Energy Recovery, Inc. reported fourth‑quarter 2025 revenue of $66.9 million, essentially flat against the $67.1 million earned in the same period a year earlier. The slight decline of $0.2 million reflects delays at several large desalination projects, creating an “air pocket” in project timing that the company has repeatedly cited as a lumpy factor in its revenue cycle.
Net income rose to $26.9 million, a 15% increase from the $23.5 million earned in Q4 2024, driven by tighter operating‑expense control and a higher operating margin of 46.8% versus 38.2% a year earlier. Adjusted earnings per share reached $0.53, missing the consensus estimate of $0.67 by $0.14, or roughly 21%. The miss is attributable to the lower revenue base and the fact that the company’s prior‑year EPS was $0.50, not $0.41 as previously reported.
Management reiterated its 2026 outlook, maintaining revenue guidance of $115 million to $140 million and adjusted EPS guidance of $0.50 to $0.70. The guidance is well below analyst expectations of $159.1 million to $167.8 million for revenue and $0.75 to $0.89 for EPS, underscoring management’s concern about the lumpy nature of desalination project timing and the impact of tariffs on product mix.
Investors reacted negatively to the results, citing the revenue miss and the sharp reduction in full‑year guidance as the primary drivers of the market’s response. The company’s exit from its CO₂ retail grocery business was also noted; the exit is expected to generate one‑time costs of $4.5 million to $5.5 million but will deliver annual savings of $7 million, signaling a strategic refocus on its core water business.
The earnings release highlights a company that is maintaining strong operating leverage and margin expansion despite a flat top line, but that is also confronting significant headwinds from project delays and tariff‑related cost pressures. The guidance indicates a cautious outlook for 2026, with management expressing confidence that growth will resume in 2027 as the pipeline of desalination projects matures.
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