Evolv Technologies Holdings, Inc. Q2 FY2024 earnings call

• Revenue was a record $25.5 million in Q2, driven by strong new customer acquisition, existing customer expansion, and Evolv Express subscriptions. ARR reached $89 million.
• Key focus areas: Building installation backlog (booking more units than installed for predictability), accelerating adoption of distribution model (over 40% of Q2 units via distribution model, doubling from Q1), and improving sales execution (enhanced demand generation, expanded pipeline, brand awareness initiatives).
• Go-to-market partners: ~70% of unit activity via channel partners, strong activity with Motorola (unit bookings up 196% YOY in Q2).
• End markets: Education (28 new customers, 60% sequential increase in Evolv Express units sold), Healthcare (~a dozen new customers, screening 700k+ daily), Professional sports/live entertainment (40+ teams using Evolv, partnership with ASM Global doubling supported properties to 16 in Q2).
• Innovation: Major software update with new MyEvolv portal and mobile app, plans to release new offerings by year-end.

Revenue in the second quarter was a record $25.5 million, up 29% year-over-year and 18% sequentially. ARR grew to $89 million as of June 30th, 2024, up about 64% year-over-year and 8% sequentially. Adjusted gross margin expanded to 58% in Q2 compared to 38% in Q2 of last year. Evolv Express had 441 new multiyear subscriptions in Q2, with an average of nearly 3 million visitors screened daily and over 500 firearms tagged daily. Revenue contribution from product segments isn't broken down further in the transcript, but key growth drivers include new customer acquisition, existing customer expansion, and Evolv Express subscriptions.

• Full-year revenue expected ~$100 million, 25% YOY growth. ARR expected ~$100 million by end of 2024, ~33% YOY growth.
• Adjusted full-year gross margin estimate ~60%.
• Expect to reach positive adjusted EBITDA by Q2 2025 without additional debt financing; actively evaluating nondilutive debt financing as interest rates become favorable.

• Regulatory risks: Ongoing communication with FTC, investigations typically lasting 12-18 months.
• Market uncertainties: Competitive landscape in price-sensitive segments, impact of interest rate environment on debt financing.

Q: Color on industrial warehouse vertical and catalyst for acceleration?

A: Early days in industrial warehouse vertical, dedicated team; expects to be material vertical in 2025, top two verticals by out years.

Q: Total sales headcount?

A: Close to 150 in go-to-market team, couple dozen quota-carrying salespeople, channel team supports 70% of business.

Q: Regulatory front update, sales cycles, FTC/SEC communication?

A: In communication with FTC, working towards resolution; sales cycles unchanged, close rate high, transparent with customers.

Q: Inbound interest from NYC subway deployment?

A: Getting inbound from other cities due to brand awareness, not included in TAM yet but seen as vertical expansion opportunity.

Q: Cash flow, inventory management, distribution vs subscription percentage?

A: Cash at $57M, expecting cash usage in Q3 then around $60M by year-end; distribution model doubled from Q1 to Q2, expecting ~50% by Q4.

Q: G&A expense jump, go-forward?

A: Adjusted level stable, some estimates for legal settlements and stock compensation in reserve.

Q: Motorola momentum, new products?

A: Motorola's size and market leadership drive momentum; new products like Visual Gun Detect, expecting 1-2 new products by year-end.

Q: Q3 trends, education pricing?

A: Q3 starting strong with continued momentum; competitive landscape unchanged, tough competition in price-sensitive schools but long-term trend positive.