Trough first-half revenue of $21.7 million (-40% year over year) drove operating losses of $10.0 million and $5.9 million despite a 74.7% Q2 2026 gross margin, underscoring a ~$14–16 million fixed-cost base that the current volume run-rate cannot cover.
Energy Recovery, Inc. (ERII) annual income statement — 20-year revenue, gross profit & net income history
| Metric | TTM | Dec'25 | Dec'24 | Dec'23 | Dec'22 | Dec'21 | Dec'20 | Dec'19 | Dec'18 | Dec'17 | Dec'16 | Dec'15 | Dec'14 | Dec'13 | Dec'12 | Dec'11 | Dec'10 | Dec'09 | Dec'08 | Dec'07 | Dec'06 |
|---|
| Sales/Revenue | 99.48M | 134.7M | 144.95M | 128.35M | 125.59M | 103.9M | 92.09M | 72.83M | 74.52M | 63.16M | 54.72M | 44.71M | 30.43M | 43.05M | 42.63M | 28.05M | 45.85M | 47.01M | 52.12M | 35.41M | 20.06M |
| Revenue Growth % | -26.41% | -7.07% | 12.93% | 2.2% | 20.87% | 12.83% | 26.44% | -2.26% | 17.99% | 15.43% | 22.37% | 46.96% | -29.32% | 0.97% | 52% | -38.83% | -2.47% | -9.79% | 47.17% | 76.56% | - |
| Cost of Goods Sold | 37.19M | 46.92M | 48.02M | 41.27M | 38.23M | 32.67M | 28.25M | 20.34M | 17.87M | 19.06M | 17.85M | 19.11M | 13.71M | 17.32M | 22.42M | 20.25M | 23.78M | 17.59M | 18.93M | 14.85M | 8.13M |
| COGS % of Revenue | - | 34.83% | 33.13% | 32.15% | 30.44% | 31.44% | 30.68% | 27.92% | 23.99% | 30.18% | 32.62% | 42.74% | 45.07% | 40.24% | 52.59% | 72.19% | 51.86% | 37.43% | 36.33% | 41.94% | 40.54% |
| Gross Profit | 62.3M | 87.78M | 96.93M | 87.08M | 87.36M | 71.23M | 63.84M | 52.5M | 56.64M | 44.09M | 36.87M | 25.6M | 16.71M | 25.72M | 20.21M | 7.8M | 22.07M | 29.42M | 33.19M | 20.56M | 11.93M |
| Gross Margin % | 62.62% | 65.17% | 66.87% | 67.85% | 69.56% | 68.56% | 69.32% | 72.08% | 76.01% | 69.82% | 67.38% | 57.26% | 54.93% | 59.76% | 47.41% | 27.81% | 48.14% | 62.58% | 63.67% | 58.06% | 59.46% |
| Gross Profit Growth % | - | -9.44% | 11.32% | -0.32% | 22.63% | 11.58% | 21.61% | -7.31% | 28.45% | 19.61% | 44% | 53.19% | -35.02% | 27.25% | 159.17% | -64.67% | -24.97% | -11.35% | 61.39% | 72.4% | - |
| Operating Expenses | 56.02M | 63.22M | 77.21M | 68.03M | 62.53M | 57.4M | 32.55M | 42.13M | 46.66M | 40.82M | 36.51M | 37.39M | 35.2M | 28.43M | 28.25M | 29.8M | 27.04M | 23.27M | 20.29M | 11.23M | 8.29M |
| OpEx % of Revenue | - | 46.94% | 53.27% | 53% | 49.79% | 55.25% | 35.34% | 57.85% | 62.62% | 64.63% | 66.73% | 83.63% | 115.68% | 66.04% | 66.27% | 106.25% | 58.97% | 49.49% | 38.92% | 31.72% | 41.32% |
| Selling, General & Admin | 34.18M | 19.35M | 58.5M | 51.03M | 44.62M | 37.32M | 33.65M | 32.27M | 29.02M | 26.75M | 25.74M | 29.1M | 24.66M | 23.14M | 22.44M | 24.74M | 25.24M | 20.23M | 17.87M | 9.53M | 7.02M |
| SG&A % of Revenue | - | 14.37% | 40.36% | 39.76% | 35.53% | 35.92% | 36.54% | 44.3% | 38.95% | 42.35% | 47.05% | 65.08% | 81.06% | 53.77% | 52.63% | 88.22% | 55.05% | 43.03% | 34.29% | 26.91% | 35% |
