UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
 Washington D.C. 20549

 Form 10-K

 (Mark One)

 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the fiscal year ended December 31, 2024
 or

 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the transition period from _____ to _____
 Commission File Number: 001-34112

 Energy Recovery, Inc.

 (Exact Name of Registrant as Specified in its Charter)

 Delaware

 01-0616867

 (State or Other Jurisdiction of Incorporation)

 (I.R.S. Employer Identification No.)

 1717 Doolittle Drive
 San Leandro, California 94577
 (Address of Principal Executive Offices) (Zip Code)
 ( 510) 483-7370
 (Registrant's telephone number, including area code)

 Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

 Title of each class

 Trading Symbol

 Name of each exchange on which registered

 Common Stock, $0.001 par value

 ERII

 Nasdaq Stock Market

 Securities registered pursuant to Section 12(g) of the Act: None

 Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
 Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
 requirements for the past 90 days. Yes No
 Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
 Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
 files). Yes No
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See
 the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange
 Act:
 Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth company
 If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
 revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control
 over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued
 its audit report.
 If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
 reflect the correction of an error to previously issued financial statements.
 Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received
 by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
 The aggregate market value of the voting stock held by non-affiliates amounted to approximately $ 748 million on June 30, 2024.
 The number of shares of the registrant's common stock outstanding as of February 20, 2025 was 54,955,305 shares.
 DOCUMENTS INCORPORATED BY REFERENCE
 As noted herein, the information called for by Part III is incorporated by reference to specified portions of the registrant's definitive proxy statement to be filed
 in conjunction with the registrant's 2025 Annual Meeting of Stockholders, which is expected to be filed not later than 120 days after the registrant's fiscal year
 ended December 31, 2024.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K)

 Page No.

 Item 1

 Business

 Item 1A

 Risk Factors

 Item 1B

 Unresolved Staff Comments

 Item 1C

 Cybersecurity

 Item 2

 Properties

 Item 3

 Legal Proceedings

 Item 4

 Mine Safety Disclosures

 Item 5

 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 Item 6

 [Reserved]

 Item 7

 Management's Discussion and Analysis of Financial Condition and Results of Operations

 Item 7A

 Quantitative and Qualitative Disclosures About Market Risk

 Item 8

 Financial Statements and Supplementary Data

 Item 9

 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 Item 9A

 Controls and Procedures

 Item 9B

 Other Information

 Item 9C

 Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

 Item 10

 Directors, Executive Officers and Corporate Governance

 Item 11

 Executive Compensation

 Item 12

 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 Item 13

 Certain Relationships and Related Transactions and Director Independence

 Item 14

 Principal Accounting Fees and Services

 Item 15

 Exhibits and Financial Statement Schedules

 Item 16

 Form 10-K Summary

 Signatures

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | FLS 1

 Forward-Looking Information
 This Annual Report on Form 10-K for the year ended December 31, 2024, including Part II, Item 7, "Management's Discussion and
 Analysis of Financial Condition and Results of Operations" (the "MD&A"), contains forward-looking statements within the "safe harbor"
 provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements in this report include, but are not limited to,
 statements about our expectations, objectives, anticipations, plans, hopes, beliefs, intentions or strategies regarding the future.
 Forward-looking statements represent our current expectations about future events, are based on assumptions, and involve risks and
 uncertainties. If the risks or uncertainties occur or the assumptions prove incorrect, then our results may differ materially from those set forth
 or implied by the forward-looking statements. Our forward-looking statements are not guarantees of future performance or events.
 Words such as "expects," "anticipates," "aims," "projects," "intends," "plans," "believes," "estimates," "seeks," "continue," "could,"
 "may," "potential," "should," "will," "would," variations of such words and similar expressions are also intended to identify such forward-looking
 statements. These forward-looking statements are subject to risks, uncertainties and assumptions that are difficult to predict; therefore,
 actual results may differ materially and adversely from those expressed in any forward-looking statement. Readers are directed to risks and
 uncertainties identified under Part I, Item 1A, "Risk Factors," and elsewhere in this report for factors that may cause actual results to be
 different from those expressed in these forward-looking statements. Except as required by law, we undertake no obligation to revise or
 update publicly any forward-looking statement for any reason.
 Forward-looking statements in this report include, without limitation, statements about the following:

 • our belief that the pressure exchanger is the industry standard for energy recovery in the seawater reverse osmosis
 desalination (" SWRO ") industry;

 • our belief that the scalability and versatility of our PX Pressure Exchanger (" PX ") can help us achieve success in emerging
 wastewater markets;

 • our belief that the Ultra PX addresses key challenges associated with treating wastewater in a range of reverse osmosis
 (" RO ") applications;

 • our belief that the Ultra High-Pressure PX addresses key challenges, such as energy intensity and environmental impacts
 associated with treating wastewater;

 • our belief that the Ultra High-Pressure PX can help make RO the preferred treatment option to achieve zero and minimum liquid
 discharge (" ZLD " and " MLD ", respectively) requirements by enhancing RO 's affordability and efficiency compared to thermal
 treatment options;

 • our expectation of greater demand of our PX in the wastewater market due to expanding environmental regulations;

 • our belief that our hydraulic turbochargers deliver substantial savings, operational benefits and ease of integration into
 desalination systems;

 • our anticipation that markets not traditionally associated with desalination, such as the United States of America (the "U.S.")
 and China will inevitably develop and provide further revenue growth opportunities;

 • our belief that countries around the world will continue to mandate ZLD or MLD requirements for specific industries;

 • our belief that, as the existing thermal technology is replaced with RO technology, demand for our products will be created;

 • our belief that our PX offers market-leading value with the highest technological and economic benefit;

 • our belief that ongoing operating costs and life cycle costs rather than the initial capital expenditures are the key factor in the
 selection of an energy recovery device solution for megaproject (" MPD ") customers;

 • our belief that our PX has a distinct competitive advantage in the market for desalination plants and numerous wastewater
 market verticals, because our PX 1) has minimal unplanned and planned downtime, resulting in lower lifecycle maintenance
 cost, 2) is a cost-effective energy recovery solution, 3) is made with highly durable and corrosion-resistant aluminum oxide
 (" alumina ") ceramic parts and outperforms our competition with respect to quality, flexibility and durability, and 4) is warrantied
 for high efficiencies;

 • our belief that leveraging our pressure exchanger technology will unlock new commercial opportunities in the future;

 • our belief that our PX G1300 can contribute to help make CO 2 -based refrigeration more economically viable in a broader
 range of climates;

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | FLS 2

 • our expectation that we will initially sell our PX G1300 to a variety of customers, such as to the OEMs themselves, potentially
 directly to end user supermarket chains or industrial sites, or to contractors who may retrofit our technology onto existing
 systems, and once the PX G1300 is established, our belief that our sales process will evolve to primarily selling through OEMs;

 • our belief that competitive technologies to the PX G1300 could arise as CO 2 -based refrigeration systems become more
 prevalent;

 • our belief that the simplicity of installation and the ease of operations of the PX G1300 could encourage adoption of the
 PX G1300;

 • our belief that our current facilities will be adequate for the foreseeable future;

 • our belief that by investing in research and development, we will be well positioned to continue to execute on our product
 strategy;

 • our belief that our technology helps our customer achieve environmentally sustainable operations;

 • our expectation that sales outside of the U.S. will remain a significant portion of our revenue;

 • our belief that the scale of the environmental impact from the use of our solutions;

 • our belief that the integration of sustainability principles into our corporate and risk management strategies can strengthen our
 existing business as well as our efforts to develop new applications of pressure exchanger technology for high-pressure fluid-
 flow environments;

 • the timing of our receipt of payment for products or services from our customers;

 • our belief that our existing cash and cash equivalents, our short and/or long-term investments, and the ongoing cash generated
 from our operations, will be sufficient to meet our anticipated liquidity needs for the foreseeable future, with the exception of a
 decision to enter into an acquisition and/or fund investments in our latest technology arising from rapid market adoption that
 could require us to seek additional equity or debt financing;

 • our expectations relating to the amount and timing of recognized revenue from our projects;

 • our expectation that, as we expand our international sales, a portion of our revenue could be denominated in foreign currencies
 and the impact of changes in exchange rates on our cash and operating results;

 • our expectation of increased sales and lower marketing expenditures for 2025;

 • our expectation that we will continue to receive a tax benefit related to U.S. federal foreign-derived intangible income and
 research and development tax credit;

 • our expectation that we will be able to enforce our intellectual property (" IP ") rights;

 • our expectation that the adoption of new accounting standards will not have a material impact on our financial position or results
 of operations;

 • the outcome of proceedings, lawsuits, disputes and claims;

 • the impact of losses due to indemnification obligations;

 • other factors disclosed under Part I, Item 1, "Business," Item 1A, "Risk Factors," and Item 2, "Properties," and Part II, Item 7,
 MD&A, and Item 7A, "Quantitative and Qualitative Disclosures about Market Risk," and elsewhere in this Form 10 K.

 You should not place undue reliance on these forward-looking statements. These forward-looking statements reflect management's
 opinions only as of the date of the filing of this Annual Report on Form 10-K. All forward-looking statements included in this document are
 subject to additional risks and uncertainties further discussed under Part I, Item 1A, "Risk Factors," and are based on information available to
 us as of February 26, 2025. We assume no obligation to update any such forward-looking statements. Certain risks and uncertainties could
 cause actual results to differ materially from those projected in the forward-looking statements. These forward-looking statements are
 disclosed from time to time in our Quarterly Reports on Form 10 Q and Current Reports on Form 8 K filed with, or furnished to, the Securities
 and Exchange Commission (the "SEC"), as well as in Part I, Item 1A, "Risk Factors," within this Annual Report on Form 10-K.
 It is important to note that our actual results could differ materially from the results set forth or implied by our forward-looking
 statements. The factors that could cause our actual results to differ from those included in such forward-looking statements are set forth
 under the heading Item 1A, "Risk Factors," in our Quarterly Reports on Form 10-Q, in our Annual Reports on Form 10-K, and from time-to-
 time, in our results disclosed in our Current Reports on Form 8-K.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | FLS 3

 We provide our Annual Reports on Form 10 K, Quarterly Reports on Form 10 Q, Current Reports on Form 8 K, Proxy Statements on
 Schedule 14A, Forms 3, 4 and 5 filed by, or on behalf of, directors, executive officers and certain large shareholders, and any amendments to
 those documents filed or furnished pursuant to the Securities Exchange Act of 1934, free of charge on the Investor Relations section of our
 website, www.energyrecovery.com. These filings will become available as soon as reasonably practicable after such material is
 electronically filed with or furnished to the SEC. From time to time, we may use our website as a channel of distribution of material company
 information.
 We also make available in the Investor Relations section of our website our corporate governance documents including our code of
 business conduct and ethics and the charters of the audit, compensation and nominating and governance committees. These documents, as
 well as the information on the website, are not intended to be part of this Annual Report on Form 10-K. We use the Investor Relations
 section of our website as a means of complying with our disclosure obligations under Regulation FD. Accordingly, you should monitor the
 Investor Relations section of our website in addition to following our press releases, SEC filings and public conference calls and webcasts.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 1

 Item 1 — Business

 Overview
 Energy Recovery, Inc. (the "Company", "Energy Recovery", "we", "our" and "us") is a trusted global leader in energy efficiency
 technology. We design and manufacture reliable, high-performance solutions that generate cost savings, increase energy efficiency, and
 reduce carbon emissions across several industries. With a strong foundation in the desalination industry, we have delivered transformative
 solutions that have increased operational efficiency and environmental sustainability to our customers for more than 30 years.
 We have been incorporated in the state of Delaware since 2001. Our corporate headquarters, principal research and development
 (" R&D "), and manufacturing facility is located in San Leandro, California. In addition, we have manufacturing and warehouse space in Tracy,
 California. W e have a global direct sales team and on-site technical support staff to service customers in the United States of America (the
 "U.S."), Europe, North, South and Latin America, the Middle East, Northern Africa, and Asia.

 Sustainability

 Our technology harnesses the powerful combination of performance and energy efficiency to deliver operational profitability and help
 our customers achieve environmentally sustainable operations. As such, we are committed to measuring and managing our own operational
 impact, as well as producing high-quality energy recovery devices for our customers. While sustainability has always been central to our
 business, five years ago we embarked on our formal sustainability journey to turn the lens on ourselves and provide our stakeholders with
 further transparency around our company. Our integrated sustainability strategy includes a dedicated sustainability team, internal
 sustainability initiatives focused on key goals with measurable targets, and sustainability solutions for our customers.
 In 2021, we set our first sustainability goals and have since achieved nearly all of our original targets. With many of our earlier goals
 now achieved and retired, it was time to re-evaluate our sustainability priorities and ensure continued alignment with our corporate growth
 strategy. Beginning in 2023, we surveyed and interviewed investors, employees, and customers to ensure our sustainability strategy remains
 aligned with the evolution of our business. The results of this assessment process and our updated sustainability priorities were published in
 November 2024.
 Our sustainability goals, which we believe are highly influential to our business, focus on four sustainability topics – Employees,
 Innovation & Opportunity, Product Safety & Performance, and Operational Impact & Management. These topics were identified by our
 management team and our stakeholders as material to our company's ability to create value. W e believe our goals provide us with a
 strategic roadmap to become a more sustainable and resilient business, and hold us accountable as we strive to be a responsible corporate
 citizen.

 Employees. Our employees are integral to success and innovation. It is our firm commitment and responsibility to provide a safe and
 supportive working environment for our staff where initiative is rewarded, suggestions are valued, and ideas to enhance our company or our
 products are implemented. Likewise, it is our responsibility to offer ample opportunities for employees to develop their skills. For more
 information on our employees and programs, please see Human Capital Resources below.
 Innovation & Opportunity. Innovation and a trusted relationship with our customers and industry partners is pivotal to this goal, as this
 allows us to understand our customers' needs and pain points. By partnering with our customers and consistently striving to improve, we are
 confident in our continued ability to contribute to our customers' operational profitability while advancing environmental sustainability.
 Product Safety & Performance. We uphold the trust of the industries we serve by meticulously manufacturing products that not only
 deliver exceptional performance and generate significant value, but also demonstrate reliability and safety. At our core, we aim to design and
 manufacture high-quality innovative products that deliver significant value to customers and help foster environmentally sustainable
 operations.
 Operational Impact & Management. In 2022, we introduced a goal to reduce our scope 1 and 2 greenhouse gas emissions intensity
 by 65% by 2026. Alongside this goal, we are also formalizing our efforts to decrease our operational waste and water consumption. These
 goals are designed to improve the sustainability of our own operations, create a more efficient manufacturing process, and reduce our
 expenses.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 2

 Detailed disclosures on our sustainability performance can be found in our 2023 Sustainability Report, which is available for download
 on our website at:  We have included this website address only as an inactive textual reference
 and do not intend it to be an active link to our website.

 Pressure Exchanger Technology
 Our pressure exchanger technology platform is at the heart of many of our solutions. It is designed to efficiently capture and transfer
 pressure energy, making commercial and industrial processes more efficient and environmentally sustainable, thereby lowering costs, saving
 energy, and minimizing emissions. This versatile technology is applicable to a wide range of industries that utilize pressurized fluids,
 including liquids and gas, and is ideal for a wide range of pressure ratings.
 Our pressure exchanger technology acts like a fluid piston, efficiently transferring energy between high- and low-pressure liquid or gas
 through continuously rotating ducts. Key to the operation of a pressure exchanger is the micron-level clearances between the rotor and the
 pressure exchanger's stationary components, including the sleeve and the end covers. Fluid circulating within this clearance acts as a
 lubricated bearing, minimizing frictional losses and wear for an extremely efficient exchange of pressure energy.

 The original product application of our pressure exchanger technology, the PX Pressure Exchanger (" PX ") energy recovery device
 was a major contributor to the advancement of seawater reverse osmosis desalination ("SWRO") globally, addressing "energy intensity",
 which is a key pain point for the industry. The PX, which we believe is today's industry standard in energy recovery in desalination,
 establishes a value proposition by reducing energy use by up to 60% in SWRO facilities. It is this significant savings that allowed SWRO to
 supplant thermal desalination as today's desalination technology of choice. The PX, which uses no electricity, operates at up to 98%
 efficiency and is designed to operate with no scheduled maintenance. Today we continue to push the boundaries of our core technology to
 handle different operating environments and industrial applications, such as wastewater and carbon dioxide ("CO 2 ") refrigeration, and deliver
 reliable, high-performance solutions that generate cost savings and increase energy efficiency for our customers.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 3

 Water Treatment

 Markets
 The need for clean water and energy optimization around the world is intensifying, driven by population growth, industrialization, rapid
 urbanization, pollution, and climate change. Apart from seasonal variations, the attainable supply of fresh water generally remains fixed and
 is already decreasing in some geographic areas, as we believe that the reliability of rainfall grows more erratic in many geographies, water
 levels drop in rivers and aquifers, and rising oceans encroach on historically fresh water sources near the coasts. It has been projected by
 the United Nations General Assembly that by 2030, global freshwater demand will exceed freshwater supply by 40%. These trends make the
 markets we serve, such as desalination and wastewater treatment, increasingly critical to meet growing global water demand. Our goal is to
 lower the costs and environmental impact associated with water production and treatment in the desalination and wastewater markets,
 respectively. In addition, we help our customers and the end user in their sustainability compliance goals.
 Reverse osmosis (" RO ") is the preferred technology in the vast majority of desalination facilities and growing in importance in
 wastewater applications. As an industry leader in energy recovery device s, we deliver efficient, scalable solutions for recovering otherwise
 wasted energy in the RO process, thereby helping our customers lower their operating costs and reduce carbon emissions.

 Desalination
 Worldwide seawater desalination plants using our products produce over 35 million cubic meters of water per day (" m 3 /day "). As
 water scarcity grows in communities across the globe, we are proud of our impact in enabling more affordable, sustainable access to this vital
 resource.
 Typical Process Flow Diagram

 * Main pump size reduced by up to 60% compared to a SWRO process not using any energy recovery device.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 4

 Seawater Reverse Osmosis Desalination. Energy intensive pumps are used to pressurize feed waters with varying concentrations of
 salts, minerals and contaminants, which is then pumped through a semi-permeable membrane to achieve the desired water quantity and
 quality. This process results in fresh water, suitable for potable, agricultural and industrial use and a highly concentrated and pressurized
 concentrate or brine stream. Rather than dissipating or "wasting" the pressure energy from the discharge brine, our PX, the most commonly
 adopted energy recovery solution, can transfer the pressure energy from the high-pressure discharge stream directly to a portion of the low-
 pressure filtered feed water stream, thereby reducing the amount of flow required by the main high-pressure process pumps, which are the
 largest consumers of power within the SWRO process. Our highly efficient technology can recycle this pressure energy at peak efficiencies
 up to 98%. This results in a more efficient process as the size of the high-pressure pumps are greatly reduced, no longer needed to be sized
 for full membrane feed flow, and are now re-sized for the permeate flow, thus reducing the energy usage by up to 60%, compared to a
 system without energy recovery devices. As a result, our PX s have helped make seawater desalination an economically viable and more
 sustainable option in the production of potable water.
 Brackish Water Reverse Osmosis Desalination. The brackish RO process is similar to that of the SWRO process. Brackish water
 typically has lower salt, mineral and contaminant content than seawater, therefore, fewer solids need to be removed and less energy is
 expended on pressurizing the feed water. Due to the lower cost and available pressure energy involved, our low pressure PX and hydraulic
 turbochargers generally have characteristics more applicable to the brackish process. The salt content in the feed water will ultimately
 determine the system design and operating conditions which, in turn, will drive decisions related to the specification or type of energy
 recovery device to be employed, if any.
 Seawater desalination has been our primary market for revenue generation, and brackish water applications are an emerging area of
 potential growth. These markets range from small, decentralized desalination plants, such as those used in cruise ships and resorts, to
 large-scale project ("megaproject") desalination plants, defined as those which produce over 50 thousand m 3 /day. Because of the
 geographical location of many significant water desalination projects, geopolitical and economic events can influence the timing of expected
 projects. We anticipate that markets traditionally not associated with desalination, such as the U.S., China and certain countries in Europe
 and North Africa, will develop and provide further revenue growth opportunities.
 Both seawater and brackish market opportunities are represented by newly constructed ("greenfield") and existing ("brownfield") water
 treatment projects. These opportunities include retrofits, upgrades, and plant expansions, that either operate without an energy recovery
 device or utilize alternative energy recovery device technologies. The large-scale greenfield market has been the key market for our water
 business and represents projects that are typically public in nature and involve a formal tendering process; while smaller projects, may be
 private in nature, may or may not involve a formal tendering process. Typical brownfield facilities face higher energy consumption and
 reduced plant availability due to legacy technologies, aging or outdated equipment, and include improvements to existing operations,
 equipment upgrades and potential expansions of existing capacity.
 We work directly with the project bidders, generally large project developers, engineering, procurement, and construction firms (" EPC "
 firm), end-users, and industry consultants, to specify our products prior to the project being awarded, where possible. Once the project is
 awarded to an EPC firm, our normal sales process ensues. The greenfield market is highly competitive, and the tendering process pays
 close attention to the cost to desalinate water (i.e., dollars per cubic meter of water produced). Retrofit opportunities may or may not have a
 formal tendering process. We typically approach the plant owners, operators, and/or end-users of these facilities to present our leading life-
 cycle cost value-proposition.

 Wastewater
 The wastewater market has more variety and covers a wide range of industries, such as discharges from heavy manufacturing, textile
 production, chemical processing, mining operations, and municipal plants, and geographies. As governments across the globe increase their
 focus on water conservation, reusing, recycling, and limiting the amount of pollution, they are establishing more stringent requirements for
 wastewater treatment to maximize water recovery, and to comply with growing freshwater withdrawal and discharge regulations. Zero or
 minimum liquid discharge (" ZLD " and " MLD ", respectively) applications are being observed in countries throughout the world. We expect this
 trend to continue to expand as we observe the implementation of regulations on the discharge of wastewater effluents as the world responds
 to the growing gap between water availability and demand while focusing on minimizing and/or eliminating pollution from these industries.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 5

 Energy Recovery Devices Utilized During Each Stage in the Treatment Train

 As climate change becomes the focus of many countries, governments around the world are increasing their regulations on
 sustainability as well as providing voluntary incentives. Many municipal and industrial industries are adopting more sustainable water reuse
 practices to reduce their reliance on existing water resources, as well as to market their sustainability performance to the public and their pro-
 active risk management to their investors. Sectors such as automotive, including electric vehicles, chemicals, pulp and paper, textiles,
 semiconductors, and other heavy industries are often large water consumers. Their water usage can compete with municipal and agricultural
 water resources, further straining potable water supply in areas already struggling with water scarcity.
 A variety of RO technologies may be utilized in the wastewater applications where our energy recovery solutions are applicable. Such
 processes are typically multi-staged, with each stage increasing in pressure as the wastewater is filtered to recover clean water from a
 wastewater stream and concentrate pollutants to a level where they can be economically utilized or safely disposed, rather than discharged
 into the environment. Our energy recovery solutions, such as our hydraulic turbochargers, low-pressure PX, and our Ultra High-Pressure PX,
 can be applied to each of these stage s.

 Technology Conversion
 The thermal desalination process was the dominant seawater desalination technology employed throughout the 1990s. In this
 process, thermal energy is used to evaporate water from heated seawater and subsequently condenses the vapor to produce fresh potable
 water. Starting in the early 1990s, due to many factors including the introduction and greater usage of energy recovery device s, the process
 of choice for the desalination industry shifted from thermal- to membrane-based RO desalination.
 Over the past two decades RO desalination technology has become the predominant technology, supplanting thermal desalination
 technology as today's desalination technology of choice. As water desalination plants that use the thermal desalination technology age, the
 industry expects the majority of these plant owners to replace their existing thermal technology with RO desalination technology. These
 conversions are driving new demand for RO desalination equipment, which in turn creates demand for our products.
 We also see a similar technology conversion in the wastewater market. Thermal technologies have been the technology of choice for
 RO systems seeking to maximize the removal of waste from the water used in the manufacturing process, such as in ZLD processes, where
 all water is recovered and contaminants are reduced to solid waste, and MLD processes, where near- ZLD processes produce small volumes
 of liquid waste. Similar to seawater desalination, thermal technologies are an energy- and cost-intensive method for cleaning water in these
 discharge processes, with up to 50% of costs typically stemming from thermal treatments. Adopting ultra high-pressure reverse osmosis
 (" UHPRO ") treatment methods to achieve ZLD and MLD objectives moves the cost of these thermal technologies further downstream. Our
 PX U Series pressure exchangers further reduce wasted energy of the UHPRO process by returning pressure energy to the system,
 ultimately reducing overall energy costs and potentially lowering capital expenditures.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 6

 Water Treatment Solutions
 Pressure Exchangers
 Our line of pressure exchangers are high efficiency isobaric energy recovery device s made of a ceramic cartridge supported by a

 highly efficient hydrodynamic and hydrostatic bearing system. Models in this product family are designed for use in a variety of reverse
 osmosis systems within the water treatment industry, including seawater and brackish desalination, and wastewater
 treatment.
 High-Pressure PX Pressure Exchanger. Our highly efficient PX Pressure Exchanger family of energy recovery
 devices delivers unmatched energy savings for water treatment systems. We offer a variety of sizes defined by the flow and
 pressure requirements of the system ranging as low as 20 and up to 400 gallons per minute (" gpm ") (as low as 4.5 and up
 to 90.8 cubic meters of water per hour (" m 3 /h ")) per device at pressures between 400 - 1200 pounds per square inch (" psi ")
 ( 28 - 84 kilograms per square centimeter (" bar ")); however, our customers can design their energy recovery systems to
 achieve unlimited capacities by installing an array of PX s in parallel.
 Small and large desalination projects around the world rely on our range of PX s to achieve optimal operations and
 maximum energy savings, and we believe the scalability and versatility of our PX can achieve similar success in the
 emerging wastewater markets we are targeting.
 Ultra High-Pressure PX. O ur Ultra High-Pressure PX energy recovery device, which we believe, addresses key

 challenges, such as energy intensity and environmental impacts associated with treating wastewater in a variety of water
 treatment applications. Designed with the pressure exchanger technology that powers our flagship high pressure PX, the
 Ultra High-Pressure PX, functions similarly to our PX but can withstand higher pressures. We offer a variety of sizes
 defined by the flow and pressure requirements of the system ranging as low as 10 and up to 250 gpm (or as low as
 2.3 and up to 56.8 m 3 /h) per device at pressures between 1200 - 1800 psi ( 84 - 126 bar); however, by installing an array of
 PXs in parallel, our customers can design their energy recovery system to achieve unlimited capacities.
 While reverse osmosis adoption in wastewater treatment is growing, we believe our Ultra High-Pressure PX can help

 accelerate further adoption of reverse osmosis in the growing zero and minimum liquid discharge markets by enhancing
 RO 's affordability and efficiency compared to thermal treatment options, similar to the impact of our PX
 in the seawater desalination market.
 Low-Pr essure PX. Products in this family are ideal for municipal and industrial potable water reuse applications
 that deploy low-pressure RO stages such as municipal wastewater reuse applications. We offer a variety of sizes defined
 by the flow and pressure requirements of the system ranging as low as 30 and up to 260 gpm (or as low as 6.8 and up to
 59.0 m 3 /h) per device at pressures between 80 - 400 psi ( 6 - 28 bar); however, by installing an array of PX s in parallel, our
 customers can design their energy recovery system to achieve unlimited capacities.
 Pumps and Turbochargers
 We offer high-pressure centrifugal pumps designed to complement our energy recovery device s for a wide range of
 RO plant capacities and applications.
 Hydraulic turbochargers. Our AT and LPT hydraulic turbochargers are high efficiency centrifugal

 energy recovery device s used in low-pressure brackish and high-pressure seawater desalination
 systems and wastewater treatment markets. Our turbocharger product lines are highly efficient with
 state-of-the-art engineering in a compact configuration. With custom-designed hydraulics that allow
 for optimum performance over a wide range of operating conditions, our turbocharger technology
 offers solutions to capital cost constrained single-stage RO applications, inter-stage boost applications
 typically found in brackish water desalination and some wastewater treatment systems. We believe
 our hydraulic turbochargers deliver substantial savings, operational benefits, and ease of integration
 into systems.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 7

 Pumps. RO requires specialized high-pressure membrane feed and, in pressure exchanger

 applications, high-pressure circulation pumps. We manufacture and/or supply specialized high-pressure feed
 and circulation pumps for only a portion of the markets served by our energy recovery solutions. Our high-
 pressure feed pumps are designed to pressurize the membrane feed flow and overcome the osmotic pressure
 requirements of the feed water resulting in the production of desalinated water. Our high-pressure circulation
 pumps are designed to circulate and control the high-pressure flow through our PX and to compensate for
 small pressure losses across the membranes, PX and associated process piping in many desalination and
 wastewater applications.

 Sales and Marketing
 Our strategically located direct sales force offers our products through capital sale to our customers around the world. We maintain a
 sales and service footprint in strategic territories to handle desalination activities, such as in the U.S., China, India, Latin America, Spain,
 Saudi Arabia, the United Arab Emirates, and countries in North Africa, allowing rapid response to our customers' needs. In addition, we are
 expanding our team to handle the growing wastewater from industrial plants in the U.S., China, India, South America, and Taiwan. Our team
 is comprised of individuals with many years of desalination and wastewater treatment industry expertise. Aligned to the geographic breadth
 of our current and potential future customers, our product marketing approach includes a strategic presence at water industry events across
 various regions. In addition, we leverage our industry and market intelligence to develop new solutions and services that can be adopted by
 our growing customer base.
 A significant portion of our revenue is from outside of the U.S. Additional segment and geographical information regarding our
 product revenue is included in Note 2, " Revenue," Note 9, " Segment Reporting," and Note 10, " Concentrations," of the Notes to Consolidated
 Financial Statements in Part II, Item 8, "Financial Statements and Supplementary Data," of this Annual Report on Form 10-K (the " Notes ").

