Energy Recovery (ERII) risk factors, FY2024 10-K

Risks Related to our Water Segment

1. 01Our 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
2. 02We may not be successful in developing suitable market adoption for our products in the wastewater market

Risks Related to our Emerging Technologies Segment

1. 03We may not be able to successfully compete in the CO2-based refrigeration system market
2. 04Energy 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
3. 05We may not be able to develop future new technologies successfully

Risks Related to our General Business

1. 06Our operating results may fluctuate significantly, making our future operating results difficult to predict and causing our operating results to fall below expectations
2. 07Energy 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
3. 08Our 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
4. 09We 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
5. 10We 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
6. 11Energy 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
7. 12We may not generate positive returns on our research and development and our corporate growth strategy
8. 13Business interruptions may damage our facilities or those of our suppliers
9. 14We 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
10. 15Our actual operating results may differ significantly from our guidance
11. 16In 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
12. 17We operate on a global basis with offices or activities in North, South and Latin America, Middle East and Africa, Asia, and Europe
13. 18Energy 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
14. 19We 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
15. 20We 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
16. 21Our success depends, in part, on key personnel whose continued service is not guaranteed
17. 22We 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

Risks Related to Economic Conditions and Geopolitical Conflicts

1. 23Uncertainty 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

Risks Related to Information Technology

1. 24We may have risks associated with security of our information technology systems
2. 25Energy 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
3. 26For 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

Risks Related to Intellectual Property

1. 27If 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
2. 28Energy Recovery, Inc. | 2024 Annual Report (Form 10-K) | 23 Claims by others that we infringe their proprietary rights could harm our business

Risks Related to Tax and Governmental Regulations

1. 29The 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
2. 30Energy 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
3. 31The 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
4. 32Unanticipated changes in our tax provisions or exposure to additional income tax liabilities could affect our profitability and cash flows

Risks Related to our Internal Controls

1. 33Changes 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
2. 34We 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

Risks Related to our Common Stock

1. 35Insiders and principal stockholders will likely have significant influence over matters requiring stockholder approval
2. 36The market price of our common stock may continue to be volatile
3. 37We 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
4. 38Energy 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
5. 39Our business could be negatively affected as a result of actions of activist shareholders, and such activism could impact the trading value of our securities
6. 40Our shareholders may experience future dilution as a result of future equity offerings