Company: EVLVW
Filing Date: 2025-11-13
Form Type: 10-Q
Source: 0001805385-25-000017
Chunk: 128

Company: Evolv Technologies Holdings, Inc.
Filing Date: 2025-11-13
Form: 10-Q
Item: Part II, Item 1A
Chunk 128
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 manufacture all components or parts of the products we require;

•potential labor unrest or unavailability affecting the ability of the third-party manufacturers to produce our systems; and

•the occurrence of unforeseen force majeure events affecting the third-party manufacturer.

We also use a third-party contract manufacturer located in Massachusetts and the U.K. as a second source for the production of a key sensor component used in our security screening systems. If our third-party contract manufacturers experience a delay, disruption, or quality control problems in their operations or if the third-party contract manufacturers do not renew or terminate our agreement with them, our operations could be significantly disrupted and our product shipments could be delayed. Qualifying new manufacturers and commencing volume production is expensive and time consuming. Ensuring that a contract manufacturer is qualified to manufacture our products or components to our standards is time consuming. In addition, if our contract manufacturers cannot scale their production of our products or components at the volumes and in the quality that we require, we may have to move production for the products or components to a new or existing third-party manufacturer, which would take significant effort and our business, results of operations and financial condition could be materially adversely affected.

As we contemplate moving manufacturing into different jurisdictions, we may be subject to additional and significant challenges in ensuring that quality, processes, and costs, among other issues, are consistent with our expectations. For example, we may not be able to collect reimbursements from our third-party contract manufacturers for penalties assessed on us because of excessive failures of products or warranty claims, which causes us to take on additional risk for potential failures of our products.

In November 2025, we entered into a non-exclusive contract manufacturing agreement with a new contract manufacturer. While we anticipate reduced product costs and and improved gross margin over time, such results may not materialize. Onboarding a new supplier involves various inherent risks that could adversely affect our production capacity and product quality, and negatively impact revenue, gross profits and field service costs. The planned shifts in manufacturing suppliers and sales models may result in changes to product cost and a reduction in overall gross margin due to differences in pricing dynamics and cost allocations. In addition, because we currently use third-party contract manufacturers to produce our security screening systems and certain key components, increases in the prices charged may have an adverse effect on our results of operations, as we may be unable to find contract manufacturers who can supply us at a lower price. As a result, the loss of a limited or sole source supplier could adversely affect our relationships with our customers and our results