10-Q 1 erii-20220930.htm FORM 10-Q - Q3'2022 erii-20220930
00014215172022--12-31Q3false31100014215172022-01-012022-09-3000014215172022-10-27xbrli:shares00014215172022-09-30iso4217:USD00014215172021-12-3100014215172022-07-012022-09-3000014215172021-07-012021-09-3000014215172021-01-012021-09-30iso4217:USDxbrli:shares0001421517us-gaap:CommonStockMember2022-06-300001421517us-gaap:CommonStockMember2021-06-300001421517us-gaap:CommonStockMember2021-12-310001421517us-gaap:CommonStockMember2020-12-310001421517us-gaap:CommonStockMember2021-01-012021-09-300001421517us-gaap:CommonStockMember2022-09-300001421517us-gaap:CommonStockMember2021-09-300001421517us-gaap:AdditionalPaidInCapitalMember2022-06-300001421517us-gaap:AdditionalPaidInCapitalMember2021-06-300001421517us-gaap:AdditionalPaidInCapitalMember2021-12-310001421517us-gaap:AdditionalPaidInCapitalMember2020-12-310001421517us-gaap:AdditionalPaidInCapitalMember2022-07-012022-09-300001421517us-gaap:AdditionalPaidInCapitalMember2021-07-012021-09-300001421517us-gaap:AdditionalPaidInCapitalMember2022-01-012022-09-300001421517us-gaap:AdditionalPaidInCapitalMember2021-01-012021-09-300001421517us-gaap:AdditionalPaidInCapitalMember2022-09-300001421517us-gaap:AdditionalPaidInCapitalMember2021-09-300001421517us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-06-300001421517us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-300001421517us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001421517us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001421517us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-07-012022-09-300001421517us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-07-012021-09-300001421517us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-09-300001421517us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-09-300001421517us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-09-300001421517us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-09-300001421517us-gaap:TreasuryStockCommonMember2022-06-300001421517us-gaap:TreasuryStockCommonMember2021-06-300001421517us-gaap:TreasuryStockCommonMember2021-12-310001421517us-gaap:TreasuryStockCommonMember2020-12-310001421517us-gaap:TreasuryStockCommonMember2022-07-012022-09-300001421517us-gaap:TreasuryStockCommonMember2021-07-012021-09-300001421517us-gaap:TreasuryStockCommonMember2022-01-012022-09-300001421517us-gaap:TreasuryStockCommonMember2021-01-012021-09-300001421517us-gaap:TreasuryStockCommonMember2022-09-300001421517us-gaap:TreasuryStockCommonMember2021-09-300001421517us-gaap:RetainedEarningsMember2022-06-300001421517us-gaap:RetainedEarningsMember2021-06-300001421517us-gaap:RetainedEarningsMember2021-12-310001421517us-gaap:RetainedEarningsMember2020-12-310001421517us-gaap:RetainedEarningsMember2022-07-012022-09-300001421517us-gaap:RetainedEarningsMember2021-07-012021-09-300001421517us-gaap:RetainedEarningsMember2022-01-012022-09-300001421517us-gaap:RetainedEarningsMember2021-01-012021-09-300001421517us-gaap:RetainedEarningsMember2022-09-300001421517us-gaap:RetainedEarningsMember2021-09-3000014215172021-09-300001421517us-gaap:CommonStockMember2022-07-012022-09-300001421517us-gaap:CommonStockMember2021-07-012021-09-300001421517us-gaap:CommonStockMember2022-01-012022-09-3000014215172020-12-310001421517erii:WaterSegmentMembererii:PXPumpsAndTurboDevicesMember2022-07-012022-09-300001421517erii:EmergingTechnologiesSegmentMembererii:PXPumpsAndTurboDevicesMember2022-07-012022-09-300001421517erii:PXPumpsAndTurboDevicesMember2022-07-012022-09-300001421517erii:WaterSegmentMembererii:PXPumpsAndTurboDevicesMember2022-01-012022-09-300001421517erii:EmergingTechnologiesSegmentMembererii:PXPumpsAndTurboDevicesMember2022-01-012022-09-300001421517erii:PXPumpsAndTurboDevicesMember2022-01-012022-09-300001421517erii:WaterSegmentMembererii:MiddleEastAndAfricaMember2022-07-012022-09-300001421517erii:EmergingTechnologiesSegmentMembererii:MiddleEastAndAfricaMember2022-07-012022-09-300001421517erii:MiddleEastAndAfricaMember2022-07-012022-09-300001421517erii:WaterSegmentMembererii:MiddleEastAndAfricaMember2022-01-012022-09-300001421517erii:EmergingTechnologiesSegmentMembererii:MiddleEastAndAfricaMember2022-01-012022-09-300001421517erii:MiddleEastAndAfricaMember2022-01-012022-09-300001421517erii:WaterSegmentMembersrt:AsiaMember2022-07-012022-09-300001421517erii:EmergingTechnologiesSegmentMembersrt:AsiaMember2022-07-012022-09-300001421517srt:AsiaMember2022-07-012022-09-300001421517erii:WaterSegmentMembersrt:AsiaMember2022-01-012022-09-300001421517erii:EmergingTechnologiesSegmentMembersrt:AsiaMember2022-01-012022-09-300001421517srt:AsiaMember2022-01-012022-09-300001421517erii:WaterSegmentMembersrt:AmericasMember2022-07-012022-09-300001421517erii:EmergingTechnologiesSegmentMembersrt:AmericasMember2022-07-012022-09-300001421517srt:AmericasMember2022-07-012022-09-300001421517erii:WaterSegmentMembersrt:AmericasMember2022-01-012022-09-300001421517erii:EmergingTechnologiesSegmentMembersrt:AmericasMember2022-01-012022-09-300001421517srt:AmericasMember2022-01-012022-09-300001421517erii:WaterSegmentMembersrt:EuropeMember2022-07-012022-09-300001421517erii:EmergingTechnologiesSegmentMembersrt:EuropeMember2022-07-012022-09-300001421517srt:EuropeMember2022-07-012022-09-300001421517erii:WaterSegmentMembersrt:EuropeMember2022-01-012022-09-300001421517erii:EmergingTechnologiesSegmentMembersrt:EuropeMember2022-01-012022-09-300001421517srt:EuropeMember