Evolv Technologies Holdings, Inc. (EVLV) appears an attractive pick, as it has been recently upgraded to a Zacks Rank #2 (Buy). An upward trend in earnings estimates -- one of the most powerful forces impacting stock prices -- has triggered this rating change.The sole determinant of the Zacks rating is a company's changing earnings picture. The Zacks Consensus Estimate -- the consensus of EPS estimates from the sell-side analysts covering the stock -- for the current and following years is tracked by the sy ...

Evolv Technologies Holdings, Inc. (EVLV) closed the last trading session at $5.46, gaining 30% over the past four weeks, but there could be plenty of upside left in the stock if short-term price targets set by Wall Street analysts are any guide. The mean price target of $7.06 indicates a 29.3% upside potential.The mean estimate comprises four short-term price targets with a standard deviation of $1.16. While the lowest estimate of $5.50 indicates a 0.7% increase from the current price level, the most optimi ...

I am a financial analyst and writer with a strong foundation in financial modeling, valuation, and data analysis. I hold FMVA (Financial Modeling & Valuation Analyst) and BIDA (Business Intelligence & Data Analyst) certifications from the Corporate Finance Institute (CFI) in Canada.The markets fascinate me (we're all looking to grow to grow wealth, after all, and the stock market is the single greatest invention that allows us to do it do it fairly easily), so I combine financial data with qualitative analy ...

Evolv (EVLV) Q1 2025 Earnings Call May 20, 2025 04:30 PM ET Company Participants Brian Norris - Senior Vice President of Finance & Investor RelationsJohn Kedzierski - CEO, President & DirectorChris Kutsor - CFOBrett Knoblauch - Managing Director Conference Call Participants Jeremy Hamblin - Senior Research AnalystMike Latimore - Managing Director & Senior Research AnalystEric Martinuzzi - Senior Research Analyst Operator Good afternoon, and welcome to the Evolve Technology First Quarter Earnings Results Con ...

Financial Data and Key Metrics Changes - Revenue in Q1 2025 was $32 million, up 10% sequentially and 44% year over year, reflecting new customer acquisition and strong expansion from the installed customer base [21][43] - Annual recurring revenue (ARR) grew 34% year over year to $106 million at the end of Q1 2025 [22][44] - Adjusted EBITDA for Q1 2025 increased to $1.7 million, with an adjusted EBITDA margin of 5% [22][47] Business Line Data and Key Metrics Changes - The company welcomed over 50 new customers in Q1 2025, serving approximately 950 customers across key end markets [21] - Sales and marketing spend as a percentage of revenue is improving, indicating more effective execution by the sales team [24] - The new certified pre-owned program aims to recapture value from returning units, contributing positively to revenue and cash flow [25][26] Market Data and Key Metrics Changes - Evolve Express is deployed in 20 of the 100 largest US school districts, screening over 850,000 students and visitors daily [30] - In healthcare, the installed base has reached 500 hospital buildings, with daily visitor screenings nearly doubling year over year [31] - The company is monitoring new legislation in California mandating weapons detection systems in hospitals, indicating potential market growth [32] Company Strategy and Development Direction - The company aims to leverage its subscription model to drive predictable long-term revenue growth, with 78% of the 2025 revenue plan already contracted [75] - The focus is on expanding the subscription base and enhancing customer engagement across various verticals, including education and healthcare [76] - The company is optimistic about the long-term potential of its AI-powered weapons detection technology, with plans to increase market penetration significantly [38] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges faced over the past year but expresses confidence in the company's ability to emerge stronger and more resilient [18][20] - The outlook for 2025 includes expected revenue growth of 20% to 25%, with a focus on achieving positive adjusted EBITDA and cash flow [40][54] - The company is committed to maintaining operational efficiency while investing in back-office improvements to support growth [54] Other Important Information - The company has resolved an FTC inquiry and completed a restatement that shifted $3.1 million in revenue to future periods [17] - The balance sheet shows $35 million in cash and equivalents, down from $52 million at the end of Q4 2024, primarily due to one-time cash disbursements [49] Q&A Session Summary Question: Success with expansions and vertical contributions - Management noted that 50% of new subscriptions came from expansions, with specific vertical contributions to be followed up later [60] Question: Impact of new California law on hospital security - Management confirmed engagement with customers in California regarding the new legislation, viewing it as a significant opportunity [63] Question: CapEx expectations for the year - Management indicated a CapEx range of $20 to $25 million to support the subscription business [68] Question: Strategy refinements and potential acquisitions - The focus remains on driving the subscription model, with 78% of the revenue outlook already contracted [75] Question: Revenue progression expectations for 2025 - Management expects to deploy at least as many units in 2025 as in 2024, with a focus on subscription growth [84] Question: Purchase versus subscription model mix - Management confirmed a preference for pure subscription models, while still offering purchase options [92] Question: New customers for Expedite product - The 12 new customers for Expedite included both existing customers and new clients, indicating strong early traction [95]

