Evolv Technology raises 2025 revenue growth outlook to 27%-30% while advancing direct fulfillment strategy

Earnings Call Insights: Evolv Technologies Holdings, Inc. (EVLV) Q2 2025

MANAGEMENT VIEW

* John Kedzierski, President and CEO, announced the company is no longer subject to a DOJ investigation and has reached a settlement in principle for a securities class action lawsuit, stating direct financial exposure is expected to be no more than $1 million. He emphasized, “With these 2 matters now largely behind us, we are fully focused on our goal of building a durable, high-growth business with highly predictable results.”
* A key leadership transition was disclosed, as Mike Ellenbogen will step down as an active employee but remain on the Board of Directors and as an adviser.
* Kedzierski highlighted revenue of $32.5 million for Q2 2025, representing 2% sequential and 29% year-over-year growth, and annual recurring revenue (ARR) at $110.5 million, up 27% year-over-year.
* He noted the company’s third consecutive quarter of positive adjusted EBITDA and the first sequential increase in total liquidity to $37 million.
* Evolv welcomed over 60 new customers in Q2 and now serves more than 1,000 globally, surpassing 7,000 active subscriptions, aiming for at least 8,000 by year-end.
* The eXpedite bag screening solution has reached a total of 20 customers since launch, including 8 added in Q2, with a recent order of over 100 systems.
* Major wins included a $15 million contract with Gwinnett County Public Schools and deployments in healthcare and sports, such as Ohio State University Wexner Medical Center and Inter Miami CF’s Miami Freedom Park.
* The company is shifting purchase activity back to direct fulfillment, which Kedzierski explained brings “higher revenue, higher lifetime value, greater cash flow and most importantly, higher ARR on a per unit basis compared to distribution fulfillment.”
* CFO George Chris Kutsor stated, "Revenue was $32.5 million, up 2% sequentially and 29% year-over-year. These results primarily reflect strong new customer growth and expanding deployments in our installed base."

OUTLOOK

* Kedzierski announced an upward revision to 2025 guidance: "We now expect to grow revenue by 27% to 30% this year compared to our previous guidance of 20% to 25% growth. We continue to expect to deliver positive full year adjusted EBITDA. We remain committed to generating positive cash flow in Q4."
* Kutsor specified, "We expect total revenue to grow by 27% to 30% in 2025 to be between $132 million and $135 million this year. This is up from our prior guidance, which called for revenue of between $125 million and $130 million."
* Adjusted gross margin is expected in the 54% to 56% range for the remainder of the year.

FINANCIAL RESULTS

* ARR at June 30, 2025, was $110.5 million, reflecting a 27% year-over-year increase.
* Remaining performance obligation (RPO) as of June 30 was $275 million, up from $261 million as of March 31, 2025.
* Adjusted gross margin was 55%, which included a noncash $1.8 million inventory reserve; excluding this, margin would have been approximately 60%.
* Adjusted operating expenses decreased to $21.6 million from $26.7 million in Q2 2024, a 19% decline.
* Adjusted EBITDA reached $2 million in Q2 2025, with an adjusted EBITDA margin of 6%.
* Cash, cash equivalents, and marketable securities were $37 million, a $2 million sequential increase; cash flow generated in operations was $2.1 million.
* Post-quarter, the company secured a $75 million non-dilutive credit facility.

Q&A

* Jeremy Scott Hamblin, Craig-Hallum: Asked about the mix of full subscription vs. purchase subscription deals. Kutsor responded, "We have been expecting to see more subscription over time... As we get into 2026, probably a little bit more balanced towards 50-50, but we'll talk more about that in the second half."
* Hamblin asked about the certified preowned program. Kedzierski said it is "brand new" and called Evolv Flex, with first orders received but "still early in the life cycle."
* Shaul Eyal, TD Cowen: Inquired about hiring and ARR trends. Kutsor noted hiring is "in the low single-digit percentage-wise in terms of total headcount" and that ARR will "lag or be less than the total revenue growth because of the IP license fees that we had in the first half."
* Eric Martinuzzi, Lake Street: Questioned renewal performance. Kedzierski reported "about 200 of those were actioned in the first half," and "net unit retention of over 100%."
* Gareth Daniel Gacetta, Cantor Fitzgerald: Asked about end market opportunities and credit line usage. Kedzierski described a diverse vertical mix and Kutsor said the first $30 million of the credit facility "should serve us for a while."
* Hamblin returned to ask about gross margin evolution. Kutsor clarified the margin range is due to "shift to more in-house and the mix of very large deals" not competitive pressure.
* Unidentified Analyst, Northland: Asked about California hospital demand and international business. Kedzierski said California law is a "further tailwind" and that international is "a small but growing business."

SENTIMENT ANALYSIS

* Analysts expressed a positive to slightly positive tone, frequently congratulating management on momentum and asking about growth drivers and market opportunities.
* Management maintained a confident and constructive tone in prepared remarks and Q&A, using phrases like "We are fully focused on our goal of building a durable, high-growth business" and "We remain committed to generating positive cash flow."
* Compared to the previous quarter, both analysts and management displayed increased confidence, with more focus on growth and operational execution.

QUARTER-OVER-QUARTER COMPARISON

* Guidance increased from 20%-25% revenue growth in Q1 to 27%-30% in Q2, with the revenue target raised from $125-$130 million to $132-$135 million.
* Margin guidance shifted slightly lower (from 61% in Q1 to 54%-56% for the remainder of the year) mainly due to a change in fulfillment strategy and product mix.
* Management tone moved from cautious optimism about stabilization and recovery in Q1 to stronger confidence in Q2, supported by legal resolutions and operational improvements.
* Analysts in Q2 focused more on strategic execution and business mix while in Q1 questions centered on recovery from prior challenges and market adoption.

RISKS AND CONCERNS

* Management acknowledged higher direct purchase activity creates a near-term gross margin headwind but emphasized it brings higher ARR and stronger long-term value.
* There is ongoing early-stage traction with new products such as eXpedite and Evolv Flex, with management noting the need for further progress to reach full scale and efficiency.
* Analyst questions indicated some concern about hiring pace, ARR growth lagging revenue, and the timing of utilizing credit facilities.

FINAL TAKEAWAY

Evolv Technologies signaled renewed momentum in Q2 2025, resolving major legal challenges, raising its 2025 revenue growth guidance, and achieving sequential gains in liquidity and adjusted EBITDA. The company is advancing a direct fulfillment strategy expected to increase ARR and strengthen long-term profitability, while continuing to scale its customer base, launch new products, and invest in operational efficiency for sustainable growth.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/evlv/earnings/transcripts]

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