2022-01-012022-09-300001421517erii:WaterSegmentMember2022-07-012022-09-300001421517erii:EmergingTechnologiesSegmentMember2022-07-012022-09-300001421517erii:WaterSegmentMember2022-01-012022-09-300001421517erii:EmergingTechnologiesSegmentMember2022-01-012022-09-300001421517erii:WaterSegmentMembererii:MegaprojectMember2022-07-012022-09-300001421517erii:EmergingTechnologiesSegmentMembererii:MegaprojectMember2022-07-012022-09-300001421517erii:MegaprojectMember2022-07-012022-09-300001421517erii:WaterSegmentMembererii:MegaprojectMember2022-01-012022-09-300001421517erii:EmergingTechnologiesSegmentMembererii:MegaprojectMember2022-01-012022-09-300001421517erii:MegaprojectMember2022-01-012022-09-300001421517erii:WaterSegmentMembererii:OriginalEquipmentManufacturerMember2022-07-012022-09-300001421517erii:EmergingTechnologiesSegmentMembererii:OriginalEquipmentManufacturerMember2022-07-012022-09-300001421517erii:OriginalEquipmentManufacturerMember2022-07-012022-09-300001421517erii:WaterSegmentMembererii:OriginalEquipmentManufacturerMember2022-01-012022-09-300001421517erii:EmergingTechnologiesSegmentMembererii:OriginalEquipmentManufacturerMember2022-01-012022-09-300001421517erii:OriginalEquipmentManufacturerMember2022-01-012022-09-300001421517erii:WaterSegmentMembererii:AftermarketMember2022-07-012022-09-300001421517erii:EmergingTechnologiesSegmentMembererii:AftermarketMember2022-07-012022-09-300001421517erii:AftermarketMember2022-07-012022-09-300001421517erii:WaterSegmentMembererii:AftermarketMember2022-01-012022-09-300001421517erii:EmergingTechnologiesSegmentMembererii:AftermarketMember2022-01-012022-09-300001421517erii:AftermarketMember2022-01-012022-09-300001421517erii:WaterSegmentMembererii:PXPumpsAndTurboDevicesMember2021-07-012021-09-300001421517erii:EmergingTechnologiesSegmentMembererii:PXPumpsAndTurboDevicesMember2021-07-012021-09-300001421517erii:PXPumpsAndTurboDevicesMember2021-07-012021-09-300001421517erii:WaterSegmentMembererii:PXPumpsAndTurboDevicesMember2021-01-012021-09-300001421517erii:EmergingTechnologiesSegmentMembererii:PXPumpsAndTurboDevicesMember2021-01-012021-09-300001421517erii:PXPumpsAndTurboDevicesMember2021-01-012021-09-300001421517erii:WaterSegmentMembererii:MiddleEastAndAfricaMember2021-07-012021-09-300001421517erii:EmergingTechnologiesSegmentMembererii:MiddleEastAndAfricaMember2021-07-012021-09-300001421517erii:MiddleEastAndAfricaMember2021-07-012021-09-300001421517erii:WaterSegmentMembererii:MiddleEastAndAfricaMember2021-01-012021-09-300001421517erii:EmergingTechnologiesSegmentMembererii:MiddleEastAndAfricaMember2021-01-012021-09-300001421517erii:MiddleEastAndAfricaMember2021-01-012021-09-300001421517erii:WaterSegmentMembersrt:AsiaMember2021-07-012021-09-300001421517erii:EmergingTechnologiesSegmentMembersrt:AsiaMember2021-07-012021-09-300001421517srt:AsiaMember2021-07-012021-09-300001421517erii:WaterSegmentMembersrt:AsiaMember2021-01-012021-09-300001421517erii:EmergingTechnologiesSegmentMembersrt:AsiaMember2021-01-012021-09-300001421517srt:AsiaMember2021-01-012021-09-300001421517erii:WaterSegmentMembersrt:AmericasMember2021-07-012021-09-300001421517erii:EmergingTechnologiesSegmentMembersrt:AmericasMember2021-07-012021-09-300001421517srt:AmericasMember2021-07-012021-09-300001421517erii:WaterSegmentMembersrt:AmericasMember2021-01-012021-09-300001421517erii:EmergingTechnologiesSegmentMembersrt:AmericasMember2021-01-012021-09-300001421517srt:AmericasMember2021-01-012021-09-300001421517erii:WaterSegmentMembersrt:EuropeMember2021-07-012021-09-300001421517erii:EmergingTechnologiesSegmentMembersrt:EuropeMember2021-07-012021-09-300001421517srt:EuropeMember2021-07-012021-09-300001421517erii:WaterSegmentMembersrt:EuropeMember2021-01-012021-09-300001421517erii:EmergingTechnologiesSegmentMembersrt:EuropeMember2021-01-012021-09-300001421517srt:EuropeMember2021-01-012021-09-300001421517erii:WaterSegmentMember2021-07-012021-09-300001421517erii:EmergingTechnologiesSegmentMember2021-07-012021-09-300001421517erii:WaterSegmentMember2021-01-012021-09-300001421517erii:EmergingTechnologiesSegmentMember2021-01-012021-09-300001421517erii:WaterSegmentMembererii:MegaprojectMember2021-07-012021-09-300001421517erii:EmergingTechnologiesSegmentMembererii:MegaprojectMember2021-07-012021-09-300001421517erii:MegaprojectMember2021-07-012021-09-300001421517erii:WaterSegmentMembererii:MegaprojectMember2021-01-012021-09-300001421517erii:EmergingTechnologiesSegmentMembererii:MegaprojectMember2021-01-012021-09-300001421517erii:MegaprojectMember2021-01-012021-09-300001421517erii:WaterSegmentMembererii:OriginalEquipmentManufacturerMember2021-07-012021-09-300001421517erii:EmergingTechnologiesSegmentMembererii:OriginalEquipmentManufacturerMember2021-07-012021-09-300001421517erii:OriginalEquipmentManufacturerMember2021-07-012021-09-300001421517erii:WaterSegmentMembererii:OriginalEquipmentManufacturerMember2021-01-012021-09-300001421517erii:EmergingTechnologiesSegmentMembererii:OriginalEquipmentManufacturerMember2021-01-012021-09-300001421517erii:OriginalEquipmentManufacturerMember2021-01-012021-09-300001421517erii:WaterSegmentMembererii:AftermarketMember2021-07-012021-09-300001421517erii:EmergingTechnologiesSegmentMembererii:AftermarketMember2021-07-012021-09-300001421517erii:AftermarketMember2021-07-012021-09-300001421517erii:WaterSegmentMembererii:AftermarketMember2021-01-012021-09-300001421517erii:EmergingTechnologiesSegmentMembererii:AftermarketMember