Energy Recovery filed Q1 results on May 6 against a backdrop of significant management upheaval — the real story here is not the mixed earnings print but what the departure of the CEO and CFO signals about the period ahead.
The headline news is hard to ignore. CEO David Moon is retiring and CFO Mike Mancini is departing simultaneously. VP of Finance Aidan Ryan steps in as interim CFO. The board softened the blow with a $25 million buyback authorisation — a signal of confidence in the balance sheet, given that ERII carries roughly $132 million in net cash against an enterprise value just under $500 million. Q1 revenue of $9.7 million beat the $8.4 million estimate. But EPS came in at -$0.11 adjusted, missing the -$0.09 consensus. A top-line beat with a bottom-line miss, announced on the same day as a double leadership departure, is a difficult package for investors to price quickly.
The history here matters. The previous February print triggered a brutal one-day drop of 35% and the stock never recovered that ground — it trades at $11.31 today, well below the pre-February levels. Against that backdrop, the 2.8% gain on May 6 and a 2% rise on the week suggest the market is reading the buyback and the revenue beat as enough to hold the floor — at least for now.
Positioning is not particularly charged. Short interest runs at roughly 3.9% of free float, down about 2.9% on the week after a sharp 37% build through April. That April surge — from around 1.44 million shares short in early April to a peak near 2.18 million — looks like a directional bet ahead of earnings that is now being partially unwound. Cost to borrow is low at 0.54%, up 13% on the week but still barely above the general lending market rate. Availability in the lending pool is ample — the ORTEX short score has drifted down to 36.9 from 38.8 two weeks ago, consistent with a reduction in short-side conviction rather than a squeeze. The overall lending setup gives shorts plenty of room to rebuild if the leadership story deteriorates.
Options traders nudged toward caution this week. The put/call ratio climbed to 0.18, nearly 1.6 standard deviations above its 20-day mean of 0.11. That's still a relatively low absolute level — this stock trades with far more call activity than put activity structurally — but the directional move is notable given the 52-week PCR range runs from 0.05 to 1.00. Defensive hedging picked up into the earnings print; whether it unwinds or extends depends on what the market makes of the management transition.
The analyst picture is stale. The consensus sits at Hold with two buys and two holds, and the most recent changes date to late 2025 — Freedom Broker trimmed its target to $18.20 in November, and CJS Securities initiated at Market Outperform with a $19.00 target in September. With the stock at $11.31 today, those targets imply meaningful upside, but they predate the February collapse and the latest leadership exits. Fresh analyst responses to today's 8-K will be the more relevant signal when they arrive. Forward EPS momentum ranks in the 89th percentile on a 12-month basis — a genuinely positive factor score — while 90-day EPS momentum ranks in only the 8th percentile, reflecting the February earnings shock still dragging on the near-term trend.
The institutional register provides ballast. BlackRock added 561,000 shares in the most recent period to reach 12% of shares outstanding. Amundi made the most aggressive move, adding nearly 1.9 million shares to reach 7.1%. Columbia Management holds almost 10%. That concentration of active managers at current levels suggests some institutional appetite around the $10–$11 range — which aligns with where the director Arve Hanstveit sold over $1.6 million worth of shares in early April and another $275,000 in March, consistently at prices between $10.14 and $10.96. That insider selling trend, at prices below today's close, is worth monitoring as the new management structure takes shape.
The next scheduled earnings event is June 4 — the Q2 update will be the first real test of whether the interim CFO can articulate a credible transition narrative and whether revenue momentum is sustainable beyond a single-quarter beat.
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