Energy Recovery Q2 Earnings Call Highlights

Energy Recovery (NASDAQ:ERII) said it remains focused on executing its growth initiatives, managing costs and advancing its manufacturing footprint while geopolitical uncertainty continues to delay the timing of major desalination projects in the Middle East.

During the company’s second-quarter 2026 earnings call, Interim President and Chief Executive Officer Alex Buehler said the company is also working to complete its search for a permanent CEO. Buehler said Energy Recovery has attracted a broad pool of experienced candidates, citing the company’s technology position, platform strength and long-term market opportunities.

“We are focused on bringing our CEO search to a close,” Buehler said, adding that his role during the transition is to maintain continuity with customers and employees while ensuring execution across growth, innovation, manufacturing transformation and capital discipline.

Middle East Pipeline Remains Strong, but Timing Is Uncertain

Buehler characterized Energy Recovery’s pipeline for mega desalination projects in the Middle East as “uniquely strong,” with visibility extending as far as five years in some cases. The company has visibility into named projects, customers and, in some instances, engineering, procurement and construction, or EPC, contractors.

However, the company said the war and related geopolitical risk have complicated project schedules. Buehler said some delays have now been formally communicated, driven by financing pressures, procurement issues and logistical challenges. Higher risk premiums have made financing more difficult, while project execution timelines have become less predictable.

“Good pipeline, but still with uncertain timing is the punchline there,” Buehler said.

Asked what could restore normal activity, Buehler said Energy Recovery will look for projects to advance through financing, EPC appointments, awards and delivery schedules. The company has received some awards where delivery has subsequently been delayed, which supports backlog but does not immediately translate into revenue.

Buehler said the company expects growth to reappear primarily in 2027 and beyond, rather than suggesting that its reported $27 million backlog can be used as a clear indicator for the remainder of 2026. He said contracting activity has resumed in some cases this year, although delays in other project activity persist.

Saudi Facility Expected to Improve Costs Gradually

Energy Recovery’s planned manufacturing facility in Saudi Arabia is intended primarily to place the company closer to customers in a strategically important market, according to Buehler. The site is expected to reduce freight, shipping and procurement costs while providing a local operating presence. It will complement, rather than replace, the company’s California facilities.

The company expects the Saudi facility to provide margin improvement over time, but Buehler cautioned that the benefit will not be immediate when the location begins operating. He said improvements are expected to build as the facility ramps during 2027 and 2028 and as the company brings products including the PX Q650 to market.

Energy Recovery is leasing the Saudi site rather than developing a greenfield facility, limiting the expected capital requirement. Buehler said the company’s prior full-year capital expenditure guidance of $3 million to $6 million remains in place. Incremental spending is primarily related to equipment and fixed assets, with potentially some additional spending next year as the site is built out further.

PX Q650 Launch Continues Despite Market Disruption

Buehler said geopolitical disruption has not delayed the launch of the company’s PX Q650 product. Energy Recovery has already launched the product and is seeing commercial uptake from key customers, including both smaller and larger agreements.

He said the Q650 is designed to address a changing desalination market in which countries are pursuing multiyear national water programs, plant trains are becoming larger and volumetric flows are increasing. Buehler said the product strengthens the company’s competitive position through factors including efficiency, specific energy consumption, back pressure, useful life and warranty coverage.

“We are inking deals for the 650, both small and large,” Buehler said.

Wastewater Strategy Centers on Broader Applications and Sales Efficiency

Energy Recovery said it continues to view wastewater as an attractive growth market despite what Buehler described as soft recent results. The company has expanded its product portfolio to serve high-pressure, ultra-high-pressure, low-pressure and ultra-low-pressure applications, broadening the range of wastewater use cases it can address.

Management highlighted opportunities in Asia, particularly China and India, where Buehler said there is significant potential for minimum liquid discharge and zero liquid discharge applications. The company is seeking to improve adoption by allocating resources toward priority geographies and target accounts, while pursuing relationships with original equipment manufacturers that could incorporate Energy Recovery products into reverse-osmosis systems.

The company is also seeking greater efficiency in its wastewater sales organization. Buehler said Energy Recovery is not reducing sales resources in priority markets, but is reassessing territorial coverage, account overlap and management structures shared between its desalination and wastewater businesses.

• Energy Recovery sees overlap among customers served by its desalination and wastewater operations.
• The company is evaluating how many salespeople and territory specialists are needed to cover key accounts in each region.
• Management also sees potential to reduce duplication between separate desalination and wastewater sales-management structures.

For its OEM and aftermarket businesses, Buehler said Energy Recovery expects resilience across the full year, despite some “choppiness” in the first half related to the conflict. He noted that these businesses are not immune to regional conditions, but management continues to expect them to remain comparatively stable through the balance of 2026.

About Energy Recovery (NASDAQ:ERII)

Energy Recovery, Inc (NASDAQ: ERII) is an energy technology company specializing in the design and manufacture of high-efficiency devices that capture and repurpose energy in fluid-handling applications. The company's core offering, the Pressure Exchanger® (PX®) device, enables seawater reverse osmosis (SWRO) desalination plants to recover and reuse hydraulic energy that would otherwise be lost during brine discharge. By integrating PX technology into desalination processes, Energy Recovery helps operators significantly reduce the energy consumption and operating costs of producing fresh water from seawater or brackish sources.

In addition to desalination solutions, Energy Recovery has expanded its portfolio to serve the oil and gas sector through turbocharger systems that improve the energy efficiency of hydraulic fracturing operations.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected].

Where Should You Invest $1,000 Right Now?

Before you make your next trade, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis.

Our team has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and none of the big name stocks were on the list.

They believe these five stocks are the five best companies for investors to buy now...

See The Five Stocks Here

Source MarketBeat