2021-01-012021-09-300001421517erii:AftermarketMember2021-01-012021-09-3000014215172021-01-012021-12-3100014215172022-10-012022-09-3000014215172023-01-012022-09-3000014215172024-01-012022-09-300001421517us-gaap:FairValueMeasurementsRecurringMember2022-09-300001421517us-gaap:FairValueMeasurementsRecurringMember2021-12-310001421517us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-310001421517us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2022-09-300001421517us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:CashAndCashEquivalentsMember2022-09-300001421517us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:CashAndCashEquivalentsMember2021-12-310001421517us-gaap:CashAndCashEquivalentsMember2022-09-300001421517us-gaap:CashAndCashEquivalentsMember2021-12-310001421517us-gaap:ShortTermInvestmentsMemberus-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Member2022-09-300001421517us-gaap:ShortTermInvestmentsMemberus-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Member2021-12-310001421517us-gaap:CorporateDebtSecuritiesMembererii:LongtermInvestmentMemberus-gaap:FairValueInputsLevel2Member2022-09-300001421517us-gaap:CorporateDebtSecuritiesMembererii:LongtermInvestmentMemberus-gaap:FairValueInputsLevel2Member2021-12-310001421517erii:ShortTermAndLongTermInvestmentsMember2022-09-300001421517erii:ShortTermAndLongTermInvestmentsMember2021-12-310001421517us-gaap:CorporateDebtSecuritiesMember2022-09-300001421517us-gaap:CorporateDebtSecuritiesMember2021-12-310001421517us-gaap:LineOfCreditMembererii:JPMorganChaseBankNAMembererii:CommittedRevolvingCreditLineMember2021-12-220001421517us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMembererii:CommittedRevolvingCreditLineMember2022-09-300001421517us-gaap:LineOfCreditMembererii:JPMorganChaseBankNAMemberus-gaap:LetterOfCreditMembererii:CommittedRevolvingCreditLineMember2022-09-300001421517erii:JPMorganChaseBankNAMemberus-gaap:LetterOfCreditMembererii:CommittedRevolvingCreditLineMember2022-09-300001421517us-gaap:StandbyLettersOfCreditMember2022-09-300001421517us-gaap:StandbyLettersOfCreditMember2021-12-3100014215172022-06-3000014215172021-06-30xbrli:pure0001421517erii:WaterSegmentMemberus-gaap:OperatingSegmentsMember2022-07-012022-09-300001421517erii:EmergingTechnologiesSegmentMemberus-gaap:OperatingSegmentsMember2022-07-012022-09-300001421517us-gaap:OperatingSegmentsMember2022-07-012022-09-300001421517erii:WaterSegmentMemberus-gaap:OperatingSegmentsMember2022-01-012022-09-300001421517erii:EmergingTechnologiesSegmentMemberus-gaap:OperatingSegmentsMember2022-01-012022-09-300001421517us-gaap:OperatingSegmentsMember2022-01-012022-09-300001421517us-gaap:CorporateNonSegmentMember2022-07-012022-09-300001421517us-gaap:CorporateNonSegmentMember2022-01-012022-09-300001421517erii:WaterSegmentMemberus-gaap:OperatingSegmentsMember2021-07-012021-09-300001421517erii:EmergingTechnologiesSegmentMemberus-gaap:OperatingSegmentsMember2021-07-012021-09-300001421517us-gaap:OperatingSegmentsMember2021-07-012021-09-300001421517erii:WaterSegmentMemberus-gaap:OperatingSegmentsMember2021-01-012021-09-300001421517erii:EmergingTechnologiesSegmentMemberus-gaap:OperatingSegmentsMember2021-01-012021-09-300001421517us-gaap:OperatingSegmentsMember2021-01-012021-09-300001421517us-gaap:CorporateNonSegmentMember2021-07-012021-09-300001421517us-gaap:CorporateNonSegmentMember2021-01-012021-09-300001421517erii:WaterSegmentMemberus-gaap:RevenueFromContractWithCustomerMembererii:CustomerAMemberus-gaap:CustomerConcentrationRiskMember2021-07-012021-09-300001421517erii:WaterSegmentMemberus-gaap:RevenueFromContractWithCustomerMembererii:CustomerAMemberus-gaap:CustomerConcentrationRiskMember2021-01-012021-09-300001421517erii:WaterSegmentMemberus-gaap:RevenueFromContractWithCustomerMembererii:CustomerBMemberus-gaap:CustomerConcentrationRiskMember2022-01-012022-09-300001421517erii:WaterSegmentMemberus-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMembererii:CustomerCMember2021-01-012021-09-300001421517erii:WaterSegmentMemberus-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMembererii:CustomerDMember2022-07-012022-09-300001421517erii:WaterSegmentMemberus-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMembererii:CustomerDMember2022-01-012022-09-300001421517erii:WaterSegmentMemberus-gaap:RevenueFromContractWithCustomerMembererii:CustomerEMemberus-gaap:CustomerConcentrationRiskMember2021-07-012021-09-300001421517erii:WaterSegmentMemberus-gaap:RevenueFromContractWithCustomerMembererii:CustomerEMemberus-gaap:CustomerConcentrationRiskMember2021-01-012021-09-300001421517erii:EmergingTechnologiesSegmentMemberus-gaap:RevenueFromContractWithCustomerMembererii:CustomerAMemberus-gaap:CustomerConcentrationRiskMember2021-07-012021-09-300001421517erii:EmergingTechnologiesSegmentMemberus-gaap:RevenueFromContractWithCustomerMembererii:CustomerAMemberus-gaap:CustomerConcentrationRiskMember2022-01-012022-09-300001421517erii:EmergingTechnologiesSegmentMemberus-gaap:RevenueFromContractWithCustomerMembererii:CustomerAMemberus-gaap:CustomerConcentrationRiskMember2021-01-012021-09-300001421517erii:EmergingTechnologiesSegmentMemberus-gaap:RevenueFromContractWithCustomerMembererii:CustomerBMemberus-gaap:CustomerConcentrationRiskMember2022-01-012022-09-300001421517erii:March2021AuthorizationMember2021-03-090001421517erii:March2021AuthorizationMember2022-07-012022-07-010001421517erii:March2021AuthorizationMember2022-09-30

