ERII 10-K & 10-Q changes, risk factors and insider trading

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 variabilityvariability, 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.

The market for energy recovery devices for desalination and other water treatment plants is becoming increasingly competitive and we expect this competition to intensify as the desalination and wastewater markets continue to grow. Competitors have introduced products that are similar to, and directly compete with, our key energy recovery products. In addition, we expect new competitors to enter the market, and existing competitors to introduce improvements to their existing products and introduce new products that are directly competitive to our solutions. Our competitors’ existing, new, and improved products may be superior to our products and/or could be offered at prices that are considerably less than the cost of our products. TheOur performance and pricing pressure of such new products could cause us to adjust the prices of certain products to remain competitive, or we may not be able to continue to win large contracts, which could adversely affect our market share, competitive position and margins. Some of our current and potential competitors may have significantly greater financial, technical, marketing, and other resources; longer operating histories; or greater name recognition. Theycustomers may also haveencourage morecompetition extensiveby products and product lines that would enable them to offer multi-product or packaged solutions as well as competing products at lower prices or with other more favorable terms and conditions. As a result, our ability to sustain our market share may be adversely impacted, which would affect our business, product margins, operating results, and financial condition. In addition, if one ofpurchasing our competitors were to merge or partner with another company, the change in the competitive landscape could adversely affect our continuing ability to compete effectively.products.

WeAdditionally, mayas a result of the wind down, we will not begenerate able to successfully competerevenues in the CO2-based refrigeration system market.

Material variations to our forecasted MPD project delivery timeline in the fourth quarter of a fiscal year may have a substantial negative impact on our annual operating results and financial condition. Each of our MPD contracts generally has a minimum dollar value of approximately $1.0 million, with larger MPD contracts exceeding $10.0 million. We generally recognize revenue under MPD contracts when control of the promised goods or services is transferred to our customers. If 1) delivery is cancelled, postponed or otherwise delayed beyond the end of the fourth quarter; or 2) if control of the promised goods or services is transferred beyond the end of the fourth quarter; we will not be able to recognize that revenue for the fiscal year. For example, in fiscal year 2024,If we forecastedexperience over 40% of our annual net revenue to be realized in theunforeseen fourth quarter. Had we experienced unforeseenquarter delivery cancellations, postponements or other delays due to project cancellations, project delays, transportation or other shipping delays, or other adverse events would have prevented delivery in the fourth quarter, it is unlikely we wouldwill have had sufficient time to make up such revenue shortfall.

Our sales efforts involve substantial education of our current and prospective customers about the use and benefits of our energy recovery products. This education process can be time-consuming and typically involves a significant product evaluation process which is particularly pronounced when dealing with product introduction into new fluid flow industrial verticals. For example, in our Water segment, the average Water segment sales cycle for our international MPD customers, which are involved with larger desalination plants, typicallycan rangesbe from 16up to 36 months, and may exceed 36 months from time-to-time, and the average sales cycle for our OEM customers, which are involved with smaller desalination plants, ranges from one to 16 months, and may exceed 16 months from time-to-time. These long sales cycles make revenue predictions difficult and results in our expending significant resources well in advance of orders for our products, which may cause our operating results to fluctuate and may adversely affect our financial condition.

In addition to the IP litigation risks discussed below, we may become involved in the future in various commercial and other disputes as well as related claims and legal proceedings that arise from time to time in the course of our business. See Note 7, “Commitments and Contingencies – Litigation,” of the Notes for information about certain legal proceedings in which we are involved. Our current legal proceedings and any future lawsuits to which we may become a party are, and will likely be, expensive and time consuming to investigate, defend and resolve, and will divert our management’s attention. Any litigation to which we are a party may result in an onerous or unfavorable judgment that may not be reversed upon appeal or in payments of substantial monetary damages or fines, or we may decide to settle lawsuits on similarly unfavorable terms, which could have an adverse effect on our business, financial condition, or results of operations.

