Evolv Technologies Holdings, Inc.

Previous wording

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K”). This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” section of this Quarterly Report on Form 10-Q and our 2025 Form 10-K and in other parts of this Quarterly Report on Form 10-Q.

Current wording

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K”). This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the “Risk Factors” section of this Quarterly Report on Form 10-Q and our 2025 Form 10-K and in other parts of this Quarterly Report on Form 10-Q.

Previous wording

Key indicators of our performance of market acceptance and customer adoption include Annual Recurring Revenue (“ARR”), a measure of annualized recurring subscription and related service revenue, and Remaining Performance Obligation (“RPO”), a measure of expected future revenue from active customer contracts. We believe these indicators reflect the scale, durability, and growth of our Security‑as‑a‑Service model.

Current wording

Key indicators of our performance, market acceptance, and customer adoption include Annual Recurring Revenue (“ARR”), a measure of annualized recurring subscription and related service revenue, and Remaining Performance Obligation (“RPO”), a measure of expected future revenue from active customer contracts. We believe these indicators reflect the scale, durability, and growth of our Security‑as‑a‑Service model.

Previous wording

On November 5, 2025, we entered into a non-exclusive contract manufacturing agreement with Plexus Corp. (“Plexus”). This shift is part of a broader supply chain strategy aimed at enhancing scalability, geographic diversification, creating long-term cost-saving opportunities, and operational resiliency. As Plexus is brought onboard, we believe we maintain sufficient inventory and committed production capacity to meet our growth targets with our existing contract manufacturer, ensuring uninterrupted service and consistent delivery to customers.

Current wording

On November 5, 2025, we entered into a non-exclusive contract manufacturing agreement with Plexus Corp. (“Plexus”). This shift is part of a broader supply chain strategy aimed at enhancing scalability, geographic diversification, creating long-term cost-saving opportunities, and operational resiliency. Plexus has been fully brought onboard, and we believe we maintain sufficient inventory and committed production capacity to meet our growth targets with our existing contract manufacturer, ensuring uninterrupted service and consistent delivery to customers.

Previous wording

Since our inception, we have incurred significant operating losses. Our ability to generate revenue and achieve cost improvements sufficient to achieve profitability will depend on the successful further development and commercialization of our products. We generated revenue of $90.1 million and $64.6 million for the six months ended June 30, 2026 and 2025, respectively. We generated a net loss of $14.3 million and $42.2 million for the six months ended June 30, 2026 and 2025, respectively. We expect to continue to incur operating losses as we focus on growing and establishing recurring commercial sales of our products, including growing our sales and marketing teams, scaling the use of third-party contract manufacturers, and continuing research and development efforts to develop new products and further enhance our existing products.

Current wording

Since our inception, we have incurred significant operating losses. Our ability to generate revenue and achieve cost improvements sufficient to achieve profitability will depend on the successful further development and commercialization of our products. We generated revenue of $137.4 million and $107.4 million for the nine months ended September 30, 2026 and 2025, respectively. We generated a net loss of $29.9 million and $44.0 million for the nine months ended September 30, 2026 and 2025, respectively. We expect to continue to incur operating losses as we focus on growing and establishing recurring commercial sales of our products, including growing our sales and marketing teams, scaling the use of third-party contract manufacturers, and continuing research and development efforts to develop new products and further enhance our existing products.

Previous wording

ARR. We believe ARR is a useful metric for investors because it provides visibility into the scale and sustainability of our recurring revenue base. ARR reflects the annualized value of active subscription arrangements at a point in time and helps investors evaluate trends in customer and unit acquisition, retention, and expansion. As our business continues to shift toward pure subscription and purchase subscription sales models (and away from our legacy distribution subscription model), we believe ARR more accurately captures the recurring nature of our revenue compared to period based revenue measures alone. Management also uses ARR to assess operating performance, inform strategic decisions, and plan for future growth, because it is impacted by multiple dimensions of our business, including new customer and unit acquisition, customer pricing, renewal history, and renewal pricing.

Current wording

Annual Recurring Revenue. We believe ARR is a useful metric for investors because it provides visibility into the scale and sustainability of our recurring revenue base. ARR reflects the annualized value of active subscription arrangements at a point in time and helps investors evaluate trends in customer and unit acquisition, retention, and expansion. As our business continues to shift toward pure subscription and purchase subscription sales models (and away from our legacy distribution subscription model), we believe ARR more accurately captures the recurring nature of our revenue compared to period based revenue measures alone. Management also uses ARR to assess operating performance, inform strategic decisions, and plan for future growth, because it is impacted by multiple dimensions of our business, including new customer and unit acquisition, customer pricing, renewal history, and renewal pricing.

Previous wording

As of June 30, 2026, ARR was $132.7 million, compared to $110.5 million as of June 30, 2025, representing year over year growth of 20%. This increase was driven by the addition of nearly 250 customers during the twelve month period ended June 30, 2026, expanded deployments by existing customers and increased demand for our pure subscription and purchase subscription sales models which generate a higher proportion of recurring revenue compared to our legacy distribution subscription sales model (see "Sales Models”).