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 
FORM 10-Q
(Mark One)
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022
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
erii-20220930_g1.jpg
Energy Recovery, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware01-0616867
(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)

(510483-7370
(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $0.001 par valueERIIThe Nasdaq Stock Market LLC

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 þ  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 and post such files).  Yes þ  No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth 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 is a shell company (as defined in Exchange Act Rule 12b-2).  Yes   No 
As of October 27, 2022, there were 55,995,969 shares of the registrant’s common stock outstanding.



ENERGY RECOVERY, INC.
TABLE OF CONTENTS
Page No.
Condensed Consolidated Balance Sheets — September 30, 2022 and December 31, 2021
Condensed Consolidated Statements of Operations — Three and Nine Months Ended September 30, 2022 and 2021
Condensed Consolidated Statements of Comprehensive Income — Three and Nine Months Ended September 30, 2022 and 2021
Condensed Consolidated Statements of Stockholders’ Equity — Three and Nine Months Ended September 30, 2022 and 2021
Condensed Consolidated Statements of Cash Flows — Nine Months Ended September 30, 2022 and 2021

Energy Recovery, Inc. | Q3'2022 Form 10-Q

Forward-Looking Information

This Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2022, including Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (the “MD&A”) and certain information incorporated by reference, contain 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 statements. Readers are directed to risks and uncertainties identified under Part II, 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 statements 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;
forecasted production and evaluations and judgments regarding supply chain matters, particularly in light of the global supply environment;
our belief that we have sufficient raw material and finished goods to mitigate supply chain issues;
our belief that the scalability and versatility of our platform can help us achieve success in emerging markets similar to SWRO;
our belief that the Ultra PX addresses key challenges associated with treating industrial wastewater in a range of reverse osmosis (“RO”) applications;
our belief that the Ultra PX can accelerate adoption of RO in the growing zero liquid discharge (“ZLD”) and minimal liquid discharge (“MLD”) markets;
our belief that the Ultra PX can help make RO the preferred treatment option to achieve ZLD and MLD requirements by enhancing RO’s affordability and efficiency compared to thermal treatment options.
our belief that pressure exchanger technology can provide benefits to our customers, including the reduction of capital expenditures and energy use;
our belief that our pressure exchanger technology can address inefficiencies and waste within industrial systems and processes that involve high-pressure and low-pressure fluid flows;
our belief that our PX® Pressure Exchanger® (“PX”) has helped make SWRO an economically viable and more sustainable option in the production of potable water;
our belief that our hydraulic turbochargers (“Turbochargers”) deliver substantial savings 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 leveraging the Ultra PX with RO will significantly lower thermal demand;
our belief that the PX Q400 will be the highest-performing and highest capacity PX available for SWRO desalination and industrial wastewater facilities;
our belief that, as the existing thermal technology is replaced with RO technology, demand for our products will be created;
our belief that ongoing operating costs rather than capital expenditures is the key factor in the selection of an ERD solution for megaproject (“MPD”) customers;
our belief that our PX offers market-leading value with the highest technological and economic benefit;
Energy Recovery, Inc. | Q3'2022 Form 10-Q | FLS 1

