Evolv Technologies Holdings, Inc. (EVLV) Earnings

Management highlights

### Long-Term Strategic Framework - The company operates in the large, underpenetrated AI-powered weapons detection public safety market, with current penetration below 5% of its addressable 700,000 serviceable doorways, creating substantial long-term growth runway. - Management reaffirmed its long-term target of reaching over $500 million in annual revenue by 2031 (25% CAGR over 5 years) and adjusted EBITDA margins of at least 25%, aligning with a Rule of 40/50 business model. - The company's competitive moat is built on proprietary hardware, real-world operational data, AI models, and long-term customer relationships; management noted that general AI advances do not replace these core assets, as the business focuses on physical public safety rather than digital software. ### Q2 2026 Operational Highlights - Added 70 new customers, the strongest quarter for new customer additions in 2 years, with ~80% of unit bookings coming from existing customers, demonstrating both new customer growth and successful account expansion. - Achieved the milestone of having customers in all 50 US states and across North America (Canada and Mexico), with long-term plans to increase growth contribution from international markets, with early progress expected by the end of 2026. - Net revenue retention remained comfortably above 100%, reflecting strong renewal and expansion performance with existing customers. RPO now exceeds 1.7x the full-year 2026 revenue outlook, providing high visibility into future contracted revenue. ### Operational Milestones - Successfully onboarded new global contract manufacturing partner Plexus, and has begun shipping product from Plexus facilities. This milestone positions the company to scale production capacity, expand global reach, improve operational resiliency, and reduce long-term bill of material costs via improved procurement leverage. - Continued progress on product innovation, with significant software enhancements to the Expedite platform in H1 2026 that improve security operations and the visitor experience, driving deeper platform adoption.

Guidance

- Management raised full-year 2026 revenue guidance to $180 million to $185 million, representing 23% to 27% year-over-year growth, up from the prior guidance range of 20% to 23% (previous revenue guidance of $175 million to $180 million). - Raised full-year 2026 end-of-year ARR guidance to $148 million to $150 million, representing 23% to 25% year-over-year growth, driven by stronger-than-expected renewal performance. - Confirmed the company expects to end 2026 with comfortably over 10,000 net deployed units, representing ~30% net year-over-year deployed unit growth, with second half 2026 deployments exceeding first half levels. - Full-year 2026 adjusted EBITDA is expected to be $15 million to $16 million, with adjusted EBITDA margins in the high single digits, up from 7.6% in 2025, representing continued margin expansion year-over-year. - Gross margins in the second half of 2026 are expected to remain consistent with first half 2026 levels. Management expects long-term gross margin expansion from Plexus manufacturing efficiencies and recently implemented product price increases. - Management reaffirmed confidence in its long-term 25% annual revenue growth target outlined at Investor Day 2026, but did not provide guidance beyond 2026.

Segment performance

Evolve Technology is a hardware-enabled AI-powered weapons detection subscription business, with results reported across core end-markets rather than distinct product segments: 1) Core Education: Strong demand, 203 new education customers added across 13 US states, serving ~1,800 schools including 204 of the top 100 largest US school districts, with supportive policy and funding environments driving adoption. 2) Healthcare: 8 new customers added, including Canada's Alberta Health Services, growing the total customer base to ~800 hospitals, with demand driven by rising concerns over workplace violence in the sector. 3) Sports and Live Entertainment: Multiple new customers added across major professional leagues, including the Pro Football Hall of Fame, and a short-term deployment for the 2026 FIFA World Cup that screened over 3.5 million fans. The company was selected as the security provider for Northwestern University's newly built Ryan Field, expanding its footprint in collegiate athletics. 4) Workplace: Added 2 new Fortune 500 customers (a leading grocery retailer and a large off-price retail chain), growing its total Fortune 500 customer base to over 30, with demand across corporate headquarters, distribution centers, and critical infrastructure. For the Expedite product specifically (autonomous AI bag screening): It now serves over 100 customers (8% of total customer base, up from 2% year-over-year), with 70% of new Expedite customers also purchasing Evolve Express, and over 40 cross-sales to existing Evolve customers. Customers screen ~90,000 bags daily via Expedite, totaling over 20 million bags screened to date. Total Q2 2026 company-wide revenue was $43.8 million, up 34% year-over-year. Adjusted EBITDA was $4.4 million, up from $2.1 million year-over-year, with an adjusted EBITDA margin of 10.1% (up from 6.5% YoY). End-of-quarter ARR was $132.7 million, up 20% year-over-year, and RPO was $312.6 million, up 4.5% sequentially.