| Research & Development | 10.78M | 6.34M | 16.24M | 17M | 17.91M | 20.07M | 23.45M | 23.4M | 17.01M | 13.44M | 10.14M | 7.66M | 9.69M | 4.36M | 4.77M | 3.53M | 3.94M | 3.04M | 2.42M | 1.71M | 1.27M |
| R&D % of Revenue | - | 4.71% | 11.2% | 13.25% | 14.26% | 19.31% | 25.46% | 32.13% | 22.83% | 21.29% | 18.53% | 17.13% | 31.85% | 10.13% | 11.2% | 12.57% | 8.6% | 6.47% | 4.63% | 4.81% | 6.32% |
| Other Operating Expenses | 855K | 37.53M | 2.48M | 0 | 0 | 12K | -24.55M | -13.53M | -80K | -188K | 290K | -139K | 69K | 109K | 143K | 0 | 0 | 0 | 0 | 0 | 0 |
| Operating Income | 6.27M | 24.55M | 19.72M | 19.05M | 24.83M | 13.83M | 31.29M | 10.36M | 9.98M | 3.28M | 357K | -11.79M | -18.48M | -2.89M | -8.65M | -25.29M | -4.97M | 6.15M | 12.9M | 9.33M | 3.64M |
| Operating Margin % | 6.31% | 18.23% | 13.61% | 14.84% | 19.77% | 13.31% | 33.98% | 14.23% | 13.39% | 5.19% | 0.65% | -26.37% | -60.75% | -6.71% | -20.3% | -90.18% | -10.83% | 13.08% | 24.75% | 26.34% | 18.15% |
| Operating Income Growth % | - | 24.49% | 3.54% | -23.28% | 79.52% | -55.8% | 201.95% | 3.87% | 204.58% | 817.65% | 103.03% | 36.21% | -539.99% | 66.62% | 65.79% | -409.24% | -180.76% | -52.33% | 38.3% | 156.26% | - |
| EBITDA | 13.97M | 28.32M | 25.54M | 24.8M | 31.13M | 19.77M | 36.59M | 14.76M | 13.85M | 6.94M | 4.04M | -7.95M | -14.46M | 909K | -7.61M | -23.93M | 237K | 7.33M | 13.42M | 9.65M | 3.87M |
| EBITDA Margin % | 14.05% | 21.02% | 17.62% | 19.32% | 24.79% | 19.03% | 39.74% | 20.26% | 18.58% | 10.99% | 7.38% | -17.79% | -47.51% | 2.11% | -17.85% | -85.34% | 0.52% | 15.6% | 25.75% | 27.25% | 19.3% |
| EBITDA Growth % | -41.52% | 10.85% | 3.01% | -20.34% | 57.47% | -45.97% | 147.94% | 6.59% | 99.47% | 71.96% | 150.76% | 44.98% | -1690.21% | 111.94% | 68.2% | -10198.73% | -96.77% | -45.37% | 39.08% | 149.32% | - |
| D&A (Non-Cash Add-back) | 7.7M | 3.76M | 5.82M | 5.75M | 6.3M | 5.94M | 5.3M | 4.39M | 3.87M | 3.67M | 3.68M | 3.84M | 4.03M | 3.8M | 1.04M | 1.36M | 5.2M | 1.18M | 522K | 323K | 231K |
| EBIT | 3.83M | 27.59M | 22.2M | 22.7M | 26.07M | 14M | 33.63M | 10.36M | 11.44M | 9.25M | 3.72M | -11.93M | -18.41M | -2.7M | -8.51M | -25.11M | -5.16M | 6.2M | 13.77M | 9.33M | 3.64M |
| Net Interest Income | 2.84M | 3.61M | 6.22M | 3.76M | 908K | 204K | 913K | 2.01M | 1.54M | 868K | 306K | 11K | 0 | 0 | -6K | -34K | -73K | -46K | 794K | 412K | -19K |
| Interest Income | 2.84M | 3.61M | 6.22M | 3.76M | 908K | 204K | 913K | 2.01M | 1.54M | 870K | 309K | 53K | 0 | 0 | 0 | 0 | 0 | 0 | 873K | 517K | 58K |
| Interest Expense | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1K | 2K | 3K | 42K | 0 | 0 | 6K | 34K | 73K | 46K | 79K | 105K | 77K |
| Other Income/Expense | -2.44M | 3.04M | 6.01M | 3.65M | 1.24M | 173K | 839K | 1.89M | 1.46M | 680K | 287K | -181K | 69K | 109K | 137K | 150K | -267K | 8K | 794K | 412K | -19K |
