Energy Recovery, Inc. (ERII): Business Model Canvas [Dec-2025 Updated]

You're digging into the Business Model Canvas for Energy Recovery, Inc. (ERII), and honestly, while their foundation in water desalination is rock solid-thanks to Pressure Exchanger (PX) devices that recover up to $\text{98\%}$ of pressure energy-the real action is their aggressive move into $\text{CO}_2$ refrigeration. As an analyst who's seen a few cycles, I see a company protecting its core with $\text{30-year}$ design life IP while chasing high-margin growth, which is reflected in their $\text{64.2\%}$ Gross Margin on $\text{32.0}$ million in revenue for Q3 2025. Below, we map out exactly how their key partnerships with EPC firms and OEMs translate into those lumpy but lucrative revenue streams, so you can see the mechanics behind their $\text{64.2\%}$ profitability.

Energy Recovery, Inc. (ERII) - Canvas Business Model: Key Partnerships

You're looking at the backbone of Energy Recovery, Inc.'s (ERII) revenue generation, which is heavily reliant on strategic alliances across water and refrigeration sectors. For context, the company reported revenue of $32.0 million for the third quarter ending September 30, 2025. These partnerships are how that revenue translates into real-world energy and water savings for critical infrastructure.

The desalination segment, built on more than 30 years of technology leadership, hinges on securing large-scale project wins with major operators and the engineering firms that build those facilities. These collaborations are essential for deploying the Pressure Exchanger (PX) technology, which can reduce energy consumption in seawater reverse osmosis (SWRO) by up to 60% and boasts a 30-year design life.

Here's a look at the significant contract awards secured through these key operator and project partnerships in 2025:

The Saudi Arabia projects specifically involved the PX Q400, and the technology in those combined Gulf region plants is estimated to prevent 832,489 tons of CO2 emissions annually. The PX technology itself achieves up to 98% efficiency in SWRO facilities.

In the commercial refrigeration space, partnerships with Original Equipment Manufacturers (OEMs) are the primary sales channel for the PX G1300, which supports the transition to CO2-based systems. These OEMs integrate the PX G1300 into new or existing racks, often for supermarket chains and cold storage facilities, which typically use systems 80 kilowatt in size or greater. Field trials with these OEM partners provided critical feedback on real-world operations and value proposition.

Performance data from these installations across North America and Europe highlights the value proposition delivered through these OEM relationships:

• Up to 15% annualized energy savings.
• Up to 22% coefficient of performance (COP) lift.
• Up to 460,000 gallons of water saved across measured sites.
• Increased cooling capacity by up to 15% at 95°F (35°C).

While the company maintains its own R&D and manufacturing facilities in California, technology validation and deployment rely on these external partners, including international distributors for regional service support.

Energy Recovery, Inc. (ERII) - Canvas Business Model: Key Activities

You're looking at the core engine of Energy Recovery, Inc. (ERII) right now, which is all about making and selling their proprietary Pressure Exchanger (PX) technology. The key activities are heavily weighted toward managing large, infrequent project awards, which causes that lumpy revenue cadence management talks about.

Manufacturing proprietary Pressure Exchanger (PX) devices in California and Texas.

Energy Recovery, Inc. designs and manufactures its solutions across multiple sites. The company maintains manufacturing and R&D facilities throughout California, including its headquarters in San Leandro, and facilities in Texas. As of 2020, the company had more than doubled its output of PX ceramic components following the opening of a 54,000 square foot facility in Tracy, California. This manufacturing footprint supports the installed base of over 30,000 Pressure Exchangers supplied globally.

Continuous Research and Development (R&D) for new applications (e.g., CO2, wastewater).

The R&D activity is focused on leveraging the core PX technology into new, high-growth areas beyond desalination. The Emerging Technologies segment includes CO2 Refrigeration and Wastewater treatment. The company is focused on driving developments to help the desalination industry reach new benchmarks in energy intensity.

Here are the specific targets and performance indicators for these newer applications as of late 2025:

• FY2025 revenue guidance for the Wastewater business is set between $8 million and $11 million.
• The Wastewater business is aiming for a revenue of $13-16 million in FY2025, based on earlier guidance.
• The CO2 application, using the PX G1300, is seeing a more measured adoption curve than previously hoped.
• The PX G1300 is designed to help supermarkets save between 15% and 30% on system energy consumption in CO2-based refrigeration.

