Energy Recovery, Inc. Q1 FY2026 earnings call

1. New product PXQ650 launched in March, received first commercial order and working with large customers for desalination plants. 2. David Moon intends to retire with successor search underway; Mike Mancini resigned as CFO, Aidan Ryan becomes interim CFO. 3. Middle East war impacts financial guidance for 2026, leading to withdrawal of guidance, but focused on product innovation, cost discipline, manufacturing transformation, and wastewater business growth.

1. Original financial guidance for 2026 is no longer reliable and temporarily withdrawn until better visibility on Middle East conflict. 2. Pausing guidance on both desalination and wastewater, with plan to update in Q2 or Q3.

1. Uncertainty from Middle East conflict causing project delays and impact on financial performance. 2. Potential deflation of confidence in Middle East region affecting project activity and growth.

Q: Will the search for David Moon's successor lean internal or external?

A: Everything's on the table.

Q: Thoughts on Middle East project delays and their nature?

A: Project delays likely with long-term fundamentals of desalination in Middle East due to water scarcity and security.

Q: Confidence in building inventory and inventory building for PXQ650?

A: Confident in building inventory as projects over next 24 months are far along in design and unlikely to change product, and PXQ650 transition to primary product expected to take couple years.

Q: Impact of higher energy prices outside Middle East on desal projects?

A: No significant impact to this point except small wastewater projects due to input cost of materials.

Q: Enthusiastic geographic regions for megaproject development?

A: China, South America, and Texas.

Q: Manufacturing project footprint expansion update?

A: Still full speed ahead with planning to start manufacturing Q400s overseas by Q1.

Q: Wastewater revenue guidance?

A: Pausing guidance on wastewater, will update when overall guidance is updated.

Q: Cost-cutting as lever for free cash flow?

A: Focus on cost discipline with reducing manufacturing costs via Lean and Kaizen, and productivity gains at factory and in SG&A with no big-time one-time opportunities left.