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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 June 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 July 31, 2025, there were 53,198,386 shares of the registrant’s common stock outstanding.

Energy Recovery, Inc. | Q2'2025 Quarterly Report (Form 10-Q)

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TABLE OF CONTENTS


		Page No.
PART I
FINANCIAL INFORMATION
Item 1	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets — June 30, 2025 and December 31, 2024	1
	Condensed Consolidated Statements of Operations — Three and Six Months Ended June 30, 2025 and 2024	2
	Condensed Consolidated Statements of Comprehensive Income (Loss) — Three and Six Months Ended June 30, 2025 and 2024	3
	Condensed Consolidated Statements of Stockholders’ Equity — Three and Six Months Ended June 30, 2025 and 2024	4
	Condensed Consolidated Statements of Cash Flows — Six Months Ended June 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	22
Item 3	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4	Controls and Procedures	34

PART II
OTHER INFORMATION
Item 1	Legal Proceedings	35
Item 1A	Risk Factors	35
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3	Defaults Upon Senior Securities	35
Item 4	Mine Safety Disclosures	35
Item 5	Other Information	35
Item 6	Exhibits	37
Exhibit Index		37

Signatures		38

Energy Recovery, Inc. | Q2'2025 Quarterly Report (Form 10-Q) | FLS 1

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Forward-Looking Information

This Quarterly Report on Form 10-Q for the three and six months ended June 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,” 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 August 6, 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. | Q2'2025 Quarterly Report (Form 10-Q) | FLS 2

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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.

Energy Recovery, Inc. | Q2'2025 Quarterly Report (Form 10-Q) | 1

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PART I — FINANCIAL INFORMATION

Item 1 — Financial Statements (unaudited)

ENERGY RECOVERY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


	June 30, 2025	December 31, 2024
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$57,050	$29,627
Short-term investments	22,467	48,392
Accounts receivable, net	32,587	64,066
Inventories, net	32,660	24,906
Prepaid expenses and other assets	7,382	6,665
Total current assets	152,146	173,656
Long-term investments	14,133	21,832
Deferred tax assets, net	10,341	9,004
Property and equipment, net	13,632	15,424
Operating lease, right of use asset	8,687	9,695
Goodwill	12,790	12,790
Other assets, non-current	546	391
Total assets	$212,275	$242,792
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$3,444	$3,109
Accrued expenses and other liabilities	11,248	17,728
Lease liabilities	2,414	2,020
Contract liabilities	1,733	571
Total current liabilities	18,839	23,428
Lease liabilities, non-current	8,144	9,297
Other liabilities, non-current	85	57
Total liabilities	27,068	32,782
Commitments and contingencies (Note 7)
Stockholders’ equity:
Common stock	67	66
Additional paid-in capital	239,883	235,010
Accumulated other comprehensive income	37	98
Treasury stock	(152,660)	(130,870)
Retained earnings	97,880	105,706
Total stockholders’ equity	185,207	210,010
Total liabilities and stockholders’ equity	$212,275	$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 June 30,		Six Months Ended June 30,
	2025	2024	2025	2024
	(In thousands, except per share data)
Revenue	$28,051	$27,199	$36,116	$39,289
Cost of revenue	10,097	9,633	13,704	14,588
Gross profit	17,954	17,566	22,412	24,701

Operating expenses:
General and administrative	7,669	9,532	16,243	17,098
Sales and marketing	5,360	6,104	10,266	12,256
Research and development	3,451	3,944	6,452	8,295
Restructuring charges	—	—	539	—
Total operating expenses	16,480	19,580	33,500	37,649
Income (loss) from operations	1,474	(2,014)	(11,088)	(12,948)

Other income (expense):
Interest income	940	1,663	2,013	3,105
Other non-operating expense, net	(26)	(49)	(20)	(102)
Total other income, net	914	1,614	1,993	3,003
Income (loss) before income taxes	2,388	(400)	(9,095)	(9,945)
Provision for (benefit from) income taxes	334	242	(1,269)	(1,043)
Net income (loss)	$2,054	$(642)	$(7,826)	$(8,902)

