Exhibit 99.1
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Energy Recovery Reports Record Full Year and Fourth Quarter Revenue for 2023

SAN LEANDRO, Calif. - February 21, 2024 – Energy Recovery, Inc. (Nasdaq:ERII) (“Energy Recovery” or the “Company”) today announced its financial results for the fourth quarter and year ended December 31, 2023.


Fiscal Year 2023 Highlights
•Record annual revenue of $128.3 million, which includes a 79% growth in wastewater and represents nine consecutive years of revenue growth.
•Record quarterly revenue of $57.2 million, representing a 35% year-on-year growth with strong performance in Energy Recovery’s primary desalination business and the continued rapid expansion of the company’s wastewater sector. Water revenue was below guidance due to the delayed shipment of a single project to be shipped in 2024. This project was highlighted as a potential risk in the Q3 earnings call.
•Gross margin of 67.8%, within Energy Recovery’s expectations and above guidance.
•Operating expenses of $68.0 million, in line with Energy Recovery’s expectations.
•Income from operations of $19.1 million.
•Net income of $21.5 million and adjusted EBITDA(1) of $31.2 million.
•Operating cash flow for the year more than doubled largely due to strong customer collections and strategic efforts to optimize raw inventory turnover rates.
•Cash and investments of $122.4 million, which include cash, cash equivalents, and short-term and long-term investments.

“We achieved record annual and fourth quarter revenue in 2023, which represents our ninth consecutive year of revenue growth despite a shift of $8 million revenue associated with a single project that was pushed from the fourth quarter into 2024,” commented David Moon, President and CEO.

“Our core desalination business is healthy, our wastewater business continues to grow rapidly, and we are making progress in our CO2 refrigeration business. This year, we expect to see our newest and most efficient product, the PX Q400, achieve roughly 50% of sales in our megaproject channel. Wastewater could reach up to 10% of our Water revenue in just three years and we are pushing hard to get our PX G1300 in multiple supermarket chains in the U.S. and Europe.”

Mr. Moon added, “Our focus in 2024, and beyond, is rebuilding shareholder value and trust within the market. We remain committed to our growth strategy of diversification into new markets, which is key to Energy Recovery’s future. In 2024, we will continue to defend our leadership position in our core desalination business, and invest in new market opportunities in CO2 and wastewater, while managing both expenses and cash with discipline and a focus on investing in the highest and best use of shareholder capital. I am excited by the long-term growth prospects and believe we are well-positioned to continue to grow.”




Financial Highlights
Quarter-to-DateYear-to-Date
Q4’2023
Q4’2022
vs. Q4’2022202320222023 vs. 2022
(In millions, except net income per share, percentages and basis points)
Revenue$57.2$42.3up 35%$128.3$125.6up 2%
Gross margin69.1%70.7%down 160 bps67.8%69.6%down 180 bps
Operating margin36.0%34.5%up 150 bps14.8%19.8%down 500 bps
Net income$19.8$13.7up 44%$21.5$24.0down 11%
Net income per share$0.34$0.24up 42%$0.37$0.42down 12%
Effective tax rate5.3%7.8%
Cash provided by operations$13.8$6.4$26.1$12.6


Non-GAAP Financial Highlights (1)
Quarter-to-DateYear-to-Date
Q4’2023
Q4’2022
vs. Q4’2022202320222023 vs. 2022
(In millions, except adjusted net income per share, percentages and basis points)
Adjusted operating margin39.9%37.9%up 200 bps21.1%26.2%down 510 bps
Adjusted net income$22.0$14.7up 50%$28.9$30.5down 5%
Adjusted net income per share$0.39$0.26up 50%$0.51$0.54down 6%
Adjusted effective tax rate6.1%10.6%
Adjusted EBITDA$23.9$17.0$31.2$36.8
Free cash flow$12.4$5.1$23.5$8.4
(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.

Forward-Looking Statements
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 the shipment of projects; our belief that our core desalination business remains strong; our expectations regarding the growth of our wastewater business; our belief we are making progress in our CO2 business; our belief that we can defend our position in seawater desalination; our ability to build shareholder value; and our belief that the Company is well positioned to continue to grow. 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.



Use of Non-GAAP Financial Measures
This press release includes certain non-GAAP financial measures, including adjusted operating margin, adjusted net income, adjusted net income 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.


