Companies: 10,796     total market cap: $140.719 T
โ‚ฌEUR๐Ÿ‡ช๐Ÿ‡บโ‚นINR๐Ÿ‡ฎ๐Ÿ‡ณยฃGBP๐Ÿ‡ฌ๐Ÿ‡ง$CAD๐Ÿ‡จ๐Ÿ‡ฆ$AUD๐Ÿ‡ฆ๐Ÿ‡บ$NZD๐Ÿ‡ณ๐Ÿ‡ฟ$HKD๐Ÿ‡ญ๐Ÿ‡ฐ$SGD๐Ÿ‡ธ๐Ÿ‡ฌ
Energy Recovery
ERII
#6948
Rank
$0.60 B
Marketcap
๐Ÿ‡บ๐Ÿ‡ธ United States
Country
$11.41
Share price
2.70%
Change (1 day)
-23.32%
Change (1 year)
๐Ÿ˜ท Pollution control and treatment
Categories
  1. Energy Recovery
  2. Quarterly Reports (10-Q)
  3. Financial Year FY2025 Q3

Energy Recovery - 10-Q quarterly report FY2025 Q3


Text size:
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 
FORM 10-Q
(Mark One)
☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2025
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to __________
Commission File Number: 001-34112
ER_Logo_Primary_Horiz_RGB-titlepage.jpg
Energy Recovery, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware
01-0616867
(State or Other Jurisdiction of Incorporation)
(I.R.S. Employer Identification No.)
1717 Doolittle Drive, San Leandro, California  94577
                  (Address of Principal Executive Offices)                        (Zip Code)
(510) 483-7370
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock, $0.001 par value
ERII
The Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d)` of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.  Yes þ  No ¨
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).  Yes þ  No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in
Rule 12b-2 of the Exchange Act.
Large accelerated filer  ☑Accelerated filer  ☐Non-accelerated filer  ☐Smaller reporting company  ☐Emerging growth company  ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).  Yes ☐  No ☑
As of October 31, 2025, there were 52,972,096 shares of the registrant’s common stock outstanding.
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q)
Table of Contents
TABLE OF CONTENTS
Page No.
Condensed Consolidated Balance Sheets — September 30, 2025 and December 31, 2024
Condensed Consolidated Statements of Operations — Three and Nine Months Ended September 30, 2025 and 2024
Condensed Consolidated Statements of Comprehensive Income (Loss) — Three and Nine Months Ended September 30, 2025
and 2024
Condensed Consolidated Statements of Stockholders’ Equity — Three and Nine Months Ended September 30, 2025 and 2024
Condensed Consolidated Statements of Cash Flows — Nine Months Ended September 30, 2025 and 2024
Exhibit Index
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | FLS 1
Table of Contents
Forward-Looking Information
This Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2025, including Part I, Item 2,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” (the “MD&A”), contains forward-looking
statements within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements in this
report include, but are not limited to, statements about our expectations, objectives, anticipations, plans, hopes, beliefs, intentions or
strategies regarding the future.
Forward-looking statements represent our current expectations about future events, are based on assumptions, and involve risks and
uncertainties.  If the risks or uncertainties occur or the assumptions prove incorrect, then our results may differ materially from those set forth
or implied by the forward-looking statements.  Our forward-looking statements are not guarantees of future performance or events.
Words such as “expects,” “anticipates,” “aims,” “projects,” “intends,” “plans,” “believes,” “estimates,” “seeks,” “continue,” “could,”
“may,” “potential,” “should,” “will,” “would,” and variations of such words and similar expressions are also intended to identify such forward-
looking statements.  These forward-looking statements are subject to risks, uncertainties and assumptions that are difficult to predict;
therefore, actual results may differ materially and adversely from those expressed in any forward-looking statement.  Readers are directed to
risks and uncertainties identified under Part II, Item 1A, “Risk Factors,” and elsewhere in this report for factors that may cause actual results
to be different from those expressed in these forward-looking statements.  Except as required by law, we undertake no obligation to revise or
update publicly any forward-looking statement for any reason.
Forward-looking statements in this report include, without limitation, statements about the following:
•our belief that our PX offers market-leading value with the highest technological and economic benefit;
•our belief that leveraging our pressure exchanger technology will unlock new commercial opportunities in the future;
•our belief that our PX G1300™ can contribute to help make CO2-based refrigeration more economically viable in a broader
range of climates;
•our belief that our technology helps our customer achieve environmentally sustainable operations;
•our expectation that sales outside of the U.S. will remain a significant portion of our revenue;
•the scale of the environmental impact from the use of our solutions;
•the timing of our receipt of payment for products or services from our customers;
•our belief that our existing cash and cash equivalents, our short and/or long-term investments, and the ongoing cash generated
from our operations, will be sufficient to meet our anticipated liquidity needs for the foreseeable future, with the exception of a
decision to enter into an acquisition and/or fund investments in our latest technology arising from rapid market adoption that
could require us to seek additional equity or debt financing;
•our expectations relating to the amount and timing of recognized revenue from our projects;
•our expectation that we will continue to receive a tax benefit related to U.S. federal foreign-derived intangible income and
research and development tax credit;
•the outcome of proceedings, lawsuits, disputes and claims;
•the impact of losses due to indemnification obligations;
•other factors disclosed under the MD&A and Part I, Item 3, “Quantitative and Qualitative Disclosures about Market Risk,” and
elsewhere in this Form 10-Q.
You should not place undue reliance on these forward-looking statements.  These forward-looking statements reflect management’s
opinions only as of the date of the filing of this Quarterly Report on Form 10-Q.  All forward-looking statements included in this document are
subject to additional risks and uncertainties further discussed under Part II, Item 1A, “Risk Factors,” and are based on information available to
us as of November 5, 2025.  We assume no obligation to update any such forward-looking statements.  Certain risks and uncertainties could
cause actual results to differ materially from those projected in the forward-looking statements.  These forward-looking statements are
disclosed from time to time in our Annual Reports on Form 10‑K, Quarterly Reports on Form 10‑Q and Current Reports on Form 8‑K filed
with, or furnished to, the Securities and Exchange Commission (the “SEC”), as well as in Part II, Item 1A, “Risk Factors,” within this Quarterly
Report on Form 10-Q.
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | FLS 2
Table of Contents
It is important to note that our actual results could differ materially from the results set forth or implied by our forward-looking
statements.  The factors that could cause our actual results to differ from those included in such forward-looking statements are set forth
under the heading Item 1A, “Risk Factors,” in our Quarterly Reports on Form 10-Q, in our Annual Reports on Form 10-K, and from time-to-
time, in our results disclosed in our Current Reports on Form 8-K.  In addition, when preparing the MD&A below, we presume the readers
have access to and have read the MD&A in our Annual Report on Form 10-K, pursuant to Instruction 2 to paragraph (b) of Item 303 of
Regulation S-K.
We provide our Annual Reports on Form 10‑K, Quarterly Reports on Form 10‑Q, Current Reports on Form 8‑K, Proxy Statements on
Schedule 14A, Forms 3, 4 and 5 filed by, or on behalf of, directors, executive officers and certain large shareholders, and any amendments to
those documents filed or furnished pursuant to the Securities Exchange Act of 1934, free of charge on the Investor Relations section of our
website, www.energyrecovery.com.  These filings will become available as soon as reasonably practicable after such material is
electronically filed with or furnished to the SEC.  From time to time, we may use our website as a channel of distribution of material company
information.
We also make available in the Investor Relations section of our website our corporate governance documents including our code of
business conduct and ethics and the charters of the audit, compensation and nominating and governance committees.  These documents, as
well as the information on the website, are not intended to be part of this Quarterly Report on Form 10-Q.  We use the Investor Relations
section of our website as a means of complying with our disclosure obligations under Regulation FD.  Accordingly, you should monitor the
Investor Relations section of our website in addition to following our press releases, SEC filings and public conference calls and webcasts.
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 1
Table of Contents
PART I — FINANCIAL INFORMATION
Item 1 — Financial Statements (unaudited)
ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30,
2025
December 31,
2024
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents
$47,103
$29,627
Short-term investments
23,278
48,392
Accounts receivable, net
44,016
64,066
Inventories, net
33,566
24,906
Prepaid expenses and other assets
7,658
6,665
Total current assets
155,621
173,656
Long-term investments
9,556
21,832
Deferred tax assets, net
9,711
9,004
Property and equipment, net
13,341
15,424
Operating lease, right of use asset
8,198
9,695
Goodwill
12,790
12,790
Other assets, non-current
428
391
Total assets
$209,645
$242,792
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$4,744
$3,109
Accrued expenses and other liabilities
12,068
17,728
Lease liabilities
2,472
2,020
Contract liabilities
1,933
571
Total current liabilities
21,217
23,428
Lease liabilities, non-current
7,527
9,297
Other liabilities, non-current
69
57
Total liabilities
28,813
32,782
Commitments and contingencies (Note 7)
Stockholders’ equity:
Common stock
67
66
Additional paid-in capital
242,344
235,010
Accumulated other comprehensive income
34
98
Treasury stock
(163,367)
(130,870)
Retained earnings
101,754
105,706
Total stockholders’ equity
180,832
210,010
Total liabilities and stockholders’ equity
$209,645
$242,792
See Accompanying Notes to Condensed Consolidated Financial Statements
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 2
Table of Contents
ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended September 30,
Nine Months Ended September 30,
2025
2024
2025
2024
 