our belief that our solutions offer a competitive advantage compared to our competitors’ solutions because our ERDs provide the lowest life-cycle cost and are, therefore, the most cost-effective ERD solutions for RO desalination applications;
our belief that leveraging our pressure exchanger technology will unlock new commercial opportunities in the future;
our belief that sales of carbon dioxide (“CO2”) refrigeration systems will increase in response to regulations and supermarkets’ search for safe natural refrigerants;
our belief that our pressure exchanger technology can significantly help reduce the operating costs of CO2 refrigeration systems by recycling the pressure energy of CO2 gas thereby significantly reducing the energy needed to operate these systems;
our belief that the PX G1300 could eventually alter the standard refrigeration system architecture by reducing costs for retail end users such as grocery stores;
our belief that we will be able to achieve efficiencies across a wider range of temperatures that exceed incumbent CO2 refrigeration technologies;
our belief that the Ultra PX can address the key challenges associated with treating industrial wastewater in ultra high-pressure reverse osmosis (“UHPRO”) applications;
our belief that the Ultra PX can help make UHPRO the preferred treatment option to achieve ZLD and MLD requirements by enhancing UHPRO’s affordability and efficiency compared to thermal treatment options;
our belief that our Ultra PX enables customers to optimize their wastewater treatment process for ZLD and MLD;
our objective of finding new applications for our technology and developing new products for use outside of desalination;
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 expectation that sales outside of the U.S. will remain a significant portion of our revenue;
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 belief that we will be in compliance with the terms of the existing credit agreement, as amended, in the future;
our tax and accounting estimates and estimates regarding any potential operational cost savings as a result of our decision to cease the VorTeq commercialization efforts;
our belief that we expect to utilize all of our net operating loss (“NOL”) carryforwards in fiscal year 2022 due to our projected income exceeding the amount of NOL carryforwards;
our expectation that we will continue to receive a tax benefit related to U.S. federal foreign-derived intangible income;
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 impact of changes in internal control over financial reporting; and
other factors disclosed under the MD&A and Part I, Item 3, “Quantitative and Qualitative Disclosures about Market Risk,” and elsewhere in this Form 10-Q.

You should not place undue reliance on these forward-looking statements, which reflect management’s opinions only as of the date of the filing of this Quarterly Report on Form 10-Q. All forward-looking statements included in this document are subject to additional risks and uncertainties further discussed under Part II, Item 1A, “Risk Factors,” and are based on information available to us as of November 2, 2022. We assume no obligation to update any such forward-looking statements, certain risks and uncertainties which 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 Annual Reports on Form 10‑K, 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 II, Item 1A, “Risk Factors,” within this Quarterly Report on Form 10-Q.

Energy Recovery, Inc. | Q3'2022 Form 10-Q | FLS 2

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, and in our Annual Reports on Form 10-K, and from time-to-time, in our results disclosed on our Current Reports on Form 8-K. In addition, when preparing the MD&A below, we presume the readers have access to and have read the MD&A in our Annual Report on Form 10-K, pursuant to Instruction 2 to paragraph (b) of Item 303 of Regulation S-K.

We provide our Annual Reports on Form 10‑K, Quarterly Reports on Form 10‑Q, Current Reports on Form 8‑K, Proxy Statements, 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 Quarterly Report on Form 10-Q. 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. | Q3'2022 Form 10-Q | FLS 3

PART I — FINANCIAL INFORMATION

Item 1 — Financial Statements (unaudited)

ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,
2022
December 31,
2021
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents$52,131 $74,358 
Short-term investments30,156 31,332 
Accounts receivable, net18,422 20,615 
Inventories, net32,132 20,383 
Prepaid expenses and other assets6,377 5,075 
Total current assets139,218 151,763 
Long-term investments4,271 2,298 
Deferred tax assets, net11,214 11,421 
Property and equipment, net18,724 20,361 
Operating lease, right of use asset13,510 14,653 
Goodwill and other intangible assets12,819 12,827 
Other assets, non-current365 367 
Total assets$200,121 $213,690 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$1,931 $909 
Accrued expenses and other liabilities11,319 13,994 
Lease liabilities1,552 1,564 
Contract liabilities2,157 3,318 
Total current liabilities16,959 19,785 
Lease liabilities, non-current13,732 14,879 
Other liabilities, non-current127 247 
Total liabilities30,818 34,911 
Commitments and contingencies (Note 7)
Stockholders’ equity:
Common stock64 64 
Additional paid-in capital202,807 195,593 
Accumulated other comprehensive loss(509)(149)
Treasury stock(80,486)(53,832)
Retained earnings47,427 37,103 
Total stockholders’ equity169,303 178,779 
Total liabilities and stockholders’ equity$200,121 $213,690 

