Energy Recovery Inc (ERII) Q2 2024 Earnings: EPS of -$0.01 Beats Estimates, Revenue of $27.2M Exceeds Expectations

Company Reports Revenue of $27.2 Million, Surpassing Analyst Estimates

Summary
  • Revenue: $27.2 million, surpassing the analyst estimate of $22.88 million and exceeding the upper end of the company's guidance of $20 - $25 million.
  • Gross Margin: 64.6%, a slight decrease of 80 basis points compared to Q2 2023, primarily due to higher manufacturing costs.
  • Operating Expenses: $19.6 million, an increase of 21.4% year-over-year, driven by investments in corporate growth strategy, sales and marketing, and executive transition costs.
  • Net Loss: $0.6 million, an improvement from the net loss of $1.7 million in Q2 2023.
  • Net Loss Per Share: $0.01, compared to a net loss per share of $0.03 in Q2 2023.
  • Cash and Investments: $138.0 million, including cash, cash equivalents, and short- and long-term investments.
  • Free Cash Flow: $7.9 million, a significant improvement from negative $4.7 million in Q2 2023.
Article's Main Image

On July 31, 2024, Energy Recovery Inc (ERII, Financial) released its 8-K filing detailing its financial results for the second quarter of 2024. Energy Recovery Inc is an engineering-driven technology company engaged in designing, manufacturing, and supplying solutions that enhance industrial process efficiency and sustainability. The company operates in three segments: Water, Emerging Technologies, and Corporate, with the majority of its revenue derived from the Water segment.

Performance Overview

Energy Recovery Inc (ERII, Financial) reported a revenue of $27.2 million for Q2 2024, exceeding the upper end of its guidance range of $20-$25 million and surpassing analyst estimates of $22.88 million. Despite this revenue growth, the company faced challenges with increased manufacturing costs, leading to a gross margin of 64.6%, a decrease of 80 basis points compared to Q2 2023.

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Financial Achievements and Challenges

Energy Recovery Inc (ERII, Financial) achieved several financial milestones in Q2 2024:

  • Revenue increased by 31% year-over-year, from $20.7 million in Q2 2023 to $27.2 million in Q2 2024.
  • Operating expenses rose by 21.4% to $19.6 million, driven by investments in corporate growth strategy, sales and marketing, and executive transition costs.
  • Net loss improved to $0.6 million from $1.7 million in Q2 2023.
  • Adjusted EBITDA reached $5.2 million, a significant improvement from $0.2 million in Q2 2023.

Despite these achievements, the company reported a loss from operations of $2.0 million due to lower gross margins and higher operating expenses. The net loss per share was $0.01, better than the estimated loss of $0.11 per share.

Key Financial Metrics

Metric Q2 2024 Q2 2023 Change
Revenue $27.2 million $20.7 million +31%
Gross Margin 64.6% 65.4% -80 bps
Net Loss ($0.6) million ($1.7) million +65%
Adjusted EBITDA $5.2 million $0.2 million NM

Commentary and Strategic Outlook

"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." - David Moon, President and CEO

David Moon also highlighted the progress in the company's CO2 business, with nine second-generation PX G1300 deployments commissioned at both existing and new customer sites. The company is collecting crucial runtime data over the summer to drive commercial adoption of the PX G1300.

Financial Statements Summary

Energy Recovery Inc (ERII, Financial) reported total assets of $249.0 million as of June 30, 2024, with cash and investments amounting to $138.0 million. The company maintained a strong balance sheet with total liabilities of $30.5 million and stockholders' equity of $218.5 million.

In summary, Energy Recovery Inc (ERII, Financial) demonstrated robust revenue growth in Q2 2024, surpassing analyst estimates despite facing higher manufacturing costs. The company's strategic investments and operational improvements position it well for continued growth in the latter half of the year.

Explore the complete 8-K earnings release (here) from Energy Recovery Inc for further details.