Nasdaq:ERII
Energy Recovery, Inc.
A leading provider of electrostatic precipitator solutions that help heavy industries reduce air pollution while recovering energy from exhaust streams.
Key Metrics
Investment Thesis
Bull Case
ERI offers exposure to the growing global need for air pollution control as industries face stricter environmental regulations requiring modern filtration systems. The company's strong free cash flow generation allows for consistent shareholder returns through buybacks, evidenced by recent $35.6M repurchases, while maintaining a conservative debt profile with total liabilities of only $25.3M.
Bear Case
Revenue declined from the 2024 peak of $144.9M to $135M in the most recent period, suggesting potential saturation in current markets or cyclical headwinds affecting industrial capex. The substantial retained earnings deficit of $128.7M indicates historical capital intensity or past aggressive expansion that may still impact future profitability if growth does not accelerate.
About Energy Recovery, Inc.
Energy Recovery, Inc. (ERI) develops and manufactures electrostatic precipitators and other energy recovery equipment to control air pollution in industrial facilities. The company serves sectors including cement, lime, glass, power generation, and metal refining with its proprietary ESP technology. ERII operates globally, focusing on retrofitting existing plants and providing new installations for environmental compliance and efficiency.
Analysis
Management Discussion
The company delivered solid financial performance with revenue of $135M and net income of $23M in the latest year, showing resilience despite a slight dip from 2024's higher figures. Operating cash flow of $18.8M provides healthy liquidity alongside a robust balance sheet with $48.1M in cash and equivalents. While share repurchases of $35.6M indicate confidence in capital allocation, the significant reduction in accounts payable ($1.5M) warrants monitoring for potential liquidity tightening.
Industry Overview
The global air pollution control equipment market is driven by stringent environmental laws requiring heavy industries to upgrade emission scrubbing and filtration systems. Electrostatic precipitators remain the preferred technology for high-temperature, high-volume exhaust streams typical in cement and power plants, offering a durable niche with limited direct competition.
Financial Statements
Income Statement
Balance Sheet
Cash Flow
| Metric | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Revenue | $125.6M | $128.3M | $144.9M | $135.0M |
| Cost of Revenue | $0 | $41.3M | $48.0M | $47.1M |
| Gross Profit | $125.6M | $87.1M | $96.9M | $87.9M |
| Operating Expenses | $100.8M | $68.0M | $77.2M | $64.0M |
| Operating Income | $24.8M | $19.1M | $19.7M | $23.9M |
| R&D | $17.9M | $17.0M | $16.2M | $13.0M |
| G&A | $28.3M | $28.9M | $33.1M | $29.8M |
| Marketing | $16.3M | $22.2M | $25.4M | $20.9M |
| Stock-Based Comp | $6.5M | $8.0M | $10.3M | $7.7M |
| D&A | $4.8M | $4.1M | $4.0M | $3.8M |
| Depreciation | $4.7M | $4.1M | $4.0M | $3.8M |
| Other OpEx | $38.2M | $0 | $2.5M | $313.0K |
| Non-Operating Income | $1.2M | $3.7M | $6.0M | $3.7M |
| Pre-Tax Income | $26.1M | $22.7M | $25.7M | $27.6M |
| Income Tax | $2.0M | $1.2M | $2.7M | $4.6M |
| Continuing Ops | $24.0M | $21.5M | $23.1M | $23.0M |
| Discontinued Ops | $0 | $0 | $0 | $0 |
| Net Income | $24.0M | $21.5M | $23.1M | $23.0M |
| Minority Interest | $0 | $0 | $0 | $0 |
| Net to Common | $24.0M | $21.5M | $23.1M | $23.0M |
| Metric | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Current Assets | $157.9M | $185.5M | $173.7M | $181.2M |
| Cash & Equivalents | $56.4M | $68.1M | $29.6M | $48.1M |