| Pretax Income | 3.83M | 27.59M | 25.73M | 22.7M | 26.07M | 14M | 32.13M | 12.26M | 11.44M | 3.96M | 644K | -11.97M | -18.41M | -2.78M | -8.52M | -25.14M | -5.23M | 6.16M | 13.7M | 9.74M | 3.62M |
| Pretax Margin % | 3.85% | 20.49% | 17.75% | 17.69% | 20.76% | 13.48% | 34.89% | 16.83% | 15.35% | 6.26% | 1.18% | -26.78% | -60.52% | -6.46% | -19.98% | -89.65% | -11.41% | 13.1% | 26.28% | 27.5% | 18.05% |
| Income Tax | -1.31M | 4.63M | 2.69M | 1.2M | 2.02M | -265K | 5.75M | 1.34M | -10.65M | -8.39M | -390K | -334K | 291K | 327K | -262K | 1.3M | -1.63M | 2.47M | 5.03M | 3.95M | 1.24M |
| Effective Tax Rate % | -34.11% | 16.79% | 10.43% | 5.29% | 7.76% | -1.89% | 17.88% | 10.96% | -93.12% | -212.18% | -60.56% | 2.79% | -1.58% | -11.77% | 3.08% | -5.17% | 31.07% | 40.14% | 36.74% | 40.52% | 34.22% |
| Net Income | 5.13M | 22.96M | 23.05M | 21.5M | 24.05M | 14.27M | 26.39M | 10.91M | 22.09M | 12.35M | 1.03M | -11.64M | -18.7M | -3.11M | -8.25M | -26.44M | -3.61M | 3.69M | 8.66M | 5.79M | 2.38M |
| Net Margin % | 5.16% | 17.05% | 15.9% | 16.75% | 19.15% | 13.73% | 28.65% | 14.98% | 29.65% | 19.55% | 1.89% | -26.03% | -61.48% | -7.22% | -19.36% | -94.28% | -7.87% | 7.84% | 16.62% | 16.36% | 11.88% |
| Net Income Growth % | -73.69% | -0.38% | 7.19% | -10.58% | 68.54% | -45.92% | 141.79% | -50.6% | 78.89% | 1094.39% | 108.88% | 37.78% | -502.22% | 62.37% | 68.79% | -632.9% | -197.88% | -57.45% | 49.54% | 143.2% | - |
| Net Income (Continuing) | 5.13M | 22.96M | 23.05M | 21.5M | 24.05M | 14.27M | 26.39M | 10.91M | 22.09M | 18.35M | 1.03M | -11.64M | -18.7M | -3.11M | -8.25M | -26.44M | -3.61M | 3.69M | 8.66M | 5.79M | 2.38M |
| Discontinued Operations | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Minority Interest | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| EPS (Diluted) | 0.10 | 0.42 | 0.40 | 0.37 | 0.42 | 0.24 | 0.47 | 0.19 | 0.40 | 0.33 | 0.07 | -0.22 | -0.36 | -0.06 | -0.16 | -0.50 | -0.07 | 0.07 | 0.18 | 0.14 | 0.06 |
| EPS Growth % | -73.55% | 5% | 8.11% | -11.9% | 75% | -48.94% | 147.37% | -52.5% | 21.21% | 371.43% | 131.82% | 38.89% | -492.11% | 62% | 68% | -621.5% | -199% | -61.11% | 28.57% | 133.33% | - |
| EPS (Basic) | - | 0.43 | 0.40 | 0.38 | 0.43 | 0.25 | 0.47 | 0.20 | 0.41 | 0.34 | 0.07 | -0.22 | -0.36 | -0.06 | -0.16 | -0.50 | -0.07 | 0.07 | 0.19 | 0.15 | 0.06 |
| Diluted Shares Outstanding | 51.03M | 54.16M | 57.82M | 57.74M | 57.64M | 58.72M | 56.64M | 56.07M | 55.34M | 55.61M | 55.45M | 52.15M | 51.67M | 51.07M | 51.45M | 52.61M | 52.07M | 52.64M | 47.39M | 41.43M | 40.24M |
| Basic Shares Outstanding | 51.03M | 53.8M | 57.21M | 56.44M | 56.22M | 56.99M | 55.71M | 54.74M | 53.76M | 53.7M | 52.34M | 52.15M | 51.67M | 51.07M | 51.45M | 52.61M | 52.07M | 50.17M | 44.85M | 39.06M | 38.02M |
| Dividend Payout Ratio | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - |
Quick answers to the most common questions about buying ERII stock.
For fiscal year 2025, Energy Recovery, Inc. (ERII) reported total revenue of $134.7M. This represents a 571.6% increase compared to $20.1M in 2006.
Energy Recovery, Inc. (ERII) is profitable, generating $23.0M in net income for the fiscal year ending 2025 with a net profit margin of 17.0%.
Energy Recovery, Inc. (ERII) reported an operating income of $24.6M, resulting in an operating profit margin of 18.2%. This margin reflects the operational efficiency of the business before interest and taxes.
Energy Recovery, Inc. (ERII) generated $87.8M in gross profit for the year, representing a gross profit margin of 65.2%. This demonstrates the company's core pricing power and production efficiency.
Key Metrics
Top Statement Risk
Revenue concentration and Q4 timing dependence
Metrics are mathematically derived from official filings.
Revenue Lapses Into Sharp Contraction
Trailing-twelve-month revenue declined approximately 11% to about $120 million, with Q2 2026 revenue of $12.0 million falling 57.2% year over year per ERII's quarterly filings, the sharpest single-quarter contraction in the ten-quarter series reviewed and the second consecutive declining print.
The ten-quarter series reveals an extreme back-half revenue profile — Q4 printed $67.1M and $66.6M while Q1-Q2 managed only $8-12M — which makes any single quarter a poor read on the underlying franchise. Critically, Q4 2025 came in essentially flat versus Q4 2024, suggesting the growth engine stalled at its seasonal peak, and the subsequent H1 2026 collapse to $21.7M versus $36.2M a year earlier appears to have extended that weakness into the off-peak periods. The 20.3% Q1 2026 revenue rebound now looks like noise rather than a turn, given the 57.2% decline that immediately followed.
Elite Gross Margins Rarely Seen in Industrials
Gross margin of 74.7% in Q2 2026 compares with peer gross margins of 9.9% to 35.5%, suggesting ERII's energy-recovery technology carries unusual pricing power; as reported in its financial statements, the metric has ranged between 44.7% and 74.7% across all ten quarters.
Structural gross margins in the mid-to-high sixties, against Franklin Electric at 35.5% and Helios at 32.3, imply a differentiated technology position rather than a commoditized industrial component — and margin actually expanded while volume cratered, with COGS falling to $3.0M on $12.0M of revenue. That inverse relationship between scale and margin suggests mix and project-level pricing rather than manufacturing efficiency gains, meaning the elevated 74.7% reading may reflect a favorable parts/service mix in a low-volume quarter. Investors should monitor whether gross margin holds as revenue normalizes, since the 44.7% print in Q1 2026 shows the metric is not immune to period-to-period swings.