We operate on a global basis with offices or activities in North, South and Latin America, Middle East and Africa, Asia, and Europe. In the future, we may further expand the international reach of our operations, including new offices and manufacturing facilities. As a result, we are exposed to several political, economic and other uncertainties, including increased risks of social unrest, strikes, terrorism, war, the high cost of investment to establish a presence in a new market, changes in economic, political or other location conditions. In addition, we face risks inherent in compliance with international and U.S. laws and regulations that apply to our international operations. These laws and regulations include tax laws, anti-competition regulations, import and trade restrictions, export control laws, and laws which prohibit corrupt payments to governmental officials or certain payments or remunerations to customers, including the U.S. FCPA or other anti-corruption laws that have recently been the subject of a substantial increase in global enforcement. Many of our products are subject to U.S. export law restrictions that limit the destinations and types of customers to which our products may be sold, or require an export license in connection with sales outside the U.S. Given the high level of complexity of these laws, there is a risk that some provisions may be inadvertently or intentionally breached, for example, through fraudulent or negligent behavior of individual employees, our failure to comply with certain formal documentation requirements, or otherwise. Also, we may be held liable for actions taken by our local dealers and partners. Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or our employees, and prohibitions or conditions on the conduct of our business. Any such violations could include prohibitions or conditions on our ability to offer our products in one or more countries and could materially damage our reputation, our brand, our business, and our operating results. In addition, we operate in many parts of the world that have experienced significant governmental corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. We may be subject to competitive disadvantages to the extent that our competitors are able to secure business, licenses, or other preferential treatment by making payments to government officials and others in positions of influence or through other methods that relevant law and regulations prohibit us from using. Our success depends, in part, on our ability to anticipate these risks and manage these difficulties. These factors or any combination of these factors may adversely affect our revenue or our overall financial performance.

We may not be able to identify opportunities or complete transactions on commercially reasonable terms, or at all, or actually realize any anticipated benefits from such acquisitions or investments. Similarly, we may not be able to obtain financing for acquisitions or investments on attractive terms. If we do complete acquisitions, we cannot ensure that they will ultimately strengthen our competitive or financial position or that they will not be viewed negatively by customers, financial markets, investors, or the media. In addition, the success of any acquisitions or investments also will depend, in part, on our ability to integrate the acquisition or investment with our existing The integration of businesses that we may acquire is likely to be a complex, time-consuming, and expensive process and we may not realize the anticipated revenues or other benefits associated with our acquisitions if we fail to successfully manage and operate the acquired business. If we fail in any acquisition integration efforts and are unable to efficiently operate as a combined organization utilizing common information and communication systems, operating procedures, financial controls, and human resources practices, our business, financial condition, and results of operations may be adversely affected.operations.

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 recently enacted currency control regulations and tariff regimes in or against China, Mexico and Canada,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, 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.

OurAs futureanother effective tax rates could be subject to volatility or adversely affected by changes in tax laws, regulations, accounting principles, or interpretations thereof. In addition,example, the U.S. Tax Cuts and Jobs Act (“Tax Act”) enacted in 2017, made significant changes to the taxation of U.S. business entities that may have a meaningful impact to our provision for income taxes. These changes includedincluding a reduction to the federal corporate income tax rate, the current taxation of certain foreign earnings, the imposition of base-erosion prevention measures which may limit the deduction of certain transfer pricing payments, foreign derived intangible income deductions, capitalization of R&D expenses beginning in the 2022 tax year, and possible limitations on the deductibility of net interest expense or corporate debt obligations. The U.S. Department of the Treasury continuesmay continue to issue regulations that affect various components of the OBBB and the Tax Act. Our future effective tax rate may be impacted by changes in interpretation of the regulations, as well as additional legislation and guidance regarding the OBBB and the Tax Act.

New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect our business operations and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us. For example, the OBBB, the Tax Act, the Coronavirus Aid, Relief, and Economic Security Act, and the Inflation Reduction Act, enacted many significant changes to the U.S. tax laws. Future guidance from the U.S. Internal Revenue Service (the “IRS”) and other tax authorities with respect to such legislation may affect us, and certain aspects thereof could be repealed or modified in future legislation. The incumbent administration and Congress periodically make and propose tax law changes, some of which could have an adverse effect on our operations, cash flows, and results of operations, and contribute to overall market volatility. In addition, it is uncertain if and to what extent various states will conform to federal tax legislation. Changes in corporate tax rates, the realization of net deferred tax assets relating to our operations, the taxation of foreign earnings, and the deductibility of expenses under the Tax Act or future reform legislation could have a material impact on the value of our deferred tax assets, could result in significant one-time charges, and could increase our future U.S. tax expense.

