Energy Recovery, Inc.

Good day, ladies and gentlemen, and welcome to Energy Recovery's fourth quarter and full year 2025 earnings call. During today's call, Energy Recovery may make projections and other forward-looking statements under the safe harbor provisions contained in the Private Security Litigation Reform Act of 1995 regarding future events or the future financial performance of the company. These statements may discuss our business, economic and market outlook, growth expectations, new products and their performance, cost structure, and business strategy. Forward-looking statements are based on information currently available to the company and on management's beliefs, assumptions, estimates, and projections. Forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties, and other factors. We refer you to the documents the company files from time to time with the SEC, specifically the company's annual Form 10-K and quarterly Form 10-Q. These documents identify important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements. All statements made during this call are made only as of today, February 25, 2026. And the company expressly disclaims any intent or obligation to update any forward-looking statements made during this call to reflect subsequent events or circumstances, unless otherwise required by law. Our hosts for today's call are David Moon, President and Chief Executive Officer of Energy Recovery, and Mike Mancini, Chief Financial Officer. I would now like to turn the call over to Mr. Moon.

Thank you, operator. Thank you, and good day, everyone. Earlier today, we released a letter to shareholders on the investor relations section of our website that reviews business and financial performance during the quarter, our outlook for 2026, and other important updates. Prior to opening the line for questions and answers, I'd like to highlight a few important takeaways from the letter. First, I'm now excited to be fully focused on our water business. As you will have seen in the letter, this is a large, growing, and profitable end market where we have the best pressure exchanger technology and continue to maintain our strong market position. As you can see from our results and guidance, we have hit an air pocket in 2025 and 2026, due to delays at several large desalination projects. Now this is a great business, but one that remains lumpy. We know investors find this frustrating and so do we. The good news is that we are confident in our growth for 2027 based on our pipeline and underlying demand trends. Second, As we've highlighted, we're winding down our CO2 retail grocery business. As conversations with customers involved over the last few months, it was clear this business couldn't achieve scaled adoption without significant continued time, investment, and risk. It's a disappointing outcome, and I'm genuinely grateful for the hard work our team members put into this effort over the past several years. Ultimately, we believe that the $7 million of annual savings was the optimal path for shareholder value creation. Now, against this backdrop, we as a management team will continue to focus on optimizing performance and controlling what we can control. keeping a high bar for capital allocation, investing in innovation, growing our wastewater business, cutting operating expenses, and buying back stock. As always, I want to thank our employees here at Energy Recovery. Our progress in 2025 and continued transformation in 2026 cannot be done without the great team that we have. With that, we'll now move to questions and answer portion of our conference call. Operator, please open the line for questions.

Thank you. And at this time, we'll conduct a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Your first question comes from Larry Solo with CJS. Please state your question.