 Competition
 As the water industry has evolved, we faced, and continue to face, increasing worldwide competition based on product offerings and
 service. While our technology has been embraced for many years as the industry standard in RO desalination plants, the competition has
 increased over time whereby more companies are offering energy recovery devices similar to our devices. Furthermore, we expect our
 competition to begin offering new products that incorporate newer technology and materials that may work with existing and new RO
 desalination and wastewater operations. We believe our flagship PX has a competitive advantage over products offered by our competitors,
 because our devices (1) are made with highly durable and corrosion-resistant aluminum oxide (" alumina ") ceramic parts that are designed for
 a life of more than 25 years; (2) are, in certain circumstances, warrantied for high efficiencies; and (3) cause minimal unplanned and planned
 downtime, resulting in lower lifecycle cost and cost-effective energy recovery solutions. In addition, our PX offers optimum scalability in both
 the desalination and growing wastewater market with a quick startup and no scheduled maintenance, as well as having been proven in the
 market and trusted by our customers.

 Project Channels
 We separate our Water segment sales into three distinct channels that are related to financial, other commercial, and technical
 aspects of the projects. We identify these sales channels as megaproject (" MPD "), original equipment manufacturer s (" OEM ") and
 aftermarket (" AM ").
 Megaproject. MPD customers are major firms that develop, design, build, own and/or operate large-scale desalination plants with
 capacities greater than 13.2 million gallons/day ( 50 thousand m 3 /day). A majority of our water treatment revenue comes from this channel.
 Our MPD customers have the required desalination expertise to engineer, undertake procurement for, construct, and sometimes own and
 operate, large-scale desalination plants. Due to the project structures and capacities of these plants, ongoing operating costs and life cycle
 costs, rather than the initial capital expenditures are the key factor in the customers' selection of an energy recovery device solution. As
 such, MPD customers most often select our PX, which we believe offers market-leading value with the highest technological and economic
 benefit. We work with our MPD customers to specify and optimize our PX solutions for their plant designs. The typical desalination and
 wastewater MPD project timeline between project tender and shipment generally ranges from 16 to 36 months; however, from time-to-time,
 may exceed 36 months. Each project in this channel generally represents revenue opportunities over $1 million.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 8

 Original Equipment Manufacturer. OEM customers are companies that supply equipment, packaged systems, and various operating
 and maintenance solutions for small- to medium-sized desalination and wastewater plants utilized by commercial and industrial entities, and
 national, state, and local municipalities worldwide. We sell to our OEM customers a broad set of our products, including our PX, hydraulic
 turbochargers, high-pressure pumps, circulation booster pumps, and associated services. As it relates to desalination and wastewater OEM
 projects, these projects comprise of plants processing up to 13.2 million gallons/day ( 50 thousand m 3 /day), such as those located in hotels
 and resorts, power plants, cruise ships, agricultural sectors, local and other municipal sites, and industrial facilities. In addition, these OEM
 customers purchase our solutions for mobile, decentralized "quick water" or emergency water solutions. Unlike MPD projects, desalination
 and wastewater OEM projects are smaller in scope and the initial capital expenditure, rather than future ongoing operating costs, is often
 more of a factor in selection of an energy recovery device solution in desalination. Accordingly, we sell not only our PX, but also our
 hydraulic turbochargers, which offer a lower cost alternative to our PX. The typical desalination and wastewater OEM project timeline from
 project tender to shipment generally ranges from one to 16 months; however, from time-to-time, may exceed 16 months. Each project in this
 channel typically represents revenue opportunities up to $1 million. Early stage revenue from these projects are dependent on the size of
 system or retrofit of our customers' projects.
 Aftermarket. Aftermarket customers are desalination or wastewater plant owners and/or operators who can utilize our technology to
 upgrade or keep their plant running optimally, and usually have our solutions installed and in operation. We provide spare parts, repair
 services, field services and various commissioning activities. We leverage our industry expertise in supporting our existing installed base to
 ensure that our energy recovery solutions are being operated effectively and efficiently in order to maximize plant availability and overall
 profitability of the facility operations, as required by our industry partners and customers.

 Seasonality
 Desalination or wastewater revenue occurs throughout a calendar year and are based on project timing and size. We often
 experience substantial fluctuations in desalination or wastewater revenue from quarter-to-quarter and from year-to-year primarily due to the
 timing and execution of our MPD shipments, which can also vary from year to year.

 Emerging Technologies
 We are leveraging our pressure exchanger technology platform to develop new product applications and diversify into new industries.
 We continue to push the limits of what our pressure exchanger technology can do, which we believe will unlock new commercial opportunities
 in the future.

 CO 2

 The global refrigeration and heating industries are major contributors to greenhouse gas emissions, of which the leakage of
 hydrofluorocarbon (" HFC ") refrigerants within these closed systems is the leading cause. HFC s have been recognized as a significant
 contributor to global warming, up to thousands of times more potent than CO 2 used as a refrigerant. Global regulations are pushing the
 refrigeration and heating industries to transition away from incumbent HFCs to lower global warming potential (" GWP") natural refrigerants.
 CO 2 used as a refrigerant is a climate-friendly alternative to greenhouse gas-emitting HFC s and has been the natural refrigerant of
 choice for decades in Europe and Japan, where tens of thousands of CO 2 implementations have occurred to date. CO 2 -based refrigeration
 systems for commercial and industrial applications are safe, sustainable, and commercially available; however, a CO 2 -based refrigeration
 system can also consume significant amounts of electricity, especially in warm environments, making them expensive to operate. We believe
 our PX G1300, which uses proven pressure exchanger technology to improve CO 2 -based refrigeration system performance, can contribute
 to solving this challenge and help make CO 2 -based refrigeration more economically viable in a broader range of climates. When integrated
 into new or existing systems, the PX G1300 can reduce compressor workload to increase cooling capacity, system stability, and energy
 efficiency.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 9

 PX G1300. Our refrigeration-focused product leverages our existing ceramics, material science, and manufacturing

 expertise. The PX G1300 can reduce the energy consumption and operating costs of CO 2 -based refrigeration systems in a
 broad range of operating conditions. We see this as potentially a significant accelerator for adoption of CO 2 -based
 refrigeration system globally as our PX G1300 could eventually alter the standard refrigeration system architecture by
 reducing costs for end users, such as grocery stores.
 We designed the PX G1300 to be integrated into new or existing CO 2 -based refrigeration systems. The PX G1300
 can integrate with any existing rack controller and is easy to operate and maintain. We believe the simplicity of installation
 and the ease of operations could encourage adoption of this new technology.

 Sales and Marketing
 We believe there is a significant potential market for the PX G1300 in a variety of channels, such as supermarket chains and cold
 storage facilities. The build of these commercial and industrial refrigeration systems is large enough and demands enough flow of CO 2
 refrigerant to warrant the use of our device, which today implies any system 80 kilowatt in size or greater.
 In understanding the market for the PX G1300, we have identified three major value propositions:
 1. Energy Savings and Emissions Reduction. The PX G1300 recycles the high-pressure energy of a CO 2 system by compressing a
 portion of the gas flow for "free." This "free" compression provided by the PX G1300 allows the main electrical refrigeration
 compressor to work less to keep the refrigeration system at the same temperature. In this way, our PX G1300 contributes to
 lower energy consumption and lower costs by reducing the amount of cycles the main compressor operates, and thereby lower
 emissions in a CO 2 refrigeration system.
 2. Increased Cooling Capacity. The PX G1300 can add compression capacity to a transcritical CO 2 -based refrigeration system to
 safeguard against high discharge pressure failures, which occur during heatwaves when refrigeration systems are under stress.
 3. Operating Costs Savings. The PX G1300 can help lower the costs of water usage and maintenance by reducing the reliance on
 an adiabatic gas cooler system.
 The magnitude of each of these value propositions, or lack thereof, will greatly depend on the geographic location of a refrigeration
 system and temperature ranges that location experiences, the cost of energy at that location, the specific architecture of the refrigeration
 system itself and possibly other parameters.

 Channels and Customers
 CO 2 sales are reported under our OEM sales channel. This includes direct sales to commercial or industrial customers, such as
 supermarket chains, cold storage facilities, and other industrial use rs, and sales to in termediaries, such as refrigeration system installers or
 refrigeration OEM s, to whom we sell the PX G1300 and associated services for inclusion in these customers' new installation or retrofit of
 existing systems.
 The commercial refrigeration market ecosystem has multiple players who integrate the components to build a system. These players
 include supermarkets, which are the end users of the systems; contractors and installers that assist with the installation and maintenance of
 the systems; refrigeration OEM s; and design consultants that assist in designing and specifying the systems for end users and in providing
 the component specifications to the refrigeration OEM s.
 In 2024, we continued to increase our commercialization efforts in the U.S. and in Europe. Initially, we sold the PX G1300 to a variety
 of customers, such as directly to an end user supermarket chain and OEM s. Now, after partnering with OEMs, we have made tremendous
 progress towards full commercialization. Through field trials, the OEMs have been able to provide us significant feedback on the PX G1300 s
 real world operations, ease of installation, value proposition, such as energy savings, an increase in refrigeration capacity and lower
 operational costs, and customer acceptance, all of which greatly increases the success rate of commercialization of the PX G1300. We
 believe that once the PX G1300 is established in the market, our sales process will organically evolve. We expect to primarily sell through
 OEM s, who in turn build and install refrigeration systems at sites maintained by end users.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 10

 Competition
 The concept of energy recovery is a new one in the refrigeration industry. Therefore, unlike in our water markets, there is no direct
 analogous competitor to our pressure exchanger technology. However, there are a variety of cost saving methods, such as parallel
 compression plus ejector and parallel compressors, as well as alternative devices, such as adiabatic gas coolers, that refrigeration
 manufacturers may try to introduce into their configurations to reduce energy consumption within their CO 2 -based refrigeration systems.
 These cost saving methods include utilizing novel system architectures, new and improved equipment or materials, ejectors or other energy
 recovery devices, and/or other technologies that could improve energy efficiency. These cost savings methods may or may not be
 compatible with the PX G1300. As CO 2 -based refrigeration systems become more prevalent, we believe competitive technologies and
 devices could arise. However, we believe that the PX G1300 is the best value proposition in the market today.

 Seasonality
 There is no specific CO 2 revenue seasonality to highlight in the early stages of this product lifecycle.

 Manufacturing
 Our products, including our PX, hydraulic turbochargers, high-pressure pumps, and circulation booster pumps, are designed,
 manufactured, assembled, and tested in two facilities located in California. Our facilities include advanced ceramics manufacturing and
 testing equipment.
 We obtain raw, processed, and certain pre-machined materials from various suppliers to support our manufacturing operations. A
 limited number of these suppliers are single source to maintain material consistency and support new product development. However,
 although we may purchase from certain single source suppliers, we have qualified redundant source(s) to ensure consistent supply for many
 of our critical raw materials and manufactured components. Alumina ceramic components for our PX products are manufactured in-house
 from high-purity alumina to the final product. We are able to leverage our ceramics manufacturing across all of our PX product lines.
 Through our vertically integrated ceramics precision manufacturing process, we ensure that all components meet our high standards for
 quality, durability, and reliability. The components for our other products undergo final precision machining to protect the proprietary nature of
 our manufacturing methods and product designs, and to maintain premium quality standards.
 We are committed to reducing the environmental impact of our operations. We recognize that as we pursue our strategy of diversified
 and disciplined growth, our operations and our impact on the environment may increase. Some of the ways we currently seek to minimize
 our environmental impact are by reducing consumption of resources through waste management strategies, optimizing the use of renewable
 energy, and monitoring key environmental indicators. For example, as part of our waste management strategies, during the machining
 phase, when the solid components are shaped, excess high-purity alumina powder is collected, processed, and then reused. Further, we
 have incorporated in our testing process multiple test loops, which allows us to test products we manufacture to their operating conditions.
 These test loops, which are a major driver of our water usage, have been modified to allow us to recycle a large proportion of the water used
 in these testing cycles. Our efforts to measure and manage our impact will continue to evolve as our business grows.

 Research, Development and Technology
 Research and development (" R&D ") has been, and remains, an essential part of our history, culture and corporate strategy. Since our
 formation, we have developed leading technology and engineering expertise through the evolution of our pressure exchanger technology,
 which can enhance environmental sustainability and improve productivity by reducing energy consumption in pressurized fluid-flow systems.
 This versatile technology works as a platform to build product applications and is at the heart of many of our products. In addition, we have
 engineered and developed ancillary devices, such as our hydraulic turbochargers and circulation booster pumps that complement our energy
 recovery device s.
 We are applying our pressure exchanger technology in new and important ways, building new products to accelerate environmental
 sustainability across more industries. Our investments into R&D are focused on (1) advancing our solutions to better service historical
 markets, such as desalination; (2) applying our pressure exchanger technology to additional markets, such as the wastewater and CO 2
 markets; and (3) fundamental research into new applications of our pressure exchanger technology in existing and new verticals.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 11

 We recognize the importance of carefully stewarding resources to support our ongoing R&D program. We maintain advanced
 analytical and testing capabilities to evaluate our solutions at all company sites. We have developed complex analytical tools which allow us
 to be less reliant on full-scale testing that is costly and often uses considerable amounts of water and consumable energy. Our advanced
 numerical modeling and analytical tools allow for 3-dimensional, multi-phase, multi-physics, and multi-scale, computational fluid dynamics,
 fluid structure interactions, thermodynamics, and system analysis. Leading-edge modeling and analytical techniques coupled with extensive
 state of the art experimental capabilities allow us to further refine our existing water and refrigeration technologies, as well as developing new
 derivatives of our pressure exchanger technology for complex systems and applications.
 Our engineering team, many of whom carry accreditation from world-recognized engineering organizations, specialize in a range of
 technical fields critical to support our current product lines and advance our incubation initiatives, including core engineering competencies of
 fluid mechanics, solid mechanics with expertise in computational fluid dynamics and finite element analysis, bearings design (roller-element,
 hydrostatic, and hydrodynamic), multi-phase flow, dynamics and controls, acoustics and vibrations, tribology, material science and coatings,
 pumps and turbines, turbo-machinery, and rotating equipment.

 Intellectual Property
 We seek patent protection for new technologies, inventions, and improvements that are likely to be incorporated into our solutions.
 We rely on patents, trade secret laws, and contractual safeguards to protect the proprietary tooling, processing techniques, and other know-
 how used in the production of our solutions. We have a robust intellectual property (" IP ") portfolio consisting of U.S. and international issued
 patents as well as pending patent applications.
 We have registered the following trademarks with the United States Patent and Trademark office: " ERI," " PX," " PX Pressure
 Exchanger," " Pressure Exchanger," " Ultra High-Pressure PX," " PX PowerTrain," " PX G1300," and the Energy Recovery logo. We have also
 applied for and received registrations in international trademark offices.

 Human Capital Resources
 Our employees are key to our Company's success. We believe we have a talented, motivated and dedicated team, and we work to
 create an inclusive, exciting, safe, and supportive environment, for all of our employees. Our company is built around innovation and driven
 by diversity of thought and background. Our employees challenge the status quo, actively partner to resolve challenges, and seek to
 continuously improve themselves as well as our operations.
 In November 2024, we announced a restructuring plan in order to lower our operating cost structure, and to position us for profitable
 growth, which included a reduction in workforce. We expect the implementation of the restructuring plan will be substantially completed by
 the end of the first quarter of fiscal year 2025. See Note 4, " Other Financial Information - Restructuring," of the Notes for further discussion
 on our r estructuring activities.
 As of December 31, 2024, we had 254 full-time employees, of which, after our restructuring plan concludes, we expect to have
 216 full-time employees. Our full-time employees represent approximately 100% of our staffing, and include both permanent and leased
 employees. Our leased employees include sales and service agents worldwide, and IT support. Our employees are not unionized, and we
 consider our relations with our employees to be good.

 We are proud to have built a global workforce to match our global customer base. Our employees represent a broad array of
 backgrounds, professionally and personally, and we believe that this diversity of experience and perspectives is a competitive advantage that
 allows us to better serve the needs of our customers.
 Our Code of Business Conduct (our " Code ") serves as a critical tool to help all of us recognize and report unethical conduct, while
 preserving and nurturing our culture. Our Code is reflected in our employee manual, which we provide to all of our employees, and training
 programs. Both our employee manual and training programs include our policies against harassment and bullying, and the elimination of
 bias in the workplace.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 12

 Recruiting, Training and Retention
 Our focus is to create an engaged employee experience, throughout the process of attracting, onboarding, developing, and retaining
 employees. We are committed to supporting employee development as well as providing competitive benefits and a safe workplace. We
 support and develop our employees through global training and development programs that build and strengthen employees' leadership and
 professional skills while striving to enhance our employee's financial, mental and physical wellness. To assess and improve employee
 retention and engagement, we survey our employees with the assistance of a third-party employee engagement survey, and take action to
 address areas of employees' concerns.
 We strive to keep our employees well informed through various engagement activities. Our engagement efforts include all- employee
 town hall meetings, informational meetings, which includes our executive staff meeting with small groups of employees in an informal setting,
 through which we aim to increase transparency and promote a culture of open communication, product and manufacturing training, where we
 help our employees to understand our product and the process to manufacture these products, and newsletters. Our values and ethics serve
 as the guiding force through which we proactively maintain the highest standards of business conduct.
 Compensation and Benefits
 We believe that compensation should be competitive and equitable, and should enable our employees to share in our company's
 success. In addition, we recognize our employees are most likely to thrive when they have the resources to meet their needs and the time
 and support to succeed in their professional and personal lives. In support of this, we offer a wide variety of benefits for our employees and
 we invest in tools and resources that are designed to support our employees' individual growth and development.
 Our compensation and benefit programs are designed to recognize our employees' contributions to value, ingenuity and business
 results, including variable pay, which rewards each employee for the Company's and individual's performance. All full-time and full-time
 equivalent employees, where allowed, are included in our stock-based equity incentive program, and are offered health and welfare benefits,
 mental wellness programs, development programs and training courses. In addition, our employees are afforded the opportunity to give back
 to our communities through donations of time and money through our company sponsored programs.
 Workplace Health and Safety
 We are committed to providing a safe and healthy workplace. We continuously strive to meet or exceed compliance with all laws,
 regulations and accepted practices pertaining to workplace safety. All employees are required to comply with established safety policies,
 standards and procedures, and to attend and complete annual safety training based on their job function. To accomplish our safety goals, we
 developed and maintain company-wide policies to ensure the safety of each employee, as well as compliance with domestic and international
 safety standards.

 Additional Information
 Our website is  We also maintain an Investor Relations website as a routine channel for distribution of
 important information, including news releases, presentations, and financial statements (  We intend to use our
 Investor Relations website as a means of complying with our disclosure obligations under Regulation FD. Accordingly, investors should
 monitor our Investor Relations website in addition to press releases, Securities and Exchange Commission ("SEC") filings, and public
 conference calls and webcasts. Our Annual Report on Form 10 K, Quarterly Reports on Form 10 Q, Current Reports on Form 8 K, all
 amendments to those reports, and the Proxy Statement for our Annual Meeting of Stockholders are made available, free of charge, in the
 Investor Relations section of our website, as soon as reasonably practicable after the reports have been filed with, or furnished to, the SEC.
 The information contained on our website, or any other website, is not part of this report nor is it considered to be incorporated by reference
 herein or with any other filing we make with the SEC. Our headquarters and primary manufacturing center is located at 1717 Doolittle Drive,
 San Leandro, California 94577, and our main telephone number is ( 510) 483-7370. The SEC maintains an internet site that contains reports,
 proxy and information statements and other information regarding issuers that file electronically with the SEC. The address of the SEC
 website is  We have included this website address only as an inactive textual reference and do not intend it to be an
 active link to the SEC website.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 13

 Item 1A — Risk Factors
 The following discussion sets forth what management currently believes could be the most significant risks and uncertainties that
 could impact our businesses, results of operations, and financial condition. Other risks and uncertainties, including those not currently known
 to us or our management, could also negatively impact our businesses, results of operations, and financial conditions. Accordingly, the
 following should not be considered a complete discussion of all of the risks and uncertainties we may face. We may amend or supplement
 these risk factors from time to time in other reports we file with the SEC.

 Risks Related to our Water Segment
 Our Water segment revenues largely depend on the construction of new large-scale desalination plants and the retrofit of existing
 desalination plants, and as a result, our operating results have historically experienced, and may continue to experience,
 significant variability due to volatility in capital spending, availability of project financing, project timing, execution and other
 factors affecting the broader water desalination industry.
 We currently derive the majority of our Water segment revenues from sales of energy recovery products and services used in newly
 constructed, large-scale desalination plants and the retrofit of existing desalination plants, particularly in dry or drought-ridden regions of the
 world. The demand for our products used in the Water segment may decrease if the construction of these large-scale desalination plants or
 the retrofit of existing plants declines for any reason, including, any global or regional economic downturns, worsening global or regional
 political conflicts, worsening regional conditions, changing government priorities, or the impact of any global or regional conflicts.
 Other factors that could affect the number and capacity of large-scale desalination plants built or the timing of their completion, include
 the availability of required engineering and design resources; availability of credit and other forms of financing; the health of the global
 economy; inflation rates; changes in government regulation, permitting requirements, or priorities; and reduced capital spending for water
 desalination solutions. Each of these factors could result in reduced or uneven demand for our products. Pronounced variability or delays in
 the construction of such plants or reductions in spending for desalination in general could negatively impact our Water segment sales, which
 in turn could have an adverse effect on our entire business, financial condition, or results of operations, and make it difficult for us to
 accurately forecast our future sales.
 Our Water segment faces competition from a number of companies that offer competing energy recovery solutions. If any of these
 companies produce superior products or offer their products at substantially lower prices, our competitive position in the market
 could be harmed and our revenues may decline.
 The market for energy recovery devices for desalination and other water treatment plants is becoming increasingly competitive and
 we expect this competition to intensify as the desalination and wastewater markets continue to grow. Competitors have introduced products
 that are similar to, and directly compete with, our key energy recovery products. In addition, we expect new competitors to enter the market,
 and existing competitors to introduce improvements to their existing products and introduce new products that are directly competitive to our
 solutions. Our competitors' existing, new, and improved products may be superior to our products and/or could be offered at prices that are
 considerably less than the cost of our products. The performance and pricing pressure of such new products could cause us to adjust the
 prices of certain products to remain competitive, or we may not be able to continue to win large contracts, which could adversely affect our
 market share, competitive position and margins. Some of our current and potential competitors may have significantly greater financial,
 technical, marketing, and other resources; longer operating histories; or greater name recognition. They may also have more extensive
 products and product lines that would enable them to offer multi-product or packaged solutions as well as competing products at lower prices
 or with other more favorable terms and conditions. As a result, our ability to sustain our market share may be adversely impacted, which
 would affect our business, product margins, operating results, and financial condition. In addition, if one of our competitors were to merge or
 partner with another company, the change in the competitive landscape could adversely affect our continuing ability to compete effectively.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 14

 A sustained downturn in the economy or global unrest could impact the future of new, and the retrofit of existing, desalination
 plants, and the treatment of various wastewater verticals, which could result in decreased demand for our water products and
 services.
 The demand for our water products and services depends primarily on the continued construction of new large-scale desalination
 plants, the retrofit of existing plants, and the construction of wastewater treatment facilities, particularly in the countries that are part of the
 Gulf Cooperation Council, China, Taiwan and India. Weak economic conditions, inflation and global uncertainty including the continuing
 conflicts in Ukraine and many parts of the Middle East may have a negative economic impact on these and other countries, which may
 impact the levels of spending on, timing of, delays to, and availability of, project financing for new desalination and retrofit plant projects. The
 inability of our customers to secure credit or financing for these projects, may result in the postponement or cancellation of these projects. In
 addition, the change in government priorities and/or their reduction in spending for water treatment projects could result in decreased demand
 for our products and services, which could have an adverse effect on our business, financial condition or results of operations.
 We may not be successful in developing suitable market adoption for our products in the wastewater market.
 We have introduced a number of products designed specifically for the wastewater market in the last few years, including the Ultra
 High-Pressure PX family of products and the low pressure PX. While we have enjoyed some initial market adoption in certain key markets,
 the wastewater market continues to evolve and covers a wide range of industries and geographies, and utilizes a variety of RO technologies.
 While we believe our products can be a potential solution to these different applications, there is no guarantee that we will continue to be
 successful in developing market adoption of our wastewater products. While countries like China and India are beginning to mandate zero or
 minimum liquid discharge (" ZLD " and " MLD ", respectively) requirements for specific industries, in many parts of the world there are no
 regulations or minimal regulations for treating wastewater. Accordingly, end users in other parts of the world with no or minimal regulations
 may not be willing to implement wastewater treatment at all or, if they do plan to implement a wastewater treatment program, they may select
 a competitive or alternative wastewater treatment technology. Similar to the desalination market, there are many competitors and competitive
 products that can service wastewater industries that do not include RO technologies or utilize our products. These competitors may have
 existing relationships with end users, greater name recognition, and/or significantly greater financial, technical, marketing and other resources
 that may make it challenging for us to compete in this industry. As a result of the foregoing, we may not be able to successfully develop our
 wastewater business, develop any market share, or win any large contracts, which would affect our business, operating results and financial
 condition.

 Risks Related to our Emerging Technologies Segment
 We may not be able to successfully compete in the CO 2 -based refrigeration system market.
 For the past decade, the global commercial and industrial refrigeration industry has been shifting away from HFC -based refrigerants
 to natural refrigerants, such as CO 2 -based refrigerants in response to the global HFC -based refrigerant phase-down and subsequent
 environmental regulations. We introduced the PX G1300 energy recovery device for use in CO 2 -based refrigeration systems in 2021 and
 continue to work on developing market adoption of this new technology. W hile interest in the PX G1300 has been positive, there is no
 guarantee that we will ultimately be successful in generating sustained interest and, more importantly, adoption of our technology on a
 timeline necessary to meet our goals, or at all. The global commercial and industrial refrigeration industry can be slow to adopt new
 technologies and alternative technologies or new refrigerants may emerge, which may slow the adoption of the PX G1300. In addition, we
 may encounter new technological challenges that we will need to solve in order to achieve adoption of the technology. The global
 commercial and industrial refrigeration industry is also saturated with very large, established companies who have greater experience and
 resources and may provide cost saving methods that utilize novel system architectures, new and improved equipment or materials, ejectors
 and/or other energy recovery devices, all or some of which could improve energy efficiency that compete against the PX G1300. If we are
 unable to solve any technological challenges, generate and sustain sufficient interest for our CO 2 -based refrigeration technology, we may not
 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
 Emerging Technologies segment financial condition or results of operation.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 15

 Our expected future development of the next generation of the PX G1300 may not be completed as anticipated and/or may not meet
 our expectations.
 We are currently working on the next generation of the PX G1300. If the project timeline is not completed as anticipated, or if the
 development of the next generation of the PX G1300 does not meet the expected goals, or if we experience unanticipated problems, we may
 incur a reduction in our forecasted revenues or market share. In addition, any delays may adversely affect our competitive position and could
 have a material adverse effect on our business.
 We may not be able to develop future new technologies successfully.
 We have made a substantial investment in R&D and sales and marketing to execute our diversification strategy into new and existing
 fluid flow markets, including our recent commercial refrigeration products. While we see diversification as core to our growth strategy, there is
 no guarantee that we will be successful in our efforts. Our model for growth is based in part on our ability to initiate and embrace disruptive
 technology trends, to enter new markets, both in terms of geographies and product areas, and to drive broad adoption of the products and
 services that we develop and market. Our competitive position and future growth depend upon a number of factors, including our ability to
 successfully: (i) innovate, develop and maintain competitive products, and services to address emerging trends and meet customers' needs,
 (ii) defend our market share against current and any future competitors, (iii) enhance our product and service offerings by adding innovative
 features or disruptive technologies that differentiate them from those of our competitors and prevent commoditization, (iv) develop,
 manufacture and bring compelling new products and services to market quickly and cost-effectively, (v) attract, develop and retain individuals
 with the requisite innovation and technical expertise and understanding of customers' needs to develop new technologies, products and
 services, and (vi) continue to invest in manufacturing, R&D, engineering, sales and marketing, and customer support. Any inability to execute
 this model for growth could damage our reputation, limit our growth, and negatively affect our operation results. In addition, profitability, if
 any, in new industrial verticals may be lower than in our Water segmen t, and we may not be sufficiently successful in our diversification
 efforts to recoup investments. The failure of our technologies, products or services to maintain and gain market acceptance due to more
 attractive offerings, or customers' slower-than-expected adoption of, and investment in, our new and innovative technologies could
 significantly reduce our revenues or market share and adversely affect our competitive position.

