Energy Recovery, Inc.
For the period ended Mar 31, 2026. Filed May 6, 2026.
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, 2026 · Filed May 6, 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-Q
Period ended 2025-09-30; filed 2025-11-05.
0001421517-25-000134
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-06.
0001421517-26-000041
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 215 previous paragraphs and 189 current paragraphs.
74 unchanged; 72 reworded; 39 added; 68 removed; 1 previous and 4 current paragraphs rearranged.
Tables are not compared: 12 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 (39)
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Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of
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metals and pollutants.
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During thethree months ended March 31, 2026, we changed the composition of our reportable segments to better reflect how the
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CODM manages the business. As a part of this change, the Water segment was separated into two segments, the Desalination segment and
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the Wastewater segment. Prior periods have been recast to conform to the current year presentation.
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Three months ended March 31, 2026, as compared to thethree months ended March 31, 2025
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Theincrease in original equipment manufacturer revenue of$2.6 million was due primarily to:
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•Wastewater: The increase in revenue of $0.4 million was due primarily to higher shipments of products to the Asia market.
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•Emerging Tech: The increase in revenue of $0.1 million was due primarily to higher shipments of products to the Americas
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market.
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Thedecrease in aftermarket revenue of$1.3 million was primarily due to lower shipments to the Asia and Middle East markets.
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primarily to$1.6 million of restructuring charges booked to inventory associated with the wind down of the CO 2 retail grocery business, as
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well as increased costs related to product and channel mix, pricing, tariffs, and indirect manufacturing costs during thethree months ended
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Three months ended March 31, 2026, as compared to thethree months ended March 31, 2025
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to impairment of goodwill and restructuring charges incurred as part of the wind down of the CO 2 retail grocery business, partially offset by a
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Desalination Segment. Desalination segment related operating expenses increased by$1.3 million, or 32.8%. This increase was due
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Wastewater Segment. Wastewater segment related operating expenses increased by$0.1 million, or 4.6%. This increase was due
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primarily to higher consulting costs, partially offset by lower employee costs.
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This increase was due primarily to impairment of goodwill and restructuring charges incurred as part of the wind down of the CO 2 retail
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the three months ended March 31, 2025.
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Restructuring Charges. During the first quarter of fiscal year 2026, we wound down operations of the CO 2 retail grocery business
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within our Emerging Technologies segment due to a fundamental change in the outlook of the business. We recorded a restructuring charge
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of approximately$1.5 million during thethree months ended March 31, 2026. The total restructuring charge recorded relates to severance
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and benefits, including reemployment assistance, for 23 terminated employees. In addition to the restructuring charges, the Company
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incurred other related charges associated with the wind down of the CO 2 retail grocery business, including excess and obsolescence
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reserves taken on CO 2 inventory of approximately$1.6 million and impairment of goodwill of approximately$1.7 million, which are included in
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“Restructuring - inventory reserve” and “Impairment of goodwill” in the Condensed Consolidated Statements of Operations, respectively.
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profitable growth. We recorded total restructuring charges ofapproximately $2.8 million, of which$0.5 million was recorded during thethree
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projected higher U.S. FDDEI benefits.
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(“LCs”) component. The Credit Agreement was amended on January 21, 2026 to extend the expiration date from December 21, 2026 to
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in May 2026. As of March 31, 2026, we have repurchased 1,346,869 shares of our common stock at an aggregate cost of approximately
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$16.3 million of which 960,303 were purchased during thethree months ended March 31, 2026 at an aggregate cost of approximately
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$10.7 million.
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expire in April 2027.
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•Accrued liabilities: an increase in cash provided due to incentives and restructuring expenses paid out in 2025, partially offset by,
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•Inventories: a decrease in cash provided due to cash used to build finished goods inventory in the first quarter of 2026.
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instruments, and capital expenditures supporting our growth. The decrease in cash provided during thethree months ended March 31, 2026,
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as compared to the prior year, is primarily due to fewer maturities of marketable securities. We believe our investments in marketable debt
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of common stock as compared to the prior year.
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metals and pollutants, and has also been applied to the development of our PX G1300® for use in the CO 2 market.
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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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Within the geographical markets, the following countries represented revenue in excess of 10%.
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Within the geographical markets, the following countries represented revenue in excess of 10%.