Global sales execution and management of large, lumpy desalination contracts.

Sales execution is defined by securing large, multi-year contracts, which is why revenue recognition is so backloaded, with management expecting 55% of yearly revenues in Q4. The PX technology itself is a key driver, capable of reducing energy consumption in seawater reverse osmosis (SWRO) by up to 60% and achieving up to 98% efficiency.

Recent desalination contract wins demonstrate this lumpy nature:

The full-year guidance for the core Desalination and Wastewater businesses combined for FY2025 is $138/145 million, compared to $145 million last year.

Providing on-site technical support and aftermarket service for installed base.

The long-term nature of the product, with a 30-year design life for the PX device, mandates a strong service component. Energy Recovery, Inc. maintains a worldwide sales and technical service organization to provide on-site support for its installed base. The company has supplied more than 30,000 Pressure Exchangers across more than 100 countries.

Strategic cost control, reducing OpEx in emerging technologies like CO2.

Management is actively managing operating expenses, particularly in the newer segments, to protect profitability amidst slower adoption curves. You can see this in the reported figures for the third quarter of 2025.

• Operating expenses for Q3 2025 were $16.9 million, representing a 6.4% decrease compared to Q3 2024.
• This OpEx reduction was primarily driven by a decrease in employee costs and Emerging Technologies segment development costs.
• The company is explicitly reducing OpEx, mainly R&D in emerging businesses like CO2, to defend profitability.
• For the nine months ended September 30, 2025, the company reported an Operating Margin of -10.9% YTD.

Finance: draft 13-week cash view by Friday.

Energy Recovery, Inc. (ERII) - Canvas Business Model: Key Resources

The Key Resources for Energy Recovery, Inc. (ERII) center on its patented hardware, manufacturing capability, financial strength, and established market presence as of late 2025.

Proprietary PX Pressure Exchanger technology and associated Intellectual Property (IP) represent the core asset. This technology is proven to reduce energy consumption by up to 60% in seawater reverse osmosis (SWRO) desalination facilities and achieves up to 98% efficiency in energy recovery. Furthermore, the company has validated an industry-leading 30-year design life for its PX Pressure Exchanger components following rigorous internal testing announced in February 2025. This IP underpins Energy Recovery, Inc.'s market position in water and other sectors.

For the specialized ceramic manufacturing facilities for core components, Energy Recovery, Inc. operates manufacturing and R&D facilities throughout California. While specific details on ceramic-only facilities aren't quantified, the physical infrastructure in California supports the production of these critical, high-durability components.

The financial foundation is solid, showing a strong cash and investments balance of $79.9 million as of the third quarter ended September 30, 2025. This balance is composed of specific liquid assets reported on the balance sheet for that date.

The global installed base of over 35,000 PX devices demonstrates significant real-world deployment and validation. This installed base operates in some of the harshest environments, including seawater desalination and industrial wastewater applications, reinforcing the reputation for reliability.

Regarding highly specialized engineering and technical talent, the company maintains R&D facilities, which implies an ongoing need for specialized engineering expertise to support the technology platform and drive future developments, such as the PX G1300 for CO2 refrigeration systems.

Here are the key quantitative resources:

The deployment footprint continues to expand, evidenced by recent contract wins:

• Desalination contracts in Saudi Arabia valued at nearly $33 million, expected to be fulfilled by the end of 2025.
• Desalination contracts in the Gulf Region totaling approximately $31 million, expected to be fulfilled by the end of Q4 2025.
• Desalination contracts in Spain totaling over $7 million, announced in May 2025.

The technology's impact is also quantified through projected environmental savings from recent large contracts:

• Saudi Arabia installations projected to save approximately 1,463 GWh annually.
• Gulf Region installations projected to save an estimated 1,724 GWh annually.

Energy Recovery, Inc. (ERII) - Canvas Business Model: Value Propositions

You're looking at the core reasons why customers choose Energy Recovery, Inc. (ERII) technology over alternatives, which really boils down to efficiency, longevity, and the bottom line. These are the hard numbers backing up the value.

The Pressure Exchanger (PX) technology is engineered for peak performance in high-pressure fluid applications, like Seawater Reverse Osmosis (SWRO) desalination. The efficiency is a major selling point; the PX recovers up to 98% of the pressure energy from the brine stream.

