Energy Recovery, Inc.
For the period ended Dec 31, 2025. Filed Feb 25, 2026.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Feb 25, 2026
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-K
Period ended 2024-12-31; filed 2025-02-26.
0001421517-25-000048
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2025-12-31; filed 2026-02-25.
0001421517-26-000022
Item 7. 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.
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144 unchanged; 59 reworded; 37 added; 101 removed; 5 previous and 1 current paragraphs rearranged.
Tables are not compared: 9 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 (37)
Current report
Revenues associated with our Water segment represented 99% of total revenues during the years ended December 31, 2025 and
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Revenues associated with our Emerging Technologies segment were immaterial.
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Thedecrease in MPD revenue of$12.5 million was due primarily to lower shipments to the Africa and Asia markets, partially offset by
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•Desalination: The increase in revenue of$2.5 million was due primarily to higher shipments of products to the Asia market.
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•Wastewater: The decrease in revenue of $2.1 million was due primarily to lower shipments of products to the Asia market.
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Theincrease in AM revenue of$2.1 million was due primarily to higher shipments to the Asia and Middle East markets.
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Revenues are primarily attributable to international sales and are concentrated in the Middle East and Africa. See Note 10,
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by geographic location.
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primarily to lower sales volume spread over fixed costs, increased costs related to product and channel mix, pricing and tariffs, partially offset
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by a decrease in indirect manufacturing costs during theyear ended December 31, 2025.
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Technologies segment development costs, facility expenses and restructuring charges, partially offset by impairment costs associated with
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the sublease of the Katy, Texas lease incurred during the year ended December 31, 2025.
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Water Segment. Water segment related operating expenses represented 40% and 38% of overall operating expenses during the
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years ended December 31, 2025 and 2024, respectively and decreased by$3.7 million, or(12.5%). This decrease was due primarily to
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lower employee costs, including stock-based compensation costs, and lower restructuring charges.
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Emerging Technologies Segment. Emerging Technologies segment related operating expenses represented 23% and 31% of overall
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operating expenses during the years ended December 31, 2025 and 2024, respectively and decreased by$9.2 million, or(38.7%). This
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decrease was due primarily to lower employee costs, including stock-based compensation, lower development costs and lower restructuring
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charges.
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due to lower employee costs, such as employee compensation, partially offset by an increase in consulting costs and impairment costs
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associated with the sublease of the Katy, Texas lease incurred during theyear ended December 31, 2025.
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recorded during theyear ended December 31, 2025. The total restructuring charge relates to severance and benefits, including
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restructuring plan was completed during theyear ended December 31, 2025. See Note 4, “Other Financial Information –Restructuring,”of
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compensation and executive compensation limits.
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tax credits, tax expense of $0.2 million related to increase of California R&D credit valuation allowance and tax expense of $0.6 million
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Share Repurchase Programs
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program during theyears ended December 31, 2025. See Note 11, “Stockholders’ Equity –Share Repurchase Programs,”of the Notes for
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On February 26, 2025 and August 6, 2025, we announced that the Board authorized share repurchase programs under which we may
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$35.6 million.
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was due primarily to the following factors:
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•Accrued liabilities: an increase in cash used due to incentives and restructuring expenses paid out in 2025,
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•Accounts receivable: a decrease in cash used due to an increase in collections related to revenues earned late in the fourth
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quarter of 2024.
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debt instruments, and capital expenditures supporting our growth. The decrease in cash used during theyear ended December 31, 2025, as
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compared to the prior year, is primarily due to lower purchases of marketable securities. We believe our investments in marketable debt
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activities in the prior year, due to lower repurchases of our common stock partially offset by lower net proceeds from the issuance of common
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stock as compared to the prior year.