Current wording

As of September 30, 2026, ARR was $140.5 million, compared to $117.2 million as of September 30, 2025, representing year over year growth of 20%. This increase was driven by the addition of about 230 new customers during the twelve month period ended September 30, 2026, expanded deployments by existing customers and increased demand for our pure subscription and purchase subscription sales models which generate a higher proportion of recurring revenue compared to our legacy distribution subscription sales model (see "Sales Models”).

Previous wording

RPO. We believe RPO, a measure of expected future revenue from active customers, to be a key indicator of our performance. As disclosed in Note 5 to our financial statements, RPO at June 30, 2026 was $312.6 million, an increase of approximately 5% from December 31, 2025, driven by continued market demand.

Current wording

Remaining Performance Obligation. We believe RPO, a measure of expected future revenue under contract with active customers, to be a key indicator of our performance. As disclosed in Note 5 to our financial statements, RPO at September 30, 2026 was $325.8 million, an increase of approximately 11% from December 31, 2025, driven by continued market demand.

Previous wording

Adjusted EBITDA is defined as net income (loss) plus depreciation and amortization, stock based compensation, interest expense (income), provision for income taxes, change in fair value of contingent earn out liability, change in fair value of contingently issuable common stock liability, change in fair value of public warrant liability, loss on impairment of leased equipment, loss on impairment of intangible asset, loss on disposal of leased equipment, non-recurring employee restructuring and other separation costs, non-recurring inventory charges, and other non-recurring legal and regulatory costs, which management believes provides a more meaningful representation of operating results.

Current wording

Adjusted EBITDA is defined as net income (loss) plus depreciation and amortization, stock based compensation, interest expense (income), provision for income taxes, change in fair value of contingent earn out liability, change in fair value of contingently issuable/returnable common stock liability/asset, loss on remeasurement of common stock receivable, change in fair value of public warrant liability, loss on impairment of leased equipment, loss on impairment of intangible asset, loss on disposal of leased equipment, non-recurring employee restructuring and other separation costs, non-recurring inventory charges, and other non-recurring legal and regulatory costs, which management believes provides a more meaningful representation of operating results.

Previous wording

The following table presents a reconciliation of net income, the most directly comparable GAAP financial measure, to Adjusted EBITDA for each of the periods indicated:

Current wording

The following table presents a reconciliation of net loss, the most directly comparable GAAP financial measure, to Adjusted EBITDA for each of the periods indicated:

Previous wording

For the three months ended June 30, 2026, Adjusted EBITDA was $4.4 million, compared to $2.1 million for the three months ended June 30, 2025, representing an improvement of $2.3 million year-over‑year. This improvement was primarily driven by revenue growth, increased operating leverage, and continued discipline in managing operating expenses, partially offset by higher investments to support growth initiatives and customer deployments. For the six months ended June 30, 2026, Adjusted EBITDA was $8.4 million, compared to $4.2 million for the six months ended June 30, 2025, representing an improvement of $4.2 million year-over‑year. This improvement was primarily driven by revenue growth, increased operating leverage, and continued discipline in managing operating expenses, partially offset by higher investments to support growth initiatives and customer deployments.

Current wording

For the three months ended September 30, 2026, Adjusted EBITDA was $4.7 million, compared to $5.1 million for the three months ended September 30, 2025, representing a decrease of $0.4 million year-over-year. The decrease primarily reflected higher operating expenses associated with continued investments in research and development and sales and marketing to support our growth initiatives, as well as professional fees in general and administrative expense to support SOX remediation efforts. For the nine months ended September 30, 2026, Adjusted EBITDA was $13.1 million, compared to $9.3 million for the nine months ended September 30, 2025, representing an improvement of $3.8 million year-over‑year. The improvement was primarily driven by revenue growth and increased operating leverage, partially offset by continued investments in research and development and sales and marketing to support our growth initiatives and in general and administrative functions, including to support SOX remediation efforts.

Previous wording

Because of the numerous risks and uncertainties associated with product development and commercialization, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability. Until such time, if ever, as we can generate substantial revenue sufficient to achieve profitability, we expect to finance our operations through cash generated from operations and our Senior Secured Credit Facilities. See “Liquidity and Capital Resources” as well as “Risks Related to Our Financial Condition and Liquidity” for more information. Additionally, as discussed in Note 13, Commitments and Contingencies, to our condensed consolidated financial statements for the three and six months ended June 30, 2026, we are involved in certain legal proceedings, including a government investigation. Given the uncertainty of such matters, no assurance can be given regarding the final outcome of such matters. However, the ultimate amount or range of potential loss, which might result to the Company, may differ materially from our current estimates.