Notes to the Fourth Quarter and Fiscal 2023 Financial Results
•Adjusted operating margin is a non-GAAP financial measure that the Company defines as income 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 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 per share is a non-GAAP financial measure that the Company defines as net income, 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 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 income (expense), net; and v) provision for income taxes.
•Free cash flow is a non-GAAP financial measure that the Company defines as net cash provided by operating activities less capital expenditures.




Conference Call to Discuss Fourth Quarter and Fiscal 2023 Financial Results
LIVE CONFERENCE CALL:
Wednesday, February 21, 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

CONFERENCE CALL REPLAY:
Expiration: March 22, 2024
US / Canada Toll-Free: +1 (877) 660-6853
Local / International Toll: +1 (201) 612-7415
Access code: 13743738

Investors may access the live call and the replay (approximately three hours after the live call concludes) over the internet on the “Events” page at: https://ir.energyrecovery.com/news-events/ir-calendar.


Disclosure Information
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.


About Energy Recovery
Energy Recovery (Nasdaq: ERII) is a trusted global leader in energy efficiency technology. Building on our pressure exchanger technology platform, we design and manufacture reliable, high-performance solutions that generate cost savings and increase energy efficiency across several industries. With a strong foundation in the desalination industry, Energy Recovery has delivered transformative solutions that optimize operations and deliver positive environmental impact to our customers worldwide for more than 30 years. 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/.


Contact
Investor Relations
ir@energyrecovery.com
+1 (346) 382-6927



ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
20232022
(In thousands)
ASSETS
Cash, cash equivalents and investments$122,375 $92,891 
Accounts receivable and contract assets47,529 35,782 
Inventories, net26,149 28,366 
Prepaid expenses and other assets3,251 3,886 
Property, equipment and operating leases30,168 32,695 
Goodwill12,790 12,790 
Deferred tax assets and other assets10,712 10,629 
TOTAL ASSETS$252,974 $217,039 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Accounts payable and accrued expenses$18,583 $15,507 
Contract liabilities and other liabilities, non-current1,304 1,316 
Lease liabilities13,279 14,878 
Total liabilities33,166 31,701 
Stockholders’ equity219,808 185,338 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$252,974 $217,039 




ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 Three Months Ended December 31,Years Ended December 31,
 2023202220232022
 (In thousands, except per share data)
Revenue$57,189 $42,291 $128,349 $125,591 
Cost of revenue17,690 12,400 41,270 38,235 
Gross profit39,499 29,891 87,079 87,356 
Operating expenses
General and administrative7,160 7,186 28,864 28,341 
Sales and marketing6,767 4,361 22,164 16,277 
Research and development4,958 3,739 17,001 17,909 
Total operating expenses18,885 15,286 68,029 62,527 
Income from operations20,614 14,605 19,050 24,829 
Other income, net1,298 765 3,655 1,242 
Income before income taxes21,912 15,370 22,705 26,071 
Provision for income taxes2,107 1,645 1,201 2,022 
Net income$19,805 $13,725 $21,504 $24,049 
Net income per share
Basic$ 0.35 $ 0.25 $ 0.38 $ 0.43 
Diluted$ 0.34 $ 0.24 $ 0.37 $ 0.42 
Number of shares used in per share calculations
Basic56,735 56,014 56,444 56,221 
Diluted57,671 57,433 57,740 57,641 




ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Years Ended December 31,
20232022
(In thousands)
Cash flows from operating activities:
Net income$21,504 $24,049 
Non-cash adjustments13,889 14,447 
Net cash used in operating assets and liabilities(9,339)(25,865)
Net cash provided by operating activities26,054 12,631 
Cash flows from investing activities:
Net investment in marketable securities(16,634)(3,816)
Capital expenditures(2,567)(4,232)
Proceeds from sales of fixed assets87 1,102 
Net cash used in investing activities(19,114)(6,946)
Cash flows from financing activities:
Net proceeds from issuance of common stock4,794 2,986 
Repurchase of common stock— (26,654)
Net cash provided by (used in) financing activities4,794 (23,668)
Effect of exchange rate differences33 (20)
Net change in cash, cash equivalents and restricted cash$11,767 $(18,003)
Cash, cash equivalents and restricted cash, end of year$68,225 $56,458 



ENERGY RECOVERY, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(Unaudited)

