Energy Recovery, Inc.

Revenue by Geographic Location and Country

The following table presents the Company’s product revenue by geographic locations. The geographic information includes product

revenue from the Company’s domestic and international customers based on the customers’ requested delivery locations, except for certain

cases in which the customer directed the Company to deliver its products to a location that differs from the known ultimate locationof use. In

such cases, the ultimate location of use rather than the delivery location is reflected in the table.

(1)Countries representing more than 10% of product revenues for the periods presented.

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

Customer Revenue Concentration

The following table presents the customers that account for 10% or more of the Company’srevenue and their related segment for

each of the periods presented. Although certain customers might account for greater than 10% of the Company’srevenue at any one point in

time, the concentration ofrevenue between a limited number of customers shifts regularly, depending on when revenue is recognized. The

percentages by customer reflect specific relationships or contracts that would concentrate revenue for the periods presented and do not

indicate a trend specific to any one customer.

Long-lived Assets

All of the Company’s long-lived assets were located in the United States at December 31, 2025 and 2024.

Major Supply Vendors

The following table presents the major supply vendors accounting for 10% or more of the Company’s consolidated supply and

manufacturing costs purchases.

Note 11 —Stockholders’ Equity

Preferred Stock

The Company has the authority to issue 10,000,000 shares of preferred stock with a par value of$0.001 per share. The Board of

Directors (the “Board”) has the authority, without action by the Company’s stockholders, to designate and issue shares of preferred stock in

one or more series. The Board is also authorized to designate the rights, preferences, and voting powers of each series of preferred stock,

any or all of which may be greater than the rights of the common stock including restrictions of dividends on the common stock, dilution of the

voting power of the common stock, reduction of the liquidation rights of the common stock, and delaying or preventing a change in control of

the Company without further action by the Company’s stockholders. To date, the Board has not designated any rights, preferences, or

powers of any preferred stock, and as of December 31, 2025 and 2024, no shares of preferred stock were issued or outstanding.

Common Stock

The Company has the authority to issue 200,000,000 shares of common stock with a par value of$0.001 per share. Subject to the

preferred rights of the holders of shares of any class or series of preferred stock as provided by the Board with respect to any such class or

series of preferred stock, the holders of the common stock shall be entitled to receive dividends, as and when declared by the Board. In the

event of any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, after the distribution or payment to the

holders of shares of any class or series of preferred stock as provided by the Board with respect to any such class or series of preferred

stock, the remaining assets of the Company available for distribution to stockholders shall be distributed among and paid to the holders of

common stock ratably in proportion to the number of shares of common stock held by them.

Share Repurchase Programs

The Company’s Board, from time-to-time, has authorized share repurchase programs under which the Company may, at the

discretion of management, repurchase its outstanding common stock in the open market, or in privately negotiated transactions, in

compliance with applicable state and federal securities laws. The timing and amounts of any purchase under the Company’s share

repurchase programs is based on market conditions and other factors including price, regulatory requirements, and capital availability. The

Company accounts for stock repurchases under these programs using the cost method. As of December 31, 2025, the Company has

repurchased 13,967,259 shares of its common stock at an aggregate cost of$166.1 million under all share repurchase programs.

November 2024 Authorization

On November 18, 2024, the Company announced that the Board authorized a share repurchase program under which the Company

may repurchase its outstanding common stock, at the discretion of management, up to$50.0 million in aggregate cost, which included both

the share value of the acquired common stock and the fees charged in connection with acquiring the common stock (the “November 2024

Authorization”). On December 11, 2024, the Company concluded all share repurchases under the November 2024 Authorization. Under the

November 2024 Authorization, the Company repurchased 3,248,533 shares at an aggregate cost of$50.0 million.

February 2025 Authorization

On February 26, 2025, the Company announced that the Board authorized a share repurchase program under which the Company

may repurchase its outstanding common stock, at the discretion of management, for up to$30.0 million in aggregate cost, which includes

both the share value of the acquired common stock and the fees charged in connection with acquiring the common stock (the “February 2025

Authorization”). The February 2025 Authorization will expire in February 2026.