Current wording

Because of the numerous risks and uncertainties associated with product development and commercialization, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability. Until such time, if ever, as we can generate substantial revenue sufficient to achieve profitability, we expect to finance our operations through cash generated from operations and our Senior Secured Credit Facilities. See “Liquidity and Capital Resources” as well as “Risks Related to Our Financial Condition and Liquidity” for more information. Additionally, as discussed in Note 13, Commitments and Contingencies, to our condensed consolidated financial statements for the three and nine months ended September 30, 2026, we are involved in certain legal proceedings, including a government investigation. Given the uncertainty of such matters, no assurance can be given regarding the final outcome of such matters. However, the ultimate amount or range of potential loss, which might result to the Company, may differ materially from our current estimates.

Previous wording

As described in Supply Chain Strategy above, we entered into a non-exclusive contract manufacturing agreement with Plexus, which is expected to enhance manufacturing scalability and operational efficiency. While the onboarding may temporarily affect working capital due to dual production activities and other onboarding costs, the Company does not anticipate a material impact on overall liquidity in the near term. Once fully operational, we expect improved inventory efficiency and commercial terms. The Company continues to monitor cash flows and capital requirements associated with the transition to ensure sufficient resources are available to support ongoing operations and strategic initiatives.

Current wording

As described in Supply Chain Strategy above, we entered into a non-exclusive contract manufacturing agreement with Plexus, which is expected to enhance manufacturing scalability and operational efficiency. Volume production has fully transferred to Plexus, with remaining transition and optimization expected to continue into the first quarter of 2027. The Company continues to monitor cash flows and capital requirements associated with the transition to ensure sufficient resources are available to support ongoing operations and strategic initiatives.

Previous wording

We derive a portion of our revenue from the sale of our Evolv Express and eXpedite equipment and related add-on accessories to customers. Revenue is recognized when control of the product has transferred to the customer, which follows the terms of each contract. We anticipate future growth in product revenue as more customers purchase systems through our purchase subscription model instead of through the now cancelled Distribution and License agreement with Columbia Tech.

Current wording

We derive a portion of our revenue from the sale of our Evolv Express and eXpedite equipment and related add-on accessories to customers. Revenue is recognized when control of the product has transferred to the customer, which follows the terms of each contract. We anticipate future growth in product revenue as more customers purchase systems through our purchase subscription model instead of through the now expired Distribution and License Agreement with Columbia Tech. Product revenue is also impacted by the pricing of the components included in our purchase subscription offerings. Pricing changes may affect the relative mix of product revenue and service revenue, with a differing amount of revenue from these arrangements recognized upfront as product revenue and recognized over the recognized over time as service revenue.

Previous wording

Subscription revenue consists of revenue derived from leasing Evolv Express and eXpedite systems to our customers. Lease terms are typically four years and customers generally pay either a quarterly or annual fixed payment for the lease, SaaS, and maintenance elements over the contractual lease term. Equipment leases are generally classified as operating leases and recognized ratably over the duration of the lease. There are no contingent lease payments as part of these arrangements.

Current wording

Subscription revenue consists of revenue derived from leasing Evolv Express and eXpedite systems to our customers. Lease terms are typically four years and customers generally pay in advance either a quarterly or annual fixed payment for the lease, SaaS, and maintenance elements over the contractual lease term. At the end of the initial contractual lease term, customers generally have the option to renew their existing lease or upgrade, typically for a longer lease term, to our second generation Evolv Express system. Equipment leases are generally classified as operating leases and recognized ratably over the duration of the lease. There are no contingent lease payments as part of these arrangements.

Previous wording

Service revenue consists of subscription-based SaaS and maintenance revenue related to Evolv Express and eXpedite systems sold to customers. Customers generally pay either a quarterly or annual fixed payment for SaaS and maintenance. SaaS and maintenance revenue is recognized ratably over the period of the arrangement, which is typically four years.

Current wording

Service revenue consists of subscription-based SaaS and maintenance revenue related to Evolv Express and eXpedite systems sold to customers. Customers generally pay in advance either a quarterly or annual fixed payment for SaaS and maintenance. SaaS and maintenance revenue is recognized ratably over the period of the arrangement, which is typically four years for the initial contractual lease. At the end of the initial contractual lease term, customers generally have the option to renew their existing lease or upgrade, typically for a longer lease term, to our second generation Evolv Express system. Additionally, pricing changes may affect the relative mix of product revenue and service revenue, with a differing amount of revenue from these arrangements recognized upfront as product revenue and recognized over the recognized over time as service revenue.

Previous wording

License fee and other revenue includes license fee revenue from the Distribution and License Agreement, revenue from professional services, and other one-time revenue. License fee revenue is recognized upon the shipment of product from Columbia Tech to the reseller. Revenue for professional services is recognized upon transfer of control of these services, which are normally rendered over a short duration. During the three months ended September 30, 2025, we discontinued quoting under this basis, and the agreement with Columbia Tech expired on December 31, 2025. All new quotes for end-user customers wishing to purchase the hardware equipment will be fulfilled through our purchase subscription model going forward. Thus, license revenue from this agreement has been reduced to zero, and is replaced by increased product revenue, which in turn provides an increase in gross profit over the duration of the contract.

