Energy Recovery's Q1 2025: Navigating Contradictions in Tariffs, Production Strategy, and Market Potential

Tariff impact on wastewater business, investment in international production capacity, international production strategy, wastewater market opportunities, and wastewater sales and market opportunities are the key contradictions discussed in Energy Recovery's latest 2025Q1 earnings call.



Desalination Market Performance:
- Energy Recovery's desalination business remained strong, with the market pipeline showing consistent strength.
- Despite a potentially tougher macro backdrop, the company remains bullish on the desalination market, especially in the Middle East and North Africa.

CO2 Business and Hillphoenix Collaboration:
- The CO2 business continues to progress towards full commercialization, with three OEMs integrating the PX into their rack designs.
- The partnership with Hillphoenix, involving integration of the PXG into their CO2 rack design, is expected to open up opportunities for broader deployment in refrigeration systems.

Tariff Mitigation and Strategic Initiatives:
- The company is directly affected by tariffs, but it is implementing initiatives to offset the financial impact.
- Energy Recovery remains confident in its ability to mitigate most of the tariff impact, with ongoing efforts to improve financial results for 2025.

International Footprint Strategy:
- The company is considering establishing its own manufacturing capacity, while not ruling out short-term partnerships to address tariffs.
- This strategic move aims to get closer to customers, particularly in the Middle East and North Africa, to better serve their needs.