Microvast Holdings, Inc. (MVST) FY 2025 MD&A

Results of Operations

This section of this Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024.

Comparison of the Year Ended December 31, 2025 to the Year Ended December 31, 2024

The following table sets forth our historical operating results for the periods indicated (in thousands, except percentages):

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Revenue

Our revenue increased from $379.8 million in 2024 to $427.5 million in 2025, reflecting a 12.6% year-over-year growth. This expansion was primarily driven by a 16.5% increase in sales volume, rising from 1,613.6 MWh in 2024 to 1,879.5 MWh in 2025. This volume growth was supported by rising demand for our battery cell products from existing and new customers across the European and U.S. markets. Our full-year revenue was impacted by evolving regulatory shifts in the Korean market and customer platform ramp up delays.

Cost of Revenue, Energy Storage System Impairment, and Gross Profit

Our cost of revenues for the year ended December 31, 2025, increased by 4.9% compared to 2024, primarily due to higher sales volumes. However, this increase was significantly lower than the 12.6% year-over-year revenue growth, reflecting improved utilization which enhanced the absorption of fixed costs, decreases in raw material costs, and improved economies of scale as we grow our manufacturing capacity.

Our gross profit margin was 28.6% for the year ended December 31, 2025, compared to 31.5% in 2024. This change was primarily attributable to a $32.5 million inventory impairment charge related to specialized ESS components, which negatively impacted our gross margin by 7.6 percentage points. Excluding the impact of this specific non-cash charge, the underlying gross margin performance reflected a more favorable product mix and improved manufacturing efficiencies across our battery solution portfolio.

Operating Expenses

General and administrative expenses

General and administrative expenses for the year ended December 31, 2025, decreased by $23.7 million, or 29.0%, compared to 2024. This decline was primarily driven by a $17.4 million reduction in share-based compensation expenses and a favorable $8.6 million increased impact from foreign currency fluctuations related to the Euro and RMB.

Research and development expenses

Research and development expenses for the year ended December 31, 2025, decreased by $7.0 million, or 16.9%, compared to 2024. This reduction in R&D was primarily driven by a $5.5 million decrease in share-based compensation expenses.

Selling and marketing expenses

Selling and marketing expenses for the year ended December 31, 2025, decreased by $0.4 million, or 1.7%, compared to 2024.

Impairment loss of long-lived assets

The impairment loss of long-lived assets for the year ended December 31, 2025 decreased by $89.0 million, or 95.6%, compared to the same period in 2024. The 2025 loss was primarily driven by the charges related to assets held for sale, where carrying values exceeded fair value less costs to sell.

Subsidy Income

Subsidy income increased from $2.7 million for the year ended December 31, 2024 to $3.1 million in 2025. The amounts are the one-time awards granted by local governments in 2024 and 2025.

Gain on Debt Restructuring

During the year ended December 31, 2025, the Company recognized a gain of $1.3 million from negotiated settlements of payables.

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Changes in Fair Value of Warrant Liability and Convertible Loan

For the year ended December 31, 2025, we recognized a loss of $39.1 million. This loss was primarily driven by the period-over-period remeasurement of our convertible loan at fair value. For further discussion regarding the valuation methodology and inputs, see Note 25 – Convertible loan measured at fair value.

Benefit from (provision for) Income Taxes

For the year ended December 31, 2025, we recognized deferred tax benefits of $5.4 million, primarily due to the remeasurement of our deferred tax assets for MPS. This was partially offset by $0.1 million in income tax expense associated with profitable foreign operations.

Liquidity and Capital Resources

Overview

Since inception, we have financed our operations primarily through capital contributions from equity holders, the issuance of convertible notes, and bank borrowings. As of December 31, 2025, our principal sources of liquidity included cash, cash equivalents, and restricted cash totaling $169.2 million, of which $105.0 million was comprised in cash and cash equivalents.

Of the cash and cash equivalents as of December 31, 2025, $40.3 million is held by our China subsidiary and $21.9 million is held by our European subsidiaries. These funds are generally intended to support local operations. If we were to repatriate these funds to the U.S., we may be required to accrue and pay applicable withholding taxes. We currently intend to retain available funds and future earnings to support ongoing operations and expansion efforts in China, Europe, and the U.S.

Going Concern Evaluation

In accordance with ASU No. 2014-15, management evaluated whether conditions and events, considered in the aggregate, raise substantial doubt about our ability to continue as a going concern within one year after the date these consolidated financial statements are issued. Based on our current business plan, we projected that existing cash and assets held for sale would not be sufficient to fund operations through the next twelve months. These conditions initially raised substantial doubt about our ability to continue as a going concern.

Management has implemented several primary plans intended to alleviate these conditions:

•Operating Cash Flows: For the year ended December 31, 2025, we generated $75.9 million in net cash from operating activities. Our order backlog stood at $196.1 million, the majority of which is expected to be fulfilled in 2026 and 2027. While we anticipate some absorption pressure during the ramp up of our Huzhou 3.2 manufacturing line expansion, we expect gross margins to remain relatively stable.

