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$7.39+3.4%Stored close · as of Nov 9, 2026
What changed in Risk Factors?
Read the current filingPrevious report: 10-K
Period ended 2024-12-31; filed 2025-02-26.
0001421517-25-000048
Item 1A. Risk FactorsCurrent report: 10-K
Period ended 2025-12-31; filed 2026-02-25.
0001421517-26-000022
Item 1A. Risk FactorsThe 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 574 previous paragraphs and 565 current paragraphs.
457 unchanged; 75 reworded; 31 added; 40 removed; 2 previous and 2 current paragraphs rearranged.
Tables are not compared: 0 previous and 0 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 (31)
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considerably less than the cost of our products. Our customers may also encourage competition by purchasing our competitors products.
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We have decided to wind down operations of our CO 2 retail grocery business, and we expect to incur costs associated with the
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While interest in the PX G1300 had been positive, in February 2026, as a result of discussions with OEM and end user customers, we
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decided to wind down operations in the CO 2 business within our Emerging Technologies segment due to a fundamental change in the
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business’ outlook. We expect to substantially complete the wind down in the first quarter of 2026, and we will incur costs associated with the
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wind down which will have an adverse effect on our Emerging Technologies segment financial condition and results of operations.
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Additionally, as a result of the wind down, we will not generate revenues in the CO 2-based refrigeration market.
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the future, we may further expand the international reach of our operations, including new offices and manufacturing facilities. As a result, we
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are exposed to several political, economic and other uncertainties, including increased risks of social unrest, strikes, terrorism, war, the high
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cost of investment to establish a presence in a new market, changes in economic, political or other location conditions. In addition, we face
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principles, or interpretations thereof. For example, on July 4, 2025, the One Big Beautiful Bill Act (“OBBB”) was enacted, which, among other
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things, allows domestic research and development expenditures to be expensed for tax years beginning on or after January 1, 2025, with
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retroactive elections for such expenditures paid or incurred in the two prior years, the restoration of 100% bonus depreciation for certain
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qualified property, modifications to international tax provisions, including provisions addressing the global intangible low-taxed income,
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foreign-derived intangible income, base erosion anti-abuse tax and controlled foreign corporation rules, and permanently extends certain
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expiring provisions of the Tax Act described below.
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Changes in U.S. policy, including the imposition of or increases in tariffs, changes to existing trade agreements and any resulting
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changes in international trade relations, such as reciprocal tariffs or trade wars may have a material adverse impact on impact on
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our business, results of operations, or financial condition.
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Throughout 2025, the U.S. has increased, expanded, or imposed new tariffs on goods imported from various countries. Several
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countries have increased or imposed additional tariffs in response to U.S. tariffs. The tariff environment has been dynamic in 2025, with
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changes occurring on an ongoing basis, and it is possible that additional developments will occur in the future, including as a result of
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negotiations between the U.S. and trade partners and legal challenges to the tariffs.
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These recent tariffs and the subsequent retaliatory tariffs could increase the cost of goods for our products or reduce our ability to sell
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products globally, particularly for our Wastewater business in China, which may adversely affect our operating results and financial condition.
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In addition, there is no guarantee that we can avoid any impact of tariff and related economic effects in the future, and these trade measures
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and retaliations may directly impact our business by increasing trade-related costs or affecting the demand for our products globally.
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Any further unfavorable government policies on international trade, such as capital controls or tariffs, may affect the demand for our
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products and services, impact the competitive position of our products or prevent us from selling products in certain countries. If any new
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tariffs, legislation and/or regulations are implemented, or if existing trade agreements are renegotiated, such changes could have an adverse
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30.0 million and 25.0 million aggregate value of the Company’s common stock, respectively. Such programs may be suspended or
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We may not be able to successfully compete in the CO 2-based refrigeration system market.
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continue to work on developing market adoption of this new technology. While interest in the PX G1300 has been positive, there is no
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guarantee that we will ultimately be successful in generating sustained interest and, more importantly, adoption of our technology on a
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timeline necessary to meet our goals, or at all. Theglobal commercial and industrial refrigeration industry can be slow to adopt new
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technologies and alternative technologies or new refrigerants may emerge, which may slow the adoption of the PX G1300. In addition, we
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may encounter new technological challenges that we will need to solve in order to achieve adoption of the technology. Theglobal
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commercial and industrial refrigeration industry is also saturated with very large, established companies who have greater experience and
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resources and may provide cost saving methods that utilize novel system architectures, new and improved equipment or materials, ejectors
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and/or other energy recovery devices, all or some of which could improve energy efficiency that compete against the PX G1300. If we are
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unable to solve any technological challenges, generate and sustain sufficient interest for our CO 2-based refrigeration technology, we may not
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be able to successfully compete in the CO 2-based refrigeration market, which could have an adverse effect on our CO 2 business, and our
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be realized in the fourth quarter. Had we experienced unforeseen delivery cancellations, postponements or other delays due to project
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We face risks arising from the restructuring of our operations and uncertainty with respect toour ability to achieve any anticipated
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cost savings associated with such restructuring.
