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DEF 14A 1 schedule14a-2022.htm FORM DEF 14A - 2022 Document

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934

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Energy Recovery, Inc.

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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Dear Fellow Stakeholders,

2021 was yet another record-breaking year for Energy Recovery on almost all fronts, setting the stage for the broader growth we are pursuing as a company. We finished the year with product revenue of $104 million, representing 13% annual growth and beating the 10% projection we had given at the beginning of 2021. Moreover, we held up our product margins and continued to reduce OPEX as a percent of revenue, resulting in quickly growing operating income. We maintained our net cash position while executing over $20 million in share buy-backs, and have further invested in our Environmental, Social, Governance (“ESG”) program, bringing us closer to our sustainability goals.

In 2022, Energy Recovery is celebrating its 30th anniversary. Since we began operations, we have helped make reverse osmosis the most environmentally sustainable seawater desalination process, responding to the globe’s ever-increasing water needs. Our trusted PX® Pressure Exchanger® (“PX”) has become the gold

standard of efficiency and reliability for energy recovery devices (“ERDs”) in seawater desalination.

Now, we are also making concrete progress in taking our pressure exchanger technology from a product to a platform, by leveraging the same engineering and manufacturing expertise that built our reputation as the most trusted ERD manufacturer in the desalination industry. Our PX will soon be making industries like wastewater treatment and commercial CO2 refrigeration more sustainable by lowering both energy costs and emissions for our customers.

Our wastewater products, including our Ultra PX™, achieved $1 million in revenue in 2021. We announced several contracts in Asia, providing our products to customers in a variety of spaces, including facilities that manufacture battery-grade lithium carbonate and treat wastewater produced from textiles. By the end of 2022, we anticipate our wastewater revenues will

Energy Recovery, Inc. — 2022 Proxy Statement

reach at least $3 million, and we have set a target of $30-$70 million in revenues by 2026.

In refrigeration, we received our first order for the PX G1300 (“PX G”), and the momentum generated by that first contract resulted in the signing of a joint development agreement with a leading refrigeration rack manufacturer to design a next-generation, PX G-centric refrigeration system. We believe this PX G-centric system, which is now poised to make its first appearance in a commercial setting in 2022, will become the standard CO2 refrigeration system architecture for commercial refrigeration users – like supermarkets – and has the potential to disrupt the global refrigeration industry in much the same manner as the PX did in the global desalination industry so many years ago. We also set a target of $100-$300 million in revenue for commercial refrigeration by 2026.

All of this success is simply a down payment on our longer-term goals:

(1)In 2021, for the first time in Energy Recovery history, we presented five-year growth targets to achieve between $330-$570 million in revenue by 2026 across the three main industries in which we operate – desalination, industrial wastewater, and commercial refrigeration.

(2)We aim to increase our profitability as a percent of revenue as we grow and normalize our spending levels.

(3)We will further build out our sustainability strategy by continuing to weave our ESG program through all facets of our business.

These are big goals, and we plan to work towards them with discipline, transparency, and an eye towards sustainability. They also demand that we look at and approach markets in new ways. It took Energy Recovery several decades to exceed $100 million in desalination revenue. We are now focused on doubling that revenue to $200 million by 2026 and, together with the $130-$370 million of revenue we are targeting in our new businesses in the same timeframe, we seek to achieve $330-$570 million in annual revenue in the coming five years. We have set a clear three-year timeline for all our new ventures, and the rigorous financial standards we’ve adopted for new product development to create a runway from development to commercialization to a cash flow breakeven run rate.

Our business is just at the start of our next act. We’ve set a course for organic growth, and we have taken steps to ensure we are prepared to support that growth. By continuing to build our ESG program, our executive team has a framework to make decisions that support sustainable development for years to come. We’ve committed to doubling emissions reductions from Energy Recovery products by the end of 2025 based on a 2019 baseline emissions number, and to report climate-related risk strategy and management aligned with the Task Force on Climate-related Financial Disclosures’ recommendations by the end of 2024. We’ve also added to our board of directors, welcoming Joan Chow and Lisa Pollina, who bring decades of collective experience that will help inform the many decisions that lie ahead for our company.

The growth we are pursuing will put new demands on our teams as we evolve

Energy Recovery, Inc. — 2022 Proxy Statement

the business in order to scale. The acquisition, retention, and development of our people and organization will be key to our success. Through the ups and downs of past years, including a global pandemic, we protected both the lives and the livelihoods of our employees. As we bring on new talent, we must maintain that focus.

