Evolv Technologies Holdings Stock

Good afternoon, and welcome to the Evolv Technology Third Quarter Earnings Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce you to your host for today's call, Brian Norris, Senior Vice President of Finance and Investor Relations for Evolv Technology. Please go ahead, sir.

Thank you, and good afternoon. Welcome to today's call. I'm joined by John Kedzierski, our President and CEO; and Chris Kutsor, our Chief Financial Officer. Earlier today, we issued a press release detailing our third quarter results and updated 2026 outlook. The release is available on the Investor Relations section of our website, and it has been furnished with the SEC. To help investors better understand the underlying trends in our business, we have also posted an investor presentation that provides additional detail on key business trends and themes discussed today.

During today's call, we will be making forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements reflect our current expectations regarding our business strategy, growth opportunities, customer activity, strategic partnerships, product demand and financial outlook. All forward-looking statements are subject to material risks, uncertainties and assumptions, some of which are beyond our control. Actual events or financial results may differ materially due to a number of factors, including those described under the caption Risk Factors in our annual report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 10, 2026, and our quarterly report for the quarter ended September 30, 2026, on Form 10-Q filed with the SEC earlier today.

The forward-looking statements made today represent our views as of November 10, 2026, although we believe that the expectations reflected in these statements are reasonable, we cannot guarantee that future results, performance or the events and circumstances reflected therein will be achieved or will occur. Except as may be required by applicable law, we disclaim any obligation to update them to reflect future events or circumstances. Our commentary today will also include non-GAAP financial measures that we believe provide additional insights for investors. These measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP. Non-GAAP measures discussed today include adjusted gross profit and margin, adjusted operating expenses and operating income, adjusted EBITDA and adjusted EBITDA margin, adjusted earnings and adjusted earnings per diluted share and free cash flow and free cash flow margin.

Reconciliations to the most directly comparable GAAP measures are included in today's press release, and our definitions may differ from similarly titled measures used by other companies. We are unable to provide a reconciliation of forward-looking non-GAAP measures, including adjusted EBITDA and adjusted EBITDA margin to the most directly comparable GAAP measures without unreasonable effort. In addition, we will be discussing annual recurring revenue, or ARR, remaining performance obligation, or RPO, net revenue retention, or NRR, and net unit retention or NUR, which we believe provide useful insights into the business.

We define ARR as the sum of subscription revenue and the recurring service revenue related to purchase subscriptions for the final month of the quarter, all multiplied by 12. RPO represents estimated revenues expected to be recognized in the future, which are related to performance obligations that are unsatisfied or partially satisfied as of the end of the reporting period. We define NRR as recurring revenue in the last month of the quarter divided by recurring revenue from the year ago month for that same customer base, inclusive of churn and expansions. We define net unit retention as total units in the last month of the quarter divided by the same measure in the year ago month for the same customer base, inclusive of churn and expansions. Finally, we define free cash flow as cash flow from operations less CapEx and capitalized R&D. Free cash flow margin is free cash flow divided by revenue.

Before I turn things over to John, I'd like to briefly highlight some of our investor outreach plans for the remainder of the year. We plan to be at 3 institutional investor conferences, including the Craig-Hallum Alpha Select Conference next week, the UBS Global Technology Conference in December and the Northland Capital Conference later in December. As always, we welcome the opportunity to engage with both existing and prospective shareholders. If you would like additional information, please feel free to contact me at [email protected]. With that, I'd like to turn the call over to John.

Good afternoon, and thank you for joining us. We continue to make meaningful progress building a scalable, high-growth business with increasingly consistent and predictable performance. Our third quarter results represent another step forward. We remain in the early stages of a very large market opportunity. Across the markets we serve today, we estimate more than 700,000 doorways could be addressed by our solutions. With approximately 10,000 units deployed today, our penetration remains below 5%, leaving significant runway ahead. Underpinning that opportunity is a differentiated technology platform purpose-built for physical security. Evolv is not simply a software application that can be replicated with AI tools.

Our proprietary sensor hardware, software, AI models trained on proprietary data and services work together as an integrated solution that we believe serves as a unique solutions moat. Advances in AI help us improve detection capabilities and performance over time. Through our long-term subscription model, we are able to deliver ongoing product enhancements to customers while building a growing base of recurring and contracted revenue. With that context, let me share some thoughts on our third quarter results.

Revenue in the third quarter was a record $47.3 million, up 10% year-over-year, driven by new customer wins and expansion within our existing customer base. That growth comes on top of 57% revenue growth in Q3 2025, which was buoyed by the largest contract in our history and created an unusually difficult year-over-year comparison. ARR increased 20% year-over-year, while recurring revenue reached a record $32.5 million or approximately 69% of total revenue. Importantly, the pricing changes we made last year are having the intended effect of less onetime product revenue and more recurring revenue for the same contract value when customers purchase our equipment. And as a result, ARR is now growing faster than revenue. Chris will get into the details of the financial impact shortly.

Our net revenue retention was a strong 108% in the third quarter, reflecting continued success renewing and expanding existing customer relationships. Our business operations continued to perform well with adjusted EBITDA margin of 10% and positive free cash flow of $3.2 million in the quarter. Finally, remaining performance obligation was up 4% sequentially and 12% year-over-year to $325.8 million, reflecting strong end market demand, continued multiproduct adoption and strong renewal upgrades to our Gen 2 Express platform. Our RPO provides visibility into future revenue and reinforces one of the key strengths of our model, a large and expanding base of contracted revenue expected to be recognized over the coming years. Our RPO represents more than 1.7x our full year revenue outlook, underscoring the visibility and durability embedded in our model.

Beyond the numbers, Evolv is making a meaningful impact in the communities we serve. We now screen more than 5 million people every day and have screened more than 5 billion visitors since deploying Evolv Express. Since the beginning of 2021, our customers have tagged more than 2.2 million weapons. That impact becomes very real when our technology helps identify a potential threat. Recently, our customers identified firearms being brought into 3 different high schools in Maryland, Georgia and Texas. These incidents underscore the very real problem our customers are working to solve and our responsibility to continue innovating on their behalf. Education remains an important part of that mission. Evolv Express is deployed in 28 of the 100 largest U.S. school districts and over 1,900 school buildings, screening nearly 1 million visitors every day.

In Q3, we added more than a dozen customers across K-12 and higher education with adoption across Gen 2 Express, Expedite and Gen 1 Express. We continue to see strong demand across health care, adding several new customers, including Bellen Health Systems, Title Health, St. John's Riverside Hospital and Southwest Healthcare System, part of the Universal Health Services. Health care represented 23% of units booked in the quarter, up from 18% over the last 12 months. Today, our technology can be found in more than 800 hospital buildings, including all 10 of the top 10 health care networks, 16 of the top 20 and 61 of the top 100. We are also seeing a supportive regulatory backdrop, including in California, where new standards requiring weapon detection screening at specified hospital entrants are required to be adopted by March of 2027.