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During the fourth quarter of fiscal year 2024, we implemented a restructuring plan which included reductions in workforce in all
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functions of the organization, primarily in our San Leandro location, in order to lower ouroperating cost structure, and to position usfor
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profitable growth. Charges related to such actions may harm our profitability in the periods incurred.
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Restructuring program actions, which include a reduction in workforce, may present a number of significant risks that could have a
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material adverse effect on our operations, financial condition, results of operations, cash flow, or business reputation, including:
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•incurrence of additional costs in the short-term, including workforce reduction costs, training of employees or third-party
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resources, and charges relating to consolidation of excess facilities;
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•actual or perceived disruption of service or reduction in service levels to our customers;
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•potential disruption of manufacturing of product to satisfy our contractual commitments;
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•potential adverse effects on our internal control environment and inability to preserve adequate internal controls relating to our
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•actual or perceived disruption to customers, suppliers, distribution networks and other important operational relationships and the
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inability to resolve potential conflicts in a timely manner;
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•diversion of management’s attention from ongoing business activities and strategic objectives;
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•failure to maintain employee morale, damage to company culture and an increase in employment claims;
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•employee attrition beyond planned reductions and workforce transitions, including inadequate transfers of knowledge; and
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•damage to our reputation as an employer, which could make it more difficult for us to hire new employees in the future.
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Because of these and other factors, some of which may not be entirely within our control, we may not fully realize the purpose and
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anticipated operational benefits, efficiencies or cost savings of any productivity actions in the expected timelines, or at all, and, if we do not,
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our business and results of operations may be adversely affected.
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the taxation of U.S. business entities that may have a meaningful impact to our provision for income taxes. These changes included a
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with our estimates or other matters and assess additional taxes. For example, we are under a federal income tax audit by the IRS, for fiscal
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year 2021 (the “2021 Tax Audit”). The 2021 Tax Audit is ongoing with no proposed adjustments by the IRS to date. We do not expect a
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preliminary resolution of the 2021 Tax Audit to be reached during the next six months. While we regularly assess the likely outcome of the
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2021 Tax Audit in order to determine the appropriateness of our tax provision, tax audits are inherently uncertain and an unfavorable
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repurchase up to $50.0 million aggregate value of the Company’s common stock. This program began and was completed in the fourth
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desalination solutions. Each of these factors could result in reduced or uneven demand for our products. Pronounced variability or delays in
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desalination solutions. Each of these factors could result in reduced or uneven demand for our products. Pronounced variability, complete
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the construction of such plants or reductions in spending for desalination in general could negatively impact our Water segment sales, which
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cancellations or delays in the construction of such plants or reductions in spending for desalination in general could negatively impact our
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in turn could have an adverse effect on our entire business, financial condition, or results of operations, and make it difficult for us to
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Water segment sales, which in turn could have an adverse effect on our entire business, financial condition, or results of operations, and
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make it difficult for us to accurately forecast our future sales.
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considerably less than the cost of our products. The performance and pricing pressure of such new products could cause us to adjust the
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The performance and pricing pressure of such products could cause us to adjust the prices of certain products to remain competitive, or we
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prices of certain products to remain competitive, or we may not be able to continue to win large contracts, which could adversely affect our
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may not be able to continue to win large contracts, which could adversely affect our market share, competitive position and margins. Some
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market share, competitive position and margins. Some of our current and potential competitors may have significantly greater financial,
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of our current and potential competitors may have significantly greater financial, technical, marketing, and other resources; longer operating
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technical, marketing, and other resources; longer operating histories; or greater name recognition. They may also have more extensive
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histories; or greater name recognition. They may also have more extensive products and product lines that would enable them to offer multi-
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products and product lines that would enable them to offer multi-product or packaged solutions as well as competing products at lower prices
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product or packaged solutions as well as competing products at lower prices or with other more favorable terms and conditions. As a result,
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or with other more favorable terms and conditions. As a result, our ability to sustain our market share may be adversely impacted, which
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our ability to sustain our market share may be adversely impacted, which would affect our business, product margins, operating results, and
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would affect our business, product margins, operating results, and financial condition. In addition, if one of our competitors were to merge or
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financial condition. In addition, if one of our competitors were to merge or partner with another company, the change in the competitive
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partner with another company, the change in the competitive landscape could adversely affect our continuing ability to compete effectively.
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landscape could adversely affect our continuing ability to compete effectively.
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regulations or minimal regulations for treating wastewater. Accordingly, end users inother parts of the world with no or minimal regulations
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regulations or minimal regulations for treating wastewater. Accordingly, end users in other parts of the world with no or minimal regulations
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Emerging Technologies segment financial condition or results of operation.
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wind down, which will have an adverse effect on our Emerging Technologies segment financial condition and results of operations.