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Economic Conditions, Challenges, and Risks
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Sustainability
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We released our fifth annual Sustainability Report, which details our efforts to accelerate the environmental sustainability of our
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customers’ operations and enhance the management of sustainability issues in our own operations. Our Sustainability Report provides data
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illustrating our products’ positive environmental impacts across the industries where we operate. We understand the importance of being a
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responsible corporate citizen and believe our sustainability objectives provide us with a strategic roadmap to become a more resilient
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business, as well as a way to maintain our competitive advantage. Our 2023 Sustainability Report (issued in June 2024) outlines our
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progress on those objectives and aligns to leading sustainability frameworks and reporting standards, including the United Nations
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Sustainable Development Goals, the Sustainability Accounting Standards Board, and the Task Force on Climate-related Financial
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Disclosures, as well as select disclosures from the Global Reporting Initiative.
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As a result of our sustainability efforts and reporting, in 2024, MSCI ESG Research LLC (“MSCI”) once again awarded to us its
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highest ESG rating of AAA. MSCI’s evaluation recognizes Energy Recovery as one of the highest performing companies within the Industrial
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Machinery industry in MSCI’s All Company World Index, reflecting robust corporate governance and labor management practices and
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significant opportunities in clean technology.
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Our complete 2023 Sustainability Report can be found on our website at: https://energyrecovery.com/sustainability/. The foregoing
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link to our 2023 Sustainability Report is an inactive textual reference, and our 2023 Sustainability Report is not incorporated by reference into,
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and is not a part of, this Annual Report on Form 10-K.
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Theincrease in MPD revenue of$11.7 million was due primarily to:
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Africa (“MEA”), Europe and Asia 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 increase in revenue of $2.7 million was due primarily to higher shipments of products to the MEA and Europe
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markets, partially offset by lower shipments of products to the Americas and Asia markets.
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•Wastewater: The increase in revenueof $3.0 million was due primarily to higher shipments of products to the Asia, Americas and
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MEA markets. The Asia market has seen considerable growth this last year ascertain countries in this market implement climate
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control regulations.
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•Emerging Technology: The decrease in revenue of $0.3 million was due primarily to our product installation in Europe and sales
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to a gas producer in the Americas, both occurring in the prior year.
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Thedecrease in AM revenue of$0.7 million was due primarilyto lower shipments of parts and service to the MEA and Europe
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markets, partially offset by higher shipments of products to the Asia market.
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Concentration of Revenue
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regarding our concentration of revenue.
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Revenues attributable to domestic and international sales as a percentage of total revenue are presented in the following table. See
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revenue by geographic location.
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Customers accounting for 10% or more of revenues
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The following table presents all customers accounting for 10% or more of our revenues. Although certain customers might account
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for greater than 10% of our revenues at any one point in time, the concentration of revenues between a limited number of large customers
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shifts regularly, depending on timing of shipments. The percentages by customer reflect specific relationships or contracts that would
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concentrate our revenue for the periods presented and do not indicate a trend specific to any one customer. See Note 10, “Concentrations –
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Customer Revenue Concentration,”of the Notes for further discussion on customer concentration.
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sales of PXs and slightly higher average selling prices related to change inproduct mix, partially offset bya decrease in gross margin. The
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Reworded paragraphs (59)
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large percentage of our sales generated outside the U.S., specifically in the Middle East and Asia markets which provide a significant portion
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large percentage of our sales generated outside the U.S., specifically in the Middle East, Africa and Asia markets which provide a significant
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of our total revenue. Therefore, we are exposed to and impacted by global macroeconomic factors, U.S. and foreign government policies
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portion of our total revenue. Therefore, we are exposed to and impacted by global macroeconomic factors, U.S. and foreign government
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and foreign exchange fluctuations. There is uncertainty surrounding macroeconomic factors in the U.S. and globally characterized by the
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policies and foreign exchange fluctuations. There is uncertainty surrounding macroeconomic factors in the U.S. and globally characterized by
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supply chain environment, inflationary pressure, rising interest rates, and labor shortages. These global macroeconomic factors, coupled
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the supply chain environment, inflationary pressure, rising interest rates, and labor shortages. These global macroeconomic factors, coupled
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As our revenue is derived from large project contract deliveries that are between 16 to 36 months from contract date, there isno
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As a significant portion of our revenue is derived from large project contract deliveries that are up to 36 months from contract date,
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specific seasonality in our revenues to highlight.