 Risks Related to our General Business
 Our o perating results may fluctuate significantly, making our future operating results difficult to predict and causing our operating
 results to fall below expectations.
 Our quarterly and yearly operating results may fluctuate due to a variety of factors, many of which are outside of our control. We have
 experienced significant fluctuations in revenue from quarter-to-quarter and year-to-year, and we expect such fluctuations to continue. As a
 result, comparing our operating results on a period-to-period basis may not be meaningful. Since it is difficult for us to anticipate the impact
 of these fluctuations on our future results, in the event our revenue or operating results fall below the expectations of investors or securities
 analysts, our stock price may be negatively affected.
 Material variations to our forecasted MPD project delivery timeline in the fourth quarter of a fiscal year may have a substantial
 negative impact on our annual operating results and financial condition. Each of our MPD contracts generally has a minimum dollar value of
 approximately $1.0 million, with larger MPD contracts exceeding $10.0 million. We generally recognize revenue under MPD contracts when
 control of the promised goods or services is transferred to our customers. If 1) delivery is cancelled, postponed or otherwise delayed beyond
 the end of the fourth quarter; or 2) if control of the promised goods or services is transferred beyond the end of the fourth quarter; we will not
 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
 be realized in the fourth quarter. Had we experienced unforeseen delivery cancellations, postponements or other delays due to project
 cancellations, project delays, transportation or other shipping delays, or other adverse events would have prevented delivery in the fourth
 quarter, it is unlikely we would have had sufficient time to make up such revenue shortfall.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 16

 Our sales cycles can be long and unpredictable, and our sales efforts require considerable time and expense. As a result, our
 sales are difficult to predict and may vary substantially from quarter to quarter, which may cause our operating results to fluctuate.
 Our sales efforts involve substantial education of our current and prospective customers about the use and benefits of our energy
 recovery products. This education process can be time-consuming and typically involves a significant product evaluation process which is
 particularly pronounced when dealing with product introduction into new fluid flow industrial verticals. For example, in our Water segment, the
 average Water segment sales cycle for our international MPD customers, which are involved with larger desalination plants, typically ranges
 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
 with smaller desalination plants, ranges from one to 16 months, and may exceed 16 months from time-to-time. These long sales cycles
 make revenue predictions difficult and results in our expending significant resources well in advance of orders for our products, which may
 cause our operating results to fluctuate and may adversely affect our financial condition.
 Our Water contracts often contain holdback provisions of up to 10% of the contract price. If we are unable to collect unbilled
 receivables, which are caused in part by these holdback provisions, our operating results could be adversely affected.
 Our Water contracts with large EPC firms generally contain holdback provisions that typically delay final installment payments for our
 products by up to 24 months after the product has been shipped and revenue has been recognized. Generally, 10% or less of the revenue
 we recognize pursuant to our customer contracts is subject to such holdback provisions and is generally accounted for as contract assets.
 Such holdbacks may result in relatively high unbilled receivables. If we are unable to collect these performance holdbacks, our operating
 results and financial condition could be adversely affected.
 We depend on a limited number of suppliers for some of our components. If our suppliers are not able to meet our demand and/or
 requirements, our business could be harmed.
 We rely on a limited number of suppliers for vessel housings, stainless steel ports, and alumina powder for our portfolio of energy
 recovery device s and stainless steel castings and components for our hydraulic turbochargers and pumps. Our reliance on a limited number
 of manufacturers for these supplies involves several risks, including reduced control over delivery schedules, quality assurance,
 manufacturing yields, production costs caused by rising inflation, and lack of guaranteed production capacity or product supply. We may
 qualify additional suppliers in the future, which would require time and resources. If we do not qualify additional suppliers, we may be
 exposed to increased risk of capacity shortages due to our dependence on current suppliers.
 We do not have long-term supply agreements with our suppliers but secure our supplies on a purchase order basis. Our suppliers
 have no obligation to supply products to us for any specific period, in any specific quantity, or at any specific price, except as set forth in a
 particular purchase order. Our requirements may represent a small portion of the total production capacities of these suppliers, and our
 suppliers may reallocate capacity to other customers, even during periods of high demand for our products. We have in the past
 experienced, and may in the future experience, product quality issues and delivery delays with our suppliers due to factors such as high
 industry demand or the inability of our vendors to consistently meet our quality or delivery requirements. If our suppliers were to cancel or
 materially change their commitments to us or fail to meet quality or delivery requirements needed to satisfy customer orders for our products,
 we could lose time-sensitive customer orders, be unable to develop or sell our products cost-effectively or on a timely basis, if at all, and have
 significantly decreased revenue, which could harm our business, operating results, and financial condition.
 We are subject to manufacturing risks, particularly related to new products, which could lead to excessive scrap, quality defects,
 warranty claims in excess of our warranty provision or result in a significant or a large number of warranty or other claims in any
 given year.
 We manufacture most of our products in our facilities. In connection with new products, we may sometimes need to develop new
 manufacturing processes and techniques that may lead to an increase in excess scrap compared to our more mature processes, as well as
 an increase in quality defects. We provide warranties for most of these products and while we test our products in our manufacturing facilities
 through a variety of means, there can be no assurance that our testing will reveal all quality defects in our products, which may not become
 apparent until after the products have been sold into the market. Accordingly, there is a risk that we may incur increased expenses due to
 excess scrap and significant warranty claims that will result in additional cost of revenue if our warranty provisions are not sufficient to cover
 the actual cost of resolving issues related to defects in our products. If these additional expenses are significant, they could adversely affect
 our business, financial condition, and results of operations.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 17

 Parts of our inventory may become excess or obsolete, which would increase our cost of revenues.
 Inventory of raw materials, parts, components, work in-process, or finished products may accumulate, and we may encounter losses
 due to a variety of factors, including technological change in the water desalination process; changes in the wastewater and refrigeration
 markets that result in product redesign; long delays in shipment of our products or order cancellations, and/or changes related to
 improvements in existing product design; our need to order raw materials that have long-lead times; our inability to estimate exact amounts
 and types of items needed, especially with regard to the configuration of our high-efficiency pumps; and cost reduction initiatives resulting in
 component changes within the products.
 In addition, we may, from time-to-time, purchase more inventory than is immediately required in order to shorten our delivery time in
 case of an anticipated increase in demand for our products. If we are unable to forecast demand for our products with a reasonable degree
 of certainty and our actual orders from our customers are lower than these forecasts, we may accumulate excess inventory that we may be
 required to write off, and our business, financial condition, and results of operations could be adversely affected.

 We may not generate positive returns on our research and development and our corporate growth strategy.
 Developing our products is expensive and the investment in product development may involve a long payback cycle. While we
 believe one of our greatest strengths lies in our innovation and our product development efforts, successfully commercializing such efforts
 and generating a return can be difficult. We expect that our results of operations may be impacted by the timing and size of these
 investments. In addition, these investments may take several years to generate positive returns, if ever.
 Our corporate growth strategy provides a roadmap for overall growth of our Company, including certain product introduction timelines,
 market opportunities and operating cost measures. While we believe that this roadmap prepares us for the future growth and longevity of our
 Company, we cannot be assured that all aspects in our corporate growth strategy will result in a favorable impact. Accordingly, actual
 implementation of our corporate growth strategy may vary from the original roadmap, and the variations may be material. In light of the
 foregoing, our corporate growth strategy, and/or subsequent changes to our corporate growth strategy, could have an adverse effect on our
 business, financial condition, or results of operations.
 Business interruptions may damage our facilities or those of our suppliers.
 Our operations and those of our suppliers may be vulnerable to interruption by fire, earthquake, flood, and other natural disasters, as
 well as power loss, telecommunications failure, and other events beyond our control. Our headquarters in California is located near major
 earthquake faults and has experienced earthquakes in the past. If a natural disaster occurs, our ability to conduct our operations could be
 seriously impaired, which could harm our business, financial condition, results of operations, and cash flows. We cannot be sure that the
 insurance we maintain against general business interruptions will be adequate to cover all of our losses.
 We are, from time to time, involved in legal proceedings and may be subject to additional future legal proceedings that may result
 in material adverse outcomes.
 In addition to the IP litigation risks discussed below, we may become involved in the future in various commercial and other disputes
 as well as related claims and legal proceedings that arise from time to time in the course of our business. See Note 7, " Commitments and
 Contingencies – Litigation," of the Notes for information about certain legal proceedings in which we are involved. Our current legal
 proceedings and any future lawsuits to which we may become a party are, and will likely be, expensive and time consuming to investigate,
 defend and resolve, and will divert our management's attention. Any litigation to which we are a party may result in an onerous or
 unfavorable judgment that may not be reversed upon appeal or in payments of substantial monetary damages or fines, or we may decide to
 settle lawsuits on similarly unfavorable terms, which could have an adverse effect on our business, financial condition, or results of
 operations.
 Our actual operating results may differ significantly from our guidance.
 We release guidance in our quarterly earnings conference calls, quarterly earnings releases, or otherwise, regarding our future
 performance that represents our management's estimates as of the date of release. This guidance, which includes forward-looking
 statements, will be based on projections prepared by our management. These projections will not be prepared with a view toward
 compliance with published guidelines of the American Institute of Certified Public Accountants, and neither our registered public accountant
 nor any other independent expert or outside party compiles or examines the projections. Accordingly, no such person will express any
 opinion or any other form of assurance with respect to the projections.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 18

 Projections are based upon a number of assumptions and estimates that, while presented with numerical specificity, are inherently
 subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and are
 based upon specific assumptions with respect to future business decisions, some of which will change. We will continue to state possible
 outcomes as high and low ranges which are intended to provide a sensitivity analysis as variables are changed. The high and low ranges are
 not intended to imply that actual results could not fall outside of the suggested ranges. The principal reason that we release guidance is to
 provide a basis for our management to discuss our business outlook with analysts and investors. We do not accept any responsibility for any
 projections or reports published by any such third parties.
 Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the guidance
 furnished by us will not materialize or will vary significantly from actual results. Accordingly, our guidance is only an estimate of what
 management believes is realizable as of the date of release. Actual results may vary from our guidance and the variations may be material.
 In light of the foregoing, investors are urged not to rely upon our guidance in making an investment decision regarding our common stock.
 Any failure to successfully implement our operating strategy or the occurrence of any of the events or circumstances set forth in this
 "Risk Factors" section in this Annual Report on Form 10-K could result in the actual operating results being different from our guidance and
 the differences may be adverse and material.
 In preparing our financial statements we make certain assumptions, judgments and estimates that affect amounts reported in our
 consolidated financial statements, which, if not accurate, may significantly impact our financial results.
 We make assumptions, judgments and estimates for a number of items, including the fair value of financial instruments, goodwill, and
 long-lived assets, the realizability of deferred tax assets, the recognition of revenue and the fair value of stock awards. We also make
 assumptions, judgments and estimates in determining the accruals for employee-related liabilities, including commissions and variable
 compensation, and in determining the accruals for uncertain tax positions, valuation allowances on deferred tax assets, allowances for
 doubtful accounts, and legal contingencies, if any. These assumptions, judgments and estimates are drawn from historical experience and
 various other factors that we believe are reasonable under the circumstances as of the date of the consolidated financial statements. Actual
 results could differ materially from our estimates, and such differences could significantly impact our financial results.

 Our global operations expose us to risks and challenges associated with conducting business internationally, and our results of
 operations may be adversely affected by our efforts to comply with the laws of other countries, as well as U.S. laws which apply to
 international operations, such as the U.S. Foreign Corrupt Practices Act ("FCPA") and U.S. export control laws.
 We operate on a global basis with offices or activities in North, South and Latin America, Middle East and Africa, Asia, and Europe.
 We face risks inherent in conducting business internationally, including compliance with international and U.S. laws and regulations that apply
 to our international operations. These laws and regulations include tax laws, anti-competition regulations, import and trade restrictions,
 export control laws, and laws which prohibit corrupt payments to governmental officials or certain payments or remunerations to customers,
 including the U.S. FCPA or other anti-corruption laws that have recently been the subject of a substantial increase in global enforcement.
 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
 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
 that some provisions may be inadvertently or intentionally breached, for example, through fraudulent or negligent behavior of individual
 employees, our failure to comply with certain formal documentation requirements, or otherwise. Also, we may be held liable for actions taken
 by our local dealers and partners. Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or
 our employees, and prohibitions or conditions on the conduct of our business. Any such violations could include prohibitions or conditions on
 our ability to offer our products in one or more countries and could materially damage our reputation, our brand, our business, and our
 operating results. In addition, we operate in many parts of the world that have experienced significant governmental corruption to some
 degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. We may be
 subject to competitive disadvantages to the extent that our competitors are able to secure business, licenses, or other preferential treatment
 by making payments to government officials and others in positions of influence or through other methods that relevant law and regulations
 prohibit us from using. Our success depends, in part, on our ability to anticipate these risks and manage these difficulties. These factors or
 any combination of these factors may adversely affect our revenue or our overall financial performance.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 19

 Our failure to maintain appropriate sustainability practices and disclosures could result in reputational harm, a loss of customer
 and investor confidence, and adverse business and financial results.
 Governments, investors, customers, and employees are enhancing their focus on sustainability practices and disclosures, and
 expectations in this area are rapidly evolving and increasing. While we monitor the various and evolving standards and associated reporting
 requirements, failure to adequately maintain appropriate sustainability practices that meet diverse stakeholder expectations may result in the
 loss of business, reduced market valuation, an inability to attract customers, and an inability to attract and retain top talent.
 We must comply with a variety of existing and future laws and regulations, such as sustainability initiatives, that could impose
 substantial costs on us and may adversely affect our business.
 Increasingly regulators, customers, investors, employees and other stakeholders are focusing on sustainability matters. Concern over
 climate change can result in new or additional legal or regulatory requirements designed to reduce greenhouse gas emissions and/or mitigate
 the effects of climate change on the environment, such as taxation of, or caps on the use of, carbon-based energy. While we have certain
 sustainability initiatives, there can be no assurance that regulators, customers, investors, and employees will determine that these programs
 are sufficiently robust. There can be no assurance that we will be able to attain any announced goals related to our sustainability program,
 as statements regarding our sustainability goals reflect our current plans and aspirations and are not guarantees that we will be able to
 achieve them within the timelines we announce or at all. Actual or perceived shortcomings with respect to our sustainability initiatives and
 reporting can impact our ability to hire and retain employees, increase our customer base, or attract and retain certain types of investors. Any
 such new or additional legal or regulatory requirements may increase the costs associated with, or disrupt sourcing, manufacturing and
 distribution of, our products which may adversely affect our business and financial statements.
 In addition, parties are increasingly focused on specific disclosures and frameworks related to sustainability matters. Collecting,
 measuring, and reporting sustainability information and metrics can be costly, difficult and time consuming, is subject to evolving reporting
 standards, and can present numerous operational, reputational, financial, legal and other risks, any of which could have a material impact,
 including on our reputation and stock price. Inadequate processes to collect and review this information prior to disclosure could be subject
 to potential liability related to such information.

 We may seek to expand through acquisitions of and investments in other businesses, technologies, and assets. These acquisition
 activities may be unsuccessful or divert management's attention.
 We may consider strategic and complementary acquisitions of and investments in other businesses, technologies, and assets, and
 such acquisitions or investments are subject to risks that could affect our business, including risks related to:
 • the necessity of coordinating geographically disparate organizations;
 • implementing common systems and controls;
 • integrating personnel with diverse business and cultural backgrounds;
 • integrating acquired research and manufacturing facilities, technology and products;
 • combining different corporate cultures and legal systems;
 • unanticipated expenses related to integration, including technical and operational integration;
 • increased costs and unanticipated liabilities, including with respect to registration, environmental, health and safety matters, that
 may affect sales and operating results;
 • retaining key employees;
 • obtaining required government and third-party approvals;
 • legal limitations in new jurisdictions;
 • installing effective internal controls and audit procedures;
 • issuing common stock that could dilute the interests of our existing stockholders;
 • spending cash and incurring debt;
 • assuming contingent liabilities; and
 • creating additional expenses.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 20

 We may not be able to identify opportunities or complete transactions on commercially reasonable terms, or at all, or actually realize
 any anticipated benefits from such acquisitions or investments. Similarly, we may not be able to obtain financing for acquisitions or
 investments on attractive terms. If we do complete acquisitions, we cannot ensure that they will ultimately strengthen our competitive or
 financial position or that they will not be viewed negatively by customers, financial markets, investors, or the media. In addition, the success
 of any acquisitions or investments also will depend, in part, on our ability to integrate the acquisition or investment with our existing
 operations.
 The integration of businesses that we may acquire is likely to be a complex, time-consuming, and expensive process and we may not
 realize the anticipated revenues or other benefits associated with our acquisitions if we fail to successfully manage and operate the acquired
 business. If we fail in any acquisition integration efforts and are unable to efficiently operate as a combined organization utilizing common
 information and communication systems, operating procedures, financial controls, and human resources practices, our business, financial
 condition, and results of operations may be adversely affected.
 In connection with certain acquisitions, we may agree to issue common stock or assume equity awards that dilute the ownership of
 our current stockholders, use a substantial portion of our cash resources, assume liabilities, record goodwill and amortizable intangible assets
 that will be subject to impairment testing on a regular basis and potential periodic impairment charges, incur amortization expenses related to
 certain intangible assets, and incur large and immediate write-offs and restructuring and other related expenses, all of which could harm our
 financial condition and results of operations.

 Our success depends, in part, on key personnel whose continued service is not guaranteed.
 Our success depends, in part, on the continued availability and service of key personnel, including executive officers and other highly
 qualified employees, particularly when we undergo a leadership transition. Competition for these key personnel is intense. We cannot
 assure that we will retain our key personnel or that we will be able to recruit and retain other highly qualified employees in the future. Losing
 any key personnel could, at least temporarily, have a material adverse effect on our business, financial position and results of operations.
 We face risks arising from the restructuring of our operations and uncertainty with respect to our ability to achieve any anticipated
 cost savings associated with such restructuring.
 During the fourth quarter of fiscal year 2024, we implemented a restructuring plan which included reductions in workforce in all
 functions of the organization, primarily in our San Leandro location, in order to lower our operating cost structure, and to position us for
 profitable growth. Charges related to such actions may harm our profitability in the periods incurred.
 Restructuring program actions, which include a reduction in workforce, may present a number of significant risks that could have a
 material adverse effect on our operations, financial condition, results of operations, cash flow, or business reputation, including:
 • incurrence of additional costs in the short-term, including workforce reduction costs, training of employees or third-party
 resources, and charges relating to consolidation of excess facilities;
 • actual or perceived disruption of service or reduction in service levels to our customers;
 • potential disruption of manufacturing of product to satisfy our contractual commitments;
 • potential adverse effects on our internal control environment and inability to preserve adequate internal controls relating to our
 general and administrative functions;
 • actual or perceived disruption to customers, suppliers, distribution networks and other important operational relationships and the
 inability to resolve potential conflicts in a timely manner;
 • diversion of management's attention from ongoing business activities and strategic objectives;
 • failure to maintain employee morale, damage to company culture and an increase in employment claims;
 • employee attrition beyond planned reductions and workforce transitions, including inadequate transfers of knowledge; and
 • damage to our reputation as an employer, which could make it more difficult for us to hire new employees in the future.
 Because of these and other factors, some of which may not be entirely within our control, we may not fully realize the purpose and
 anticipated operational benefits, efficiencies or cost savings of any productivity actions in the expected timelines, or at all, and, if we do not,
 our business and results of operations may be adversely affected.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 21

 Risks Related to Economic Conditions and Geopolitical Conflicts
 Uncertainty in the global geopolitical landscape and macro-economic environment may impact our operations outside the U.S.,
 including in the Middle East where many of our water megaprojects are planned.
 We conduct our business on a global basis. Our products are sold in numerous countries worldwide, with a large percentage of our
 sales generated outside the U.S., specifically in the Middle East and Africa, and Asian markets which provide a significant portion of our total
 revenue. Therefore, we are exposed to, and impacted by, global macroeconomic factors, U.S. and foreign government policies, and foreign
 exchange fluctuations. There is uncertainty surrounding macroeconomic factors in the U.S. and globally characterized by the supply chain
 environment, inflationary pressure, rising interest rates, and labor shortages. These global macroeconomic factors, coupled with the U.S.
 political climate, political unrest internationally, and conflicts in Europe and the Middle East, have created global economic and political
 uncertainty, and have impacted demand for certain of our products. While the impact and longevity of these factors remain uncertain, we are
 constantly evaluating the extent to which these factors will impact our business, financial condition, or results of operations. Over the long-
 term, demand for our energy recovery devices could correlate to global macroeconomic and geopolitical factors. Any disruption to the
 economic factors and regulations in these regions, which remain uncertain, may adversely affect our results of operations and financial
 condition.
 In addition, there is uncertainty as to the position the U.S. will take with respect to world affairs. This uncertainty may include such
 issues as the U.S. support for existing treaty and trade relationships with other countries, including, notably, China, Mexico and Canada. This
 uncertainty, together with other recent key global events, such as recently enacted currency control regulations and tariff regimes in or
 against China, Mexico and Canada, ongoing terrorist activity, and hostilities in the Middle East, may adversely impact (i) the ability or
 willingness of non- U.S. companies to transact business with U.S. companies, including with us; (ii) our ability to transact business in other
 countries, including the Middle East, where many of the water megaprojects are planned; (iii) regulation and trade agreements affecting U.S.
 companies; (iv) global stock markets (including The NASDAQ Global Select Market Composite on which our common shares are traded); and
 (v) general global economic conditions. Furthermore, the conflicts in Europe and the Middle East have resulted in worldwide geopolitical and
 macroeconomic uncertainty, and we cannot predict how these conflicts will evolve or their timing. If these conflicts continue for a significant
 time or further expand to other countries or regions, they could have additional adverse effects on macroeconomic conditions that may have
 a direct adverse impact on our business and/or our supply chain, business partners or customers in the broader region. All of these factors
 are outside of our control, but may nonetheless cause us to adjust our strategy in order to compete effectively in global markets.

 Risks Related to Information Technology
 We may have risks associated with security of our information technology systems.
 We make significant efforts to maintain the security and integrity of our information technology systems and data. Despite significant
 efforts to create security barriers to such systems, it is virtually impossible for us to entirely mitigate this risk. W e have implemented
 additional enhanced security features and monitoring procedures and continue to closely monitor our cybersecurity risks. There is a risk of
 industrial espionage, cyberattacks, such as LOG4J, misuse or theft of information or assets, or damage to assets by people who may gain
 unauthorized access to our facilities, systems, or information. Such cybersecurity breaches, misuse, or other disruptions could lead to the
 disclosure of confidential information, improper usage and distribution of our IP, theft, manipulation and destruction of private and proprietary
 data, and production downtimes. Although we actively employ measures to prevent unauthorized access to our information systems,
 preventing unauthorized use or infringement of our rights is inherently difficult. These events could adversely affect our financial results and
 any legal action in connection with any such cybersecurity breach could be costly and time-consuming and may divert management's
 attention and adversely affect the market's perception of us and our products. In addition, we must frequently expand our internal information
 system to meet increasing demand in storage, computing and communication, which may result in increased costs. Our internal information
 system is expensive to expand and must be highly secure due to the sensitive nature of our customers' information that we transmit. Building
 and managing the support necessary for our growth places significant demands on our management and resources. These demands may
 divert these resources from the continued growth of our business and implementation of our business strategy.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 22

 Our actual or perceived failure to adequately protect personal data could adversely affect our business, financial condition and
 results of operations.
 A wide variety of provincial, state, national, foreign, and international laws and regulations apply to the collection, use, retention,
 protection, disclosure, transfer, and other processing of personal data. These privacy and data protection-related laws and regulations are
 evolving, with new or modified laws and regulations proposed and implemented frequently and existing laws and regulations subject to new
 or different interpretations. Further, our legal and regulatory obligations in foreign jurisdictions are subject to unexpected changes, including
 the potential for regulatory or other governmental entities to enact new or additional laws or regulations, to issue rulings that invalidate prior
 laws or regulations, or to increase penalties significantly. Compliance with these laws and regulations can be costly and can delay or impede
 the development and offering of new products and services.
 For example, the General Data Protection Regulation, which became effective in May 2018, imposes more stringent data protection
 requirements, and provides for significantly greater penalties for noncompliance, than the European Union laws that previously applied.
 Additionally, California recently enacted legislation, the California Privacy Rights Act (" CPRA "), which amends the California Consumer
 Privacy Act. The CPRA took effect on January 1, 2023, and enforcement began on July 1, 2023. We may be subject to additional
 obligations relating to personal data by contract that industry standards apply to our practices. Our actual or perceived failure to comply with
 applicable laws and regulations or other obligations to which we may be subject relating to personal data, or to protect personal data from
 unauthorized access, use, or other processing, could result in enforcement actions and regulatory investigations against us, claims for
 damages by customers and other affected individuals, fines, damage to our reputation, and loss of goodwill, any of which could have a
 material adverse effect on our operations, financial performance, and business. Further, evolving and changing definitions of personal data
 and information, including the classification of internet protocol addresses, machine identification information, location data, and other
 information, may limit or inhibit our ability to operate or expand our business, including limiting business relationships and partnerships that
 may involve the sharing or uses of data, and may require significant costs, resources, and efforts in order to comply.

 Risks Related to Intellectual Property
 If we are unable to protect our technology or enforce our intellectual property rights, our competitive position could be harmed, and
 we could be required to incur significant expenses to enforce our rights.
 Our competitive position depends on our ability to establish and maintain proprietary rights in our technology and to protect our
 technology from copying by others. We rely on trade secret, patent, copyright, and trademark laws, as well as confidentiality agreements with
 employees and third parties, all of which may offer only limited protection. We hold a number of U.S. and counterpart international patents,
 and when their terms expire, we could become more vulnerable to increased competition. The protection of our IP in some countries may be
 limited. While we have expanded our portfolio of patent applications, we do not know whether any of our pending patent applications will
 result in the issuance of patents or whether the examination process will require us to narrow our claims, and even if patents are issued, they
 may be contested, circumvented, or invalidated. Moreover, while we believe our issued patents and patent pending applications are
 essential to the protection of our technology, the rights granted under any of our issued patents or patents that may be issued in the future
 may not provide us with proprietary protection or competitive advantages, and as with any technology, competitors may be able to develop
 similar or superior technologies now or in the future. In addition, our granted patents may not prevent misappropriation of our technology,
 particularly in foreign countries where IP laws may not protect our proprietary rights as fully as those in the U.S. This may render our patents
 impaired or useless and ultimately expose us to currently unanticipated competition. Protecting against the unauthorized use of our products,
 trademarks, and other proprietary rights is expensive, difficult, and in some cases, impossible. Litigation may be necessary in the future to
 enforce or defend our IP rights or to determine the validity and scope of the proprietary rights of others. IP litigation could result in substantial
 costs and diversion of management resources, either of which could harm our business.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 23

 Claims by others that we infringe their proprietary rights could harm our business.
 Third parties could claim that our technology infringes their IP rights. In addition, we or our customers may be contacted by third
 parties suggesting that we obtain a license to certain of their IP rights that they may believe we are infringing. We expect that infringement
 claims against us may increase as the number of products and competitors in our market increases and overlaps occur. In addition, to the
 extent that we gain greater visibility, we believe that we will face a higher risk of being the subject of IP infringement claims. Any claim of
 infringement by a third party, even those without merit, could cause us to incur substantial costs defending against the claim and could
 distract management from our business. Furthermore, a party making such a claim, if successful, could secure a judgment that requires us
 to pay substantial damages. A judgment against us could also include an injunction or other court order that could prevent us from offering
 our products. In addition, we might be required to seek a license for the use of such IP, which may not be available on commercially
 reasonable terms, or at all. Alternatively, we may be required to develop non-infringing technology, which could require significant effort and
 expense and may ultimately not be successful. Any of these events could seriously harm our business. Third parties may also assert
 infringement claims against our customers. Because we generally indemnify our customers if our products infringe the proprietary rights of
 third parties, any such claims would require us to initiate or defend protracted and costly litigation on their behalf in one or more jurisdictions,
 regardless of the merits of these claims. If any of these claims succeed, we may be forced to pay damages on behalf of our customers.

 Risks Related to Tax and Governmental Regulations
 The enactment of legislation implementing changes in taxation of international business activities, the adoption of other corporate
 tax reform policies, or changes in tax legislation or policies could materially impact our financial position and results of operations.
 Our future effective tax rates could be subject to volatility or adversely affected by changes in tax laws, regulations, accounting
 principles, or interpretations thereof. In addition, the U.S. Tax Cuts and Jobs Act (" Tax Act ") enacted in 2017, made significant changes to
 the taxation of U.S. business entities that may have a meaningful impact to our provision for income taxes. These changes included a
 reduction to the federal corporate income tax rate, the current taxation of certain foreign earnings, the imposition of base-erosion prevention
 measures which may limit the deduction of certain transfer pricing payments, foreign derived intangible income deductions, capitalization of
 R&D expenses beginning in the 2022 tax year, and possible limitations on the deductibility of net interest expense or corporate debt
 obligations. The U.S. Department of the Treasury continues to issue regulations that affect various components of the Tax Act. Our future
 effective tax rate may be impacted by changes in interpretation of the regulations, as well as additional legislation and guidance regarding the
 Tax Act.
 In addition, many countries are beginning to implement legislation and other guidance to align their international tax rules with the
 Organisation for Economic Co-operation's Base Erosion and Profit Shifting recommendations and action plan that aim to standardize and
 modernize global corporate tax policy, including changes to cross-border tax, transfer-pricing documentation rules, and nexus-based tax
 incentive practices. As a result of the heightened scrutiny of corporate taxation policies, prior decisions by tax authorities regarding
 treatments and positions of corporate income taxes could be subject to enforcement activities, and legislative investigation and inquiry, which
 could also result in changes in tax policies or prior tax rulings. Any such changes in policies or rulings may also result in the taxes we
 previously paid being subject to change.
 Due to the scale of our international business activities any substantial changes in international corporate tax policies, enforcement
 activities or legislative initiatives may materially and adversely affect our business, the amount of taxes we are required to pay and our
 financial condition and results of operations generally.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 24

 Changes in tax laws or regulations that are applied adversely to us or our customers may have a material adverse effect on our
 business, cash flow, financial condition or results of operations.
 New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could
 adversely affect our business operations and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances
 could be interpreted, changed, modified or applied adversely to us. For example, the Tax Act, the Coronavirus Aid, Relief, and Economic
 Security Act, and the Inflation Reduction Act, enacted many significant changes to the U.S. tax laws. Future guidance from the U.S. Internal
 Revenue Service (the "IRS") and other tax authorities with respect to such legislation may affect us, and certain aspects thereof could be
 repealed or modified in future legislation. The incumbent administration and Congress periodically make and propose tax law changes, some
 of which could have an adverse effect on our operations, cash flows, and results of operations, and contribute to overall market volatility. In
 addition, it is uncertain if and to what extent various states will conform to federal tax legislation. Changes in corporate tax rates, the
 realization of net deferred tax assets relating to our operations, the taxation of foreign earnings, and the deductibility of expenses under the
 Tax Act or future reform legislation could have a material impact on the value of our deferred tax assets, could result in significant one-time
 charges, and could increase our future U.S. tax expense.
 The U.S. Congress and Incumbent Administration may make substantial changes to fiscal, regulation and other federal policies that
 may adversely affect our business, financial condition, operating results and cash flows.
 Changes in general economic conditions in the U.S. or other regions could adversely affect our business. There have been, and
 there may be, significant changes in, and uncertainty with respect to, legislation, regulation and government policy. While it is not possible to
 predict whether and when any such changes will occur, changes at the local, state or federal level could impact our business. Specific
 legislative and regulatory proposals that could have a material impact on us include, but are not limited to, modifications to international trade
 policy; public company reporting requirements; and environmental regulation.
 We cannot predict what actions may ultimately be taken with respect to tariffs or trade relations between the U.S. and other countries,
 what products may be subject to such actions, or what actions may be taken by the other countries in retaliation. There is currently
 uncertainty about the future relationship between the U.S. and various other countries with respect to trade practices. The incumbent
 administration has proposed the implementation of a number of tariffs on products produced from countries, which could, if enacted into law,
 increase the cost of certain raw materials and components we import into the U.S. In addition, certain countries have enacted retaliatory
 tariffs, which could significantly increase the cost of our products shipped into those countries.
 Accordingly, it is difficult to predict how such actions may impact our business operations, such as our supply chain from our vendors
 and sales to our customers on which we are substantially dependent, that are located in various countries at risk for escalating trade disputes
 and retaliatory tariffs. Any resulting trade wars could have a significant adverse effect on world trade and could adversely impact our
 revenues, gross margins and business operations.
 Unanticipated changes in our tax provisions or exposure to additional income tax liabilities could affect our profitability and cash
 flows.
 We are subject to income and other taxes in the U.S. and numerous foreign jurisdictions. Significant judgments and estimates are
 required to be made in determining our worldwide provision for income taxes. Changes in estimates of projected future operating results,
 changes in tax laws, loss of deductibility of items, changes in the source of income, amount and location of R&D spending, limitations on our
 ability to utilize tax net operating losses in the future or changes in assumptions regarding our ability to generate future taxable income could
 result in significant increases to our tax expense and liabilities that could adversely affect our financial condition and profitability. In addition,
 we are subject to ongoing tax audits in various jurisdictions. In connection with these audits (or future audits), tax authorities may disagree
 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
 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
 preliminary resolution of the 2021 Tax Audit to be reached during the next six months. While we regularly assess the likely outcome of the
 2021 Tax Audit in order to determine the appropriateness of our tax provision, tax audits are inherently uncertain and an unfavorable
 outcome could occur. As a result, the ultimate resolution of the 2021 Tax Audit, changes in tax laws or tax rates, and the ability to utilize our
 deferred tax assets could materially affect our tax provision, net income and cash flows in future periods.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 25

 Risks Related to our Internal Controls
 Changes in the U.S. generally accepted accounting principles could adversely affect our financial results and may require
 significant changes to our internal accounting systems and processes.
 We prepare our consolidated financial statements in conformity with U.S. generally accepted accounting principles (" GAAP "). These
 principles are subject to interpretation by the Financial Accounting Standards Board (" FASB "), the SEC and various bodies formed to interpret
 and create appropriate accounting principles and guidance. The FASB periodically issues new accounting standards on a variety of topics.
 These and other such standards generally result in different accounting principles, which may significantly impact our reported results or
 could result in variability of our financial results.
 We are required to evaluate the effectiveness of our internal control over financial reporting and publicly disclose material
 weaknesses in our controls. Any adverse results from such evaluation may adversely affect investor perception, and our stock
 price.
 Section 404 of the Sarbanes-Oxley Act of 2002 requires our management to assess the effectiveness of our internal controls over
 financial reporting and to disclose in our filing if such controls were unable to provide assurance that a material error would be prevented or
 detected in a timely manner. We have an ongoing program to review the design of our internal controls framework in keeping with changes
 in business needs, implement necessary changes to our controls design and test the system and process controls necessary to comply with
 these requirements. If in the future, our internal controls over financial reporting are determined to be not effective resulting in a material
 weakness or significant deficiency, investor perceptions regarding the reliability of our financial statements may be adversely affected which
 could cause a decline in the market price of our stock and otherwise negatively affect our liquidity and financial condition.

