10-Q · May 6, 2026
Energy Recovery, Inc. reported a revenue increase of 20% year-over-year, reaching $9.706 million compared to $8.065 million for the same quarter last year. Despite a growth in revenue, the company experienced a net loss…
Earnings analysis · 10-Q
ERII earnings analysis
Filed November 4, 2026 · Our reading of the company's report
The latest report
Energy Recovery’s Q3 results deteriorated sharply: revenue fell 65% year over year to $11.196 million, gross margin declined to 37.5%, operating loss reached $9.795 million, and diluted EPS was $(0.12). The decline was…
Read full summary
Energy Recovery’s Q3 results deteriorated sharply: revenue fell 65% year over year to $11.196 million, gross margin declined to 37.5%, operating loss reached $9.795 million, and diluted EPS was $(0.12). The decline was driven primarily by a 95% collapse in megaproject revenue, while both Desalination and Wastewater revenue contracted materially. Liquidity remains solid at $42.482 million of cash and $43.123 million of investments, and nine-month operating cash flow was $28.096 million, but project concentration, geopolitical exposure and the planned Saudi manufacturing facility add substantial execution risk.
Gross and operating margin
How much of each revenue dollar the business keeps.
One point per quarterly or annual filing. Both margins are shares of that report's revenue.
From revenue to operating profit
Where each $100 of revenue went in this report.
Cost of sales, operating expenses, and what remained. Figures are rounded to whole dollars.
How we read each report
Our analysis across the last few reports.
Our model's reading of each filing, not the share price or the market's reaction. Annual and quarterly reports each occupy one position.
Reported figures
- Earnings per share
- $-0.12
- Segment
- Desalination revenue was $10.693 million in Q3 2026 versus $29.110 million in Q3 2025, down 63.3%; segment operating loss was $1.622 million versus operating income of $14.074 million.
- Segment
- Wastewater revenue was $0.476 million versus $2.818 million, down 83.1%; segment operating loss was $1.388 million versus $0.411 million.
- Segment
- Corporate and Other revenue was $0.027 million versus $0.072 million; operating loss was $6.785 million versus $10.001 million.
What stood out
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Revenue and Megaprojects Collapsed
Q3 revenue was $11.196 million, down $20.804 million, or 65%, from $32.000 million in Q3 2025 and down from approximately $12 million in Q2 2026. Megaproject revenue fell 95% to $0 from $18.400 million.
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Gross Margin Compressed
Gross margin declined to 37.5% from 64.2% year over year and 74.7% in Q2 2026, while gross profit fell to $4.197 million from $20.558 million. Management attributed the decline primarily to lower volume, product mix and indirect manufacturing costs.
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Operating Loss and EPS Miss
The company reported a Q3 operating loss of $9.795 million, equivalent to an operating margin of approximately negative 87.5%, versus operating income of $3.662 million and an 11.4% operating margin in Q3 2025. Diluted EPS declined to $(0.12) from $0.07 and was below the $(0.01) consensus estimate.
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Nine-Month Cash Flow Improved
Nine-month operating cash flow increased to $28.096 million from $11.693 million, primarily because of $65.997 million of cash provided by accounts receivable collections. Capital expenditures were $2.148 million, implying nine-month free cash flow of approximately $25.948 million.
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Strong Liquidity and No Debt Drawn
Liquidity remained substantial, with $42.482 million of cash and cash equivalents and $43.123 million of short- and long-term investments at September 30, 2026. The company had no revolving loans outstanding under its $50.0 million credit facility, although $20.0 million of the $30.0 million LC component was utilized.
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Restructuring Nears Completion
The CO2 retail grocery wind-down was substantially complete by the end of Q2 2026, with $2.391 million of restructuring charges, $1.632 million of inventory reserves and $1.662 million of goodwill impairment recorded during the first nine months. Management does not expect significant additional expenses related to the restructuring.
What to watch
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Large-Project Revenue Volatility
Megaproject revenue declined 95% to $0 in Q3 2026 from $18.400 million in Q3 2025, demonstrating the company’s exposure to project timing, financing and geopolitical conditions affecting large desalination plants. Desalination revenue also fell to $10.693 million from $29.110 million.
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Middle East Geopolitical Exposure
The filing specifically adds the 2026 conflict in Iran and escalating Middle East tensions as risks to desalination demand, project financing and execution. Middle East revenue was $3.925 million in Q3 2026, or approximately 35% of total revenue of $11.196 million.
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Tariff and Global Trade Risk
The company identifies increased tariffs as having raised costs during the nine months ended September 30, 2026, with potential further tariffs or retaliatory measures threatening pricing, supply chains and demand. The company operates globally and reported $32.898 million of nine-month revenue, making international conditions material.
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Saudi Facility Execution Risk
A newly described risk concerns the first international manufacturing facility in Saudi Arabia, which is under development and expected to begin operations in 2027. Delays, cost overruns or commissioning problems could require additional capital expenditures and delay customer deliveries.
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Inventory Build and Demand Risk
Inventory increased to $44.050 million from $24.260 million at December 31, 2025, while Q3 revenue declined 65% year over year to $11.196 million. This raises risk of working-capital absorption or additional inventory valuation charges, despite the $1.632 million reserve already recorded year to date.
Management's outlook
No numeric revenue or EPS guidance, or change to prior outlook, was disclosed. Management said existing resources and cash generated from operations should meet anticipated capital requirements for at least the next 12 months; remaining performance obligations totaled $10.609 million as of September 30, 2026.
Earlier filings 4
10-K · February 25, 2026
Energy Recovery reported FY2025 revenue of $134.987M (down $9.961M or 7% vs. 2024) with net income of $22.962M and diluted EPS of $0.42. Profitability remains intact (gross margin 65.1%, operating income $23.889M) but…
10-Q · May 7, 2025
Energy Recovery reported Q1 2025 revenue of $8,065 (down $4,025 or 33% YoY) and a materially lower gross margin of 55.3% (down 370 bps). Operating expenses totaled $17,020, producing an operating loss of $12,562 and a…
10-K · February 26, 2025
Energy Recovery reported fiscal 2024 revenue of $144.948M (up $16.599M or 13% vs. 2023) with GAAP diluted EPS of $0.40 and net income of $23.05M. Profitability improved (gross profit $96.933M; gross margin 66.9%) and…
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.