Energy Recovery ((ERII)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Energy Recovery’s recent earnings call conveyed a generally positive sentiment, with strong performance in core areas such as desalination and wastewater. The company is on track with its strategic initiatives, including share repurchases and expansion in wastewater. However, uncertainties in emerging markets like data centers and ongoing challenges with tariffs in China were noted.
Reiteration of 2025 Guidance and Positive Wastewater Outlook
Energy Recovery reiterated its 2025 guidance across all metrics, reinstating its wastewater guidance with expectations that tariff impacts will be better than initially indicated. This reflects the company’s confidence in its core desalination business and its ability to navigate the current macro environment.
Share Repurchase Program Expansion
The company announced an additional share repurchase program, totaling $105 million over the past 10 months. This initiative aims to repurchase over 10% of outstanding shares, demonstrating a commitment to returning value to shareholders while supporting growth reinvestment.
Strong Performance in Desalination and Wastewater
Energy Recovery reported signing multiple large deals in its core desalination business. The company is well-positioned to capture growth trends in contracted desalination capacity, water reuse, and CO2 refrigeration installations, reinforcing its market leadership.
Better Than Expected Results in China
A pause in tariffs allowed Energy Recovery to execute on previously stalled projects in China, resulting in over $2 million shipped in the quarter. This development highlights the company’s ability to adapt and capitalize on changing market conditions.
Expansion in Wastewater Footprint
The company expanded its wastewater footprint, focusing on five verticals and is on track to secure reference cases in each by year-end. This strategic move underscores Energy Recovery’s commitment to broadening its market presence and enhancing its competitive edge.
Uncertain Data Center Market Opportunity
The data center market presents an uncertain opportunity for Energy Recovery, as CO2 remains a nascent part of that market. The company acknowledges limited opportunity unless growth in this sector accelerates.
Ongoing Challenges with Tariffs in China
Despite a reduction in tariffs, Energy Recovery continues to face significant challenges doing business in China due to high tariff rates. This remains a critical area of concern for the company.
Forward-Looking Guidance
Energy Recovery reiterated its 2025 guidance, showcasing resilience in its core desalination business. The company signed multiple large deals, providing a clear line of sight to full-year revenue based on contracts and pipeline. Tariff impacts in the wastewater segment are expected to be better than initially indicated, allowing for comfortable issuance of guidance despite ongoing uncertainties. The company also expressed increasing confidence in long-term trends, positioning it well to achieve its 2029 goals.
In summary, Energy Recovery’s earnings call reflected a positive outlook, driven by strong performances in desalination and wastewater. The company is effectively navigating challenges, such as tariffs in China, while expanding its market footprint and executing strategic initiatives like share repurchases. The forward-looking guidance reaffirms Energy Recovery’s confidence in its growth trajectory and market leadership.