Current wording

License fee and other revenue includes license fee revenue from professional services, other one-time revenue, and revenue from the Distribution and License Agreement. License fee revenue is recognized upon the shipment of product from Columbia Tech to the reseller. Revenue for professional services is recognized upon transfer of control of these services, which are normally rendered over a short duration. During the three months ended September 30, 2025, we discontinued quoting under this basis, and the agreement with Columbia Tech expired on December 31, 2025. All new quotes for end-user customers wishing to purchase the hardware equipment will be fulfilled through our purchase subscription model going forward. Thus, license revenue from this agreement has been reduced to zero, and is replaced by increased product revenue, which in turn provides an increase in gross profit over the duration of the contract.

Previous wording

Restructuring costs consists of termination charges arising from severance obligations, incremental non-cash expense related to extended eligibility for the vesting of certain equity awards, and other customary employee benefit payments in connection with a reduction in force. See Note 15, Restructuring Charges for additional information.

Current wording

Restructuring costs consist of termination charges arising from severance obligations, incremental non-cash expense related to extended eligibility for the vesting of certain equity awards, and other customary employee benefit payments in connection with a reduction in force. See Note 15, Restructuring Charges for additional information.

Previous wording

Prior to the Merger, certain NHIC stockholders owned 4,312,500 shares of NHIC Class B common stock, referred to as Founder Shares. Upon the closing of the Merger, NHIC Class A and Class B common stock became the Company's common stock. 1,897,500 Founder Shares vested at the closing of the Merger, 1,897,500 Founder Shares are contingently issuable and shall vest upon the Company achieving certain milestones by July 16, 2026, and 517,500 Founder Shares were contributed to Give Evolv LLC. The 1,897,500 outstanding contingently issuable common shares are accounted for either as a liability, if still held at the Company's transfer agent, or as an asset as described below, and subsequently remeasured at each reporting date with changes in fair value recorded as a component of other income (expense), net in the condensed consolidated statements of operations and comprehensive loss.

Current wording

Prior to the Merger, certain NHIC stockholders owned 4,312,500 shares of NHIC Class B common stock, referred to as Founder Shares. Upon the closing of the Merger, NHIC Class A and Class B common stock became the Company's common stock. 1,897,500 Founder Shares vested at the closing of the Merger, 1,897,500 Founder Shares were contingently issuable and were to vest upon the Company achieving certain milestones by July 16, 2026, and 517,500 Founder Shares were contributed to Give Evolv LLC. Prior to the expiration of the vesting period, the 1,897,500 outstanding contingently issuable common shares were accounted for either as a liability, if still held at the Company's transfer agent, or as an asset as described below, and subsequently remeasured at each reporting date with changes in fair value recorded as a component of other (expense) income, net in the condensed consolidated statements of operations and comprehensive loss.

Previous wording

Under the Founder Shares arrangement, Founder Shares may be transferred to third parties, subject to certain conditions. The unvested shares must be returned to the Company for cancellation if the specified vesting conditions are not met. As of June 30, 2026, a total of 729,570 unvested shares had been transferred to individual brokerage accounts, resulting in a reduction to the contingently issuable common stock liability and recognition of the value of the shares as outstanding equity. The remainder of the unvested shares were held in directly registered form at the transfer agent. The contractual obligation of the holders to return the transferred shares upon failure to meet vesting conditions is accounted for as a freestanding financial asset. This asset is initially recognized at fair value and remeasured at each reporting date with changes in fair value recorded as a component of other income (expense), net in the condensed consolidated statements of operations and comprehensive loss. As of June 30, 2026, no milestones had been achieved, and none were achieved prior to the expiration of the vesting period on July 16, 2026.

Current wording

Under the Founder Shares arrangement, Founder Shares could be transferred to third parties, subject to certain conditions. The unvested shares are required to be returned to the Company for cancellation if the specified vesting conditions are not met. As of September 30, 2026, a total of 471,241 Founder Shares that had previously been transferred to individual stockholders' brokerage accounts remained outstanding and are subject to recovery by the Company, while all other Founder Shares, had either been forfeited upon expiration of the vesting period, if held in directly registered form at the transfer agent, or retired upon their subsequent return by stockholders. Prior to the expiration of the vesting period, the contractual obligation of the holders to return the transferred shares upon failure to meet vesting conditions was accounted for as a freestanding financial asset. This asset was initially recognized at fair value and remeasured at each reporting period through the expiration of the vesting period on July 16, 2026 with changes in fair value recorded as a component of other (expense) income, net in the condensed consolidated statements of operations and comprehensive loss. No milestones were achieved prior to the expiration of the vesting period on July 16, 2026. In accordance with ASC 815-40, upon expiration of the vesting period, the contingently returnable common stock asset was reclassified to equity as common stock receivable, which is included within additional paid-in capital in our condensed consolidated balance sheets and statements of stockholders' equity, with loss on remeasurement of common stock receivable recorded as a component of other (expense) income, net in the condensed consolidated statements of operations and comprehensive loss. See Note 4, Fair Value Measurements for additional information regarding the Founder Shares accounting.

