Energy Recovery Inc

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

Form 10-K

(Mark One)

For the fiscal year ended December 31, 2023

or

For the transition period from _____ to _____

Commission File Number:001-34112

Energy Recovery, Inc.

(Exact Name of Registrant as Specified in its Charter)

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 Securities Exchange Act of 1934:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐No ☑

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 ☑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 such

files). Yes ☑No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control

over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued

its audit report.☑

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing

reflect the correction of an error to previously issued financial statements.☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received

by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑

The aggregate market value of the voting stock held by non-affiliates amounted to approximately$1.54 billion on June 30, 2023.

The number of shares of the registrant’s common stock outstanding as of February 15, 2024 was 57,078,540 shares.

DOCUMENTS INCORPORATED BY REFERENCE

As noted herein, the information called for by Part III is incorporated by reference to specified portions of the registrant’s definitive proxy statement to be filed

in conjunction with the registrant’s 2024 Annual Meeting of Stockholders, which is expected to be filed not later than 120 days after the registrant’s fiscal year

ended December 31, 2023.

TABLE OF CONTENTS

Energy Recovery, Inc. | 2023 Form 10-K Annual Report

Forward-Looking Information

This Annual Report on Form 10-K for theyear ended December 31, 2023, including Part II, Item 7, “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 I, 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 the pressure exchanger is the industry standard for energy recovery in the seawater reverse osmosis desalination (“SWRO”) industry;

•our belief that the scalability and versatility of our PX® Pressure Exchanger® (“PX”) can help us achieve success in emerging wastewater markets;

•our belief that the Ultra PX™ addresses key challenges associated with treating wastewater in a range of reverse osmosis (“RO”) applications;

•our belief that the Ultra PX addresses key challenges, such as energy intensity and environmental impacts associated with treating wastewater;

•our belief that the Ultra PX can help make RO the preferred treatment option to achieve zero and minimum liquid discharge (“ZLD” and “MLD”, respectively) requirements by enhancing RO’s affordability and efficiency compared to thermal treatment options;

•our belief that our PX has helped make SWRO an economically viable and more sustainable option in the production of potable water;

•our expectation of greater demand of our PX in the wastewater market due to expanding environmental regulations;

•our belief that our hydraulic turbochargers deliver substantial savings, operational benefits and ease of integration into desalination systems;

•our anticipation that markets not traditionally associated with desalination, such as the United States of America (the “U.S.”) and China will inevitably develop and provide further revenue growth opportunities;

•our belief that countries around the world will continue to mandate ZLD or MLD requirements for specific industries;

•our belief that, as the existing thermal technology is replaced with RO technology, demand for our products will be created;

•our belief that our PX offers market-leading value with the highest technological and economic benefit;

•our belief that ongoing operating costs and life cycle costs rather than the initial capital expenditures are the key factor in the selection of an energy recovery device solution for megaproject (“MPD”) customers;

•our belief that initial capital expenditure rather than future ongoing operating costs is more of a factor in the selection of an energy recovery device solution for original equipment manufacturer (“OEM”) projects;

•our belief that our PX has a distinct competitive advantage in the market for desalination plants and numerous wastewater market verticals, because our PX 1) has minimal unplanned and planned downtime, resulting in lower lifecycle maintenance cost, 2) is a cost-effective energy recovery solution, 3) is made with highly durable and corrosion-resistant aluminum oxide (“alumina”) ceramic parts and outperforms our competition with respect to quality, flexibility and durability, and 4) is warrantied for high efficiencies;

•our belief that leveraging our pressure exchanger technology will unlock new commercial opportunities in the future;

Energy Recovery, Inc. | 2023 Form 10-K Annual Report | FLS 1

•our belief that our PX G1300™ can contribute to help make CO2-based refrigeration economically viable in a broader range of climates;

•our belief that the PX G1300 could eventually alter the standard refrigeration system architecture by reducing costs for retail end users such as grocery stores;

•our belief that there is a significant potential market for the PX G1300 in a variety of channels, such as supermarket chains and cold storage facilities.

•our expectation that we will initially sell our PX G1300 to a variety of customers, such as to the OEMs themselves, potentially directly to end user supermarket chains or industrial sites, or to contractors who may retrofit our technology onto existing systems, and once the PX G1300 is established, our belief that our sales process will evolve to primarily selling through OEMs;

•our belief that as CO2-based refrigeration systems become more prevalent, competitive technologies to the PX G1300 could arise;

•our belief that the simplicity of installation and the ease of operations of the PX G1300 could encourage adoption of the PX G1300;

•our belief that our current facilities will be adequate for the foreseeable future;

•our belief that by investing in research and development, we will be well positioned to continue to execute on our product strategy;

•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;

•our belief that the integration of sustainability principles into our corporate and risk management strategies can strengthen our existing business as well as our efforts to develop new applications of pressure exchanger technology for high-pressure fluid-flow environments;

•our belief that our sustainability goals are highly influential to our business success;

•our belief that we contribute to our customers’ operational profitability while advancing environmental sustainability;

•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 belief that our cash deposit risk at uninsured or under insured financial institutions will not materially affect our current liquidity;

•our expectation that the lender under our current credit agreement, as amended, will continue to honor its commitments to us;

•our expectation that, as we expand our international sales, a portion of our revenue could be denominated in foreign currencies and the impact of changes in exchange rates on our cash and operating results;

•our expectation of increased sales and marketing expenditures for 2024 and 2025;

•our belief that we will be in compliance with the terms of the existing credit agreement, as amended, in the future;

•our expectation that we will continue to receive a tax benefit related to U.S. federal foreign-derived intangible income and California research and development tax credit;

•our expectation that we will be able to enforce our intellectual property (“IP”) rights;

•our expectation that the adoption of new accounting standards will not have a material impact on our financial position or results of operations;

•the outcome of proceedings, lawsuits, disputes and claims;

•the impact of losses due to indemnification obligations;

•the impact of changes in internal control over financial reporting; and

•other factors disclosed under Part I, Item 1, “Business,” Item 1A, “Risk Factors,” and Item 2, “Properties,” and Part II, Item 7, MD&A, and Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” and elsewhere in this Form 10‑K.

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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 Annual Report on Form 10-K. All forward-looking statements included in this document are

subject to additional risks and uncertainties further discussed under Part I, Item 1A, “Risk Factors,” and are based on information available to

us as of February 21, 2024. 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 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 I, Item 1A, “Risk Factors,” within this Annual Report on Form 10-K.

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, and 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.

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 Annual Report on Form 10-K. 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. | 2023 Form 10-K Annual Report | FLS 3