We are subject to income and other taxes in the U.S. and numerous foreign jurisdictions. Significant judgments and estimates are required to be made in determining our worldwide provision for income taxes. Changes in estimates of projected future operating results, changes in tax laws, loss of deductibility of items, changes in the source of income, amount and location of R&D spending, limitations on our ability to utilize tax net operating losses in the future or changes in assumptions regarding our ability to generate future taxable income could result in significant increases to our tax expense and liabilities that could adversely affect our financial condition and profitability. In addition, we are subject to ongoing tax audits in various jurisdictions. In connection with these audits (or future audits), tax authorities may disagree with our estimates or other matters and assess additional taxes. For example, we are under a federal income tax audit by the IRS, for fiscal year 2021 (the “2021 Tax Audit”). The 2021 Tax Audit is ongoing with no proposed adjustments by the IRS to date. We do not expect a preliminary resolution of the 2021 Tax Audit to be reached during the next six months. While we regularly assess the likely outcome of the 2021 Tax Audit in order to determine the appropriateness of our tax provision, tax audits are inherently uncertain and an unfavorable outcome could occur. As a result, the ultimate resolution of the 2021 Tax Audit, changes in tax laws or tax rates, and the ability to utilize our deferred tax assets could materially affect our tax provision, net income and cash flows in future periods.

The markets for our products are dynamic and constantly evolving. Our products are sold in numerous countries worldwide, with a large percentage of our sales generated outside the U.S., specifically in the Middle EastEast, Africa and Asia 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 known conflicts in Europe and the Middle East, 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 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.operations.

As a significant portion of our revenue is derived from large project contract deliveries that are between 16up to 36 months from contract date, there is no specific seasonality in our revenues to highlight.

The decrease in AMMPD revenue of $0.7$12.5 million was due primarily to lower shipments of parts and service to the MEAAfrica and EuropeAsia markets, partially offset by higher shipments of products to the AsiaMiddle market.East and Europe markets.

Revenues are primarily attributable to domestic and international sales as a percentage of total revenueand are presentedconcentrated in the followingMiddle table.East and Africa. See Note 10, “Concentrations – Revenue by Geographic Location and Country,” of the Notes for further discussion regarding our concentration of revenue by geographic location.

The increasedecrease in gross profit and gross margin for the year ended December 31, 2024,2025, as compared to the prior year, was due primarily to an increase inlower sales ofvolume PXsspread andover slightlyfixed highercosts, averageincreased selling pricescosts related to change in product and channel mix, pricing and tariffs, partially offset by a decrease in grossindirect margin.manufacturing Thecosts decrease in gross margin forduring the year ended December 31, 2024, as compared to the prior year, was due primarily to higher manufacturing costs and scrap costs.2025.

The total material changes of general and administrative (“G&A”), sales and marketing (“S&M”) and research and development (“R&D”) operating expenses for the year ended December 31, 2024,2025, as compared to the comparable period in the prior year, are discussed within the following overall operating expenditures, and the segment and corporate operating expenses discussions below.

Overall Operating Expenditures. Overall operating expenditures increaseddecreased by $9.2$13.2 million, or 13.5%.(17.1%). This increasedecrease was due primarily to restructuringa charges, and an increasedecrease in employee costs, such as employee compensation,compensation and stock-based compensation, severanceas well as lower Emerging Technologies segment development costs, facility expenses and recruitingrestructuring costs,charges, inpartially G&Aoffset andby S&M. Changes in non-employeeimpairment costs included:associated with the sublease of the Katy, Texas lease incurred during the year ended December 31, 2025.

Restructuring Charges. 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 inwithin ourthe SanG&A Leandro location,function, in order to lower our operating cost structure, and to position the Company for profitable growth. We expectrecorded to record an estimatedtotal restructuring chargecharges of approximately $3.0$2.8 million, of which $2.5$0.3 million was recorded during the fourth quarter of fiscal year 2024.ended ThisDecember 31, 2025. The total restructuring charge was relatedrelates to severance and benefitsbenefits, toincluding reemployment assistance, for 38 terminated employees, which was approximately 15% of our workforce. We expect theThe implementation of the restructuring plan willwas becompleted substantially complete byduring the endyear ofended theDecember first quarter of fiscal year31, 2025. See Note 4, “Other Financial Information – Restructuring,” of the Notes for further discussion and disclosure on our restructuring program.

