Energy Recovery (ERII) Q1 2026 earnings summary

Executive summary

• Launched the PX Q650 product in March, received first commercial order, and are engaging with large customers for integration into major desalination plants.

• CEO David Moon announced plans to retire, remaining until a successor is appointed; CFO Mike Mancini resigned, replaced on an interim basis by Aidan Ryan.

• Strategic direction remains unchanged, focusing on product innovation, cost discipline, manufacturing transformation, and wastewater business growth.

• Revenue increased 20% year-over-year to $9.7 million for Q1 2026, driven by higher shipments in the desalination and wastewater segments, partially offset by lower aftermarket sales.

• Net loss widened to $12.3 million from $9.9 million in Q1 2025, primarily due to restructuring and impairment charges related to the wind down of the Emerging Technologies segment's grocery business.

Financial highlights

• Q1 2026 revenue was $9.7 million, up from $8.1 million year-over-year.

• Gross margin declined to 27.8% from 55.3% year-over-year, impacted by restructuring charges, product mix, and increased costs.

• Operating expenses rose to $17.6 million from $17.0 million, mainly due to goodwill impairment and restructuring charges.

• Loss from operations was $14.9 million, a decrease of 18.3% year-over-year.

• Cash and investments totaled $92.1 million at quarter end.

Outlook and guidance

• Original 2026 financial guidance withdrawn due to Middle East conflict; new guidance will be provided when visibility improves.

• Guidance for both desalination and wastewater segments is paused, with updates expected in Q2 or Q3.

• Management expects existing cash, investments, and operating cash flow to meet liquidity needs for at least the next 12 months, barring major acquisitions or rapid technology adoption.

• Revenue variability is expected due to the project-driven nature of the business and timing of large contracts.

• Management discussed 2026 outlook in a shareholder letter, with forward-looking statements noting risks related to demand, customer performance, and revenue timing.