Energy Recovery (ERII) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue reached $27.2 million, up 31% year-over-year, driven by strong shipments in the Middle East, Africa, and Asia, and robust Water segment performance.

• Gross margin was 64.6% in Q2 2024, slightly down from Q2 2023 due to higher manufacturing costs, but rebounded from earlier quarters.

• Operating expenses rose 21.4% year-over-year, driven by consulting, compensation, share-based costs, and executive transition expenses.

• Net loss narrowed to $0.6 million from $1.7 million in Q2 2023, with adjusted EBITDA at $5.2 million and sequential improvement toward breakeven.

• Cash and investments totaled $138 million at quarter end, reflecting improved liquidity.

Financial highlights

• Q2 2024 revenue: $27.2 million (up from $20.7 million in Q2 2023); six-month revenue: $39.3 million (up from $34.1 million year-over-year).

• Q2 gross margin: 64.6%; full-year gross margin guidance: 64%-67%.

• Q2 net loss: $0.6 million; adjusted net income for Q2: $5.1 million; adjusted EBITDA: $5.2 million.

• Operating expenses for Q2 2024: $19.6 million (up 21.4% year-over-year); Q3 guidance: $21-$22 million.

• Cash and investments at June 30, 2024: $138 million; operating cash flow for six months ended June 30, 2024: $14.6 million.

Outlook and guidance

• Full-year 2024 revenue guidance reaffirmed at $140–$150 million, with $12–$15 million expected from wastewater.

• Revenue expected to be heavily weighted to Q3 and Q4, with Q3 water revenue projected at $35–$39 million and Q4 at $66–$72 million.

• Operating expense guidance maintained at $78–$80 million, including $7 million in one-time costs.

• Management expects existing cash, investments, and operating cash flow to meet liquidity needs for at least the next 12 months.

• 30–50 PXG sites targeted for installation by year-end.