Net income (loss) per share:
Basic	$ 0.04	$ (0.01)	$ (0.14)	$ (0.16)
Diluted	$ 0.04	$ (0.01)	$ (0.14)	$ (0.16)

Number of shares used in per share calculations:
Basic	54,257	57,366	54,578	57,234
Diluted	54,486	57,366	54,578	57,234

See Accompanying Notes to Condensed Consolidated Financial Statements

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ENERGY RECOVERY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


	Three Months Ended June 30,		Six Months Ended June 30,
	2025	2024	2025	2024
	(In thousands)
Net income (loss)	$2,054	$(642)	$(7,826)	$(8,902)
Other comprehensive loss, net of tax
Foreign currency translation adjustments	53	9	37	37
Unrealized loss on investments	(91)	(10)	(98)	(54)
Total other comprehensive loss, net of tax	(38)	(1)	(61)	(17)
Comprehensive income (loss)	$2,016	$(643)	$(7,887)	$(8,919)

See Accompanying Notes to Condensed Consolidated Financial Statements

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ENERGY RECOVERY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY


	Three Months Ended June 30,		Six Months Ended June 30,
	2025	2024	2025	2024
	(In thousands, except shares)
Common stock
Beginning balance	$67	$65	$66	$65
Issuance of common stock, net	—	1	1	1
Ending balance	67	66	67	66

Additional paid-in capital
Beginning balance	237,550	222,122	235,010	217,617
Issuance of common stock, net	368	311	983	1,501
Stock-based compensation	1,965	2,807	3,890	6,122
Ending balance	239,883	225,240	239,883	225,240

Accumulated other comprehensive income (loss)
Beginning balance	75	(60)	98	(44)
Other comprehensive loss
Foreign currency translation adjustments	53	9	37	37
Unrealized loss on investments	(91)	(10)	(98)	(54)
Total other comprehensive loss, net	(38)	(1)	(61)	(17)
Ending balance	37	(61)	37	(61)

Treasury stock
Beginning balance	(135,405)	(80,486)	(130,870)	(80,486)
Common stock repurchased	(17,255)	—	(21,790)	—
Ending balance	(152,660)	(80,486)	(152,660)	(80,486)

Retained earnings
Beginning balance	95,826	74,396	105,706	82,656
Net (loss) income	2,054	(642)	(7,826)	(8,902)
Ending balance	97,880	73,754	97,880	73,754

Total stockholders’ equity	$185,207	$218,513	$185,207	$218,513

Common stock issued (shares)
Beginning balance	66,533,052	65,477,914	66,182,906	65,029,459
Issuance of common stock, net	104,736	93,361	454,882	541,816
Ending balance	66,637,788	65,571,275	66,637,788	65,571,275

Treasury stock (shares)
Beginning balance	11,676,340	8,148,512	11,397,045	8,148,512
Common stock repurchased	1,277,913	—	1,557,208	—
Ending balance	12,954,253	8,148,512	12,954,253	8,148,512

Total common stock outstanding (shares)	53,683,535	57,422,763	53,683,535	57,422,763

See Accompanying Notes to Condensed Consolidated Financial Statements

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ENERGY RECOVERY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Six Months Ended June 30,
	2025	2024
(In thousands)
Cash flows from operating activities:
Net loss	$(7,826)	$(8,902)
Adjustments to reconcile net loss to cash provided by operating activities
Stock-based compensation	3,899	6,100
Depreciation and amortization	1,906	2,041
Right of use asset amortization	936	870
Accretion (amortization) of discounts (premiums) on investments	(350)	(596)
Deferred income taxes	(1,337)	(1,117)
Impairment of long-lived assets	353	—
Other non-cash adjustments	235	288
Changes in operating assets and liabilities:
Accounts receivable, net	31,479	26,235
Contract assets	(185)	64
Inventories, net	(8,027)	(7,880)
Prepaid and other assets	(707)	(568)
Accounts payable	272	2,278
Accrued expenses and other liabilities	(6,986)	(6,270)
Contract liabilities	1,162	2,027
Net cash provided by operating activities	14,824	14,570