 Risks Related to our Common Stock
 Insiders and principal stockholders will likely have significant influence over matters requiring stockholder approval.
 Our directors, executive officers, and other principal stockholders beneficially own, in the aggregate, a substantial amount of our
 outstanding common stock. These stockholders could likely have significant influence over all matters requiring stockholder approval,
 including the election of directors and approval of significant corporate transactions such as a merger or other sale of our company, or our
 company's assets.
 The market price of our common stock may continue to be volatile.
 The market price of our common stock has been, and is likely to continue to be, volatile and subject to fluctuations. Changes in the
 stock market generally, as it concerns our industry, as well as geopolitical, economic, and business factors unrelated to us, may also affect
 our stock price. Significant declines in the market price of our common stock or failure of the market price to increase could harm our ability
 to recruit and retain key employees, reduce our access to debt or equity capital, and otherwise harm our business or financial condition. In
 addition, we may not be able to use our common stock effectively as consideration in connection with any future acquisitions.
 We cannot guarantee that our share repurchase programs will enhance long-term shareholder value, and share repurchases could
 increase the volatility of the price of our common stock.
 From time-to-time, our Board of Directors (the " Board ") have authorized a share repurchase program, in which our management is
 authorized to repurchase up to an aggregate of outstanding shares of our common stock through a combination of open market repurchases,
 privately negotiated transactions, 10b5-1 trading plans, accelerated stock repurchase transactions, and/or other transactions, in accordance
 with federal securities laws. For example, the Board authorized a share repurchase program in the fourth quarter of fiscal year 2024 to
 repurchase up to $50.0 million aggregate value of the Company's common stock. This program began and was completed in the fourth
 quarter of fiscal year 2024. Such programs may be suspended or discontinued at any time, at the discretion of management. The timing of
 repurchases pursuant to our share repurchase program(s), if any, could affect our stock price and increase its volatility. We cannot
 guarantee that we will repurchase any additional shares under these program(s), and there can be no assurance that any share repurchases
 will enhance shareholder value because the stock price of our common stock may decline below the levels at which we effected repurchases.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 26

 Anti-takeover provisions in our charter documents and under Delaware law could discourage, delay, or prevent a change in control
 of our company and may affect the trading price of our common stock.
 Provisions in our amended and restated certificate of incorporation and bylaws may have the effect of delaying or preventing a
 change of control or changes in our management. Our amended and restated certificate of incorporation and amended and restated bylaws
 include provisions that:
 • authorize the Board to issue, without further action by the stockholders, up to 10,000,000 shares of undesignated preferred
 stock;
 • require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written
 consent;
 • specify that special meetings of our stockholders can be called only by the Board, the chairman of the board, the chief executive
 officer, or the president;
 • establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders,
 including proposed nominations of persons for election to the Board;
 • provide that our directors may be removed only for cause;
 • provide that vacancies on the Board may be filled only by a majority vote of directors then in office, even though less than a
 quorum;
 • specify that no stockholder is permitted to cumulate votes at any election of directors; and
 • require a super-majority of votes to amend certain of the above-mentioned provisions.
 In addition, we are subject to the provisions of Section 203 of the Delaware General Corporation Law regulating corporate takeovers.
 Section 203 generally prohibits us from engaging in a business combination with an interested stockholder subject to certain exceptions.
 Our business could be negatively affected as a result of actions of activist shareholders, and such activism could impact the
 trading value of our securities.
 In recent years, shareholder activists have become involved in numerous public companies. Shareholder activists frequently propose
 to involve themselves in the governance, strategic direction and operations of the company. Such proposals may disrupt our business and
 divert the attention of the Board, management and employees, and any perceived uncertainties as to our future direction resulting from such
 a situation could result in the loss of potential business opportunities, interfere with our ability to execute our strategic plan, be exploited by
 our competitors, cause concern to our current or potential customers, and make it more difficult to attract and retain qualified personnel and
 business partners, all of which could adversely affect our business. A proxy contest for the election of directors at our annual meeting could
 also require us to incur significant legal fees and proxy solicitation expenses. In addition, actions of activist shareholders may cause
 significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect
 the underlying fundamentals and prospects of our business.
 Our shareholders may experience future dilution as a result of future equity offerings.
 In the future, we may offer additional shares of our common stock or other securities convertible into, or exchangeable for, our
 common stock in order to raise additional capital. We cannot assure our shareholders that we will be able to sell shares or other securities in
 any other offering at a price per share that is equal to or greater than the price per share our shareholders paid for our shares. Investors
 purchasing shares or other securities in the future could have rights, preferences or privileges senior to those of our shareholders and our
 shareholders may experience dilution. Our shareholders may incur additional dilution upon the exercise of any outstanding stock options or
 warrants, the issuance of shares of restricted stock, the vesting of restricted stock units, or the issuance, vesting or exercise of other equity
 awards.

 Item 1B — Unresolved Staff Comments
 None.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 27

 Item 1C — Cybersecurity

 Managing Material Risks & Integrated Overall Risk Management
 We have strategically integrated cybersecurity risk management into our broader risk management framework to promote a company-
 wide culture of cybersecurity risk management. This integration ensures that cybersecurity considerations are an integral part of our
 decision-making processes at every level. Our Risk Management Team (see " Management's Role Managing Risk " below for details
 regarding the team members and scope) works closely with our Information Technology (" IT ") team (our " IT team ") to continuously evaluate
 and address cybersecurity risks in alignment with our business objectives and operational needs.
 Engage Third-parties on Risk Management
 Recognizing the complexity and evolving nature of cybersecurity threats, we engage with a range of external experts, including
 cybersecurity consultants in evaluating and testing our risk management systems. These partnerships enable us to leverage specialized
 knowledge and insights, ensuring our cybersecurity strategies and processes remain at the forefront of industry best practices. Our
 collaboration with these third-parties includes regular audits, threat assessments, and consultation on security enhancements.
 Oversee Third-party Risk
 Because we are aware of the risks associated with third-party service providers, we have implemented stringent processes to oversee
 and manage these risks. We conduct thorough security assessments of all third-party providers before engagement and maintain ongoing
 monitoring to ensure compliance with our cybersecurity standards. The monitoring includes an initial assessment by our Sr. Director,
 Information Technology (our " Sr. Director of IT ") and IT team, and on an ongoing basis of a few key high-risk third-party systems by our
 security engineers. We also rely upon certain third-party system providers, including cloud and non-cloud programs provided by software
 developers such as Microsoft Corporation, Blackline Systems, Inc., Workiva, Inc., and others, to review and notify their customers of any data
 breach. This approach, both internal and reliance on external review notification, is designed to mitigate risks related to data breaches or
 other security incidents originating from third-parties.
 Risks from Cybersecurity Threats
 While we have a cybersecurity program designed to protect and preserve the integrity of our information systems, we also maintain
 cybersecurity insurance to manage potential liabilities resulting from specific cyber-attacks. However, it's important to note that although we
 maintain cybersecurity insurance, there can be no guarantee that our insurance coverage limits will protect against any future claims or that
 such insurance proceeds will be paid to us in a timely manner. As of December 31, 2024, no risks from cybersecurity threats, including as a
 result of any previous cybersecurity incidents, have materially affected, or are reasonably likely to materially affect, us, including our business
 strategy, results of operations, or financial condition.

 Governance
 The Board is acutely aware of the critical nature of managing risks associated with cybersecurity threats. The Board has established
 oversight mechanisms to ensure effective governance in managing risks associated with cybersecurity threats because we recognize the
 significance of these threats to our operational integrity and stakeholder confidence.
 Board of Directors Oversight
 The Audit Committee of the Board (the " Audit Committee ") is central to the Board 's oversight of cybersecurity risks and bears the
 primary responsibility for this domain. The Audit Committee is composed of independent board members with diverse expertise and
 experience which allows them to oversee cybersecurity risks effectively.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 28

 Management's Role Managing Risk
 We have an internal management team comprising of our Chief Financial Officer ("CFO"), Chief Legal Officer ("CLO"), VP, Corporate
 Controller, Sr. Director, SEC Reporting, and Sr. Director of IT (the " Risk Management Team "), that plays a pivotal role in informing the Audit
 Committee on cybersecurity risks. The Sr. Director of IT and IT team monitor cybersecurity risks and perform continual risk exercises and
 assessments. The Risk Management Team meets quarterly to discuss current security breaches and threats, if any, and discuss new
 controls and results of the cybersecurity risk monitoring, exercises, and assessments. The Risk Management Team provides comprehensive
 briefings to the Audit Committee on a regular basis, with a minimum frequency of once per year. These briefings encompass a broad range
 of topics, including:
 • Current cybersecurity landscape and emerging threats;
 • Status of ongoing cybersecurity initiatives and strategies;
 • Incident reports and learnings from any cybersecurity events; and
 • Compliance with regulatory requirements and industry standards.

 In addition to our scheduled meetings, the Audit Committee and the Risk Management Team maintain an ongoing dialogue regarding
 emerging or potential cybersecurity risks. Together, the Board receives updates on any significant developments in the cybersecurity
 domain, ensuring the Board 's oversight is proactive and responsive. The Audit Committee actively participates in strategic decisions related
 to cybersecurity, offering guidance and approval for major initiatives. This involvement ensures that cybersecurity considerations are
 integrated into our broader strategic objectives.

 Risk Management Personnel
 Our Sr. Director of IT, who has a career of 24 years in IT, has in-depth working knowledge on IT systems and data security, and his
 experience is instrumental in developing and executing our cybersecurity strategies. Our Sr. Director of IT along with the IT team, oversees
 our governance programs, tests our compliance with standards, remediates known risks, and leads our employee cybersecurity risk training
 program. However, the primary responsibility for assessing, monitoring and managing our cybersecurity risks rests with the Risk
 Management Team. The diverse background and experience of o ur Risk Management Team members are instrumental in developing and
 executing our cybersecurity strategies and supplement the expertise of our Sr. Director of IT with their understanding of the needs of our
 business.
 Monitor Cybersecurity Incidents
 Our Sr. Director of IT and the IT team are continually informed about the latest developments in cybersecurity, including potential
 threats and innovative risk management techniques. This ongoing knowledge acquisition is crucial for the effective prevention, detection,
 mitigation, and remediation of cybersecurity incidents. Our Sr. Director of IT and the IT team implement and oversee processes for the
 regular monitoring of our information systems. This includes the deployment of advanced security measures and regular system audits to
 identify potential vulnerabilities. In the event of a cybersecurity incident, our Sr. Director of IT is equipped with a well-defined incident
 response plan. This plan includes immediate actions to mitigate the impact and long-term strategies for remediation and prevention of future
 incidents.
 Reporting to Board of Directors
 Our Sr. Director of IT, in his capacity, regularly informs the other Risk Management Team members of all aspects related to
 cybersecurity risks and incidents. This ensures that various levels of management are kept abreast of the cybersecurity posture and potential
 risks to the company. Furthermore, significant cybersecurity matters, and strategic risk management decisions are escalated to the Audit
 Committee, ensuring that the Audit Committee has comprehensive oversight and can provide guidance on critical cybersecurity issues.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 29

 Item 2 — Properties

 The table below presents details for each of our principal properties. Each of these principal properties is located in the U.S.

 Facility

 Location

 Status

 Approximate
 Square
 Footage

 Lease
 Expiration

 Segment Usage

 Headquarters, R&D and manufacturing

 San Leandro, California

 Lease

 171,000

 Dec- 2028

 Water, Emerging Technology

 Manufacturing and warehouse

 Tracy, California

 Lease

 54,429

 Apr- 2030

 Water, Emerging Technology

 Office, R&D, warehouse, and yard

 Katy, Texas

 Lease

 221,220

 Dec- 2029

 Water, Emerging Technology

 Additionally, we lease offices located in Dubai, United Arab Emirates; and Shanghai, Peoples Republic of China. We believe that
 these facilities will be adequate for our purposes for the foreseeable future.

 Item 3 — Legal Proceedings
 See Note 7, " Commitments and Contingencies – Litigation " of the Notes which is incorporated by reference into this Item 3, for a
 description of the lawsuits pending, if any, against us.

 Item 4 — Mine Safety Disclosures
 Not applicable.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 30

 Item 5 — Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
 Purchases of Equity Securities

 Market Information
 Our common stock is listed on the Nasdaq Stock Market – The NASDAQ Global Select Market Composite under the symbol "ERII."

 Stockholders
 As of December 31, 2024, there were approximately 14 stockholders of record of our common stock as reported by our transfer
 agent, one of which is Cede & Co., a nominee for Depository Trust Company (" DTC "). All of the shares of common stock held by brokerage
 firms, banks, and other financial institutions as nominees for beneficial owners are deposited into participant accounts at DTC and are
 therefore considered to be held of record by Cede & Co., as one stockholder.

 Dividend Policy
 We have never declared or paid any dividends on our common stock, and we do not currently intend to pay any dividends on our
 common stock for the foreseeable future. Any future determination to pay dividends on our common stock will be, subject to applicable law,
 at the discretion of the Board, and will depend upon, among other factors, our results of operations, financial condition, capital requirements,
 and contractual restrictions in loan or other agreements.

 Securities Authorized for Issuance Under Equity Compensation Plans
 Information regarding our equity compensation plans and the securities authorized for issuance thereunder is set forth herein under
 Part III, Item 12, " Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters," included in this
 Annual Report on Form 10-K.

 Sales of Unregistered Securities
 None.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 31

 Share Repurchase Program
 The Board has authorized various share repurchase programs since 2012. Since the initial authorization of the share repurchase
 programs, we have spent an aggregate $130.5 million, including commissions, to repurchase 11,397,045 shares. As of December 31, 2024,
 there are no active authorized share repurchase plans.

 November 2024 Authorization
 On November 18, 2024, we announced that the Board authorized a share repurchase program under which we may, at the discretion
 of management, repurchase up to $50.0 million in aggregate cost of our outstanding common stock (the " November 2024 Authorization ").
 Under the November 2024 Authorization, purchases of shares of common stock were made in the open market, or in privately negotiated
 transactions, in compliance with applicable state and federal securities laws. The timing and amounts of any purchases were based on
 market conditions and other factors including price, regulatory requirements, and capital availability. The share buyback program did not
 obligate us to acquire any specific number of shares in any period, and may have been expanded, extended, modified or discontinued at any
 time without prior notice. T he share repurchases under the November 2024 Authorization was fully completed in December 2024 and
 3,248,533 shares were repurchased at an aggregate cost of $50.0 million.

 The following table presents the share repurchase activity during the quarter ended December 31, 2024.

 Period

 Total Number
 of Shares
 Purchased

 Average Price
 Paid per
 Share (1)

 Total Number of
 Shares Purchased
 as Part of Publicly
 Announced
 Program

 Maximum Number of
 Shares or Approximate
 Dollar Value (2) That May
 Yet to be Purchased
 Under the Program

 (In millions)

 November 2024 Authorization

 $50.0

 November 1 – November 30, 2024

 2,744,169

 $15.16

 2,744,169

 8.3

 December 1 – December 31, 2024

 504,364

 16.51

 3,248,533

 —

 (1) Excluding commissions
 (2) Including commissions

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 32

 Stock Performance Graph
 The following graph shows the cumulative total stockholder return of an investment of $100 on December 31, 2019 in (i) our common
 stock, (ii) the NASDAQ Composite Index, (iii) and a peer group for the current fiscal year ("Peer Group"). Cumulative total return assumes
 the reinvestment of dividends, although dividends have never been declared on our stock, and is based on the returns of the component
 companies weighted according to their capitalization as of the end of each annual period. For each reported year, the reported dates are the
 last trading dates of our annual year.
 The NASDAQ Composite Index tracks the aggregate total return performance of equity securities traded on the Nasdaq Stock Market.
 The Peer Group tracks the weighted average total return performance of equity securities of nine companies that management believes
 Energy Recovery, Inc. is closely aligned during the years presented. As we evolve and grow into new industries, management expects to
 expand or rebalance the companies within this peer group. The companies within the Peer Group are: Badger Meter, Inc.; Evoqua Water
 Technologies Corp. (through May 2023); Flowserve Corp; Franklin Electric Co., Inc.; The Gorman-Rupp Company; Itron, Inc.; Kurita Water
 Industries Ltd.; Pentair plc; and Primo Water Corp (through November 2024). The return of each component issuer of the Peer Group is
 weighted according to the respective issuer's stock market capitalization at the end of each period for which a return is indicated. Our stock
 price performance shown in the graph below is not indicative of future stock price performance.
 The following graph and its related information is not "soliciting material," is not deemed "filed" with the Securities and Exchange
 Commission, and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended or the
 Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation
 language contained in such filing.
 COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
 Among Energy Recovery, Inc., The NASDAQ Composite Index,
 and Peer Group

 As of December 31,

 2019

 2020

 2021

 2022

 2023

 2024

 Energy Recovery, Inc.

 $100.00

 $139.33

 $219.51

 $209.30

 $192.44

 $150.15

 NASDAQ Composite Index

 100.00

 144.38

 176.40

 119.01

 172.14

 223.09

 Peer Group

 100.00

 118.47

 161.27

 135.48

 177.74

 215.97

 Item 6 — [Reserved]

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 33

 Item 7 — Management's Discussion and Analysis of Financial Condition and Results of
 Operations
 The following Management Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader
 understand our results of operations and financial condition. It should be read in conjunction with the Consolidated Financial Statements and
 related Notes included in Part II, Item 8, "Financial Statements and Supplementary Data," in this Annual Report on Form 10-K.

 Overview
 Our reportable operating segments consist of the Water and Emerging Technologies segments. These segments are based on the
 industries in which the technology solutions are sold, the type of energy recovery device or other technology sold and the related solution and
 service or, in the case of emerging technologies, where revenues from new and/or potential devices utilizing our pressure exchanger
 technology can be brought to market. Other factors for determining the reportable operating segments include the manner in which
 management evaluates the performance of the Company combined with the nature of the individual business activities. In addition, our
 corporate operating expenses include expenditures in support of the water and emerging technologies segments, as well as R&D
 expenditures applicable to potential future industry verticals, or enabling technologies that could benefit either or both existing business units.

 Economic Conditions, Challenges, and Risks

 Sustainability
 We released our fifth annual Sustainability Report, which details our efforts to accelerate the environmental sustainability of our
 customers' operations and enhance the management of sustainability issues in our own operations. Our Sustainability Report provides data
 illustrating our products' positive environmental impacts across the industries where we operate. We understand the importance of being a
 responsible corporate citizen and believe our sustainability objectives provide us with a strategic roadmap to become a more resilient
 business, as well as a way to maintain our competitive advantage. Our 2023 Sustainability Report (issued in June 2024) outlines our
 progress on those objectives and aligns to leading sustainability frameworks and reporting standards, including the United Nations
 Sustainable Development Goals, the Sustainability Accounting Standards Board, and the Task Force on Climate-related Financial
 Disclosures, as well as select disclosures from the Global Reporting Initiative.
 As a result of our sustainability efforts and reporting, in 2024, MSCI ESG Research LLC ("MSCI") once again awarded to us its
 highest ESG rating of AAA. MSCI's evaluation recognizes Energy Recovery as one of the highest performing companies within the Industrial
 Machinery industry in MSCI's All Company World Index, reflecting robust corporate governance and labor management practices and
 significant opportunities in clean technology.
 Our complete 2023 Sustainability Report can be found on our website at:  The foregoing
 link to our 2023 Sustainability Report is an inactive textual reference, and our 2023 Sustainability Report is not incorporated by reference into,
 and is not a part of, this Annual Report on Form 10-K.

 Global Economic and Political Environment Considerations
 The markets for our products are dynamic and constantly evolving. Our products are sold in numerous countries worldwide, with a
 large percentage of our sales generated outside the U.S., specifically in the Middle East and Asia markets which provide a significant portion
 of our total revenue. Therefore, we are exposed to and impacted by global macroeconomic factors, U.S. and foreign government policies
 and foreign exchange fluctuations. There is uncertainty surrounding macroeconomic factors in the U.S. and globally characterized by the
 supply chain environment, inflationary pressure, rising interest rates, and labor shortages. These global macroeconomic factors, coupled
 with the U.S. political climate, political unrest internationally, and known conflicts in Europe and the Middle East, have created global
 economic and political uncertainty, and have impacted demand for certain of our products. While the impact and longevity of these factors
 remain uncertain, we are constantly evaluating the extent to which these factors will impact our business, financial condition or results of
 operations.
 Over the long-term, demand for our energy recovery devices could correlate to global macroeconomic and geopolitical factors. Any
 disruption to the economic factors and regulations in these regions, which remain uncertain, may adversely affect our results of operations
 and financial condition.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 34

 Refer to Part I, Item 1, " Business," and Part I, Item 1A, " Risk Factors," in this Annual Report on Form 10-K for further discussion of
 these trends and other risks.

 Results of Operations
 A discussion regarding our financial condition and results of operations for the year ended December 31, 2023, compared to the year
 ended December 31, 2022, can be found under Item 7 in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with
 the SEC on February 21, 2024, which is available free of charge on the SEC's website at  and at our investor relations
 website (

 As our revenue is derived from large project contract deliveries that are between 16 to 36 months from contract date, there is no
 specific seasonality in our revenues to highlight.

 We generally track our revenues by channels. The channels we recognize and channel definitions we utilize are as follows:
 • Megaproject (" MPD ") channel: The MPD channel has been the main driver of our long-term growth as revenue from this channel
 benefits from a growing number of projects as well as an increase in the capacity of these projects in some cases. MPD projects
 are large-scale in nature and generally have shipment timelines from 16 to 36 months from contract date. Recognition of
 revenue is dependent on customers' project timing and execution of these projects.
 • Original Equipment Manufacturer (" OEM ") channel: The OEM channel reflects sales to a wide variety of industries in the
 desalination, wastewater, and the refrigeration markets. This channel contains projects smaller in size and revenue, and of
 shorter duration compared to those projects in the MPD channel.
 • Aftermarket (" AM ") channel: The AM channel represents support and services rendered to our installed customer base. AM
 revenue generally fluctuates from year-to-year and is dependent on our customers' timing of product upgrades, as well as their
 replenishment of spare parts and supplies.

 Revenue by Channel Customers

 2024

 2023

 % of

 % of

 Change

 (In thousands, except percentages)

 Megaproject

 $ 95,399

 66%

 $ 83,665

 65%

 $ 11,734

 14%

 Original equipment manufacturer

 31,525

 22%

 25,995

 20%

 5,530

 21%

 Aftermarket

 18,024

 12%

 18,689

 15%

 (665)

 (4%)

 Total revenue

 100%

 100%

 $ 16,599

 13%

 Revenue Attributable to Primary Geographical Markets by Segments

 2024

 2023

 Water

 Total

 Water

 Total

 Middle East and Africa

 $ 90,269

 $ 399

 $ 90,668

 $ 76,437

 $ 177

 $ 76,614

 Asia

 36,030

 36,066

 30,500

 —

 30,500

 Europe

 9,064

 9,216

 5,740

 6,034

 Americas

 8,947

 8,998

 15,048

 15,201

 Total revenue

 $ 144,310

 $ 638

 $ 127,725

 $ 624

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 35

 Year ended December 31, 2024, as compared to the year ended December 31, 2023
 The increase in MPD revenue of $11.7 million was due primarily to:
 • Desalination: The increase in revenue of $8.9 million was due primarily to higher shipments of products to the Middle East and
 Africa (" MEA"), Europe and Asia markets, partially offset by lower shipments of products to the Americas market.
 • Wastewater: The increase in revenue of $2.8 million was due primarily to higher shipments of products to the MEA market.
 The increase in OEM revenue of $5.5 million was primarily due to:
 • Desalination: The increase in revenue of $2.7 million was due primarily to higher shipments of products to the MEA and Europe
 markets, partially offset by lower shipments of products to the Americas and Asia markets.
 • Wastewater: The increase in revenue of $3.0 million was due primarily to higher shipments of products to the Asia, Americas and
 MEA markets. The Asia market has seen considerable growth this last year as certain countries in this market implement climate
 control regulations.
 • Emerging Technology: The decrease in revenue of $0.3 m illion was due primarily to our product installation in Europe and sales
 to a gas producer in the Americas, both occurring in the prior year.
 The decrease in AM revenue of $0.7 million was due primarily to lower shipments of parts and service to the MEA and Europe
 markets, partially offset by higher shipments of products to the Asia market.

 Concentration of Revenue

 See Note 10, " Concentrations – Revenue by Geographic Location and Country," of the Notes to Consolidated Financial Statements in
 Part II, Item 8, "Financial Statements and Supplementary Data," of this Annual Report on Form 10-K (the " Notes ") for further discussion
 regarding our concentration of revenue.

 Revenues attributable to domestic and international sales
 Revenues attributable to domestic and international sales as a percentage of total revenue are presented in the following table. See
 Note 10, " Concentrations – Revenue by Geographic Location and Country," of the Notes for further discussion regarding our concentration of
 revenue by geographic location.

 2024

 2023

 United States

 1 %

 2 %

 International

 99 %

 98 %

 Total revenue

 100 %

 100 %

 Customers accounting for 10% or more of revenues
 The following table presents all customers accounting for 10% or more of our revenues. Although certain customers might account
 for greater than 10% of our revenues at any one point in time, the concentration of revenues between a limited number of large customers
 shifts regularly, depending on timing of shipments. The percentages by customer reflect specific relationships or contracts that would
 concentrate our revenue for the periods presented and do not indicate a trend specific to any one customer. See Note 10, " Concentrations –
 Customer Revenue Concentration," of the Notes for further discussion on customer concentration.

 2024

 2023

 Customer A

 13%

 **

 Customer B

 11%

 **

 Customer C

 **

 13%

 ** Zero or less than 10%.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 36

 Gross Profit and Gross Margin
 Gross profit represents revenue less cost of revenue. Cost of revenue consists primarily of raw materials, personnel costs (including
 stock-based compensation), manufacturing overhead, warranty costs, and depreciation expense.

 2024

 2023

 Change

 (In thousands, except percentage and basis point)

 Gross profit

 $ 96,933

 $ 87,079

 $ 9,854

 Gross margin

 66.9 %

 67.8 %

 (90) bps

 The increase in gross profit for the year ended December 31, 2024, as compared to the prior year, was due primarily to an increase in
 sales of PXs and slightly higher average selling prices related to change in product mix, partially offset by a decrease in gross margin. The
 decrease in gross margin for the year ended December 31, 2024, as compared to the prior year, was due primarily to higher manufacturing
 costs and scrap costs.

 Operating Expenses
 The total material changes of general and administrative ("G&A"), sales and marketing ("S&M") and research and development
 ("R&D") operating expenses for the year ended December 31, 2024, as compared to the comparable period in the prior year, are discussed
 within the following overall operating expenditures, and the segment and corporate operating expenses discussions below.