See Accompanying Notes to Condensed Consolidated Financial Statements
Energy Recovery, Inc. | Q3'2022 Form 10-Q | 1

ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
 (In thousands, except per share data)
Revenue$30,462 $20,781 $83,300 $70,328 
Cost of revenue9,417 6,089 25,835 22,251 
Gross profit21,045 14,692 57,465 48,077 
Operating expenses:
General and administrative7,608 5,853 21,155 18,641 
Sales and marketing4,703 2,996 11,916 8,236 
Research and development3,828 4,416 14,170 13,342 
Total operating expenses16,139 13,265 47,241 40,219 
Income from operations4,906 1,427 10,224 7,858 
Other income (expense):
Interest income259 36 486 179 
Other non-operating (expense) income, net(5)1 (9)(21)
Total other income, net254 37 477 158 
Income before income taxes5,160 1,464 10,701 8,016 
Provision for (benefit from) income taxes371 393 377 (990)
Net income$4,789 $1,071 $10,324 $9,006 
Net income per share:
Basic0.09 0.02 0.18 0.16 
Diluted0.08 0.02 0.18 0.15 
Number of shares used in per share calculations:
Basic55,881 57,026 56,291 57,053 
Diluted57,372 58,709 57,708 58,785 

See Accompanying Notes to Condensed Consolidated Financial Statements


Energy Recovery, Inc. | Q3'2022 Form 10-Q | 2

ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
 (In thousands)
Net income$4,789 $1,071 $10,324 $9,006 
Other comprehensive (loss) income, net of tax
Foreign currency translation adjustments34 (20)38 (40)
Unrealized loss on investments(28)(13)(398)(99)
Total other comprehensive (loss) income, net of tax6 (33)(360)(139)
Comprehensive income$4,795 $1,038 $9,964 $8,867 

See Accompanying Notes to Condensed Consolidated Financial Statements


Energy Recovery, Inc. | Q3'2022 Form 10-Q | 3

ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

 Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
 (In thousands, except shares)
Common stock
Beginning balance$64 $63 $64 $62 
Issuance of common stock, net— — — 1 
Ending balance64 63 64 63 
Additional paid-in capital
Beginning balance200,129 191,087 195,593 179,161 
Issuance of common stock, net1,259 242 2,244 8,938 
Stock-based compensation1,419 1,235 4,970 4,465 
Ending balance202,807 192,564 202,807 192,564 
Accumulated other comprehensive loss
Beginning balance(515)(53)(149)53 
Other comprehensive (loss) income
Foreign currency translation adjustments34 (20)38 (40)
Unrealized loss on investments(28)(13)(398)(99)
Total other comprehensive (loss) income, net6 (33)(360)(139)
Ending balance(509)(86)(509)(86)
Treasury stock
Beginning balance(80,455)(42,040)(53,832)(30,486)
Common stock repurchased(31)(5,602)(26,654)(17,156)
Ending balance(80,486)(47,642)(80,486)(47,642)
Retained earnings
Beginning balance42,638 30,769 37,103 22,834 
Net income4,789 1,071 10,324 9,006 
Ending balance47,427 31,840 47,427 31,840 
Total stockholders’ equity$169,303 $176,739 $169,303 $176,739 
Common stock issued (shares)
Beginning balance63,935,378 63,267,293 63,544,419 61,798,004 
Issuance of common stock, net196,110 31,690 587,069 1,500,979 
Ending balance64,131,488 63,298,983 64,131,488 63,298,983 
Treasury stock (shares)
Beginning balance8,146,859 6,112,873 6,721,153 5,455,935 
Common stock repurchased1,653 295,728 1,427,359 952,666 
Ending balance8,148,512 6,408,601 8,148,512 6,408,601 
Total common stock outstanding (shares)55,982,976 56,890,382 55,982,976 56,890,382 


See Accompanying Notes to Condensed Consolidated Financial Statements
Energy Recovery, Inc. | Q3'2022 Form 10-Q | 4

ENERGY RECOVERY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,
20222021
(In thousands)
Cash flows from operating activities:
Net income$10,324 $9,006 
Adjustments to reconcile net income to cash provided by (used in) operating activities
Stock-based compensation5,101 4,574 
Depreciation and amortization4,946 4,141 
Amortization of premiums and discounts on investments647 340 
Deferred income taxes207 (1,063)
Other non-cash adjustments235 161 
Changes in operating assets and liabilities:
Accounts receivable, net2,208 (1,274)
Contract assets(398)1,892 
Inventories, net(11,848)(8,874)
Prepaid and other assets(461)(1,097)
Accounts payable1,121 2,739 
Accrued expenses and other liabilities(4,617)(3,132)
Contract liabilities(1,197)(119)
Net cash provided by operating activities6,268 7,294 
Cash flows from investing activities:
Maturities of marketable securities34,107 20,686 
Purchases of marketable securities(35,964)(43,339)
Capital expenditures(2,999)(4,899)
Proceeds from sales of fixed assets734 5 
Net cash used in investing activities(4,122)(27,547)
Cash flows from financing activities:
Net proceeds from issuance of common stock2,244 8,939 
Repurchase of common stock(26,654)(17,156)
Net cash used in financing activities(24,410)(8,217)
Effect of exchange rate differences on cash, cash equivalents and restricted cash38 (40)
Net change in cash, cash equivalents and restricted cash(22,226)(28,510)
Cash, cash equivalents and restricted cash, beginning of year74,461 94,358 
Cash, cash equivalents and restricted cash, end of period$52,235 $65,848 