The increasedecrease in “Total other income, net” in the yearyears ended December 31, 2024,2025, as compared to the comparable period in the prior year, was primarily due primarily to ana increasedecrease in short- and long-term investments.

The higher provision for income taxes in 2024,2025, as compared to the prior year, was due primarily to an increase in income from operations, a decrease in tax benefit of $0.3 million related to Foreign Derived Intangible Income (“FDII”), and a decrease of $0.4$0.6 million in federal R&D tax credits, partiallya offsetdecrease byin $0.7$0.6 million in realizable California R&D credit and $0.1 million net changeincrease on the tax impact of stock-based compensation and executive compensation limits.

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 December 31, 2024,2025, our principal sources of liquidity consisted of (i) unrestricted cash and cash equivalents of $29.6$48.1 million that are primarilyheld 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 $70.2$35.2 million that are primarily invested in U.S. treasury securities, corporate notessecurities and bonds, and municipal and agencycorporate notes and bonds; and (iii) accounts receivable, net of allowances, of $64.1$76.6 million. As of December 31, 2024,2025, there was unrestricted cash of $1.0$1.4 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.

We entered into a credit agreement with JPMorgan Chase Bank, N.A. (“JPMC”) on December 22, 2021 (as amended, the “Credit Agreement”). The Credit Agreement, which will expire on December 21, 2026,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 maximum allowable LCs under the credit line component of the Credit Agreement is $30.0 million. As of December 31, 2024,2025, wethe wereCompany was in compliance with all covenants under the Credit Agreement.

Share Repurchase ProgramPrograms

The Board, from time-to-time, has authorized a share repurchase programprograms 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 December 31, 2024,2025, we have cumulatively repurchased 11.414.0 million shares of the Company’s common stock at an aggregate cost of $130.5$166.1 million under all closed share repurchase programs. The following is a discussion of the current share repurchase programsprogram during the last 3-yearsyears ended December 31, 2024.2025. See Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Share Repurchase Program,” included in this Annual Report on Form 10-K for discussion of shares repurchased in the fourth quarter of fiscal year 2024 and Note 11, “Stockholders’ Equity – Share Repurchase Program,Programs,” of the Notes for further discussion related to share repurchase programs and a reconciliation of the latest share repurchase plan balance.

On February 26, 2025 and August 6, 2025, we announced that the Board authorized a share repurchase programprograms under which we may repurchase our outstanding common stock, at the discretion of management, up to $30.0an aggregate amount of $55.0 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”). We expect to commence repurchasing our outstanding common stock after March 4, 2025.stock.

Ukraine, the continuing 2026 conflict in Iran and escalating conflicts in the Middle East, as well as the impact of increased inflation and a potential stagflation 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.

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. Further escalation of the conflict could heighten inflationary pressures on our input costs, adversely affect global financial markets, increase currency exchange rate volatility, and elevate interest rates, which could increase the cost of future financing. 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, economic sanctions and export controls, trade restrictions, 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 where we have existing or prospective customer relationships, 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

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 ortime, further expand to other countries or regions,regions or cannot be stabilized by any diplomatic efforts, 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.

Results of Operations

Our reportable operating segments consist of the desalination, wastewaterDesalination and emerging technologiesWastewater 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 or, in the case of emerging technologies, where revenues from new and/or potential devices utilizing our pressure exchanger technology can be brought to market.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 corporateCorporate operatingand expensesOther include expenditures in support of the desalination, wastewaterDesalination and emergingWastewater technologiessegments, 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 threesix months ended MarchJune 31,30, 2026, we changed the composition of our reportable segments to better reflect how the CODM manages the business. AsDuring athe partfist quarter of thisfiscal change,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.

A discussion regarding our financial condition and results of operations for the three and six months ended MarchJune 31,30, 2026, compared to the three and six months ended MarchJune 31,30, 2025, is presented below.

Three months ended MarchJune 31,30, 2026, as compared to the three months ended MarchJune 31,30, 2025

The increasedecrease in originalOriginal equipmentEquipment manufacturerManufacturer (“OEM”) revenue of $2.6$3.2 million was due primarily to:

•Emerging TechDesalination: The increasedecrease in revenue of $0.1$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 AmericasAmerica, market.Europe and Middle East markets.

