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In conjunction with these financial results, management has released a letter to shareholders reviewing business and financial updates from the third quarter and discussing our outlook for 2025. This letter is located under “Financial Info” in the “Investors” section on the Energy Recovery website (https://ir.energyrecovery.com/financial-information).


	Quarter-to-Date			Year to Date
	Q3’2025	Q3’2024	vs. Q3’2024	2025	2024	2025 vs. 2024
	(In millions, except net income (loss) per share, percentages and basis points)
Revenue	$32.0	$38.6	down 17%	$68.1	$77.9	down 13%
Gross margin	64.2%	65.1%	down 90 bps	63.1%	64.0%	down 90 bps

Operating margin	11.4%	18.3%	down 690 bps	(10.9%)	(7.6%)	down 330 bps
Net income (loss)	$3.9	$8.5	down 54%	($4.0)	($0.4)	NM
Net income (loss) per share	$0.07	$0.15	down $0.08	($0.07)	($0.01)	down $0.06
Effective tax rate				13.0%	62.4%
Cash provided by (used for) operations	($3.1)	($3.0)		$11.7	$11.6


	Quarter-to-Date			Year to Date
	Q3’2025	Q3’2024	vs. Q3’2024	2025	2024	2025 vs. 2024
	(In millions, except adjusted net income per share, percentages and basis points)


Adjusted operating margin	18.3%	27.5%	down 920 bps	(0.6%)	9.7%	NM
Adjusted net income	$6.3	$12.0	down 47%	$3.0	$12.4	down 75%
Adjusted net income per share	$0.12	$0.21	down $0.09	$0.06	$0.22	down $0.16

Adjusted EBITDA	$6.8	$11.6		$2.4	$10.6
Free cash flow	($3.5)	($3.2)		$11.0	$10.4

Certain matters discussed in this press release and on the conference call are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on information currently available to the Company and on management’s beliefs, assumptions, estimates, or projections and are not guarantees of future events or results. Potential risks and uncertainties include risks relating to the future demand for the Company’s products, risks relating to performance by our customers and third-party partners, risks relating to the timing of revenue, and any other factors that may have been discussed herein regarding the risks and uncertainties of the Company’s business, and the risks discussed under “Risk Factors” in the Company’s Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) for the year ended December 31, 2024, as well as other reports filed by the Company with the SEC from time to time. Because such forward-looking statements involve risks and uncertainties, the Company’s actual results may differ materially from the predictions in these forward-looking statements. All forward-looking statements are made as of today, and the Company assumes no obligation to update such statements.

This press release includes certain non-GAAP financial measures, including adjusted operating margin, adjusted net income, adjusted net income per share, adjusted EBITDA and free cash flow. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows that either exclude or include amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles in the United States of America, or GAAP. These non-GAAP financial measures do not reflect a comprehensive system of accounting, differ from GAAP measures with the same captions, and may differ from non-GAAP financial measures with the same or similar captions that are used by other companies. As such, these non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. The Company uses these non-GAAP financial measures to analyze its operating performance and future prospects, develop internal budgets and financial goals, and to facilitate period-to-period comparisons. The Company believes these non-GAAP financial measures reflect an additional way of viewing aspects of its operations that, when viewed with its GAAP results, provide a more complete understanding of factors and trends affecting its business.

•Adjusted operating margin is a non-GAAP financial measure that the Company defines as income (loss) from operations which excludes i) stock-based compensation; ii) executive transition costs, such as executive search costs, retention costs, one-time severance costs and one-time corporate growth strategy costs; iii) restructuring charges, and iv) impairment of long-lived assets, divided by revenues.

•Adjusted net income is a non-GAAP financial measure that the Company defines as net income (loss) which excludes i) stock-based compensation; ii) executive transition costs; iii) restructuring charges; iv) impairment of long-lived assets; and v) the applicable tax effect of the excluded items including the stock-based compensation discrete tax item.

•Adjusted net income per share is a non-GAAP financial measure that the Company defines as net income (loss), which excludes i) stock-based compensation; ii) executive transition costs; iii) restructuring charges; iv) impairment of long-lived assets; and v) the applicable tax effect of the excluded items including the stock-based compensation discrete tax item, divided by basic shares outstanding.

•Adjusted EBITDA is a non-GAAP financial measure that the Company defines as net income (loss) which excludes i) depreciation and amortization; ii) stock-based compensation; iii) executive transition costs; iv) restructuring charges; v) impairment of long-lived assets; vi) other income, net, such as interest income and other non-operating income (expense), net; and vii) provision for (benefit from) income taxes.