Cash flows from investing activities:
Maturities of marketable securities	51,125	30,385
Purchases of marketable securities	(17,243)	(73,280)
Capital expenditures	(326)	(1,025)
Proceeds from sales of fixed assets	10	90
Net cash provided by (used in) investing activities	33,566	(43,830)

Cash flows from financing activities:
Net proceeds from issuance of common stock	983	1,502
Repurchase of common stock	(21,577)	—
Payment of excise tax associated with repurchase of common stock	(432)	—
Net cash (used in) provided by financing activities	(21,026)	1,502

Effect of exchange rate differences on cash and cash equivalents	60	(24)
Net change in cash, cash equivalents and restricted cash	27,424	(27,782)
Cash, cash equivalents and restricted cash, beginning of year	29,757	68,225
Cash, cash equivalents and restricted cash, end of period	$57,181	$40,443

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 June 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.

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ENERGY RECOVERY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 August 6, 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.

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 six

months ended June 30, 2025.

Recently Issued Accounting Pronouncement Not Yet Adopted

There have been no issued accounting pronouncements that have not yet been adopted during the six months ended June 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.

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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 June 30, 2025			Six Months Ended June 30, 2025
	Water	Emerging Technologies	Total	Water	Emerging Technologies	Total
	(In thousands)
Geographical market
Middle East and Africa1	$9,324	$92	$9,416	$12,204	$93	$12,297
Asia2	8,008	65	8,073	11,446	65	11,511
Europe3	9,056	55	9,111	10,131	55	10,186
Americas	1,451	—	1,451	2,122	—	2,122
Total revenue	$27,839	$212	$28,051	$35,903	$213	$36,116

Channel
Megaproject	$14,802	$—	$14,802	$14,838	$—	$14,838
Original equipment manufacturer	8,238	119	8,357	12,239	119	12,358
Aftermarket	4,800	92	4,892	8,827	93	8,920
Total revenue	$27,839	$212	$28,051	$35,903	$213	$36,116

1 Within the Middle East and Africa market, Oman represented revenue of $5,994, or 21% and $6,009, or 17% of total revenue during the

three and six months ended June 30, 2025, respectively.

2 Within the Asia market, China represented revenue of $3,484, or 12% and $4,052, or 11% of total revenue during the three and six months

ended June 30, 2025, respectively.

3 Within the Europe market, Spain represented revenue of $8,013, or 29% and $8,734, or 24% of total revenue during the three and six

months ended June 30, 2025, respectively.


	Three Months Ended June 30, 2024			Six Months Ended June 30, 2024
	Water	Emerging Technologies	Total	Water	Emerging Technologies	Total
	(In thousands)
Geographical market
Middle East and Africa1	$14,467	$245	$14,712	$19,252	$246	$19,498
Asia2	7,962	36	7,998	9,941	36	9,977
Europe	2,522	—	2,522	3,908	—	3,908
Americas	1,967	—	1,967	5,906	—	5,906
Total revenue	$26,918	$281	$27,199	$39,007	$282	$39,289

Channel
Megaproject	$15,815	$—	$15,815	$19,915	$—	$19,915
Original equipment manufacturer	6,909	36	6,945	10,255	36	10,291
Aftermarket	4,194	245	4,439	8,837	246	9,083
Total revenue	$26,918	$281	$27,199	$39,007	$282	$39,289

1 Within the Middle East and Africa market, Morocco represented revenue of $4,831, or 18% of total revenue and $6,236 or 16% of total

revenue during the three and six months ended June 30, 2024, respectively and the United Arab Emirates represented revenue of $5,424, or

20% of total revenue and $5,654 or 14% of total revenue during the three and six months ended June 30, 2024, respectively.

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ENERGY RECOVERY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

2 Within the Asia market, India represented revenue of $4,456, or 16% of total revenue and $4,633 or 12% of total revenue during the three

and six months ended June 30, 2024, respectively.

Contract Balances

The following table presents contract balances by category.