Today’s geopolitical uncertainties may present unforeseen hurdles for our business. However, over the past few years, we managed to not just weather the ongoing disruptions of the COVID-19 pandemic, but to successfully grow our business in that time. While we cannot foresee the future, we can and will continue to closely monitor the horizon, keep our stakeholders informed of any impacts on our business, and invest in the resiliency of our company.

That said, the future ahead is bright.

Finally, I want to acknowledge and thank all our stakeholders – especially our employees, our customers, and our investors – for giving us your trust and confidence as we chart the course to a new Energy Recovery.

Thank you for standing with us through our thirty years of business, and I look forward to taking the next steps in our transformation alongside you all.

Sincerely,

Robert Yu Lang Mao

President and Chief Executive Officer and Executive Chairman of the Board

Energy Recovery, Inc. — 2022 Proxy Statement

Table of Contents

NOTICE OF 2022 ANNUAL MEETING OF STOCKHOLDERS



Date:	Place:	Record Date:
Thursday, June 9, 2022	www.virtualshareholdermeeting.com/ERII2022	April 11, 2022
at 10:00 a.m. Pacific Time

Dear Stockholders of Energy Recovery, Inc.:

You are invited to attend the Energy Recovery, Inc., 2022 Annual Meeting of Stockholders, which will be held on Thursday, June 9, 2022, at 10:00 a.m. Pacific Time (the “Annual Meeting”). As in past years, this year’s Annual Meeting will be conducted in a virtual format via a live audio webcast at www.virtualshareholdermeeting.com/ERII2022. To participate in the Annual Meeting, you will need the 16-digit control number that appears on your Notice Regarding the Availability of Proxy Materials, your proxy card (printed in the box and marked by the arrow), and the instructions that accompanied your proxy materials. If you hold shares in the name of a broker, bank, trustee or other nominee, you may need to contact your broker, bank, trustee or other nominee for assistance with your 16-digit control number. You will have the ability to submit questions during the Annual Meeting via the meeting website.

Agenda:

1.To elect five (5) directors for a one-year term;

2.To consider and approve, on a non-binding advisory basis, executive compensation as disclosed in the attached Proxy Statement;

3.To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022; and

4.To consider any other business that may properly come before the Annual Meeting or any adjournment or postponement thereof;

Energy Recovery, Inc. — 2022 Proxy Statement | i

Table of Contents

Our Board of Directors has fixed the close of business on April 11, 2022, as the record date for the Annual Meeting. Stockholders of record as of April 11, 2022, may vote at the Annual Meeting or any postponements or adjournments of the meeting. This notice of annual meeting, notice of internet availability, proxy statement, annual report on Form 10-K and form of proxy are being made available on or about April 25, 2022.

It is important that your shares are represented at the Annual Meeting, and regardless of whether you plan to attend, we respectfully request that you vote in advance on the matters to be presented at the Annual Meeting as described in these proxy materials.

You can help us reduce costs and the impact on the environment by electing to receive and access future copies of our proxy statements, annual reports and other stockholder materials electronically by email. If your shares are registered directly in your name with our stock registrar and transfer agent, American Stock Transfer & Trust Company, LLC, you can make this election by going to its website (www.astfinancial.com) or by following the instructions provided when voting over the Internet. If you hold your shares in a brokerage account or otherwise through a third party in “street name,” please refer to the information provided by your broker, bank or other nominee for instructions on how to elect to receive and view future annual meeting materials electronically.


			By Order of the Board of Directors,

			William W. Yeung
			Chief Legal Officer and Corporate Secretary

San Leandro, California

April 25, 2022



Important Notice Regarding the Availability of Proxy Materials for the Annual Stockholder Meeting

To Be Held on June 9, 2022: This Proxy Statement, along with the Annual Report on Form 10-K for the fiscal year ended December 31, 2021, is available free of charge at the following website: www.proxyvote.com

Energy Recovery, Inc. — 2022 Proxy Statement | ii


Table of Contents


			Page
Proxy Statement			1

Proxy Summary			2
Meeting Information			2
Proposals to be Voted on and Board Voting Recommendations			2
2022 Director Nominees			3
2021 Performance Highlights			3
Diversity and Inclusion			5
Board Diversity			5

SEC Form DEF 14A filed by Energy Recovery Inc.