(In thousands, except per share data)
Revenue
$32,000
$38,584
$68,116
$77,873
Cost of revenue
11,442
13,472
25,146
28,060
Gross profit
20,558
25,112
42,970
49,813
Operating expenses:
General and administrative
7,514
7,673
23,757
24,771
Sales and marketing
5,714
6,413
15,980
18,669
Research and development
3,668
3,969
10,120
12,264
Restructuring charges
—
—
539
—
Total operating expenses
16,896
18,055
50,396
55,704
Income (loss) from operations
3,662
7,057
(7,426)
(5,891)
Other income (expense):
Interest income
847
1,711
2,860
4,816
Other non-operating income (expense), net
45
57
25
(45)
Total other income, net
892
1,768
2,885
4,771
Income (loss) before income taxes
4,554
8,825
(4,541)
(1,120)
Provision for (benefit from) income taxes
680
344
(589)
(699)
Net income (loss)
$3,874
$8,481
$(3,952)
$(421)
Net income (loss) per share:
Basic
$ 0.07
$ 0.15
$ (0.07)
$ (0.01)
Diluted
$ 0.07
$ 0.15
$ (0.07)
$ (0.01)
Number of shares used in per share calculations:
Basic
53,162
57,756
54,101
57,409
Diluted
53,466
58,290
54,101
57,409
See Accompanying Notes to Condensed Consolidated Financial Statements
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 3
Table of Contents
ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Three Months Ended September 30,
Nine Months Ended September 30,
2025
2024
2025
2024
 
(In thousands)
Net income (loss)
$3,874
$8,481
$(3,952)
$(421)
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments
(68)
(94)
(31)
(57)
Unrealized gain (loss) on investments
65
304
(33)
250
Total other comprehensive income (loss), net of tax
(3)
210
(64)
193
Comprehensive income (loss)
$3,871
$8,691
$(4,016)
$(228)
See Accompanying Notes to Condensed Consolidated Financial Statements
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 4
Table of Contents
ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
 
Three Months Ended September 30,
Nine Months Ended September 30,
 
2025
2024
2025
2024
 
(In thousands, except shares)
Common stock
Beginning balance
$67
$66
$66
$65
Issuance of common stock, net
—
—
1
1
Ending balance
67
66
67
66
Additional paid-in capital
Beginning balance
239,883
225,240
235,010
217,617
Issuance of common stock, net
380
4,293
1,363
5,794
Stock-based compensation
2,081
2,376
5,971
8,498
Ending balance
242,344
231,909
242,344
231,909
Accumulated other comprehensive income
Beginning balance
37
(61)
98
(44)
Other comprehensive (loss) income
Foreign currency translation adjustments
(68)
(94)
(31)
(57)
Unrealized (loss) gain on investments
65
304
(33)
250
Total other comprehensive (loss) income, net
(3)
210
(64)
193
Ending balance
34
149
34
149
Treasury stock
Beginning balance
(152,660)
(80,486)
(130,870)
(80,486)
Common stock repurchased
(10,707)
—
(32,497)
—
Ending balance
(163,367)
(80,486)
(163,367)
(80,486)
Retained earnings
Beginning balance
97,880
73,754
105,706
82,656
Net (loss) income
3,874
8,481
(3,952)
(421)
Ending balance
101,754
82,235
101,754
82,235
Total stockholders’ equity
$180,832
$233,873
$180,832
$233,873
Common stock issued (shares)
Beginning balance
66,637,788
65,571,275
66,182,906
65,029,459
Issuance of common stock, net
71,876
459,312
526,758
1,001,128
Ending balance
66,709,664
66,030,587
66,709,664
66,030,587
Treasury stock (shares)
Beginning balance
12,954,253
8,148,512
11,397,045
8,148,512
Common stock repurchased
775,610
—
2,332,818
—
Ending balance
13,729,863
8,148,512
13,729,863
8,148,512
Total common stock outstanding (shares)
52,979,801
57,882,075
52,979,801
57,882,075
See Accompanying Notes to Condensed Consolidated Financial Statements
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 5
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ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30,
2025
2024
(In thousands)
Cash flows from operating activities:
Net loss
$(3,952)
$(421)
Adjustments to reconcile net loss to cash provided by (used in) operating activities
Stock-based compensation
6,106
8,512
Depreciation and amortization
2,819
3,050
Right of use asset amortization
1,434
1,317
Accretion (amortization) of discounts (premiums) on investments
(308)
(1,049)
Deferred income taxes
(707)
(705)
Impairment of long-lived assets
353
—
Inventory reserve adjustment
575
136
Other non-cash adjustments
(91)
171
Changes in operating assets and liabilities:
Accounts receivable, net
19,946
15,060
Contract assets
(17)
(882)
Inventories, net
(9,320)
(7,686)
Prepaid and other assets
(1,063)
(2,159)
Accounts payable
1,212
879
Accrued expenses and other liabilities
(6,656)
(6,467)
Contract liabilities
1,362
1,811
Net cash provided by operating activities
11,693
11,567
Cash flows from investing activities:
Maturities of marketable securities
60,150
59,423
Purchases of marketable securities
(22,480)
(80,490)
Capital expenditures
(668)
(1,194)
Proceeds from sales of fixed assets
10
90
Net cash provided by (used in) investing activities
37,012
(22,171)
Cash flows from financing activities:
Net proceeds from issuance of common stock
1,364
5,795
Repurchase of common stock
(32,178)
—
Payment of excise tax associated with repurchase of common stock
(603)
—
Net cash (used in) provided by financing activities
(31,417)
5,795
Effect of exchange rate differences on cash and cash equivalents
58
(23)
Net change in cash, cash equivalents and restricted cash
17,346
(4,832)
Cash, cash equivalents and restricted cash, beginning of year
29,757
68,225
Cash, cash equivalents and restricted cash, end of period
$47,103
$63,393
See Accompanying Notes to Condensed Consolidated Financial Statements
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 6
Table of Contents
ENERGY RECOVERY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 — Description of Business and Significant Accounting Policies
Energy Recovery, Inc. and its wholly-owned subsidiaries (the “Company” or “Energy Recovery”) designs and manufactures reliable,
high-performance solutions that generate cost savings by increasing energy efficiency and reducing carbon emissions across several
industries.  Leveraging the Company’s pressure exchanger technology, which generates little to no emissions when operating, the Company
believes its solutions lower costs, save energy, reduce waste, and minimize emissions for companies across a variety of commercial and
industrial processes.  As the world coalesces around the urgent need to address climate change and its impacts, the Company is helping
companies reduce their energy consumption in their industrial processes, which in turn, reduces their carbon footprint.  The Company
believes that its customers do not have to sacrifice quality and cost savings for sustainability and the Company is committed to developing
solutions that drive long-term value – both financial and environmental.  The Company’s solutions are marketed, sold in, and developed for,
the fluid-flow and gas markets, such as seawater and wastewater desalination, natural gas, chemical processing and CO2-based refrigeration
systems, under the trademarks ERI®, PX®, Pressure Exchanger®, PX® Pressure Exchanger® (“PX”), Ultra PX™, PX G™, PX G1300®,
PX PowerTrain™, AT™, and Aquabold™.  The Company owns, manufactures and/or develops its solutions, in whole or in part, in the United
States of America (the “U.S.”).
Basis of Presentation
The Condensed Consolidated Financial Statements include the accounts of Energy Recovery, Inc. and its wholly-owned subsidiaries. 
All intercompany accounts and transactions have been eliminated in consolidation.
The accompanying Condensed Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission (the “SEC”).  Certain information and footnote disclosures normally included in the financial statements
prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules
and regulations.  The December 31, 2024 Condensed Consolidated Balance Sheet was derived from audited financial statements and may
not include all disclosures required by GAAP; however, the Company believes that the disclosures are adequate to make the information
presented not misleading.
The September 30, 2025 unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited
Consolidated Financial Statements and the notes thereto for the fiscal year ended December 31, 2024 included in the Company’s Annual
Report on Form 10-K filed with the SEC on February 26, 2025 (the “2024 Annual Report”).
The results of operations for the interim periods are not necessarily indicative of the operating results for the full fiscal year or any
future periods.
Use of Estimates
The preparation of Condensed Consolidated Financial Statements, in conformity with GAAP, requires the Company’s management to
make judgments, assumptions and estimates that affect the amounts reported in the Condensed Consolidated Financial Statements and
accompanying notes.
The accounting policies that reflect the Company’s significant estimates and judgments and that the Company believes are the most
critical to aid in fully understanding and evaluating its reported financial results are revenue recognition; stock-based compensation expense;
equipment useful life and valuation; goodwill valuation and impairment; inventory valuation and allowances, deferred taxes and valuation
allowances on deferred tax assets; and evaluation and measurement of contingencies. Those estimates could change, and as a result,
actual results could differ materially from those estimates.
The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a
revision of the carrying value of its assets or liabilities as of November 5, 2025, the date of issuance of this Quarterly Report on Form 10-Q. 
These estimates may change, as new events occur and additional information is obtained.  Actual results could differ materially from these
estimates under different assumptions or conditions.  The Company undertakes no obligation to publicly update these estimates for any
reason after the date of this Quarterly Report on Form 10-Q, except as required by law.
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 7
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ENERGY RECOVERY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Significant Accounting Policies
There have been no material changes to the Company’s significant accounting policies in Note 1, “Description of Business and
Significant Accounting Policies - Significant Accounting Policies,” of the Notes to Consolidated Financial Statements included in Item 8,
“Financial Statements and Supplementary Data,” of the 2024 Annual Report. See Note 12, “Stock-Based Compensation - Performance
Restricted Stock Units” for further discussion regarding the Company’s Performance Restricted Stock Units (“PRSUs”) issued during the nine
months ended September 30, 2025. 
Recently Issued Accounting Pronouncement Not Yet Adopted
Other than the accounting pronouncement discussed below, there have been no issued accounting pronouncements that have not yet
been adopted during the nine months ended September 30, 2025 that apply to the Company other than the pronouncements disclosed in
Note 1, “Description of Business and Significant Accounting Policies - Recently Issued Accounting Pronouncement Not Yet Adopted,” of the
Notes to Consolidated Financial Statements included in Item 8, “Financial Statements and Supplementary Data,” of the 2024 Annual Report.
In July 2025, the Financial Accounting Standards Board issued Accounting Standards Update 2025-05, Measurement of Credit
Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”).  ASU 2025-05 provides a practical expedient for measuring expected
credit losses on current accounts receivables and contract assets by assuming that conditions at the balance sheet date remain unchanged
over the life of the asset. ASU 2025-05 is effective for annual reporting periods beginning after December 15, 2025, and interim periods within
those years, with early adoption permitted. The Company believes the adoption of ASU-2025-05 will not have a material impact on results of
operations, cash flows, or financial condition.
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 8
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ENERGY RECOVERY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 2 — Revenue
Disaggregation of Revenue
The following tables present the disaggregated revenues by segment, and within each segment, by geographical market based on the
customer “shipped to” address, and by channel customers.  Sales and usage-based taxes are excluded from revenues.  See Note 9,
“Segment Reporting,” for further discussion related to the Company’s segments.
Three Months Ended September 30, 2025
Nine Months Ended September 30, 2025
Water
Emerging
Technologies
Total
Water
Emerging
Technologies
Total
(In thousands)
Geographical market1
Middle East and Africa
$16,685
$—
$16,685
$28,889
$93
$28,982
Asia
11,088
—
11,088
22,534
65
22,599
Europe
1,639
—
1,639
11,770
55
11,825
Americas
2,516
72
2,588
4,638
72
4,710
Total revenue
$31,928
$72
$32,000
$67,831
$285
$68,116
Channel
Megaproject
$18,400
$—
$18,400
$33,238
$—
$33,238
Original equipment manufacturer
8,890
72
8,962
21,128
192
21,320
Aftermarket
4,638
—
4,638
13,465
93
13,558
Total revenue
$31,928
$72
$32,000
$67,831
$285
$68,116
1 Within the geographical markets, the following countries represent revenue in excess of 10%.
Three Months Ended
September 30, 2025
Nine Months Ended September
30, 2025
Total
Percentage
Total
Percentage
(In thousands, except percentages)
Morocco
$9,261
29%
$10,897
16%
India
$4,916
15%
$6,749
10%
Saudi Arabia
$4,095
13%
**
**
Spain
**
**
$8,977
13%
China
**
**
$6,791
10%
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 9
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ENERGY RECOVERY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Three Months Ended September 30, 2024
Nine Months Ended September 30, 2024
Water
Emerging
Technologies
Total
Water
Emerging
Technologies
Total
(In thousands)
Geographical market1
Middle East and Africa
$28,043
$153
$28,196
$47,295
$399
$47,694
Asia
6,829
—
6,829
16,770
36
16,806
Europe
2,421
87
2,508
6,329
87
6,416
Americas
1,051
—
1,051
6,957
—
6,957
Total revenue
$38,344
$240
$38,584
$77,351
$522
$77,873
Channel
Megaproject
$29,009
$—
$29,009
$48,924
$—
$48,924
Original equipment manufacturer
4,832
87
4,919
15,087
123
15,210
Aftermarket
4,503
153
4,656
13,340
399
13,739
Total revenue
$38,344
$240
$38,584
$77,351
$522
$77,873
1 Within the geographical markets, the following countries represent revenue in excess of 10%.
Three Months Ended
September 30, 2024
Nine Months Ended September
30, 2024
Total
Percentage
Total
Percentage
(In thousands, except percentages)
Saudi Arabia
$11,101
29%
$13,833
18%
United Arab Emirates
$8,650
22%
$14,304
18%
Morocco
$5,636
15%
$11,872
15%
India
$4,708
12%
$9,341
12%
Contract Balances
The following table presents contract balances by category.
September 30,
2025
December 31,
2024
(In thousands)
Accounts receivable, net
$44,016
$64,066
Contract assets, current (included in prepaid expenses and other assets)
$2,793
$2,776
Contract liabilities:
Contract liabilities, current
$1,933
$571
Total contract liabilities
$1,933
$571
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 10
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ENERGY RECOVERY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Contract Liabilities
The Company records contract liabilities, which consist of customer deposits and deferred revenue, when cash payments are
received in advance of the Company’s performance.  The following table presents the change in contract liability balances during the reported
periods.
September 30,
2025
December 31,
2024
(In thousands)
Contract liabilities, beginning of year
$571
$1,187
Revenue recognized
(274)
(1,085)
Cash received, excluding amounts recognized as revenue during the period
1,636
469
Contract liabilities, end of period
$1,933
$571
Remaining Performance Obligations
As of September 30, 2025, the following table presents the revenue that is expected to be recognized related to performance
obligations that are unsatisfied or partially unsatisfied.
Period
Remaining
Performance
Obligations
(In thousands)
2025 (remaining three months)
$4,786
Total
$4,786
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 11
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ENERGY RECOVERY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 3 — Net Income (Loss) Per Share
Net income (loss) for the reported period is divided by the weighted average number of basic and diluted common shares outstanding
during the reported period to calculate the basic and diluted net income (loss) per share, respectively.  Outstanding stock options to purchase
common shares, unvested restricted stock units (“RSUs”), and unvested performance restricted stock units (“PRSUs”) are collectively
referred to as “equity awards.”
•Basic net income (loss) per share is computed using the weighted average number of common shares outstanding during the
period.
•Diluted net income (loss) per share is computed using the weighted average number of common and potentially dilutive shares
outstanding during the period, using the treasury stock method.  Any anti-dilutive effect of equity awards outstanding is not
included in the computation of diluted net income (loss) per share.
The following tables present the computation of basic and diluted net income (loss) per share.
Three Months Ended September 30,
Nine Months Ended September 30,
2025
2024
2025
2024
(In thousands, except per share amounts)
Numerator
Net income (loss)
$3,874
$8,481
$(3,952)
$(421)
Denominator (weighted average shares)
Basic common shares outstanding
53,162
57,756
54,101
57,409
Stock options
169
316
—
—
RSUs
135
218
—
—
Diluted common shares outstanding
53,466
58,290
54,101
57,409
Net income (loss) per share
Basic
$ 0.07
$ 0.15
$ (0.07)
$ (0.01)
Diluted
$ 0.07
$ 0.15
$ (0.07)
$ (0.01)
The following tables present the equity awards that are excluded from diluted net income (loss) per share because their effect would
have been anti-dilutive.
 
