Breaking Down Energy Recovery, Inc. (ERII) Financial Health: Key Insights for Investors

Are you keeping a close watch on Energy Recovery Inc.'s (ERII) financial performance? The company's recent Q4 2024 results, released on February 26, 2025, show a mixed bag, and understanding the details is crucial for investors. While revenue reached $67.1 million, a 17% increase year-over-year, it slightly missed estimates. However, net income jumped by 19% to $23.5 million, with earnings per share (EPS) at $0.41, exceeding expectations. Gross margins also improved to 70.2%. How do these figures stack up against previous performance, and what are the key factors driving these results? Dive in to uncover the insights that can inform your investment decisions.

Energy Recovery, Inc. (ERII) Revenue Analysis

Understanding Energy Recovery, Inc.'s (ERII) financial health requires a close examination of its revenue streams. A comprehensive analysis reveals key insights into the company's performance and future prospects.

Breakdown of Primary Revenue Sources:

Energy Recovery, Inc. operates primarily in three segments:

• Water: This segment constitutes a significant portion of the company's revenue, focusing on solutions for seawater and brackish water desalination, and wastewater treatment.
• Emerging Technologies: This includes the development and application of technologies like the PX G1300 for CO2 refrigeration in supermarkets.
• Corporate: Encompasses overall company activities and support functions.

Year-over-Year Revenue Growth Rate:

In Q4 2024, Energy Recovery Inc. reported revenue of $67.1 million, a 17% increase compared to Q4 2023. For the full year 2024, the company's revenue reached $144.95 million, reflecting a 12.93% increase compared to the previous year's $128.35 million.

Historical revenue trends showcase the following:

Contribution of Different Business Segments to Overall Revenue:

The Water segment remains a primary revenue driver, with significant contributions from desalination projects in the Middle East, Asia, and Europe. The wastewater segment is also expanding, with contracts growing by 46%. The Emerging Technologies segment, particularly the CO2 refrigeration business, is expected to contribute more substantially in the coming years, with revenue projections of $1 to $3 million in 2025 and $5 to $10 million in 2026.

Analysis of Any Significant Changes in Revenue Streams:

A notable shift includes the increasing focus on the wastewater segment and the strategic expansion into CO2 refrigeration technologies. While the NEOM project in Saudi Arabia has shifted to a phased approach, potentially delaying some expected revenue, the company is making significant progress in diversifying its revenue streams through these new ventures. The manufacturing transformation initiatives have also positively impacted gross margins, contributing to overall financial health. In Q3 2024, the company reported a revenue of $38.584 million, with significant contributions from PX sales.

Explore more about Energy Recovery, Inc. in this detailed investor profile: Exploring Energy Recovery, Inc. (ERII) Investor Profile: Who’s Buying and Why?

Energy Recovery, Inc. (ERII) Profitability Metrics

Analyzing Energy Recovery, Inc.'s profitability involves examining its gross profit, operating profit, and net profit margins to understand the company's financial health and operational efficiency. Trends in these metrics over time, in comparison to industry averages, offer valuable insights for investors.

Here's a breakdown of key profitability aspects based on the latest available data:

• Gross Profit: Gross profit is calculated as revenue less the cost of goods sold (COGS). It indicates how efficiently a company utilizes its raw materials, labor, and production-related fixed assets to generate profits.
• Operating Profit: Operating profit is derived by deducting operating expenses, such as salaries, rent, and depreciation, from gross profit. Also known as earnings before interest and taxes (EBIT), operating profit offers insights into a company's profitability from its core business operations.
• Net Profit: Net profit represents a company's profit after all expenses, including interest, taxes, and depreciation, have been deducted from revenue. It is a crucial indicator of overall financial performance.

For the fiscal year 2024, Energy Recovery, Inc. reported a gross profit of $45.6 million, marking a 10.2% increase compared to the previous year. This growth was primarily attributed to increased product revenue and a favorable shift in product mix, highlighting the company's ability to manage its cost of goods sold effectively.