•Refinancing of Short-term Borrowings: Based on our historical ability to access credit, we expect to maintain the ability to refinance these obligations as needed as they become due over the next twelve months.

•Equity Funding: Under our Controlled Equity Offering Sales Agreement (the “Sales Agreement”), the Company has received $27.9 million in net proceeds through the date of this issuance. We intend to continue utilizing the Sales Agreement to raise additional capital as needed for general corporate purposes and debt repayment.

Based on the execution of these plans, management has concluded it is probable that these actions will alleviate substantial doubt about the Company's ability to continue as a going concern and provide adequate liquidity to meet our requirements for the next twelve months. However, there is no assurance that the Company will be able to alleviate these concerns.

Additional Liquidity Initiatives

We secured $85.7 million in bank loans during the year ended December 31, 2025 (see Note 12 – Bank Borrowings). The Company has been exploring a potential sale of its Lake Mary, Florida facility with a prospective buyer

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for a gross purchase price of $11,500. This divestiture is intended to provide additional liquidity without impacting core operations. The transaction is subject to customary closing conditions and a due diligence period for the buyer. The Company currently anticipates that, if completed, the transaction would close during the second quarter of 2026.

Financings

As of December 31, 2025, our debt obligations consisted of:

•Bank borrowings of $106.3 million, the terms of which range from 1 to 18 months. The interest rates of our bank borrowings ranged from 2.60% to 4.85% per annum.

•Convertible bonds of $41.7 million, with interest rates ranging from 3% to 4%. The convertible bonds are due in 2027.

•Convertible loan measured at fair value of $140.9 million. This loan bears interest at Term SOFR plus an applicable margin of 9.75%. Of this, 3.75% is paid in kind and added to the outstanding principal balance, and the remainder is paid in cash. See Note 25 – Convertible loan measured at fair value for details.

As of December 31, 2025, we were in compliance with all material terms and covenants of our loan agreements, credit agreements, and bonds.

On July 23, 2021, we received $705.1 million in net proceeds from our Business Combination. We have used $514.2 million of the net proceeds to expand our manufacturing facilities and for the purchase of property and equipment associated with our existing manufacturing and R&D facilities. In addition, $190.9 million of the net proceeds were used for general working capital.

Although no additional binding financing agreements have been entered into, the Company remains engaged in discussions with third parties to explore further capital-raising opportunities. Future capital requirements may change based on business developments, market conditions, and liquidity needs. The Company continues to evaluate potential options, including equity offerings and debt financing, to provide financial flexibility and long-term growth.

The exercise price for our outstanding warrants is $11.50 per share of common stock, and the trading price of our common stock was $2.10 as of March 9, 2026. There is no guarantee that the warrants will be exercised prior to their expiration, however, we do not expect this to impact our liquidity.

Capital Expenditures and Other Contractual Obligations

Our capital expenditures amounted to $38.7 million and $49.9 million for the years ended December 31, 2025 and 2024, respectively. Our capital expenditures in 2025 were primarily related to our Huzhou Phase 3.2 expansion, which is funded primarily by localized borrowings and cash flow from our China operations, and deferred payments related to our Clarksville facility. 2024 capital expenditures were primarily related to the construction of manufacturing facilities in Clarksville, Tennessee and Huzhou, China.

In 2021, we started our capacity expansion plans in Huzhou, China, Berlin, Germany and Clarksville, Tennessee. The project in Germany was completed in 2021. The Huzhou Phase 3.1 expansion was successfully completed in 2023.

Because of delays in securing additional financing, in the fourth quarter of 2023 we began experiencing slow progress in continuing construction of our Clarksville expansion, slowing down certain construction work streams due to the need for additional financing. This facility was initially intended to produce 53.5Ah cells for our ESS solutions; however, we believe that LFP cells are better suited for our ESS solutions and intend to utilize the Tennessee facility to produce LFP cells instead of 53.5Ah cells. Additionally, our ESS products that were previously developed and assembled in Colorado are now planned to be assembled at our Tennessee facility once the facility is completed. The proceeds from the Business Combination alone will not be sufficient to complete the Clarksville expansion and meet our general working capital needs. Due to regulatory restrictions, adverse tax consequences, and localized working capital needs, we are currently unable to repatriate cash from China to fund U.S. operations or the Clarksville expansion. We are seeking alternate sources of capital to complete this facility and satisfy domestic content requirements for our U.S. customers.

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Our future capital requirements will depend on many factors, including, but not limited to funding planned production capacity expansions and for general working capital. In addition, we may in the future enter into arrangements to acquire or invest in complementary businesses or technologies. We may need to seek additional equity or debt financing in order to meet these future capital requirements. If we are unable to raise additional capital when desired, or on terms that are acceptable to us, our business, financial condition, and results of operations could be adversely affected. There are no material off-balance sheet arrangements other than those described below.

Lease commitments

We lease certain facilities and equipment under non-cancellable lease agreements that expire at various dates through 2036. For additional information, see Note 17 – Leases, in the notes to the consolidated financial statements in Part II, Item 8 of this Report on Form 10-K.