Previous wording

In connection with the closing of the Merger, the Company assumed warrants to purchase 14,325,000 shares of common stock (the “Public Warrants”) at an exercise price of $11.50. The Public Warrants expired on July 16, 2026. We assessed the features of these warrants and determined that they qualify for classification as a liability. Accordingly, we recorded the warrants at fair value upon the closing of the Mergeras a component of other income (expense), net in thecondensed consolidated statements of operations and comprehensive loss with the offset to additional paid-in capital. The liability was subsequently remeasured at each reporting date with changes in fair value recorded as a component of other income (expense), net in the condensed consolidated statements of operations and comprehensive loss.

Current wording

In connection with the closing of the Merger, the Company assumed warrants to purchase 14,325,000 shares of common stock (the “Public Warrants”) at an exercise price of $11.50. We assessed the features of these warrants and determined that they qualified for classification as a liability. Accordingly, we recorded the warrants at fair value upon the closing of the Mergeras a component of other income (expense), net in thecondensed consolidated statements of operations and comprehensive loss with the offset to additional paid-in capital. The liability was subsequently remeasured at each reporting date with changes in fair value recorded as a component of other income (expense), net in the condensed consolidated statements of operations and comprehensive loss. The Public Warrants expired on July 16, 2026.

Previous wording

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law in the United States. The OBBBA introduces various corporate and international tax law changes with staggered effective dates through 2027. Key provisions include immediate R&D expensing, permanent bonus depreciation, modifications to interest expense limitations, and changes to certain international tax rules. The enacted legislation did not have a material impact on our financial position, results of operations, or effective tax rate for the six months ended June 30, 2026, primarily due to our full valuation allowance position on U.S. deferred tax assets, immaterial current tax liabilities, and insignificant foreign earnings from Evolv UK. We will continue to monitor and evaluate all applicable provisions of the OBBBA and any potential future impact on our consolidated financial statements.

Current wording

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law in the United States. The OBBBA introduces various corporate and international tax law changes with staggered effective dates through 2027. Key provisions include immediate R&D expensing, permanent bonus depreciation, modifications to interest expense limitations, and changes to certain international tax rules. The enacted legislation did not have a material impact on our financial position, results of operations, or effective tax rate for the nine months ended September 30, 2026, primarily due to our full valuation allowance position on U.S. deferred tax assets, immaterial current tax liabilities, and insignificant foreign earnings from Evolv UK. We will continue to monitor and evaluate all applicable provisions of the OBBBA and any potential future impact on our consolidated financial statements.

Previous wording

We believe there are several key trends that are continuing to drive increased adoption of our solutions and growth in our sales, including (i) escalating gun violence, which has created stronger demand for security screening solutions for customers and prospects in our key vertical markets, (ii) customer acquisition activities which led to the addition of 70 newend-users during the three months ended June 30, 2026,(iii) the expansion of our existing customers' initial Evolv Express deployments to other venues and locations, and (iv) growing momentum with our channel partners which helps us extend our reach in certain geographies or vertical markets.

Current wording

We believe there are several key trends that are continuing to drive increased adoption of our solutions and growth in our sales, including (i) escalating gun violence, which has created stronger demand for security screening solutions for customers and prospects in our key vertical markets, (ii) customer acquisition activities which led to the addition of 51 newend-users during the three months ended September 30, 2026,(iii) the expansion of our existing customers' initial Evolv Express deployments to other venues and locations, and (iv) growing momentum with our channel partners which helps us extend our reach in certain geographies or vertical markets.

Previous wording

The increases in subscription revenue, cost of subscription revenue, and subscription gross profit are primarily due to expansion within our existing customer base and continued growth in our overall customer base as of June 30, 2026 compared to the prior year, with a higher number of active Evolv Expressand Evolv eXpedite systems deployed under our pure subscription model during the three months ended June 30, 2026. The increase in subscription gross profit margin is also driven by a decrease of $1.1 million of expense related to disposals of certain first generation Evolv Express systems during the three months ended June 30, 2026 as compared to the three months ended June 30, 2025.

Current wording

The increase in subscription revenue is primarily due to expansion within our existing customer base and continued growth in our overall customer base as of September 30, 2026 compared to the prior year, with a higher number of active Evolv Express and Evolv eXpedite systems deployed under our pure subscription model during the three months ended September 30, 2026. The increase in subscription gross profit margin is driven by a decrease of $1.9 million of expense related to disposals of certain first generation Evolv Express systems during the three months ended September 30, 2026 as compared to the three months ended September 30, 2025, a $0.6 million estimated field services cost related to the replacement of certain Express system parts recognized in the prior period that did not recur in the current period, and a decrease in field services costs related to our subscription systems of $0.3 million, partially offset by an increase in outbound shipping costs of $0.4 million.