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For the past decade, theglobal commercial and industrial refrigeration industry has been shifting away from HFC-based refrigerants
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For the past decade, the global commercial and industrial refrigeration industry has been shifting away from HFC-based
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to natural refrigerants, such as CO 2-based refrigerants in response to the global HFC-based refrigerant phase-down and subsequent
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refrigerants to natural refrigerants, such as CO 2-based refrigerants in response to the global HFC-based refrigerant phase-down and
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environmental regulations. We introduced the PX G1300 energy recovery device for use in CO 2-based refrigeration systems in 2021 and
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subsequent environmental regulations. We introduced the PX G1300 energy recovery device for use in CO 2-based refrigeration systems in
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We have made a substantial investment in R&D andsales and marketing to execute our diversification strategy into new and existing
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We have made a substantial investment in R&D and sales and marketing to execute our diversification strategy into new and existing
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be able to recognize that revenue for the fiscal year. For example, in fiscal year 2024, we forecasted over 40% of our annual net revenue to
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be able to recognize that revenue for the fiscal year. If we experience unforeseen fourth quarter delivery cancellations, postponements or
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cancellations, project delays, transportation or other shipping delays, or other adverse events would have prevented delivery in the fourth
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other delays due to project cancellations, project delays, transportation or other shipping delays, or other adverse events would have
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quarter, it is unlikely we would have had sufficient time to make up such revenue shortfall.
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prevented delivery in the fourth quarter, it is unlikely we will have sufficient time to make up such revenue shortfall.
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average Water segment sales cycle for our international MPD customers, which are involved with larger desalination plants, typically ranges
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average Water segment sales cycle for our international MPD customers, which are involved with larger desalination plants, can be up to 36
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from 16 to 36 months, and may exceed 36 months from time-to-time, and the average sales cycle for our OEM customers, which are involved
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months, and may exceed 36 months from time-to-time, and the average sales cycle for our OEM customers, which are involved with smaller
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with smaller desalination plants, ranges fromone to 16 months, and may exceed 16 months from time-to-time. These long sales cycles
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desalination plants, ranges fromone to 16 months, and may exceed 16 months from time-to-time. These long sales cycles make revenue
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make revenue predictions difficult and results in our expending significant resources well in advance of orders for our products, which may
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predictions difficult and results in our expending significant resources well in advance of orders for our products, which may cause our
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cause our operating results to fluctuate and may adversely affect our financial condition.
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operating results to fluctuate and may adversely affect our financial condition.
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We operate on a global basis with offices or activities in North, South and Latin America, Middle East and Africa, Asia, and Europe.
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We operate on a global basis with offices or activities in North, South and Latin America, Middle East and Africa, Asia, and Europe. In
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We face risks inherent in conducting business internationally, including compliance with international and U.S. laws and regulations that apply
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risks inherent in compliance with international and U.S. laws and regulations that apply to our international operations. These laws and
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to our international operations. These laws and regulations include tax laws, anti-competition regulations, import and trade restrictions,
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regulations include tax laws, anti-competition regulations, import and trade restrictions, export control laws, and laws which prohibit corrupt
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export control laws, and laws which prohibit corrupt payments to governmental officials or certain payments or remunerations to customers,
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payments to governmental officials or certain payments or remunerations to customers, including the U.S. FCPA or other anti-corruption laws
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including the U.S. FCPA or other anti-corruption laws that have recently been the subject of a substantial increase in global enforcement.
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that have recently been the subject of a substantial increase in global enforcement. Many of our products are subject to U.S. export law
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Many of our products are subject to U.S. export law restrictions that limit the destinations and types of customers to which our products may
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restrictions that limit the destinations and types of customers to which our products may be sold, or require an export license in connection
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be sold, or require an export license in connection with sales outside the U.S. Given the high level of complexity of these laws, there is a risk
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with sales outside the U.S. Given the high level of complexity of these laws, there is a risk that some provisions may be inadvertently or
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that some provisions may be inadvertently or intentionally breached, for example, through fraudulent or negligent behavior of individual
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intentionally breached, for example, through fraudulent or negligent behavior of individual employees, our failure to comply with certain formal
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employees, our failure to comply with certain formal documentation requirements, or otherwise. Also, we may be held liable for actions taken
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documentation requirements, or otherwise. Also, we may be held liable for actions taken by our local dealers and partners. Violations of
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by our local dealers and partners. Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or
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these laws and regulations could result in fines, criminal sanctions against us, our officers or our employees, and prohibitions or conditions on
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our employees, and prohibitions or conditions on the conduct of our business. Any such violations could include prohibitions or conditions on
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the conduct of our business. Any such violations could include prohibitions or conditions on our ability to offer our products in one or more
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our ability to offer our products in one or more countries and could materially damage our reputation, our brand, our business, and our
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countries and could materially damage our reputation, our brand, our business, and our operating results. In addition, we operate in many
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operating results. In addition, we operate in many parts of the world that have experienced significant governmental corruption to some
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parts of the world that have experienced significant governmental corruption to some degree and, in certain circumstances, strict compliance
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degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. We may be
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with anti-bribery laws may conflict with local customs and practices. We may be subject to competitive disadvantages to the extent that our
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companies, including with us; (ii) our ability to transact business in other countries, including the Middle East, where many of the water
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program(s), and there can be no assurance that any share repurchases will enhance shareholder value because the stock price of our
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against China, Mexico and Canada, ongoing terrorist activity, and hostilities in the Middle East, may adversely impact (i) the ability or
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guarantee that we will repurchase any additional shares under these program(s), and there can be no assurance that any share repurchases