Energy Recovery Affirms FY 2023 Guidance,
Continues Investments in Wastewater and CO2 Business Growth

SAN LEANDRO, Calif. - August 2, 2023 – Energy Recovery, Inc. (Nasdaq:ERII) (“Energy Recovery” or the “Company”) today announced its financial results for the second quarter and six months ended June 30, 2023.

•Revenue of $20.7 million, within the lower end of guidance. Revenue was lower due to a timing delay of a $5.7 million megaproject shipment that will subsequently be recognized in the third quarter.

•Gross margin of 65.4%, within the upper range of our guidance of 64% – 66% for the quarter for Water.

•Operating expenses of $16.1 million, which included growing investments in sales and marketing, and research and development to support business expansion.

•Loss from operations of $2.6 million primarily attributable to lower revenue and gross margin due to timing of revenue recognition of a megaproject shipment.

•Net loss of $1.7 million and adjusted EBITDA(1) of $0.2 million.

•Cash and investments of $97.5 million which include cash, cash equivalents, and short-term and long-term investments.

•Expanded the PX U Series product line used in and tailored for ultra high-pressure reverse osmosis applications.

Robert Mao, Chairman, President and CEO, commented on the financial results, “We delivered second quarter results in line with our previous guidance and we expect our outlook for the remainder of the year to be unchanged. As of today, our desalination and wastewater businesses are on track, and the significant increases in megaproject shipments expected in the second half of 2023, give us confidence in our ability to achieve our full-year revenue guidance.”

Mr. Mao added, “We continue to achieve new milestones in our CO2 business. We were awarded the prestigious Refrigeration Innovation of the Year Award by ATMO for our PX G1300™ in June. We are also partnering with a major U.S. refrigeration manufacturer on a new training center in California that will incorporate our PX G1300, providing us a unique opportunity to educate the market further on our device. We continue to deploy the PX G1300 at new locations in Europe with our partners Fieuw Koeltechniiek nv and Epta S.p.A., and in North America. We are focused on building and enhancing relationships within the industry, as well as expanding our team in both the U.S. and Europe.”

Non-GAAP Financial Highlights (1)

NM    Not material

(1)Refer to the sections “Use of Non-GAAP Financial Measures” and “Reconciliation of Non-GAAP Financial Measures” for definition of adjustment to GAAP presentation.

Certain matters discussed in this press release and on the conference call are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including our beliefs about our future financial performance; our beliefs relating to our wastewater and desalination businesses; our expectation that there will be significant increases in megaproject shipments in the second half of 2023; and our expectations for multiple PX G1300 commissions in multiple countries this year in North America and Europe. These forward-looking statements are based on information currently available to us and on management’s beliefs, assumptions, estimates, or projections and are not guarantees of future events or results. Potential risks and uncertainties include risks relating to the future demand for our products, risks relating to performance by our customers and third-party partners, risks relating to the timing of revenue, and any other factors that may have been discussed herein regarding the risks and uncertainties of the Company’s business, and the risks discussed under “Risk Factors” in the Company’s Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) for the year ended December 31, 2022, as supplemented by the risks discussed under “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, as well as other reports filed by the Company with the SEC from time to time. Because such forward-looking statements involve risks and uncertainties, the Company’s actual results may differ materially from the predictions in these forward-looking statements. All forward-looking statements are made as of today, and the Company assumes no obligation to update such statements.

This press release includes certain non-GAAP financial measures, including adjusted operating margin, adjusted net income (loss), adjusted net income (loss) per share, adjusted effective tax rate, adjusted EBITDA and free cash flow. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows that either exclude or include amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles in the United States of America, or GAAP. These non-GAAP financial measures do not reflect a comprehensive system of accounting, differ from GAAP measures with the same captions, and may differ from non-GAAP financial measures with the same or similar captions that are used by other companies. As such, these non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. The Company uses these non-GAAP financial measures to analyze its operating performance and future prospects, develop internal budgets and financial goals, and to facilitate period-to-period comparisons. The Company believes these non-GAAP financial measures reflect an additional way of viewing aspects of its operations that, when viewed with its GAAP results, provide a more complete understanding of factors and trends affecting its business.

•Adjusted operating margin is a non-GAAP financial measure that the Company defines as income (loss) from operations which excludes i) share-based compensation; and ii) non-core operational costs, such as VorTeq-related severance costs and accelerated depreciation, divided by revenues.

•Adjusted net income (loss) is a non-GAAP financial measure that the Company defines as net income which excludes i) share-based compensation; ii) non-core operational costs, such as VorTeq-related severance costs and accelerated depreciation; and iii) the applicable tax effect of the excluded items including the share-based compensation discrete tax item.

•Adjusted net income (loss) per share is a non-GAAP financial measure that the Company defines as net income (loss), which excludes i) share-based compensation; and ii) non-core operational costs, such as VorTeq-related severance costs and accelerated depreciation; and iii) the applicable tax effect of the excluded items including the share-based compensation discrete tax item, divided by basic shares outstanding.

•Adjusted effective tax rate reflects adjustments for share-based compensation discrete tax item, share-based compensation, and VorTeq-related severance costs and accelerated depreciation.

•Adjusted EBITDA is a non-GAAP financial measure that the Company defines as net income (loss) which excludes i) depreciation and amortization; ii) share-based compensation; iii) non-core operational costs, such as VorTeq-related severance costs; iv) other income, net, such as interest income and other non-operating expense, net; and v) provision for (benefit from) income taxes.

•Free cash flow is a non-GAAP financial measure that the Company defines as net cash provided by (used in) operating activities less capital expenditures.

Wednesday, August 2, 2023, 2:00 PM PT / 5:00 PM ET

Listen-only, US / Canada Toll-Free: +1 (877) 709-8150

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Expiration: September 1, 2023

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Investors may access the live call and the replay (approximately three hours after the live call concludes) over the internet at:
ir.energyrecovery.com/websites/energyrecover/English/2200/calendar.html

Energy Recovery uses the investor relations section on its website as means of complying with its disclosure obligations under Regulation FD. Accordingly, investors should monitor Energy Recovery’s investor relations website in addition to following Energy Recovery’s press releases, SEC filings, and public conference calls and webcasts.

Energy Recovery, Inc., creates technologies that solve complex challenges for commercial and industrial fluid-flow markets worldwide. Building on an innovative pressure exchanger technology platform, they design and manufacture solutions that make commercial and industrial processes more efficient and sustainable. What began as a game-changing invention for desalination has grown into a global business accelerating the environmental sustainability of customers’ operations in multiple industries. Headquartered in the San Francisco Bay Area, Energy Recovery has manufacturing and research and development facilities across California and Texas with sales and on-site technical support available globally. To learn more, visit https://energyrecovery.com/.

Investor Relations

ir@energyrecovery.com

+1 (346) 382-6927

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (1)

This press release includes certain non-GAAP financial information because we plan and manage our business using such information. The following table reconciles the GAAP financial information to the non-GAAP financial information.

(1)Amounts may not total due to rounding.

(2)Amount presented are net of tax.

(3)Refer to the sections “Use of Non-GAAP Financial Measures” for description of items included in adjustments.