Evolv Technologies Holdings, Inc. Q2 FY2025 earnings call

• Resolved DOJ investigation: In August 2025, the DOJ informed Evolv it is no longer the subject of an investigation. - Securities class action settlement: Reached a settlement in principle in the securities class action lawsuit, with direct financial exposure expected to be no more than $1 million. - Revenue growth: Strong new customer growth and expanding deployments in the installed base. - ARR growth: ARR at $110.5 million, up 27% year-over-year. - Customer wins: Over 60 new customers in Q2, serving over 1,000 customers globally, and surpassed 7,000 active subscriptions. - Market segments: Growth in education, healthcare, sports and entertainment, and industrial workplaces. - Go-to-market shift: Shift purchase activity back to direct fulfillment from distribution fulfillment for better ARR and cash flow.

Revenue for the second quarter was $32.5 million, up 2% sequentially and 29% year-over-year. Annual recurring revenue (ARR) at June 30, 2025, was $110.5 million, reflecting 27% year-over-year growth. Adjusted EBITDA margin was 6% in Q2 '25. Total cash, cash equivalents and marketable securities increased to $37 million in Q2 '25 from $35 million at the end of Q1. Approximately 54% of booked units and 56% of booked ARR in Q2 came from existing customers. eXpedite, the autonomous AI-based bag screening solution, added 8 more customers in Q2 '25, bringing total to 20 since launch.

• Raised 2025 revenue guidance: Expect revenue to grow 27% to 30% in 2025, up from previous guidance of 20% to 25%. - Adjusted gross margin: Expect adjusted gross margin to be in the 54% to 56% range for the remainder of 2025. - Credit facility: Secured a new $75 million non-dilutive credit facility, with $30 million drawn at close and $30 million available for draw over next 2 years. - Cash flow: Expect to be cash flow positive in Q4 2025.

• Forward-looking statements subject to material risks, uncertainties and assumptions. - Settlement in securities class action lawsuit is subject to negotiation of definitive documentation and court approval. - Shift in go-to-market model creates a year 1 gross margin headwind but is expected to lead to faster ARR growth over time.

Q: What is the mix of full subscription deals, lease deals versus purchase subscription deals in the back half and go-forward?

A: Mix depends on large orders in any period, with longer-term shift towards more subscription, likely 50-50 by 2026.

Q: How much does it cost to refurbish Gen1 Express machines to make them CPO ready and traction on Evolv Flex program?

A: Costs to refurbish kept reasonable, first orders received but early in life cycle.

Q: Thinking on hiring for remainder of the year and ARR correlation with revenue?

A: Hiring in targeted areas like R&D and services, low single-digit percentage-wise in total headcount. ARR lags revenue due to IP license fees and purchase arranged deals in second half.

Q: Renewals: Gross renewal, net revenue retention?

A: About 400 units up for natural renewal in 2025, 200 actioned in first half, 40 in second half, net unit retention over 100% for some.

Q: Opportunities in end markets, especially education and international?

A: Diversified end markets including education, healthcare, sports/entertainment, industrial; international demand growing but focused on making delivery more efficient.

Q: Higher ARR with purchase subscription deals?

A: Purchase subscription deals result in substantially higher ARR, 30% higher compared to distribution model, with ARR from hardware and software subscription being higher.