This high recovery translates directly into significant operational savings for the user. In SWRO desalination facilities, this technology can reduce energy consumption by up to 60%. For customers, this means substantial cost avoidance; for instance, Energy Recovery saves customers a combined US $1.9B annually, based on prior data.

Durability is built into the design, which helps protect profitability by minimizing downtime. Energy Recovery, Inc. has validated that the PX energy recovery device now boasts a 30-year design life, an increase from the previously published 25-year life. The fatigue life analyses demonstrate that PX components can operate through full-pressure cycles for 30 years without material fatigue, assuming proper operation up to 1,200 psi (82 bar) in SWRO applications. To date, no PX unit has been returned by a customer for design or manufacturing defects.

The environmental impact is also a core value. For example, recent project wins in Saudi Arabia, valued at nearly $33 million, are expected to prevent 706,485 tons of CO₂ emissions each year across the combined plants. Overall, customers avoid an estimated 22.5M metric tons of carbon emissions annually.

Financially, the product structure supports strong profitability, which is key for long-term viability. You can see this reflected in the recent financial performance.

The value proposition is further supported by the installed base and market presence:

• Over 35,000 PX devices deployed worldwide.
• Devices installed in over 100 countries.
• The company has been leading in energy recovery for over 30 years.

The efficiency of the PX technology is quantified by its ability to recover energy, which in one study comparing it to a turbopump system, resulted in an energy efficiency of around 98.57% for the PX versus around 82.5% for the turbopump. This translated to an annual power cost saving of 3,510,229.14 KWH in a 12.6 MLD SWRO plant.

Finance: review the impact of the Q3 2025 product mix on the 90 bps gross margin decline by next Tuesday.

Energy Recovery, Inc. (ERII) - Canvas Business Model: Customer Relationships

You're looking at the deep, long-term nature of the relationships Energy Recovery, Inc. (ERII) builds, especially in the water sector. This isn't about quick sales; it's about multi-decade partnerships cemented by proven technology.

High-touch, long-term relationships for large, contracted desalination projects.

The relationship here is defined by the product's longevity and the critical nature of the infrastructure. The PX® Pressure Exchanger boasts a 30-year design life, meaning the customer relationship extends across decades of operation. You see this commitment reflected in the major project wins announced throughout 2025:

• Contracts totaling nearly $33 million in Saudi Arabia, expected to be fulfilled by the end of 2025.
• Approximately $31 million in contracts secured in the Gulf Region, with fulfillment expected by the end of Q4 2025.
• Over $7 million in contracts for projects in Spain, all expected to be fulfilled in 2025.

These recent wins alone total approximately $70.8 million in contracted revenue, all tied to long-term water production goals. The scale is massive; the Saudi Arabia installations alone will supply over 1.5 million cubic meters of fresh water per day.

Dedicated account management for key global EPC firms and plant operators.

Managing these large, complex projects requires direct, dedicated support for Engineering, Procurement, and Construction (EPC) firms and the eventual plant operators. This ensures smooth integration, which is vital when you consider the performance metrics these devices deliver, such as reducing energy consumption by up to 60% in seawater reverse osmosis (SWRO) facilities. The focus is on reliability, as plant operators simply cannot risk downtime in harsh, corrosive environments.

Technical consultation and co-development with OEMs for new market integration (CO2).

For emerging markets like CO2 refrigeration, the relationship shifts to technical consultation and co-development with Original Equipment Manufacturers (OEMs). While the summer of 2025 saw a 'nice season of testing' for the PX G1300®, management noted that OEM engagement, though strong, is in the very early days for commercialization. The company plans to provide clear updates on this progress in 2026. The current FY25 guidance for the CO2 business is muted, set at $1/3 million in revenue.

Aftermarket service and spare parts sales for the installed product base.

The installed base drives recurring value, supported by the technology's long design life. While specific aftermarket revenue percentages aren't detailed here, the wastewater segment shows the health of the installed base, with revenue continuing to rebound. The wastewater segment expects to meet its yearly guidance of $8/11 million. Furthermore, one of the Spanish projects involved a significant retrofit utilizing the PX Q300, showing an active relationship with existing asset owners looking to upgrade.

Investor relations transparency regarding lumpy revenue cadence.

Energy Recovery, Inc. is upfront with investors about the non-linear nature of its large equipment sales. This lumpy cadence is a key relationship point with the financial community. Here's the quick math on the timing impact:

Management clearly communicated that they expect the core business revenue to be heavily backloaded, with most of the year's sales anticipated to close in Q4. This transparency is crucial for managing expectations around the timing of mega-project shipments.