Previous wording

The decreases in license fee and other revenue and gross profit are primarily driven by the expiration and non-renewal of the Distribution and License Agreement effective December 31, 2025. As a result, there wasno license fee revenue earned during the three months ended June 30, 2026 compared to $2.3 million earned during the prior year period. Following expiration of the agreement, all customers preferring to purchase Evolv systems do so directly from the Company, thus contributing to the increase in product revenue discussed above. The decrease in gross profit margin is primarily due to the reduction in license fee revenue, which has no associated cost of revenue.

Current wording

The decreases in license fee and other revenue and gross profit are primarily driven by the expiration and non-renewal of the Distribution and License Agreement effective December 31, 2025. As a result, there was no license fee revenue earned during the three months ended September 30, 2026 compared to $2.3 million earned during the prior year period. Following expiration of the agreement, all customers preferring to purchase Evolv systems do so directly from the Company, thus contributing to the increase in product revenue discussed above. The license fee and other gross profit margin was consistent with the prior period.

Previous wording

The increase in personnel related expenses is primarily due to an increase in payroll costs and stock-based compensation of $1.2 million, which resulted primarily from new hires in our research and development functions to support continued product innovation. The increase in materials and prototypes expense is primarily due to an increase of $0.3 million in design and engineering costs. Other expense increased primarily due to an increase in software subscription costs of $0.4 million.

Current wording

The increase in personnel related expenses is primarily due to an increase in payroll costs and stock-based compensation of $0.5 million, which resulted primarily from new hires in our research and development functions to support continued product innovation.

Previous wording

The increase in personnel related expenses is primarily due to an increase in stock-based compensation of $0.3 million, which resulted primarily from new hires in our sales and marketing functions to support increased sales volume. The increase in advertising and direct marketing expense is primarily due to an increase in expenses related to trade shows and events of $0.1 million. Professional fees decreased due to a decrease in marketing consulting costs. Other expense increased primarily due to increase in shipping costs related to demonstration units of $0.3 million and software subscription costs of $0.2 million.

Current wording

The increase in personnel related expenses is primarily due to an increase in payroll costs and stock-based compensation of $1.0 million, which resulted primarily from new hires in our sales and marketing functions to support increased sales volume. Stock-based compensation expense included in sales and marketing expenses was $2.0 million for the three months ended September 30, 2026 compared to $1.5 million for the three months ended September 30, 2025. The increase in advertising and direct marketing expense is primarily due to an increase in expenses related to trade shows and events of $0.3 million. Professional fees decreased due to a decrease in marketing consulting costs.

Previous wording

Personnel related expenses increased due to an increase in payroll costs and stock-based compensation of $1.3 million, resulting from increased general and administrative headcount during the past twelve months while reducing the use of outsourced contractors and consultants. Stock-based compensation expense included in general and administrative expenses was $3.3 million for the three months ended June 30, 2026 compared to $2.4 million for the three months ended June 30, 2025. Non-recurring professional fees and other expenses decreased primarily due to a $4.6 million decrease in consulting and legal fees and audit fees incurred in connection with a previously disclosed investigation and restatement of prior period financial statements.

Current wording

The increase in personnel related expenses is primarily due to an increase in stock-based compensation of $0.8 million, resulting from increased general and administrative headcount during the past twelve months, partially offset by a decrease in payroll costs of $0.5 million primarily due to a decrease in short term incentive compensation. Stock-based compensation expense included in general and administrative expenses was $3.2 million for the three months ended September 30, 2026 compared to $2.4 million for the three months ended September 30, 2025. Professional fees increased primarily due to an increase in outsourced accounting consultancy of $0.9 million, primarily related to SOX compliance remediation efforts. Non-recurring professional fees and other expenses increased primarily due to a $3.4 million increase in the estimated accrual for the SEC proposed settlement during the three months ended September 30, 2026 and a $1.8 million increase in legal fees incurred in connection with the ongoing legal and regulatory matters, partially offset by an increase in estimated insurance recoveries of $0.4 million.

Previous wording

Interest expense of $1.0 million for the three months ended June 30, 2026 relatedto interest on long-term debt, amortization of debt issuance costs, and unused commitment fees. No interest expense was recognized for the three months ended June 30, 2025, as there was no debt outstanding during the period.

Current wording

Interest expense of $1.0 million for the three months ended September 30, 2026 and $0.7 million for the three months ended September 30, 2025 related to interest on long-term debt, amortization of debt issuance costs, and unused commitment fees.

Previous wording

Interest income of $0.5 million for the three months ended June 30, 2026 and $0.2 million for the three months ended June 30, 2025 related primarily to interest earned on money market funds and the accretion of discounts on treasury bills. The interest earned increased primarily due to higher average balances in interest-bearing accounts during the three months ended June 30, 2026 compared to during the three months ended June 30, 2025.