Financial Performance - Evolv generated revenue of $32.0 million for the three months ended March 31, 2025, compared to $22.2 million for the same period in 2024, representing a year-over-year increase of 44%[158]. - The company reported a net loss of $1.7 million for the three months ended March 31, 2025, significantly improved from a net loss of $11.3 million in the same period of 2024[158]. - Total revenue for the three months ended March 31, 2025, was $32,007,000, representing a 44% increase from $22,181,000 in the same period of 2024[185]. - Subscription revenue increased by 35% to $19,237,000 in Q1 2025, up from $14,219,000 in Q1 2024[188]. - The net loss for the three months ended March 31, 2025, was $1,689,000, an 85% improvement from a net loss of $11,272,000 in the same period of 2024[185]. - Cash used in operating activities decreased from $16.2 million in Q1 2024 to $2.5 million in Q1 2025, indicating improved cash flow management[210]. - The company expects to continue generating losses for the foreseeable future, necessitating careful investment and potential additional capital[202]. Revenue Streams and Customer Growth - Evolv's solutions are primarily offered under a multi-year subscription model, which provides predictable revenue streams and is increasingly being adopted by customers[150]. - The company added 54 new customers during the three months ended March 31, 2025, contributing to revenue growth[186]. - License fee and other revenue surged by 205% to $3,718,000 in Q1 2025, compared to $1,219,000 in Q1 2024[190]. Cost Management and Expenses - Sales and marketing costs are anticipated to decrease for the year ending December 31, 2025, due to cost-cutting measures including a reduction in force implemented in January 2025[175]. - General and administrative expenses rose significantly due to legal and consulting fees, expected to continue through Q2 2025[176]. - Research and development expenses decreased by 24% to $4,862,000 in Q1 2025, down from $6,396,000 in Q1 2024[191]. - Sales and marketing expenses decreased by $4.8 million (30%) from $15.9 million in Q1 2024 to $11.0 million in Q1 2025, primarily due to reductions in personnel-related costs and advertising expenses[193]. - General and administrative expenses increased by $3.2 million (27%) from $11.8 million in Q1 2024 to $15.0 million in Q1 2025, driven by a significant rise in non-recurring professional fees[194]. - The company incurred restructuring costs of $2.7 million in Q1 2025, primarily related to a reduction in force[195]. Product and Technology - Evolv's flagship product, Evolv Express, utilizes AI-powered software to enhance security screening and improve visitor experience, distinguishing between threats and harmless items[148]. - Evolv's innovative technology aims to address the growing demand for safer environments in venues such as sports, education, and healthcare facilities[146]. Market Dynamics and Future Outlook - The company expects fluctuations in revenue and operating results due to factors such as inflation, supply chain issues, and shifts towards touchless security screening[153][154]. - The company is focused on expanding its market presence in various verticals, particularly in the United States, while adapting pricing strategies to regional dynamics[156]. - The company anticipates a decrease in general and administrative expenses in the second half of 2025 as ongoing investigations conclude[176]. Financial Position and Cash Flow - As of March 31, 2025, the company had $35.0 million in cash, cash equivalents, and marketable securities, down from a net income of $11.3 million in Q1 2024 to a net loss of $1.7 million in Q1 2025[200]. - Cash provided by financing activities was less than $0.1 million in Q1 2025, indicating limited financing activity compared to $0.3 million used in Q1 2024[216]. - Total future minimum lease payments under noncancelable operating leases amount to $19.1 million as of March 31, 2025[208]. Accounting and Reporting - No material changes to critical accounting estimates during the three months ended March 31, 2025[218]. - The company is classified as a smaller reporting company and is not required to provide certain market risk disclosures[219].