Operating expenses for the same period totaled $48.4 million, reflecting strategic investments in research and development, as well as sales and marketing initiatives, to support long-term growth objectives. The company's operating loss stood at $2.8 million. Despite the operating loss, these investments are aimed at fostering future revenue streams and enhancing the company's competitive positioning.

Net income for 2024 was reported as $2.4 million, or $0.04 per basic and diluted share. This positive net income was largely influenced by a $6.3 million gain from the change in fair value of warrant liabilities and a $1.1 million interest income, showcasing the impact of strategic financial management on the bottom line.

The following table summarizes Energy Recovery, Inc.'s profitability metrics for the fiscal year 2024:

These figures are crucial for investors assessing ERII's financial health and growth potential.

For further insights, you might find this resource helpful: Breaking Down Energy Recovery, Inc. (ERII) Financial Health: Key Insights for Investors

Energy Recovery, Inc. (ERII) Debt vs. Equity Structure

Understanding how Energy Recovery, Inc. (ERII) finances its growth is crucial for investors. This involves analyzing the company's debt levels, its debt-to-equity ratio, and how it strategically balances debt and equity funding.

As of the end of the fiscal year 2024, Energy Recovery, Inc. (ERII) reported having no long-term debt. This indicates a strong reliance on equity or other financing methods rather than long-term borrowing to fund its operations and growth initiatives.

A company's debt-to-equity ratio is a key metric that provides insights into its financial leverage and risk. Given that Energy Recovery, Inc. (ERII) has no long-term debt, calculating the debt-to-equity ratio would primarily involve assessing any short-term liabilities against the total equity. However, without specific figures for short-term debt, a precise ratio cannot be determined. Generally, this ratio is compared against industry standards to gauge whether the company's leverage is within a reasonable and sustainable range.

Keeping track of any recent debt issuances, credit ratings, or refinancing activities provides insight into Energy Recovery, Inc.'s (ERII) financial strategy and health. For instance, new debt issuances might indicate expansion plans, while strong credit ratings can lower borrowing costs. Refinancing activities could suggest efforts to optimize debt terms.

Energy Recovery, Inc. (ERII) strategically balances debt financing and equity funding. The absence of long-term debt suggests a preference for funding growth through equity, which can be less risky but may dilute existing shareholders' ownership. The balance between these two affects the company's financial stability and potential returns for investors.

For further insights into Energy Recovery, Inc. (ERII)'s financial health, check out: Breaking Down Energy Recovery, Inc. (ERII) Financial Health: Key Insights for Investors

Energy Recovery, Inc. (ERII) Liquidity and Solvency

Assessing Energy Recovery, Inc.'s (ERII) financial health requires a close look at its liquidity and solvency positions. These metrics provide insights into the company's ability to meet its short-term and long-term obligations. You might also be interested in Mission Statement, Vision, & Core Values of Energy Recovery, Inc. (ERII).

Liquidity Positions:

For the fiscal year ending December 31, 2024, Energy Recovery's liquidity positions can be assessed through the following ratios:

• Current Ratio: The current ratio, which measures a company's ability to pay short-term obligations, stood at 7.41 as of December 2024. This indicates that Energy Recovery has $7.41 in current assets for every $1 of current liabilities.
• Quick Ratio: The quick ratio, a more conservative measure of liquidity that excludes inventory, was 6.35 as of December 2024. This suggests that Energy Recovery has $6.35 in readily convertible assets for every $1 of current liabilities.
• Cash Ratio: The cash ratio, which only considers cash and cash equivalents, was 1.26.

Analysis of Working Capital Trends:

Net current asset value, which represents working capital, was reported as $140.87 million as of December 2024. Analyzing working capital trends reveals the company's efficiency in managing its short-term assets and liabilities.

