Energy Recovery, Inc.

What they do

Energy Recovery's core product is the PX Pressure Exchanger, a device that captures and transfers pressure energy between high- and low-pressure fluids without using electricity, operating at up to 98% efficiency. It originated in seawater reverse osmosis desalination, where it reduces facility energy use by up to 60%, and is now being applied to wastewater filtration and other industrial applications. Manufacturing and R&D are based in San Leandro and Tracy, California, with direct sales and technical support across the U.S., Europe, the Middle East, Northern Africa, Asia and Latin America.

Revenue drivers

• Megaproject (MPD) channel — Large-scale desalination plant orders with 16-36 month shipment timelines; generated $82.9M, or 61% of 2025 revenue, down 13% from 2024's $95.4M.
• Original equipment manufacturer (OEM) channel — Smaller, shorter-duration sales into desalination, wastewater and refrigeration; $31.9M, or 24% of 2025 revenue, roughly flat versus 2024.
• Aftermarket (AM) channel — Spare parts, upgrades and service for the installed base; $20.2M, or 15% of 2025 revenue, up 12% year over year and variable by customer timing.
• Emerging Technologies (CO2 grocery) — Was developing CO2 refrigeration applications until the company decided on February 25, 2026 to wind down the CO2 retail grocery business due to a fundamental change in outlook.

Recent performance

Q2 2026 revenue fell 57% to $12.0M from $28.1M in Q2 2025, with the megaproject channel down 82% to $2.7M and OEM down 38% to $5.2M. Q2 gross margin rose to 74.7% from 64.0% on channel mix and indirect manufacturing costs, but the company reported an operating loss of $5.9M, a net loss of $3.2M, and adjusted EBITDA loss of $2.6M. The earnings release attributed the revenue decline primarily to the war in Iran. First-half 2026 revenue was $21.7M, down 40% from $36.1M, with a net loss of $15.4M and negative $0.30 diluted EPS. Cash provided by operations was $16.3M in Q2 2026, and cash and investments totaled $98.1M.

Strategy

The company continues to build on its PX pressure exchanger platform, extending it beyond desalination into wastewater filtration for battery manufacturers, mining, municipalities and other industrial dischargers. In Q1 2026 it split the former Water segment into separate Desalination and Wastewater reportable segments, and it wound down the CO2 retail grocery business so that Emerging Technologies no longer meets the criteria for a reportable segment; prior periods were recast. R&D and engineering remain a stated core of the strategy, and the company also sells complementary hydraulic turbochargers and circulation booster pumps. Corporate and Other now includes the former Emerging Technologies revenue and expenses.

Risks

• Dependence on large desalination projects — The majority of revenue comes from newly built or retrofitted large-scale desalination plants, so reduced construction, project delays or financing constraints directly cut orders.
• Megaproject revenue concentration and timing — Megaproject sales are 16-36 month contracts tied to customer schedules; in Q2 2026 that channel fell 82% year over year, driving the overall revenue decline.
• Geopolitical and macro exposure — A large share of sales is generated outside the U.S., particularly in the Middle East, Africa and Asia, exposing the company to conflict, government policy and foreign exchange swings; Q2 2026 results were attributed to the war in Iran.
• Loss-making recent periods — First-half 2026 produced a $15.4M net loss and negative $9.7M adjusted EBITDA, and management noted quarter-to-quarter revenue variability is typical.

Outlook

Management released a shareholder letter with Q2 2026 results discussing its outlook for 2026, but the specific guidance figures are not included in the provided materials. The company points to its installed base, aftermarket demand and the newly separated Desalination and Wastewater segments as the basis for how it manages the business. It also flags that project timing, political conflict and macroeconomic conditions make year-on-year comparisons less indicative of full-year trends.