Channel Revenue
Three Months Ended December 31,Years Ended December 31,
20232022vs. 202220232022vs. 2022
(In thousands, except percentages)
Megaproject$41,382$30,631up 35%$83,665$81,888up 2%
Original equipment manufacturer9,1507,466up 23%25,99528,858down 10%
Aftermarket6,6574,194up 59%18,68914,845up 26%
Total revenue$57,189$42,291up 35%$128,349$125,591up 2%
Segment Activity
Three Months Ended December 31, 2023Three Months Ended December 31, 2022
WaterEmerging TechnologiesCorporateTotalWaterEmerging TechnologiesCorporateTotal
(In thousands)
Revenue$57,103 $86 $— $57,189 $42,237 $54 $— $42,291 
Cost of revenue17,154 536 — 17,690 12,341 59 — 12,400 
Gross profit (loss)39,949 (450)— 39,499 29,896 (5)— 29,891 
Operating expenses
General and administrative1,914 951 4,295 7,160 2,027 964 4,195 7,186 
Sales and marketing4,124 1,882 761 6,767 2,868 927 566 4,361 
Research and development1,130 3,828 — 4,958 992 2,747 — 3,739 
Total operating expenses7,168 6,661 5,056 18,885 5,887 4,638 4,761 15,286 
Operating income (loss)$32,781 $(7,111)$(5,056)$20,614 $24,009 $(4,643)$(4,761)$14,605 


Year Ended December 31, 2023Year Ended December 31, 2022
WaterEmerging TechnologiesCorporateTotalWaterEmerging TechnologiesCorporateTotal
(In thousands)
Revenue$127,725 $624 $— $128,349 $125,428 $163 $— $125,591 
Cost of revenue40,290 980 — 41,270 38,158 77 — 38,235 
Gross profit (loss)87,435 (356)— 87,079 87,270 86 — 87,356 
Operating expenses
General and administrative7,751 3,927 17,186 28,864 6,936 4,104 17,301 28,341 
Sales and marketing13,691 6,053 2,420 22,164 11,065 3,047 2,165 16,277 
Research and development4,251 12,750 — 17,001 4,151 13,758 — 17,909 
Total operating expenses25,693 22,730 19,606 68,029 22,152 20,909 19,466 62,527 
Operating income (loss)$61,742 $(23,086)$(19,606)$19,050 $65,118 $(20,823)$(19,466)$24,829 


Share-based Compensation
 Three Months Ended December 31,Years Ended December 31,
 2023202220232022
(In thousands)
Stock-based compensation expense charged to:
Cost of revenue$164 $136 $719 $506 
General and administrative1,033 701 3,661 3,436 
Sales and marketing649 360 2,333 1,592 
Research and development381 210 1,325 977 
Total stock-based compensation expense$2,227 $1,407 $8,038 $6,511 




ENERGY RECOVERY, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (1)
(Unaudited)

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.

Quarter-to-DateYear-to-Date
Q4'2023Q4'202220232022
(In millions, except shares, per share and percentages)
Operating margin
36.0 %34.5 %14.8 %19.8 %
Share-based compensation3.9 3.3 6.3 5.2 
Severance— — — 0.2 
Accelerated depreciation— — — 0.7 
Litigation charges— — — 0.3 
Adjusted operating margin
39.9 %37.9 %21.1 %26.2 %
Net income
$19.8 $13.7 $21.5 $24.0 
Share-based compensation (2)
2.2 1.4 8.0 6.5 
Severance (2)
— — — 0.3 
Accelerated depreciation (2)
— — — 0.7 
Litigation charges (2)
— — — 0.4 
Share-based compensation discrete tax item— (0.4)(0.7)(1.4)
Adjusted net income
$22.0 $14.7 $28.9 $30.5 
Net income per share
$0.34 $0.24 $0.37 $0.42 
Adjustments to net income per share (3)
0.05 0.02 0.14 0.12 
Adjusted net income per share
$0.39 $0.26 $0.51 $0.54 
Effective tax rate
5.3%7.8%
Adjustments to effective tax rate (3)
0.82.9
Adjusted effective tax rate
6.1%10.6%
Net income
$19.8 $13.7 $21.5 $24.0 
Share-based compensation2.2 1.4 8.0 6.5 
Severance— — — 0.3 
Depreciation and amortization1.0 1.0 4.1 4.8 
Litigation charges— — — 0.4 
Other income, net
(1.3)(0.8)(3.7)(1.2)
Provision for income taxes2.1 1.6 1.2 2.0 
Adjusted EBITDA
$23.9 $17.0 $31.2 $36.8 
Free cash flow
Net cash provided by operating activities$13.8 $6.4 $26.1 $12.6 
Capital expenditures(1.4)(1.2)(2.6)(4.2)
Free cash flow$12.4 $5.1 $23.5 $8.4 
(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.