Cash Flow Statements Overview:

A review of Energy Recovery's cash flow statements provides insight into the company's ability to generate cash from its operating, investing, and financing activities.

• Operating Cash Flow: For the year 2024, Energy Recovery's operating cash flow was $20.52 million.
• Investing Cash Flow: The investing cash flow for the same period was -$15.65 million.
• Financing Cash Flow: The financing cash flow was -$43.28 million, reflecting activities such as share repurchases. In November 2024, the Board of Directors approved a share repurchase program to purchase up to $50 million of the company's outstanding common stock. In February 2025, a new program was approved to purchase up to $30 million of the company's outstanding common stock.
• Free Cash Flow: ERII's free cash flow for Q4 2024 was $0.70. For the 2024 fiscal year, ERII's free cash flow was decreased by $ and operating cash flow was $0.42.

Potential Liquidity Concerns or Strengths:

Energy Recovery's high current and quick ratios suggest a strong liquidity position. The company's ability to cover its short-term liabilities with its current assets indicates financial stability. Additionally, the positive operating cash flow further supports the company's liquidity strength.

The following table summarizes key financial ratios for Energy Recovery:

Energy Recovery, Inc. (ERII) Valuation Analysis

To determine whether Energy Recovery, Inc. (ERII) is overvalued or undervalued, several key financial metrics and market indicators should be considered. These include price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios, as well as stock price trends, dividend yield, payout ratios (if applicable), and analyst consensus.

Currently, comprehensive P/E, P/B, and EV/EBITDA ratios for Energy Recovery, Inc. (ERII) are not readily available in the provided search results for the fiscal year 2024. For detailed valuation, consulting financial databases such as Bloomberg Terminal, Yahoo Finance, or reputable financial analysis websites is recommended.

Analyzing Energy Recovery, Inc.'s (ERII) stock price trends over the last 12 months provides insights into market sentiment and company performance. According to available data, ERII's stock has shown considerable fluctuation. For example, one source indicates a stock price increase, while another notes a significant institutional ownership, which can influence price stability and volatility. Recent data shows the stock experienced a notable correction, trading down -16.4%. Monitoring these trends helps investors gauge potential entry and exit points.

Energy Recovery, Inc. (ERII) does not currently offer a dividend yield, as the company has not established a history of dividend payouts. Therefore, dividend yield and payout ratios are not applicable in this valuation analysis.

Analyst consensus provides a summarized view of professional financial analysts' opinions on Energy Recovery, Inc.'s (ERII) stock. The consensus is typically categorized as buy, hold, or sell, reflecting overall expectations for the stock's performance. Recent analyst ratings show varied recommendations. One source indicates a consensus of 'hold,' while another suggests a more optimistic outlook. For instance, analysts at B. Riley Securities adjusted their price target on ERII, indicating a change in valuation perspective. Investors should consider these diverse opinions alongside their own research.

To summarize, a thorough valuation analysis of Energy Recovery, Inc. (ERII) requires a detailed examination of valuation ratios, stock price trends, and analyst consensus. Given the dynamic nature of market conditions and financial data, continuous monitoring and up-to-date information are essential for making informed investment decisions.

Further insights into the company's investor profile can be found here: Exploring Energy Recovery, Inc. (ERII) Investor Profile: Who’s Buying and Why?

Energy Recovery, Inc. (ERII) Risk Factors

Energy Recovery, Inc. (ERII) faces a variety of internal and external risks that could impact its financial health. These risks span industry competition, regulatory changes, market conditions, and specific operational and strategic challenges identified in their financial reports. Understanding these factors is crucial for investors assessing the company's stability and growth potential.

Industry Competition: The water treatment and industrial process industries are highly competitive. Energy Recovery faces competition from established companies and new entrants, some of which may have greater financial and technical resources. Increased competition could lead to price pressures, reduced market share, and decreased profitability for Energy Recovery.

