Energy Recovery, Inc.
For the period ended Mar 31, 2025. Filed May 7, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 7, 2025
ERII$7.15+6.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-10-30.
0001421517-24-000191
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-07.
0001421517-25-000078
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 207 previous paragraphs and 172 current paragraphs.
78 unchanged; 45 reworded; 47 added; 83 removed; 1 previous and 2 current paragraphs rearranged.
Tables are not compared: 10 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (47)
Current report
As a significant portion of our revenue is derived from large project contract deliveries that are between 16 to 36 months from contract
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1 Within the Asia market, India represented revenue of$1,456, or 18% of total revenue during thethree months ended March 31, 2025
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Three months ended March 31, 2025, as compared to thethree months ended March 31, 2024
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Thedecrease in megaproject (“MPD”) revenue of$4.1 million was due primarily to lower shipments to the Middle East and Africa
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(“MEA”) and Americas as compared to thethree months ended March 31, 2024.
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and MEA markets, partially offset by lower shipments to the Americas and Europe markets.
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Thedecrease in aftermarket (“AM”) revenue of$0.6 million was due primarily to lower shipments to the America markets, partially
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offset by higher shipments to the Asia market.
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Thedecrease in gross profit and gross margin for thethree months ended March 31, 2025, as compared to the prior year, was due
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primarily to lower sales volume spread over fixed costs during thethree months ended March 31, 2025.
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Three months ended March 31, 2025, as compared to thethree months ended March 31, 2024
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primarily to a decrease in employee costs, such as employee compensation and stock-based compensation, partially offset by restructuring
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charges, and an increase in consulting costs. Changes in non-employee costs included:
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•G&A: higher consulting costs related to the enhancement of our corporate strategy as well as$0.4 million ofimpairment costs
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associated with the sublease of our Katy, Texas lease.
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•R&D: lower Emerging Technologies segment development costs.
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employee costs, including commission costs and stock-based compensation costs.
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was due primarily to lower development costs and lower employee costs, primarily related to stock-based compensation.
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to increases in consulting, restructuring, and recruiting costs, as well as impairment costs associated with the sublease of the Katy, Texas
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lease. The increase was partially offset by lower employee costs.
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Restructuring Charges. During the fourth quarter of fiscal year 2024, we implemented a restructuring plan which included reductions
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in our workforce in all functions of the organization, primarily in our San Leandro location, in order to lower ouroperating cost structure, and
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to position the Companyfor profitable growth. We recorded a restructuring charge of$3.0 million, of which$0.5 million was recorded during
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the first quarter of fiscal year 2025. This charge relates to severance and benefits, including reemployment assistance, for 38 terminated
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employees, which was approximately 15% of ourworkforce. The implementation of the restructuring plan was substantially complete by the
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end of the first quarter of fiscal year 2025 and the Company does not expect to incur significant additional expenses related to the
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restructuring. See Note 4, “Other Financial Information –Restructuring,”of the Notes for further discussion and disclosure on our
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restructuring program.
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prior year, wasprimarily due to a decrease in short- and long-termin vestments.
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compensation.
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Share Repurchase Program
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The Board, from time-to-time, has authorized a share repurchase program under which we may, at our discretion, repurchasethe
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Company’s outstanding common stock in the open market, or in privately negotiated transactions, in compliance with applicable state and
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federal securities laws. The timing and amounts of any purchase under the share repurchase programs are based on market conditions and
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other factors including price, regulatory requirements, and capital availability. We account for stock repurchases under these programs using
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the cost method. As of March 31, 2025, we have cumulatively repurchased 11.7 million shares of the Company’s common stock at an
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aggregate cost of$135.0 million under all closed share repurchase programs. The following is a discussion of the current share repurchase
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program during the three months ended March 31, 2025. See Note 11, “Stockholders’ Equity –Share Repurchase Program,”of the Notes for
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further discussion related to share repurchase programs and a reconciliation of the latest share repurchase plan balance.
