Energy Recovery’s third quarter results were met with a significant negative market reaction as investors digested both a year-over-year decline in revenue and a sharp drop in operating margin. Management attributed the downturn largely to lower mega-project shipments compared to last year and ongoing challenges in the commercialization of its CO2 refrigeration technology. CEO David Moon noted, “Mega-project shipments improved during the quarter and wastewater revenue continued to rebound,” but acknowledged that the company remains in the early stages of CO2 business development.
Is now the time to buy ERII? Find out in our full research report (it’s free for active Edge members).
Energy Recovery (ERII) Q3 CY2025 Highlights:
- Revenue: $32 million vs analyst estimates of $29.94 million (17.1% year-on-year decline, 6.9% beat)
- Adjusted EPS: $0.12 vs analyst estimates of $0.10 (24.1% beat)
- Adjusted EBITDA: $6.8 million vs analyst estimates of $7.21 million (21.3% margin, 5.7% miss)
- Operating Margin: 11.4%, down from 18.3% in the same quarter last year
- Market Capitalization: $744.3 million
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Energy Recovery’s Q3 Earnings Call
- Ryan Pfingst (B. Riley Securities) asked about the main takeaways from the CO2 white paper, to which CEO David Moon cited validated energy and water savings and improved performance in high-heat conditions.
- Pfingst (B. Riley Securities) also questioned the timeline for signing commercial agreements with OEMs. Moon explained that further field testing would be required, pushing agreements to 2026 or later.
- Lawrence Solow (CJS) probed whether the delay in CO2 commercialization affected management’s confidence. Moon maintained his optimism about customer interest but acknowledged the extended timeline.
- Jeffrey Campbell (Seaport Research Partners) inquired whether cost controls were linked to international expansion, and Moon clarified that cost reductions were independent of global footprint initiatives.
- Campbell (Seaport Research Partners) also asked about the potential for lithium extraction projects to become a meaningful niche. Moon indicated that recent wins in Argentina and China point to growth prospects in this area.
Catalysts in Upcoming Quarters
In the coming quarters, StockStory analysts will monitor (1) the pace of backlog build and shipment execution in the wastewater segment, (2) progress on CO2 technology testing with OEMs and large retailers, and (3) signs of cost discipline despite ongoing investments in new markets. We will also track new lithium extraction contracts and any meaningful updates on desalination project awards.
Energy Recovery currently trades at $14.26, down from $17.24 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).
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