In sports and live entertainment, we continue to expand our presence at major venues, adding new customers, including Climate Pledge Arena, Prudential Center and PPG Paints Arena. We also continue to make inroads at the collegiate level with key wins at the University of Tennessee and the University of Memphis, while deepening relationships with existing customers through renewals and upgrades at SoFi Stadium and the Hollywood Park campus, Mercedes-Benz Stadium, Acersur Stadium and Bridgestone Arena. We also continue to see momentum in workplace, adding 3 additional Fortune 500 companies during the quarter. Today, we serve as the weapon screening partner for more than 40 Fortune 500 companies.

Innovation remains central to how we create value for customers and Expedite is a good example. We now have more than 115 Expedite customers, representing approximately 9% of our customer base, up from 3% a year ago. In the third quarter, approximately 88% of new customers purchasing Expedite also purchased Evolv Express. We're particularly excited about the value of Express and Expedite working together. Early 2026 data from 5 school district customers using the products together showed that approximately 97% of students passed through Express without an alert, while approximately 98% of bags passed through Expedite without an alert. The combination of Evolv Express and Expedite gives customers additional flexibility to tailor their people and bag screening operations to their needs, including the ability to screen bags separately and operate Express in higher sensitivity settings.

That matters because fewer alerts can translate to fewer secondary screening events and lower staffing requirements. often a barrier to deploying screening at scale. We believe that combination can make screening more practical across a broader range of customers, entrances and use cases. Expedite 3.0 builds on that foundation. Our Expedite 3.0 software release gives operators greater context when a bag alerts by showing them where to search with a red box on the X-ray image. It also expands sensitivity options to enhance knife detection while reducing false alarms from common items like 3-ring binders and further integrate Express and Expedite data through the -- my Evolv portal. We remain very encouraged by the opportunity in front of us, and I think the progress we've made over the past 2 years provides important context for where we're headed.

Over that period, revenue has grown from $104 million in 2024 to the $183 million midpoint of our 2026 guidance, an increase of approximately 76%. During that time, we delivered positive adjusted EBITDA every quarter, dramatically improved our capital structure, improved sales productivity and discount discipline, increased the recurring component of our customer contracts and built a stronger renewal and expansion motion, all while maintaining a disciplined and thoughtful approach to how we invest and deploy capital. That progress gives us confidence in the long-term operating model we outlined at Investor Day in June, including our expectation for revenue to ramp and grow at a compound annual rate of approximately 25% through 2031. We expect growth to build toward that longer-term rate as the investments we are making increasingly contribute to the business.

There are several reasons for that confidence. First, we will meaningfully expand our sales capacity by adding frontline sellers. As we discussed at Investor Day, we are putting additional resources into sales and marketing, the growth engine of the business. New sellers take several quarters to reach full productivity, so we expect the contribution from these investments to build through 2027 and become increasingly meaningful in 2028 and beyond. Second, we are improving the performance characteristics our customers care about most, detecting more threats while generating fewer alerts. With the release of Expedite 3.0 software and the anticipated release of Express 11.0, we believe we are making meaningful improvements in detection and alert rates. We also plan to introduce new product tiers and are developing new form factors to address more entrances, use cases and customers, which we believe can unlock additional portions of the approximately 700,000 Norway market opportunity we identified at Investor Day.

Third, our renewal and expansion motion continues to strengthen. Net revenue retention was 108% at September 30, 2026, and we believe there is an opportunity to drive NRR higher as we continue to strengthen renewals and increase upgrade and expansion activity across our installed base. Fourth, we are seeing encouraging ARPU trends and strong market acceptance of the pricing increases we implemented earlier this year. We believe those trends can continue as we increase the value we deliver to customers and expand those relationships over time.

And finally, we believe Expedite gives us another important way to expand our existing customer relationships. With approximately 1,350 customers today, we see a significant opportunity to deploy Express and Expedite together across different types of entrances. That creates a powerful net revenue retention expansion opportunity while also improving CAC efficiency by allowing us to sell more into existing customers. We expect to fund our growth through the gross profit generated by the business and our existing balance sheet. At the same time, we expect to deliver modest expansion in our adjusted EBITDA margin in 2026 while continuing to prioritize top line growth.

As you think about 2027, there are 2 year-over-year dynamics that will affect reported revenue growth. First, the pricing changes I described earlier shift more of each purchase subscription contract from upfront product revenue into recurring revenue. We believe this creates a better long-term revenue mix, but it reduces the amount of revenue recognized upfront in 2027. We estimate that the pricing changes will represent an approximately 3 to 4 percentage point headwind to revenue growth in 2027. Additionally, the first half of 2027 faces harder year-over-year comparisons to the first half of 2026, which benefited from a full 6 months of product revenue under our direct fulfillment model as well as the shipment of a significant amount of product backlog.

As a result, we expect reported growth to build through the year as these comparisons normalize, new sellers ramp and our investments contribute more meaningfully. Importantly, we expect to deploy more units in 2027 than we will in 2026. We anticipate the incremental units from our investments to arrive in the second half of 2027, limiting the recurring revenue recognized within the year. This informs our initial view of 2027 revenue growth, which we expect to be 20% or more, inclusive of the 3- to 4-point headwind from our prior pricing changes, which moved more of the contract value to recurring revenue that will be recognized over time. That also means we expect ARR growth to outpace revenue in 2027.

In summary, we remain confident in the opportunity ahead. Demand remains strong. Our products continue to improve, so we're investing in expanding our portfolio and go-to-market capabilities to address more of the market. We remain confident in the 5-year framework we laid out at Investor Day and look forward to providing more detail on our plans and 2027 outlook when we report our fourth quarter results in February. With that, I'll turn it over to Chris to walk through our third quarter financial results and updated outlook in greater detail.

Thanks, John, and good afternoon, everyone. I'm going to review our third quarter results in more detail and then share our updated outlook for 2026. Revenue in Q3 was $47.3 million, an increase of 10% year-over-year. This primarily reflected strong underlying demand for our solutions. I also remind investors that Q3 of 2025 was the first quarter of product revenue under direct fulfillment and included approximately $3 million of revenue from the largest contract in the company's history. Normalizing for that contract, along with the pricing changes that John covered, would result in approximately 18% to 19% year-over-year growth in Q3 of 2026.

As John discussed, we've made several pricing changes over the last 18 months. And as we have covered several times on prior investor calls and at our June Investor Day, for customers that want to own the asset, we intentionally lowered the hardware price and increased software and services by the same amount, leaving the total contract price unchanged, with the expected impact on revenue recognition starting primarily in Q3. To illustrate the impact, consider the model we shared at Investor Day that included a 4-year purchase subscription contract of approximately $70,000. Under the new pricing, approximately $4,200 that previously would have been recognized upfront as onetime product revenue instead moves into ARR and is recognized over the entire contract term.

Applied to 1,300 purchase subscription units on the year, that represents approximately $5.5 million shifting from upfront product revenue into recurring revenue, which we estimate represents approximately a 3% headwind to our 2026 revenue growth rate. In short, the economics haven't changed, but the revenue mix has, which we believe is better for the long-term value of the business and makes ARR and RPO increasingly important measures of our performance. ARR at September 30, 2026, was $140.5 million, reflecting growth of 20% year-over-year. Growth in ARR was driven by strong new customer acquisition, expanding deployments within the installed base and continued strength in renewal activity.