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Three months ended September 30, 2025, as compared to the three months ended September 30, 2024
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(“MEA”) and Europe markets, partially offset by higher shipments of products to the Asia market.
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Theincrease in OEM revenueof$4.0 million was due primarily to:
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•Desalination: The increase in revenue of $3.0 million was due primarily to higher shipments of products to the Americas, Asia
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and Europe markets.
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•Wastewater: The increase in revenue of$1.0 million was due primarily to higher shipments of products to the Asia and Europe
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markets.
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Thedecrease in AMrevenue of$18 thousand was prim arily due to higher shipments of products to the Asia markets, partially offset
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Nine months ended September 30, 2025, as compared to thenine months ended September 30, 2024
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Thedecrease in MPDrevenueof $15.7 million was due primarily to lower shipments to the MEA and Americas markets, partially
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Theincrease in OEM revenue of$6.1 million was primarily due:
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•Desalination: The increase in revenue of $3.3 million was due primarily to higher shipments of products to the Asia market.
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•Wastewater: The increase in revenue of$2.8 million was due primarily to higher shipments to the Asia and Europe markets.
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Thedecrease in AM revenue of$0.2 million was due primarily to lower shipments to the Americas market, partially offset by higher
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shipments of products to the Asia markets.
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due primarily to costs related to product mix andtariffs, partially offset by a decrease in indirect manufacturing costs.
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Thedecrease in gross profit and gross margin for thenine months ended September 30, 2025, as compared to the prior year, was
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due primarily to costs related to product mix and tariffs, partially offset by a decrease inindirect manufacturing costs during thenine months
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ended September 30, 2025.
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Three months ended September 30, 2025, as compared to the three months ended September 30, 2024
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Overall Operating Expenditures. Overall operating expenditures decreased$1.2 million, or(6.4%). This decrease wasdue primarily
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tolower employee compensation costs and lower Emerging Technologies segment development costs, partially offset by an increase in
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consulting costs.
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Water Segment. Water segment operating expenses increased by$0.2 million, or 3.2%. This increase was due primarily to higher
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marketing costs and bad debt expense.
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decrease was due primarily to lower employee compensation costs as well as lower development costs.
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Reworded paragraphs (72)
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Our reportable operating segments consist of the water and emerging technologies segments. These segments are based on the
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Our reportable operating segments consist of the desalination, wastewater and emerging technologies segments. These segments
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industries in which the technology solutions are sold, the type of energy recovery device or other technology sold and the related solution and
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are based on the industries in which the technology solutions are sold, the type of energy recovery device or other technology sold and the
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service or, in the case of emerging technologies, where revenues from new and/or potential devices utilizing our pressure exchanger
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related solution and service or, in the case of emerging technologies, where revenues from new and/or potential devices utilizing our
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technology can be brought to market. Other factors for determining the reportable operating segments include the manner in which our Chief
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pressure exchanger technology can be brought to market. Other factors for determining the reportable operating segments include the
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Operating Decision Maker (“CODM”), our President and Chief Executive Officer, evaluates our performance combined with the nature of the
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manner in which our Chief Operating Decision Maker (“CODM”), our President and Chief Executive Officer, evaluates our performance
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individual business activities. In addition, our corporate operating expenses include expenditures in support of the water and emerging
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combined with the nature of the individual business activities. In addition, our corporate operating expenses include expenditures in support
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technologies segments. Wecontinue tomonitor and review oursegment reporting structure in accordance with authoritative guidance to
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of the desalination, wastewater and emerging technologies segments. Wecontinue tomonitor and review oursegment reporting structure in
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determine whether any changes have occurred that would impact ourreportable segments.
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accordance with authoritative guidance to determine whether any changes have occurred that would impact ourreportable segments.
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A discussion regarding our financial condition and results of operations for thethree and nine months ended September 30, 2025,
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A discussion regarding our financial condition and results of operations for thethree months ended March 31, 2026, compared to the
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compared to thethree and nine months ended September 30, 2024, is presented below.
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three months ended March 31, 2025, is presented below.
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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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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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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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variability in revenue from quarter to quarter is typical, therefore year-on-year comparisons are not necessarily indicative of the trend for the
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the full year due to these variations. There isno specific seasonality in our revenues to highlight.
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full year due to these variations. There isno specific seasonality in our revenues to highlight.
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offset by higher shipments of products to the Europe market.