The following table presents the share repurchase activities under the February 2025 Authorization as of December 31, 2025.

The Company completed all purchases under the February 2025 Authorization in August 2025.

August 2025 Authorization

On August 6, 2025, the Board announced a share repurchase program under which the Company may repurchase its 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 “August 2025 Authorization”). The August

2025 Authorization will expire in May 2026. The Company began to purchase under the August 2025 Authorization in August 2025.

The following table presents the share repurchase activities under the August 2025 Authorization as of December 31, 2025.

Note 12 —Stock-based Compensation

Stock Option Plans

In July 2020, the stockholders approved the 2020 Incentive Plan (the “2020 Plan”), that permits the grant of stock options, restricted

stock units (“RSUs”), stock appreciation rights (“SARS”), restricted stock, restricted stock awards (“RSAs”), performance restricted stock units

(“PRSUs”), performance shares, and other stock-based awards to employees, officers, directors, and consultants. Prior to the approval of the

2020 Plan, the Company maintained the 2016 Incentive Plan and the Amended and Restated 2008 Equity Incentive Plan (hereinafter

referred to as the “Predecessor Plans”). Subject to adjustments, as provided in the 2020 Plan, the number of shares of common stock

initially authorized for issuance under the 2020 Plan was 5,894,727 shares (which consists of 4,500,000 new share awards plus

1,394,727 share awards that were authorized and unissued under the Predecessor Plans) plus up to 4,850,630 shares that were set aside for

awards granted under the Predecessor Plans that are subsequently forfeited. The 2020 Plan supersedes all previously issued stock

incentive plans (including the Predecessor Plans) and is currently the only available plan from which awards may be granted. The

Company’s 2020 Plan and Predecessor Plans are hereinafter referred to as “Equity Incentive Plans.”

Shares available for grant under the 2020 Plan at December 31, 2025 were 2,449,603 shares. There wereno shares available for

grant under the Predecessor Plans after July 15, 2020.

Stock Options and Stock Appreciation Rights

Employee stock options and SARS outstanding at December 31, 2025 and to be granted subsequently to December 31, 2025,

generally vest over four years and expire no more than 10 years after the date of grant. Non-employee board of director grants generally

vest one year after the date of grant or on the date of the annual stockholders’ meeting following the date of grant, whichever date occurs

first, and expire no more than 10 years after the date of grant.

Restricted Stock Units

RSUs outstanding at, and to be awarded subsequently after, December 31, 2025, generally vest 25% annually over thefour years

from date of grant and are dependent upon continued employment. Non-employee board of director grants generally vest one year after the

date of grant or on the date of the annual stockholders’ meeting following the date of grant, whichever date occurs first. As RSUs vest, the

units will be settled in shares of common stock. The units are valued based on the Company’s market price on the date of grant.

Performance Restricted Stock Units

On January 23, 2025, the Compensation Committee of the Board adopted a new form of PRSU award agreement under the 2020

Equity Incentive Plan (the “2020 Plan”), to among other things, define the terms of the performance metrics and performance period for such

PRSUs.

PRSUs outstanding as of December 31, 2025 generally vest over three years and are dependent upon continued employment and

meeting certain cumulative revenue and cumulative adjusted EBITDA targets. Adjusted EBITDA is a non-GAAP financial measure that the

Company defines asnet income which excludes i) depreciation and amortization; ii)stock-based compensation; iii)executive transition costs;

iv) restructuring charges; v) impairment of long-lived assets; vi)other income, net, such asinterest income and other non-operating income

(expense), net; and vii)provision for income taxes. As PRSUs vest, the units will be settled in shares of common stock. Depending on the

results achieved during the performance period, the actual number of shares that a grantee will receive at the end of the performance period

may range from 0% to 300% of the target PRSUs granted, provided that the grantee is continuously employed by the Company through the

vesting date. The units are valued based on the Company’s market price on the date of grant. As of December 31, 2025, no expense has

been recognized in relation to the PRSUs as the performance conditions are not considered probable.