 2024

 2023

 Water

 Total

 Water

 Total

 General and
 administrative

 $ 8,127

 $ 3,821

 $ 21,126

 $ 33,074

 $ 7,751

 $ 3,927

 $ 17,186

 $ 28,864

 Sales and marketing

 15,683

 7,340

 2,400

 25,423

 13,691

 6,053

 2,420

 22,164

 Research and
 development

 4,523

 11,713

 —

 16,236

 4,251

 12,750

 —

 17,001

 Restructuring charges

 1,147

 2,476

 —

 —

 —

 —

 Total operating
 expenses

 $ 29,480

 $ 23,706

 $ 24,023

 $ 77,209

 $ 25,693

 $ 22,730

 $ 19,606

 $ 68,029

 Year ended December 31, 2024, as compared to the year ended December 31, 2023
 Overall Operating Expenditures. Overall operating expenditures increase d by $9.2 million, or 13.5%. This increase was due primarily
 to r estructuring charges, and an increase in employee costs, such as employee compensation, stock-based compensation, severance a nd
 recruiting costs, in G&A and S&M. Changes in non-employee costs included:
 • G&A: higher consulting costs related to the enhancement of our corporate growth strategy; partially offset by lower dues and
 subscription costs.
 • S&M: lower commission costs and lower one-time sustainability consulting costs that we incurred in fiscal year 2023.
 • R&D: lower Emerging Technologies segment development costs and depreciation costs.
 Water Segment. Water segment operating expenses increase d by $3.8 million, or 14.7%. This increase was due primarily
 to restructuring charges, and higher employee compensation and benefit costs and stock-based compensation expense in S&M related to an
 increase in headcount to support our existing desalination operations and our growth in wastewate r. In addition, non-employee operating
 expenses were higher due primarily to an increase in consulting costs to support our growth in desalination and wastewater. These
 increases were partially offset by lower commission costs and depreciation expenses.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 37

 Emerging Technologies Segment. Emerging Technologies operating expenses increase d by $1.0 million, or 4.3%. This increase was
 due primarily to restructuring charges, and an increase in S&M employee compensation and marketing costs, partially offset by lower R&D
 costs.
 Corporate Operating Expenses. Corporate operating expenses increase d by $4.4 million, or 22.5%. This increase was due primarily
 to higher employee compensation and benefit costs, and stock-based compensation expense, related to an increase in headcount in G&A,
 an increase in recruiting costs, and an increase in stock-based compensation expense due to modification of certain equity awards and
 higher severance payments and restructuring charges. In addition, the increase in non-employee operating expenses was due primarily to
 higher consulting costs related to the enhancement of our corporate growth strategy, partially offset by lower marketing costs and
 depreciation expenses.

 Restructuring Charges. During the fourth quarter of fiscal year 2024, we implemented a restructuring plan which included reductions
 in workforce in all functions of the organization, primarily in our San Leandro location, in order to lower our operating cost structure, and to
 position the Company for profitable growth. We expect to record an estimated restructuring charge of approximately $3.0 million, of which
 $2.5 million was recorded during the fourth quarter of fiscal year 2024. This charge was related to severance and benefits to 38 terminated
 employees, which was approximately 15% of our workforce. We expect the implementation of the restructuring plan will be substantially
 complete by the end of the first quarter of fiscal year 2025. See Note 4, " Other Financial Information – Restructuring," of the Notes for further
 discussion and disclosure on our restructuring program.

 Other Income, Net

 2024

 2023

 Interest income

 $ 6,218

 $ 3,756

 Other non-operating expense, net

 (207)

 (101)

 Total other income, net

 $ 6,011

 $ 3,655

 The increase in " Total other income, net " in the year ended December 31, 2024, as compared to the comparable period in the prior
 year, w as due primarily to an increase in short- and long-term in vestments.

 Income Taxes

 2024

 2023

 Change

 (In thousands, except percentages)

 Provision for income taxes

 $ 2,685

 $ 1,201

 $ 1,484

 Effective tax rate

 10%

 5%

 The higher provision for income taxes in 2024, as compared to the prior year, was due primarily to an increase in income from
 operations, a decrease in tax benefit of $0.3 million related to Foreign Derived Intangible Income ("FDII"), and a decrease of $0.4 million in
 R&D tax credits, partially offset by $0.7 million net change on the tax impact of stock-based compensation and executive compensation limits.
 The fiscal year 2024 effective tax rate included a benefit of $2.1 million related to FDII, a benefit of $0.9 million related to R&D tax
 credits and tax expense of $0.5 million related to stock-based compensation and executive compensation limits. The fiscal year 2023
 effective tax rate included a benefit of $2.4 million related to related to FDII, a benefit of $1.3 million related to R&D tax credits, and a benefit
 of $0.7 million related to tax deductions from stock-based compensation related windfalls net of executive compensation limits.
 See Note 8, " Income Taxes," of the Notes for further discussion regarding further information related to our tax rate reconciliation.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 38

 Liquidity and Capital Resources

 Overview
 From time-to-time, management and our Board of Directors (the " Board ") review our liquidity and future cash needs and may make a
 decision to (1) return capital to our shareholders through a share repurchase program or dividend payout; or (2) seek additional debt or equity
 financing. As of December 31, 2024, our principal sources of liquidity consisted of (i) unrestricted cash and cash equivalents of $29.6 million
 that are primarily invested in money market funds and U.S. treasury securities; (ii) investment-grade short-term and long-term marketable
 debt instruments of $70.2 million that are primarily invested in U.S. treasury securities, corporate notes and bonds, and municipal and agency
 notes and bonds; and (iii) accounts receivable, net of allowances, of $64.1 million. As of December 31, 2024, there was unrestricted cash of
 $1.0 million held outside the U.S. We invest cash not needed for current operations predominantly in investment-grade, marketable debt
 instruments with the intent to make such funds available for future operating purposes, as needed. Although these securities are available for
 sale, we generally hold these securities to maturity, and therefore, do not currently see a need to trade these securities in order to support our
 liquidity needs in the foreseeable future. We believe the risk of this portfolio to us is in the ability of the underlying companies or government
 agencies to cover their obligations at maturity, not in our ability to trade these securities at a profit. Based on current projections, we believe
 existing cash balances and future cash inflows from this portfolio will meet our liquidity needs for at least the next 12 months.

 Short-term Contract Assets
 As of December 31, 2024, we had $2.8 million of short-term contract assets which represents unbilled trade receivables from certain
 Water segment contract sales which include contractual holdback provisions, pursuant to which we will invoice the final retention payment
 due within the next 12 months. The customer holdbacks represent amounts intended to provide a form of security for the customer; and
 accordingly, these contract assets have not been discounted to present value.

 Credit Agreement
 We entered into a credit agreement with JPMorgan Chase Bank, N.A. (" JPMC ") on December 22, 2021 (as amended, the " Credit
 Agreement "). The Credit Agreement, which will expire on December 21, 2026, provides a committed revolving credit line of $50.0 million and
 includes both a revolving loan and a letters of credit (" LCs ") component. The maximum allowable LCs under the credit line component of the
 Credit Agreement is $30.0 million. As of December 31, 2024, we were in compliance with all covenants under the Credit Agreement.
 Under the Credit Agreement, as of December 31, 2024, there were no revolving loans outstanding. In addition, as of December 31,
 2024, under the LCs component, we utilized $18.4 million of the maximum allowable credit line of $30.0 million, which included newly
 issued LCs, and previously issued and unexpired stand-by letters of credits ("SBLCs") and certain non-expired commitments under the
 previous Loan and Pledge Agreement with Citibank, N.A., which are guaranteed under the Credit Agreement. As of December 31, 2024,
 there was $15.7 million of outstanding LCs. These LCs had a weighted average remaining life of approximately 17 months.
 See Note 6, " Lines of Credit," of the Notes for further discussion related to the Credit Agreement.

 Letters of Credit
 From time-to-time, we enter into LCs related to our product warranty and performance guarantees. As of December 31, 2024,
 outstanding LCs totaled $15.7 million. See Note 6, " Lines of Credit – Letters of Credit," of the Notes for further discussion related to LCs and
 Note 7, " Commitments and Contingencies – Guarantees," of the Notes for further discussion related to performance guarantees.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 39

 Share Repurchase Program

 The Board, from time-to-time, has authorized a share repurchase program under which we may, at our discretion, repurchase the
 Company's outstanding common stock in the open market, or in privately negotiated transactions, in compliance with applicable state and
 federal securities laws. The timing and amounts of any purchase under the share repurchase programs are based on market conditions and
 other factors including price, regulatory requirements, and capital availability. We account for stock repurchases under these programs using
 the cost method. As of December 31, 2024, we have cumulatively repurchased 11.4 million shares of the Company's common stock at an
 aggregate cost of $130.5 million under all closed share repurchase programs. The following is a discussion of the share repurchase
 programs during the last 3-years ended December 31, 2024. See Part II, Item 5, " Market for Registrant's Common Equity, Related
 Stockholder Matters and Issuer Purchases of Equity Securities – Share Repurchase Program," included in this Annual Report on Form 10-K
 for discussion of shares repurchased in the fourth quarter of fiscal year 2024 and Note 11, " Stockholders' Equity – Share Repurchase
 Program," of the Notes f or further discussion related to share repurchase programs and a reconciliation of the latest share repurchase plan
 balance.

 On March 11, 2021, we announced that the Board authorized a share repurchase program under which we may repurchase, at
 management's discretion, up to $50.0 million in aggregate cost, which includes both the share value of the acquired common stock and the
 fees charged in connection with acquiring the common stock (the " March 2021 Authorization "). On July 1, 2022, we concluded all share
 repurchases under the March 2021 Authorization. Under the March 2021 Authorization, we repurchased 2,692,577 shares of our common
 stock at an aggregate cost of approximately $50.0 million.

 On November 18, 2024, we announced that the Board authorized a share repurchase program under which we may repurchase our
 outstanding common stock, at the discretion of management, up to $50.0 million in aggregate cost, which includes both the share value of the
 acquired common stock and the fees charged in connection with acquiring the common stock (the " November 2024 Authorization "). On
 December 11, 2024, the Company concluded all share repurchases under the November 2024 Authorization. Under the November 2024
 Authorization, we repurchased 3,248,533 shares of our common stock at an aggregate cost of approximately $50.0 million.

 On February 26, 2025, we announced that the Board authorized a share repurchase program under which we may repurchase our
 outstanding common stock, at the discretion of management, up to $30.0 million in aggregate cost, which includes both the share value of the
 acquired common stock and the fees charged in connection with acquiring the common stock (the " February 2025 Authorization "). We
 expect to commence repurchasing our outstanding common stock after March 4, 2025.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 40

 Cash Flows

 2024

 2023

 Change

 Net cash provided by operating activities

 $ 20,522

 $ 26,054

 $ (5,532)

 Net cash used in investing activities

 (15,654)

 (19,114)

 3,460

 Net cash (used in) provided by financing activities

 (43,284)

 4,794

 (48,078)

 Effect of exchange rate differences on cash and cash equivalents

 (52)

 (85)

 Net change in cash, cash equivalents and restricted cash

 $ (38,468)

 $ 11,767

 $ (50,235)

 Cash Flows from Operating Activities
 Net cash provided by operating activities is subject to the project driven, non-cyclical nature of our business. Operating cash flow can
 fluctuate significantly from year to year, due to the timing of receipts of large project orders. Operating cash flow may be negative in one year
 and significantly positive in the next, consequently individual reporting period results and comparisons may not necessarily indicate a
 significant trend, either positive or negative.
 The higher net cash used for operating assets and liabilities for the year ended December 31, 2024, as compared to the prior year,
 was due primarily to the following factors:
 • Accounts receivable and contract assets: an increase in cash used primarily due to an increase in revenues late in the fourth
 quarter of 2024 resulting in increased billed and unbilled receivables. In addition, our collections efforts have been timely
 throughout the year;
 • Accounts payables: a d ecrease in cash provided was primarily due to the tim ing of payments and vendor invoices received; and
 • Accrued liabilities: an increase in cash provided was primarily due to the accrual of restructuring related costs.
 Cash Flows from Investing Activities
 Net cash used in investing activities primarily relates to sales, maturities and purchases of investment-grade marketable debt
 instruments, such as corporate notes and bonds, and capital expenditures supporting our growth. We believe our investments in marketable
 debt instruments are structured to preserve principal and liquidity while at the same time maximizing yields without significantly increasing
 risk. The lower net cash used in investing activities of $3.5 million in the year ended December 31, 2024, as compared to the prior year, was
 primarily driven by l ower net cash used for purchases of marketable debt instrumen ts of $2.1 million and lower capital expenditures of
 $1.3 million.
 Cash Flows from Financing Activities
 Net cash used in financing activities for the year ended December 31, 2024, as compared to the cash provided by financing activities
 in the prior year, was due primarily to an increase in cash used for the repurchase of our common stock under the November 2024
 Authorization, partially offset by a net increase of cash from exercises of employee stock options granted under our equity incentive plans.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 41

 Liquidity and Capital Resource Requirements
 We believe that our existing resources and cash generated from our operations will be sufficient to meet our anticipated capital
 requirements for at least the next 12 months. However, we may need to raise additional capital or incur additional indebtedness to continue
 to fund our operations or to support acquisitions in the future and/or to fund investments in our latest technology arising from rapid market
 adoption. These needs could require us to seek additional equity or debt financing. Our future capital requirements will depend on many
 factors including the continuing market acceptance of our products, our rate of revenue growth, the timing of new product introductions, the
 expansion of our R&D, manufacturing and S&M activities, and the timing and extent of our expansion into new geographic territories. In
 addition, we may enter into potential material investments in, or acquisitions of, complementary businesses, services or technologies in the
 future which could also require us to seek additional equity or debt financing. Should we need additional liquidity or capital funds, these funds
 may not be available to us on favorable terms, or at all.

 Facility and Equipment Leases. We lease facilities and equipment under fixed noncancelable operating leases that expire on various
 dates through fiscal year 2030. See Note 7, " Commitments and Contingencies – Operating Lease Obligations," of the Notes for additional
 information related to our fixed noncancelable operating leases.

 Purchase Order Arrangements. We have purchase order arrangements with our vendors for which we have not received the related
 goods or services. These arrangements are subject to change based on our sales demand forecasts. We have the right to cancel the
 arrangements prior to the date of delivery. The purchase order arrangements are related to various raw materials and component parts, as
 well as capital equipment. See Note 7, " Commitments and Contingencies – Purchase Obligations," of the Notes for additional information
 related to our purchase order arrangements.

 Off-balance Sheet Arrangements. During the periods presented, we did not have any relationships with unconsolidated entities or
 financial partnerships such as entities often referred to as structured finance or special purpose entities which would have been established
 for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

 Critical Accounting Policies and Estimates
 Our Consolidated Financial Statements are prepared in accordance with U.S. GAAP. These accounting principles require us to make
 estimates and judgments that can affect the reported amounts of assets and liabilities as of the date of the Consolidated Financial
 Statements as well as the reported amounts of revenue and expense during the periods presented. We believe that the estimates and
 judgments upon which we rely are reasonable based upon information available to us at the time that we make these estimates and
 judgments. To the extent that there are material differences between these estimates and actual results, our consolidated financial results
 will be affected. The accounting policies that reflect our more significant estimates and judgments and which we believe are the most critical
 to aid in fully understanding and evaluating our reported financial results are revenue recognition; valuation of stock options; valuation and
 impairment of goodwill; inventory; and deferred taxes and valuation allowances on deferred tax assets.
 The following is not intended to be a comprehensive list of all of our accounting policies or estimates. See Note 1, " Description of
 Business and Significant Accounting Policies, " of the Notes for further detailed discussion regarding our accounting policies and estimates.

 Revenue Recognition
 Revenues are recognized when control of the promised goods or services is transferred to our customers in an amount that reflects
 the consideration we expect to be entitled to in exchange for those goods or services. At the inception of each contract, performance
 obligations are identified and the total transaction price is allocated to the performance obligations. Our contracts with customers may
 include multiple performance obligations. For such arrangements, we allocate revenue to each performance obligation based on its relative
 stand-alone selling price. We generally determine stand-alone selling prices based on the prices charged to customers. With respect to
 termination, we do not have the ability to cancel a contract for convenience. In general, customers can cancel for convenience upon the
 payment of a termination fee that covers costs and profit. It is rare for customers to cancel contracts. See Note 1, " Description of Business
 and Significant Accounting Policies – Significant Accounting Policies – Revenue Recognition ( Product and Service Revenue Recognition)," of
 the Notes for more detail on product and service revenue recognition.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 42

 Stock-based Compensation
 We account for stock-based compensation according to U.S. GAAP relating to stock-based payments, which requires the
 measurement and recognition of compensation expense for all stock-based awards made to employees and directors based on estimated fair
 values on the grant date. The fair value of stock options is calculated on the date of grant using a Black-Scholes (also referred to as the
 "Black-Scholes-Merton") model, which requires a number of complex assumptions including the expected life to exercise a vested award
 based upon the Company's exercise history, expected volatility based upon the Company's historical stock prices, risk-free interest rate
 based upon the U.S. Treasury rates, and the Company's dividend yield. See Note 1, " Description of Business and Significant Accounting
 Policies – Significant Accounting Policies – Stock-based Compensation " and Note 12, " Stock-based Compensation," of the Notes for further
 discussion of our accounting policy and stock-based compensation activities, respectively.

 Our goodwill represents the excess of the purchase price of a business combination over the fair value of the net assets acquired.
 Goodwill impairment testing requires significant judgment and management estimates, including, but not limited to, the determination of (i) the
 number of reporting units, (ii) the goodwill and other assets and liabilities to be allocated to the reporting units and (iii) the fair values of the
 reporting units. The estimates and assumptions described above, along with other factors such as discount rates, will significantly affect the
 outcome of the impairment tests and the amounts of any resulting impairment losses. We perform a quantitative assessment of goodwill for
 impairment on an annual basis during the third quarter of each year, and between annual tests, a qualitative assessment whenever events or
 changes in circumstances indicate that the carrying amount may not be recoverable. If these interim qualitative factors were to indicate that it
 is more-likely-than-not that the fair value of the reporting unit is less than its carrying value, we would then perform a quantitative assessment,
 which would consist primarily of a discounted cash flow analysis to determine the fair value of the reporting unit's goodwill. To the extent the
 carrying amount of the reporting unit's allocated goodwill exceeds the unit's fair value, we recognize an impairment of goodwill for the excess
 up to the amount of goodwill of that reporting unit. See Note 1, " Description of Business and Significant Accounting Policies – Significant
 Accounting Policies – Goodwill " and Note 4, " Other Financial Information – Goodwill," of the Notes for further discussion of our accounting
 policy and goodwill activities, respectively.

 Inventories
 We determine at each balance sheet date how much, if any, of our inventory may ultimately prove to be either unsalable or unsalable
 at its carrying cost. Reserves are established to effectively adjust the carrying value of such inventory to lower of cost (first-in, first-out
 method) or net realizable value. See Note 1, " Description of Business and Significant Accounting Policies – Significant Accounting Policies –
 Inventories " and Note 4, " Other Financial Information – Inventories, net," of the Notes for further discussion of our accounting policy and
 estimates, and inventory activities, respectively.

 Income Taxes
 Our annual tax rate is determined based on our income and the jurisdictions where it is earned, statutory tax rates, and the tax
 impacts of items treated differently for tax purposes than for financial reporting purposes. Also inherent in determining our annual tax rate are
 judgments and assumptions regarding the recoverability of certain deferred tax balances, and our ability to uphold certain tax positions. We
 are subject to complex tax laws, in the U.S. and numerous foreign jurisdictions, and the manner in which they apply can be open to
 interpretation. Realization of deferred tax assets is dependent upon generating sufficient taxable income in the appropriate jurisdiction in
 future periods, which involves business plans, planning opportunities, and expectations about future outcomes. Our assessment relies on
 estimates and assumptions, and may involve a series of complex judgments about future events. We use an estimate of our annual effective
 tax rate at each interim period based on the facts and circumstances available at that time, while the actual effective tax rate is calculated at
 year-end. See Note 1, " Description of Business and Significant Accounting Policies – Significant Accounting Policies – Income Taxes " and
 Note 8, " Income Taxes," of the Notes for further discussion of our income tax policy and our tax valuation allowance, respectively.

 Recent Accounting Pronouncements
 Refer to Note 1, " Description of Business and Significant Accounting Policies – Recently Issued Accounting Pronouncement Not Yet
 Adopted," of the Notes.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 43

 Item 7A — Quantitative and Qualitative Disclosures About Market Risk
 Our exposure to market risk may be found primarily in two areas, foreign currency and interest rates.

 Foreign Currency Risk
 Our foreign currency exposures are due to fluctuations in exchange rates for the U.S. dollar ("USD") versus the British pound, Saudi
 riyal, Emirati dirham, European euro, Chinese yuan, Indian rupee and Canadian dollar. Changes in currency exchange rates could adversely
 affect our consolidated operating results or financial position.
 Our revenue contracts have been denominated in the USD. At times, our international customers may have difficulty obtaining
 the USD to pay our receivables, thus increasing collection risk and potential bad debt expense. To the extent we expand our international
 sales, a larger portion of our revenue could be denominated in foreign currencies. As a result, our cash and operating results could be
 increasingly affected by changes in exchange rates.
 In addition, we pay many vendors in foreign currency and, therefore, are subject to changes in foreign currency exchange rates. Our
 international sales and service operations incur expense that is denominated in foreign currencies. This expense could be materially affected
 by currency fluctuations. Our international sales and services operations also maintain cash balances denominated in foreign currencies. To
 decrease the inherent risk associated with translation of foreign cash balances into our reporting currency, we do not maintain excess cash
 balances in foreign currencies.
 We have not hedged our exposure to changes in foreign currency exchange rates because expenses in foreign currencies have been
 insignificant to date and exchange rate fluctuations have had little impact on our operating results and cash flows. In addition, we do not
 have any exposure to the Russian ruble.

 Interest Rate and Credit Risks
 The primary objective of our investment activities is to preserve principal and liquidity while at the same time maximizing yields without
 significantly increasing risk. We invest primarily in investment-grade short-term and long-term marketable debt instruments that are subject
 to counter-party credit risk. To minimize this risk, we invest pursuant to an investment policy approved by the Board. The policy mandates
 high credit rating requirements and restricts our exposure to any single corporate issuer by imposing concentration limits.
 As of December 31, 2024, our investment portfolio of $70.2 million, in investment-grade marketable debt instruments, such as U.S.
 treasury securities, corporate notes and bonds, and municipal and agency notes and bonds, are classified as either short-term and/or long-
 term investments on our Consolidated Balance Sheets. These investments are subject to interest rate fluctuations and decrease in market
 value to the extent interest rates increase, which occurred during the year ended December 31, 2024. To minimize the exposure due to
 adverse shifts in interest rates, we maintain investments with a weighted average maturity of approximately nine months. As of
 December 31, 2024, a hypothetical 1% increase in interest rates would have resulted in a less than $0.4 million decrease in the fair value of
 our investments in marketable debt instruments as of such date.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 44

 Item 8 — Financial Statements and Supplementary Data

 Page No.

 Reports of Independent Registered Public Accounting Firm (PCAOB ID No. 34)

 Consolidated Financial Statements:

 Consolidated Balance Sheets — December 31, 2024 and 2023

 Consolidated Statements of Operations — Years ended December 31, 2024, 2023 and 2022

 Consolidated Statements of Comprehensive Income — Years ended December 31, 2024, 2023 and 2022

 Consolidated Statements of Stockholders' Equity — Years ended December 31, 2024, 2023 and 2022

 Consolidated Statements of Cash Flows — Years ended December 31, 2024, 2023 and 2022

 Notes to Consolidated Financial Statements

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 45

 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 To the stockholders and the Board of Directors of Energy Recovery, Inc.
 Opinion on the Financial Statements
 We have audited the accompanying consolidated balance sheets of Energy Recovery, Inc. and subsidiaries (the "Company") as of
 December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income, stockholders' equity, and cash
 flows, for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the "financial
 statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of
 December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended
 December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
 We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
 Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated
 Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26,
 2025, expressed an unqualified opinion on the Company's internal control over financial reporting.
 Basis for Opinion
 These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the
 Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be
 independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
 Securities and Exchange Commission and the PCAOB.
 We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
 obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our
 audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud,
 and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
 amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
 estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide
 a reasonable basis for our opinion.
 Critical Audit Matter
 The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was
 communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the
 financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit
 matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical
 audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
 Revenue Recognition — Refer to Notes 1, 2 and 10 to the financial statements
 Critical Audit Matter Description
 Revenue is recognized upon transfer of control of products which typically follows transfer of title upon shipment or delivery in accordance
 with International Commercial Terms. The processing and recording of the Company's revenue transactions is a combination of automated
 and manual processes (i.e., the revenue transactions are recorded automatically upon invoice generation at the time of shipment, whereas
 the review process remains relatively manual to ensure control has properly transferred to recognize revenue) and therefore, the Company
 uses a precise set of procedures to ensure revenue is accurate for each transaction.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 46

 We identified the Company's revenue recognition processes as a critical audit matter as the Company has a significant volume of product
 revenue transactions throughout the year and a manual process to generate accurate data to process and record revenue in line with when
 risk is transferred to the customers. This required an increased extent of effort to audit these revenue tran sactions and to evaluate that they
 were recorded in the appropriate period.
 How the Critical Audit Matter Was Addressed in the Audit
 Our audit procedures related to revenue recognition included the following, among others:
 • We tested the effectiveness of controls over the recognition of revenue.
 • We obtained an understanding of the nature of the revenue recognition process through inquiry with the Company personnel
 responsible for the invoices as well as review of the contract with the customers.
 • We performed detail testing procedures on processed revenue transactions, we traced and agreed the calculation of the
 Company's recorded revenue and the timing of revenue recognition to source documents such as the agreed upon terms with
 the customer and shipping records, as well as the related invoices generated within the system and evaluated any differences.
 /s/ Deloitte & Touche LLP
 San Francisco, California
 We have served as the Company's auditor since 2018.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 47

 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 To the stockholders and the Board of Directors of Energy Recovery, Inc.
 Opinion on Internal Control over Financial Reporting
 We have audited the internal control over financial reporting of Energy Recovery, Inc. and subsidiaries (the "Company") as of December 31,
 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
 of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over
 financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by
 COSO.
 We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
 consolidated financial statements as of and for the year ended December 31, 2024, of the Company and our report dated February 26, 2025,
 expressed an unqualified opinion on those financial statements.
 Basis for Opinion
 The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
 effectiveness of internal control over financial reporting, included in the accompanying "Management's Report on Internal Control Over
 Financial Reporting." Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.
 We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance
 with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
 We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
 obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our
 audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,
 testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other
 procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
 Definition and Limitations of Internal Control over Financial Reporting
 A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
 financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
 principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of
 records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
 reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
 accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
 management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
 acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
 Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
 evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
 that the degree of compliance with the policies or procedures may deteriorate.
 /s/ Deloitte & Touche LLP
 San Francisco, California

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 48

 CONSOLIDATED BALANCE SHEETS

 2024

 2023

 (In thousands, except shares and per share data)

 ASSETS

 Current assets:

 Cash and cash equivalents

 $ 29,627

 $ 68,098

 Short-term investments

 48,392

 40,445

 Accounts receivable, net

 64,066

 46,937

 Inventories, net

 24,906

 26,149

 Prepaid expenses and other assets

 6,665

 3,843

 Total current assets

 173,656

 185,472

 Long-term investments

 21,832

 13,832

 Deferred tax assets, net

 9,004

 10,324

 Property and equipment, net

 15,424

 18,699

 Operating lease, right of use asset

 9,695

 11,469

 12,790

 12,790

 Other assets, non-current

 Total assets

 $ 242,792

 $ 252,974

 LIABILITIES AND STOCKHOLDERS' EQUITY

 Current liabilities:

 Accounts payable

 $ 3,109

 $ 3,000

 Accrued expenses and other liabilities

 17,728

 15,583

 Lease liabilities

 2,020

 1,791

 Contract liabilities

 1,097

 Total current liabilities

 23,428

 21,471

 Lease liabilities, non-current

 9,297

 11,488

 Other liabilities, non-current

 Total liabilities

 32,782

 33,166

 Commitments and contingencies (Note 7)

 Stockholders' equity:

 Preferred stock, $ 0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding at
 December 31, 2024 and 2023

 —

 —

 Common stock, $ 0.001 par value; 200,000,000 shares authorized; 66,182,906 shares issued and
 54,785,861 shares outstanding at December 31, 2024 and 65,029,459 shares issued and
 56,880,947 shares outstanding at December 31, 2023

 Additional paid-in capital

 235,010

 217,617

 Accumulated other comprehensive income (loss)

 ( 44)

 Treasury stock, at cost, 11,397,045 shares repurchased at December 31, 2024 and 8,148,512 shares
 repurchased at December 31, 2023

 ( 130,870)

 Retained earnings

 105,706

 82,656

 Total stockholders' equity

 210,010

 219,808

 Total liabilities and stockholders' equity

 $ 242,792

 $ 252,974

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 49

 CONSOLIDATED STATEMENTS OF OPERATIONS

 2024

 2023

 2022

 (In thousands, except per share data)

 $ 125,591

 Cost of revenue

 48,015

 41,270

 38,235

 Gross profit

 96,933

 87,079

 87,356

 Operating expenses:

 General and administrative

 33,074

 28,864

 28,341

 Sales and marketing

 25,423

 22,164

 16,277

 Research and development

 16,236

 17,001

 17,909

 Restructuring charges

 2,476

 —

 —

 Total operating expenses

 77,209

 68,029

 62,527

 Income from operations

 19,724

 19,050

 24,829

 Other income (expense):

 Interest income

 6,218

 3,756

 Other non-operating income (expense), net

 ( 207)

 ( 101)

 Total other income, net

 6,011

 3,655

 1,242

 Income before income taxes

 25,735

 22,705

 26,071

 Provision for income taxes

 2,685

 1,201

 2,022

 $ 23,050

 $ 21,504

 $ 24,049

 Net income per share:

 Basic

 $ 0.40

 $ 0.38

 $ 0.43

 Diluted

 $ 0.40

 $ 0.37

 $ 0.42

 Number of shares used in per share calculations:

 Basic

 57,213

 56,444

 56,221

 Diluted

 57,822

 57,740

 57,641

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 50

 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 Year Ended December 31,

 2024

 2023

 2022

 $ 23,050

 $ 21,504

 $ 24,049

 Other comprehensive income (loss), net of tax

 Foreign currency translation adjustments

 Unrealized gain (loss) on investments

 ( 215)

 Total other comprehensive income (loss), net of tax

 ( 200)

 Comprehensive income

 $ 23,192

 $ 21,809

 $ 23,849

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 51

 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

 2024

 2023

 2022

 (In thousands, except shares)

 Common stock

 $ 65

 $ 64

 $ 64

 Issuance of common stock, net

 —

 $ 64

 Additional paid-in capital

 217,617

 204,957

 195,593

 Issuance of common stock, net

 7,099

 4,793

 2,986

 Stock-based compensation

 10,294

 7,867

 6,378

 235,010

 217,617

 204,957

 Accumulated other comprehensive income (loss)

 ( 44)

 ( 349)

 ( 149)