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there isno specific seasonality in our revenues to highlight.
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•Desalination: The increase in revenue of $8.9 million was due primarily to higher shipments of products to the Middle East and
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higher shipments of products to the Middle East and Europe markets.
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Theincrease in OEM revenue of$5.5 million was primarily due to:
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Theincrease in OEM revenue of$0.4 million was primarily due:
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Note 10, “Concentrations –Revenue by Geographic Location and Country,”of the Notes for further discussion regarding our concentration of
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“Concentrations –Revenue by Geographic Location and Country,”of the Notes for further discussion regarding our concentration of revenue
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decrease in gross margin for theyear ended December 31, 2024, as compared to the prior year, was due primarily tohigher manufacturing
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Thedecrease in gross profit and gross margin for theyear ended December 31, 2025, as compared to the prior year, was due
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The total material changes of general and administrative (“G&A”), sales and marketing (“S&M”) and research and development
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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
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(“R&D”) operating expenses for theyear ended December 31, 2024, as compared to the comparable period in the prior year, are discussed
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year ended December 31, 2025, as compared to the comparable period in the prior year, are discussed within the following overall operating
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within the following overall operating expenditures, and the segment and corporate operating expenses discussions below.
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expenditures, and the segment and corporate operating expenses discussions below.
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Overall Operating Expenditures. Overall operating expenditures increased by$9.2 million, or 13.5%. This increase was due primarily
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Overall Operating Expenditures. Overall operating expenditures decreased by$13.2 million, or(17.1%). This decrease was due
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to restructuring charges, and an increase in employee costs, such as employee compensation, stock-based compensation, severance and
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primarily to a decrease in employee costs, such as employee compensation and stock-based compensation, as well as lower Emerging
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Corporate Operating Expenses. Corporate operating expenses increased by$4.4 million, or 22.5%. This increase was due primarily
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Corporate Operating Expenses. Corporate operating expenses decreased by$0.3 million, or(1.3%). This decrease was primarily
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in workforce in all functions of the organization, primarily in our San Leandro location, in order to lower ouroperating cost structure, and to
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in our workforce in all functions of the organization, primarily within the G&A function, in order to lower ouroperating cost structure, and to
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position the Companyfor profitable growth. We expectto record an estimated restructuring charge of approximately $3.0 million, of which
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position the Companyfor profitable growth. We recorded total restructuring charges of approximately$2.8 million, of which$0.3 million was
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employees, which was approximately 15% of ourworkforce. Weexpect the implementation of the restructuring plan will be substantially
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reemployment assistance, for 38 terminated employees, which was approximately 15% of ourworkforce. The implementation of the
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discussion and disclosure on our restructuring program.
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the Notes for further discussion and disclosure on our restructuring program.
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Theincrease in “Total other income, net” in theyear ended December 31, 2024, as compared to the comparable period in the prior
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Thedecrease in “Total other income, net” in theyears ended December 31, 2025, as compared to the comparable period in the prior
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year, was due primarily to an increase in short- and long-term investments.
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year, was primarily due to a decrease in short- and long-term investments.
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operations, a decrease in tax benefit of$0.3 million related to Foreign Derived Intangible Income (“FDII”), and a decrease of$0.4 million in
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operations, a decrease in tax benefit of$0.3 million related to Foreign Derived Intangible Income (“FDII”), a decrease of $0.6 million in federal
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R&D tax credits, partially offset by$0.7 million net change on the tax impact of stock-based compensation and executive compensation limits.