| Marketable Securities | $33.5M | $40.4M | $48.4M | $27.2M |
| Accounts Receivable | $34.1M | $46.9M | $64.1M | $76.6M |
| Inventory | $28.4M | $26.1M | $24.9M | $24.3M |
| Prepaid Expenses | $5.6M | $3.8M | $6.7M | $5.1M |
| Other Current Assets | $0 | $0 | $0 | $0 |
| Long-Term Assets | $59.2M | $67.5M | $69.1M | $50.3M |
| PP&E (Net) | $19.6M | $18.7M | $15.4M | $12.9M |
| Goodwill | $12.8M | $12.8M | $12.8M | $12.8M |
| Operating Leases | $13.1M | $11.5M | $9.7M | $7.7M |
| LT Investments | $3.1M | $13.8M | $21.8M | $8.0M |
| Other LT Assets | $10.6M | $10.7M | $9.4M | $8.8M |
| Total Assets | $217.0M | $253.0M | $242.8M | $231.5M |
| Current Liabilities | $18.3M | $21.5M | $23.4M | $17.4M |
| Accounts Payable | $814.0K | $3.0M | $3.1M | $2.1M |
| Current Leases | $1.6M | $1.8M | $2.0M | $2.5M |
| Deferred Revenue | $1.2M | $1.1M | $571.0K | $1.0M |
| Taxes Payable | — | $1.1M | $947.0K | $2.4M |
| Other Current Liab | $14.7M | $14.5M | $16.8M | $9.3M |
| Long-Term Liabilities | $13.4M | $11.7M | $9.4M | $8.0M |
| LT Operating Leases | $13.3M | $11.5M | $9.3M | $6.9M |
| Other LT Liab | $0 | $117.0K | $57.0K | $1.1M |
| Total Liabilities | $31.7M | $33.2M | $32.8M | $25.3M |
| Shareholders' Equity | $185.3M | $219.8M | $210.0M | $206.2M |
| Paid-In Capital | $205.0M | $217.6M | $235.0M | $244.4M |
| Retained Earnings | $61.2M | $82.7M | $105.7M | $128.7M |
| AOCI | $-349.0K | $-44.0K | $98.0K | $-94.0K |
| Total L&E | $217.0M | $253.0M | $242.8M | $231.5M |
| Metric | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Net Income (CFO) | $24.0M | $21.5M | $23.1M | $23.0M |
| Non-Cash Adjustments | $-32.1M | $-8.3M | $-20.1M | $-11.3M |
| Working Capital Changes | $20.7M | $12.9M | $17.6M | $7.2M |
| Cash from Operations | $12.6M | $26.1M | $20.5M | $18.8M |
| Capital Expenditures | $4.2M | $2.6M | $1.3M | $1.3M |
| Cash from Investing | $-6.9M | $-19.1M | $-15.7M | $34.0M |
| Share Buybacks | $26.7M | $0 | $50.4M | $35.6M |
| Cash from Financing | $-23.7M | $4.8M | $-43.3M | $-34.5M |
| FX Effect | $-20.0K | $33.0K | $-52.0K | $98.0K |
| Net Change in Cash | $-18.0M | $11.8M | $-38.5M | $18.3M |
| Beginning Cash | $74.5M | $56.5M | $68.2M | $29.8M |
| Ending Cash | $56.5M | $68.2M | $29.8M | $48.1M |
Frequently Asked Questions
How does Energy Recovery, Inc. make money?
Revenue is primarily derived from the sale and installation of electrostatic precipitators (ESP) and fabric filters for air pollution control. The company also generates income through equipment retrofitting services, maintenance contracts, and spare parts sales to existing industrial clients.
What are the main risks for ERII?
Regulatory changes in environmental standards could force rapid adoption of new technologies or conversely reduce demand if compliance thresholds relax. Heavy reliance on a concentrated customer base within specific heavy industries creates exposure to cyclical downturns in cement, steel, or power generation sectors. Global supply chain disruptions for specialized manufacturing components could impact margins and delivery timelines.
What is ERII's competitive advantage?
ERI holds significant intellectual property protection via its patented ESP technology, creating a high barrier to entry against competitors. The company benefits from strong customer loyalty in niche industrial sectors where switching costs are high due to the specialized nature of air pollution control systems.
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Not financial advice. All content is for informational purposes only. Data may contain errors. Consult a qualified financial advisor before making investment decisions.