Finance: draft 13-week cash view by Friday.

Energy Recovery, Inc. (ERII) - Canvas Business Model: Channels

You're looking at how Energy Recovery, Inc. gets its technology into the hands of customers, which is heavily weighted toward large, lumpy projects right now.

The core of the channel strategy remains focused on the Water segment, which accounted for over 95% of the nine months ended September 30, 2025, revenue of $68.1 million.

The company expects the heavy second half of the year to drive the majority of the full-year revenue guidance of $138/145 million for 2025, with visibility on 90% of that guidance plus committed backlog.

Here are the key financial metrics as of the third quarter of 2025:

Direct sales force efforts target large-scale desalination and industrial projects, where revenue timing causes the quarterly volatility seen in the 17% year-over-year revenue decrease in Q3 2025 compared to Q3 2024.

Global network of distributors and sales agents in key regions is critical, as evidenced by the geographic revenue concentration from the prior year:

• Middle East and Africa: 62.55%
• Asia: 24.88%
• Europe: 6.36%
• Americas: 6.21%

OEM partners are central to the Emerging Technologies channel, specifically the CO2 refrigeration solution (PX G1300).

OEM engagement is strong, but commercialization timelines have shifted:

• FY 2025 Revenue Guidance from CO2 business: $1 million to $3 million.
• Management indicated real commercialization is likely to happen in 2027.
• The company expects to gain traction in 2026.

The Investor Relations website at https://ir.energyrecovery.com/ serves as the official channel for financial and product information, used by Energy Recovery, Inc. for complying with its disclosure obligations under Regulation FD.

The company reports financial results quarterly, with the Q3 2025 earnings call occurring on November 5, 2025.

Finance: review the Q4 2025 revenue forecast against the $79.9 million cash balance by next Tuesday.

Energy Recovery, Inc. (ERII) - Canvas Business Model: Customer Segments

You're looking at the core groups Energy Recovery, Inc. (ERII) serves right now, based on their technology deployment across different industrial needs.

The customer base is primarily segmented into two main areas: Water and Emerging Technologies. The Water segment is the historical powerhouse, heavily focused on large-scale water projects, while Emerging Technologies is where the growth in new applications, like CO2 refrigeration, is being pushed.

The geographic concentration is a major factor in the business's revenue profile. For fiscal year 2024, the split was quite clear:

The reliance on the Middle East and Africa region means that project timing there directly impacts near-term financials; for instance, a recent announcement in November 2025 detailed project wins in Saudi Arabia valued at nearly $33 million, expected to be fulfilled by the end of 2025.

Here's a breakdown of the specific customer types within those segments:

• Large-scale Seawater Reverse Osmosis (SWRO) desalination plants.
• Industrial wastewater treatment facilities.
• Commercial and industrial CO2 refrigeration system manufacturers (Emerging Tech).
• Oil, Gas, and Chemical processing industries (VorTeq technology).

For the desalination customers, the value proposition is tied to massive energy savings. Energy Recovery's PX technology can reduce energy consumption by up to 60% in SWRO facilities and achieves up to 98% efficiency. The Saudi Arabia projects alone are expected to save approximately 1,463 GWh/year, preventing 706,485 tons of CO2 emissions annually, and will supply over 1.5 million cubic meters of fresh water per day.

The Emerging Technologies customer group, specifically commercial and industrial CO2 refrigeration system manufacturers, is showing tangible progress as of late 2025. Management noted that three OEMs are integrating the PX into their rack designs, with pilot test sites expected for the summer of 2025.

The Oil, Gas, and Chemical processing industries segment, historically linked to the VorTeq technology, saw the company exit the exclusive licensing agreement with Schlumberger in June 2020, making Energy Recovery, Inc. fully responsible for global commercialization since then. While the company historically served this sector, current, specific 2025 revenue figures for VorTeq customers aren't explicitly detailed alongside the main segment reporting.

To give you a sense of the scale these customers operate within, the company reported Q3 2025 revenue of $32.00 million, and analysts forecast 0.36 earnings per share for the current fiscal year.

Finance: draft 13-week cash view by Friday.

Energy Recovery, Inc. (ERII) - Canvas Business Model: Cost Structure

You're looking at the hard numbers behind Energy Recovery, Inc. (ERII)'s operations as of late 2025. The cost structure is heavily influenced by the precision required for their core technology.

