Overview Energy Recovery, Inc. (the “Company”, “Energy Recovery”, “we”, “our” and “us”) designs and manufactures solutions that make industrial processes more efficient and sustainable. Leveraging our pressure exchanger technology, which generates little to no emissions when operating, we believe our 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, we are helping companies reduce their energy consumption in their industrial processes, which in turn, reduces their carbon footprint. We believe that our customers do not have to sacrifice quality and cost savings for sustainability and we are committed to developing solutions that drive long-term value – both financial and environmental. The original product application of our technology, the PX® Pressure Exchanger® (“PX”) energy recovery device, was a major contributor to the advancement of seawater reverse osmosis desalination (“SWRO”), significantly lowering the energy intensity and cost of water production globally from SWRO. Our pressure exchanger technology is being applied to the wastewater filtration market, such as battery manufacturers, mining operations, municipalities, and other manufacturing plants that discharge wastewater with significant levels of metals and pollutants. Engineering, and research and development (“R&D”), have been, and remain, an essential part of our history, culture and corporate strategy. Since our formation, we have developed leading technology and engineering expertise through the continual evolution of our pressure exchanger technology, which can enhance environmental sustainability and improve productivity by reducing waste and energy consumption in high-pressure industrial 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 devices. Segments Our reportable operating segments consist of the Desalination and Wastewater 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. Other factors for determining the reportable operating segments include the manner in which our Chief Operating Decision Maker (“CODM”), our Interim President and Chief Executive Officer, evaluates our performance combined with the nature of the individual business activities. In addition, our Corporate and Other include expenditures in support of the Desalination and Wastewater segments, as well as revenue and expenditures associated with the former Emerging Technologies segment. We continue to monitor and review our segment reporting structure in accordance with authoritative guidance to determine whether any changes have occurred that would impact our reportable segments. During the six months ended June 30, 2026, we changed the composition of our reportable segments to better reflect how the CODM manages the business. During the fist quarter of fiscal 2026, the Water segment was separated into two segments, the Desalination segment and the Wastewater segment. During the first quarter of fiscal 2026, the CO2 retail grocery business within the Emerging Technologies segment was wound-down, which resulted in the Emerging Technologies segment no longer meeting the criteria of a reportable segment as of the second quarter of fiscal 2026. As a result, revenue and expenses associated with the former Emerging Technologies segment have been included within Corporate and Other. Prior periods have been recast to conform to the current year presentation. Energy Recovery, Inc. | Q2'2026 Quarterly Report (Form 10-Q) | 25 Table of Contents Results of Operations A discussion regarding our financial condition and results of operations for the three and six months ended June 30, 2026, compared to the three and six months ended June 30, 2025, is presented below. Revenue As a significant portion of our revenue is derived from large project contract deliveries that are up to 36 months from contract date, variability in revenue from quarter to quarter is typical, therefore year-on-year comparisons are not necessarily indicative of the trend for the full year due to these variations. There is no specific seasonality in our revenues to highlight. Revenue by Channel Customers Three Months Ended June 30, 2026 2025 Revenue % of Revenue Revenue % of Revenue Change (In thousands, except percentages) Original equipment manufacturer $5,178 43% $8,357 30% $(3,179) (38%) Aftermarket 4,112 34% 4,892 17% (780) (16%) Megaproject 2,706 23% 14,802 53% (12,096) (82%) Total revenue $11,996 100% $28,051 100% $(16,055) (57%) Six Months Ended June 30, 2026 2025 Revenue % of Revenue Revenue % of Revenue Change (In thousands, except percentages) Original equipment manufacturer $11,766 54% $12,358 34% $(592) (5%) Aftermarket 6,866 32% 8,920 25% (2,054) (23%) Megaproject 3,070 14% 14,838 41% (11,768) (79%) Total revenue $21,702 100% $36,116 100% $(14,414) (40%) Revenue Attributable to Primary Geographical Markets by Segments Three Months Ended June 30, 2026 