Regulatory Changes: Environmental regulations and standards play a significant role in the adoption of Energy Recovery’s products. Changes in regulations, such as stricter environmental standards or incentives for alternative technologies, could impact the demand for their solutions. Monitoring regulatory developments and adapting to changing requirements are essential for maintaining a competitive edge. For more information, refer to Mission Statement, Vision, & Core Values of Energy Recovery, Inc. (ERII).

Market Conditions: Energy Recovery's financial performance is influenced by global economic conditions and specific market dynamics in the water treatment and industrial sectors. Economic downturns, reduced capital spending by customers, or fluctuations in commodity prices could adversely affect the company's revenue and profitability.

Operational Risks: Operational risks include challenges related to manufacturing, supply chain management, and project execution. Disruptions in the supply of critical components, delays in project implementation, or quality control issues could lead to increased costs, project delays, and customer dissatisfaction.

Financial Risks: Financial risks encompass factors such as liquidity, access to capital, and currency exchange rate fluctuations. Maintaining sufficient cash flow to fund operations, invest in research and development, and manage debt obligations is critical. Fluctuations in exchange rates can impact revenue and expenses, particularly for companies with international operations like Energy Recovery.

Strategic Risks: Strategic risks involve decisions related to market expansion, product development, and partnerships. Entering new markets or launching new products carries inherent risks, including the potential for lower-than-expected adoption rates or increased competition. Strategic alliances and partnerships also involve risks related to alignment of interests, contract disputes, or the performance of partners.

Details of Energy Recovery, Inc.'s risk factors can be found in their latest Form 10-K filing with the Securities and Exchange Commission (SEC). The Form 10-K provides a comprehensive overview of the company's business, financial condition, and risk factors.

Energy Recovery, Inc. (ERII) Growth Opportunities

Energy Recovery, Inc. (ERII) is strategically positioned for future growth, driven by several key factors. These include innovative product development, expansion into new markets, strategic partnerships, and a competitive edge derived from its unique technology.

Key growth drivers for Energy Recovery, Inc. (ERII) include:

• Product Innovations: Energy Recovery, Inc. (ERII) consistently invests in research and development to enhance its existing product line and introduce new solutions.
• Market Expansions: Energy Recovery, Inc. (ERII) is actively expanding its reach into new geographic regions and industries, targeting areas with high growth potential for water treatment and industrial processes.
• Strategic Acquisitions: Although not always a primary strategy, Energy Recovery, Inc. (ERII) may consider strategic acquisitions to enhance its technology portfolio or expand its market presence.

Future revenue growth projections and earnings estimates for Energy Recovery, Inc. (ERII) depend on several factors, including the successful execution of its growth strategies and overall market conditions. Financial analysts' estimates indicate a positive growth trajectory, driven by increasing demand for efficient energy recovery solutions. For example, analysts predict revenues of $167.9 million for fiscal year 2024, which represents a 28.97% increase year-over-year. Revenue is projected to increase to $213.4 million in 2025 and $258.4 million in 2026.

Strategic initiatives and partnerships play a crucial role in Energy Recovery, Inc. (ERII)'s growth strategy. Collaborations with key industry players and technology partners can accelerate product development and market penetration. These partnerships often provide access to new markets, technologies, and expertise, enhancing Energy Recovery, Inc. (ERII)'s competitive position.

Energy Recovery, Inc. (ERII)'s competitive advantages stem from its proprietary technology and established market presence. The company's pressure exchanger technology offers superior energy efficiency and cost savings compared to traditional methods. This technological edge, combined with a strong reputation and customer relationships, positions Energy Recovery, Inc. (ERII) favorably for sustained growth.

A summary of Energy Recovery, Inc. (ERII)'s financial performance and projections is as follows:

For more insights into Energy Recovery, Inc. (ERII) and its investors, check out: Exploring Energy Recovery, Inc. (ERII) Investor Profile: Who’s Buying and Why?