Purchase commitments

We regularly enter into non-cancelable contractual obligations primarily related to purchases of inventory. As of December 31, 2025, such purchase commitments, which do not qualify for recognition on our consolidated balance sheets, amount to $37.2 million, most of which is short-term.

Cash Flows

The following table provides a summary of our cash flow data for the years indicated (in thousands):

Cash Flows from Operating Activities

Net cash provided by operating activities was $75.9 million for the year ended December 31, 2025, an increase of $73.1 million compared to $2.8 million in 2024. This improvement was primarily driven by a $49.9 million increase in net income after adjusting for non-cash items and a $23.2 million net improvement in operating assets and liabilities. The increase in our net operating assets and liabilities was mainly driven by an increase of accounts payable and a decrease of inventories as compared to 2024, partially offset by an increase of accounts receivables due to revenue growth.

Cash Flows from Investing Activities

Net cash used in investing activities was $16.0 million for the year ended December 31, 2025, compared to $12.2 million in 2024. This outflow was primarily driven by capital expenditures related to the expansion of our manufacturing facilities and the acquisition of property and equipment for existing manufacturing and R&D operations, partially offset by disposal of property, plant and equipment and short-term investments.

Cash Flows from Financing Activities

Net cash used in financing activities was $2.7 million for the year ended December 31, 2025, a decrease of $40.3 million compared to $37.6 million provided in 2024. The decrease was primarily due to a $29.8 million increase in repayments of bank borrowings and $15.8 million decrease in proceeds from bank borrowings, partially offset by net proceeds from sales of common stocks of $27.9 million.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets,

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liabilities, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.

We believe the following critical accounting policies involve a higher degree of judgment and complexity than our other accounting policies. Therefore, these are the policies we believe are the most critical to understanding and evaluating our consolidated financial condition and results of operations.

Convertible Loan Measured at Fair Value

We elected the fair value option to account for the convertible loan and record changes in fair value in the consolidated statements of operations, with the exception of changes in fair value due to instrument-specific credit risk which, if present, will be recorded as a component of other comprehensive income. Interest expense related to the convertible loan is included in the changes in fair value. The fair value of the convertible loan was determined by using a discounted cash flow model for the bond component and a Black-Scholes-Merton model for the conversion option, which is considered a Level 3 fair value measurement.

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined using the weighted average method. Inventory levels are analyzed periodically and written down to their net realizable value if they have become obsolete, have a cost basis in excess of expected net realizable value or are in excess of expected demand. We analyze current and future product demand relative to the remaining product life to identify potential excess inventories. These forecasts of future demand are based upon historical trends and analysis as adjusted for overall market conditions. Inventory write-downs are measured as the difference between the cost of the inventory and its net realizable value, and charged to inventory reserves, which is a component of cost of revenue. At the point of the loss recognition, a new, lower cost basis for those inventories is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. We monitor the inventory impairments periodically and, since battery technology continues to advance, we may incur inventory impairment losses in the future.

Income Taxes

We utilize the asset and liability method in accounting for income taxes. Deferred tax assets and liabilities reflect the estimated future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax expense or benefit is the result of changes in the deferred tax asset and liability. Valuation allowances are established when necessary to reduce deferred tax assets where it is more likely than not that the deferred tax assets will not be realized. We make estimates, assumptions and judgments to determine its provision for its income taxes, deferred tax assets and liabilities, and any valuation allowance recorded against deferred tax assets. We assess the likelihood that our deferred tax assets will be recovered from future taxable income, and to the extent we believe that recovery is not likely, we established a valuation allowance.

We account for uncertain tax positions by reporting a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. Tax benefits are recognized from uncertain tax positions when we believe that it is more-likely-than-not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. We recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

Stock-Based Compensation

We recognize compensation expense on a straight-line basis over the service period that awards are expected to vest, based on the estimated fair value of the awards on the date of the grant. We recognize forfeitures as they occur. Fair value excludes the effect of non-market based vesting conditions. The fair value of RSUs with service conditions is based on the grant date share price. We estimate the fair value of options utilizing the Binomial-Lattice Model. The fair value of non-vested shares that vest based on market conditions are estimated using the Monte Carlo valuation method. These fair value estimates of stock related awards and assumptions inherent therein are estimates and, as a result, may not be reflective of future results or amounts ultimately realized by recipients of the grants. For these awards with performance

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conditions, we recognize compensation expense when the performance goals are achieved, or when it becomes probable that the performance goals will be achieved. Management performs the probability assessment on a quarterly basis by reviewing external factors, such as macroeconomic conditions and the analog industry revenue forecasts, and internal factors, such as our business and operational objectives and revenue forecasts. Changes in the probability assessment of achievement of the performance conditions are accounted for in the period of change by recording a cumulative catch-up adjustment as if the new estimate had been applied since the service inception date. As a result, our stock-based compensation expense is subject to volatility and may fluctuate significantly each quarter due to changes in our probability assessment of achievement of the performance conditions or actual results being different from projections made by management. Liability-classified awards are remeasured at lower of capped value or fair value as of each report date during settlement.