Risks & headwinds

- Near-term gross margin headwinds exist from three key factors: 1) A higher-than-forecast mix of purchase subscriptions (now 60% of 2026 new deployed units, up from 55% in prior guidance) which creates near-term margin pressure as hardware costs are recognized upfront while software/service revenue is deferred to future periods. 2) Higher-than-expected Gen2 upgrade activity, which creates temporary margin headwinds from freight, refurbishment, and depreciation costs for returned Gen1 units prior to their redeployment. These costs added just under 1 percentage point of gross margin headwind in 2026. 3) Modestly higher component and supply chain costs than originally forecast, adding approximately 0.5 percentage points of gross margin headwind, consistent with broader industry trends. - Ongoing industry-wide semiconductor supply chain constraints continue to create supply chain uncertainty, though management is confident it can meet full-year 2026 deployment plans. - The Expedite product is still progressing along its cost reduction curve, and has not yet fully captured expected bill of material optimization and supply chain efficiency gains as adoption scales. - All forward-looking statements are subject to material uncertainties, and actual results may differ from current expectations due to factors including deployment timing, customer buying behavior, and market conditions.

Analyst Q&A

• Q: Why is 30% year-over-year deployed unit growth faster than 20%-25% ARR growth, and will ARR growth accelerate after lapping 2025 fulfillment and pricing changes? /

  A: The divergence between unit and ARR growth is expected. As customers upgrade to Gen2, returned Gen1 units are redeployed to new customers at lower ARPUs than new Gen2 units. Additionally, the Expedite product launched at a lower introductory price point than Express, pulling down average ARPU growth relative to unit growth. Recently implemented across-the-board price increases, including a larger adjustment for Expedite to align its pricing closer with Express, will drive ARR growth acceleration going forward after lapping 2025 changes. (312 characters)

• Q: What is the update on state-level school safety legislation, particularly in lower-penetration markets like Florida and Texas? /

  A: The progress of mandatory weapons detection legislation in California and pending legislation in Georgia is a positive proof point that safety technology like Evolve's will eventually become an expected standard, similar to airbags or sprinkler systems. The company is becoming more active in advocating for the impact of its technology in legislative discussions. No specific updates were provided on Florida or Texas. (298 characters)

• Q: What is the status of the Plexus manufacturing transition, and what are your plans for the planned $2 million to $4 million inventory investment? /

  A: The transition is on schedule, with the majority of new units now shipping from Plexus facilities, in line with the original timeline communicated when the partnership was announced. While the company remains exposed to publicized electronics supply chain constraints, it has clear line of sight to meet 2026 revenue guidance. The potential $2 million to $4 million inventory investment is opportunistic, not imminent, and would be used to lock in supply for anticipated demand. (367 characters)

• Q: How many Gen1 customers are upgrading to Gen2 this year, and what is the magnitude of the recent price increase? /

  A: Approximately 60% of renewing Gen1 customers have upgraded to Gen2 year-to-date, in line with prior guidance. Price increases were implemented across all products and verticals as part of a new regular pricing review process to align pricing with product value and input costs. Expedite, which launched at an introductory price 1.5 years ago, received a larger increase to bring its pricing more in line with Express, reflecting its proven customer value. (321 characters)