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On February 26, 2025, we announced that the Board authorized a share repurchase program under which we may repurchase our
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Removed paragraphs (83)
Previous report
We generally track our revenues by channels. The channels we recognize and channel definitions we utilize are as follows:
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•Megaproject (“MPD”) channel: The MPD channel has been the main driver of our long-term growth as revenue from this channel
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benefits from a growing number of projects as well as an increase in the capacity of these projects in some cases. MPD projects
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are large-scale in nature and generally have shipment timelines from 16 to 36 months from contract date. Recognition of
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revenue is dependent oncustomers’ project timing and execution of these projects.
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•Original Equipment Manufacturer (“OEM”) channel: The OEM channel reflects sales to a wide variety of industries in the
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desalination, wastewater, and the refrigeration markets. This channel contains projects smaller in size and revenue, and of
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shorter duration compared to those projects in the MPD channel.
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•Aftermarket (“AM”) channel: The AM channel represents support and services rendered to our installed customer base. AM
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revenue generally fluctuates from year-to-year and is dependent on our customers’ timing of product upgrades, as well as their
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replenishment of spare parts and supplies.
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Three months ended September 30, 2024, as compared to the three months ended September 30, 2023
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Theincrease in MPD revenue of$2.2 million was due primarily to:
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•Desalination: The decrease in revenue of $0.6 million was due primarily to lower shipments of products to the Americas and
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Middle East and Africa (“MEA”) markets, partially offset by higher shipments of products to the Asia and Europe markets.
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•Wastewater: The increase in revenue of $2.8 million was due primarily to higher shipments of products to the MEA market.
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Thedecrease in OEM revenueof$0.4 million was due primarily to:
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•Desalination: The decrease in revenue of $0.6 million was due primarily to lower shipments of products to the Asia and Americas
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markets, partially offset by higher shipments of products to the MEA and Europe markets.
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•Wastewater: The increase in revenue of $0.3 million was due primarily to higher shipments of products to the Asia market,
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partially offset by lower shipments of products to the Europe and Americas markets.
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•Emerging Technology: The decrease in revenue of $0.1 million was due primarily to lower shipments of products.
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Thedecrease in AM revenue of$0.2 million was due primarily to lower shipments of products to the Asia market, partially offset by
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higher shipments of productsto the Europe and MEA markets.
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Nine months ended September 30, 2024, as compared to thenine months ended September 30, 2023
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Theincrease in MPD revenue of$6.6 million was due primarily to:
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•Desalination: The increase in revenue of $3.8 million was due primarily to higher shipments of products to the MEA, Asia and
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Europe markets, partially offset by lower shipments of products to the Americas market.
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•Wastewater: The increase in revenue of $2.8 million was due primarily to higher shipments of products to the MEA market.
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•Desalination: The decrease in revenue of $0.5 million was due primarily to lower shipments of products to the Asia and Americas
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markets, partially offset by higher shipments of products to the MEA and Europe markets.
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•Wastewater: The decrease in revenueof $0.9 million was due primarily to lower shipments of products in all markets, with the
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largest decrease in the Europe market.
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•Emerging Technology: The decrease in revenue of $0.3 million was due primarily to an installment in Europe and sales to a gas
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producer in the Americas, both occurring in the prior year.
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Theincrease in AM revenue of$1.7 million was due primarilyto higher shipments of product to the Americas, Asia, and the MEA
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markets, partially offset by lower shipments of product to the Asia market.
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Thedecrease in gross profit for the three months ended September 30, 2024, as compared to the prior year, was due primarily toa
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decrease in gross margin, partially offset by an increase in sales of PXs. Thedecrease in gross margin for the three months ended
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September 30, 2024, as compared to the prior year, was due primarilyto higher manufacturing costs, higher costs related toproduct mix, and
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A discussion regarding our financial condition and results of operations for thethree and nine months ended September 30, 2024,
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A discussion regarding our financial condition and results of operations for thethree months ended March 31, 2025, compared to the
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compared to thethree and nine months ended September 30, 2023, is presented below.
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three months ended March 31, 2024, is presented below.
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Variability in revenue from quarter to quarter is typical, therefore year-on-year comparisons are not necessarily indicative of the trend
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date, variability in revenue from quarter to quarter is typical, therefore year-on-year comparisons are not necessarily indicative of the trend for
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for the full year due to these variations. There isno specific seasonality in our revenues to highlight that occurs throughout a calendar year.
