Energy Recovery, Inc.
For the period ended Jun 30, 2026. Filed Aug 5, 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.
Jun 30, 2026 · Filed Aug 5, 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 2026-03-31; filed 2026-05-06.
0001421517-26-000041
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-06-30; filed 2026-08-05.
0001421517-26-000083
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 189 previous paragraphs and 220 current paragraphs.
105 unchanged; 58 reworded; 53 added; 23 removed; 3 previous and 4 current paragraphs rearranged.
Tables are not compared: 7 previous and 10 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 (53)
Current report
(“CODM”), our Interim President and Chief Executive Officer, evaluates our performance combined with the nature of the individual business
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activities. In addition, our Corporate and Other include expenditures in support of the Desalination and Wastewater segments, as well as
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revenue and expenditures associated with the former Emerging Technologies segment. Wecontinue tomonitor and review oursegment
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reportable segments.
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and the Wastewater segment. Duringthe first quarter of fiscal 2026, the CO 2 retail grocery business within the Emerging Technologies
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segment was wound-down, which resulted in the Emerging Technologies segment no longer meeting the criteria of a reportable segment as
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of the second quarter of fiscal 2026. As a result, revenue and expenses associated with the former Emerging Technologies segment have
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Results of Operations
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Three months ended June 30, 2026, as compared to the three months ended June 30, 2025
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•Desalination: The decrease in revenue of $1.3 million was due primarily to lower shipments of products to the Asia and Africa
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markets, partially offset by higher shipments of products to the America, Europe and Middle East markets.
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•Wastewater: The decrease in revenue of $1.9 million was due primarily to lower shipments of products to the Asia markets.
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Thedecrease in After Market (“AM”)revenue of$0.8 million was due primarily to lower shipment of products to the Europe and Asia
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Thedecrease in Megaproject (“MPD”) revenue of$12.1 million was primarily due to lower shipments of products to the Europe,
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Middle East and Asia markets.
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Six months ended June 30, 2026, as compared to thesix months ended June 30, 2025
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Thedecrease in OEM revenue of$0.6 million was due primarily to:
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•Desalination: The increase in revenue of $0.8 million was due primarily to higher shipments of products to the Europe, Middle
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East and Africa markets, partially offset by lower shipments of products to the Asia market.
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•Wastewater: The decrease in revenue of $1.4 million was due primarily to lower shipments of products to the Asia market.
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Thedecrease in AM revenue of$2.1 million was primarily due to lower shipments to the Asia and Europe markets.
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The decrease in gross profit for the three months ended June 30, 2026, as compared to the prior year, was due primarily to lower
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volume as compared to the prior year, partially offset by decreases to indirect manufacturing costs and channel mix.
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Theincrease ingross margin for the three months ended June 30, 2026, as compared to the prior year, was due primarily to indirect
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manufacturing costs and channel mix, partially offset by lower volume.
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offset by improvements to indirect manufacturing costs during thesix months ended June 30, 2026.
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Three months ended June 30, 2026, as compared to the three months ended June 30, 2025
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restructuring charges incurred in thethree months ended June 30, 2026.
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Desalination Segment. Desalination segment operating expenses increased by$1.5 million, or 35.2%. This increase was primarily
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Wastewater Segment. Wastewater segment operating expenses increased by$0.5 million, or 26%. This increase was primarily due
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to higher employee costs and higher consulting costs.
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Corporate and Other. Corporate and Other decreased by$3.6 million, or(35.5)%. This decrease was primarily due to lower
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employee compensation costs, including stock-based compensation expense, lower consulting costs, and lower emerging technology
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development costs, partially offset byrestructuring charges incurred in the three months ended June 30, 2026.
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Six months ended June 30, 2026, as compared to thesix months ended June 30, 2025
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Overall Operating Expenditures. Overall operating expenditures decreased by$1.1 million, or(3.3%). This decrease was primarily
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due to to lower employee compensation costs, including stock-based compensation expense, and lower consulting costs, and waspartially
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primarily due to to higher employee costs and higher consulting costs.
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Corporate and Other. Corporate and Other decreased by$4.5 million, or(21.2)%. This decrease was primarily due to lower
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employee costs, including stock-based compensation expense, lower consulting costs and lower emerging technology development costs,
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Operations
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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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manner in which our Chief Operating Decision Maker (“CODM”), our President and Chief Executive Officer, evaluates our performance
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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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of the desalination, wastewater and emerging technologies segments. Wecontinue tomonitor and review oursegment reporting structure in
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Three months ended March 31, 2026, as compared to thethree months ended March 31, 2025
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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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•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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Theincrease in megaproject revenue of$0.3 million was due primarily to higher shipments to the Middle East market.
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Three months ended March 31, 2026, as compared to thethree months ended March 31, 2025
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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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Emerging Technologies Segment. Emerging Technologies segment related operating expenses increased by$1.1 million, or 27.0%.
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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 decreased by$1.9 million, or(27.6%). This decrease was primarily
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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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the three months ended March 31, 2025.
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primarily due to lower projected federal R&D tax credits, increased non-deductible officer stock-based compensation, largely offset by
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projected higher U.S. FDDEI benefits.
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$10.7 million.
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expire in April 2027.
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of common stock as compared to the prior year.
Reworded paragraphs (58)
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Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of
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Item 2 — Management’s Discussion and Analysis of Financial Condition and
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Our reportable operating segments consist of the desalination, wastewater and emerging technologies segments. These segments
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Our reportable operating segments consist of the Desalination and Wastewater segments. These segments are based on the
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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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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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pressure exchanger technology can be brought to market. Other factors for determining the reportable operating segments include the
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service. Other factors for determining the reportable operating segments include the manner in which our Chief Operating Decision Maker
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accordance with authoritative guidance to determine whether any changes have occurred that would impact ourreportable segments.