Gross margin on a GAAP basis was 49.7% in the third quarter, consistent with the year ago period. By revenue stream, product gross margin was 8.7% compared with 13.9% in Q3 last year, primarily reflecting our new pricing model, which intentionally shifts a greater portion of contract value from upfront product revenue and recurring revenue. While that shift reduces product gross margin in the near term, it shifts revenue into RPO with the associated gross profit recognized over the contract term contributing to the expansion we are seeing in our recurring revenue margins. Subscription gross margin increased to 59.8% from 51.8% while services gross margin increased to 72.6% from 70.1%. And adjusted gross margin was 50.8% compared with 50.6% a year ago.

Moving down the P&L. Q3 adjusted operating expenses, which excludes stock-based compensation, loss on impairment of equipment and certain other onetime expenses were $26.5 million compared to $24.8 million in the third quarter of last year, reflecting the continued investment in product innovation and go-to-market capacity and strategic investments in IT systems and personnel to support scale and efficiency. Q3 adjusted EBITDA, which excludes stock-based compensation and other onetime items, was $4.7 million compared to $5.1 million in the third quarter of last year. This resulted in adjusted EBITDA margin of 10% compared to 12% in the third quarter of last year.

The year-over-year decline primarily reflected investments we are making to support growth, particularly in research and development and sales and marketing as well as incremental spending on internal systems and controls associated with our ongoing SOX remediation efforts. Remaining performance obligation, or RPO, was $325.8 million at the end of the third quarter, reflecting growth of 4% sequentially and 12% year-over-year. And $132 million of that RPO is expected to revenue in the next 12 months. An important element of our path to higher profitability is the gross margin profile embedded in our remaining performance obligation, which we estimate to be approximately 66% gross margin, well above our current reported gross margin levels.

The difference reflects the structure of our purchase subscription model with the majority of hardware costs recognized upfront and a significant portion of the related software and services revenue recognized in future periods. We believe the conversion of this revenue that is under contract will increasingly benefit our margin profile and represents an important source of earnings leverage as we scale.

Turning to the balance sheet. Cash, cash equivalents, marketable securities and restricted cash increased approximately $3.5 million sequentially to $66.9 million. Cash flow from operations was $18 million in the third quarter, up $14.5 million from $3.5 million a year ago, driven by improved profitability, significantly stronger collections and better inventory and working capital management.

Turning to our 2026 outlook. As John highlighted, the fundamentals of our business remain strong with robust customer demand and the foundational changes we made to our business model are taking hold. With 1 quarter to go in the year, we are tightening our full year 2026 outlook for revenue to $182 million to $185 million compared to our prior guidance of $180 million to $185 million, representing a growth of approximately 25% to 27% year-over-year. We are reaffirming our estimate for year-end annual recurring revenue to approximately $148 million to $150 million, representing growth of approximately 23% to 25% year-over-year.

As we discussed at our Investor Day in June, we are continuing to invest in expanding our sales and marketing capabilities to increase our market presence in R&D to accelerate innovation and further improve system performance and in financial and operational infrastructure to support scale in an increasingly mature control environment. Even with these investments, we continue to expect full year adjusted EBITDA margins in the high single digits compared with 7.6% adjusted EBITDA margins in 2025. I want to take a moment to touch on 2027. As John mentioned, we remain encouraged by the outlook for the business, which includes revenue growth of 20% or more in 2027 despite the 3% to 4% short-term headwind associated with the pricing changes that's driving more recurring revenue and less onetime product revenue.

While our 2027 operating plan is not yet finalized, we remain confident in the long-term framework we laid out at Investor Day, including our expectation for revenue to grow at a compound annual rate of approximately 25% through 2031. We expect that revenue growth to build toward that longer-term rate over the next 5 years as the investments we are making increasingly contribute to the business. We also believe we have reached a point where ARR growth should sustainably outpace revenue growth as the recurring component of the business continues to expand, and we expect that dynamic to continue in 2027. At the same time, we expect to continue the investment strategy I just outlined to support the long-term growth opportunity in front of us. Importantly, we are making these investments from a position of financial strength.

The business has demonstrated its ability to generate positive adjusted EBITDA and cash, and we expect to fund our growth investments from the gross profit generated by the business and our existing balance sheet. This gives us the flexibility to invest where we see attractive returns while remaining disciplined on profitability and cash generation. While our operating plan is still being finalized, we currently expect continued modest expansion in adjusted EBITDA margins in 2027. As we make our final investment decisions, we will continue to balance our focus on the significant growth opportunity in front of us with our commitment to profitable growth and disciplined capital allocation. We will provide a more complete outlook when we report our fourth quarter results, at which point we will expect to have the benefit of a finalized operating plan.

With that, I'll turn it over to Brian for Q&A.

Thank you, Chris. Operator, at this time, we'd like to open the call up for Q&A.

[Operator Instructions] Your first question comes from Jeremy Hamblin of Craig-Hallum Capital.

Congratulations on the momentum in the business. I thought I would start with just understanding, first, in Q3, your mix of subscription deals versus purchase deals. And then as we look ahead to 2027, what do you anticipate that mix looks like as we move through next year? Is there going to be any seasonality first half versus second half? But what color can you share with us on that?

Jeremy, thanks for the question. I just wanted to clarify, you're asking about the mix in Q3, and I want to make sure I got it. Were you asking about how that trends to 2027? I want to make sure I got that right.

Right. I wanted to understand what the Q3 mix looks like. And then if you have some color on Q4, that would be great. But then as we look at '27, how do you expect that mix to play out given the pricing changes that have been made?

Yes, thanks. If you looked at our deployments for the quarter in Q3, it was close to 50-50, which we've typically been guiding people on. In '27, it's a little early for us to want to share. I think 50-50 is a good place to start. And as we get closer to actually guiding on '27 in February, we'll update you then. 50-50 for Q3 to be very specific, is approximately what it was.

So you're seeing that kind of normalization towards the long term that you would expect. I wanted to also ask about the ARR growth rate in Q3. So as you look at your guidance for the year, it would imply, I think, about a 24% growth rate for the year, but you've been at kind of the steady ARR growth rate now for the last 3 quarters of around 20%. Can you just walk us through that acceleration? Obviously, you've talked about that example deal of the $70,000 in kind of the $4,200 of upfront revs that are being traded to ARR. But is there more detail you can share with us?

Yes, Jeremy. And we actually posted an investor slide deck on our Investor Relations site to specifically talk about this. So we have made pricing changes. Those were made last year in July of last year that as we just discussed in our prepared remarks, have moved more value to ARR. Those take a while to materialize inside our results, and we're there now, which is why you see ARR at 20% growth in Q3 compared to 10% revenue growth, and we see that accelerating from here as we close out the year. For a specific magnitude of that impact, as compared to 2025, we now have -- on that $70,000 illustrative ARPU that we shared at our Investor Day, we take $8,000 less of onetime product revenue, which means $8,000 goes into ARR.

Now mind you, the ARR is most typically recognized over 4 years. So you have an $8,000 per unit trade for onetime product revenue for $2,000 in the year of recognized subscription and recurring revenue. Now in the Q3, about 50% of our business was purchased. That $8,000 trade from 2025 as we look forward to 2027 is only part of that purchase business. Take all of that is what we guided is that next year, we see that as a 3% to 4% headwind on onetime product revenue and why we are confident that recurring revenue, ARR specifically will outpace overall revenue growth.