Fair Value Assumptions

Stock Options and Stock Appreciation Rights

The fair value of stock options and SARS granted to employees is based on the Black-Scholes option pricing model. To determine

the inputs for the Black-Scholes option pricing model, the Company is required to develop several assumptions, which are highly subjective.

The Company determines these inputs at grant date as follows:

•Expected Term:

◦Employees: Based on historical exercise data.

◦Board: Based on the simplified method.

◦SARS: Based on historical exercise data. Post-grant date expected term is based upon the remaining grant life at each

remeasurement date.

•Expected Volatility: Based on the Company’s historical data and the corresponding expected term.

•Risk-Free Interest Rate: Based on U.S. Treasury issues with terms similar to the expected term.

•Dividend Yield: Based on an expected dividend yield of zero.

The following table presents 1) assumptions used in the Black-Scholes option pricing model to determine the estimated grant date fair

values of stock options and SARS granted to employees; and 2) options and SARS granted and weighted average grant date fair value.

Restricted Stock Units

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

Performance Restricted Stock Units

The fair value of PRSUs granted to employees is based on the Company’s common stock price on the date of grant as the metric

targets utilized to determine the vesting of these awards are all based upon achieving certain performance metrics.

Forfeitures

The Company estimates forfeitures at the time of grant and revises those estimates periodically in subsequent periods if actual

forfeitures differ from those estimates. The Company uses historical data to estimate pre-vesting option forfeitures and records stock-based

compensation expense only for those awards that are expected to vest. If the Company’s actual forfeiture rate is materially different from its

estimate, the stock-based compensation expense could be significantly different from what the Company has recorded in the current period.

The following table presents the estimated weighted average forfeiture rates for all employees used in determining the expense in the

stock-based compensation expense table above.

Stock-based Compensation Expense

The following table presents the stock-based compensation expense related to the fair value measurement of awards granted to

employees by expense category and by type of award. All stock-based payment awards are amortized on a straight-line basis over the

requisite service periods of the awards.

Stock Option and Stock Appreciation Rights Activities

The following table presents stock option and SARS activities under the Equity Incentive Plans.

(1)The aggregate intrinsic value of an exercised option and SARS is calculated as the difference between the exercise price of the underlying option and

SARS and the fair value of the Company’s common stock at the time of exercise. The aggregate intrinsic value at December 31, 2025 is calculated as

the difference between the exercise price of the underlying outstanding options and SARS and the fair value of the Company’s common stock as of

December 31, 2025 or the last trading day prior to December 31, 2025.

Restricted Stock Unit Activities

The following table presents RSU activities under the Equity Incentive Plans.

Performance Restricted Stock Unit Activities

The following table presents PRSU activities under the Equity Incentive Plans.

Vested Equity Awards

The following table presents the total grant date fair value of equity awards vested during the period.

Unamortized Stock-Based Compensation Costs

Stock-based compensation costs related to unvested equity awards will generally be amortized on a straight-line basis over the

remaining average service period of each award. The following table presents theunamortized compensation costs and weighted average

service period of all unvested outstanding awards as of December 31, 2025.

Note 13 — Subsequent Events

On January 21, 2026, the Company amended the Credit Agreement with JPMC to extend the termination date from December 2026

to January 2031.

On February 25, 2026, the Company decided to wind down operations of the CO 2 retail grocery business within its Emerging

Technologies segment due to a fundamental change in the outlook of the business. Recent discussions with OEM and end user customers

have made it increasingly evident that scaled adoption would require significant time, investment, and risk. The Company believes this

investment no longer meets capital allocation criteria and thus acted quickly in an effort to maximize shareholder value.

The Company expects to substantially complete the wind down by the end of the first quarter of the fiscal year ended December 31,

2026. The Company expects to incur approximately$4.5 million to$5.5 million in one-time costs associated with the wind down during the

first quarter of 2026. One-time costs are expected to consist of $1.0 million to$2.0 million in cash severance as well as non-cash expenses,

which are primarily related to a reserve against inventory, impairment of goodwill and other miscellaneous non-cash expenses.