2025 Desalination Wastewater Corporate and Other Total Desalination Wastewater Corporate and Other Total (In thousands) Middle East $6,081 $— $— $6,081 $8,275 $— $92 $8,367 Africa 475 — — 475 1,049 — — 1,049 Other 4,927 513 — 5,440 16,176 2,339 120 18,635 Total revenue $11,483 $513 $— $11,996 $25,500 $2,339 $212 $28,051 Energy Recovery, Inc. | Q2'2026 Quarterly Report (Form 10-Q) | 26 Table of Contents Six Months Ended June 30, 2026 2025 Desalination Wastewater Corporate and Other Total Desalination Wastewater Corporate and Other Total (In thousands) Middle East $8,587 $— $77 $8,664 $10,289 $— $93 $10,382 Africa 671 — — 671 1,915 — — 1,915 Other 11,132 1,114 121 12,367 21,055 2,644 120 23,819 Total revenue $20,390 $1,114 $198 $21,702 $33,259 $2,644 $213 $36,116 Three months ended June 30, 2026, as compared to the three months ended June 30, 2025 The decrease in Original Equipment Manufacturer (“OEM”) revenue of $3.2 million was due primarily to: •Desalination: The decrease in revenue of $1.3 million was due primarily to lower shipments of products to the Asia and Africa markets, partially offset by higher shipments of products to the America, Europe and Middle East markets. •Wastewater: The decrease in revenue of $1.9 million was due primarily to lower shipments of products to the Asia markets. The decrease in After Market (“AM”) revenue of $0.8 million was due primarily to lower shipment of products to the Europe and Asia markets, partially offset by higher shipments of products to the Middle East market. The decrease in Megaproject (“MPD”) revenue of $12.1 million was primarily due to lower shipments of products to the Europe, Middle East and Asia markets. Six months ended June 30, 2026, as compared to the six months ended June 30, 2025 The decrease in OEM revenue of $0.6 million was due primarily to: •Desalination: The increase in revenue of $0.8 million was due primarily to higher shipments of products to the Europe, Middle East and Africa markets, partially offset by lower shipments of products to the Asia market. •Wastewater: The decrease in revenue of $1.4 million was due primarily to lower shipments of products to the Asia market. The decrease in AM revenue of $2.1 million was primarily due to lower shipments to the Asia and Europe markets. The decrease in MPD revenue of $11.8 million was due primarily to lower shipments to the Europe, Asia and Middle East markets. Concentration of Revenue See Note 10, “Concentrations,” of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1, “Financial Statements (unaudited),” of this Quarterly Report on Form 10-Q (the “Notes”) for further discussion regarding our concentration of revenue. 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. Three Months Ended June 30, Six Months Ended June 30, 2026 2025 Change 2026 2025 Change (In thousands, except percentage and basis point) Gross profit $8,957 $17,954 $(8,997) $11,659 $22,412 $(10,753) Gross margin 74.7% 64.0% 1,070 bps 53.7% 62.1% (840) bps Energy Recovery, Inc. | Q2'2026 Quarterly Report (Form 10-Q) | 27 Table of Contents The decrease in gross profit for the three months ended June 30, 2026, as compared to the prior year, was due primarily to lower volume as compared to the prior year, partially offset by decreases to indirect manufacturing costs and channel mix. The increase in gross margin for the three months ended June 30, 2026, as compared to the prior year, was due primarily to indirect manufacturing costs and channel mix, partially offset by lower volume. The decrease in gross profit and gross margin for the six months ended June 30, 2026, as compared to the prior year, was due primarily to lower volume as compared to the prior year as well as $1.6 million of restructuring charges booked to inventory associated with the wind down of the CO2 retail grocery business, as well as increased costs related to product and channel mix, pricing, and tariffs, partially offset by improvements to indirect manufacturing costs during the six months ended June 30, 2026. Operating Expenses The total material changes of general and administrative (“G&A”), sales and marketing (“S&M”) and R&D operating expenses for the three months ended June 30, 2026, as compared to the comparable periods in the prior year, are discussed within the following overall operating expenditures, and the segment and corporate operating expenses discussions below. Three Months Ended June 30, 2026 2025 Desalination Wastewater Corporate and Other Total Desalination Wastewater Corporate and Other Total (In thousands) Operating expenses General and administrative $1,025 $872 $4,904 $6,801 $788 $535 $6,346 $7,669 Sales and marketing 2,453 1,209 674 4,336 2,183 1,097 2,080 5,360 Research and development 2,391 262 196 2,849 1,370 234 1,847 3,451 Restructuring charges — — 855 855 — — — — Total operating expenses $5,869 $2,343 $6,629 $14,841 $4,341 $1,866 $10,273 $16,480 Three months ended June 30, 2026, as compared to the three months ended June 30, 2025 Overall Operating Expenditures. Overall operating expenditures decreased $1.6 million, or (10.0%). This decrease was primarily due to lower employee compensation costs, including stock-based compensation expense, and lower consulting costs, partially offset by restructuring charges incurred in the three months ended June 30, 2026. Desalination Segment. Desalination segment operating expenses increased by $1.5 million, or 35.2%. This increase was primarily due to higher employee costs, including stock-based compensation expense. Wastewater Segment. Wastewater segment operating expenses increased by $0.5 million, or 26%. This increase was primarily due to higher employee costs and higher consulting costs. Corporate and Other. Corporate and Other decreased by $3.6 million, or (35.5)%. This decrease was primarily due to lower employee compensation costs, including stock-based compensation expense, lower consulting costs, and lower emerging technology development costs, partially offset by restructuring charges incurred in the three months ended June 30, 2026. Restructuring Charges. During the first quarter of fiscal year 2026, we wound down operations of the CO2 retail grocery business within our Emerging Technologies segment due to a fundamental change in the outlook of the business. We recorded a restructuring charge of approximately $0.9 million during the three months ended June 30, 2026. The total restructuring charge recorded relates to severance and benefits, including reemployment assistance, for 23 terminated employees. The restructuring plan was substantially complete by the end of the second quarter of fiscal year 2026 and we do not expect to incur significant additional expenses related to the restructuring. Energy Recovery, Inc. | Q2'2026 Quarterly Report (Form 10-Q) | 28 Table of Contents Six Months Ended June 30, 2026 2025 Desalination Wastewater Corporate and Other Total Desalination Wastewater Corporate and Other Total (In thousands) General and administrative $1,781 $1,853 $9,622 $13,256 $1,633 $1,263 $13,347 $16,243 Sales and marketing 4,938 2,372 2,145 $9,455 4,291 2,134 3,841 $10,266 Research and development 4,007 398 1,233 $5,638 2,219 563 3,670 $6,452 Restructuring charges 335 18 2,038 $2,391 107 103 329 $539 Impairment of goodwill — — 1,662 $1,662 — — — $— Total operating expenses $11,061 $4,641 $16,700 $32,402 $8,250 $4,063 $21,187 $33,500 Six months ended June 30, 2026, as compared to the six months ended June 30, 2025 Overall Operating Expenditures. Overall operating expenditures decreased by $1.1 million, or (3.3%). This decrease was primarily due to to lower employee compensation costs, including stock-based compensation expense, and lower consulting costs, and was partially offset by impairment of goodwill and restructuring charges incurred as part of the wind down of the CO2 retail grocery business. Desalination Segment. Desalination segment related operating expenses increased by $2.8 million, or 34.1%. This increase was primarily due to to higher employee costs, including stock-based compensation costs, and higher restructuring charges. Wastewater Segment. Wastewater segment related operating expenses increased by $0.6 million, or 14.2%. This increase was primarily due to to higher employee costs and higher consulting costs. Corporate and Other. Corporate and Other decreased by $4.5 million, or (21.2)%. This decrease was primarily due to lower employee costs, including stock-based compensation expense, lower consulting costs and lower emerging technology development costs, partially offset by impairment of goodwill and restructuring charges incurred as part of the wind down of the CO2 retail grocery business. Restructuring Charges. During the first quarter of fiscal year 2026, we wound down operations of the CO2 retail grocery business within our Emerging Technologies segment due to a fundamental change in the outlook of the business. We recorded a restructuring charge of approximately $2.4 million during the six months ended June 30, 2026. The total restructuring charge recorded relates to severance and benefits, including reemployment assistance, for 23 terminated employees. In addition to the restructuring charges, we incurred other related charges associated with the wind down of the CO2 retail grocery business, including excess and obsolescence reserves taken on CO2 inventory of approximately $1.6 million and impairment of goodwill of approximately $1.7 million, which are included in “Restructuring - inventory reserve” and “Impairment of goodwill” in the Condensed Consolidated Statements of Operations, respectively. The restructuring plan was substantially complete by the end of the second quarter of fiscal year 