Energy Recovery uses the investor relations section on its website as means of complying with its disclosure obligations under Regulation FD. Accordingly, investors should monitor Energy Recovery’s investor relations website in addition to following Energy Recovery’s press releases, SEC filings, and public conference calls and webcasts.

Energy Recovery (Nasdaq: ERII) designs and manufactures world-class energy-saving technology for critical infrastructure that communities rely on every day, driving a more resilient and sustainable future. Grounded in more than 30 years of leadership in the desalination industry, today we use our proprietary pressure exchanger technology to help customers in multiple industries improve their operations and lower their emissions. Headquartered in the San Francisco Bay Area, we operate manufacturing and R&D facilities throughout California, with sales and on-site technical support available globally. For more information, please visit www.energyrecovery.com


	September 30, 2025		December 31, 2024
	(In thousands)
ASSETS



Cash, cash equivalents and investments	$	79,937	$	99,851



Accounts receivable and contract assets	46,809		66,842
Inventories, net	33,566		24,906
Prepaid expenses and other assets	4,865		3,889





Property, equipment and operating leases	21,539		25,119
Goodwill	12,790		12,790


Deferred tax assets and other assets	10,139		9,395
TOTAL ASSETS	$	209,645	$	242,792

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities



Accounts payable, accrued expenses, and other liabilities, current	$	16,812	$	20,837


Contract liabilities and other liabilities, non-current	2,002		628


Lease liabilities	9,999		11,317





Total liabilities	28,813		32,782









Stockholders’ equity	180,832		210,010
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	209,645	$	242,792


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
	(In thousands, except per share data)
Revenue	$	32,000	$	38,584	$	68,116	$	77,873
Cost of revenue	11,442		13,472		25,146		28,060
Gross profit	20,558		25,112		42,970		49,813



Operating expenses
General and administrative	7,514		7,673		23,757		24,771
Sales and marketing	5,714		6,413		15,980		18,669

Research and development	3,668		3,969		10,120		12,264

Restructuring charges	—		—		539		—



Total operating expenses	16,896		18,055		50,396		55,704
Income (loss) from operations	3,662		7,057		(7,426)		(5,891)





Other income, net	892		1,768		2,885		4,771
Income (loss) before income taxes	4,554		8,825		(4,541)		(1,120)
Provision for (benefit from) income taxes	680		344		(589)		(699)
Net income (loss)	$	3,874	$	8,481	$	(3,952)	$	(421)

Net income (loss) per share
Basic	$	0.07	$	0.15	$	(0.07)	$	(0.01)
Diluted	$	0.07	$	0.15	$	(0.07)	$	(0.01)

Number of shares used in per share calculations
Basic	53,162		57,756		54,101		57,409
Diluted	53,466		58,290		54,101		57,409


	Nine Months Ended September 30,
		2025		2024
	(In thousands)
Cash flows from operating activities:
Net loss		$	(3,952)	$	(421)



















Non-cash adjustments		10,181		11,432











Net cash provided by operating assets and liabilities		5,464		556
Net cash provided by operating activities		11,693		11,567

Cash flows from investing activities:



Net investment in marketable securities		37,670		(21,067)
Capital expenditures		(668)		(1,194)
Proceeds from sales of fixed assets		10		90


Net cash provided by (used in) investing activities		37,012		(22,171)

Cash flows from financing activities:
Net proceeds from issuance of common stock		1,364		5,795






Repurchase of common stock and payment of excise tax		(32,781)		—
Net cash (used in) provided by financing activities		(31,417)		5,795

Effect of exchange rate differences		58		(23)
Net change in cash, cash equivalents and restricted cash		$	17,346	$	(4,832)

Cash, cash equivalents and restricted cash, end of period		$	47,103	$	63,393


	Three Months Ended September 30,					Nine Months Ended September 30,
	2025		2024		vs. 2024	2025		2024		vs. 2024
	(In thousands, except percentages)
Megaproject	$	18,400	$	29,009	down 37%	$	33,238	$	48,924	down 32%
Original equipment manufacturer	8,962		4,919		up 82%	21,320		15,210		up 40%
Aftermarket	4,638		4,656		no change	13,558		13,739		down 1%

Total revenue	$	32,000	$	38,584	down 17%	$	68,116	$	77,873	down 13%


	Three Months Ended September 30,
	2025								2024
	Water		Emerging Technologies		Corporate		Total		Water		Emerging Technologies		Corporate		Total
	(In thousands)
Revenue	$	31,928	$	72	$	—	$	32,000	$	38,344	$	240	$	—	$	38,584
Cost of revenue	11,323		119		—		11,442		13,334		138		—		13,472
Gross profit (loss)	20,605		(47)		—		20,558		25,010		102		—		25,112