Three Months Ended September 30,
Nine Months Ended September 30,
 
2025
2024
2025
2024
(In thousands)
Anti-dilutive equity award shares
1,048
1,077
2,949
2,876
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 12
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ENERGY RECOVERY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 4 — Other Financial Information
Cash, Cash Equivalents and Restricted Cash
The Condensed Consolidated Statements of Cash Flows explain the changes in the total of cash, cash equivalents and restricted
cash, such as cash amounts deposited in restricted cash accounts in connection with the Company’s credit cards.  The following table
presents a reconciliation of cash, cash equivalents and restricted cash, reported for each period within the Condensed Consolidated Balance
Sheets and the Condensed Consolidated Statements of Cash Flows that sum to the total of such amounts.
September 30,
2025
December 31,
2024
September 30,
2024
(In thousands)
Cash and cash equivalents
$47,103
$29,627
$63,261
Restricted cash, non-current (included in other assets, non-current)
—
130
132
Total cash, cash equivalents and restricted cash
$47,103
$29,757
$63,393
Accounts Receivable, net
 
September 30,
2025
December 31,
2024
(In thousands)
Accounts receivable, gross
$44,341
$64,287
Allowance for doubtful accounts
(325)
(221)
Accounts receivable, net
$44,016
$64,066
Inventories, net
Inventory amounts are stated at the lower of cost or net realizable value, using the first-in, first-out method.
 
September 30,
2025
December 31,
2024
(In thousands)
Raw materials
$8,494
$8,829
Work in process
8,030
6,417
Finished goods
18,260
10,463
Inventories, gross
34,784
25,709
Valuation adjustments for excess and obsolete inventory
(1,218)
(803)
Inventories, net
$33,566
$24,906
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 13
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ENERGY RECOVERY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Accrued Expenses and Other Liabilities
 
September 30,
2025
December 31,
2024
(In thousands)
Accrued expenses and other liabilities, current
Payroll, benefits, incentives and commissions payable
$7,471
$10,179
Warranty reserve
987
1,090
Restructuring accrual
226
2,476
Income taxes payable
44
947
Other accrued expenses and other liabilities
3,340
3,036
Total accrued expenses and other liabilities
12,068
17,728
Other liabilities, non-current
69
57
Total accrued expenses, and current and non-current other liabilities
$12,137
$17,785
Restructuring
During the fourth quarter of fiscal year 2024, the Company implemented a restructuring plan which included reductions in its
workforce in all functions of the organization, primarily in its San Leandro location, in order to lower the Company’s operating cost structure,
and to position the Company for profitable growth.  The Company recorded a restructuring charge of approximately $3.0 million in total, of
which $0.5 million was recorded during the nine months ended September 30, 2025. The Company did not record any restructuring charge
during the three months ended September 30, 2025. The total restructuring charge recorded relates to severance and benefits, including
reemployment assistance, for 38 terminated employees, which was approximately 15% of the Company’s workforce. The implementation of
the restructuring plan was substantially complete by the end of the first quarter of fiscal year 2025 and the Company does not expect to incur
significant additional expenses related to the restructuring.  All expenses associated with the Company’s restructuring plan are included in
“Restructuring charges” in the Condensed Consolidated Statements of Operations.
 