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the full year due to these variations. There isno specific seasonality in our revenues to highlight.
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Thedecrease in OEM revenue of$1.6 million was primarily due to:
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Theincrease in original equipment manufacturer (“OEM”) revenue of$0.7 million was primarily due to higher shipments to the Asia
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share-based compensation), manufacturing overhead, warranty costs, and depreciation expense.
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stock-based compensation), manufacturing overhead, warranty costs, and depreciation expense.
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(“R&D”) operating expenses for thethree and nine months ended September 30, 2024, as compared to the comparable periods in the prior
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(“R&D”) operating expenses for thethree months ended March 31, 2025, as compared to the comparable period in the prior year, are
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year, are discussed within the following overall operating expenditures, and the segment and corporate operating expenses discussions
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discussed within the following overall operating expenditures, and the segment and corporate operating expenses discussions below.
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Overall Operating Expenditures. Overall operating expenditures increased by$6.6 million, or 13.4%. This increase was due primarily
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Overall Operating Expenditures. Overall operating expenditures decreased by$1.0 million, or(5.8%). This decrease was due
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Water Segment. Water segment operating expenses increased by$0.3 million, or 4.9%. This increase was due primarily to an
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Water Segment. Water segment operating expenses decreased by$0.7 million, or(9.8%). This decrease was due primarily tolower
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Emerging Technologies Segment. Emerging Technologies segment operating expenses increased by$0.2 million, or 3.9%. This
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Emerging Technologies Segment. Emerging Technologies operating expenses decreased by$2.1 million, or(34.6%). This decrease
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Corporate Operating Expenses. Corporate operating expenses increased by$0.8 million, or 16.0%. This increase was due primarily
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Corporate Operating Expenses. Corporate operating expenses increased by$1.7 million, or 32.9%. This increase was due primarily
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Theincrease in “Total other income, net” in thethree and nine months ended September 30, 2024, as compared to the comparable
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Thedecrease in “Total other income, net” in thethree months ended March 31, 2025, as compared to the comparable period in the
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The interim periodtax provision for (benefit from) income taxes is determined using an estimate of ourannual effective tax rate,
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The interim periodtax benefit from income taxes is determined using an estimate of ourannual effective tax rate, adjusted for discrete
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adjusted for discrete items, if any, that arise during the period. Each quarter, we update ourestimate of the annual effective tax rate, and if
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items, if any, that arise during the period. Each quarter, we update ourestimate of the annual effective tax rate, and if the estimated annual
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the estimated annual effective tax rate changes, we make a cumulative adjustment in such period. Thequarterly tax provision and estimate
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effective tax rate changes, we make a cumulative adjustment in such period. Thequarterly tax provision and estimate of ourannual effective
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of ourannual effective tax rate are subject to variation due to several factors, including variability in accurately predicting ourpre-tax income
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tax rate are subject to variation due to several factors, including variability in accurately predicting ourpre-tax income or loss and the mix of
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or loss and the mix of jurisdictions to which they relate, the applicability of special tax regimes, and changes in how we dobusiness.
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jurisdictions to which they relate, the applicability of special tax regimes, and changes in how we dobusiness.
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For thethree and nine months ended September 30, 2024, the recognized provision for and (benefit from) income taxes, respectively,
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For thethree months ended March 31, 2025, the recognized benefit from income taxes resulted from the tax projection based on the
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resulted from the tax projection based on the full year forecasted profit and included benefits related to the U.S. federal foreign-derived
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full year forecasted profit and included benefits related to the U.S. federal foreign-derived intangible income (“FDII”), federal R&D tax credit,
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intangible income (“FDII”), federal R&D tax credit, certain permanent differences, such as share-based compensation shortfalls, and partial
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certain permanent differences, such as stock-based compensation shortfalls, and partial release of California valuation allowance.
