Energy Recovery's Q2 2025: Navigating Contradictions in Desalination Revenue, Production Strategy, and Market Expansion

Desalination market and revenue expectations, international production strategy, water reuse and potential market expansion, desalination revenue growth expectations, and tariff impact on wastewater business are the key contradictions discussed in Energy Recovery, Inc.'s latest 2025Q2 earnings call.



Strong Financial Performance and Guidance Reinstatement:
- Energy Recovery, Inc. reiterated its 2025 guidance on all metrics and reinstated its wastewater guidance.
- The core desalination business showed resilience to macroeconomic challenges, driven by multiple large deals and a robust pipeline.

Desalination Capacity and Market Growth:
- Contracted desalination capacity is expected to grow at high rates, providing confidence for future revenue growth.
- The growth is attributed to increasing water scarcity trends and the need for water management solutions.

Share Repurchase Programs:
- The company announced an additional share repurchase program, with 3 authorizations totaling $105 million in the past 10 months.
- These programs are expected to enable the repurchase of over 10% of outstanding shares while investing for growth.

Next-Generation PX Product Launch:
- The next-generation PX product is expected to offer meaningful improvement compared to the Q400, potentially at a higher selling price.
- The new product is anticipated to help increase market share and fill plants with fewer units.

CO2 Refrigeration and Market Expansion:
- Energy Recovery is making progress in discussions with Hillphoenix for a commercial agreement in CO2 refrigeration.
- Summer testing for the product has been ongoing, with 7 new sites added in the second quarter, indicating strong market engagement.