Segment
Corporate
Total Expense
 
Water
Emerging
Technology
(In thousands)
Amount recognized in 2024
1,147
832
497
2,476
Amount recognized in 2025
210
123
206
539
Total restructuring expenses recognized
$1,357
$955
$703
$3,015
The following table presents the change in the Company’s restructuring accrual balances during the reported period:
Severance and
Benefits
(In thousands)
Balance, as of December 31, 2024
$2,476
Restructuring provision
539
Cash paid
(2,789)
Balance, as of September 30, 2025
$226
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 14
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ENERGY RECOVERY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 5 — Investments and Fair Value Measurements
Fair Value of Financial Instruments
The following table presents the Company’s financial assets measured on a recurring basis by contractual maturity, including pricing
category, amortized cost, gross unrealized gains and losses, and fair value.  As of September 30, 2025 and December 31, 2024, the
Company had no financial liabilities and no Level 3 financial assets.
September 30, 2025
December 31, 2024
Pricing
Category
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
(In thousands)
Cash equivalents
Money market
securities
Level 1
$9,926
$—
$—
$9,926
$2,580
$—
$—
$2,580
U.S. treasury
securities
Level 2
15,966
—
—
15,966
—
—
—
—
Total cash equivalents
25,892
—
—
25,892
2,580
—
—
2,580
Short-term investments
U.S. treasury
securities
Level 2
10,043
8
—
10,051
20,303
42
—
20,345
Corporate notes and
bonds
Level 2
13,178
49
—
13,227
27,995
52
—
28,047
Total short-term investments
23,221
57
—
23,278
48,298
94
—
48,392
Long-term investments
U.S. treasury
securities
Level 2
3,460
20
—
3,480
999
1
—
1,000
Corporate notes and
bonds
Level 2
6,050
26
—
6,076
18,983
65
(13)
19,035
Municipal and
agency notes and
bonds
Level 2
—
—
—
—
1,799
—
(2)
1,797
Total long-term investments
9,510
46
—
9,556
21,781
66
(15)
21,832
Total short and long-term
investments
32,731
103
—
32,834
70,079
160
(15)
70,224
Total
$58,623
$103
$—
$58,726
$72,659
$160
$(15)
$72,804
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 15
Table of Contents
ENERGY RECOVERY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents a summary of the fair value and gross unrealized losses on the available-for-sale securities that have
been in a continuous unrealized loss position, aggregated by type of investment instrument.  The available-for-sale securities that were in an
unrealized gain position have been excluded from the table.
 
September 30, 2025
December 31, 2024
 
Fair
Value
Gross
Unrealized
Losses1
Fair
Value
Gross
Unrealized
Losses
(In thousands)
U.S. treasury securities
$9,878
$—
$—
$—
Corporate notes and bonds
—
—
7,569
(13)
Municipal and agency notes and bonds
—
—
1,797
(2)
Total available-for-sale investments with unrealized loss positions
$9,878
$—
$9,366
$(15)
1 Gross unrealized losses on the available-for-sale securities were not material as of September 30, 2025.
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 16
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ENERGY RECOVERY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 6 — Lines of Credit
Credit Agreement
The Company entered into a credit agreement with JPMorgan Chase Bank, N.A. on December 22, 2021 (as amended, the “Credit
Agreement”).  The Credit Agreement, which will expire on December 21, 2026, provides a committed revolving credit line of $50.0 million and
includes both a revolving loan and a letters of credit (“LCs”) component. 
Under the Credit Agreement, as of September 30, 2025, there were no revolving loans outstanding.  In addition, under the LCs
component, the Company utilized $18.2 million of the maximum allowable credit line of $30.0 million, which includes newly issued LCs and
previously issued and unexpired stand-by letters of credit (“SBLCs”).
Letters of Credit
The following table presents the total outstanding LCs and SBLCs issued by the Company to its customers related to product
warranty and performance guarantees. 
September 30,
2025
December 31,
2024
(In thousands)
Outstanding letters of credit
$18,210
$15,708
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 17
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ENERGY RECOVERY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 7 — Commitments and Contingencies
Sublease
On March 10, 2025, the Company entered into an agreement to sublease its Katy, Texas operating lease. The sublease commenced
on March 10, 2025 and will expire on December 31, 2029. The sublease is classified as an operating lease and has a remaining lease term
of 4.3 years as of September 30, 2025. Sublease income was immaterial during the three and nine months ended September 30, 2025 and is
recorded as a reduction of lease expense in general and administrative within the Company’s Condensed Consolidated Statements of
Operations.
The Company considered the sublease to be an indicator of impairment of the original lease. The Company compared the
undiscounted cash flows from the sublease to the carrying value of the Katy, Texas operating lease, which included the associated right-of-
use asset and leasehold improvements. The Company concluded that the carrying value was not recoverable as it exceeded the estimated
undiscounted cash flows.
The Company calculated the impairment charge by comparing the carrying value of the Katy, Texas operating lease to its fair value,
which was calculated based on the net discounted cash flows associated with the sublease. The Company recorded a total impairment
charge of $0.4 million during the nine months ended September 30, 2025, of which $0.2 million and $0.2 million was recorded against the
right-of-use asset and the associated leasehold improvements, respectively. No impairment charges were recorded during the three months
ended September 30, 2025. The allocation of the impairment charge was based on the relative carrying value of the assets. The impairment
charge was recorded in general and administrative within the Company’s Condensed Consolidated Statements of Operations.
Litigation
From time-to-time, the Company has been named in and subject to various proceedings and claims in connection with its business. 
The Company may in the future become involved in litigation in the ordinary course of business, including litigation that could be material to
its business.  The Company considers all claims, if any, on a quarterly basis and, based on known facts, assesses whether potential losses
are considered reasonably possible, probable and estimable.  Based upon this assessment, the Company then evaluates disclosure
requirements and whether to accrue for such claims in its consolidated financial statements.  The Company records a provision for a liability
when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.  These provisions are
reviewed at least quarterly and are adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other
information and events pertaining to a particular case.  As of September 30, 2025, the Company was not involved in any lawsuits, legal
proceedings or claims that would have a material effect on the Company’s financial position, results of operations, or cash flows.  Therefore,
there were no material losses which were probable or reasonably possible.
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 18
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ENERGY RECOVERY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 8 — Income Taxes
 