Jeremy, just a bit more color, too, to John's point. While that 8,000 comes out of onetime product revenue and into future recurring revenue, John mentioned that, that's about $2,000 in ARR because it's split among the 4 years, but the entire 8,000 goes into our RPO, of course, right, by definition. The other thing I'll point out is that's a trade we like because, of course, the business becomes more predictable and with more recurring revenue. And it's really important to note when that contract is up for renewal down the road, it's now at a higher rate for the customer for that recurring business, for that SaaS that we're providing. And that's an important driver at renewal for us to get a higher ARPU at that time. So that's going to compound as we move forward into the future. And that's obviously one of the great values that we're unlocking here.

Last one before I hop out of the queue. Just in terms of new customers, right, so you added, I think, 51 new customers in the quarter. Can you give us a sense for what portion of your new customers are deploying both Express and Expedite initially and how that compares versus maybe where you were a year ago.

Jeremy, we're very excited about Expedite and the continued adoption of that product, and we're really thrilled about Expedite 3.0, which is a software release that all of our Expedite customers will get further enhancing the capabilities of the product and bringing features they've been really asking for like identifying what caused the alert with the red box on the image. In terms of the attachment rate, we see a very high attachment rate of Expedite to Express sales. And overall, about 9% of our total installed base customer base, I'm sorry, has deployed Expedite at this point, which in the time frame that it's been available, we're really thrilled about.

As we look into 2027, we see further opportunities to enhance the penetration of Expedite into the market, in particular, at the time of renewal, and we're looking at how we can make those really attractive renewal and upgrade offers for our customers.

Your next question comes from Mike Latimore of Northland Capital Group.

Nice quarter. In terms of the bookings in the quarter, what percent of the units came from the base versus new customers? And then what's the kind of ballpark for number of units by year-end, do you think?

About -- it was about 60-40, 60% of our overall business came from existing customers. The -- you asked about year-end units?

Yes, subscription counter.

Yes. So if you look at our total installed base, no change from being comfortably over 10,000, which we said before.

And then how do you think about -- you're moving more revenue into recurring. I mean, how do you think about the -- just kind of the growth in RPO? What does that kind of need to trend towards to kind of hit your goals?

Yes. I wouldn't give a specific number. We talked about all the drivers that's happening. You should expect that to continue to be healthy from here because of everything we've been talking about of moving more into recurring. Our mix will ultimately impact that in any given quarter or year, which we talked about a few minutes ago, of course. And then contract length will also. So those are some variables of one of the reasons we wouldn't want to give a point specifics.

Yes. We're thrilled with the rate of RPO growth, the moves that we're making to increase the long-term value of the business as we build to the 5-year plan that we deployed at Investor Day. More RPO, more ARR drives more recurring revenue that we're going to recognize. It provides more predictability in the business as we look forward, a higher base as we look into future years. And as Chris mentioned, increases the lifetime value of these customers, and we're thrilled with how that's working.

[Operator Instructions] Our next question comes from Eric Martinuzzi from Lake Street Capital Markets.

Yes. Curious to know a little bit more about the sales capacity investments that you're making. I know you can press out in a number of different directions, whether it's direct or channel or marketing spend. But what are the -- can you prioritize those for us?

Yes. We are encouraged by what we're seeing in the market and adoption of our products, and we think it's the right time to continue to invest in our sales and marketing capacity because we can reach more customers, but also the opportunities that we see in cross-sell with existing customers and renewing existing customers to continue to drive that NRR up. So in terms of where we're putting that, it's across the board in our markets inside North America, which is the strength of our business. And as we've commented previously, we see an opportunity internationally as well, and we're going to make investments in those markets.

Now the international opportunity is an investment for the future because that also has to come part and parcel with product and regulatory clearances. But most importantly, the majority of that investment is frontline sellers. It's individual sellers that are going out to customers and communicating what Evolv can do for them.

And with regard to the competitive landscape, you've highlighted 3 different areas about your competitive advantages. There's throughput, there's threat isolation and there's data insights. Obviously, with the Expedite 3.0, that's an example of a threat isolation advancement. What are you working on as far as throughput and data insights?

We're continuously working on improving the characteristics of the product that we believe matter most to the customers and matter most to continued market penetration. Expedite 3.0 is now out in the market. Customers can upgrade their systems, and they're doing so now. We are also working on Express 11.0, which is out with a reasonable size of cohort of customers in beta with hundreds of thousands of people having walked through it at this point. And we're encouraged by the signs that we see there in terms of maintaining or improving detection performance while lowering the alert rate. We think that is a critical function of these systems. It's the characteristic that customers focus on the most because it reduces the friction on people coming in the visitor experience. And we believe it's the opportunity to lower the friction on staff.

And as I mentioned in my prepared remarks, staff and the burden of manning and entrance is very often one of the largest barriers to penetration of this category into the market. And simply put, if there's less alerts, there's less things for staff to deal with.

And Eric, just in case it's not obvious, John talked about 11.0 on Express and 3.0 on Expedite, those are backward compatible. This is the value we provide with our recurring software and services platform. And so whether it's Gen 2 or Gen 1 Express, these benefits go to our existing installed base and new customers.

Your next question comes from the line of Shervin Zand from Ladenburg Thalmann.

Congrats on a nice quarter. Just thinking about your guide and thinking about kind of this framework you've talked about for 2027 of at least 20% growth. I know that I think international kind of lags behind where we are in the U.S. in terms of entryway security, but I think still it was a sizable opportunity. So I want to know within that growth, is kind of sort of like an international like expansion plan or ramp-up included in that? Or should we treat that as an essential like upside to your framework?

We are also very excited about the international opportunity. Safety and security is not totally a U.S. concern. We think it's a global concern, and we're encouraged by the early traction that we see. The comment that I made in terms of it's an investment for the future, I want to be clear. We're making that investment now, focused particularly on product and regulatory compliance. We are a hardware-attached SaaS business. That's a very important distinction. We love the fact that we're putting hardware on a company site and the real estate that we occupy, especially for the durability of the future of the of the business. But that hardware also comes with a compliance requirement. Expedite uses ionizing radiation. There's requirements for that. There's health and safety requirements that apply to Express. We have a cloud platform that gathers data that comes with privacy compliance.

And we're at those investments right now. But that informs the comments that I made that we see international as a future growth opportunity. And as far as the contemplation in our 2027 guide, it is a small contributor.

And it's just the base is so much smaller to grow from to have a real impact on 2027 numbers. It's just such a scale difference. It was about 4% of our revenue in 2025, just to give you some perspective. So it can grow wildly for us, and it will have a little bit of effect early on, just to put in perspective.

And then one quick one. Just obviously, it was a sizable beat in terms of adjusted EBITDA this quarter. And you're moving your guide up by $0.5 million at the midpoint. Just thinking about, obviously, we're doing 10% last quarter, 10% this quarter. You're pricing in a step down in terms of a margin. Is that just due to maybe certain risks in 4Q in terms of sales? Or is it that step-up in sales and marketing and R&D spend that you were talking about that you -- those investments you haven't necessarily made in made yet and you're planning to make in 4Q?