 Other comprehensive income (loss)

 Foreign currency translation adjustments

 Unrealized gain (loss) on investments

 ( 215)

 Total other comprehensive income (loss), net

 ( 200)

 ( 44)

 ( 349)

 Treasury stock

 ( 53,832)

 Common stock repurchased

 ( 50,384)

 —

 ( 26,654)

 ( 130,870)

 Retained earnings

 82,656

 61,152

 37,103

 23,050

 21,504

 24,049

 105,706

 82,656

 61,152

 Total stockholders' equity

 $ 210,010

 $ 219,808

 $ 185,338

 Common stock issued (shares)

 65,029,459

 64,225,391

 63,544,419

 Issuance of common stock, net

 1,153,447

 804,068

 680,972

 66,182,906

 65,029,459

 64,225,391

 Treasury stock (shares)

 8,148,512

 8,148,512

 6,721,153

 Common stock repurchased

 3,248,533

 —

 1,427,359

 11,397,045

 8,148,512

 8,148,512

 Total common stock outstanding (shares)

 54,785,861

 56,880,947

 56,076,879

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 52

 CONSOLIDATED STATEMENTS OF CASH FLOWS

 2024

 2023

 2022

 Cash flows from operating activities:

 $ 23,050

 $ 21,504

 $ 24,049

 Adjustments to reconcile net income to cash provided by operating activities

 Stock-based compensation

 10,322

 8,038

 6,508

 Depreciation and amortization

 4,046

 4,102

 4,764

 Right of use asset amortization

 1,774

 1,646

 1,538

 Accretion (amortization) of discounts (premiums) on investments

 ( 1,331)

 ( 862)

 Deferred income taxes

 1,320

 ( 61)

 1,158

 Other non-cash adjustments

 1,026

 ( 201)

 Changes in operating assets and liabilities:

 Accounts receivable, net

 ( 17,212)

 ( 12,873)

 ( 13,480)

 Contract assets

 ( 2,184)

 1,128

 ( 1,227)

 Inventories, net

 1,202

 1,354

 ( 8,282)

 Prepaid and other assets

 ( 756)

 ( 96)

 Accounts payable

 2,629

 Accrued expenses and other liabilities

 ( 1,352)

 ( 1,062)

 Contract liabilities

 ( 616)

 ( 129)

 ( 2,090)

 Net cash provided by operating activities

 20,522

 26,054

 12,631

 Cash flows from investing activities:

 Sales of marketable securities

 —

 2,966

 —

 Maturities of marketable securities

 76,508

 64,955

 39,756

 Purchases of marketable securities

 ( 90,997)

 ( 84,555)

 ( 43,572)

 Capital expenditures

 ( 1,298)

 ( 2,567)

 ( 4,232)

 Proceeds from sales of fixed assets

 1,102

 Net cash used in investing activities

 ( 15,654)

 ( 19,114)

 ( 6,946)

 Cash flows from financing activities:

 Net proceeds from issuance of common stock

 7,100

 4,794

 2,986

 Repurchase of common stock

 ( 50,384)

 —

 ( 26,654)

 Net cash (used in) provided by financing activities

 ( 43,284)

 4,794

 ( 23,668)

 Effect of exchange rate differences on cash and cash equivalents

 ( 52)

 ( 20)

 Net change in cash, cash equivalents and restricted cash

 ( 38,468)

 11,767

 ( 18,003)

 Cash, cash equivalents and restricted cash, beginning of year

 68,225

 56,458

 74,461

 Cash, cash equivalents and restricted cash, end of year

 $ 29,757

 $ 68,225

 $ 56,458

 Supplemental disclosure of cash flow information:

 Cash received for income tax refunds

 $ —

 $ 3

 $ 2

 Cash paid for income taxes

 1,553

 Supplemental disclosure on non-cash investing and financing transactions:

 Purchases of property and equipment in trade accounts payable, and accrued
 expenses and other liabilities

 $ 70

 $ 647

 $ 740

 Excise tax on share repurchases, accrued but not paid

 —

 —

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 53

 Note 1 — Description of Business and Significant Accounting Policies
 Energy Recovery, Inc. and its wholly-owned subsidiaries (the "Company" or "Energy Recovery") designs and manufactures reliable,
 high-performance solutions that generate cost savings, increase energy efficiency, and reduce carbon emissions across several industries.
 Leveraging the Company's pressure exchanger technology, which generates little to no emissions when operating, the Company believes its
 solutions lower costs, save energy, reduce waste, and minimize emissions for companies across a variety of commercial and industrial
 processes. As the world coalesces around the urgent need to address climate change and its impacts, the Company is helping companies
 reduce their energy consumption in their industrial processes, which in turn, reduces their carbon footprint. The Company believes that its
 customers do not have to sacrifice quality and cost savings for sustainability and the Company is committed to developing solutions that drive
 long-term value – both financial and environmental. The Company's solutions are marketed, sold in, and developed for, the fluid-flow and
 gas markets, such as seawater and wastewater desalination, natural gas, chemical processing and CO 2 -based refrigeration systems, under
 the trademarks ERI, PX, Pressure Exchanger, PX Pressure Exchanger ("PX"), Ultra PX, PX G, PX G1300, PX PowerTrain, AT,
 and Aquabold. The Company owns, manufactures and/or develops its solutions, in whole or in part, in the United States of America (the
 "U.S.").

 Basis of Presentation
 The Consolidated Financial Statements include the accounts of Energy Recovery, Inc. and its wholly-owned subsidiaries. All
 intercompany accounts and transactions have been eliminated in consolidation.

 Reclassifications
 Certain prior period amounts have been reclassified in certain notes to the Consolidated Financial Statements to conform to the
 current period presentation.

 Use of Estimates
 The preparation of Consolidated Financial Statements, in conformity with U.S. generally accepted accounting principles ("GAAP"),
 requires the Company's management to make judgments, assumptions and estimates that affect the amounts reported in the Consolidated
 Financial Statements and accompanying notes.
 The accounting policies that reflect the Company's significant estimates and judgments and that the Company believes are the most
 critical to aid in fully understanding and evaluating its reported financial results are r evenue recognition; granted stock option valuations;
 equipment useful life and valuation; goodwill valuation and impairment; inventory valuation and allowances, deferred taxes and valuation
 allowances on deferred tax assets; and evaluation and measurement of contingencies. Those estimates could change, and as a result,
 actual results could differ materially from those estimates.
 The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a
 revision of the carrying value of its assets or liabilities as of February 26, 2025, the date of issuance of this Annual Report on Form 10-K.
 These estimates may change, as new events occur and additional information is obtained. Actual results could differ materially from these
 estimates under different assumptions or conditions. The Company undertakes no obligation to publicly update these estimates for any
 reason after the date of this Annual Report on Form 10-K, except as required by law.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 54

 Significant Accounting Policies

 Cash and Cash Equivalents
 The Company considers all highly liquid investments with an original or remaining contractual maturity on date of purchase of less
 than or equal to three months to be classified and presented as cash equivalents on the Consolidated Balance Sheets. Cash equivalents are
 stated at cost, which approximates fair value. The Company's cash and cash equivalents may include demand deposit accounts with large
 financial institutions, institutional money market funds, U.S. treasury securities, corporate notes and bonds, and municipal and agency notes
 and bonds. The Company monitors the creditworthiness of the financial institutions, institutional money market funds, and corporations in
 which the Company invests its surplus funds. The Company has experienced no credit losses from its cash investments.

 Short-term and Long-term Investments
 The Company's short-term and long-term investments consist primarily of investment-grade debt securities, such as U.S. treasury
 securities, corporate notes and bonds, and municipal and agency notes and bonds, all of which are classified as available-for-sale.
 Available-for-sale securities are carried at fair value. Amortization or accretion of premium or discount is included in other income (expense),
 net on the Consolidated Statements of Operations. Changes in the fair value of available-for-sale securities are reported as a component of
 accumulated other comprehensive income (loss) within stockholders' equity on the Consolidated Balance Sheets. Realized gains and losses
 on the sale of available-for-sale securities are determined by specific identification of the cost basis of each security.
 The Company categorizes and classifies short-term and long-term available-for-sale investments on the Company's Consolidated
 Balance Sheets as follows:
 • Short-term investments: Investments purchased with an original or remaining maturity at time of purchase greater than three
 months and that are expected to mature within 12 months from the balance sheet date are classified as short-term investments
 and are presented in current assets.
 • Long-term investments: Investments purchased with an original or remaining maturity at time of purchase greater than three
 months and that are expected to mature more than 12 months from the balance sheet date are classified as long-term
 investments and are presented in non-current assets.

 Allowance for Doubtful Accounts
 The Company records a provision for doubtful accounts based on historical experience and an estimate of the expected credit losses.
 In estimating the allowance for doubtful accounts, the Company considers, among other factors, the aging of the accounts receivable, its
 historical write-offs, the credit worthiness of each customer, and general economic conditions. Account balances are charged off against the
 allowance when the Company believes that it is probable that the receivable will not be recovered. Actual write-offs may be in excess of the
 Company's estimated allowance.

 Inventories
 Inventories are stated at the lower of cost (using the first-in, first-out "FIFO" method) or net realizable value. The Company calculates
 inventory valuation adjustments for excess and obsolete inventory based on current inventory levels, movement, expected useful lives, and
 estimated future demand of the products and spare parts.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 55

 Property and Equipment
 Property and equipment is recorded at cost and reduced by accumulated depreciation. Depreciation expense is recognized over the
 estimated useful lives of the assets using the straight-line method. The following table presents the estimated useful life, or range of useful
 lives, of the Company's property and equipment. Maintenance and repairs are charged directly to expense as incurred.

 Minimum

 Maximum

 Machinery and equipment (excluding equipment used for manufacturing of ceramic components)

 3 years

 7 years

 Machinery and equipment used for manufacturing of ceramic components

 3 years

 10 years

 Leasehold improvements (1)

 1 year

 4.5 years

 Software (2)

 3 years

 5 years

 Office equipment, furniture, and fixtures

 3 years

 5 years

 Automobiles

 1 year

 7 years

 (1) Leasehold improvements represent remodeling and retrofitting costs for leased office and manufacturing space and are depreciated over the shorter of
 either the estimated useful lives or the term of the lease. See Note 7, " Commitments and Contingencies - Operating Lease Obligations," for further
 discussion of lease terms.
 (2) Software purchased for internal use consists primarily of amounts paid for perpetual licenses to third-party software providers and implementation
 costs.
 Estimated useful lives are periodically reviewed, and when appropriate, changes are made prospectively. When certain events or
 changes in operating conditions occur, asset lives may be adjusted and an impairment assessment may be performed on the recoverability of
 the carrying amounts. The Company evaluates the recoverability of long-lived assets by comparing the carrying amount of an asset to
 estimated future net undiscounted cash flows generated by the asset (asset group). If such assets are considered to be impaired, the
 impairment recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. The
 evaluation of recoverability involves estimates of future operating cash flows based upon certain forecasted assumptions, including, but not
 limited to, revenue growth rates, gross profit margins, and operating expenses.

 Leases
 The Company determines if an arrangement is a lease, or contains a lease, at the inception of the arrangement and evaluates
 whether the lease is an operating or a finance lease at the commencement date. The Company recognizes right-of-use ("ROU") assets and
 lease liabilities for operating leases with terms greater than 1 year. ROU assets represent the Company's right to use an asset for the lease
 term, while lease liabilities represent the Company's obligation to make lease payments. Operating lease ROU assets and liabilities are
 recognized based on the present value of lease payments over the lease term at the lease commencement date. The Company uses the
 implicit interest rate or, if not readily determinable, its incremental borrowing rate as of the lease commencement date to determine the
 present value of lease payments. The incremental borrowing rate is based on the Company's unsecured borrowing rate, adjusted for the
 effects of collateral. Operating lease ROU assets are recognized net of any lease prepayments and incentives. Based on materiality, the
 Company accounts for both the non-lease components and related lease components as a single lease component. Lease terms may
 include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating lease
 expense is recognized on a straight-line basis over the lease term.
 The Company applies lease modifications that change the contractual terms and conditions of a lease, that were not part of the
 original lease, and grants additional right of use with a price consistent with the market, as a new lease. These modifications will be
 assessed in compliance with the above parameters. For other types of lease modification, the modified lease is reassessed and all new
 assumptions are applied in the calculation of the updated lease liability and the ROU asset.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 56

 Our goodwill represents the excess of the purchase price of a business combination over the fair value of the net assets acquired.
 Goodwill is not amortized but is evaluated annually (July 1) for impairment at the reporting unit level or when indicators of a potential
 impairment are present. Goodwill impairment testing requires significant judgment and management estimates, including, but not limited to,
 the determination of (i) the number of reporting units, (ii) the goodwill and other assets and liabilities to be allocated to the reporting units and
 (iii) the fair values of the reporting units. The estimates and assumptions described above, along with other factors such as discount rates,
 will significantly affect the outcome of the impairment tests and the amounts of any resulting impairment losses. We perform a quantitative
 assessment of goodwill for impairment on an annual basis during the third quarter of each year, which would consist primarily of a discounted
 cash flow analysis to determine the fair value of the reporting unit's goodwill. The forecast of future cash flows, which is based on the
 Company's best estimate of future net sales and operating expenses, is based primarily on expected category expansion, pricing, market
 segment, and general economic conditions. In addition, the Company incorporates other significant inputs to its fair value calculations,
 including discount rate and market multiples, to reflect current market conditions. Between annual tests, a qualitative assessment whenever
 events or changes in circumstances indicate that the carrying amount may not be recoverable. If these interim qualitative factors were to
 indicate that it is more-likely-than-not that the fair value of the reporting unit is less than its carrying value, we would then perform a
 quantitative assessment. To the extent the carrying amount of the reporting unit's allocated goodwill exceeds the unit's fair value, we
 recognize an impairment of goodwill for the excess up to the amount of goodwill of that reporting unit.

 Fair Value of Financial Instruments
 The Company's financial instruments include cash and cash equivalents, restricted cash, investments in marketable securities,
 accounts receivable, and accounts payable. The carrying amounts for these financial instruments reported in the Consolidated Balance
 Sheets approximate their fair values. See Note 5, " Investments and Fair Value Measurements," for further discussion related to fair value.

 Revenue Recognition
 Revenues are recognized when control of the promised goods or services is transferred to the Company's customers, in an amount
 that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Performance obligations are
 identified and the total transaction price is allocated to the performance obligations at execution of the contract.
 The Company's payment terms vary based on the credit risk of its customer. For certain customer types, the Company requires
 payment before the products or services are delivered to the customer. The Company performs an evaluation of customer credit worthiness
 on an individual contract basis to assess whether collectability is reasonably assured at the inception of the contract. As part of this
 evaluation, the Company considers many factors about the individual customer, including the underlying financial strength of the customer
 and/or partnership consortium and the Company's prior history or industry-specific knowledge about the customer and its supplier
 relationships. For smaller projects, the Company requires the customer to remit payment generally within 30 to 60 days after product
 delivery. In some cases, if credit worthiness cannot be determined, prepayment or other security is required.
 Sales commissions are expensed as incurred when product revenue is earned. These costs are recorded within sales and marketing
 expenses.

 Arrangements with Multiple Performance Obligations and Termination for Convenience
 The Company's contracts with customers may include multiple performance obligations. For such arrangements, the Company
 allocates revenue to each performance obligation based on its relative stand-alone selling price. The Company generally determines stand-
 alone selling prices based on stand-alone observable sales to customers.
 With respect to termination, the Company does not have the ability to cancel the contract for convenience. In general, customers can
 cancel for convenience upon the payment of a termination fee that covers costs and profit.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 57

 Practical Expedients and Exemptions
 The time period between when the Company transfers control of products to the customer and the payment for the products is, in
 general, less than one year and, therefore, the practical expedient with respect to a financing component has been adopted by the Company.
 With respect to taxes, the Company has made the policy election to exclude taxes from the measurement of the transaction price.
 The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of
 one year or less; and (ii) contracts for which the Company recognizes revenue at the amount to which the Company has the right to invoice
 for services performed.

 Contract Costs
 The Company recognizes the incremental cost of obtaining contracts as an expense when incurred if the amortization period of the
 assets that the Company otherwise would have recognized is one year or less. The costs of obtaining contracts are included in sales and
 marketing expenses.

 Product and Service Revenue Recognition
 A contract is established by a written agreement (executed sales order, executed purchase order or stand-alone contract) with the
 customer with fixed pricing, and a credit risk assessment is completed prior to the signing of the agreement to ensure that collectability is
 reasonably assured.
 The Company adheres to consistent pricing in the stand-alone sale of products and services. Performance obligations consist of
 delivery of products, such as the Company's PX s, hydraulic turbochargers, pumps and spare parts. Service obligations, such as
 commissioning, which are not material, are deferred as contract liabilities until the services are performed.
 The transfer of control for the Company's products follows transfer of title which typically occurs upon shipment or delivery of the
 equipment in accordance with International Commercial Terms (commonly referred to as "incoterms"). The specified product performance
 criteria for the Company's products pertain to the ability of the Company's product to meet its published performance specifications and
 warranty provisions, which the Company's products have demonstrated on a consistent basis. This factor, combined with historical
 performance metrics, provides the Company's management with a reasonable basis to conclude that the products will perform satisfactorily
 upon commissioning of the plant. Installation is relatively simple, requires no customization, and is performed by the customer under the
 supervision of the Company's personnel. Based on these factors, the Company concluded that performance has been completed upon
 shipment or delivery when title transfers based on the shipping terms, and that product revenue is recognized at a point in time.
 The Company does not provide its customers with a right of product return; however, the Company will accept returns of products that
 are deemed to be damaged or defective when delivered that are covered by the terms and conditions of the product warranty. Product
 warranty is provided consistent with the industry and is considered to be an assurance warranty, not a separate performance obligation.
 Product returns and warranty charges have not been material.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 58

 For large projects, stand-alone contracts are utilized. For these contracts, consistent with industry practice, the Company's customers
 typically require their suppliers, including the Company, to accept contractual holdback provisions (also referred to as a retention payment)
 whereby the final amounts due under the sales contract are remitted over extended periods of time or alternatively, stand-by letters of credit
 are issued. These retention payments are generally 10 % or less of the total contract amount and are due and payable based upon the
 contractual milestone billing, generally between 24 to 36 months from the date of product delivery. These retention payments with
 performance conditions are recorded as contract assets and align with the product warranty period. Given that they are not material in the
 context of the contract, they are not considered to be a financing component.
 Shipping and handling charges billed to customers are pass-through from the freight forwarder to the customer and are included in
 product revenue. The cost of shipping to customers is included in product cost of revenue.

 Contracts are sometimes modified for a change in scope or other requirements. The Company considers contract modifications to
 exist when the modification either creates new or changes the existing enforceable rights and obligations. Any subsequent contract
 modifications are analyzed to determine the treatment of the contract modification as a separate contract, prospectively or through a
 cumulative catch-up adjustment.

 Warranty Costs
 The Company sells products with a limited warranty for a period ranging from 18 months to five years. The Company accrues for
 warranty costs based on estimated product failure rates, historical activity, and expectations of future costs. Periodically, the Company
 evaluates and adjusts the warranty costs to the extent that actual warranty costs vary from the original estimates.

 Stock-based Compensation
 The Company measures and recognizes stock-based compensation expense based on the fair value measurement for all stock-
 based awards made to its employees, non-employee consultants and directors, including restricted stock units ("RSUs"), and incentive stock
 options over the requisite service period (typically the vesting period of the awards). The fair value of RSUs is based on the Company's
 common stock price on the date of grant. The fair value of stock options is calculated on the date of grant using a Black-Scholes (also
 referred to as the "Black-Scholes-Merton") model, which requires a number of complex assumptions including the expected life to exercise a
 vested award based upon the Company's exercise history, expected volatility based upon the Company's historical stock prices, risk-free
 interest rate based upon the U.S. Treasury rates, and the Company's dividend yield. The estimation of awards that will ultimately vest
 requires judgment, and to the extent that actual results or updated estimates differ from the Company's current estimates, such amounts are
 recorded as a cumulative adjustment in the period in which the estimates are revised. See Note 12, " Stock-based Compensation – Fair
 Value Assumptions," for further discussion of fair value measurements of stock-based a wards.

 Foreign Currency
 The Company's reporting currency is the U.S. dollar. The functional currency of the Company's foreign subsidiaries is their respective
 local currencies. The asset and liability accounts of the Company's foreign subsidiaries are translated from their local currencies at the rates
 in effect on the balance sheet date. Revenue and expenses are translated at average rates of exchange prevailing during the period. Gains
 and losses resulting from the translation of the Company's subsidiary balance sheets are recorded as a component of accumulated other
 comprehensive income (loss). Gains and losses from foreign currency transactions are recorded in other income (expense) in the
 Consolidated Statements of Operations.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 59

 Income Taxes
 Current and non-current tax assets and liabilities are based upon an estimate of taxes refundable or payable for each of the
 jurisdictions in which the Company is subject to tax. In the ordinary course of business, there is inherent uncertainty in quantifying income tax
 positions. The Company assesses income tax positions and records tax benefits for all years subject to examination based upon the
 Company's evaluation of the facts, circumstances, and information available at the reporting dates. For those tax positions where it is more
 likely than not that a tax benefit will be sustained, the Company records the largest amount of tax benefit with a greater than 50% likelihood of
 being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax
 positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit is recognized in the financial statements.
 When applicable, associated interest and penalties are recognized as a component of income tax expense. Accrued interest and penalties
 are included within the related tax asset or liability on the Consolidated Balance Sheets.
 Deferred income taxes are provided for temporary differences arising from differences in bases of assets and liabilities for tax and
 financial reporting purposes. Deferred income taxes are recorded on temporary differences using enacted tax rates in effect for the year in
 which the temporary differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is
 recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the
 opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Significant judgment
 is required in determining whether and to what extent any valuation allowance is needed on the Company's deferred tax assets. In making
 such a determination, the Company considers all available positive and negative evidence including recent results of operations, scheduled
 reversals of deferred tax liabilities, projected future income, and available tax planning strategies. See Note 8, " Income Taxes," for further
 discussion of tax valuation allowances.
 The Company's operations are subject to income and transaction taxes in the U.S. and in foreign jurisdictions. Significant estimates
 and judgments are required in determining the Company's worldwide provision for income taxes. Some of these estimates are based on
 interpretations of existing tax laws or regulations. The ultimate amount of tax liability may be uncertain as a result.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 60

 Recently Adopted Accounting Pronouncement

 In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07,
 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07"). ASU 2023-07 expands public entities'
 segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the Chief Operating Decision-
 Maker ("CODM") and included within each reported measure of segment profit or loss, an amount and description of its composition for other
 segment items, and interim disclosures of a reportable segment's profit or loss and assets. ASU 2023-07 is effective for fiscal years
 beginning after December 15, 2023 (i.e., the Company's 2024 Annual Report) and interim periods within fiscal years beginning after
 December 15, 2024. On December 31, 2024, the Company adopted ASU 2023-07 and has applied the disclosure requirements
 retrospectively to all prior periods presented in the financial statements. The Company has evaluated the impact of the adoption of
 ASU 2023-07 on its consolidated financial statements and disclosures, and has determined that the adoption of this guidance will only impact
 disclosures, with no material impact on the Company's results of operations, cash flows, or financial condition. See Note 9, " Segment
 Reporting," for further discussion of the Company's reporting segments.

 Recently Issued Accounting Pronouncement Not Yet Adopted

 In October 2023, the FASB issued ASU 2023-06, Disclosure Agreements - Codification Amendments in Response to the SEC's
 Disclosure Update and Simplification Initiative ("ASU 2023-06"). The amendments in ASU 2023-06 will impact various disclosure areas,
 including the statement of cash flows, accounting changes and error corrections, earnings per share, debt, equity, derivatives, and transfers
 of financial assets. The amendments in ASU 2023-06 will be effective on the date the related disclosures are removed from Regulation S-X
 or Regulation S-K by the Securities and Exchange Commission (the "SEC"), and will no longer be effective if the SEC has not removed the
 applicable disclosure requirement by June 30, 2027. Early adoption is prohibited. The Company has evaluated the impact of the adoption of
 ASU 2023-06 on its consolidated financial statements and disclosures, and has determined that the adoption of this guidance will not
 materially impact the Company's current disclosures. In addition, the Company believes the adoption of ASU 2023-06 will not have a
 material impact on results of operations, cash flows, or financial condition.

 In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures
 ("ASU 2023-09"). ASU 2023-09 was issued to enhance the transparency and decision usefulness of income tax disclosures. ASU 2023-09
 is effective for annual periods beginning after December 15, 2024 (i.e., the Company's 2025 Annual Report) on a prospective basis; however,
 retrospective application is permitted. In addition, early adoption is permitted. The Company has evaluated the impact of the adoption of
 ASU 2023-09 on its consolidated financial statements and disclosures, and has determined that the adoption of this guidance will only impact
 disclosures, with no material impact on results of operations, cash flows, or financial condition. See Note 8, " Income Taxes," for further
 discussion of the Company's income taxes.

 In November 2024, the FASB issued ASU 2024-03, "Income Statement - Reporting Comprehensive Income - Expense
 Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses" ("ASU 2024-03"). ASU 2024-03 is intended
 to require more detailed disclosures about specified categories of expenses (including employee compensation, depreciation, and
 amortization) included in certain expense captions presented on the face of the income statement. ASU 2024-03 is effective for fiscal years
 beginning after December 15, 2026 (i.e., the Company's 2027 Annual Report), and for interim periods within fiscal years beginning after
 December 15, 2027. Early adoption is permitted. The amendments may be applied either (1) prospectively to financial statements issued for
 reporting periods after the effective date of ASU 2024-03 or (2) retrospectively to all prior periods presented in the financial statements. The
 Company is evaluating the potential impact of this adoption on the consolidated financial statements and related disclosures.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 61

 Note 2 — Revenue

 Disaggregation of Revenue
 The Company classifies its channel customers as follows:
 • Megaproject (" MPD "). MPD customers are major firms that develop, design, build, own and/or operate large-scale desalination
 plants or projects. Revenues from projects generally exceed $ 1.0 million and the MPD project timeline between project tender
 and shipment generally ranges from 16 to 36 months; however, from time-to-time, may exceed 36 months.
 • Original Equipment Manufacturer (" OEM "). In addition to the type of customers listed below, revenues from projects generally
 are $ 1.0 million or less and the OEM project timeline from project tender to shipment generally ranges from one to 16 months;
 however, from time-to-time, may exceed 16 months.
 Water: OEM customers are companies that supply equipment, packaged systems, and various operating and
 maintenance solutions for small to medium-sized desalination plants, utilized by commercial and industrial
 entities, as well as national, state and local municipalities worldwide.
 Emerging Technologies: OEM customers include direct sales to commercial or industrial customers, such as
 supermarket chains, cold storage facilities, and other industrial users. Also, included are sales to
 intermediaries, such as refrigeration system installers or refrigeration original equipment manufacturers.
 • Aftermarket (" AM "). AM customers are desalination plant owners and/or operators who can utilize the Company's technology to
 upgrade or keep their plant running. AM revenue includes sales of spare parts, repair services, field services and various
 commissioning activities.

 The following table present s the disaggregated revenues by segment, and within each segment, by geographical market based on the
 customer "shipped to" address, and by channel customers. Sales and usage-based taxes are excluded from revenues. See Note 9,
 " Segment Reporting," for further discussion related to the Company's segments.

 2024

 2023

 2022

 Water

 Total

 Water

 Total

 Water

 Total

 Geographical market

 Middle East
 and Africa

 $ 90,269

 $ 399

 $ 90,668

 $ 76,437

 $ 177

 $ 76,614

 $ 86,227

 $ 94

 $ 86,321

 Asia

 36,030

 36,066

 30,500

 —

 30,500

 24,777

 —

 24,777

 Europe

 9,064

 9,216

 5,740

 6,034

 5,880

 5,915

 Americas

 8,947

 8,998

 15,048

 15,201

 8,544

 8,578

 Total
 revenue

 $ 144,310

 $ 638

 $ 127,725

 $ 624

 $ 125,428

 $ 163

 $ 125,591

 Channel

 Megaproject

 $ 95,399

 $ —

 $ 95,399

 $ 83,665

 $ —

 $ 83,665

 $ 81,755

 $ 133

 $ 81,888

 Original
 equipment
 manufacturer

 31,337

 31,525

 25,548

 25,995

 28,858

 —

 28,858

 Aftermarket

 17,574

 18,024

 18,512

 18,689

 14,815

 14,845

 Total
 revenue

 $ 144,310

 $ 638

 $ 127,725

 $ 624

 $ 125,428

 $ 163

 $ 125,591

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 62

 Contract Balances
 The following table presents contract balances by category.

 2024

 2023

 Accounts receivable, net

 $ 64,066

 $ 46,937

 Contract assets, current (included in prepaid expenses and other assets)

 $ 2,776

 $ 592

 Contract liabilities:

 Contract liabilities, current

 $ 571

 $ 1,097

 Contract liabilities, non-current (included in other liabilities, non-current)

 —

 Total contract liabilities

 $ 571

 $ 1,187

 Contract Assets
 The Company records unbilled receivables as contract assets. The following table presents the change in contract asset balances
 during the reported periods.

 2024

 2023

 Contract assets balance, beginning of year

 $ 592

 $ 1,720

 Transferred to trade receivables

 ( 592)

 ( 1,720)

 Additions to contract assets, excluding amounts transferred to trade receivables during the year

 2,776

 Contract assets balance, end of year

 $ 2,776

 $ 592

 Contract Liabilities
 The Company records contract liabilities, which consist of customer deposits and deferred revenue, when cash payments are
 received in advance of the Company's performance. The following table presents the change in contract liability balances during the reported
 periods.

 2024

 2023

 2022

 Contract liabilities, beginning of year

 $ 1,187

 $ 1,316

 $ 3,406

 Revenue recognized

 ( 1,085)

 ( 1,254)

 ( 3,123)

 Cash received, excluding amounts recognized as revenue during the year

 1,125

 1,033

 Contract liabilities, end of year

 $ 571

 $ 1,187

 $ 1,316

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 63

 Remaining Performance Obligations
 As of December 31, 2024, t he following table presents the revenue that is expected to be recognized related to performance
 obligations that are unsatisfied or partially unsatisfied.

