erii-20250930

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

☐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

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.

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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.

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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.

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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

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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

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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

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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

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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.

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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.

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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%

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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

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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

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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	Corporate	Total Expense
	(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) | 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

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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

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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

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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

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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

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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) | 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) | 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
Exhibit Number		Exhibit Description
31.1*		Certification of Principal Executive Officer, pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Principal Financial Officer, pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**		Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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.


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


			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)


		Page No.
PART I
FINANCIAL INFORMATION
Item 1	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets — September 30, 2025 and December 31, 2024	1
	Condensed Consolidated Statements of Operations — Three and Nine Months Ended September 30, 2025 and 2024	2
	Condensed Consolidated Statements of Comprehensive Income (Loss) — Three and Nine Months Ended September 30, 2025 and 2024	3
	Condensed Consolidated Statements of Stockholders’ Equity — Three and Nine Months Ended September 30, 2025 and 2024	4
	Condensed Consolidated Statements of Cash Flows — Nine Months Ended September 30, 2025 and 2024	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4	Controls and Procedures	35

PART II
OTHER INFORMATION
Item 1	Legal Proceedings	36
Item 1A	Risk Factors	36
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3	Defaults Upon Senior Securities	36
Item 4	Mine Safety Disclosures	36
Item 5	Other Information	36
Item 6	Exhibits	38
Exhibit Index		38

Signatures		39