Q4 Leverage Sharpens the Off-Quarter Losses
Q4 2025 posted a 48.0% operating margin on $66.6 million of revenue, while Q2 2026 recorded a $5.9 million operating loss at a -49.0% margin, based on ERII's reported expense lines, reflecting a roughly $14-16 million quarterly fixed cost base.
The swing from +48.0% to -49.0% operating margin in two quarters is a direct function of an expense base that barely moves while revenue varies by more than 5x across the year, which cuts both ways for the model. Trailing-four-quarter operating income of $19.8M actually edged up from $18.2M in the prior four, so the leverage engine has not broken in absolute terms — but that figure is carried almost entirely by Q4 2025, and the first-half 2026 losses of $15.9M suggest the fixed base is now outrunning off-peak revenue. This structure implies very high incremental margins on any Q2-Q3 revenue recovery, but also asymmetric downside if the peak quarter slips.
SG&A Timing Obscures True Expense Run-Rate
SG&A of $1.2 million in Q1 2026 compares with a $11-15.6 million range in every other quarter of the series; based on ERII's income statements, this anomaly appears to reflect expense-recognition timing rather than structural cost reduction.
Combined SG&A and R&D was only $2.2M in Q1 2026 versus $13.9M in Q2 2026 and $26.5M in Q1 2025, an outlier that appears to reflect quarter-boundary expense allocation rather than a disclosed cost-discipline program, and analysts should therefore model opex on a trailing-four-quarter basis. R&D intensity has nonetheless crept up in relative terms — $2.8M of R&D against just $12.0M of Q2 2026 revenue versus $4.4M on $12.1M in Q1 2024 — which sustains the technology moat but compresses operating income when revenue is weak. Whether management defends that R&D spend through a downturn, as the reported figures do not yet show meaningful retrenchment, warrants further investigation.
SBC Lumpiness Distorts Profit Comparisons
Stock-based compensation of $13.6 million in Q4 2025 stands against $1.4-3.3 million in surrounding quarters; per ERII's disclosures, the charge appears to reflect a concentrated annual grant rather than run-rate dilution, complicating period-over-period earnings comparisons and the volatility in reported net margin.
The $13.6M Q4 2025 SBC charge is roughly four to nine times the level seen in every other quarter of the series, which implies an annual grant or vesting event concentrated in that period — yet it also means the $26.9M net income and 40.4% net margin printed in that quarter were earned against an unusually heavy non-cash drag. Normalizing SBC to the observed $1.4-2.8M quarterly range would materially lift trailing earnings power, but it would also signal ongoing dilution that headline EPS figures understate. Net margin swings from -126.2% in Q1 2026 to +40.4% in Q4 2025 appear driven more by this expense lumpiness and non-operating items than by underlying unit economics, so smoothed multi-quarter averages are the more reliable lens.
The Bear Case Rests on First-Half Erosion
First-half 2026 revenue of $21.7 million trails the prior year's $36.2 million by roughly 40%, yet quarterly operating expenses held near historical levels, implying losses of $10.0 million and $5.9 million with no disclosed offsetting cost program.
A skeptic would argue the entire investment case hinges on Q4 order timing, and with Q4 2025 already flat year over year and H1 2026 down 40%, the visible revenue trajectory provides little cushion for the notion of a growing franchise. The pattern of heavy losses outside the peak quarter — -$10.0M in Q1 2026 and -$5.9M in Q2 2026 — implies cash consumption during off-peak periods, though the absence of balance sheet and cash flow data here means the durability of that burn cannot be assessed. Finally, 74.7% gross margins on a $12.0M quarter suggest revenue is concentrated in very few projects, so a single slipped desalination or energy-recovery order could produce another print resembling Q2 2026 rather than Q4 2025.