See Accompanying Notes to Condensed Consolidated Financial Statements
Energy Recovery, Inc. | Q3'2022 Form 10-Q | 5


ENERGY RECOVERY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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 solutions that make industrial processes more efficient and sustainable. Leveraging the Company’s pressure exchanger technology, which generates little to no emissions when operating, the Company’s solutions lower costs, save energy, reduce waste and minimize emissions for companies across a variety of 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 is committed to developing solutions that drive long-term value – both financial and environmental. The Company’s solutions are marketed, sold in, or developed for, the fluid-flow and gas markets, such as seawater and industrial wastewater desalination, natural gas, chemical processing and refrigeration systems, under the trademarks ERI®, PX®, Pressure Exchanger®, PX® Pressure Exchanger® (“PX”), Ultra PX, PX G1300, PX G, PX PowerTrain, IsoBoost, 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 Condensed 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.

The accompanying Condensed Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in the financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. The December 31, 2021 Condensed Consolidated Balance Sheet was derived from audited financial statements and may not include all disclosures required by GAAP; however, the Company believes that the disclosures are adequate to make the information presented not misleading.

The September 30, 2022 unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the notes thereto for the fiscal year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 24, 2022 (the “2021 Annual Report”).

All adjustments consisting of normal recurring adjustments that are necessary to present fairly the financial position, results of operations and cash flows for the interim periods have been made. The results of operations for the interim periods are not necessarily indicative of the operating results for the full fiscal year or any future periods.

Reclassifications

Certain prior period amounts have been reclassified in the Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Cash Flows and certain notes to the Condensed Consolidated Financial Statements to conform to the current period presentation.

Use of Estimates

The preparation of Condensed Consolidated Financial Statements, in conformity with GAAP, requires the Company’s management to make judgments, assumptions and estimates that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes.

The accounting policies that reflect the Company’s more 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 revenue recognition; valuation of stock options; useful life and valuation of equipment; valuation and impairment of goodwill; inventory; 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.

Energy Recovery, Inc. | Q3'2022 Form 10-Q | 6


ENERGY RECOVERY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Although there has been uncertainty and disruption in the global economy, supply chain and financial markets, 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 November 2, 2022, the date of issuance of this Quarterly Report on Form 10-Q. 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 update publicly these estimates for any reason after the date of this Quarterly Report on Form 10-Q, except as required by law.

Significant Accounting Policies

There have been no material changes to the Company’s significant accounting policies in Note 1, “Description of Business and Significant Accounting Policies,” of the Notes to Consolidated Financial Statements included in Item 8, “Financial Statements and Supplementary Data,” in the 2021 Annual Report.

Recently Adopted Accounting Pronouncement

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”), which provided optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. The FASB later issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope, to clarify the scope of Topic 848 so that derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions in Topic 848 (“ASU 2021-01”). Entities may apply the provisions of the new standards as of the beginning of the reporting period when the election is made (i.e., as early as the first quarter of 2020). Unlike other topics, the provisions of this update are only available until December 31, 2022, when the reference rate replacement activity is expected to have been completed. An entity may elect to apply amendments prospectively through December 31, 2022.

On July 15, 2022, the Company amended its existing credit agreement (as defined in Note 6, “Lines of Credit”) to change the reference rate for borrowings from LIBOR to the Secured Overnight Financing Rate (“SOFR”). The Company applied ASU 2020-04 and the optional expedients at the time of this modification. The Company’s adoption of ASU 2020-04 and ASU 2021-01 on July 15, 2022, did not have a material impact on the Company’s financial condition, results of operations, and cash flows. Refer to Note 6, “Lines of Credit,” for more information.

Energy Recovery, Inc. | Q3'2022 Form 10-Q | 7


ENERGY RECOVERY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 2 — Revenue

Disaggregation of Revenue

The following tables present the disaggregated revenues by segment, and within each segment, by product type, by primary geographical market based on the customer “shipped to” address, and by channel customers.

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.
Original Equipment Manufacturer (“OEM”). 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.
Aftermarket (“AM”). AM customers are desalination plant owners and/or operators who can utilize our technology to upgrade or keep their plant running.

Sales and usage-based taxes are excluded from revenues. See Note 9, “Segment Reporting,” for further discussion related to the Company’s segments.

Three Months Ended September 30, 2022Nine Months Ended September 30, 2022
WaterEmerging TechnologiesTotalWaterEmerging TechnologiesTotal
(In thousands)
Product type
PXs, pumps and turbo devices, and other$30,462 $ $30,462 $83,191 $109 $83,300 
Primary geographical market
Middle East and Africa$16,722 $ $16,722 $53,629 $79 $53,708 
Asia8,168  8,168 17,771  17,771 
Americas3,156  3,156 6,951 30 6,981 
Europe2,416  2,416 4,840  4,840 
Total revenue$30,462 $ $30,462 $83,191 $109 $83,300 
Channel
Megaproject$17,347 $ $17,347 $51,178 $79 $51,257 
Original equipment manufacturer9,032  9,032 21,392  21,392 
Aftermarket4,083  4,083 10,621 30 10,651 
Total revenue$30,462 $ $30,462 $83,191 $109 $83,300 