 Period

 Remaining
 Performance
 Obligations

 2025

 $ 5,111

 2026

 3,419

 Total

 $ 8,530

 Note 3 — Net Income Per Share

 Net income for the reported period is divided by the weighted average number of basic and diluted common shares outstanding
 during the reported period to calculate the basic and diluted net income per share, respectively. Outstanding stock options to purchase
 common shares and unvested restricted stock units (" RSUs ") are collectively referred to as "equity awards."
 • Basic net income per share is computed using the weighted average number of common shares outstanding during the period.
 • Diluted net income per share is computed using the weighted average number of common and potentially dilutive shares
 outstanding during the period, using the treasury stock method. Any anti-dilutive effect of equity awards outstanding is not
 included in the computation of diluted net income per share.

 The following table presents the computation of basic and diluted net income per share.

 2024

 2023

 2022

 (In thousands, except per share amounts)

 Numerator

 $ 23,050

 $ 21,504

 $ 24,049

 Denominator (weighted average shares)

 Basic common shares outstanding

 57,213

 56,444

 56,221

 Stock options

 1,051

 1,131

 RSUs

 Diluted common shares outstanding

 57,822

 57,740

 57,641

 Net income per share

 Basic

 $ 0.40

 $ 0.38

 $ 0.43

 Diluted

 $ 0.40

 $ 0.37

 $ 0.42

 The following table presents the equity awards that are excluded from diluted net income per share because their effect would have
 been anti-dilutive.

 2024

 2023

 2022

 Anti-dilutive equity award shares

 1,054

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 64

 N ote 4 — Other Financial Information

 Cash, Cash Equivalents and Restricted Cash
 The Consolidated Statements of Cash Flows explain the changes in the total of cash, cash equivalents and restricted cash, such as
 cash amounts deposited in restricted cash accounts in connection with the Company's credit cards. The following table presents a
 reconciliation of cash, cash equivalents and restricted cash, reported for each period within the Consolidated Balance Sheets and the
 Consolidated Statements of Cash Flows that sum to the total of such amounts.

 2024

 2023

 2022

 Cash and cash equivalents

 $ 29,627

 $ 68,098

 $ 56,354

 Restricted cash, non-current (included in other assets, non-current)

 Total cash, cash equivalents and restricted cash

 $ 29,757

 $ 68,225

 $ 56,458

 Acc ounts Receivable, net

 2024

 2023

 Accounts receivable, gross

 $ 64,287

 $ 47,075

 Allowance for doubtful accounts

 ( 221)

 ( 138)

 Accounts receivable, net

 $ 64,066

 $ 46,937

 Allowance for Doubtful Accounts
 The following table presents the allowance for doubtful accounts activities.

 2024

 2023

 2022

 Balance, beginning of year

 $ 138

 $ 148

 $ 117

 Changes to reserves (1)

 Collection of specific reserves and uncollectible accounts written off, net of recoveries

 ( 123)

 ( 83)

 ( 5)

 Balance, end of year

 $ 221

 $ 138

 $ 148

 (1) General and specific reserves charged to expense.

 Inventories, net

 2024

 2023

 Raw materials

 $ 8,829

 $ 8,752

 Work in process

 6,417

 5,234

 Finished goods

 10,463

 13,319

 Inventories, gross

 25,709

 27,305

 Valuation adjustments for excess and obsolete inventory

 ( 803)

 ( 1,156)

 Inventories, net

 $ 24,906

 $ 26,149

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 65

 Prepaid Expenses and Other Assets

 2024

 2023

 Contract assets

 $ 2,776

 $ 592

 Cloud computing arrangement implementation costs

 Supplier advances

 1,491

 Insurance

 Interest receivable

 Other prepaid expenses and other assets

 1,097

 Total prepaid expenses and other assets

 6,665

 3,843

 Restricted cash, non-current

 Security deposits, non-current

 Total other assets, non-current

 Total prepaid and other assets, and other assets, non-current

 $ 7,056

 $ 4,231

 Property and Equipment

 2024

 2023

 Machinery and equipment

 $ 29,718

 $ 30,962

 Leasehold improvements

 19,419

 18,895

 Software

 1,895

 1,766

 Office equipment, furniture, and fixtures

 2,930

 2,974

 Automobiles

 Construction in progress

 1,207

 Total property and equipment

 54,518

 56,150

 Less: Accumulated depreciation and amortization

 ( 39,094)

 ( 37,451)

 Total property and equipment, net

 $ 15,424

 $ 18,699

 2024

 2023

 2022

 Depreciation and amortization expense

 $ 4,046

 $ 4,102

 $ 4,727

 Goodwill is tested for impairment annually in the third quarter of the Company's fiscal year or more frequently if indicators of potential
 impairment exist. The Company monitors the industries in which it operates and reviews its business performance for indicators of potential
 impairment. The recoverability of goodwill is measured at the reporting unit level, which represents the operating segment. The carrying
 amount of goodwill as of December 31, 2024 and 2023 was $ 12.8 million.
 On July 1, 2024, the Company estimated the fair value of its reporting units using the discounted cash flow approach and market
 approach. The forecast of future cash flows, which is based on the Company's best estimate of future net sales and operating expenses, is
 based primarily on expected category expansion, pricing, market segment, and general economic conditions. The Company incorporates
 other significant inputs to its fair value calculations, including discount rate and market multiples, to reflect current market conditions. As a
 result, the analysis performed indicated that the fair value of each reporting unit, that is allocated goodwill, significantly exceeds its carrying
 value, and therefore, no impairment charges were recorded.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 66

 Acc rued Expenses and Other Liabilities

 2024

 2023

 Accrued expenses and other liabilities, current

 Payroll, incentives and commissions payable

 $ 10,179

 $ 11,037

 Warranty reserve

 1,090

 1,057

 Restructuring accrual

 2,476

 —

 Income taxes payable

 1,077

 Other accrued expenses and other liabilities

 3,036

 2,412

 Total accrued expenses and other liabilities

 17,728

 15,583

 Other liabilities, non-current

 Total accrued expenses, and current and non-current other liabilities

 $ 17,785

 $ 15,790

 Restructuring
 During the fourth quarter of fiscal year 2024, the Company implemented a restructuring plan which included reductions in workforce in
 all functions of the organization, primarily in its San Leandro location, in order to lower the Company's operating cost structure, and to
 position the Company for profitable growth. The Company expects to record an estimated restructuring charge of approximately $ 3.0 million,
 of which $ 2.5 million was recorded during the fourth quarter of fiscal year 2024. This charge was related to severance and benefits to
 38 terminated employees, which was approximately 15 % of the Company's workforce. The Company expect s the implementation of the
 restructuring plan will be substantially complete by the end of the first quarter of fiscal year 2025. All expenses associated with the
 Company's restructuring plan are included in " Restructuring charges " in the Consolidated Statements of Operations.

 Segment

 Total Estimated
 Expense

 Water

 Technology

 Estimated restructuring expense

 $ 1,385

 $ 948

 $ 691

 $ 3,024

 Amount recognized in 2024

 1,147

 2,476

 Remaining estimated expenses to be recognized

 $ 238

 $ 116

 $ 194

 $ 548

 Accumulated Other Comprehensive Income (Loss)
 There were no reclassifications of amounts out of accumulated other comprehensive income (loss) for the years ended December 31,
 2024 and 2022, as there have been no sales of securities or translation adjustments that impacted other comprehensive income during these
 periods. For the year ended December 31, 2023, there was $ 3.0 million of securities sold and the reclassification to other comprehensive
 income was immaterial.
 The tax impact of the changes in accumulated other comprehensive income (loss) for the years ended December 31, 2024, 2023 and
 2022, was not material.

 Advertising Expense
 Advertising expense is charged to operations during the year in which it is incurred. Total advertising expense was not material for
 the years ended December 31, 2024, 2023 and 2022.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 67

 Note 5 — Investments and Fair Value Measurements

 Available-for-Sale Investments

 The classification of available-for-sale investments on the Consolidated Balance Sheets and definition of each of these classifications
 are presented in Note 1, " Description of Business and Significant Accounting Policies - Significant Accounting Policies," subsections " Cash
 and Cash Equivalents " and " Short-term and Long-term Investments."

 Expected maturities can differ from contractual maturities because borrowers may have the right to prepay obligations without
 prepayment penalties. The Company generally holds available-for-sale investments until maturity; however, from time-to-time, the Company
 may elect to sell certain available-for-sale investments prior to contractual maturity.

 Fair Value of Financial Instruments

 The Company follows the authoritative guidance for fair value measurements and disclosures that, among other things, defines fair
 value, establishes a consistent framework for measuring fair value, and expands disclosure for each major asset and liability category
 measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price that would be received to sell an
 asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement
 that should be determined based on assumptions that market participants would use in pricing an asset or liability.

 All of the Company's financial assets and liabilities are remeasured and reported at fair value at each reporting period, and are
 classified and disclosed in one of the following three pricing category levels:
 Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities;
 Level 2 — Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and
 Level 3 — Unobservable inputs in which little or no market activity exists, thereby requiring an entity to develop its own
 assumptions that market participants would use in pricing.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 68

 The following table presents the Company's financial assets measured on a recurring basis by contractual maturity, including pricing
 category, amortized cost, gross unrealized gains and losses, and fair value. As of December 31, 2024 and 2023, the Company had no
 financial liabilities and no Level 3 financial assets.

 December 31, 2024

 December 31, 2023

 Pricing
 Category

 Amortized
 Cost

 Gross
 Gains

 Gross
 Losses

 Fair
 Value

 Amortized
 Cost

 Gross
 Gains

 Gross
 Losses

 Fair
 Value

 Cash equivalents

 Money market
 securities

 Level 1

 $ 2,580

 $ —

 $ —

 $ 2,580

 $ 18,767

 $ —

 $ —

 $ 18,767

 Short-term investments

 U.S. treasury
 securities

 20,303

 —

 20,345

 4,900

 ( 1)

 4,900

 Corporate notes and
 bonds

 27,995

 —

 28,047

 25,674

 ( 18)

 25,667

 Municipal and
 agency notes and
 bonds

 —

 —

 —

 —

 9,887

 —

 ( 9)

 9,878

 Total short-term investments

 48,298

 —

 48,392

 40,461

 ( 28)

 40,445

 Long-term investments

 U.S. treasury
 securities

 —

 1,000

 —

 —

 —

 —

 Corporate notes and
 bonds

 18,983

 ( 13)

 19,035

 9,229

 ( 3)

 9,254

 Municipal and
 agency notes and
 bonds

 1,799

 —

 ( 2)

 1,797

 4,585

 —

 ( 7)

 4,578

 Total long-term investments

 21,781

 ( 15)

 21,832

 13,814

 ( 10)

 13,832

 Total short and long-term
 investments

 70,079

 ( 15)

 70,224

 54,275

 ( 38)

 54,277

 Total

 $ 72,659

 $ 160

 $ ( 15)

 $ 72,804

 $ 73,042

 $ 40

 $ ( 38)

 $ 73,044

 The Company monitors its investments for impairment. It was determined that unrealized gains and losses included in
 accumulated other comprehensive income (loss) at December 31, 2024 and 2023, were temporary in nature, because the changes in market
 value for these securities resulted from fluctuating interest rates, rather than a deterioration of the credit worthiness of the issuers.

 The following table presents a summary of the fair value and gross unrealized losses on the available-for-sale securities that have
 been in a continuous unrealized loss position, aggregated by type of investment instrument. The available-for-sale securities that were in an
 unrealized gain position have been excluded from the table.

 December 31, 2024

 December 31, 2023

 Fair
 Value

 Gross
 Losses

 Fair
 Value

 Gross
 Losses

 U.S. treasury securities

 $ —

 $ —

 $ 2,931

 $ ( 1)

 Corporate notes and bonds

 7,569

 ( 13)

 15,276

 ( 21)

 Municipal and agency notes and bonds

 1,797

 ( 2)

 12,956

 ( 16)

 Total available-for-sale investments with unrealized loss positions

 $ 9,366

 $ ( 15)

 $ 31,163

 $ ( 38)

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 69

 Sales of Available-for-Sale Investments
 The following table presents the sales of available-for-sale investments.

 2024

 2023

 2022

 Corporate notes and bonds

 $ —

 $ 2,966

 $ —

 Realized losses on sales of securities were immaterial during the year ended December 31, 2023.

 Note 6 — Lines of Credit

 Credit Agreement
 The Company entered into a credit agreement with JPMorgan Chase Bank, N.A. (" JPMC ") on December 22, 2021 (" Credit
 Agreement "). The Credit Agreement, which will expire on December 21, 2026, provides a committed revolving credit line of $ 50.0 million.
 The Credit Agreement requires the Company to comply with various covenants, including among other things, financial covenants to
 1) maintain a leverage ratio of consolidated net debt to adjusted earnings before income taxes, depreciation and amortization ("adjusted
 EBITDA"), not to exceed 3.0 to 1; and 2) limit annual capital expenditures. The Credit Agreement allows the Company to, among other
 things, make distributions to shareholders, repurchase its stock, incur other debt or liens, or acquire or dispose of assets provided that the
 Company complies with certain requirements and limitations set forth in the Credit Agreement. The unused portion of the credit line is
 subject to a fee equal to 0.20 % per annum multiplied by the amount of such unused portion.
 On July 15, 2022, the Company and JPMC agreed to a modification of the Credit Agreement ("First Amendment") to change the
 indicated reference rate from the London Interbank Offered Rate (also referred to as "LIBOR") to the Secured Overnight Financing Rate (also
 referred to as " SOFR "). Changes in the Credit Agreement reference rate to SOFR did not materially change the provisions defined in the
 original Credit Agreement nor did this change materially affect the Company's financial statements. During September 2023, the Company
 and JPMC amended the Credit Agreement (the "Second Amendment") to only increase the maximum allowable letters of credit (" LCs ") credit
 line component from $ 25.0 million to $ 30.0 million. No other components or features under the Credit Agreement (including the First
 Amendment dated July 15, 2022) were amended.

 Revolving Loans
 Revolving loans under the Credit Agreement may be in the form of 1) a base rate loan that bears interest equal to (a) the greater of
 the Wall Street Journal prime rate and (b) the sum of (i) one-month reserve adjusted SOFR and (ii) 2.50 %, plus an applicable margin of
 0.25 % or 0.50 %, subject to the Company's total leverage ratio, or 2) a Eurodollar loan that bears interest equal to the sum of the reserved
 adjusted SOFR rate for an interest period elected by the Company, plus an applicable margin of 1.25 % or 1.50 %, based upon the Company's
 total leverage ratio. The Company may request loans up to the lower of a maximum exposure of $ 50.0 million or the amounts of unused
 credit under the Credit Agreement. The unused portion of the credit facility is subject to a facility fee in an amount equal to 0.20 % per annum
 of the average unused portion of the revolving line. At the election of the lender following an event of default, the loans shall bear the
 aforementioned interest rate plus an additional 2 %. As of December 31, 2024, there were no revolving loans outstanding under the Credit
 Agreement.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 70

 Letters of Credit
 Under the Credit Agreement, the Company is allowed to request LCs up to the lower of a maximum exposure of $ 30.0 million or the
 amounts of unused credit under the Credit Agreement. The Credit Agreement does not require any cash collateral when LCs are issued;
 however, at the election of the lender following a default, the lender may require the Company to deposit cash in an amount equal to 103 % of
 the LCs exposure. LCs are subject to customary fees and expenses for issuance or renewal, and all disbursements are subject to the same
 interest rate provision as noted directly above under Revolving Loans. LCs are limited to a term of one year, unless extended. Under the
 LCs component, the Company utilized $ 18.4 million of the maximum allowable credit line of $ 30.0 million, which includes newly issued LCs,
 and previously issued and unexpired stand-by letters of credits ("SBLCs") and certain non-expired commitments under the Company's
 previous Loan and Pledge Agreement with Citibank, N.A. which are guaranteed under the Credit Agreement.

 The following table presents the total outstanding LCs and SBLCs issued by the Company to its customers related to product
 warranty and performance guarantees. See Note 7, "Commitments and Contingencies – Guarantees," for further discussion on product
 warranty and performance guarantees.

 2024

 2023

 Outstanding letters of credit

 $ 15,708

 $ 19,945

 Note 7 — Commitments and Contingencies

 Operating Lease Obligations
 The Company leases office, warehouse and manufacturing facilities under operating leases in San Leandro, CA, Tracy, CA and Katy,
 TX that expire on various dates through fiscal year 2030. The following table presents a summary of operating lease, right of use assets and
 lease liabilities.

 2024

 2023

 Operating lease, right of use asset

 $ 9,695

 $ 11,469

 Lease liabilities, current

 $ 2,020

 $ 1,791

 Lease liabilities, non-current

 9,297

 11,488

 Total lease liability

 $ 11,317

 $ 13,279

 The following table presents certain facts regarding the Company's material property leases.

 Location

 Purpose

 Square
 Footage

 Expiration (1)

 Option to
 Extend (2)

 San Leandro, California

 Headquarters, R&D and manufacturing

 171,000

 December-2028

 1 / 5 years

 Tracy, California

 Manufacturing and warehouse

 54,429

 April-2030

 1 / 5 years

 Katy, Texas

 Office, R&D, warehouse, and yard

 221,220

 December-2029

 2 / 5 years

 (1) Month-Year of original lease expiration.
 (2) Number of renewal option(s) / Number of year(s) per renewal option.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 71

 The following table presents operating lease activities related to all leased properties.

 2024

 2023

 2022

 Operating lease expense

 $ 2,571

 $ 2,571

 $ 2,571

 Cash payments

 2,812

 2,580

 2,650

 The following table presents other information related to outstanding operating leases as of December 31, 2024.

 Weighted average remaining lease term

 4.5 years

 Weighted average discount rate

 7.0 %

 As of December 31, 2024, t he following table presents the minimum lease payments by year under noncancelable operating leases,
 exclusive of execution costs.

 Year

 Lease Liabilities

 2025

 $ 2,736

 2026

 2,982

 2027

 3,072

 2028

 3,165

 2029

 1,031

 2030 and thereafter

 Total future minimum lease payments

 13,197

 Less imputed lease interest

 ( 1,880)

 Total lease liabilities

 $ 11,317

 Warranty
 The following table presents the c hanges in the Company's accrued product warranty reserve.

 2024

 2023

 2022

 Warranty reserve balance, beginning of year

 $ 1,057

 $ 968

 $ 879

 Warranty costs charged to cost of revenue

 Utilization charges against reserve

 ( 251)

 ( 92)

 ( 64)

 Release of accrual related to expired warranties

 ( 206)

 ( 334)

 ( 330)

 Warranty reserve balance, end of year

 $ 1,090

 $ 1,057

 $ 968

 Purchase Obligations
 The Company has purchase order arrangements with its vendors for which the Company has not received the related goods or
 services as of December 31, 2024. These arrangements are subject to change based on the Company's sales demand forecasts. The
 Company has the right to cancel the arrangements prior to the date of delivery. The purchase order arrangements are related to various raw
 materials and component parts, as well as capital equipment. As of December 31, 2024, the Company had approximately $ 1.7 million of
 such open cancellable purchase order arrangements.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 72

 Guarantees

 The Company enters into indemnification provisions under its agreements with other companies in the ordinary course of business,
 typically with its customers. Under these provisions, the Company generally indemnifies and holds harmless the indemnified party for losses
 suffered or incurred by the indemnified party as a result of the Company's activities, generally limited to personal injury and property damage
 caused by the Company's employees at a customer's plant, and in proportion to the employee's percentage of fault for the accident.
 Damages incurred for these indemnifications would be covered by the Company's general liability insurance to the extent provided by the
 policy limitations. The Company has not incurred material costs to defend lawsuits or settle claims related to these indemnification
 agreements. As a result, the estimated valuation of the potential liability arising from these agreements is not material. Accordingly, the
 Company recorded no liabilities for these agreements as of December 31, 2024 and 2023.

 In certain cases, the Company issues product warranty and performance guarantees to its customers for amounts generally equal to
 10 % or less of the total sales agreement to endorse the execution of product delivery and to the warranty of design work, fabrication and
 operating performance of the Company's devices. These guarantees are generally LCs that have a weighted average life at inception of 37
 months. See Note 6, " Lines of Credit – Letters of Credit," for information related to LCs.

 Litigation
 From time-to-time, the Company has been named in and subject to various proceedings and claims in connection with its business.
 The Company may in the future become involved in litigation in the ordinary course of business, including litigation that could be material to
 its business. The Company considers all claims, if any, on a quarterly basis and, based on known facts, assesses whether potential losses
 are considered reasonably possible, probable and estimable. Based upon this assessment, the Company then evaluates disclosure
 requirements and whether to accrue for such claims in its consolidated financial statements. The Company records a provision for a liability
 when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are
 reviewed at least quarterly and are adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other
 information and events pertaining to a particular case. As of December 31, 2024, the Company was not involved in any lawsuits, legal
 proceedings or claims that would have a material effect on the Company's financial position, results of operations, or cash flows. Therefore,
 there were no material losses which were probable or reasonably possible.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 73

 Note 8 — Income Taxes

 The following table presents the Company's U.S. and foreign components of consolidated income before income taxes and the
 provision for income taxes.

 2024

 2023

 2022

 Income before income taxes:

 U.S.

 $ 25,608

 $ 22,592

 $ 25,918

 Foreign

 Total income before income taxes

 $ 25,735

 $ 22,705

 $ 26,071

 Current tax provision:

 Federal

 $ 1,266

 $ 1,268

 $ 698

 State

 Foreign

 Current tax provision

 1,396

 1,332

 Deferred tax provision (benefit):

 Federal

 1,619

 ( 262)

 1,104

 State

 ( 330)

 Total deferred tax provision (benefit)

 1,289

 ( 131)

 1,218

 Total provision for income taxes

 $ 2,685

 $ 1,201

 $ 2,022

 The following table presents a reconciliation of income taxes computed at the statutory federal income tax rate to the effective tax rate
 implied by the accompanying Consolidated Statements of Operations.

 2024

 2023

 2022

 U.S. federal taxes at statutory rate

 21 %

 21 %

 21 %

 State income tax, net of federal benefit

 —

 —

 Stock-based compensation

 ( 1)

 ( 4)

 Non-deductible expenses

 Federal research credits

 ( 4)

 ( 6)

 ( 4)

 Valuation allowance

 ( 2)

 —

 —

 Foreign derived intangible income

 ( 8)

 ( 10)

 ( 7)

 Effective tax rate

 10 %

 5 %

 8 %

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 74

 The following table presents the components of the Company's net deferred tax asset, which is presented in other assets, non-current
 on the Consolidated Balance Sheets.

 2024

 2023

 Deferred tax assets:

 Net operating loss carry forwards

 $ 496

 $ 547

 Amortization of research and experimental expenditures

 7,649

 6,079

 Accruals and reserves

 4,549

 4,857

 Operating lease liabilities

 2,474

 2,870

 Research and development, and foreign tax credit carry forwards

 4,908

 7,609

 Acquired intangibles

 —

 Total deferred tax assets

 20,076

 22,119

 Valuation allowance

 ( 4,425)

 ( 4,600)

 Total deferred tax assets, net of valuation allowance

 15,651

 17,519

 Deferred tax liabilities:

 Depreciation on property and equipment

 ( 2,116)

 ( 2,545)

 Right of use asset

 ( 2,110)

 ( 2,473)

 Other

 ( 25)

 ( 10)

 ( 2,396)

 ( 2,167)

 Total deferred tax liabilities

 ( 6,647)

 ( 7,195)

 Net deferred tax asset

 $ 9,004

 $ 10,324

 In asserting the recoverability of deferred tax assets, the Company considers whether it is more likely than not that the assets will be
 realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in
 which those temporary differences become deductible.
 The Company assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated
 to use the existing deferred tax assets. In making such a determination, the Company considers all available positive and negative evidence,
 including recent results of operations, scheduled reversals of deferred tax liabilities, projected future income, tax law updates, and available
 tax planning strategies. A significant piece of objective positive evidence evaluated was the cumulative profit incurred in the U.S.
 On the basis of this evaluation, as of December 31, 2024, the Company continues to maintain a valuation allowance on its California
 research and development (" R&D ") credit carryovers of $ 4.4 million. In tax year 2024 California amended its tax laws to suspend the use of
 net operating loss carryovers of amounts over $1.0 million for the 2024 to 2026 tax years. As a result of this amendment, the Company
 recognized a deferred tax asset of California R&D credit carryovers of $ 0.4 million. The Company will maintain a valuation allowance on its
 remaining California R&D credit carryovers because it is more likely than not that the Company will continue to annually generate more
 California R&D tax credits than it utilizes, resulting in no net reduction of credits.
 The Company continues to assert that the accumulated foreign earnings of its subsidiaries in Spain and Canada are permanently
 reinvested. Due to the U.S. Tax Cuts and Jobs Act ("Tax Act") enacted in 2017, any future repatriation of the earnings of its subsidiaries in
 Spain and Canada would not be subject to U.S. federal income tax. The Company has estimated that the foreign withholding taxes and U.S.
 state income taxes related to a potential future repatriation of these earnings would be immaterial. The Company has evaluated the impact of
 the global intangible low taxed income (" GILTI ") and has concluded that the impact to the Company is immaterial.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 75

 The following table presents the Company's California net operating loss carryforward.

 Earliest
 Expiration Year

 2024

 2023

 California

 2034

 $ 6,822

 $ 7,391

 Utilization of the California net operating loss carryforward may be subject to a substantial annual limitation due to the ownership
 change limitations provided by the California Revenue and Taxation Code which could result in the expiration of the net operating loss
 carryforward before utilization. As of December 31, 2024, there are no ownership change limits on the utilization of the California net
 operating loss carryforward.

 The following table presents the Company's R&D credit by taxing authority, minimum tax credit and foreign tax credit carryforwards.

 Earliest
 Expiration Year

 2024

 2023

 Federal

 2043

 $ 91

 $ 2,983

 California

 No Expiration Date

 6,098

 5,855

 Total credit carryforwards

 $ 6,189

 $ 8,838

 Utilization of the credit carryforwards may be subject to a substantial annual limitation due to the ownership change limitations
 provided by the U.S. Internal Revenue Code ("IRC") and similar California provisions. As of December 31, 2024, there are no ownership
 change limits on the utilization of these net tax credit carryforwards.

 Accounting for uncertain tax positions is based on judgment regarding the largest amount that is greater than 50% likely of being
 realized upon the ultimate settlement with a taxing authority. The following table presents the aggregate changes in the balance of the gross
 unrecognized tax benefits.

 2024

 2023

 2022

 Gross unrecognized tax benefits, beginning of year

 $ 1,705

 $ 1,505

 $ 1,321

 Additions:

 Current year tax position

 Prior year tax position

 —

 Reductions:

 Prior year tax position

 ( 13)

 —

 —

 Gross unrecognized tax benefits, end of year

 $ 1,862

 $ 1,705

 $ 1,505

 As of December 31, 2024, the Company had unrecognized tax benefits of $ 1.9 million, of which $ 1.1 million, if recognized, would
 affect the Company's effective tax rate.
 The Company adopted the accounting policy that interest and penalties are classified as part of its income taxes. As of December 31,
 2024, there was no accrued interest or penaltie s associated with any unrecognized tax benefits.
 As of December 31, 2024, the Company is under an examination of its 2021 U.S. Federal income tax return by the U.S. Federal tax
 authorities, and there are no other examinations by any state and foreign tax authorities. The Company believes that, as of December 31,
 2024, the gross unrecognized tax benefits will not materially change in the next twelve months. The Company believes that it has adequately
 provided for any reasonably foreseeable outcomes related to any tax audits and that any settlement will not have a material adverse effect on
 the consolidated financial position or results of operations. However, there can be no assurances as to the possible outcomes.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 76

 The Organization for Economic Cooperation and Development (" OCED ") developed Model Global Anti-Base Erosion (" GloBE ") rules
 (commonly referred to as Pillar II) establishing a Global Minimum Tax to ensure multinational enterprises with consolidated revenue of more
 than 750.0 million pay at least an effective tax rate of 15% on income arising in each jurisdiction in which they operate. Given the Company
 does not meet the minimum threshold, there is no impact to our tax provision for fiscal year 2024. The Company will continue to evaluate the
 impact of these tax law changes in future reporting periods.

 Note 9 — Segment Reporting
 The Company's Chief Operating Decision-Maker ("CODM") is its President and Chief Executive Officer. The Company continue s to
 monitor and review its segment reporting structure in accordance with authoritative guidance to determine whether any changes have
 occurred that would impact its reportable segments.

 Segment Definition
 Income and type of expense activities that are included in the Water and Emerging Technologies segments and corporate operating
 expenses are as follows:
 Water segment: The continued development, sales and support of the PX, hydraulic turbochargers and pumps used in
 seawater desalination and wastewater treatment activities.
 Emerging Technologies segment: The continued development, sales and support of activities related to emerging
 technologies, such as the PX G1300 used in industrial and commercial refrigeration applications.
 Corporate operating expenses: The corporate expenses include certain unallocated expenses outside of the operating
 segments, such as audit and accounting services, legal services, board of director fees and expenses, human resources
 activities, information systems activities and other separately managed general expenses not related to the identified
 segments.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 77

 Segment Financial Information
 The CODM allocates resources to, and assesses the performance of, each operating segment using information about its revenue
 and operating income. T he CODM reviews consolidated reports and analysis at the levels presented in the following tables. In addition, the
 operating income (loss) for each segment excludes other income and expenses, and corporate operating expenses not included in how the
 CODM assesses the performance of the operating segments, such as income taxes and other separately managed expenses not attributed
 to the operating segments. Assets and liabilities are reviewed at the consolidated level by the CODM and are not attributed to the segments.

 The following table presents a summary of the Company's financial information by segment, including significant segment expenses,
 and corporate operating expenses.