Operating expenses
General and administrative	1,418		669		5,427		7,514		1,803		906		4,964		7,673
Sales and marketing	3,704		1,557		453		5,714		3,777		1,977		659		6,413

Research and development	1,820		1,848		—		3,668		1,145		2,824		—		3,969



Total operating expenses	6,942		4,074		5,880		16,896		6,725		5,707		5,623		18,055
Operating income (loss)	$	13,663	$	(4,121)	$	(5,880)	3,662		$	18,285	$	(5,605)	$	(5,623)	7,057
Other income, net							892								1,768
Income before income taxes							$	4,554							$	8,825


	Nine Months Ended September 30,
	2025								2024
	Water		Emerging Technologies		Corporate		Total		Water		Emerging Technologies		Corporate		Total
	(In thousands)
Revenue	$	67,831	$	285	$	—	$	68,116	$	77,351	$	522	$	—	$	77,873
Cost of revenue	24,810		336		—		25,146		27,633		427		—		28,060
Gross profit (loss)	43,021		(51)		—		42,970		49,718		95		—		49,813



Operating expenses
General and administrative	4,314		1,995		17,448		23,757		5,637		2,908		16,226		24,771
Sales and marketing	10,129		4,396		1,455		15,980		11,359		5,484		1,826		18,669

Research and development	4,602		5,518		—		10,120		3,318		8,946		—		12,264

Restructuring charges	210		123		206		539		—		—		—		—

Total operating expenses	19,255		12,032		19,109		50,396		20,314		17,338		18,052		55,704
Operating income (loss)	$	23,766	$	(12,083)	$	(19,109)	(7,426)		$	29,404	$	(17,243)	$	(18,052)	(5,891)
Other income, net							2,885								4,771
Income before income taxes							$	(4,541)							$	(1,120)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
	(In thousands)
Stock-based compensation expense charged to:
Cost of revenue	$	156	$	176	$	452	$	980
General and administrative	868		954		2,466		3,372
Sales and marketing	828		845		2,208		2,767
Research and development	355		437		980		1,393
Total stock-based compensation expense	$	2,207	$	2,412	$	6,106	$	8,512


	Quarter-to-Date						Year to Date
	Q3'2025			Q3'2024				Q3'2025			Q3'2024
	(In millions, except shares, per share and percentages)









































































Operating margin	11.4		%	18.3		%		(10.9)		%	(7.6)		%
Stock-based compensation	6.9			6.3				9.0			10.9


Executive transition costs	—			2.9				—			6.4
Restructuring charges	—			—				0.8			—
Impairment of long-lived assets	—			—				0.5			—


Adjusted operating margin	18.3		%	27.5		%		(0.6)		%	9.7		%




















Net income (loss)	$	3.9		$	8.5			$	(4.0)		$	(0.4)


Stock-based compensation	2.2			2.4				6.1			8.5


Executive transition costs (2)	—			1.0				—			4.4
Restructuring charges (2)	—			—				0.5			—
Impairment of long-lived assets (2)	—			—				0.3			—




Stock-based compensation discrete tax item	0.3			0.1				0.1			(0.1)


Adjusted net income	$	6.3		$	12.0			$	3.0		$	12.4












Net income (loss) per share	$	0.07		$	0.15			$	(0.07)		$	(0.01)
Adjustments to net income (loss) per share (3)	0.05			0.06				0.13			0.23
Adjusted net income per share	$	0.12		$	0.21			$	0.06		$	0.22










Net income (loss)	$	3.9		$	8.5			$	(4.0)		$	(0.4)


Stock-based compensation	2.2			2.4				6.1			8.5

Depreciation and amortization	0.9			1.0				2.8			3.1
Executive transition costs	—			1.1				—			5.0
Restructuring charges	—			—				0.5			—
Impairment of long-lived assets	—			—				0.4			—





Other income, net	(0.9)			(1.8)				(2.9)			(4.8)





Provision for (benefit from) income taxes	0.7			0.3				(0.6)			(0.7)

Adjusted EBITDA	$	6.8		$	11.6			$	2.4		$	10.6

Free cash flow
Net cash provided by (used in) operating activities	$	(3.1)		$	(3.0)			$	11.7		$	11.6
Capital expenditures	(0.3)			(0.2)				(0.7)			(1.2)

Free cash flow	$	(3.5)		$	(3.2)			$	11.0		$	10.4