	June 30, 2025	December 31, 2024
	(In thousands)
Accounts receivable, net	$32,587	$64,066
Contract assets, current (included in prepaid expenses and other assets)	$2,961	$2,776

Contract liabilities:
Contract liabilities, current	$1,733	$571
Total contract liabilities	$1,733	$571

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.


	June 30, 2025	December 31, 2024
(In thousands)
Contract liabilities, beginning of year	$571	$1,187
Revenue recognized	(76)	(1,085)
Cash received, excluding amounts recognized as revenue during the period	1,238	469
Contract liabilities, end of period	$1,733	$571

Remaining Performance Obligations

As of June 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 six months)			$8,517
Total			$8,517

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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 June 30,		Six Months Ended June 30,
	2025	2024	2025	2024
	(In thousands, except per share amounts)
Numerator
Net income (loss)	$2,054	$(642)	$(7,826)	$(8,902)

Denominator (weighted average shares)
Basic common shares outstanding	54,257	57,366	54,578	57,234
Stock options	173	—	—	—
RSUs	56	—	—	—
Diluted common shares outstanding	54,486	57,366	54,578	57,234

Net income (loss) per share
Basic	$ 0.04	$ (0.01)	$ (0.14)	$ (0.16)
Diluted	$ 0.04	$ (0.01)	$ (0.14)	$ (0.16)

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 June 30,		Six Months Ended June 30,
	2025	2024	2025	2024
	(In thousands)
Anti-dilutive equity award shares	1,992	3,010	3,038	3,010

Energy Recovery, Inc. | Q2'2025 Quarterly Report (Form 10-Q) | 11

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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.


	June 30, 2025	December 31, 2024	June 30, 2024
	(In thousands)
Cash and cash equivalents	$57,050	$29,627	$40,313
Restricted cash, non-current (included in other assets, non-current)	131	130	130
Total cash, cash equivalents and restricted cash	$57,181	$29,757	$40,443

Accounts Receivable, net


	June 30, 2025	December 31, 2024
	(In thousands)
Accounts receivable, gross	$32,808	$64,287
Allowance for doubtful accounts	(221)	(221)
Accounts receivable, net	$32,587	$64,066

Inventories, net

Inventory amounts are stated at the lower of cost or net realizable value, using the first-in, first-out method.


	June 30, 2025	December 31, 2024
	(In thousands)
Raw materials	$9,119	$8,829
Work in process	7,989	6,417
Finished goods	16,465	10,463
Inventories, gross	33,573	25,709
Valuation adjustments for excess and obsolete inventory	(913)	(803)
Inventories, net	$32,660	$24,906

Energy Recovery, Inc. | Q2'2025 Quarterly Report (Form 10-Q) | 12

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ENERGY RECOVERY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Accrued Expenses and Other Liabilities


	June 30, 2025	December 31, 2024
	(In thousands)
Accrued expenses and other liabilities, current
Payroll, benefits, incentives and commissions payable	$7,944	$10,179
Warranty reserve	984	1,090
Restructuring accrual	262	2,476
Income taxes payable	42	947
Other accrued expenses and other liabilities	2,016	3,036
Total accrued expenses and other liabilities	11,248	17,728

Other liabilities, non-current	85	57
Total accrued expenses, and current and non-current other liabilities	$11,333	$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 six months ended June 30, 2025. The Company did not record any restructuring charge during

the three months ended June 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 Q1 2025	210	123	206	539
Amount recognized in Q2 2025	—	—	—	—
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		(2,753)
Balance, as of June 30, 2025		$262

Energy Recovery, Inc. | Q2'2025 Quarterly Report (Form 10-Q) | 13

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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 June 30, 2025 and December 31, 2024, the Company had

no financial liabilities and no Level 3 financial assets.