2026 and we do not expect to incur significant additional expenses related to the restructuring. During the fourth quarter of fiscal year 2024, we implemented a restructuring plan which included reductions in our workforce in all functions of the organization, primarily within the G&A function, in order to lower our operating cost structure, and to position the Company for profitable growth. We recorded total restructuring charges of approximately $2.8 million, of which $0.5 million was recorded during the six months ended June 30, 2025. The total restructuring charge relates to severance and benefits, including reemployment assistance, for 38 terminated employees, which was approximately 15% of our workforce. The implementation of the restructuring plan was complete as of December 31, 2025. See Note 4, “Other Financial Information – Restructuring,” of the Notes for further discussion and disclosure on our restructuring program. Energy Recovery, Inc. | Q2'2026 Quarterly Report (Form 10-Q) | 29 Table of Contents Other Income, Net Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (In thousands) Interest income $680 $940 $1,405 $2,013 Other non-operating income (expense), net 122 (26) 230 (20) Total other income, net $802 $914 $1,635 $1,993 The decrease in “Total other income, net” in the three and six months ended June 30, 2026, as compared to the comparable period in the prior year, was primarily due to a decrease in the interest rate for short- and long-term investments. Income Taxes Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (In thousands, except percentages) (Benefit from) provision for income taxes $(1,884) $334 $(3,659) $(1,269) Discrete items (185) (22) (317) 30 (Benefit from) provision for income taxes, excluding discrete items $(2,069) $312 $(3,976) $(1,239) Effective tax rate 37.1% 14.0% 19.1% 14.0% Effective tax rate, excluding discrete items 40.7% 13.0% 20.8% 13.7% The interim period tax benefit from income taxes is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each quarter, we update our estimate of the annual effective tax rate, and if the estimated annual effective tax rate changes, we make a cumulative adjustment in such period. The quarterly tax provision and estimate of our annual effective tax rate are subject to variation due to several factors, including variability in accurately predicting our pre-tax income or loss and the mix of jurisdictions to which they relate, the applicability of special tax regimes, and changes in how we do business. For the three and six months ended June 30, 2026, the recognized benefit from income taxes resulted from the tax projection based on the full year forecast and included benefits related to the U.S. federal research and development (“R&D”) tax credit, and certain permanent differences, such as non-deductible stock-based compensation as well as an increase in the California valuation allowance for California R&D tax credits. For the three and six months ended June 30, 2025, the recognized provision for and (benefit from) income taxes, respectively, resulted from the tax projection based on the full year forecasted profit and included benefits related to the U.S. federal foreign-derived intangible income (“FDII”), federal R&D tax credit, certain permanent differences, such as stock-based compensation shortfalls, and partial release of California valuation allowance. The effective tax rate excluding discrete items for the six months ended June 30, 2026, as compared to the prior year, differed primarily due to the projection that the Company will not generate the U.S. federal foreign-derived intangible income deduction in 2026 due to the Company’s forecasted loss in 2026. Energy Recovery, Inc. | Q2'2026 Quarterly Report (Form 10-Q) | 30 Table of Contents 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 June 30, 2026, our principal sources of liquidity consisted of (i) unrestricted cash and cash equivalents of $61.4 million that are held in cash accounts and invested in money market funds and U.S. treasury securities; (ii) investment-grade short-term and long-term marketable debt instruments of $36.6 million that are primarily invested in U.S. treasury securities and corporate notes and bonds; and (iii) accounts receivable, net of allowances, of $14.2 million. As of June 30, 2026, there was unrestricted cash of $0.9 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. Credit Agreement We entered into a credit agreement with JPMorgan Chase Bank, N.A. on December 22, 2021 (as amended, the “Credit Agreement”). The Credit Agreement provides a committed revolving credit line of $50.0 million and includes both a revolving loan and a letters of credit (“LCs”) component. The Credit Agreement was amended on January 21, 2026 to extend the expiration date from December 21, 2026 to January 21, 2031. The maximum