Three Months Ended September 30,
Nine Months Ended September 30,
 
2025
2024
2025
2024
(In thousands, except percentages)
Provision for (benefit from) income taxes
$680
$344
$(589)
$(699)
Discrete items
(117)
426
(87)
566
Provision for (benefit from) income taxes, excluding discrete items
$563
$770
$(676)
$(133)
Effective tax rate
14.9%
3.9%
13.0%
62.4%
Effective tax rate, excluding discrete items
12.4%
8.7%
14.9%
11.8%
The Company’s interim period tax provision for (benefit from) income taxes is determined using an estimate of its annual effective tax
rate, adjusted for discrete items, if any, that arise during the period.  Each quarter, the Company updates its estimate of the annual effective
tax rate, and if the estimated annual effective tax rate changes, the Company makes a cumulative adjustment in such period.  The
Company’s quarterly tax provision and estimate of its annual effective tax rate are subject to variation due to several factors, including
variability in accurately predicting its pre-tax income or loss and the mix of jurisdictions to which they relate, the applicability of special tax
regimes, and changes in how the Company does business.
For the three and nine months ended September 30, 2025, the recognized provision for and (benefit from) income taxes, respectively,
resulted from the tax projection based on the full year forecasted profit and included benefits related to the U.S. federal foreign-derived
intangible income (“FDII”), federal research and development (“R&D”) tax credit, certain permanent differences, such as stock-based
compensation shortfalls, and partial release of California valuation allowance.
For the three and nine months ended September 30, 2024, the recognized provision for and (benefit from) income taxes, respectively,
resulted from the tax projection based on the full year forecasted profit and included benefits related to the U.S. FDII, federal R&D tax credit,
certain permanent differences, such as share-based compensation shortfalls, and partial release of California valuation allowance.
The effective tax rate excluding discrete items for the nine months ended September 30, 2025, as compared to the prior year, differed
primarily due to lower projected R&D tax credits, increased non-deductible officer stock-based compensation, and lower projected U.S. FDII
benefits.
On July 4, 2025, the One Big Beautiful Bill (“OBBA”) Act, which includes a broad range of tax reform provisions, was signed into law in
the United States. During the three and nine months ended September 30, 2025, the Company recorded its best estimate of the impact of the
OBBA on the income tax provision. The Company will continue to evaluate the elections available within the OBBA, which may impact the
timing of permanent and temporary differences within the Company’s tax provision. 
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 19
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ENERGY RECOVERY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 9 — Segment Reporting
The Company’s Chief Operating Decision-Maker (“CODM”) is its President and Chief Executive Officer.  The Company continues to
monitor and review its segment reporting structure in accordance with authoritative guidance to determine whether any changes have
occurred that would impact its reportable segments.
The following tables present a summary of the Company’s financial information by segment, including significant segment expenses,
and corporate operating expenses.
Three Months Ended September 30, 2025
Nine Months Ended September 30, 2025
Water
Emerging
Technologies
Corporate
Total
Water
Emerging
Technologies
Corporate
Total
(In thousands)
Revenue
$31,928
$72
$—
$32,000
$67,831
$285
$—
$68,116
Cost of revenue
11,323
119
—
11,442
24,810
336
—
25,146
Gross profit (loss)
20,605
(47)
—
20,558
43,021
(51)
—
42,970
Operating expenses
General and
administrative
1,418
669
5,427
7,514
4,314
1,995
17,448
23,757
Sales and marketing
3,704
1,557
453
5,714
10,129
4,396
1,455
15,980
Research and
development
1,820
1,848
—
3,668
4,602
5,518
—
10,120
Restructuring charges
—
—
—
—
210
123
206
539
Total operating
expenses
6,942
4,074
5,880
16,896
19,255
12,032
19,109
50,396
Operating income (loss)
$13,663
$(4,121)
$(5,880)
$3,662
$23,766
$(12,083)
$(19,109)
$(7,426)
Three Months Ended September 30, 2024
Nine Months Ended September 30, 2024
Water
Emerging
Technologies
Corporate
Total
Water
Emerging
Technologies
Corporate
Total
(In thousands)
Revenue
$38,344
$240
$—
$38,584
$77,351
$522
$—
$77,873
Cost of revenue
13,334
138
—
13,472
27,633
427
—
28,060
Gross profit
25,010
102
—
25,112
49,718
95
—
49,813
Operating expenses
General and
administrative
1,803
906
4,964
7,673
5,637
2,908
16,226
24,771
Sales and marketing
3,777
1,977
659
6,413
11,359
5,484
1,826
18,669
Research and
development
1,145
2,824
—
3,969
3,318
8,946
—
12,264
Total operating
expenses
6,725
5,707
5,623
18,055
20,314
17,338
18,052
55,704
Operating income
(loss)
$18,285
$(5,605)
$(5,623)
$7,057
$29,404
$(17,243)
$(18,052)
$(5,891)
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 20
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ENERGY RECOVERY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 10 — Concentrations
Customer Revenue Concentration
The following tables present the customers that account for 10% or more of the Company’s revenue and their related segment for
each of the periods presented.  Although certain customers might account for greater than 10% of the Company’s revenue at any one point in
time, the concentration of revenue between a limited number of customers shifts regularly, depending on when revenue is recognized.  The
percentages by customer reflect specific relationships or contracts that would concentrate revenue for the periods presented and do not
indicate a trend specific to any one customer.
Three Months Ended September 30,
Nine Months Ended September 30,
 
Segment
2025
2024
2025
2024
Customer A
Water
26%
** 
12%
** 
Customer B
Water
** 
14%
** 
14%
Customer C
Water
** 
11%
** 
11%
Customer D
Water
13%
** 
** 
** 
Customer E
Water
10%
** 
** 
** 
Customer F
Water
** 
17%
** 
** 
Customer G
Water
** 
10%
** 
** 
**Zero or less than 10%.
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 21
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ENERGY RECOVERY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 11 — Stockholders’ Equity
Share Repurchase Programs
The Company’s Board, from time-to-time, has authorized share repurchase programs under which the Company may, at the
discretion of management, repurchase its outstanding common stock in the open market, or in privately negotiated transactions, in
compliance with applicable state and federal securities laws.  The timing and amounts of any purchase under the Company’s share
repurchase programs is based on market conditions and other factors including price, regulatory requirements, and capital availability.  The
Company accounts for stock repurchases under these programs using the cost method.  As of September 30, 2025, the Company has
repurchased 13.7 million shares of its common stock at an aggregate cost of $162.7 million under all share repurchase programs.
February 2025 Authorization
On February 26, 2025, the Company announced that the Board authorized a share repurchase program under which the Company
may repurchase its outstanding common stock, at the discretion of management, for up to $30.0 million in aggregate cost, which includes
both the share value of the acquired common stock and the fees charged in connection with acquiring the common stock (the “February 2025
Authorization”). The February 2025 Authorization will expire in February 2026.
The following table presents the share repurchase activities under the February 2025 Authorization as of September 30, 2025.
Number of Shares
Purchased
Average Price Paid
per Share(1)
Plan Activity
(In millions)
February 2025 Authorization
$30.0
Repurchases under February 2025 Authorization
2,183,648
$13.72
(30.0)
Remaining amount under February 2025 Authorization
$—
(1)Excluding commissions
Of the 2,183,648 shares purchased, 626,440 and 2,183,648 were purchased during the three and nine months ended September 30,
2025 for $8.4 million and $30.0 million, respectively. The Company completed all purchases under the February 2025 Authorization in August
2025.
August 2025 Authorization
On August 6, 2025, the Board announced a share repurchase program under which the Company may repurchase its outstanding
common stock, at the discretion of management, for up to $25.0 million in aggregate cost, which includes both the share value of the
acquired common stock and the fees charged in connection with acquiring the common stock (the “August 2025 Authorization”). The August
2025 Authorization will expire in May 2026. The Company began to purchase under the August 2025 Authorization in August 2025.
The following table presents the share repurchase activities under the August 2025 Authorization as of September 30, 2025.
Number of Shares
Purchased
Average Price Paid
per Share(1)
Plan Activity
(In millions)
August 2025 Authorization
25.0
Repurchases under August 2025 Authorization
149,170
$14.58
(2.2)
Remaining amount under August 2025 Authorization
$22.8
(1)Excluding commissions
All of the 149,170 shares were purchased during the three and nine months ended September 30, 2025 for $2.2 million.
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 22
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ENERGY RECOVERY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 12 — Stock-based Compensation
Performance Restricted Stock Units
On January 23, 2025, the Compensation Committee of the Board adopted a new form of PRSU award agreement under the 2020
Equity Incentive Plan (the “2020 Plan”), to among other things, define the terms of the performance metrics and performance period for such
PRSUs. During the three and nine months ended September 30, 2025, the Company granted 3,847 and 304,600 PRSUs, respectively.
PRSUs outstanding as of September 30, 2025 generally vest over 3 years and are dependent upon continued employment and
meeting certain cumulative revenue and cumulative adjusted EBITDA targets. Adjusted EBITDA is a non-GAAP financial measure that the
Company defines as net income (loss) which excludes i) depreciation and amortization; ii) stock-based compensation; iii) executive transition
costs; iv) restructuring charges; v) impairment of long-lived assets; vi) other income, net, such as interest income and other non-operating
income (expense), net; and vii) provision for (benefit from) income taxes. As PRSUs vest, the units will be settled in shares of common stock. 
The number of potential shares issued based on PRSUs granted during the three and nine months ended September 30, 2025 is dependent
on the level of achievement of the performance targets discussed above, which ranges from 0 shares to up to 11,541 and 913,800 shares of
common stock, respectively.  The units are valued based on the Company’s market price on the date of grant. As of September 30, 2025, no
expense has been recognized in relation to the PRSUs as the performance conditions are not considered probable.
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 23
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Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Overview
Energy Recovery, Inc. (the “Company”, “Energy Recovery”, “we”, “our” and “us”) designs and manufactures solutions that make
industrial processes more efficient and sustainable.  Leveraging our pressure exchanger technology, which generates little to no emissions
when operating, we believe our solutions lower costs, save energy, reduce waste, and minimize emissions for companies across a variety of
commercial and industrial processes.  As the world coalesces around the urgent need to address climate change and its impacts, we are
helping companies reduce their energy consumption in their industrial processes, which in turn, reduces their carbon footprint.  We believe
that our customers do not have to sacrifice quality and cost savings for sustainability and we are committed to developing solutions that drive
long-term value – both financial and environmental.
The original product application of our technology, the PX® Pressure Exchanger® (“PX”) energy recovery device, was a major
contributor to the advancement of seawater reverse osmosis desalination (“SWRO”), significantly lowering the energy intensity and cost of
water production globally from SWRO.  Our pressure exchanger technology is being applied to the wastewater filtration market, such as
battery manufacturers, mining operations, municipalities, and other manufacturing plants that discharge wastewater with significant levels of
metals and pollutants, and has also been applied to the development of our PX G1300® for use in the CO2 market.
Engineering, and research and development (“R&D”), have been, and remain, an essential part of our history, culture and corporate
strategy.  Since our formation, we have developed leading technology and engineering expertise through the continual evolution of our
pressure exchanger technology, which can enhance environmental sustainability and improve productivity by reducing waste and energy
consumption in high-pressure industrial fluid-flow systems.  This versatile technology works as a platform to build product applications and is
at the heart of many of our products.  In addition, we have engineered and developed ancillary devices, such as our hydraulic turbochargers
and circulation “booster” pumps, that complement our energy recovery devices.
Segments
Our reportable operating segments consist of the water and emerging technologies segments.  These segments are based on the
industries in which the technology solutions are sold, the type of energy recovery device or other technology sold and the related solution and
service or, in the case of emerging technologies, where revenues from new and/or potential devices utilizing our pressure exchanger
technology can be brought to market.  Other factors for determining the reportable operating segments include the manner in which our Chief
Operating Decision Maker (“CODM”), our President and Chief Executive Officer, evaluates our performance combined with the nature of the
individual business activities.  In addition, our corporate operating expenses include expenditures in support of the water and emerging
technologies segments.  We continue to monitor and review our segment reporting structure in accordance with authoritative guidance to
determine whether any changes have occurred that would impact our reportable segments.
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 24
Table of Contents
Results of Operations
A discussion regarding our financial condition and results of operations for the three and nine months ended September 30, 2025,
compared to the three and nine months ended September 30, 2024, is presented below.
Revenue
As a significant portion of our revenue is derived from large project contract deliveries that are between 16 to 36 months from contract
date, variability in revenue from quarter to quarter is typical, therefore year-on-year comparisons are not necessarily indicative of the trend for
the full year due to these variations.  There is no specific seasonality in our revenues to highlight.
We generally track our revenues by channels.  The channels we recognize and channel definitions we utilize are as follows:
•Megaproject (“MPD”) channel: The MPD channel has been the main driver of our long-term growth as revenue from this channel
benefits from a growing number of projects as well as an increase in the capacity of these projects in some cases.  MPD projects
are large-scale in nature and generally have shipment timelines from 16 to 36 months from contract date.  Recognition of
revenue is dependent on customers’ project timing and execution of these projects.
•Original Equipment Manufacturer (“OEM”) channel: The OEM channel reflects sales to a wide variety of industries in the
desalination, wastewater, and the refrigeration markets.  This channel contains projects smaller in size and revenue, and of
shorter duration compared to those projects in the MPD channel. 
•Aftermarket (“AM”) channel: The AM channel represents support and services rendered to our installed customer base.  AM
revenue generally fluctuates from year-to-year and is dependent on our customers’ timing of product upgrades, as well as their
replenishment of spare parts and supplies.
Revenue by Channel Customers
Three Months Ended September 30,
2025
2024
Revenue
% of
Revenue
Revenue
% of
Revenue
Change
(In thousands, except percentages)
Megaproject
$18,400
58%
$29,009
75%
$(10,609)
(37%)
Original equipment manufacturer
8,962
28%
4,919
13%
4,043
82%
Aftermarket
4,638
14%
4,656
12%
(18)
—%
Total revenue
$32,000
100%
$38,584
100%
$(6,584)
(17%)
Nine Months Ended September 30,
2025
2024
Revenue
% of
Revenue
Revenue
% of
Revenue
Change
(In thousands, except percentages)
Megaproject
$33,238
49%
$48,924
63%
$(15,686)
(32%)
Original equipment manufacturer
21,320
31%
15,210
19%
6,110
40%
Aftermarket
13,558
20%
13,739
18%
(181)
(1%)
Total revenue
$68,116
100%
$77,873
100%
$(9,757)
(13%)
Revenue Attributable to Primary Geographical Markets by Segments
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 25
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Three Months Ended September 30,
2025
2024
Water
Emerging
Technologies
Total
Water
Emerging
Technologies
Total
(In thousands)
Middle East and Africa
$16,685
$—
$16,685
$28,043
$153
$28,196
Asia
11,088
—
11,088
6,829
—
6,829
Europe
1,639
—
1,639
2,421
87
2,508
Americas
2,516
72
2,588
1,051
—
1,051
Total revenue
$31,928
$72
$32,000
$38,344
$240
$38,584
Within the geographical markets, the following countries represented revenue in excess of 10%.
Three Months Ended September 30,
2025
2024
Revenue
Percentage
Revenue
Percentage
(In thousands)
Morocco
$9,261
29%
$5,636
15%
Saudi Arabia
$4,095
13%
$11,101
29%
United Arab Emirates
** 
** 
$8,650
22%
India
$4,916
15%
$4,708
12%
Nine Months Ended September 30,
2025
2024
Water
Emerging
Technologies
Total
Water
Emerging
Technologies
Total
(In thousands)
Middle East and Africa
$28,889
$93
$28,982
$47,295
$399
$47,694
Asia
22,534
65
22,599
16,770
36
16,806
Europe
11,770
55
11,825
6,329
87
6,416
Americas
4,638
72
4,710
6,957
—
6,957
Total revenue
$67,831
$285
$68,116
$77,351
$522
$77,873
Within the geographical markets, the following countries represented revenue in excess of 10%.
Nine Months Ended September 30,
2025
2024
Revenue
Percentage
Revenue
Percentage
(In thousands)
Morocco
$10,897
16%
$11,872
15%
United Arab Emirates
** 
** 
$14,304
18%
Saudi Arabia
** 
** 
$13,833
18%
China
$6,791
10%
** 
** 
India
$6,749
10%
$9,341
12%
Spain
$8,977
13%
** 
** 
Three months ended September 30, 2025, as compared to the three months ended September 30, 2024
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 26
Table of Contents
The decrease in MPD revenue of $10.6 million was due primarily to lower shipments of products to the Middle East and Africa
(“MEA”) and Europe markets, partially offset by higher shipments of products to the Asia market.
The increase in OEM revenue of $4.0 million was due primarily to:
•Desalination: The increase in revenue of $3.0 million was due primarily to higher shipments of products to the Americas, Asia
and Europe markets.
•Wastewater: The increase in revenue of $1.0 million was due primarily to higher shipments of products to the Asia and Europe
markets.
The decrease in AM revenue of $18 thousand was primarily due to higher shipments of products to the Asia markets, partially offset
by lower shipments of products to the Europe and MEA markets .
Nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024
The decrease in MPD revenue of $15.7 million was due primarily to lower shipments to the MEA and Americas markets, partially
offset by higher shipments of products to the Europe market.
The increase in OEM revenue of $6.1 million was primarily due:
•Desalination: The increase in revenue of $3.3 million was due primarily to higher shipments of products to the Asia market.
•Wastewater: The increase in revenue of $2.8 million was due primarily to higher shipments to the Asia and Europe markets.
The decrease in AM revenue of $0.2 million was due primarily to lower shipments to the Americas market, partially offset by higher
shipments of products to the Asia markets.
Concentration of Revenue
See Note 10, “Concentrations,” of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1, “Financial Statements
(unaudited),” of this Quarterly Report on Form 10-Q (the “Notes”) for further discussion regarding our concentration of revenue.
Gross Profit and Gross Margin
Gross profit represents revenue less cost of revenue.  Cost of revenue consists primarily of raw materials, personnel costs (including
stock-based compensation), manufacturing overhead, warranty costs, and depreciation expense.
 