•Wastewater: The decrease in aftermarket revenue of $1.3$1.9 million was due primarily due to lower shipments of products to the Asia and Middle East markets.

The increasedecrease in megaprojectAfter Market (“AM”) revenue of $0.3$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.

Energy Recovery, Inc. | Q2'2026 Quarterly Report (Form 10-Q) | 27 The decrease in gross profit and gross margin for the three months ended MarchJune 31,30, 2026, as compared to the prior year, was due primarily to $1.6lower millionvolume ofas restructuring charges bookedcompared to inventory associated with the windprior downyear, ofpartially theoffset CO2by retail grocery business, as well as increased costs relateddecreases to product and channel mix, pricing, tariffs, and indirect manufacturing costs duringand thechannel three months ended March 31, 2026.mix.

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 MarchJune 31,30, 2026, as compared to the comparable periodperiods in the prior year, are discussed within the following overall operating expenditures, and the segment and corporate operating expenses discussions below.

Three months ended MarchJune 31,30, 2026, as compared to the three months ended MarchJune 31,30, 2025

CorporateOverall Operating Expenses.Expenditures. CorporateOverall operating expensesexpenditures decreased by $1.9$1.6 million, or (27.6%10.0%). This decrease was primarily due to lower employee compensation costs, including stock-based compensation expense, and lower consulting costscosts, andpartially impairmentoffset costsby associatedrestructuring with the sublease of the Katy, Texas leasecharges incurred duringin the three months ended MarchJune 31,30, 2025.2026.

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 $1.5$0.9 million during the three months ended MarchJune 31,30, 2026. The total restructuring charge recorded relates to severance and benefits, including reemployment assistance, for 23 terminated employees. InThe additionrestructuring 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 charges, the Company 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.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 threesix months ended MarchJune 31,30, 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.

The decrease in “Total other income, net” in the three and six months ended MarchJune 31,30, 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.

For the three and six months ended MarchJune 31,30, 2025,2026, the recognized benefit from income taxes resulted from the tax projection based on the full year forecasted profitforecast and included benefits related to the U.S. federal foreign-derivedresearch intangibleand incomedevelopment (“FDII”), federal R&D”) tax credit, and certain permanent differences, such as non-deductible stock-based compensation shortfalls,as andwell partialas releasean ofincrease in the California valuation allowance.allowance for California R&D tax credits.

The effective tax rate excluding discrete items for the threesix months ended MarchJune 31,30, 2026, as compared to the prior year, differed primarily due to lowerthe projectedprojection that the Company will not generate the U.S. federal R&Dforeign-derived taxintangible credits,income increaseddeduction non-deductiblein officer2026 stock-baseddue compensation,to largelythe offsetCompany’s byforecasted projectedloss higherin U.S. FDDEI benefits.2026.

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 MarchJune 31,30, 2026, our principal sources of liquidity consisted of (i) unrestricted cash and cash equivalents of $50.1$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 $42.0$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 $38.9$14.2 million. As of MarchJune 31,30, 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.

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 MarchJune 31,30, 2026, the Company was in compliance with all covenants under the Credit Agreement.

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 MarchJune 31,30, 2026, we have cumulatively repurchased 14.915.9 million shares of the Company’s common stock at an aggregate cost of $176.8$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 MarchJune 31,30, 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 will expireexpired in May 2026. As of MarchJune 31,30, 2026, we have repurchased 1,346,8692,179,419 shares of our common stock at an aggregate cost of approximately $16.3$25.0 million of which 960,303832,550 and 1,792,853 were purchased during the three and six months ended MarchJune 31,30, 2026 at an aggregate cost of approximately $10.7$8.7 million.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 expect to commencebegan 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.

The higher net cash provided by operating assets and liabilities for the threesix months ended MarchJune 31,30, 2026, as compared to the prior year, was due primarily to the following factors:

•Inventories: a decrease in cash provided due to cash used to build finished goods inventory in the first quarterhalf of 2026.

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 threesix months ended MarchJune 31,30, 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.

Net cash used in financing activities for the threesix months ended MarchJune 31,30, 2026 was higherlower as compared to the cash used in financing activities in the prior year, due to higherlower repurchases of our common stock partiallyas offsetwell byas lowera net$0.4 proceedsmillion fromrefund received for excise tax payments made during the issuanceprevious of common stock as compared to the priorfiscal year.