It's more about the run rate. And if I understand your question, Shervin, just to be clear, were you comparing it to what would be Q4 of 2025? Or were you comparing it sequentially?

Like this next quarter?

So Q3 versus Q4. There's not a dramatic step-up in investments, the continuation of the investments, and it will matter based off of the mix of the products that ship and therefore, the gross margin that comes with a purchase subscription versus a pure subscription. That's one of the main factors. And then you've got just a little bit of seasonality there of a Q3, Q4. But there's no underlying change to the business trends that were going on in Q3 that won't continue in Q4. And welcome to the call, Shervin.

Thank you, everyone, for joining. This concludes today's call. You may now disconnect.

Good afternoon, and welcome to the Evolv Technology Second Quarter Earnings Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's call, Brian Norris, Senior Vice President of Finance and Investor Relations for Evolv Technology. Please go ahead, sir.

Thank you, and good afternoon, everyone. Welcome to today's call. I'm joined today by John Kedzierski, our President and Chief Executive Officer; and Chris Kutsor, our Chief Financial Officer.

Earlier today, we issued a press release detailing our second quarter results and our updated 2026 outlook. This release is available on the Investor Relations section of our website and has been filed with the Securities and Exchange Commission. During today's call, we will make forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements reflect our current expectations regarding our business, strategy, growth opportunities, customer activity, strategic partnerships, product demand and financial outlook. All forward-looking statements are subject to material risks, uncertainties and assumptions, some of which are beyond our control.

Actual events or financial results may differ materially due to a number of factors, including those described under the caption Risk Factors in our annual report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 10, 2026, and our quarterly report on Form 10-Q for the quarter ended June 30, 2026, which we filed with the SEC earlier today. The forward-looking statements made today represent our views as of August 11, 2026. Although we believe that the expectations reflected in these statements are reasonable, we cannot guarantee that future results, performance or the events and circumstances reflected herein will be achieved or will occur. Except as may be required by applicable law, we disclaim any obligation to update them to reflect future events or circumstances.

Our commentary today will include non-GAAP financial measures that we believe provide additional insights for investors. These measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP. Non-GAAP measures discussed today include adjusted gross profit and margin, adjusted operating expenses and operating income, adjusted EBITDA and adjusted EBITDA margin and adjusted earnings and adjusted earnings per diluted share. Reconciliations to the most directly comparable GAAP measures are included in today's press release, and our definitions may differ from similarly titled measures used by other companies.

In addition, we will discuss annual recurring revenue, or ARR, remaining performance obligation, or RPO, and net revenue retention, or NRR, which we believe provide useful insights into the business. We define ARR as the sum of subscription revenue and the recurring service revenue related to purchase subscriptions for the final month of the quarter, all multiplied by 12. RPO represents estimated revenues expected to be recognized in the future, which are related to performance obligations that are either unsatisfied or partially satisfied as of the end of the reporting period. We define NRR as recurring revenue in the last month of the quarter, divided by recurring revenue from the year ago month for the same customer base, inclusive of churn and expansions.

Before I turn things over to John, I'd like to briefly highlight some of the investor outreach plans for the second half of 2026. We plan to be at 4 institutional investor conferences, including the Lake Street Investor Conference in September, the Craig-Hallum Alpha Select Conference in November, the UBS Global Technology Conference in December and the Northland Capital Conference later in December. As always, we welcome the opportunity to engage with both existing and prospective shareholders. If you would like additional information, please feel free to contact me at [email protected].

With that, I'd like to turn the call over to John.

Good afternoon, and thank you for joining us. Before we discuss our second quarter results, I'd like to briefly revisit a few themes from our Investor Day in June. At Investor Day, we shared our perspective on the long-term growth potential we see in front of the company. We discussed our belief in the large and underpenetrated markets we serve, our differentiated technology and the opportunity we see to expand adoption across a broad range of end markets.

We estimate there are more than 700,000 serviceable doorways across the markets that we serve today. With about 9,200 units deployed, our current penetration remains well below 5% highlighting the substantial runway for future growth. Against that backdrop, we outlined a path to growing revenue to more than $500 million by 2031, representing a compound annual growth rate of approximately 25% over the next 5 years. While we expect growth to vary from year-to-year based on factors such as deployment timing, product mix and customer buying behavior, we remain confident in the long-term opportunity ahead. We also discussed a path to achieving adjusted EBITDA margins of at least 25%.

Taken together, we believe this represents a path to becoming a Rule of 50 business, a combination of top line growth and bottom line profitability that we believe reflects the strength of our business model and the scale of the opportunity ahead. Importantly, we believe the foundation for that framework is already in place today through our growing base of contracted recurring revenue and more than $300 million of remaining performance obligation, or RPO, which carries attractive long-term gross margins.

At its core, Evolv is a hardware-enabled subscription business that generates high-margin long-term recurring revenue. We are built around physical security, not digital workflows. We are a leader in what we believe is one of the largest and least penetrated segments of the public safety market, AI-powered weapons detection. Our platform combines proprietary hardware, software, AI models, data and services into a single integrated solution delivered through multiyear subscription agreements, typically 4 years in duration. These long-term contracts create a growing base of contracted future revenue and visibility that differs meaningfully from many software businesses.

While advances in AI and agentic technologies may reshape portions of the software industry, they do not replace proprietary hardware, real-world data, operational expertise and long-term customer relationships that underpin our business. We use AI to help protect people and places, not screens and code. We view the second quarter of 2026 as another step toward achieving these Rule of 50 objectives. New customer acquisition remained healthy, renewal trends continue to strengthen and customers increasingly adopted additional platform capabilities such as eXpedite. While significant opportunity remains ahead of us, we are encouraged by our progress and remain confident in our long-term outlook.

With that in context, let me briefly summarize our second quarter results. Revenue in the second quarter was up 34% year-over-year, reflecting strong new customer wins and continued expansion within our existing customers. We ended the quarter with annual recurring revenue up 20% year-over-year, reflecting the compounding impact of the growth in our deployed unit base.

Adjusted EBITDA margin expanded to 10.1% in Q2 compared to 6.5% in the second quarter of last year. Of note, total adjusted EBITDA in the first half of 2026 doubled compared to the first half of 2025. We added 70 new customers during the quarter, marking our strongest quarter in 2 years for new customer additions. What makes this result particularly encouraging is that approximately 60% of unit bookings during the quarter came from existing customers. Together, these results highlight both our ability to deepen relationships with existing customers and continuing to add new logos at a healthy pace.

We're pleased to report that we now have customers in all 50 U.S. states and across North America, including Canada and Mexico. This milestone reflects both the versatility of our platform and the growing global demand for solutions that enhance safety without creating friction for visitors. As we outlined at Investor Day, we expect an increasing portion of our growth over the next 5 years to come from markets outside the United States, with early progress expected later in the year. Today, our solutions screening nearly 5 million people each day, reflecting the growing scale and global reach of the Evolv platform. Our net revenue retention remained comfortably above 100% in the second quarter, reflecting continued success renewing and expanding existing customer relationships.

