Evolv Technologies Holdings, Inc. ((EVLV)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Evolv Technologies Holdings, Inc. recently held its earnings call, revealing a positive yet nuanced sentiment. The company celebrated strong revenue growth and strategic advancements, highlighted by a landmark customer contract and a promising partnership with Plexus. However, concerns were raised about a decline in adjusted gross margins and the temporary nature of some revenue sources.
Strong Revenue Growth
Evolv Technologies reported a remarkable revenue of $42.9 million for the quarter, representing a 57% increase year-over-year. This growth was primarily driven by robust new customer acquisition and expanded deployments, showcasing the company’s ability to capture market demand effectively.
Positive Adjusted EBITDA
The company achieved its fourth consecutive quarter of positive adjusted EBITDA, with margins reaching 12% in Q3. This consistent performance underscores Evolv’s operational efficiency and financial discipline.
Record Customer Contract
Evolv secured the largest customer contract in its history, contributing approximately $3 million in revenue during Q3. This milestone reflects the company’s growing influence and capability to attract significant business deals.
Strategic Partnership with Plexus
The announcement of a strategic partnership with Plexus aims to expand Evolv’s production capacity, global reach, and operational resiliency. This collaboration is expected to bolster the company’s supply chain and enhance its market presence.
Product Development Milestones
Evolv made significant strides in product development, releasing new versions of Evolv Express 9.0, Evolv eXpedite 1.2, MyEvolv Portal, and Evolv Insights 6.0. These advancements are set to improve the company’s technological offerings and customer experience.
Increase in Customer Base
The company welcomed over 60 new customers in Q3, raising its year-end estimate for active subscriptions to between 8,000 and 8,100. This growth in customer base is a testament to Evolv’s expanding market footprint.
Adjusted Gross Margin Decline
Despite the revenue growth, Evolv experienced a decline in adjusted gross margin, which fell to 51% in Q3 from 64% in the same period last year. This was attributed to shifts in distribution fulfillment and costs associated with new products.
ARR Growth Lagging
Annual recurring revenue (ARR) grew by 25% year-over-year, trailing behind the overall revenue growth of 57%. This indicates a need for the company to focus on enhancing its recurring revenue streams.
One-Time Revenue Contributions
The quarter’s revenue included approximately $3 million of one-time product revenue and $3 million in IP license and other one-time revenue, which are not expected to recur. This highlights the importance of sustainable revenue sources for future growth.
Forward-Looking Guidance
Looking ahead, Evolv Technologies provided guidance for 2025, expecting revenue growth between 37% and 40%, with full-year adjusted EBITDA margins in the high single digits. For 2026, the company anticipates ARR growth to outpace revenue growth, forecasting revenues between $160 million and $165 million. A strategic shift to a direct distribution model is expected to enhance long-term recurring revenue and profitability.
In conclusion, Evolv Technologies Holdings, Inc.’s earnings call painted a picture of robust growth and strategic progress, tempered by challenges in maintaining margins and sustainable revenue streams. The company’s forward-looking guidance suggests a focus on strengthening its recurring revenue model and enhancing profitability in the coming years.