Three Months Ended September 30,
Nine Months Ended September 30,
 
2025
2024
Change
2025
2024
Change
(In thousands, except percentage and basis point)
Gross profit
$20,558
$25,112
$(4,554)
$42,970
$49,813
$(6,843)
Gross margin
64.2%
65.1%
(90) bps
63.1%
64.0%
(90) bps
The decrease in gross profit and gross margin for the three months ended September 30, 2025, as compared to the prior year, was
due primarily to costs related to product mix and tariffs, partially offset by a decrease in indirect manufacturing costs.
The decrease in gross profit and gross margin for the nine months ended September 30, 2025, as compared to the prior year, was
due primarily to costs related to product mix and tariffs, partially offset by a decrease in indirect manufacturing costs during the nine months
ended September 30, 2025.
Operating Expenses
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 27
Table of Contents
The total material changes of general and administrative (“G&A”), sales and marketing (“S&M”) and R&D operating expenses for the
three and nine months ended September 30, 2025, as compared to the comparable periods in the prior year, are discussed within the
following overall operating expenditures, and the segment and corporate operating expenses discussions below.
Three Months Ended September 30,
2025
2024
Water
Emerging
Technologies
Corporate
Total
Water
Emerging
Technologies
Corporate
Total
(In thousands)
Operating expenses
General and
administrative
$1,418
$669
$5,427
$7,514
$1,803
$906
$4,964
$7,673
Sales and marketing
3,704
1,557
453
5,714
3,777
1,977
659
6,413
Research and
development
1,820
1,848
—
3,668
1,145
2,824
—
3,969
Total operating
expenses
$6,942
$4,074
$5,880
$16,896
$6,725
$5,707
$5,623
$18,055
Three months ended September 30, 2025, as compared to the three months ended September 30, 2024
Overall Operating Expenditures.  Overall operating expenditures decreased $1.2 million, or (6.4%).  This decrease was due primarily
to lower employee compensation costs and lower Emerging Technologies segment development costs, partially offset by an increase in
consulting costs.
Water Segment.  Water segment operating expenses increased by $0.2 million, or 3.2%.  This increase was due primarily to higher
marketing costs and bad debt expense.
Emerging Technologies Segment.  Emerging Technologies segment operating expenses decreased by $1.6 million, or (28.6%).  This
decrease was due primarily to lower employee compensation costs as well as lower development costs.
Corporate Operating Expenses. Corporate operating expenses increased by $0.3 million, or 4.6%. This increase was due primarily to
higher consulting costs incurred.
Nine Months Ended September 30,
2025
2024
Water
Emerging
Technologies
Corporate
Total
Water
Emerging
Technologies
Corporate
Total
(In thousands)
General and
administrative
$4,314
$1,995
$17,448
$23,757
$5,637
$2,908
$16,226
$24,771
Sales and marketing
10,129
4,396
1,455
15,980
11,359
5,484
1,826
18,669
Research and
development
4,602
5,518
—
10,120
3,318
8,946
—
12,264
Restructuring charges
210
123
206
539
—
—
—
—
Total operating
expenses
$19,255
$12,032
$19,109
$50,396
$20,314
$17,338
$18,052
$55,704
Nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 28
Table of Contents
Overall Operating Expenditures.  Overall operating expenditures decreased by $5.3 million, or (9.5%).  This decrease was due
primarily to a decrease in employee costs, such as employee compensation and stock-based compensation, lower Emerging Technologies
segment development costs and lower facility expenses, partially offset by restructuring and impairment charges, and an increase in
consulting costs.  Changes in non-employee costs included:
•G&A:  higher consulting costs related to the enhancement of our corporate strategy as well as $0.4 million of impairment costs
associated with the sublease of our Katy, Texas lease.
•R&D:  lower Emerging Technologies segment development costs.
Water Segment.  Water segment operating expenses decreased by $1.1 million, or (5.2%).  This decrease was due primarily to lower
employee costs, including stock-based compensation costs, partially offset by an increase in consulting costs.
Emerging Technologies Segment.  Emerging Technologies operating expenses decreased by $5.3 million, or (30.6%).  This decrease
was due primarily to lower employee costs, including stock-based compensation, as well as lower development costs.
Corporate Operating Expenses.  Corporate operating expenses increased by $1.1 million, or 5.9%.  This increase was primarily due
to higher consulting costs, restructuring charges and impairment costs associated with the sublease of the Katy, Texas lease incurred during
the nine months ended September 30, 2025, partially offset by lower employee costs.
Restructuring Charges.  During the fourth quarter of fiscal year 2024, we implemented a restructuring plan which included reductions
in our workforce in all functions of the organization, primarily in our San Leandro location, in order to lower our operating cost structure, and
to position the Company for profitable growth.  We recorded a restructuring charge of approximately $3.0 million, of which $0.5 million was
recorded during the nine months ended September 30, 2025.  The company did not record a restructuring charge during the three months
ended September 30, 2025.  The total restructuring charge relates to severance and benefits, including reemployment assistance, for
38 terminated employees, which was approximately 15% of our workforce.  The implementation of the restructuring plan was substantially
complete by the end of the first quarter of fiscal year 2025 and the Company does not expect to incur significant additional expenses related
to the restructuring. See Note 4, “Other Financial Information – Restructuring,” of the Notes for further discussion and disclosure on our
restructuring program. 
Other Income, Net
 