Financial Performance - Total revenue for Q4 2024 was $29.1 million, a 41% increase compared to $20.6 million in Q4 2023[6] - Annual Recurring Revenue (ARR) at the end of Q4 2024 was $99.4 million, up 39% from $71.3 million in Q4 2023[6] - Total revenue for the full year 2024 was $103.9 million, a 31% increase from $79.6 million in 2023[6] - Total revenue for the nine months ended September 30, 2024 was $74.8 million, a 27% increase compared to $59.0 million in the same period of 2023[5] - Total revenue for the twelve months ended December 31, 2024, was $74,765,000, representing a 26.7% increase from $58,985,000 in 2023[23] Profitability Metrics - Adjusted EBITDA for Q4 2024 was $0.4 million, compared to a loss of $(10.3) million in Q4 2023[6] - The company achieved positive adjusted EBITDA in Q4 2024, six months ahead of schedule[2] - Gross profit for the year ended December 31, 2024, was $59.3 million, compared to $31.9 million for the previous year, representing an 86.1% increase[17] - The total comprehensive loss for the year was $54.0 million, compared to $108.1 million in the previous year, indicating a significant reduction[18] - Adjusted gross profit for the twelve months ended December 31, 2024, reached $64,100 million, up from $34,462 million in 2023, reflecting an 85.8% year-over-year growth[33] Net Loss and Earnings Per Share - Net loss for the full year 2024 was $(54.0) million, or $(0.34) per share, compared to $(108.0) million, or $(0.72) per share in 2023[6] - The net loss for Q4 2024 was $15.7 million, a slight improvement from a net loss of $17.2 million in Q4 2023[17] - Net loss for the twelve months ended December 31, 2024, was $54.02 million, improved from $108.05 million in the previous year[37] - Adjusted loss per share for Q4 2024 was $0.03, compared to $0.08 in Q4 2023, indicating a reduction in losses[37] Cash and Liquidity - As of December 31, 2024, the company had cash and cash equivalents of $51.9 million and no debt[6] - Cash and cash equivalents decreased to $37,015,000 at the end of 2024 from $67,162,000 at the end of 2023, reflecting a decrease of 44.7%[22] - Cash flows from operating activities showed a net cash used of $34,057 million for the nine months ended September 30, 2024, compared to $6,658 million for the same period in 2023[27] Expenses - Research and development expenses for the year totaled $23.4 million, a decrease from $24.5 million in the previous year[17] - Sales and marketing expenses increased to $61.3 million for the year, compared to $55.0 million in 2023, reflecting a 9.4% rise[17] - One-time employee separation costs for the three months ended December 31, 2024, amounted to $2,060 million, compared to $262 million in the same period of 2023[34] - Stock-based compensation for the twelve months ended December 31, 2024, totaled $24,756 million, slightly increasing from $24,129 million in 2023[36] Customer Metrics - The company reported a total of 60 new customers in Q3 2024, compared to 52 in Q2 2024, indicating a growth in customer acquisition[29] - Total net units shipped rose from 375 in Q1 2024 to 468 in Q3 2024, indicating an increase of 24.8%[29] Future Outlook - The company plans to continue focusing on cost management and operational efficiency to improve future performance[37]