Current wording

Interest income of $0.5 million for the three months ended September 30, 2026 and $0.4 million for the three months ended September 30, 2025 related primarily to interest earned on money market funds and the accretion of discounts on treasury bills.

Previous wording

No change in the fair value of the contingent earn-out liability was recognized for the three months ended June 30, 2026, due to the expiration of the earn-out period on March 8, 2026. Change in the fair value of the contingent earn-out liability resulted in a $14.2 million loss for the three months ended June 30, 2025, resulting from quarterly mark-to-market adjustments.

Current wording

No change in the fair value of the contingent earn-out liability was recognized for the three months ended September 30, 2026, due to the expiration of the earn-out period on March 8, 2026. Change in the fair value of the contingent earn-out liability resulted in a $7.5 million gain for the three months ended September 30, 2025, resulting from quarterly mark-to-market adjustments.

Previous wording

Change in the fair value of the contingently issuable/returnable common stock liability resulted in a $1.5 million gain and $2.2 million loss for the six months ended June 30, 2026 and 2025, respectively, resulting from quarterly mark-to-market adjustments.

Current wording

Change in the fair value of the contingently issuable/returnable common stock liability/asset resulted in a $0.3 million loss and $2.2 million gain for the three months ended September 30, 2026 and 2025, respectively, resulting from quarterly mark-to-market adjustments.

Previous wording

Change in the fair value of the public warrant liability resulted in a $1.7 million gain and $5.3 million loss for the three months ended June 30, 2026 and 2025, respectively, resulting from quarterly mark-to-market adjustments.

Current wording

Change in the fair value of the public warrant liability resulted in a $0.1 million gain for the three months ended September 30, 2026, due to the expiration of the Public Warrant on July 16, 2026. Change in the fair value of the public warrant liability resulted in a $2.6 million loss for the three months ended September 30, 2025, resulting from quarterly mark-to-market adjustments.

Previous wording

The following table summarizes our results of operations for the six months ended June 30, 2026 and 2025 (in thousands):

Current wording

The following table summarizes our results of operations for the nine months ended September 30, 2026 and 2025 (in thousands):

Previous wording

We believe there are several key trends that are continuing to drive increased adoption of our solutions and growth in our sales, including (i) escalating gun violence, which has created stronger demand for security screening solutions for customers and prospects in our key vertical markets, (ii) customer acquisition activities which led to the addition of 118 newend-users during the six months ended June 30, 2026,(iii) the expansion of our existing customers' initial Evolv Express deployments to other venues and locations, and (iv) growing momentum with our channel partners which helps us extend our reach in certain geographies or vertical markets.

Current wording

We believe there are several key trends that are continuing to drive increased adoption of our solutions and growth in our sales, including (i) escalating gun violence, which has created stronger demand for security screening solutions for customers and prospects in our key vertical markets, (ii) customer acquisition activities which led to the addition of 169 newend-users during the nine months ended September 30, 2026,(iii) the expansion of our existing customers' initial Evolv Express deployments to other venues and locations, and (iv) growing momentum with our channel partners which helps us extend our reach in certain geographies or vertical markets.

Previous wording

The increases in product revenue and cost of product revenue for the three months ended June 30, 2026 compared to the prior year period are driven by increased demand for our solutions, as well as a shift in sales fulfillment following the expiration and non-renewal of the Distribution and License Agreement effective December 31, 2025. As a result, a greater proportion of customers purchased Evolv Express and Evolv eXpedite systems directly from us under our purchase subscription model. The increase in product gross profit margin for the three months ended June 30, 2026 compared to prior year period was primarily driven by our ability to leverage our fixed costs over a higher revenue base and a $1.7 million decrease in charges taken related to our inventory reserve on first generation Evolv Express parts compared to the prior year period, partially offset by an increase in manufacturing expense of $0.7 million and outbound shipping costs of $0.3 million due to higher shipping volume.

Current wording

The increases in product revenue and cost of product revenue for the nine months ended September 30, 2026 compared to the prior year period are driven by increased demand for our solutions and increased utilization of our purchase subscription model, partially offset by the impact of the pricing changes, which resulted in a reduced proportion of revenue from purchase subscription arrangements being recognized upfront as product revenue, as compared to the prior year period. Product revenue in the prior year period also included approximately $2.5 million associated with a large contract with a U.S.-based education customer in Georgia. The increase in product gross profit margin for the nine months ended September 30, 2026 compared to the prior year period was primarily driven by our ability to leverage our fixed costs over a higher revenue base, a $1.9 million decrease in charges taken related to our inventory reserves on first generation Evolv Express parts and a $0.3 million decrease in expense associated with adverse non-cancellable inventory purchase commitments, which related primarily to the transition of our manufacturing operations to the next generation of Evolv Express systems in the prior year, partially offset by pricing changes, which resulted in less gross profit recognized upfront, as well as an increase in manufacturing expense of $1.5 million and increase in outbound shipping costs of $1.0 million due to higher shipping volume.

