Evolv Technologies Holdings, Inc. Q3 FY2025 earnings call

• Revenue was $42.9 million, up 57% YOY, driven by new customer acquisition, existing customer deployments, and large contracts. • ARR was $117.2 million, up 25% YOY. • RPO was ~$299 million, up sequentially. • Welcomed over 60 new customers in Q3 and raised year-end active subscriptions estimate to 8,000-8,100. • Proactively upgrading to Gen2 Express platform, with Gen2 upgrades driving 8% sequential increase in RPO. • eXpedite, autonomous AI-powered bag screening solution, gained traction with 12 new customers in Q3, particularly in schools. • Strategic partnership with Plexus to expand production capacity, global reach, and operational resiliency. • Product updates include latest versions of software like Evolv Express 9.0, Evolv eXpedite 1.2, etc. • Market expansions in education, healthcare, sports, and live entertainment with various customer wins.

Revenue for the third quarter was $42.9 million, a 57% year-over-year increase. Annual recurring revenue (ARR) was $117.2 million, reflecting a 25% year-over-year growth. Remaining performance obligation (RPO) was approximately $299 million at the end of Q3. Adjusted gross margin in Q3 was 51%. The revenue growth was driven by strong new customer acquisition, expanded deployments within existing customers, and onetime product revenue from large contracts.

• 2025 revenue expected to grow 37%-40% to $142M-$145M, up from prior guidance. • 2026 revenue modeled at $160M-$165M. • Expect ARR to grow by at least 20% in 2026, outpacing total revenue growth, making 2026 an inflection point. • eXpedite costs expected to improve in 2026, positively impacting future gross margins. • Shift to direct purchase fulfillment will defer $5M-$10M of revenue in 2026 to long-term recurring revenue streams.

Q: Congratulations on strong results. Come back to onetime items and large contract revenue recognition.

A: The legacy distribution model caused more upfront revenue, but will normalize. The large contract will have tail effects with revenue recognition adjusting over time.

Q: Ask about new strategic contract manufacturer agreement and eXpedite attachment rate.

A: Partnership with Plexus to start manufacturing product, with full portfolio eventually available. eXpedite has a trend where 11 of 12 new eXpedite customers in Q3 also acquired Express, with deployments across education, sports, entertainment, and healthcare.

Q: Ask about units growing in 2025 vs 2024 and price delta.

A: Units refer to aggregate of Express and eXpedite, with unit economics similar. eXpedite is a new product with current gross margin headwind due to lack of multiyear manufacturing scale.

Q: Ask about reaction of channel partners to shift from distribution to direct fulfillment.

A: Reaction is positive; the change simplified the buying process for channel partners as they now purchase directly from Evolv, capturing 100% of ARPU.

Q: Ask about number of triple-digit transactions in pipeline.

A: No specific details on pipeline provided, but planning to grow units in 2026 over 2025.

Q: Ask about percentage of bookings from existing customers and new verticals.

A: Well over 50% of bookings came from existing customers. Vertical mix includes education, healthcare, sports, entertainment, with opportunities to expand in other areas like Fortune 500 distribution.