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For the three and nine months ended September 30, 2023, the recognized provision for and (benefit from) income taxes, respectively,
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For the three months ended March 31, 2024, the recognized benefit from income taxes resulted from the loss for the quarter and
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included benefits related to the U.S. FDII and federal R&D tax credit, along with a discrete tax benefit due primarily to share-based
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included benefits related to the U.S. FDII and federal R&D tax credit, partially offset by certain permanent differences, such as share-based
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The effective tax rate excluding discrete items for thenine months ended September 30, 2024, as compared to the prior year, differed
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The effective tax rate excluding discrete items for thethree months ended March 31, 2025, as compared to the prior year, differed
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primarily due to lower projected R&D tax credits, increased non-deductible officer share-based compensation, and lower projected U.S. FDII
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primarily due to lower projected R&D tax credits, increased non-deductible officer stock-based compensation, and lower projected U.S. FDII
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From time-to-time, management and our Board of Directors review our liquidity and future cash needs and may make a decision to
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From time-to-time, management and our Board of Directors (the “Board”) review our liquidity and future cash needs and may make a
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(1) return capital to our shareholders through a share repurchase program or dividend payout; or (2) seek additional debt or equity financing.
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decision to (1) return capital to our shareholders through a share repurchase program or dividend payout; or (2) seek additional debt or equity
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As of September 30, 2024, our principal sources of liquidity consisted of (i)unrestricted cash and cash equivalents of$63.3 million that are
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financing. As of March 31, 2025, our principal sources of liquidity consisted of (i)unrestricted cash and cash equivalents of$49.1 million that
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primarily invested in money market funds and U.S. treasury securities; (ii) investment-grade short-term and long-term marketable debt
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are primarily invested in money market funds and U.S. treasury securities; (ii) investment-grade short-term and long-term marketable debt
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instruments of$76.7 million that are primarily invested in U.S. treasury securities, corporate notes and bonds, and municipal and agency
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instruments of$57.6 million that are primarily invested in U.S. treasury securities, corporate notes and bonds, and municipal and agency
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notes and bonds; and (iii) accounts receivable, net of allowances, of$31.8 million. As of September 30, 2024, there was unrestricted cash of
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notes and bonds; and (iii) accounts receivable, net of allowances, of$32.4 million. As of March 31, 2025, there was unrestricted cash of
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Credit Agreement is$30.0 million. As of September 30, 2024, we were in compliance with all covenants under the Credit Agreement.
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Credit Agreement is$30.0 million. As of March 31, 2025, we were incompliance with all covenants under the Credit Agreement.
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2024, under the LCs component, we utilized$18.4 million of the maximum allowable credit line of$30.0 million, which included newly
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under the LCs component, we utilized$15.7 million of the maximum allowable credit line of$30.0 million, which included newly issued LCs,
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issued LCs, and previously issued and unexpired stand-by letters of credits (“SBLCs”) and certain non-expired commitments under the
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and previously issued and unexpired stand-by letters of credits (“SBLCs”). As of March 31, 2025, there was$15.7 million of outstanding LCs.
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there was$17.4 million of outstanding LCs. These LCs had a weighted average remaining life of approximately 17 months.
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These LCs had a weighted average remaining life of approximately 14 months.
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fluctuate significantly from year to year, due to the timing of receipts of large project orders. Operating cash flow may be negative in one year
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fluctuate significantly from reporting period to reporting period, due to the timing of receipts of large project orders. Operating cash flow may
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and significantly positive in the next, consequently individual quarterly results and comparisons may not necessarily indicate a significant
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be negative in one reporting period and significantly positive in the next, consequently individual reporting period results and comparisons
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Thelower net cash provided by operating assets and liabilities for thenine months ended September 30, 2024, as compared to the
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Thehigher net cash provided by operating assets and liabilities for thethree months ended March 31, 2025, as compared to the prior
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prior year, was due primarily to thefollowing factors:
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year, was due primarily to thefollowing factors:
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•Accounts receivable and contract assets: an increase in cash provided primarily related to an increase in revenues, the timing of
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•Accounts receivable and contract assets: an increase in cash due to an increase in collections related to revenues earned latein
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may not necessarily indicate a significant trend, either positive or negative.
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Authorization and a decrease in cash from exercises of employee stock options granted under our equity incentive plans.
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Previous report — wording carried elsewhere
Emerging Technologies Segment. Emerging Technologies operating expenses increased by$1.3 million, or 7.9%. This increase was