Energy Recovery, Inc. | Q3'2022 Form 10-Q | 8


ENERGY RECOVERY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Three Months Ended September 30, 2021Nine Months Ended September 30, 2021
WaterEmerging TechnologiesTotalWaterEmerging TechnologiesTotal
(In thousands)
Product type
PXs, pumps and turbo devices, and other$20,767 $14 $20,781 $70,275 $53 $70,328 
Primary geographical market
Middle East and Africa$14,825 $14 $14,839 $52,186 $53 $52,239 
Asia3,563  3,563 13,066  13,066 
Americas993  993 2,361  2,361 
Europe1,386  1,386 2,662  2,662 
Total product revenue$20,767 $14 $20,781 $70,275 $53 $70,328 
Channel
Megaproject$13,261 $14 $13,275 $50,254 $53 $50,307 
Original equipment manufacturer4,844  4,844 11,909  11,909 
Aftermarket2,662  2,662 8,112  8,112 
Total revenue$20,767 $14 $20,781 $70,275 $53 $70,328 

Contract Balances

The following table presents contract balances by category.
September 30,
2022
December 31,
2021
(In thousands)
Accounts receivable, net$18,422 $20,615 
Contract assets, current (included in prepaid expenses and other assets)891 493 
Contract liabilities:
Contract liabilities, current$2,157 $3,318 
Contract liabilities, non-current (included in other liabilities, non-current)52 88 
Total contract liabilities$2,209 $3,406 

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 significant changes in contract liabilities during the period.
September 30,
2022
December 31,
2021
(In thousands)
Contract liabilities, beginning of year$3,406 $1,640 
Revenue recognized(3,049)(1,415)
Cash received, excluding amounts recognized as revenue during the period1,852 3,181 
Contract liabilities, end of period$2,209 $3,406 

Energy Recovery, Inc. | Q3'2022 Form 10-Q | 9


ENERGY RECOVERY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Future Performance Obligations

As of September 30, 2022, the following table presents the future estimated revenue by year expected to be recognized related to performance obligations that are unsatisfied or partially unsatisfied.
Year RecognizedFuture Performance Obligations
(In thousands)
2022 (remaining three months)$3,660 
20234,452 
20247,493 
Total$15,605 

Energy Recovery, Inc. | Q3'2022 Form 10-Q | 10


ENERGY RECOVERY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 3 — Net Income Per Share

Net income for the reported period is divided by the weighted average number of common shares outstanding during the reported period to calculate basic net income per common share.

Basic net income per common share excludes any dilutive effect of stock options and restricted stock units ("RSU").
Diluted net income per common share reflects the potential dilution that would occur if outstanding stock options to purchase common stock were exercised for shares of common stock, using the treasury stock method, and if the shares of common stock underlying each unvested RSU were issued.

Outstanding stock options to purchase common stock and unvested RSUs are collectively referred to as “stock awards.”

The following table presents the computation of basic and diluted net income per common share.
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
(In thousands, except per share amounts)
Numerator
Net income$4,789 $1,071 $10,324 $9,006 
Denominator (weighted average shares)
Basic common shares outstanding55,881 57,026 56,291 57,053 
Dilutive stock awards1,491 1,683 1,417 1,732 
Diluted common shares outstanding57,372 58,709 57,708 58,785 
Net income per share
Basic0.09 0.02 0.18 0.16 
Diluted0.08 0.02 0.18 0.15 

Certain shares of common stock issuable under stock awards have been omitted from the diluted net income per common share calculations because their inclusion is considered anti-dilutive. The following table presents the weighted potential common shares issuable under stock awards that were excluded from the computation of diluted net income per common share.
 Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
(In thousands)
Anti-dilutive stock award shares387 26 522 456 

Energy Recovery, Inc. | Q3'2022 Form 10-Q | 11


ENERGY RECOVERY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 4 — Other Financial Information

Cash, Cash Equivalents and Restricted Cash

The Condensed Consolidated Statements of Cash Flows explain the changes in the total of cash, cash equivalents and restricted cash. The following table presents a reconciliation of cash, cash equivalents and restricted cash, such as cash amounts deposited in restricted cash accounts in connection with the Company’s credit cards, reported within the Condensed Consolidated Balance Sheets that sum to the total of such amounts presented.
September 30,
2022
December 31,
2021
September 30,
2021
(In thousands)
Cash and cash equivalents$52,131 $74,358 $65,745 
Restricted cash, non-current (included in other assets, non-current)104 103 103 
Total cash, cash equivalents and restricted cash$52,235 $74,461 $65,848 

Accounts Receivable, net
 September 30,
2022
December 31,
2021
(In thousands)
Accounts receivable, gross$18,522 $20,732 
Allowance for doubtful accounts(100)(117)
Accounts receivable, net$18,422 $20,615 

Inventories, net
 September 30,
2022
December 31,
2021
(In thousands)
Raw materials$12,751 $7,352 
Work in process3,266 3,406 
Finished goods16,832 10,274 
Inventories, gross32,849 21,032 
Valuation adjustments for excess and obsolete inventory(717)(649)
Inventories, net$32,132 $20,383 

Inventory amounts are stated at the lower of cost or net realizable value, using the first-in, first-out method.

Prepaid Expenses and Other Assets
 September 30,
2022
December 31,
2021
(In thousands)
Contract assets$891 $493 
Cloud computing arrangement implementation costs881 1,041 
Supplier advances2,079 1,717 
Other prepaid expenses and other assets2,526