 Year Ended December 31, 2024

 Year Ended December 31, 2023

 Year Ended December 31, 2022

 Water

 Total

 Water

 Total

 Water

 Total

 $ 144,310

 $ 638

 $ —

 $ 127,725

 $ 624

 $ —

 $ 125,428

 $ 163

 $ —

 $ 125,591

 Cost of revenue

 47,389

 —

 48,015

 40,290

 —

 41,270

 38,158

 —

 38,235

 Gross profit
 (loss)

 96,921

 —

 96,933

 87,435

 ( 356)

 —

 87,079

 87,270

 —

 87,356

 Operating
 expenses

 General and
 administrative

 8,127

 3,821

 21,126

 33,074

 7,751

 3,927

 17,186

 28,864

 6,936

 4,104

 17,301

 28,341

 Sales and
 marketing

 15,683

 7,340

 2,400

 25,423

 13,691

 6,053

 2,420

 22,164

 11,065

 3,047

 2,165

 16,277

 Research and
 development

 4,523

 11,713

 —

 16,236

 4,251

 12,750

 —

 17,001

 4,151

 13,758

 —

 17,909

 Restructuring
 charges

 1,147

 2,476

 —

 —

 —

 —

 —

 —

 —

 —

 Total
 operating
 expenses

 29,480

 23,706

 24,023

 77,209

 25,693

 22,730

 19,606

 68,029

 22,152

 20,909

 19,466

 62,527

 Operating income
 (loss)

 $ 67,441

 $ ( 23,694)

 $ ( 24,023)

 $ 19,724

 $ 61,742

 $ ( 23,086)

 $ ( 19,606)

 $ 19,050

 $ 65,118

 $ ( 20,823)

 $ ( 19,466)

 $ 24,829

 The following table presents a summary of the Company's depreciation and amortization by segment and corporate operating
 expenses.

 2024

 2023

 2022

 Water

 $ 2,875

 $ 2,779

 $ 2,141

 Emerging Technologies

 1,864

 Total depreciation and amortization

 $ 4,046

 $ 4,102

 $ 4,764

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 78

 Note 10 — Concentrations

 Revenue by Geographic Location and Country
 The following table presents the Company's product revenue by geographic locations. The geographic information includes product
 revenue from the Company's domestic and international customers based on the customers' requested delivery locations, except for certain
 cases in which the customer directed the Company to deliver its products to a location that differs from the known ultimate location of use. In
 such cases, the ultimate location of use rather than the delivery location is reflected in the table.

 2024

 2023

 2022

 Revenue by geographic location:

 United States

 1 %

 2 %

 1 %

 International

 99 %

 98 %

 99 %

 Total revenue

 100 %

 100 %

 100 %

 Product revenue by country: (1)

 United Arab Emirates

 21 %

 10 %

 **

 Morocco

 19 %

 **

 **

 Saudi Arabia

 15 %

 15 %

 47 %

 India

 11 %

 **

 **

 Algeria

 **

 18 %

 **

 China

 **

 15 %

 **

 Others (2)

 34 %

 42 %

 53 %

 Total

 100 %

 100 %

 100 %

 ** Zero or less than 10%.
 (1) Countries representing more than 10% of product revenues for the periods presented.
 (2) Countries in the aggregate, individually representing less than 10% of product revenues for the periods presented.

 Customer Revenue Concentration
 The following table presents the customers that account for 10% or more of the Company's revenue and their related segment for
 each of the periods presented. Although certain customers might account for greater than 10% of the Company's revenue at any one point in
 time, the concentration of revenue between a limited number of customers shifts regularly, depending on when revenue is recognized. The
 percentages by customer reflect specific relationships or contracts that would concentrate revenue for the periods presented and do not
 indicate a trend specific to any one customer.

 Segment

 2024

 2023

 2022

 Customer A

 Water

 13 %

 **

 15 %

 Customer B

 Water

 11 %

 **

 **

 Customer C

 Water

 **

 13 %

 **

 Customer D

 Water

 **

 **

 18 %

 Customer E

 Water

 **

 **

 11 %

 ** Zero or less than 10%.

 Long-lived Assets
 All of the Company's long-lived assets were located in the United States at December 31, 2024 and 2023.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 79

 Major Supply Vendors
 The following table presents the major supply vendors accounting for 10% or more of the Company's consolidated supply and
 manufacturing costs purchases.

 2024

 2023

 2022

 Vendor A

 22 %

 21 %

 21 %

 Vendor B

 20 %

 19 %

 19 %

 Vendor C

 **

 13 %

 13 %

 ** Zero or less than 10%.

 Note 11 — Stockholders' Equity

 Preferred Stock
 The Company has the authority to issue 10,000,000 shares of preferred stock with a par value of $ 0.001 per share. The Board of
 Directors (the " Board ") has the authority, without action by the Company's stockholders, to designate and issue shares of preferred stock in
 one or more series. The Board is also authorized to designate the rights, preferences, and voting powers of each series of preferred stock,
 any or all of which may be greater than the rights of the common stock including restrictions of dividends on the common stock, dilution of the
 voting power of the common stock, reduction of the liquidation rights of the common stock, and delaying or preventing a change in control of
 the Company without further action by the Company's stockholders. To date, the Board has not designated any rights, preferences, or
 powers of any preferred stock, and as of December 31, 2024 and 2023, no shares of preferred stock were issued or outstanding.

 Common Stock
 The Company has the authority to issue 200,000,000 shares of common stock with a par value of $ 0.001 per share. Subject to the
 preferred rights of the holders of shares of any class or series of preferred stock as provided by the Board with respect to any such class or
 series of preferred stock, the holders of the common stock shall be entitled to receive dividends, as and when declared by the Board. In the
 event of any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, after the distribution or payment to the
 holders of shares of any class or series of preferred stock as provided by the Board with respect to any such class or series of preferred
 stock, the remaining assets of the Company available for distribution to stockholders shall be distributed among and paid to the holders of
 common stock ratably in proportion to the number of shares of common stock held by them.

 Share Repurchase Program

 The Company's Board, from time-to-time, has authorized a share repurchase program under which the Company may, at the
 discretion of management, repurchase its outstanding common stock in the open market, or in privately negotiated transactions, in
 compliance with applicable state and federal securities laws. The timing and amounts of any purchase under the Company's share
 repurchase program is based on market conditions and other factors including price, regulatory requirements, and capital availability. The
 Company accounts for stock repurchases under these programs using the cost method. As of December 31, 2024, the Company has
 repurchased 11.4 million shares of its common stock at an aggregate cost of $ 130.5 million under all share repurchase programs.

 March 2021 Authorization
 On March 11, 2021, the Company announce that the Board authorized a share repurchase program under which the Company may
 repurchase its outstanding common stock, at the discretion of management, up to $ 50.0 million in aggregate cost, which included both the
 share value of the acquired common stock and the fees charged in connection with acquiring the common stock (the " March 2021
 Authorization "). On July 1, 2022, the Company concluded all share repurchases under the March 2021 Authorization. Under the March 2021
 Authorization, the Company repurchased 2,692,577 shares at an aggregate cost of $ 50.0 million.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 80

 November 2024 Authorization
 On November 18, 2024, the Company announced that the Board authorized a share repurchase program under which the Company
 may repurchase its outstanding common stock, at the discretion of management, up to $ 50.0 million in aggregate cost, which included both
 the share value of the acquired common stock and the fees charged in connection with acquiring the common stock (the " November 2024
 Authorization "). On December 11, 2024, the Company concluded all share repurchases under the November 2024 Authorization.

 The following table presents the share repurchase activities under the November 2024 Authorization as of December 31, 2024.

 Number of Shares
 Purchased

 Average Price Paid
 per Share (1)

 Plan Activity

 (In millions)

 November 2024 Authorization

 $ 50.0

 Repurchases under November 2024 Authorization

 3,248,533

 $ 15.37

 ( 50.0)

 Remaining amount under November 2024 Authorization

 $ —

 (1) Excluding commissions

 Note 12 — Stock-based Compensation

 Stock Option Plans
 In July 2020, the stockholders approved the 2020 Incentive Plan (the " 2020 Plan "), that permits the grant of stock options, restricted
 stock units ("RSU"), stock appreciation rights ("SARS"), restricted stock, restricted stock awards ("RSA"), performance restricted stock units
 ("PRSU"), performance shares, and other stock-based awards to employees, officers, directors, and consultants. Prior to the approval of the
 2020 Plan, the Company maintained the 2016 Incentive Plan and the Amended and Restated 2008 Equity Incentive Plan (hereinafter
 referred to as the " Predecessor Plans "). Subject to adjustments, as provided in the 2020 Plan, the number of shares of common stock
 initially authorized for issuance under the 2020 Plan was 5,894,727 shares (which consist of 4,500,000 new share awards plus
 1,394,727 share awards that were authorized and unissued under the Predecessor Plans) plus up to 4,850,630 shares that were set aside for
 awards granted under the Predecessor Plans that are subsequently forfeited. The 2020 Plan supersedes all previously issued stock
 incentive plans (including the Predecessor Plans) and is currently the only available plan from which awards may be granted. The
 Company's 2020 Plan and Predecessor Plans are hereinafter referred to as " Equity Incentive Plans."
 Shares available for grant under the 2020 Plan at December 31, 2024 were 3,179,045 shares. There were no shares available for
 grant under the Predecessor Plans after July 15, 2020.

 Stock Options and Stock Appreciation Rights
 Employee stock options and SARS outstanding at December 31, 2024 and to be granted subsequently to December 31, 2024,
 generally vest over four years and expire no more than 10 years after the date of grant. Non-employee board of director grants generally
 vest one year after the date of grant or on the date of the annual stockholders' meeting following the date of grant, whichever date occurs
 first, and expire no more than 10 years after the date of grant.

 Restricted Stock Units
 RSUs outstanding at, and to be awarded subsequently after, December 31, 2024, generally vest 25 % annually over the four years
 from date of grant and are dependent upon continued employment. Non-employee board of director grants generally vest one year after the
 date of grant or on the date of the annual stockholders' meeting following the date of grant, whichever date occurs first. As RSUs vest, the
 units will be settled in shares of common stock based on a one -to-one ratio. The units are valued based on the Company's market price on
 the date of grant.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 81

 Restricted Stock Awards
 There were no RSAs outstanding as of December 31, 2024.

 Fair Value Assumptions

 Stock Options and Stock Appreciation Rights
 The fair value of stock options and SARS granted to employees is based on the Black-Scholes option pricing model. To determine
 the inputs for the Black-Scholes option pricing model, the Company is required to develop several assumptions, which are highly subjective.
 The Company determines these inputs at grant date as follows:
 • Expected Term:
 Employees: Based on historical exercise data.
 Board: Based on the simplified method.
 SARS: Based on historical exercise data. Post-grant date expected term is based upon the remaining grant life at each
 remeasurement date.
 • Expected Volatility: Based on the Company's historical data and the corresponding expected term.
 • Risk-Free Interest Rate: Based on U.S. Treasury issues with terms similar to the expected term.
 • Dividend Yield: Based on an expected dividend yield of zero.
 The following table presents 1) assumptions used in the Black-Scholes option pricing model to determine the estimated grant date fair
 values of stock options and SARS granted to employees; and 2) options and SARS granted and weighted average grant date fair value.

 2024

 2023

 2022

 (Shares in thousands)

 Weighted average expected life (years)

 4.0

 9.1

 4.0

 Weighted average expected volatility

 49.0 %

 60.4 %

 48.7 %

 Risk-free interest rate

 3.52 % – 4.54 %

 3.87 % – 3.87 %

 1.44 % – 3.90 %

 Weighted average dividend yield

 — %

 — %

 — %

 Stock options and SARS granted

 Weighted average grant date fair value

 $ 6.36

 $ 8.72

 $ 7.43

 Restricted Stock Units
 The fair value of RSUs granted to employees is based on the Company's common stock price on the date of grant.

 Forfeitures
 The Company estimates forfeitures at the time of grant and revises those estimates periodically in subsequent periods if actual
 forfeitures differ from those estimates. The Company uses historical data to estimate pre-vesting option forfeitures and records stock-based
 compensation expense only for those awards that are expected to vest. If the Company's actual forfeiture rate is materially different from its
 estimate, the stock-based compensation expense could be significantly different from what the Company has recorded in the current period.
 The following table presents the estimated weighted average forfeiture rates for all employees used in determining the expense in the
 stock-based compensation expense table above.

 2024

 2023

 2022

 Stock options, SARS and RSUs

 6.3 %

 6.4 %

 9.2 %

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 82

 Stock -base d Compensation Expense
 The following table presents the s tock-based compensation expense related to the fair value measurement of awards granted to
 employees by expense category and by type of award. All stock-based payment awards are amortized on a straight-line basis over the
 requisite service periods of the awards, generally the vesting periods.

 2024

 2023

 2022

 Stock-based compensation expense charged to:

 Cost of revenue

 $ 1,076

 $ 719

 $ 506

 General and administrative

 4,013

 3,661

 3,436

 Sales and marketing

 3,489

 2,333

 1,592

 Research and development

 1,744

 1,325

 Total stock-based compensation expense

 $ 10,322

 $ 8,038

 $ 6,511

 Stock-based compensation expense by type of award:

 Stock options and SARS

 $ 2,334

 $ 1,985

 $ 2,837

 RSUs

 7,988

 6,053

 3,674

 Total stock-based compensation expense

 $ 10,322

 $ 8,038

 $ 6,511

 Stock Option and Stock Appreciation Rights Activities
 The following table presents stock option and SARS activities under the Equity Incentive Plans.

 Number of
 Shares

 Weighted
 Average
 Exercise Price

 Weighted
 Average
 Remaining
 Contractual
 Life

 Aggregate
 Intrinsic
 Value (1)

 (Per share)

 (In years)

 Balance, December 31, 2021

 2,544

 $ 9.21

 Granted

 19.13

 Exercised

 ( 429)

 7.32

 $ 6,387

 ( 97)

 13.66

 Balance, December 31, 2022

 2,421

 11.02

 Granted

 22.13

 Exercised

 ( 511)

 9.38

 5,619

 Balance, December 31, 2023

 1,924

 11.54

 Granted

 15.02

 Exercised

 ( 767)

 9.26

 5,260

 ( 270)

 18.06

 Balance, December 31, 2024

 1,608

 $ 13.09

 6.6

 $ 4,063

 Vested and exercisable as of December 31, 2024

 $ 11.08

 4.1

 $ 3,670

 Vested and exercisable as of December 31, 2024 and expected to vest thereafter

 1,538

 $ 13.00

 6.4

 $ 4,026

 (1) The aggregate intrinsic value of an exercised option and SARS is calculated as the difference between the exercise price of the underlying option and
 SARS and the fair value of the Company's common stock at the time of exercise. The aggregate intrinsic value at December 31, 2024 is calculated as
 the difference between the exercise price of the underlying outstanding options and SARS and the fair value of the Company's common stock as of
 December 31, 2024 or the last trading day prior to December 31, 2024.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 83

 Restricted Stock Unit Activities
 The following table presents RSU activities under the Equity Incentive Plans.

 Number of
 Shares

 Weighted
 Average
 Grant Date
 Fair Value

 (Per share)

 Balance, December 31, 2021

 $ 12.23

 Awarded

 19.61

 Vested

 ( 268)

 12.03

 ( 60)

 15.16

 Balance, December 31, 2022

 15.51

 Awarded

 23.97

 Vested

 ( 294)

 14.02

 ( 21)

 19.91

 Balance, December 31, 2023

 20.91

 Awarded

 14.85

 Vested

 ( 389)

 18.79

 ( 281)

 20.70

 Balance, December 31, 2024

 1,000

 17.24

 Vested Stock Options and RSUs
 The following table presents the total grant date fair value of stock options and RSUs vested during the period.

 2024

 2023

 2022

 Stock options

 $ 857

 $ 2,724

 $ 2,683

 RSUs

 7,298

 4,112

 3,226

 Total grant date fair value of stock options and RSUs vested during the period

 $ 8,155

 $ 6,836

 $ 5,909

 Unamortized Stock-Based Compensation Costs
 Stock-based compensation costs related to unvested stock options and RSUs will generally be amortized on a straight-line basis over
 the remaining average service period of each award. The following table presents the unamortized compensation costs and weighted
 average service period of all unvested outstanding awards as of December 31, 2024.

 Unamortized
 Compensation
 Costs

 Weighted Average
 Service Period

 (In years)

 Stock options

 $ 3,927

 2.6

 RSUs

 12,106

 1.3

 Total unamortized compensation costs, net of adjusted forfeitures

 $ 16,033

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 84

 Item 9 — Changes in and Disagreements with Accountants on Accounting and Financial
 Disclosure
 None.

 Item 9A — Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
 Our management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of
 our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, or
 "Exchange Act") as of the end of the period covered by this Annual Report on Form 10-K. Based on that evaluation, our Chief Executive
 Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective to ensure that
 information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and
 reported within the time periods specified in Securities and Exchange Commission rules and forms and that such information is accumulated
 and communicated to management as appropriate to allow for timely decisions regarding required disclosure.
 Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, and our Chief
 Executive Officer and Chief Financial Officer have concluded that these controls and procedures are effective at the "reasonable assurance"
 level. Our management, including the Chief Executive Officer and Chief Financial Officer, believes that a control system, no matter how well
 designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and that no evaluation of
 controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
 Management's Annual Report on Internal Control Over Financial Reporting and Attestation Report of the
 Registered Public Accounting Firm
 Management's Report on Internal Control Over Financial Reporting
 Management is responsible for establishing and maintaining adequate internal control over the Company's financial reporting.
 Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2024. In making this
 assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in
 Internal Control — Integrated Framework (2013). Based on the assessment using those criteria, management concluded that, as of
 December 31, 2024, our internal control over financial reporting was effective.
 Attestation Report of the Registered Public Accounting Firm
 The Company's independent registered public accountants, Deloitte & Touche, LLP, audited the Consolidated Financial Statements
 included in this Annual Report on Form 10-K and have issued an audit report on the Company's internal control over financial reporting. The
 report on the audit of internal control over financial reporting appears in Part II, Item 8, " Financial Statements and Supplementary Data," in
 this Annual Report on Form 10-K.
 Changes in Internal Control Over Financial Reporting
 There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have
 materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 85

 Item 9B — Other Information

 10b5-1 Plans
 As set forth below, during the three months ended December 31, 2024, one officer (within the meaning of Rule 16a-1(f) under the
 Securities Exchange Act of 1934, as amended) has adopted and terminated a Rule 10b5-1 trading arrangement. There has been no non-
 Rule 10b5-1 trading arrangements (as defined in Item 408 of Regulation S-K).

 Name

 Title

 Date of Adoption or
 Termination (1)

 Status (2)

 Plan Type

 Rodney Clemente

 SVP, Water

 November 27, 2024

 Termination

 Rule 10b5-1 trading arrangement

 Rodney Clemente

 SVP, Water

 December 10, 2024

 Adoption

 Rule 10b5-1 trading arrangement (3)

 (1) Effective (a) date of adoption; or (b) date of termination, of registrant's Rule 10b5-1 trading arrangement.
 (2) Activity related to registrant's Rule 10b5-1 trading arrangement.
 (3) The trading arrangement covers the sale of 67,281 shares of the Company's common stock held by the participant at market price at various dates
 during the plan active period. This plan is scheduled to expire on July 31, 2025 or upon the completion of all sales thereunder.

 Insider Trading Policy
 We have adopted an Insider Trading Policy (the " Policy "), which outlines the trading policies and procedures governing the purchase,
 sale, and other dispositions of the Company's securities by directors, officers and employees that are reasonably designed to promote
 compliance with insider trading laws, rules and regulations, and Nasdaq listing standards applicable to the company. A copy of the Policy is
 filed as an exhibit to this Annual Report of Form 10-K.
 The Policy prohibits all employees of the Company from using or pledging Energy Recovery's securities as collateral in a margin
 account. Unless expressly approved in advance by our Compliance Officer, no employee of the Company may enter into a loan that uses or
 pledges Energy Recovery's securities as collateral.
 The Policy also prohibits the named executive officers and other officers of the Company from engaging at any time in hedging or
 monetization transactions involving Energy Recovery's securities, such as zero-cost collars and forward sale contracts, or from contributing
 Energy Recovery's securities to exchange funds that could be interpreted as having the effect of hedging in Energy Recovery's securities. All
 other employees of the Company are strongly discouraged from engaging in hedging activities.

 Form Equity Incentive Plan Agreement
 On January 23, 2025, the Compensation Committee of the Board adopted a new form of performance restricted stock unit ("PRSU")
 award agreement under the 2020 Equity Incentive Plan (the "2020 Plan"), to among other things, define the terms of the performance metrics
 and performance period for such PRSUs.
 The foregoing is a summary description of the material terms of the form of PRSU award agreement, and is qualified in its entirety by
 the text of the form, which are attached hereto as Exhibit 10.20 and incorporated herein by reference.

 Item 9C — Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
 Not applicable.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 86

 Certain information required by Part III is omitted from this report because we will file with the SEC a definitive proxy statement
 pursuant to Regulation 14A, or the 2025 Proxy Statement ("Proxy Statement"), no later than 120 days after the end of fiscal year 2024, and
 certain information included therein is incorporated herein by reference.

 Item 10 — Directors, Executive Officers and Corporate Governance
 The information required by this Item is included in and incorporated by reference from the Proxy Statement.

 Item 11 — Executive Compensation
 The information required by this Item is included in and incorporated by reference from the Proxy Statement under the captions
 "Director Compensation," "Executive Compensation," "Compensation Committee Interlocks and Insider Participation," "Compensation
 Discussion and Analysis," "Report of the Compensation Committee" and "Compensation Policies and Practices as They Relate to Risk
 Management."

 Clawback Policy on Executive Compensation in Restatement Situations
 In July 2023, the Compensation Committee approved the Company's Compensation Recovery Policy (the "Clawback Policy") in
 accordance with the applicable rules of the Nasdaq Stock Market, and Section 10D and Rule 10D-1 of the Securities Exchange Act of 1934,
 as amended. The purpose of the Clawback Policy is to describe the circumstances under which the Company is required to recover certain
 compensation paid to certain executive officers. In the event that the Company is required to prepare an accounting restatement, the
 Company, through its Board or its Compensation Committee will recover reasonably promptly from any of the Company's executive officer
 the amount of erroneously awarded compensation received during the recovery period.

 Item 12 — Security Ownership of Certain Beneficial Owners and Management and Related
 Stockholder Matters

 The following table sets forth equity compensation plan information as of December 31, 2024.

 Plan Category

 Number of Securities to be
 Issued Upon Exercise of
 Outstanding Options, Warrants,
 and Rights

 Weighted- Average
 Exercise Price of
 Outstanding
 Options, Warrants,
 and Rights

 Number of Securities Remaining
 Available for Future Issuance
 Under Equity Compensation
 Plans (Excluding Securities
 Reflected in the First Column)

 Equity compensation plans approved by security holders (1)

 2,539,357

 $13.09

 3,179,045

 Equity compensation plans not approved by security holders

 None

 Not applicable

 Not applicable

 (1) Represents shares of our common stock issuable upon exercise of options outstanding under the following equity compensation plans: the 2020
 Incentive Plan, the 2016 Incentive Plan, and the Amended and Restated 2008 Equity Incentive Plan.
 The information required by this Item is included in and incorporated by reference from the Proxy Statement under the captions
 "Security Ownership of Certain Beneficial Owners and Management," "Equity-Based Incentive Compensation" and "Additional Information
 Regarding Executive Compensation."

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 87

 Item 13 — Certain Relationships and Related Transactions and Director Independence
 The information required by this Item is included in and incorporated by reference from the Proxy Statement under the captions
 "Related Person Policies and Transactions" and "Information About the Board of Directors and Corporate Governance Matters."

 Item 14 — Principal Accounting Fees and Services
 The information required by this item is included in and incorporated by reference from the Proxy Statement under the caption
 "Principal Accountant Fees and Services."
 With the exception of the information specifically incorporated by reference in Part III to this Annual Report on Form 10-K from the
 Proxy Statement, the Proxy Statement shall not be deemed to be filed as part of this report.

 Item 15 — Exhibits and Financial Statement Schedules
 Financial Statements
 (a) The following documents are included as part of this Annual Report on Form 10-K:
 (1) Financial Statements. The financial statements included in Part II, Item 8, " Financial Statements and Supplementary Data," of
 this Annual Report on Form 10-K.
 (2) Financial Statement Schedule. See Note 4, " Other Financial Information – Allowance for Doubtful Accounts," of the Notes.
 Schedules not listed have been omitted because information required to be set forth therein is not applicable or is shown in the
 financial statements or notes thereto.
 (b) Financial Statement Schedules. All financial statement schedules are omitted because they are not applicable, not required, or
 because the required information is included in the Consolidated Financial Statements, the Notes thereto, or in the Exhibits listed
 under Item 15(a)(2).

 (c) Exhibits required by Item 601 of Regulation S-K.

 Exhibit
 Number

 Exhibit Description

 Incorporated by Reference

 Filed
 Herewith

 Form

 File No.

 Exhibit

 Filing Date

 3.1

 Amended and Restated Certificate of Incorporation, dated June 25, 2008,
 and Certificate of Amendment thereto, dated June 10, 2021.

 3.1

 8/6/2021

 3.2

 Amended and Restated Bylaws, effective as of April 14, 2021.

 3.1

 4/16/2021

 4.1

 Description of Securities.

 4.1

 2/24/2022

 10.1*

 Form of Indemnification Agreement between the Company and its directors
 and officers.

 S-1/A

 333-150007

 10.1

 5/12/2008

 10.2*

 Energy Recovery Inc. Amended and Restated 2008 Equity Incentive Plan.

 DEF14A

 Appendix A

 4/27/2012

 10.3*

 Energy Recovery, Inc. Change in Control Severance Plan dated March 5,
 2012.

 10.1

 3/9/2012

 10.4*

 Energy Recovery, Inc. Annual Incentive Plan effective as of January 1, 2016.

 10.1

 3/2/2016

 10.5*

 Energy Recovery, Inc. 2016 Incentive Plan.

 DEF14A

 Appendix A

 4/27/2016

 10.6

 Offer Letter to Mr. William Yeung, dated May 27, 2016.

 99.1

 6/22/2016

 10.7

 Lease Agreement, dated as of April 2, 2018, by and between Energy
 Recovery, Inc. and D/C Doolittle Sub LLC.

 10.1

 4/18/2018

 10.8

 Offer Letter to Mr. Joshua Ballard, as Chief Financial Officer.

 2.2

 8/15/2018

 10.9

 Employment Agreement with Mr. Rodney Clemente.

 10.3

 8/27/2018

 10.10

 Lease Agreement, dated as of January 10, 2019, by and between Energy
 Recovery, Inc. and FS Clay, LLC.

 10.1

 1/16/2019

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 88

 Exhibit
 Number

 Exhibit Description

 Incorporated by Reference

 Filed
 Herewith

 Form

 File No.

 Exhibit

 Filing Date

 10.1 1

 Lease Agreement, dated as of February 10, 2020, by and between Energy
 Recovery, Inc. and Prologis, L.P.

 10.1

 5/1/2020

 10.13 *

 Energy Recovery, Inc. 2020 Incentive Plan and Forms of Award Agreements.

 10.13

 2/21/2024

 10.1 4

 Energy Recovery, Inc. Severance Plan dated as of February 5, 2021

 10.1

 2/10/2021

 10.1 5

 Credit Agreement by and between Energy Recovery, Inc. as Borrower, and
 JPMorgan Chase Bank N.A. as Lender dated December 22, 2022.

 10.1

 1/6/2022

 10.1 6

 First Amendment to the Credit Agreement by and between Energy Recovery,
 Inc. as Borrower, and JPMorgan Chase Bank N.A. as Lender dated July 15,
 2022.

 10.1

 8/3/2022

 10.1 7

 Second Amendment to the Credit Agreement by and between Energy
 Recovery, Inc. as Borrower, and JPMorgan Chase Bank N.A. as Lender dated
 September 30, 2023.

 10.1

 11/1/2023

 10.1 8

 Offer Letter to Mr. David W. Moon, as President and Chief Executive Officer.

 8-K/A

 10.1

 1/31/2024

 10.19

 Offer Letter to Mr. Michael Mancini, as Chief Financial Officer.

 10.1

 7/31/2024

 10.20 *

 Energy Recovery, Inc. 2020 Incentive Plan Performance Restricted Stock Unit
 Grant Notice and Agreement.

 X

 14.1

 Code of Ethics of Energy Recovery, Inc. Additional Conduct and Ethics
 Policies for the Chief Executive Officer and Senior Financial Officers.

 14.1

 3/27/2009

 19.1

 Energy Recovery, Inc. Insider Trading Policy dated November 4, 2020.

 X

 21.1

 List of subsidiaries of the Company.

 X

 23.1

 Consent of Deloitte & Touche LLP, Independent Registered Public Accounting
 Firm.

 X

 31.1

 Certification of Principal Executive Officer, pursuant to Exchange Act
 Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the
 Sarbanes-Oxley Act of 2002.

 X

 31.2

 Certification of Principal Financial Officer, pursuant to Exchange Act
 Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the
 Sarbanes-Oxley Act of 2002.

 X

 32.1**

 Certification of Principal Executive Officer and Principal Financial Officer,
 pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
 the Sarbanes-Oxley Act of 2002.

 X

 97.1

 Energy Recovery, Inc. Compensation Recovery ("Clawback") Policy dated
 July 25, 2023.

 97.1

 2/21/2024

 accompanying notes in Part II, Item 8, "Financial Statements and
 Supplementary Data" of this Annual Report on Form 10-K.

 X

 X

 * Indicates management compensatory plan, contract or arrangement.
 ** The certifications furnished in Exhibits 32.1 are deemed to accompany this Form 10-K and are not deemed "filed" for purposes of Section 18 of the
 Exchange Act, or otherwise subject to the liability of that section, nor shall they be deemed incorporated by reference into any filing under the Securities
 Act or the Exchange Act.

 Item 16 — Form 10-K Summary
 None.

 Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 89

 SIGNATURES
 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
 Report to be signed on its behalf by the undersigned, thereunto duly authorized, as of the 26th day of February, 2025.

 /s/ DAVID W. MOON

 David W. Moon

 President and Chief Executive Officer

 Pursuant to the requirements of the Securities and Exchange Act of 1934, this Report has been signed below by the following persons
 on behalf of the Registrant and in the capacities and on the dates indicated.

 Signature

 Title

 Date

 /s/ DAVID W. MOON

 Director, and President and Chief Executive Officer

 David W. Moon

 (Principal Executive Officer)

 /s/ MICHAEL S. MANCINI

 Chief Financial Officer

 Michael S. Mancini

 (Principal Financial Officer)

 /s/ PAMELA TONDREAU

 Chairperson of the Board, Director

 Pamela Tondreau

 /s/ ALEXANDER J. BUEHLER

 Director

 Alexander J. Buehler

 /s/ JOAN K. CHOW

 Director

 Joan K. Chow

 /s/ ARVE HANSTVEIT

 Director

 Arve Hanstveit

 /s/ COLIN R. SABOL

 Director

 Colin R. Sabol