Finally, remaining performance obligation was up 4.5% sequentially to $312.6 million, reflecting strong end market demand, continued multiproduct adoption and strong renewal upgrades to our Gen2 Express platform. Our RPO provides visibility into future revenues and reinforces one of the key strengths of our model, a large and expanding base of contracted revenue expected to be recognized over the coming years. Our RPO now exceeds 1.7x our full year revenue outlook, underscoring the visibility and durability embedded in our model.

In the second quarter of 2026, we saw strong demand across our core education market. We added 23 new education customers across 13 states. These wins spanned K-12 schools, higher education institutions and state education agencies, demonstrating the broad applicability of our solutions across a diverse range of educational environments. Today, we are proud to support approximately 1,800 schools across the country, including 24 of the top 100 largest school districts in the United States. We continue to see strong adoption of our Gen2 Express platform with customers signing new 4-year contracts to upgrade from Gen1 deployments.

We also continue to see a supportive policy and funding environment for school safety investments. Alongside federal grant programs, we are monitoring school safety funding and legislative initiatives across nearly a dozen states, creating potential opportunities to expand access to modern security solutions. Importantly, these efforts are being driven by demand from policymakers, educators and local communities, underscoring the long-term importance of school safety nationwide.

In health care, we added 8 new customers, ranging from community hospitals to regional health systems, including Alberta Health Services, Canada's largest integrated health care system, further strengthening our position in the Canadian market while demonstrating the scalability of our platform across a diverse range of health care environments. As workplace violence remains a significant challenge across the health care sector, providers are increasingly prioritizing technologies that enhance security while preserving the open access and efficient visitor flow that are fundamental to care delivery. Today, we support approximately 800 hospitals, reflecting the growing recognition that health care organizations can improve safety without compromising the patient, visitor and staff experience.

In sports and live entertainment, we added more new customers across professional hockey, basketball and football, including the Pro Football Hall of Fame in Canton, Ohio. These organizations are investing in security solutions that enhance both safety and the fan experience by enabling faster and more efficient venue entry without compromising threat detection. We also supported the 2026 FIFA World Cup through a short-term subscription deployment spanning Q2 and Q3 with installations at match venues, fan festivals and transportation hubs, including New York Penn Station.

During the nearly 40-day tournament, Evolv screened more than 3.5 million fans, demonstrating the scalability of our platform and further strengthening global awareness of the Evolv brand. We're also pleased to announce the recent collection of Evolv by Northwestern University's New Ryan Field, one of the most anticipated venue openings in college sports. Following a rigorous evaluation process, Ryan Sports Development selected Evolv to help deliver the fan arrival experience at what is believed to be the most expensive college football stadium ever built, representing an investment of approximately $870 million. We believe this win reflects a broader trend across college athletics, where leading institutions are increasingly investing in the same fan experience, operational capabilities and security infrastructure traditionally associated professional sports venues.

We're proud to support a growing roster of leading universities, including The University of North Carolina, BYU, Boston College, The University of Nebraska, The University of Texas and now Northwestern's new Ryan Field. As schools continue to modernize their facilities and elevate the game day experience, we believe security is becoming an increasingly important component of the overall fan journey and that Evolv is well positioned to support that evolution. We also continue to see momentum in the workplace across corporate headquarters, distribution centers and critical infrastructure.

During the quarter, we added 2 additional Fortune 500 companies, including a leading grocery retailer with one of the largest distribution networks in the United States and one of the country's largest off-price retail chains. These wins further expand our footprint within large enterprise environments where organizations are seeking to enhance security while maintaining efficient operations and positive employee and visitor experiences.

Today, we are proud to serve as a trusted weapon screening partner for over 30 Fortune 500 companies. The momentum we're seeing across these markets reinforces our belief that customers increasingly view Evolv as a security platform rather than a point solution. eXpedite, our autonomous AI-powered bag screening solution continues to gain traction in environments where customers want to screen bags without slowing entry. Increasingly, customers are looking to conduct bag screening as part of a single integrated security workflow and eXpedite is purpose-built for that model. We now have over 100 eXpedite customers, representing approximately 8% of our total customer base, up from 2% a year ago.

In the second quarter, approximately 70% of new customers who purchased eXpedite also bought Evolv Express. We've now also cross-sold eXpedite into more than 40 existing Evolv Express customers. Customers have now screened more than 20 million bags with Evolv eXpedite and now averaging approximately 90,000 bags each day. We believe eXpedite represents a compelling expansion opportunity, allowing us to effectively stack ARPUs, while creating additional leverage on our customer acquisition investments.

Importantly, as our installed base continues to expand, we are accumulating a growing body of security and screening data that can be used to help improve product performance, strengthen our AI models and create opportunities for additional software-driven capabilities. We believe this data advantage enhances outcomes for customers, supports future software innovation and reinforces our long-term competitive position.

During the first half of the year, we delivered significant enhancements to the eXpedite platform through software innovation. These enhancements help customers optimize security operations, improve the visitor experience and make more informed decisions about staffing and screening workflows. As customers increasingly see the value of managing both walk-through and bag screening through a single cloud-connected platform, we believe there remains a meaningful opportunity for account expansion, deeper platform adoption and stronger subscription retention over time.

Turning to operations. I'm pleased to report that we have onboarded Plexus, our new global contract manufacturing partner and have now begun shipping product through their facilities. This represents an important milestone in our manufacturing strategy and positions us to scale production capacity, extend our global reach, enhance operational resiliency and over time, reduce bill of material costs through greater procurement leverage and manufacturing efficiencies. With respect to the broader supply chain environment, we continue to actively manage through the well-documented semiconductor supply constraints and remain confident in our ability to execute against our full year deployment plans.

Before I turn things over to Chris, I want to share some context around our outlook. We continue to see strong momentum across the business. Our pipeline remains healthy. Execution is tracking well. And for those reasons, we are raising our outlook for 2026. We expect to end 2026 with comfortably over 10,000 units deployed, which would reflect net deployed unit growth of about 30% year-over-year. We are raising full year revenue guidance to 23% to 27% year-over-year compared to our previous forecast of 20% to 23%. While we continue to invest in innovation and operations, we continue to expect to deliver expanded adjusted EBITDA margins in 2026 compared to 2025.

As we look to the balance of 2026, we expect continued growth in deployed units, ARR, revenue, adjusted EBITDA and RPO. Importantly, the combination of strong new customer additions, growing multiproduct adoption and continued operating leverage gives us confidence in both our updated 2026 outlook and the long-term framework we outlined at Investor Day.

With that, I'll turn it over to Chris to walk through our second quarter financial results and updated outlook in greater detail.

Thanks, John, and good afternoon, everyone. I'm going to cover our second quarter results in more detail and then share our updated outlook for 2026. Revenue in Q2 was $43.8 million, an increase of 34% year-over-year. This primarily reflected strong underlying demand for our solutions and the now fully completed transition to the direct fulfillment model, which created a temporary year-over-year tailwind to product revenue as a larger portion of revenue was recognized upfront relative to prior periods.

While the step-up in dollars is permanent, the year-over-year comps will normalize beginning here in Q3 as we've now anniversaried both the fulfillment and the pricing changes, which we implemented on July 1, 2025. As a result, we expect future year-over-year comparisons to provide a cleaner view as to the underlying operating performance of the business. To be clear, we expect revenue growth to more closely align with deployed unit growth, subject to normal fluctuations driven by deployment timing, pricing, product mix and the timing of short-term rental agreements.

