Evolv Technologies (EVLV) 2024 10-K Review

Evolv Technologies (NASDAQ: EVLV) is pioneering AI-powered security screening. Their flagship Evolv Express® and Evolv eXpedite™ solutions aim to make venues safer without gridlock. 2024 marked their first full year post-restatement, with revenues of $103.9 M (up 31% year-over-year) but a net loss of $54.0 M.

Warren.AI 💰 5.0 / 10

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Table of Contents

1. Business Overview
2. Market Opportunity & Growth Strategy
3. 2024 Financial Highlights
4. Balance Sheet & Cash Flows
5. Key Risk Factors
6. Outlook & Valuation

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1. Business Overview

Evolv Technologies is a Security-as-a-Service (SaaS) company delivering touchless weapons detection at high-throughput entry points.

• Evolv Express® uses AI and advanced sensors to detect concealed firearms, explosives, and large knives in unstructured people flows.
• Evolv eXpedite™ is an autonomous AI-driven X-ray system for high-clutter bag screening.
• Evolv Insights® is a cloud analytics dashboard for traffic flows, alarm statistics, and weapon detection performance.

Customer verticals include sports venues, K-12 and higher education, healthcare, entertainment, industrial workplaces, and more. The core value proposition is a frictionless visitor experience—visitors don’t have to empty pockets or relinquish bags, and staff can conduct targeted secondary searches.

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2. Market Opportunity & Growth Strategy

TAM: Evolv estimates ~400,000 sites (700,000 thresholds) across target segments in North America, representing a potential $20 B of annual weapon screening systems sales.

Growth Drivers:

1. Macroeconomic & Social Trends: Rising gun violence and high-profile mass shootings are prompting venues to adopt screening.
2. Sales & Distribution: A hybrid model of direct sales and a global network of value-added resellers.
3. Product Expansion: Rollouts into new verticals and geographies, e.g., hospitals, airports, industrial.
4. Upsell & Referrals: Existing site expansions, SaaS add-ons, referrals within metro “clusters.”
5. Technology Leadership: Proprietary AI models, large data set (2 + billion people screened), patented sensors, and APIs for integrations (e.g., VMS, biometrics).

Challenges:

• The market is early-stage and unregulated, with potential pushback on cost, logistics, and privacy concerns.
• Competition from legacy walk-through metal detectors and newer passive imaging solutions.

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3. 2024 Financial Highlights

All figures in USD millions

Metric	2024	2023	Change	%
Revenue	103.9	79.6	+24.3	+31%
• Product	6.5	22.8	(16.3)	(72%)
• Subscription	65.0	36.2	+28.8	+80%
• Service & Other	32.4	20.6	+11.8	+57%
Gross Profit	59.3	31.9	+27.4	+86%
Gross Margin	57%	40%	+17 pts
Operating Expenses	141.6	122.0	+19.6	+16%
• R&D	23.4	24.5	(1.1)	(4%)
• Sales & Marketing	61.3	55.0	+6.3	+11%
• G&A	56.6	42.2	+14.4	+34%
Net Loss	(54.0)	(108.0)	+54.0	+50%

Key Variances:

• Subscription growth: +80%, driven by more leases of Evolv Express.
• Product decline: (72%), reflecting strategic shift to leases and distributor licensing.
• Margin expansion: Higher subscription mix and economies of scale.
• G&A spike: +34% due to investigations (SEC/FTC legal fees), restatement costs, and expanded infrastructure.

Restatement Impact: In 2024, Evolv completed a full restatement for 2022–2023 after an internal probe uncovered revenue recognition issues. CEO and CFO changes followed, along with material weakness disclosures.

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4. Balance Sheet & Cash Flow

Liquidity:

• Cash & Equivalents (end of 2024): $77 M
• Operating Cash Burn: $7–9 M per quarter (2024 average)
• Debt: None (paid off SVB term loans in March 2023)

CapEx & Opex:

• CapEx (2024): $16 M for hardware manufacturing and R&D tooling
• R&D spend: ~$23 M (22% of revenue)

Cash runway: ~2.5–3 years at current burn, barring unexpected legal or compliance costs.

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5. Key Risk Factors

1. Restatement & Controls: 2022–2023 restatements expose material weaknesses, investigations (SEC & FTC), legal liability, and reputational risk.
2. Profitability: Net losses of $54 M in 2024, with deeper cash burn on legal and compliance.
3. Market Adoption: Early-stage market; cost and logistics could slow enterprise rollout.
4. Supply Chain & Manufacturing: Single primary contract manufacturer; component shortages or tariffs could disrupt deliveries. Recent SVB collapse disrupted financing of hardware purchases.
5. Cyber & Privacy: Data privacy, AI bias, and security breach risks as systems handle visitor data.
6. Competition: Legacy metal detectors, millimeter-wave, and emerging AI competitors.
7. Regulatory: Export controls on AI hardware, evolving laws on data transfers, “high-risk” AI rules (EU AI Act), and potential Florida gun-detection ban on AI.

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6. Outlook & Valuation

Evolv’s mission to improve security while preserving throughput is compelling. Subscription revenue is scaling rapidly and gross margins are healthy at ~57%. However, legal and compliance costs remain a headwind.

2025 Guidance (Management0:

• Revenue: $130–145 M
• Gross Margin: 55%–58%
• Opex: $160–175 M
• Net Loss: $65–75 M

Valuation:

• EV/Sales: ~3.0× (2024 revenue)
• EV/Subscription Revenue: ~4.8× (cloud-like recurring mix)

Bull Case:

• Strong data-driven competitive moat, expanding verticals, and upcoming Express Gen-2 launch.
• Legal matters close by mid-2025, cost normalization in second half.

Bear Case:

• Ongoing restatement fallout, fines, and management turnover.
• Slower-than-expected adoption in price-sensitive verticals.

Investment Summary:
Evolv is a technology innovator disrupting a $20 B screened entry market and gaining share in public venues. The recurring SaaS model and sticky installs underpin a strong revenue growth profile. Yet the 2022–2023 restatements impose near-term uncertainty around compliance costs and governance. Cash runway is ample, but EBITDA breakeven remains >3 years away.

Rating: 5.0/10 — Moderate Opportunity, High Execution Risk

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Disclosure: This research is for informational purposes only and is not a recommendation to buy or sell any security.