Energy Recovery Swings to Operating Loss on Iran War

The Tip Desk · November 4, 2026 · 2 min read

Third-quarter revenue was $11.2 million as the company posted a $9.8 million operating loss and a $6.3 million net loss.

Energy Recovery, Inc. (ERII), the San Leandro, Calif.-based maker of pressure-exchanger equipment for desalination and wastewater, reported third-quarter revenue of $11.2 million, down 65% from $32.0 million a year earlier, after a 57% year-over-year decline in the second quarter.

The company said the swing to a $9.8 million loss from operations, from $3.7 million of operating income a year earlier, was due primarily to lower revenue from the war in Iran. Net loss was $6.3 million, or $0.12 a share, versus net income of $3.9 million, or $0.07 a share, a year earlier.

Gross margin compressed to 37.5% from 64.2% a year earlier, a 2,670 bps drop, after expanding 1,070 bps in the prior quarter. The company attributed the year-over-year margin decline primarily to lower volume, product mix and indirect manufacturing costs, partially offset by channel mix. Operating expenses fell 17.2% to $14.0 million from $16.9 million a year earlier, which the company said was primarily due to lower employee compensation costs, including stock-based compensation, and lower consulting costs. Adjusted EBITDA was a $7.8 million loss versus $6.8 million of adjusted EBITDA a year earlier.

Megaproject revenue collapsed to $0.9 million from $18.4 million a year earlier, down 95%. Original equipment manufacturer revenue was $6.2 million, down 31%, and aftermarket revenue was $4.0 million, down 13%. Desalination revenue was $10.7 million versus $29.1 million a year earlier, with wastewater at $0.5 million versus $2.8 million. Desalination posted a $1.6 million operating loss versus $14.1 million of operating income a year earlier.

Cash and investments were $85.6 million at September 30, 2026, down from $98.1 million at June 30, 2026. Accounts receivable and contract assets were $10.7 million at September 30, 2026, versus $78.3 million at December 31, 2025. Inventories were $44.1 million at September 30, 2026, versus $24.3 million at year-end 2025. Cash used in operations was $9.8 million in the quarter, versus $3.1 million of cash used a year earlier.

For the nine months ended September 30, 2026, revenue was $32.9 million, down 52% from $68.1 million a year earlier. Gross margin was 48.2%. Net loss was $21.8 million, or $0.42 a share. Cash provided by operations was $28.1 million.