ARR or annual recurring revenue at June 30, 2026, was $132.7 million, reflecting growth of 20% year-over-year. Growth in ARR was driven by strong new customer acquisition, expanding deployments within the installed base and continued strength in renewal activity, which drove net revenue retention comfortably above 100%. Adjusted gross margin was 51% in Q2, consistent with Q1.

Moving down the P&L. Adjusted operating expenses, which excludes stock-based compensation, loss on impairment of equipment and certain other onetime expenses were $25 million compared to $21.6 million in the second quarter of last year, reflecting growth of 16% year-over-year. The increase reflects continued investments in product innovation and go-to-market capacity, higher commission expense associated with our revenue growth and targeted investments in IT systems and personnel to support scale and efficiency in the business.

Q2 adjusted EBITDA, which excludes stock-based compensation and other onetime items, was $4.4 million compared to $2.1 million in the second quarter of last year. This resulted in adjusted EBITDA margin of 10.1% compared to 6.5% in the second quarter of last year. Importantly, adjusted EBITDA margins expanded 160 basis points sequentially and 360 basis points year-over-year despite continued investment in product development, commercial resources and operational infrastructure, demonstrating the operating leverage inherent in our model.

Remaining performance obligation, or RPO, was $312.6 million at the end of the second quarter, reflecting growth of 4.5% sequentially. We continue to see strong demand for Gen2 Express with customers increasingly choosing to upgrade their existing deployments. This, combined with solid end market demand, contributed to continued RPO growth during the quarter. We continue to expect RPO growth to accelerate over time, supported by increasing end market demand, favorable renewal activity, expansion within the installed base and the higher level of contracted revenue associated with our current fulfillment model.

We continue to believe the gross margin profile of our remaining performance obligation is an important indicator of future earnings potential. As we discussed at our Investor Day, the contracted revenue reflected in our RPO carries an estimated gross margin profile of approximately 66%, well above our current reported gross margin. This difference reflects the economics of the purchase subscription model, where the majority of the hardware costs are recognized immediately and upfront, while a significant portion of the associated software and services revenue remains contracted and will be recognized over future periods. As a result, we believe our RPO represents a substantial pool of future contracted revenue with attractive margin characteristics that supports our confidence in the long-term profitability and earnings leverage of the business.

Turning to the balance sheet. Cash, cash equivalents, marketable securities and restricted cash increased about $2 million sequentially to $63 million. The positive cash flow in Q2 is a quarter ahead of our expectations, driven by improved profitability and strong cash collections in the quarter. We expect to remain cash flow positive through the balance of the year. However, we may selectively choose to invest an additional $2 million to $4 million into inventory safety stock to enhance supply chain readiness and support anticipated customer demand. We would expect that any such investment would be largely opportunistic and timing related in nature.

Turning to 2026. As John highlighted, the fundamentals of our business remain strong with robust customer demand and the foundational changes we made to our business are taking hold. We are raising our full year 2026 outlook for revenue to $180 million to $185 million compared to our prior guidance of $175 million to $180 million. This represents year-over-year growth of approximately 23% to 27%. Our upwardly revised revenue outlook reflects both continued strength in customer demand, pricing and ARPU trends as well as a higher mix of purchase subscriptions, which increases the year 1 revenue recognition.

We are raising our estimate for year-end annual recurring revenue to be approximately $148 million to $150 million, representing 23% to 25% year-over-year growth. Our updated forecast reflects stronger-than-anticipated renewal performance, which is driving higher net revenue retention, helping to offset the impact to ARR that's driven by the higher mix of purchase subscriptions relative to pure subscriptions in the second half of the year.

At the midpoint of our outlook, we expect second half revenue to be modestly higher than H1 and up year-over-year with ARR growth outpacing revenue growth in the second half. Remember, these prior period growth comparisons reflect the changes to our pricing and fulfillment model that were implemented in mid-2025 as discussed on prior earnings calls. These changes have now lapped a year, so future variances will be more comparable.

This updated outlook and H2 strong demand underpins the 23% to 27% annual growth that we expect for 2026 and the same fundamentals underlying our long-term growth expectations of approximately 25% revenue growth, which we outlined in June at our Investor Day. We continue to expect strong unit growth with second half deployment exceeding first half deployments and growing approximately 30% year-over-year. We expect gross margins in the second half to remain consistent with first half levels throughout the remainder of '26.

Our 2026 outlook reflects the impact of 3 factors on gross margin. First, we are seeing a higher mix of purchase subscriptions, which is a little more of a point to the gross margin headwind I just mentioned. We are now forecasting 60% of new full year deployed units to be via purchase subscription versus 55% that we assumed in our last guidance issued in May. As a reminder, with purchase subscription transaction, we recognize all of the hardware costs immediately while deferring software and services revenue into future RPO.

Second, we are seeing stronger demand than anticipated for Gen2 upgrades, which drive new 4-year contracts and higher RPO. While these upgrades enhance long-term value, they also create a temporary margin headwind as returned Gen1 units incur freight, refurbishment and depreciation costs during the period between upgrade and redeployment. These higher Gen2 upgrades and associated Gen1 costs are just under 1 point of gross margin headwind. We expect these costs to convert to significant revenue and cash as these Gen1s are redeployed in the future.

Finally, we are seeing modestly higher component and supply chain costs than we originally anticipated, as seen across the tech industry, which is approximately 0.5 point of gross margin headwind. I'd also remind investors that Evolv eXpedite is still progressing along its cost reduction curve and has not yet fully benefited from the bill of material optimization and supply chain efficiencies that we expect to achieve as adoption continues to grow. While these factors are combining to create near-term pressure on gross margin, we are also expecting some tailwinds to gross margin to emerge.

We continue to realize manufacturing efficiencies and scale benefits through our new contract manufacturing partner, and we have recently implemented pricing increases across our product lines of Express and eXpedite. As those higher price points are reflected in new deployments and renewals, we expect them to support gross margin expansion over time as those higher prices become increasingly reflected in our revenue.

Overall, our 2026 outlook reflects a business that is capturing more of the economic value that it creates, generating stronger renewal outcomes, increasing visibility through ARR and RPO and delivering a more durable and predictable financial profile over time. We're continuing to invest thoughtfully in the capabilities needed to support the long-term vision that we outlined at our Investor Day. This includes targeted investments in selling and marketing to expand our market presence, R&D to accelerate innovation and reduce false alarms and the systems and processes needed to operate at greater scale. Importantly, even as we increase investment in these areas, we expect full year adjusted EBITDA to be in the range of $15 million to $16 million, with margins in the high single digits for 2026, up from 7.6% in 2025.

In summary, we believe Q2 marked another quarter of strong growth, customer and revenue retention, profitability and operating leverage. The drivers underlying the long-term framework that we outlined at Investor Day continue to perform in line with our expectations. And while we're not providing guidance beyond 2026, we remain confident in the opportunity ahead and in our ability to deliver against the long-term financial framework and Rule of 50 objectives that we shared in June.

With that, I'll turn things back over to Brian for Q&A.

Thank you, Chris. Operator, at this time, we'd like to open the call up for Q&A, and we're going to ask participants to limit themselves to one question and one follow-up.

