket and cold storage segments, aiming for $30-$40 million revenue by 2029, with pilot tests, OEM integration, and third-gen PX G release as key milestones.

• Aggressive cost reduction: 30% salaried workforce cut, $5 million annual savings, and 10% annual cost reduction in desalination.

• Manufacturing transformation underway, with phase I to optimize productivity and add 300 basis points to gross margin.

Financial guidance and capital allocation

• 2024 revenue guidance: $140-$150 million, gross margin 64%-67%.

• 2025 revenue guidance: $152-$164 million, with 9% growth over 2024; wastewater to grow 20%, CO2 to begin full commercialization.

• 2026 revenue growth expected at 10%, with wastewater accelerating to 25% and CO2 reaching $5-$10 million.

• Long-term targets: $300 million revenue by 2029, gross margin above 68%, and less than $30 million CapEx required over five years.

• $50 million share buyback program announced, with ongoing commitment to return excess capital to shareholders.