SAN LEANDRO, Calif. - July 31, 2024 – 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, 2024.

•Revenue of $27.2 million, exceeding the upper end of our guidance of $20 - $25 million.

•Gross margin of 64.6%, a decrease of 80 bps, as compared to Q2’2023, due primarily to higher manufacturing costs.

•Operating expenses of $19.6 million, an increase of 21.4%, as compared to Q2’2023, due primarily to the enhancement of our corporate growth strategy, increased investments within sales and marketing, and executive transition costs.

•Loss from operations of $2.0 million, mainly due to lower gross margin and higher operating expenses.

•Net loss of $0.6 million and adjusted EBITDA of $5.2 million.

•Cash and investments of $138.0 million, which include cash, cash equivalents, and short- and long-term investments.

David Moon, President and CEO, commented on the financial results: “Operationally, the second quarter played out as we expected and second quarter revenue of $27 million exceeded the top-end of our guidance of $20–$25 million. As we have stated since the beginning of the year, this year’s revenue cadence is heavily weighted to the third and fourth quarters, and we reaffirm our full-year revenue guidance of $140–$150 million.”

Mr. Moon added, “In our CO2 business, we commissioned nine second-generation PX G1300 deployments at both existing and new customer sites with a tenth site to be commissioned by the end of August. We believe the summer runtime data we are collecting now, and will be collecting over the next few months, is crucial to the commercial adoption of the PX G1300.”

Mr. Moon continued, “On the corporate side, my team and I have made excellent progress on the strategic work undertaken earlier this year and have completed the Where to Play phase and we are now in the How to Play phase. I look forward to presenting the strategy and roadmap for using our PX technology to drive growth and to create real value for our shareholders.”

Non-GAAP Financial Highlights (1)

(1)Refer to the sections “Use of Non-GAAP Financial Measures” and “Reconciliation of Non-GAAP Financial Measures” for definitions of our non-GAAP financial measures and reconciliations of GAAP to non-GAAP amounts, respectively.

NM    Not Material

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 expectations regarding revenue guidance for the year, the timing of potential new CO2 deployments, our belief that the summer runtime data is crucial to the commercial adoption of the PX G1300 . These forward-looking statements are based on information currently available to the Company 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 the Company’s 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, 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 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 loss from operations which excludes i) share-based compensation; and ii) executive transition costs, such as executive search costs, retention costs, one-time severance costs and one-time corporate growth strategy costs, 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) executive transition costs; 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 loss, which excludes i) share-based compensation; ii) executive transition costs and iii) the applicable tax effect of the excluded items including the share-based compensation discrete tax item, divided by basic shares outstanding.

•Adjusted EBITDA is a non-GAAP financial measure that the Company defines as net loss which excludes i) depreciation and amortization; ii) share-based compensation; iii) executive transition 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, July 31, 2024, 2:00 PM PT / 5:00 PM ET

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

Listen-only, Local / International Toll: +1 (201) 689-8354

Available approximately three hours after conclusion of the live call.

Expiration: Friday, August 30, 2024

US / Canada Toll-Free: +1 (877) 660-6853

Local / International Toll: +1 (201) 612-7415

Access code: 13747957

Investors may also access the live call and the replay over the internet on the “Events” page of the Company’s website located at https://ir.energyrecovery.com/news-events/ir-calendar.

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 (Nasdaq: ERII) is a trusted global leader in energy efficiency technology. Building on the Company’s pressure exchanger technology platform, the Company designs and manufactures reliable, high-performance solutions that generate cost savings and increase energy efficiency across several industries. With a strong foundation in the desalination industry, the Company has delivered transformative solutions that optimize operations and deliver positive environmental impact to its customers worldwide for more than 30 years. Headquartered in the San Francisco Bay Area, the Company 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)Amounts presented are net of tax.

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