Energy Recovery, Inc.

Except as noted below, there have been no material changes in our risk factors from those disclosed in Part I, Item 1A, “Risk Factors,”

in the 2025 Annual Report.

Our Water segment revenues largely depend on the construction of new large-scale desalination plants and the retrofit of

existing desalination plants, and as a result, our operating results have historically experienced, and may continue to experience,

significant variability due to volatility in capital spending, availability of project financing, project timing, execution, war or other

hostilities and other factors affecting the broader water desalination industry.

We currently derive the majority of our Water segment revenues from sales of energy recovery products and services used in newly

constructed, large-scale desalination plants and the retrofit of existing desalination plants, particularly in dry or drought-ridden regions of the

world. The demand for our products used in the Water segment may decrease if the construction of these large-scale desalination plants or

the retrofit of existing plants declines for any reason, including, any global or regional economic downturns, worsening global or regional

political conflicts, war or other hostilities, such as the 2026 conflict in Iran and escalating tensions in the Middle East, worsening regional

conditions, changing government priorities, or the impact of any global or regional conflicts.

Other factors that could affect the number and capacity of large-scale desalination plants built or the timing of their completion,

include the availability of required engineering and design resources; availability of credit and other forms of financing; the health of the global

economy; inflation rates; changes in government regulation, permitting requirements, or priorities; and reduced capital spending for water

desalination solutions. Each of these factors could result in reduced or uneven demand for our products. Pronounced variability, complete

cancellations or delays in the construction of such plants or reductions in spending for desalination in general could negatively impact our

Water segment sales, which in turn could have an adverse effect on our entire business, financial condition, or results of operations, and

make it difficult for us to accurately forecast our future sales.

A sustained downturn in the economy or global unrest could impact the future of new, and the retrofit of existing,

desalination plants, and the treatment of various wastewater verticals, which could result in decreased demand for our water

products and services.

The demand for our water products and services depends primarily on the continued construction of new large-scale desalination

plants, the retrofit of existing plants, and the construction of wastewater treatment facilities, particularly in the countries that are part of the

Gulf Cooperation Council, China, Taiwan and India. Weak economic conditions, global uncertainty including the continuing conflicts in

Ukraine, the 2026 conflict in Iran and escalating conflicts in the Middle East, as well as the impact of increased inflation resulting from such

conflicts may have a negative economic impact on these and other countries, which may impact the levels of spending on, timing of, delays

to, and availability of, project financing for new desalination and retrofit plant projects. The inability of our customers to secure credit or

financing for these projects, may result in the postponement or cancellation of these projects. In addition, the change in government priorities

and/or their reduction in spending for water treatment projects could result in decreased demand for our products and services, which could

have an adverse effect on our business, financial condition or results of operations.

Uncertainty 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.

We conduct our business on a global basis. Our products are sold in numerous countries worldwide, with a large percentage of our

sales generated outside the U.S., specifically in the Middle East and Africa, and Asian markets which provide a significant portion of our total

revenue. Therefore, we are exposed to, and impacted by, global macroeconomic factors, U.S. and foreign government policies, and foreign

exchange fluctuations. There is uncertainty surrounding macroeconomic factors in the U.S. and globally characterized by the supply chain

environment, inflationary pressure, rising interest rates, and labor shortages. These global macroeconomic factors, coupled with the U.S.

political climate, political unrest internationally, and conflicts in Europe and the Middle East, such as the 2026 conflict in Iran and Iran’s

response to attacks by the United States and Israel, have created global economic and political uncertainty, and have impacted demand for

certain of our products. While the impact and longevity of these factors remain uncertain, we are constantly evaluating the extent to which

these factors will impact our business, financial condition, or results of operations. Over the long-term, demand for our energy recovery

devices could correlate to global macroeconomic and geopolitical factors. Any disruption to the economic factors and regulations in these

regions, which remain uncertain, may adversely affect our results of operations and financial condition.

In addition, there is uncertainty as to the position the U.S. will take with respect to world affairs. This uncertainty may include such

issues as the U.S. support for existing treaty and trade relationships with other countries, including, notably, China, Mexico and Canada. This

uncertainty, together with other recent key global events, such as currency control regulations and tariff regimes, ongoing terrorist activity,

and hostilities in the Middle East, may adversely impact (i) the ability or willingness of non-U.S. companies to transact business with U.S.

companies, including with us; (ii) our ability to transact business in other countries, including the Middle East, where many of the water

megaprojects are planned; (iii) regulation and trade agreements affecting U.S. companies; (iv) global stock markets (including The NASDAQ

Global Select Market Composite on which our common shares are traded); and (v) general global economic conditions. Furthermore, the

conflicts in Europe and the Middle East have resulted in worldwide geopolitical and macroeconomic uncertainty, and we cannot predict how

these conflicts will evolve or their timing. If these conflicts continue for a significant time or further expand to other countries or regions, they

could have additional adverse effects on macroeconomic conditions that may have a direct adverse impact on our business and/or our supply

chain, business partners or customers in the broader region. All of these factors are outside of our control, but may nonetheless cause us to

adjust our strategy in order to compete effectively in global markets.