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R&D tax credits, a decrease in $0.6 million in realizable California R&D credit and $0.1 million net increase on the tax impact of stock-based
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The fiscal year 2024 effective tax rate includeda benefit of$2.1 million related to FDII, abenefit of$0.9 million related to R&D tax
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The fiscal year 2025 effective tax rate includeda benefit of$1.9 million related to FDII, abenefit of$0.3 million related to federal R&D
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effective tax rate included abenefit of$2.4 million related to related to FDII, abenefit of$1.3 million related to R&D tax credits, anda benefit
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$2.1 million related to FDII, abenefit of$0.9 million related to federal R&D tax credits, a benefit of $0.4 million related to California R&D credit
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credits and tax expense of $0.5 million related to stock-based compensation and executive compensation limits. The fiscal year 2023
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valuation allowance release, and tax expense of $0.5 million related to stock-based compensation and executive compensation limits.
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financing. As of December 31, 2024, our principal sources of liquidity consisted of (i)unrestricted cash and cash equivalents of$29.6 million
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financing. As of December 31, 2025, our principal sources of liquidity consisted of (i) unrestricted cash and cash equivalents of$48.1 million
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that are primarily invested in money market funds and U.S. treasury securities; (ii) investment-grade short-term and long-term marketable
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that are held in cash accounts and invested in money market funds and U.S. treasury securities; (ii) investment-grade short-term and long-
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debt instruments of$70.2 million that are primarily invested in U.S. treasury securities, corporate notes and bonds, and municipal and agency
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term marketable debt instruments of$35.2 million that are primarily invested in U.S. treasury securities and corporate notes and bonds; and
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notes and bonds; and (iii) accounts receivable, net of allowances, of$64.1 million. As of December 31, 2024, there was unrestricted cash of
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(iii) accounts receivable, net of allowances, of$76.6 million. As of December 31, 2025, there was unrestricted cash of$1.4 million held
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$1.0 million held outside the U.S. We invest cash not needed for current operations predominantly in investment-grade, marketable debt
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outside the U.S. We invest cash not needed for current operations predominantly in investment-grade, marketable debt instruments with the
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instruments with the intent to make such funds available for future operating purposes, as needed. Although these securities are available for
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intent to make such funds available for future operating purposes, as needed. Although these securities are available for sale, we generally
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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
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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
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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
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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
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agencies to cover their obligations at maturity, not in our ability to trade these securities at a profit. Based on current projections, we believe
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their obligations at maturity, not in our ability to trade these securities at a profit. Based on current projections, we believe existing cash
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existing cash balances and future cash inflows from this portfolio will meet our liquidity needs for at least the next 12 months.
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balances and future cash inflows from this portfolio will meet our liquidity needs for at least the next 12 months.
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We entered into a credit agreement with JPMorgan Chase Bank, N.A. (“JPMC”) on December 22, 2021 (as amended, the “Credit
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We entered into a credit agreement with JPMorgan Chase Bank, N.A. on December 22, 2021 (as amended, the “Credit Agreement”).
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Agreement”). The Credit Agreement, which will expire on December 21, 2026, provides a committed revolving credit line of$50.0 million and
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The Credit Agreement provides a committed revolving credit line of$50.0 million and includes both a revolving loan and a letters of credit
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includes both a revolving loan and a letters of credit (“LCs”) component. The maximum allowable LCs under the credit line component of the
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(“LCs”) component. The maximum allowable LCs under the credit line component of the Credit Agreement is$30.0 million. As of
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related to stock-based compensation and executive compensation limits. The fiscal year 2024 effective tax rate included abenefit of
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See Note 10, “Concentrations –Revenue by Geographic Location and Country,”of the Notes to Consolidated Financial Statements in
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Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K (the “Notes”)for further discussion
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Theincrease in gross profit for theyear ended December 31, 2024, as compared to the prior year, was due primarily toan increase in
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stock at an aggregate cost of approximately$50.0 million.
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outstanding common stock, at the discretion of management, up to$30.0 million in aggregate cost, which includes both the share value of the