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•Desalination: The increase in revenue of $2.1 million was due primarily to higher shipments of products to the Europe market and
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by lower shipments of products to the Europe and MEAmarkets .
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the Middle East market, partially offset by lower shipments of products to the Africa market.
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Thedecrease in MPD revenue of$10.6 million was due primarily to lower shipments of products to the Middle East and Africa
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Theincrease in megaproject revenue of$0.3 million was due primarily to higher shipments to the Middle East market.
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The decrease ingross profit and gross margin for the three months ended September 30, 2025, as compared to the prior year, was
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Thedecrease ingross profit and gross margin for thethree months ended March 31, 2026, as compared to the prior year, was due
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three and nine months ended September 30, 2025, as compared to the comparable periodsin the prior year, are discussed within the
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three months ended March 31, 2026, as compared to the comparable period in the prior year, are discussed within the following overall
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following overall operating expenditures, and the segment and corporate operating expenses discussions below.
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operating expenditures, and the segment and corporate operating expenses discussions below.
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Overall Operating Expenditures. Overall operating expenditures decreased by$5.3 million, or(9.5%). This decrease was due
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Overall Operating Expenditures. Overall operating expenditures increased by$0.5 million, or 3.2%. This increase was due primarily
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recorded during thenine months ended September 30, 2025. The company did not record a restructuring charge during the three months
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during the three months ended March 31, 2025.
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Emerging Technologies Segment. Emerging Technologies segment operating expenses decreased by$1.6 million, or(28.6%). This
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Emerging Technologies Segment. Emerging Technologies segment related operating expenses increased by$1.1 million, or 27.0%.
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employee costs, including stock-based compensation costs, partially offset by an increase in consulting costs.
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grocery business, partially offset by lower employee costs, including stock-based compensation costs.
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Corporate Operating Expenses. Corporate operating expenses increased by$0.3 million, or 4.6%. This increase was due primarilyto
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Corporate Operating Expenses. Corporate operating expenses decreased by$1.9 million, or(27.6%). This decrease was primarily
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to higher consulting costs, restructuring charges and impairment costs associated with the sublease of the Katy, Texas lease incurred during
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due to lower employee costs, consulting costs and impairment costs associated with the sublease of the Katy, Texas lease incurred during
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complete by the end of the first quarter of fiscal year 2025 and the Company does not expect to incur significant additional expenses related
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The restructuring plan was substantially complete by the end of the first quarter of fiscal year 2026 and the Company does not expect to incur
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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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During the fourth quarter of fiscal year 2024, we implemented a restructuring plan which included reductions in our workforce in all
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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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functions of the organization, primarily within the G&A function, in order to lower ouroperating cost structure, and to position the Companyfor
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ended September 30, 2025. The total restructuring charge relates to severance and benefits, including reemployment assistance, for
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months ended March 31, 2025. The total restructuring charge relates to severance and benefits, including reemployment assistance, for
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38 terminated employees, which was approximately 15% of ourworkforce. The implementation of the restructuring plan was substantially
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38 terminated employees, which was approximately 15% of ourworkforce. The implementation of the restructuring plan was complete as of
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to the restructuring. See Note 4, “Other Financial Information –Restructuring,”of the Notes for further discussion and disclosure on our
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December 31, 2025. See Note 4, “Other Financial Information –Restructuring,”of the Notes for further discussion and disclosure on our
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Thedecrease in “Total other income, net” in thethree and nine months ended September 30, 2025, as compared to the comparable
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Thedecrease in “Total other income, net” in thethree months ended March 31, 2026, as compared to the comparable period in the
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period in the prior year, was primarily due to a decrease in short- and long-term investments.
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prior year, was primarily due to a decrease in short- and long-term investments.
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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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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 deduction eligible income (“FDDEI”) federal
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intangible income (“FDII”), federal R&D tax credit, certain permanent differences, such as stock-based compensation shortfalls, and partial
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research and development (“R&D”) tax credit, andcertain permanent differences, such as non-deductible stock-based compensation.
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decrease in employee costs, as well as consulting costs and impairment costs associated with the sublease of the Katy, Texas lease incurred
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primarily to higher employee costs, including stock-based compensation costs, and higher restructuring charges.
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significant additional expenses related to the restructuring.
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For thethree months ended March 31, 2026, the recognized benefit from income taxes resulted from the tax projection based on the
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associated with the sublease of our Katy, Texas lease.