Three Months Ended September 30,
Nine Months Ended September 30,
 
2025
2024
2025
2024
(In thousands)
Interest income
$847
$1,711
$2,860
$4,816
Other non-operating income (expense), net
45
57
25
(45)
Total other income, net
$892
$1,768
$2,885
$4,771
The decrease in “Total other income, net” in the three and nine months ended September 30, 2025, as compared to the comparable
period in the prior year, was primarily due to a decrease in short- and long-term investments.
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 29
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Income Taxes
 
Three Months Ended September 30,
Nine Months Ended September 30,
 
2025
2024
2025
2024
(In thousands, except percentages)
(Benefit from) provision for income taxes
$680
$344
$(589)
$(699)
Discrete items
(117)
426
(87)
566
(Benefit from) provision for income taxes, excluding discrete items
$563
$770
$(676)
$(133)
Effective tax rate
14.9%
3.9%
13.0%
62.4%
Effective tax rate, excluding discrete items
12.4%
8.7%
14.9%
11.8%
The interim period tax provision for (benefit from) income taxes is determined using an estimate of our annual effective tax rate,
adjusted for discrete items, if any, that arise during the period.  Each quarter, we update our estimate of the annual effective tax rate, and if
the estimated annual effective tax rate changes, we make a cumulative adjustment in such period.  The quarterly tax provision and estimate
of our annual effective tax rate are subject to variation due to several factors, including variability in accurately predicting our pre-tax income
or loss and the mix of jurisdictions to which they relate, the applicability of special tax regimes, and changes in how we do business.
For the three and nine months ended September 30, 2025, the recognized provision for and (benefit from) income taxes, respectively,
resulted from the tax projection based on the full year forecasted profit and included benefits related to the U.S. federal foreign-derived
intangible income (“FDII”), federal R&D tax credit, certain permanent differences, such as stock-based compensation shortfalls, and partial
release of California valuation allowance.
For the three and nine months ended September 30, 2024, the recognized provision for and (benefit from) income taxes, respectively,
resulted from the tax projection based on the full year forecasted profit and included benefits related to the U.S. FDII, federal R&D tax credit,
certain permanent differences, such as share-based compensation shortfalls, and partial release of California valuation allowance.
The effective tax rate excluding discrete items for the nine months ended September 30, 2025, as compared to the prior year, differed
primarily due to lower projected R&D tax credits, increased non-deductible officer stock-based compensation, and lower projected U.S. FDII
benefits.
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 30
Table of Contents
Liquidity and Capital Resources
Overview
From time-to-time, management and our Board of Directors (the “Board”) review our liquidity and future cash needs and may make a
decision to (1) return capital to our shareholders through a share repurchase program or dividend payout; or (2) seek additional debt or equity
financing.  As of September 30, 2025, our principal sources of liquidity consisted of (i) unrestricted cash and cash equivalents of $47.1 million
that are held in cash accounts and invested in money market funds and U.S. treasury securities; (ii) investment-grade short-term and long-
term marketable debt instruments of $32.8 million that are primarily invested in U.S. treasury securities and corporate notes and bonds; and
(iii) accounts receivable, net of allowances, of $44.0 million.  As of September 30, 2025, there was unrestricted cash of $0.5 million held
outside the U.S.  We invest cash not needed for current operations predominantly in investment-grade, marketable debt instruments with the
intent to make such funds available for future operating purposes, as needed.  Although these securities are available for sale, we generally
hold these securities to maturity, and therefore, do not currently see a need to trade these securities in order to support our liquidity needs in
the foreseeable future.  We believe the risk of this portfolio to us is in the ability of the underlying companies or government agencies to cover
their obligations at maturity, not in our ability to trade these securities at a profit.  Based on current projections, we believe existing cash
balances and future cash inflows from this portfolio will meet our liquidity needs for at least the next 12 months.
Credit Agreement
We entered into a credit agreement with JPMorgan Chase Bank, N.A. on December 22, 2021 (as amended, the “Credit Agreement”). 
The Credit Agreement, which will expire on December 21, 2026, provides a committed revolving credit line of $50.0 million and includes both
a revolving loan and a letters of credit (“LCs”) component. The maximum allowable LCs under the credit line component of the Credit
Agreement is $30.0 million.  As of September 30, 2025, we were in compliance with all covenants under the Credit Agreement.
Under the Credit Agreement, as of September 30, 2025, there were no revolving loans outstanding.  In addition, as of September 30,
2025, under the LCs component, we utilized $18.2 million of the maximum allowable credit line of $30.0 million, which included newly
issued LCs, and previously issued and unexpired stand-by letters of credits (“SBLCs”).  These LCs had a weighted average remaining life of
approximately 12 months.
See Note 6, “Lines of Credit,” of the Notes for further discussion related to the Credit Agreement.
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 31
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Share Repurchase Programs
The Board, from time-to-time, has authorized share repurchase programs under which we may, at our discretion, repurchase the
Company’s outstanding common stock in the open market, or in privately negotiated transactions, in compliance with applicable state and
federal securities laws.  The timing and amounts of any purchase under the share repurchase programs are based on market conditions and
other factors including price, regulatory requirements, and capital availability.  We account for stock repurchases under these programs using
the cost method.  As of September 30, 2025, we have cumulatively repurchased 13.7 million shares of the Company’s common stock at an
aggregate cost of $162.7 million under all closed share repurchase programs.  The following is a discussion of the current share repurchase
program during the three and nine months ended September 30, 2025.  See Note 11, “Stockholders’ Equity – Share Repurchase Programs,”
of the Notes for further discussion related to share repurchase programs and a reconciliation of the latest share repurchase plan balance.
On February 26, 2025, we announced that the Board authorized a share repurchase program under which we may repurchase our
outstanding common stock, at the discretion of management, up to $30.0 million in aggregate cost, which includes both the share value of the
acquired common stock and the fees charged in connection with acquiring the common stock (the “February 2025 Authorization”).  We began 
repurchasing our outstanding common stock in March 2025 and completed all purchases under the program in August 2025. 
On August 6, 2025, the Board announced a share repurchase program under which we may repurchase our outstanding common
stock, at the discretion of management, up to $25.0 million in aggregate cost, which includes both the share value of the acquired common
stock and the fees charged in connection with acquiring the common stock (the “August 2025 Authorization”).  We began repurchasing our
outstanding common stock under the August 2025 Authorization in August 2025. The August 2025 Authorization will expire in May 2026.
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 32
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Cash Flows
Nine Months Ended September 30,
2025
2024
Change
 