High cost of goods sold (COGS) due to specialized ceramic manufacturing is a constant factor. While the exact COGS isn't explicitly published as a standalone line item in the Q3 2025 summary, we can calculate it based on the reported Revenue and Gross Margin for the period. For the third quarter ended September 30, 2025, Revenue was $32.0 million and the Gross Margin was 64.2%. This implies a COGS of approximately $11.456 million ($32.0 million (1 - 0.642)). This cost reflects the specialized nature of manufacturing their pressure exchanger technology, which involves high-tolerance components like ceramics.

Significant investment in Research and Development (R&D) for emerging technologies is a key area of expenditure. Management noted that Operating Expenses decreased by 6.4% year-over-year in Q3 2025, driven in part by a reduction in Emerging Technologies segment development costs. This shows a dynamic cost structure where spending on future growth, like the CO2 refrigeration business, is actively managed to protect near-term profitability.

The total Operating expenses, which totaled $16.9 million in Q3 2025, reflect the company's overhead and investment in future growth. This figure was lower than the $18.1 million reported in Q3 2024, showing a focus on cost control across the board, even while maintaining global operations.

For international support, Global sales, general, and administrative (SG&A) expenses are embedded within the total Operating Expenses. The Q1 2025 report broke down operating expenses into G&A, Sales & Marketing (S&M), and R&D, confirming that SG&A components are material parts of the overall cost base necessary to support global sales and technical support facilities.

The pressure from costs related to product mix and tariffs impacting gross margin was explicitly cited. The Q3 2025 Gross Margin of 64.2% was down 90 basis points (bps) from Q3 2024's 65.1%. The primary driver for this compression was stated as costs related to product mix and tariffs, although this was partially offset by a decrease in indirect manufacturing costs.

Here's a quick look at the key cost-related financial metrics for Q3 2025 compared to the prior year:

The cost structure management involves balancing the fixed-like costs of specialized manufacturing with variable spending on emerging technologies. You can see the focus on efficiency:

• Reduced Operating Expenses by 6.4% year-over-year in Q3 2025.
• Actively managed Emerging Technologies segment development costs to improve the expense profile.
• Gross Margin compression directly linked to external factors like tariffs.
• Desalination and wastewater businesses are expected to meet yearly revenue guidance, suggesting their COGS structure is more stable than the emerging segment.

Finance: draft 13-week cash view by Friday.

Energy Recovery, Inc. (ERII) - Canvas Business Model: Revenue Streams

You're looking at the top-line story for Energy Recovery, Inc. (ERII) as of late 2025, and honestly, it's a tale of two dynamics: high-margin product sales versus lumpy, project-based revenue recognition. The core of Energy Recovery, Inc.'s revenue generation comes from its Water segment, which supplies its proprietary pressure exchanger (PX) technology and pumps to the reverse osmosis desalination market, alongside related products and services.

The most significant factor impacting near-term revenue visibility is the nature of their large, contracted projects. Revenue from these contracted mega-projects causes noticeable revenue lumpiness, meaning the timing of shipment and recognition can swing quarterly results significantly. We saw this play out in Q3 2025, where the revenue cadence was lower than the prior year due to this timing effect.

To give you a clear snapshot of the recent performance grounding this revenue stream analysis, here are the actual numbers reported through the third quarter of 2025. This data shows the immediate impact of that project timing on the top line.

The business model relies on several distinct revenue sources tied to its installed base and new deployments. While the primary driver is the initial sale of the PX Pressure Exchanger devices for desalination and wastewater applications, the ongoing service component is crucial for stability. The company also generates revenue from the installed base through aftermarket sales of spare parts and service contracts, which typically provide a more predictable revenue stream compared to the large equipment orders.

Here's a breakdown of the confirmed revenue stream components and context:

• Product sales of PX Pressure Exchanger devices for desalination and wastewater.
• Revenue from contracted mega-projects, which causes revenue lumpiness.
• Aftermarket sales of spare parts and service for the installed base.
• The Water segment contributes the majority of Energy Recovery, Inc.'s revenue.

The company also reports revenue from its Emerging Technologies segment, though the Water segment remains the dominant source. If onboarding takes 14+ days longer than expected for a major desalination plant, that $6.6 million year-over-year revenue decrease in Q3 2025 can definitely happen.

Finance: draft 13-week cash view by Friday.