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reporting structure in accordance with authoritative guidance to determine whether any changes have occurred that would impact our
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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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During thesix months ended June 30, 2026, we changed the composition of our reportable segments to better reflect how the CODM
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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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manages the business. During the fist quarter of fiscal 2026, the Water segment was separated into two segments, the Desalination segment
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the Wastewater segment. Prior periods have been recast to conform to the current year presentation.
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been included within Corporate and Other. Prior periods have been recast to conform to the current year presentation.
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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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A discussion regarding our financial condition and results of operations for thethree and six months ended June 30, 2026, compared
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three months ended March 31, 2025, is presented below.
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to thethree and six months ended June 30, 2025, is presented below.
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Theincrease in original equipment manufacturer revenue of$2.6 million was due primarily to:
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Thedecrease in Original Equipment Manufacturer (“OEM”) revenue of$3.2 million was due primarilyto:
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the Middle East market, partially offset by lower shipments of products to the Africa market.
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markets, partially offset by higher shipments of products to the Middle East 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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Thedecrease in MPD revenue of$11.8 million was due primarily to lower shipments to the Europe, Asia and Middle East markets.
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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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Thedecrease ingross profit and gross margin for thesix months ended June 30, 2026, as compared to the prior year, was due
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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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primarily to lower volume as compared to the prior year as well as$1.6 million of restructuring charges booked to inventory associated with
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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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the wind down of the CO 2 retail grocery business, as well as increased costs related to product and channel mix, pricing, and tariffs, partially
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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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three months ended June 30, 2026, as compared to the comparable periodsinthe prior year, are discussed within the following overall
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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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Overall Operating Expenditures. Overall operating expenditures decreased$1.6 million, or(10.0%). This decrease was primarily due
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primarily to higher consulting costs, partially offset by lower employee costs.
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to lower employee compensation costs, including stock-based compensation expense, and lower consulting costs, partially offset by
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financing activities in the prior year, due to higher repurchases of our common stock partially offset bylower net proceeds from the issuance
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due to higher employee costs, including stock-based compensation expense.
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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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of approximately$0.9 million during the three months ended June 30, 2026. The total restructuring charge recorded relates to severance and
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significant additional expenses related to the restructuring.
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the second quarter of fiscal year 2026 and we do not expect to incur significant additional expenses related to the restructuring.
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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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offset byimpairment of goodwill and restructuring charges incurred as part of the wind down of the CO2 retail grocery business.
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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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Desalination Segment. Desalination segment related operating expenses increased by$2.8 million, or 34.1%. This increase was
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primarily to higher employee costs, including stock-based compensation costs, and higher restructuring charges.
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primarily due to to higher employee costs, including stock-based compensation costs, and higher restructuring charges.
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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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Wastewater Segment. Wastewater segment related operating expenses increased by$0.6 million, or 14.2%. This increase was
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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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partially offset byimpairment of goodwill and restructuring charges incurred as part of the wind down of the CO 2 retail grocery business.
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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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benefits, including reemployment assistance, for 23 terminated employees. In addition to the restructuring charges, we incurred other related
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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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charges associated with the wind down of the CO 2 retail grocery business, including excess and obsolescence reserves taken on CO 2
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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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inventory of approximately$1.6 million and impairment of goodwill of approximately$1.7 million, which are included in “Restructuring -
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“Restructuring - inventory reserve” and “Impairment of goodwill” in the Condensed Consolidated Statements of Operations, respectively.
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inventory reserve” and “Impairment of goodwill” in the Condensed Consolidated Statements of Operations, respectively. The restructuring
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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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plan was substantially complete by the end of thesecond quarter of fiscal year 2026 and we do not expect to incur significant additional
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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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profitable growth. We recorded total restructuring charges ofapproximately $2.8 million, of which$0.5 million was recorded during thesix
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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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Thedecrease in “Total other income, net” in thethree and six months ended June 30, 2026, as compared to the comparable period in
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prior year, was primarily due to a decrease in short- and long-term investments.
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the prior year, was primarily due to adecrease in the interest rate for short- and long-term investments.
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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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For thethree and six months ended June 30, 2026, the recognized benefit from income taxes resulted from the tax projection based
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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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on the full year forecast and included benefits related to the U.S. federal research and development (“R&D”) tax credit, andcertain
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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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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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research and development (“R&D”) tax credit, andcertain permanent differences, such as non-deductible stock-based compensation.
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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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The effective tax rate excluding discrete items for thethree months ended March 31, 2026, as compared to the prior year, differed
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The effective tax rate excluding discrete items for thesix months ended June 30, 2026, as compared to the prior year, differed
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benefits, including reemployment assistance, for 23 terminated employees. The restructuring plan was substantially complete by the end of
Current report — wording carried from elsewhere
Restructuring Charges. During the first quarter of fiscal year 2026, we wound down operations of the CO 2 retail grocery business within
Current report — wording carried from elsewhere
our Emerging Technologies segment due to a fundamental change in the outlook of the business. We recorded a restructuring charge of
Current report — wording carried from elsewhere
permanent differences, such as non-deductible stock-based compensation as well as an increase in the California valuation allowance for
Rearranged previous paragraphs (3)
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during the three months ended March 31, 2025.
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For the three months ended March 31, 2025, the recognized benefit from income taxes resulted from the tax projection based on the
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certain permanent differences, such as stock-based compensation shortfalls, and partial release of California valuation allowance.