(In thousands)
Net cash provided by operating activities
$11,693
$11,567
$126
Net cash provided by (used in) investing activities
37,012
(22,171)
59,183
Net cash (used in) provided by financing activities
(31,417)
5,795
(37,212)
Effect of exchange rate differences on cash and cash equivalents
58
(23)
81
Net change in cash, cash equivalents and restricted cash
$17,346
$(4,832)
$22,178
Cash Flows from Operating Activities
Net cash provided by operating activities is subject to the project driven, non-cyclical nature of our business.  Operating cash flow can
fluctuate significantly from reporting period to reporting period, due to the timing of receipts of large project orders.  Operating cash flow may
be negative in one reporting period and significantly positive in the next. Consequently, individual reporting period results and comparisons
may not necessarily indicate a significant trend, either positive or negative. 
The higher net cash provided by operating assets and liabilities for the nine months ended September 30, 2025, as compared to the
prior year, was due primarily to the following factors: 
•Accounts receivable: an increase in cash provided due to an increase in collections related to revenues earned late in the fourth
quarter of 2024; partially offset by
•Inventory: an increase in cash used primarily related to the increase in PXs manufactured for project deliveries in the fourth
quarter of 2025.
Cash Flows from Investing Activities
Net cash provided by (used in) investing activities primarily relates to maturities and purchases of investment-grade marketable debt
instruments, such as corporate notes and bonds, and capital expenditures supporting our growth.  We believe our investments in marketable
debt instruments are structured to preserve principal and liquidity while at the same time maximizing yields without significantly increasing
risk.  The increase in net cash provided by investing activities of $59.2 million in the nine months ended September 30, 2025, as compared to
the prior year, was driven by a decrease in purchases of marketable debt instruments, net of proceeds from maturities of marketable debt
instruments, of $58.7 million and a decrease in capital expenditures of $0.5 million.
Cash Flows from Financing Activities
Net cash used in financing activities for the nine months ended September 30, 2025 was lower as compared to the cash provided by
financing activities in the prior year, due primarily to cash used for the repurchase of our common stock under the February 2025
Authorization and August 2025 Authorization and payment of associated excise tax, as well as a decrease in cash from exercises of
employee stock options granted under our equity incentive plans.
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 33
Table of Contents
Liquidity and Capital Resource Requirements
We believe that our existing resources and cash generated from our operations will be sufficient to meet our anticipated capital
requirements for at least the next 12 months.  However, we may need to raise additional capital or incur additional indebtedness to continue
to fund our operations or to support acquisitions in the future and/or to fund investments in our latest technology arising from rapid market
adoption.  These needs could require us to seek additional equity or debt financing.  Our future capital requirements will depend on many
factors including the continuing market acceptance of our products, our rate of revenue growth, the timing of new product introductions, the
expansion of our R&D, manufacturing and S&M activities, and the timing and extent of our expansion into new geographic territories.  In
addition, we may enter into potential material investments in, or acquisitions of, complementary businesses, services or technologies in the
future which could also require us to seek additional equity or debt financing.  Should we need additional liquidity or capital funds, these funds
may not be available to us on favorable terms, or at all.
Recent Accounting Pronouncements
Refer to Note 1, “Description of Business and Significant Accounting Policies – Significant Accounting Policies,” of the Notes to
Condensed Consolidated Financial Statements in Part I, Item 1, “Financial Statements (unaudited),” of this Quarterly Report on Form 10-Q.
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 34
Table of Contents
Item 3 — Quantitative and Qualitative Disclosures About Market Risk
Our exposure to market risk may be found primarily in two areas, foreign currency and interest rates.
Foreign Currency Risk
Our foreign currency exposures are due to fluctuations in exchange rates for the U.S. dollar (“USD”) versus the British pound, Saudi
riyal, Emirati dirham, European euro, Chinese yuan, Indian rupee and Canadian dollar.  Changes in currency exchange rates could adversely
affect our consolidated operating results or financial position.
Our revenue contracts have been denominated in the USD.  At times, our international customers may have difficulty obtaining
the USD to pay our receivables, thus increasing collection risk and potential bad debt expense.  To the extent we expand our international
sales, a larger portion of our revenue could be denominated in foreign currencies.  As a result, our cash and operating results could be
increasingly affected by changes in exchange rates.
In addition, we pay many vendors in foreign currency and, therefore, are subject to changes in foreign currency exchange rates.  Our
international sales and service operations incur expense that is denominated in foreign currencies.  This expense could be materially affected
by currency fluctuations.  Our international sales and services operations also maintain cash balances denominated in foreign currencies.  To
decrease the inherent risk associated with translation of foreign cash balances into our reporting currency, we do not maintain excess cash
balances in foreign currencies.
We have not hedged our exposure to changes in foreign currency exchange rates because expenses in foreign currencies have been
insignificant to date and exchange rate fluctuations have had little impact on our operating results and cash flows.  In addition, we do not
have any exposure to the Russian ruble.
Interest Rate and Credit Risks
The primary objective of our investment activities is to preserve principal and liquidity while at the same time maximizing yields without
significantly increasing risk.  We invest primarily in investment-grade short-term and long-term marketable debt instruments that are subject
to counter-party credit risk.  To minimize this risk, we invest pursuant to an investment policy approved by the Board.  The policy mandates
high credit rating requirements and restricts our exposure to any single corporate issuer by imposing concentration limits.
As of September 30, 2025, our investment portfolio of $48.8 million, in investment-grade marketable debt instruments, such as U.S.
treasury securities, corporate notes and bonds, and municipal and agency notes and bonds, are classified as either cash equivalents or
short-term and/or long-term investments on our Condensed Consolidated Balance Sheets.  These investments are subject to interest rate
fluctuations and a decrease in market value to the extent interest rates increase.  To minimize the exposure due to adverse shifts in interest
rates, we maintain investments with a weighted average maturity of approximately four months.  As of September 30, 2025, a hypothetical
1% increase in interest rates would have resulted in a less than $0.2 million decrease in the fair value of our investments in marketable debt
instruments as of such date.
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 35
Table of Contents
Item 4 — Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our President and Chief Executive Officer and our Chief Financial Officer, have evaluated
the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 as of the
end of the period covered by this report.
Based on that evaluation, our President and Chief Executive Officer and our Chief Financial Officer have concluded that, as of
September 30, 2025, our disclosure controls and procedures were effective.
Changes in Internal Controls
There were no changes in our internal control over financial reporting during the period covered by this report that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 36
Table of Contents
PART II — OTHER INFORMATION
Item 1 — Legal Proceedings
We have been, and may be from time to time, involved in legal proceedings or subject to claims incident to the ordinary course of
business.  We are not presently a party to any legal proceedings that we believe are likely to have a material adverse effect on our business,
financial condition, or operating results.  Regardless of the outcome, such proceedings or claims can have an adverse impact on us because
of defense and settlement costs, diversion of resources and other factors, and there can be no assurances that favorable outcomes will be
obtained.
Item 1A — Risk Factors
Except as noted below, there have been no material changes in our risk factors from those disclosed in Part I, Item 1A, “Risk Factors,”
in the 2024 Annual Report.
Changes in U.S. policy, including the imposition of or increases in tariffs, changes to existing trade agreements and any
resulting changes in international trade relations, such as reciprocal tariffs or trade wars, particularly with regard to China, may
have a material adverse impact on impact on our business, results of operations, or financial condition.
In January 2025, the global tariff landscape began to quickly change with the U.S. implementing new and/or increased tariffs on
various foreign countries, either generally or with respect to certain products.  Certain foreign countries, including China have, and may
continue to, change their tariff policies in response to changes in the U.S. tariff policy.
These recent tariffs and the subsequent retaliatory tariffs could increase the cost of goods for our products or reduce our ability to sell
products globally, particularly in China, which may adversely affect our operating results and financial condition.  So far, these new tariffs and
trade policies have not had a significant impact on our business operations and financial results, primarily due to our prior efforts to
accumulate and maintain inventories at favorable cost levels.  However, there is no guarantee that we can avoid the impact of tariff and
related economic effects in the future, and these trade measures and retaliations may directly impact our business by increasing trade-related
costs or affecting the demand for our products globally, and specifically in China.
Any further unfavorable government policies on international trade, such as capital controls or tariffs, may affect the demand for our
products and services, impact the competitive position of our products or prevent us from selling products in certain countries. If any new
tariffs, legislation and/or regulations are implemented, or if existing trade agreements are renegotiated or, in particular, if the U.S. government
takes retaliatory trade actions due to the recent U.S.-China trade tension, such changes could have an adverse effect on our business,
financial condition and results of operations.
Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3 — Defaults Upon Senior Securities
None.
Item 4 — Mine Safety Disclosures
Not applicable.
Item 5 — Other Information
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 37
Table of Contents
10b5-1 Plans
As set forth below, during the three months ended September 30, 2025, one officer (within the meaning of Rule 16a-1(f) under the
Securities Exchange Act of 1934, as amended) has terminated and no officers adopted a Rule 10b5-1 trading arrangement (as defined in
Item 408 of Regulation S-K).
Name
Title
Date of Adoption or
Termination (1)
Status (2)
Plan Type
Rodney Clemente
SVP, Water
July 31, 2025
Termination
Rule 10b5-1 trading arrangement
(1)Effective (a) date of adoption; or (b) date of termination, of registrant’s Rule 10b5-1 trading arrangement.
(2)Activity related to registrant’s Rule 10b5-1 trading arrangement.
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 38
Table of Contents
Item 6 — Exhibits
A list of exhibits filed or furnished with this report or incorporated herein by reference is found in the Exhibit Index below.
Exhibit
Number
Exhibit Description
101
Inline XBRL Document Set for the consolidated financial statements and accompanying notes in Part I, “Financial Information” of this
Quarterly Report on Form 10-Q.
104
Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set.
*Filed herewith.
**The certification furnished in Exhibit 32.1 is not deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that
section, nor shall they be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.
 
Energy Recovery, Inc. | Q3'2025 Quarterly Report (Form 10-Q) | 39
Table of Contents
    SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
 
ENERGY RECOVERY, INC.
Date:
November 5, 2025
By:
/s/ DAVID W. MOON
David W. Moon
President and Chief Executive Officer
(Principal Executive Officer)
Date:
November 5, 2025
By:
/s/ MICHAEL S. MANCINI
Michael S. Mancini
Chief Financial Officer
(Principal Financial Officer)

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