		June 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	$17,417	$—	$—	$17,417	$2,580	$—	$—	$2,580
U.S. treasury securities	Level 2	3,979	—	—	3,979	—	—	—	—
Total cash equivalents		21,396	—	—	21,396	2,580	—	—	2,580

Short-term investments
U.S. treasury securities	Level 2	7,585	4	(1)	7,588	20,303	42	—	20,345
Corporate notes and bonds	Level 2	14,829	52	(2)	14,879	27,995	52	—	28,047
Total short-term investments		22,414	56	(3)	22,467	48,298	94	—	48,392

Long-term investments
U.S. treasury securities	Level 2	4,467	19	—	4,486	999	1	—	1,000
Corporate notes and bonds	Level 2	9,620	27	—	9,647	18,983	65	(13)	19,035
Municipal and agency notes and bonds	Level 2	—	—	—	—	1,799	—	(2)	1,797
Total long-term investments		14,087	46	—	14,133	21,781	66	(15)	21,832
Total short and long-term investments		36,501	102	(3)	36,600	70,079	160	(15)	70,224
Total		$57,897	$102	$(3)	$57,996	$72,659	$160	$(15)	$72,804

Energy Recovery, Inc. | Q2'2025 Quarterly Report (Form 10-Q) | 14

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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.


	June 30, 2025		December 31, 2024
	Fair Value	Gross Unrealized Losses	Fair Value	Gross Unrealized Losses
	(In thousands)
U.S. treasury securities	$1,892	$(1)	$—	$—
Corporate notes and bonds	1,919	(2)	7,569	(13)
Municipal and agency notes and bonds	—	—	1,797	(2)
Total available-for-sale investments with unrealized loss positions	$3,811	$(3)	$9,366	$(15)

Energy Recovery, Inc. | Q2'2025 Quarterly Report (Form 10-Q) | 15

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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 June 30, 2025, there were no revolving loans outstanding. In addition, under the LCs component,

the Company utilized $16.8 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.


	June 30, 2025	December 31, 2024
	(In thousands)
Outstanding letters of credit	$16,793	$15,708

Energy Recovery, Inc. | Q2'2025 Quarterly Report (Form 10-Q) | 16

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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 4.5 years as of June 30, 2025. Sublease income was immaterial during the three and six months ended June 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 six months ended June 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

June 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 June 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. | Q2'2025 Quarterly Report (Form 10-Q) | 17

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ENERGY RECOVERY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 8 — Income Taxes


	Three Months Ended June 30,		Six Months Ended June 30,
	2025	2024	2025	2024
	(In thousands, except percentages)
Provision for (benefit from) income taxes	$334	$242	$(1,269)	$(1,043)
Discrete items	(22)	64	30	140
Provision for (benefit from) income taxes, excluding discrete items	$312	$306	$(1,239)	$(903)
Effective tax rate	14.0%	(60.5%)	14.0%	10.5%
Effective tax rate, excluding discrete items	13.0%	(76.2%)	13.7%	9.1%

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 six months ended June 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 six months ended June 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,

and certain permanent differences, such as share-based compensation windfalls.

The effective tax rate excluding discrete items for the six months ended June 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. The OBBA has multiple effective dates, and the Company is currently assessing the impact of these tax law changes on its

financial statements.

Energy Recovery, Inc. | Q2'2025 Quarterly Report (Form 10-Q) | 18

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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 June 30, 2025				Six Months Ended June 30, 2025
	Water	Emerging Technologies	Corporate	Total	Water	Emerging Technologies	Corporate	Total
	(In thousands)
Revenue	$27,839	$212	$—	$28,051	$35,903	$213	$—	$36,116
Cost of revenue	9,926	171	—	10,097	13,487	217	—	13,704
Gross profit (loss)	17,913	41	—	17,954	22,416	(4)	—	22,412

Operating expenses
General and administrative	1,323	571	5,775	7,669	2,896	1,326	12,021	16,243
Sales and marketing	3,280	1,569	511	5,360	6,425	2,839	1,002	10,266
Research and development	1,604	1,847	—	3,451	2,782	3,670	—	6,452
Restructuring charges	—	—	—	—	210	123	206	539
Total operating expenses	6,207	3,987	6,286	16,480	12,313	7,958	13,229	33,500
Operating income (loss)	$11,706

Energy Recovery, Inc. 10-Q