Financial Performance - The company reported net losses of $108.0 million and $54.0 million for the years ended December 31, 2023 and 2024, respectively, with an accumulated deficit of $354.7 million as of December 31, 2024[98]. - The company has not been profitable historically and may not achieve or maintain profitability in the future, with significant uncertainties affecting future operating results[98]. - The company intends to retain future earnings for business development and does not plan to pay cash dividends for the foreseeable future[224]. - The market price of the company's common stock has been highly volatile, influenced by various factors including financial performance and regulatory inquiries[219]. - Future sales of common stock by existing security holders could lead to a decline in the market price of the company's securities[225]. Internal Controls and Compliance - The company identified material weaknesses in internal control over financial reporting, leading to restatements of financial statements for the fiscal years ended December 31, 2022 and 2023[94]. - The company has restated its previously issued financial statements due to misstatements, which has exposed it to additional risks and uncertainties[92]. - The company is subject to ongoing legal proceedings and investigations related to its financial reporting and internal controls[93]. - The company is currently under investigation by the SEC regarding its sales practices, which may impact revenue recognition and other metrics[209]. - The company has received requests for documents from the SEC and the U.S. Attorney's Office related to the ongoing investigation and is cooperating with these inquiries[210]. Market and Competition - Increased competition may lead to pricing pressures, affecting sales prices and profitability[120]. - The competitive landscape in the physical security solutions market poses challenges for customer acquisition and retention, with competitors having greater resources[148]. - The evolving market for AI-based weapons detection may not grow as expected, with traditional security solutions still dominating enterprise budgets[139]. - Customer adoption and retention rates for AI-based products are difficult to predict, and any reduction in demand could adversely affect revenue and financial results[141]. Research and Development - The company expects to continue substantial investments in research and development and sales and marketing, including expanding its sales organization[99]. - Strategic investments in research and development, sales, and marketing are expected, but costs will be recognized earlier than the anticipated benefits[119]. - Significant investment in research and development is necessary to address evolving security risks, but this may also risk rendering existing products obsolete[154]. Legal and Regulatory Risks - The company faces potential legal liabilities from acquisitions, which could adversely impact its business and financial condition if acquired businesses do not meet expectations[127]. - Legal frameworks for AI governance are unsettled, and potential regulations could disrupt operations and impose additional costs on the company[144]. - Non-compliance with data privacy laws could lead to governmental enforcement actions, litigation, and reputational damage, adversely affecting business operations[196]. - The company faces potential liabilities from third-party actions related to data privacy, which could necessitate changes in business practices[197]. Operational Challenges - The company may face increased costs and operational challenges due to reliance on third-party technology and components[91]. - Supply chain disruptions and reliance on third-party manufacturers pose risks to production and operational efficiency[108][112]. - Business operations are vulnerable to disruptions from natural disasters, including climate-related events, which could significantly delay product shipments and installations[231]. - Concerns about terrorism, political turmoil, and epidemic diseases could negatively impact the operations of the company's facilities and those of its contract manufacturers, suppliers, and customers[232]. Customer Relations and Sales - A significant portion of revenue is generated from product sales to new customers and additional sales to existing customers, with sales cycles lasting several months[101]. - The company faces challenges in attracting and retaining new customers and selling additional products to existing customers[103]. - The company must effectively manage relationships with reseller partners to ensure successful marketing and distribution of products[105][107]. Cybersecurity - Cybersecurity threats are constantly evolving, requiring the company to allocate additional resources to strengthen defenses against potential breaches[162]. - Cybersecurity incidents can lead to the misappropriation or destruction of critical data, impacting business operations and customer trust[165]. - The company has experienced cyber-attacks but has not yet faced material adverse impacts on its operations or financial condition[166]. Intellectual Property - The company’s ability to protect its intellectual property rights is crucial for maintaining its competitive position, with potential challenges in enforcing these rights[175]. - Legal actions to enforce intellectual property rights could result in substantial costs and divert resources from core business operations[177]. - The company may face significant damages and legal costs if found to infringe third-party intellectual property rights, which could harm its financial condition[180]. Tax and Financial Obligations - Changes in tax laws, such as the recent U.S. Inflation Reduction Act, could adversely affect the company's tax obligations and effective tax rates[201]. - The company may face additional costs and liabilities due to compliance with anti-corruption laws and export controls, which could impact financial condition[202]. - As of December 31, 2024, the company had federal net operating loss carryforwards of $20.1 million, which begin to expire in 2033, and an additional $203.3 million that do not expire but are limited to offsetting up to 80% of taxable income in any given year[213].