Previous wording

The increases in subscription revenue, cost of subscription revenue, and subscription gross profit are primarily due to expansion within our existing customer base and continued growth in our overall customer base as of June 30, 2026 compared to the prior year, with a higher number of active Evolv Express and Evolv eXpedite systems deployed under our pure subscription model during the six months ended June 30, 2026. The increase in subscription gross profit margin is driven by a $1.3 million decrease in field services cost related to our subscription systems and a $1.0 million decrease in loss on disposals of certain first generation Evolv Express systems during the six months ended June 30, 2026.

Current wording

The increase in subscription revenue is primarily due to expansion within our existing customer base and continued growth in our overall customer base as of September 30, 2026 compared to the prior year, with a higher number of active Evolv Express and Evolv eXpedite systems deployed under our pure subscription model during the nine months ended September 30, 2026. The increase in subscription gross profit margin is driven by a $2.9 million decrease in loss on disposals of certain first generation Evolv Express systems compared to the prior year, a $1.7 million decrease in field services cost related to our subscription systems, a $0.4 million estimated field services cost related to the replacement of certain Express system parts recognized in the prior period that did not recur in the current period, partially offset by an increase in outbound shipping costs of $0.5 million due to higher shipping volume and manufacturing expense of $0.3 million.

Previous wording

The increases in service revenue, cost of service revenue, and gross profit are primarily due to the growth in the number of active revenue-generating purchase subscription systems in the field for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The gross profit margin was consistent with the prior period.

Current wording

The increases in service revenue, cost of service revenue, and gross profit are primarily due to the growth in the number of active revenue-generating purchase subscription systems in the field for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. Service revenue and gross profit also increased due to pricing changes, which resulted in a greater proportion of revenue from purchase subscription arrangements being recognized as recurring service revenue over the contract term, as compared to the prior year period. The service gross profit margin was consistent with the prior period.

Previous wording

The decreases in license fee and other revenue and gross profit are primarily driven by $0.2 million of license fees earned during the six months ended June 30, 2026 compared to $5.5 million earned during the prior year period under the Distribution and License Agreement due to the expiration and non-renewal of the agreement effective December 31, 2025. The decrease in gross profit margin is primarily due to the reduction in license fee revenue, which has no associated cost of revenue.

Current wording

The decreases in license fee and other revenue and gross profit are primarily driven by $0.2 million of license fees earned during the nine months ended September 30, 2026 compared to $7.8 million earned during the prior year period under the Distribution and License Agreement due to the expiration and non-renewal of the agreement effective December 31, 2025. The decrease in gross profit margin is primarily due to the reduction in license fee revenue, which has no associated cost of revenue, partially offset by a decrease in personnel and overhead costs of $0.2 million.

Previous wording

The increase in personnel related expenses is primarily due to an increase in payroll costs and stock-based compensation of $0.7 million, which resulted primarily from new hires in our research and development functions to support continued product innovation. Other expense increased primarily due to an increase in software subscription costs of $0.2 million.

Current wording

The increase in personnel related expenses is primarily due to an increase in payroll costs and stock-based compensation of $1.7 million, which resulted primarily from new hires in our research and development functions to support continued product innovation. Other expense increased primarily due to an increase in software subscription costs of $0.3 million and $0.1 million in supplies costs.

Previous wording

The increase in personnel related expenses is due to an increase in payroll costs and stock-based compensation of $1.4 million, which resulted primarily from new hires in our sales and marketing functions to support increased sales volume. Stock-based compensation expense included in sales and marketing expenses was $3.5 million for the six months ended June 30, 2026 compared to $2.8 million for the six months ended June 30, 2025. The increase in advertising and direct marketing expense is primarily due to an increase in expenses related to trade shows and events of $0.3 million. The increase in travel and entertainment expense is due to an increase in travel costs for in-person sales meetings. Professional fees decreased due to a decrease in marketing consulting costs. Other expense increased primarily due to increase in software subscription costs of $0.3 million and shipping costs related to demonstration units of $0.2 million.

Current wording

The increase in personnel related expenses is due to an increase in payroll costs and stock-based compensation of $2.4 million, which resulted primarily from new hires in our sales and marketing functions to support increased sales volume. Stock-based compensation expense included in sales and marketing expenses was $5.5 million for the nine months ended September 30, 2026 compared to $4.2 million for the nine months ended September 30, 2025. The increase in advertising and direct marketing expense is primarily due to an increase in expenses related to trade shows and events of $0.7 million. The increase in travel and entertainment expense is due to an increase in travel costs for in-person sales meetings. Professional fees decreased due to a decrease in marketing consulting costs. Other expense increased primarily due to increase in shipping costs related to demonstration units of $0.4 million and software subscription costs of $0.4 million.