allowable LCs under the credit line component of the Credit Agreement is $30.0 million. As of June 30, 2026, the Company was in compliance with all covenants under the Credit Agreement. See Note 6, “Lines of Credit,” of the Notes for further discussion related to the Credit Agreement. Share Repurchase Programs The Board, from time-to-time, has authorized share repurchase programs 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 June 30, 2026, we have cumulatively repurchased 15.9 million shares of the Company’s common stock at an aggregate cost of $186.8 million under all share repurchase programs. The following is a discussion of the current share repurchase program during the three and six months ended June 30, 2026. See Note 11, “Stockholders’ Equity – Share Repurchase Programs,” of the Notes for further discussion related to share repurchase programs and a reconciliation of the latest share repurchase plan balance. On August 6, 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 $25.0 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 “August 2025 Authorization”). We began repurchasing our outstanding common stock under the August 2025 Authorization in August 2025. The August 2025 Authorization expired in May 2026. As of June 30, 2026, we have repurchased 2,179,419 shares of our common stock at an aggregate cost of approximately $25.0 million of which 832,550 and 1,792,853 were purchased during the three and six months ended June 30, 2026 at an aggregate cost of approximately $8.7 million and $19.3 million, respectively. On May 6, 2026, we announced that the Board authorized a share repurchase program under which we may repurchase our outstanding common stock, at the discretion of management, for up to $25.0 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 “May 2026 Authorization”). We began repurchasing our outstanding common stock under the May 2026 Authorization in May 2026. The May 2026 Authorization will expire in April 2027. As of June 30, 2026, we have repurchased 156,900 shares of our common stock at an aggregate cost of approximately $1.3 million. All 156,900 shares were purchased during the three and six months ended June 30, 2026. Energy Recovery, Inc. | Q2'2026 Quarterly Report (Form 10-Q) | 31 Table of Contents Cash Flows Six Months Ended June 30, 2026 2025 Change (In thousands) Net cash provided by operating activities $37,343 $14,824 $22,519 Net cash (used in) provided by investing activities (2,979) 33,566 (36,545) Net cash used in financing activities (20,982) (21,026) 44 Effect of exchange rate differences on cash and cash equivalents (20) 60 (80) Net change in cash, cash equivalents and restricted cash $13,362 $27,424 $(14,062) 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 reporting period to reporting period, due to the timing of receipts of large project orders. Operating cash flow may be negative in one reporting period 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 provided by operating assets and liabilities for the six months ended June 30, 2026, as compared to the prior year, was due primarily to the following factors: •Accounts receivable: an increase in cash provided due to an increase in collections related to revenues earned late in the fourth quarter of 2025; •Accrued liabilities: an increase in cash provided due to incentives and restructuring expenses paid out in 2025, partially offset by, •Inventories: a decrease in cash provided due to cash used to build finished goods inventory in the first half of 2026. Cash Flows from Investing Activities Net cash (used in) provided by investing activities primarily relates to maturities and purchases of investment-grade marketable debt instruments, and capital expenditures supporting our growth. The decrease in cash provided during the six months ended June 30, 2026, as compared to the prior year, is primarily due to fewer maturities as well as higher purchases of marketable securities. 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. Cash Flows from Financing Activities Net cash used in financing activities for the six months ended June 30, 2026 was lower as compared to the cash used in financing activities in the prior year, due to lower repurchases of our common stock as well as a $0.4 million refund received for excise tax payments made during the previous fiscal year. Energy Recovery, Inc. | Q2'2026 Quarterly Report (Form 10-Q) | 32 Table of Contents 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. Recent Accounting Pronouncements Refer to Note 1, “Description of Business and Significant Accounting Policies – Significant Accounting Policies,” of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1, “Financial Statements (unaudited),” of this Quarterly Report on Form 10-Q. Energy Recovery, Inc. | Q2'2026 Quarterly Report (Form 10-Q) | 33 Table of Contents