Financial Performance - Evolv generated revenue of $74.8 million for the nine months ended September 30, 2024, compared to $59.0 million for the same period in 2023, representing a year-over-year increase of approximately 26.4%[173]. - The company reported a net loss of $38.3 million for the nine months ended September 30, 2024, significantly improved from a net loss of $90.9 million for the same period in 2023[173]. - Total revenue for the three months ended September 30, 2024, was $27.36 million, a 37% increase from $19.96 million in the same period of 2023[202]. - Total revenue for the nine months ended September 30, 2024, was $74.77 million, an increase of $15.78 million (27%) from $58.99 million in 2023[218]. - The company reported a net loss of $30.44 million for Q3 2024, a significant decline from a net income of $5.05 million in Q3 2023, representing a 703% decrease[202]. - The net loss for the nine months ended September 30, 2024, was $38.30 million, a decrease of $52.55 million (58%) from a net loss of $90.85 million in 2023[218]. Revenue Sources - Evolv's solutions are offered primarily under a multi-year subscription model, providing predictable revenue streams and enhancing customer value[163]. - Evolv's revenue is derived from multiple sources, including subscription arrangements, product sales, and professional services, with subscription revenue recognized ratably over the lease term[175][177]. - Subscription revenue increased by 82% to $17.91 million in Q3 2024, compared to $9.86 million in Q3 2023[205]. - Subscription revenue surged by $24.05 million (101%) to $47.78 million for the nine months ended September 30, 2024, compared to $23.73 million in 2023[221]. - Service revenue increased by $6.15 million (57%) to $16.90 million for the nine months ended September 30, 2024, compared to $10.75 million in 2023[222]. - License fee and other revenue increased by 48% to $5.29 million for the nine months ended September 30, 2024, compared to $3.58 million in 2023[223]. Customer Growth - The company added 52 new customers during the three months ended September 30, 2024, contributing to growth in sales[203]. - The company added 189 new customers during the nine months ended September 30, 2024, contributing to revenue growth[219]. Operating Expenses - Total operating expenses rose by 9% to $34.96 million in Q3 2024, compared to $32.08 million in Q3 2023[202]. - Research and development expenses were $5.81 million in Q3 2024, a 9% decrease from $6.39 million in Q3 2023[202]. - Sales and marketing expenses increased by $558,000 (4%) to $14.97 million for the three months ended September 30, 2024, compared to $14.41 million in 2023[210]. - General and administrative expenses rose by $2.72 million (24%) to $13.98 million for the three months ended September 30, 2024, compared to $11.26 million in 2023[211]. - Research and development expenses decreased by 1% to $18.06 million for the nine months ended September 30, 2024, primarily due to higher capitalized payroll costs[224]. - Sales and marketing expenses increased by 18% to $47.84 million for the nine months ended September 30, 2024, driven by new hires and increased stock-based compensation[225]. - General and administrative expenses rose by 28% to $39.88 million for the nine months ended September 30, 2024, largely due to increased personnel costs and one-time regulatory expenses[226]. Profitability Metrics - Gross profit for subscription revenue was $10.56 million, representing an 85% increase from $5.70 million in the prior year[205]. - The gross profit margin for subscription revenue was 59% in Q3 2024, slightly up from 58% in the prior year[205]. - The gross profit margin for subscription revenue was 60% for the nine months ended September 30, 2024, compared to 59% in 2023[221]. - Gross profit from license fee and other revenue rose by 71% to $4.81 million, with a gross profit margin of 91% for the nine months ended September 30, 2024, up from 78% in 2023[223]. Cash Flow and Financial Position - Cash, cash equivalents, and marketable securities totaled $56.0 million as of September 30, 2024, expected to fund operating expenses for at least twelve months[235]. - The company incurred cash outflows from operating activities of $34.1 million for the nine months ended September 30, 2024, compared to $6.7 million in 2023[233]. - Interest income decreased to $2.4 million for the nine months ended September 30, 2024, down from $4.6 million in 2023[229]. - Cash provided by investing activities for the nine months ended September 30, 2024, was $11.9 million, while cash used in investing activities for the same period in 2023 was $92.8 million[244][246]. - Cash provided by financing activities for the nine months ended September 30, 2024, was $1.2 million, a significant decrease from the $29.7 million used in financing activities during the same period in 2023[247][248]. - The company invested $24.4 million in property and equipment during the nine months ended September 30, 2024, primarily for Evolv Express units[244]. Market and Operational Risks - The company expects fluctuations in revenue and operating results due to factors such as rising inflation, supply chain issues, and shifts towards touchless security screening[167][168]. - The company has restated certain previously reported financial information for the fiscal year ended December 31, 2023, impacting its consolidated financial statements[158]. - There were no new accounting pronouncements that materially impacted the company's financial position or operations since the issuance of the 2023 Form 10-K[249]. - The company reported no material changes in critical accounting estimates during the nine months ended September 30, 2024[250]. - Market risks remained unchanged from the disclosures in the 2023 Form 10-K[251].

Company Overview - Evolv Technologies Holdings, Inc (NASDAQ: EVLV) specializes in using sensors and cameras to detect unwanted objects, focusing primarily on weapons and explosives, which are challenging for traditional security methods [1] Investment Strategy - The investment strategy targets companies with a market capitalization of less than $10 billion, aiming for those with a proven ability to reinvest capital for impressive returns [1] - The ideal companies should demonstrate long-term capital compounding capabilities with a high compound annual growth rate, potentially delivering tenfold returns or greater [1] - A long-term perspective is maintained to generate higher returns compared to market indices, especially in a rapidly evolving investment landscape [1] - A conservative investment strategy is primarily adopted, with occasional pursuits of opportunities that present a favorable risk-reward ratio [1]