[Operator Instructions] Our first question will come from Jeremy Hamblin with Craig-Hallum.

Congratulations on strong results and momentum in the business. I thought I would just start with some of the commentary around ARR growth and then the commentary around the unit growth that you're seeing where you discussed comfortably over 10,000 units deployed at the end of the year. But can you just discuss those 2 things, kind of the ARR growth rate that you're seeing and whether or not ARR growth as a percentage you expect as you now lap the change in fulfillment and the pricing change from '25, if that should also pick up in growth. But just kind of the comparison between the unit growth and the ARR growth.

Jeremy, yes, thanks for the question. This is Chris. A couple of things to unpack there. We do expect ARR growth to continue to accelerate from here as we've talked about compared to the past with some of the changes we've made to the business, pricing included from the prior year. When you talk about the unit growth percentage, and we talked about that at about approximately 30% for the quarter and the year compared to ARR growth of approximately 25% -- 23% to 25% for the year or 20% for the quarter. Those are diverging, I think, is part of your question.

One of the things to consider is the fact that those are different is as we would have expected. And the reason we expect it is we have a broader portfolio today than we did in the year ago period in which we're comparing the growth rates. We've now added our Gen1 units that are increasingly coming back from customers that are upgrading to Gen2. So as customers upgrade to Gen2, they sign a new 4-year contract. That's very good, good for the business, good for RPO and everything else that goes with it, but they give us back Gen1. And that's been happening at an ever greater pace than we were expecting. That's the good news.

The flip side to that is, as those Gen1s come back, we store them, we bring them back, and we will redeploy those to customers at a lower ARPU. And we've been doing that in the first half, and we'll continue to do that in the second half and beyond. Well, those Gen1 units, of course, have a lower ARPU than the comparison Gen2s in the prior period.

Let me also talk about eXpedite. eXpedite was launched at a lower price point. We've seen it have significant demand, as we've talked about every quarter since it's been out. That has a slightly lower price than does Express. So when you compare eXpedite ARPU to Express ARPU, those are also different. However, as we mentioned in our prepared remarks, we have also implemented a price increase across the board and with a little bit more of that to eXpedite such that eXpedite and Express going forward will be more closely aligned than they are today.

So I just wanted to recap all of that. The difference between ARR and unit growth is as we would have expected because we are selling Gen1 units at a lower ARPU and eXpedite has been lower, and that will be converging with Express. So I'm glad you asked it. That was something we talked about in prepared remarks because we thought that could be a question. Hopefully, I answered it. John, I don't know if you got anything to add. Otherwise, Jeremy, we can take it back to your -- if you have a follow-up.

Great. Unless John is adding something, just wanted to ask about kind of the legislative environment. So you have HB 1023 in Georgia. You have legislation in California, in the health care side. And I believe the legislation in Georgia has been tabled until their state Senate returns in January. But just wanted to get a sense of whether or not there are other things we should be paying attention to on the legislative side here in 2026?

And then how is this potentially making progress in some other states like, let's say, Florida and Texas, where you may have a little bit less penetration today than you do in some other geographies in the Southeast, let's say, like the Carolinas or Georgia?

Jeremy, we think that what happened in California organically and what's in progress in Georgia because as you know, that bill has not been booted on yet in the Georgia Senate and the latest information that I have is an encouraging sign that a technology like ours can become standardized and even regulated in the places that it makes a big impact. And there are plenty of examples that we can see from our lives where a new safety and security technology becomes not only commonplace, but expected over time. And I look at what's happening in California and Georgia as a proof point of that, just like airbags are expected in tight vehicles and sprinkler systems in certain buildings, and I could keep going on the presence of body camps on police officers.

We weren't involved in either those situations in California and Georgia. But as we mentioned at Investor Day, we think we're in a position now to make our voice heard on what the potential positive impact of our technology is, and you're going to see us be more assertive in those areas.

Great. And then just the question on the progress in Florida and Texas.

I don't have any specific update on Florida and Texas.

Our next question will come from Eric Martinuzzi with Lake Street Capital.

Yes. My congrats as well on the quarter and the guide. It looks like the business is in pretty good shape here. I wanted to talk about the Plexus relationship here. As far as your thoughts about there may be a potential inventory buy. How are we doing components-wise? If you could give a layer deeper on both availability as well as cost.

We are on track with the schedule that we've communicated regarding the moving to Plexus. When we announced the deal late last year, we had said that we'll be transitioning throughout the first half of 2026. And in the second half of 2026, the majority of our units would be shipping from Plexus facilities. And I'm pleased that we are on that schedule, and that is what's happening today with the majority of our orders being fulfilled from units that are built at Plexus.

As we commented in the prepared remarks, we're not immune to the challenges that are well publicized around supply chains, particularly around electronics, but I'm proud of the efforts we made in collaboration with Plexus and the line of sight that we have to hit the revenue guidance that we provided. We continue to work through it every day and making sure that we're in our best position to fulfill the demand that we're capturing.

Just a follow-up there. Chris, you commented that it seemed like a pretty specific dollar amount. Is this something that is already in the works as far as the inventory investment kind of in advanced commit in order to lock up supply at a certain price, that $2 million to $4 million range?

No, there is nothing imminent. That comes with scanning the market and participating over the last 6 months and learning what an opportunity might look like. So it is a possibility, not a probability at this point.

Our next question will come from Michael Latimore with Northland Capital Markets.

Great results there. I guess just 2 on the financials. How many Gen1 customers do you expect to upgrade this year? And then on the price change, what is the magnitude to the change you're seeing? Is it across the board, all products, all verticals?

Sorry, Eric, (sic) [ Mike ] can you repeat the last part of your question? I missed the last part.

Yes. On the price change, what is the rough magnitude of the price change? And is that across the board, like all products, all verticals?

Yes. So -- go ahead, John.

I'll take this one. So regarding your question on the Gen1 to Gen2 upgrade activity, what we've provided publicly in prior calls is that to date, and that was as of Q2 call, about 60% of our existing customers that were renewing had upgraded to Gen1. They like the form factor of that product, the performance of that product inside that environment. So that is as much information as we provided that renewals transacted to date was approximately 60% into Gen2.

In terms of the price increase, it was across the board. We've implemented a more diligent process to have regular price reviews to make sure we're pricing appropriately for value as well as what we're seeing around the horizon in terms of costs. I would call out eXpedite separately because again, the price increase was across the board on Express and eXpedite and associated piece parts. On eXpedite, we introduced that product about 1.5 years ago and made it generally available. I would say that we introduced it at an introductory type price. It was a new solution developed specifically to address the unique circumstances around verticals such as schools, and workplaces and some health care environments where people are entering with bags that contain large amounts of what we call clutter. It is various electronics like laptops, AirPods, tablets and chargers that can contribute to a higher false positive rate.

1.5 years later, we're really pleased with the traction that we've seen in the eXpedite product, not only in terms of customer adoption, as we shared in our prepared remarks, but also in the impact on customers' entry. We've shared some statistics on the clearance rate that customers are seeing, clearance rate, meaning the amount of people that walk through without ever being stopped for either their bag or for something on their person. And we think it's the right time to adjust the price of eXpedite to be more in line than it already was with Express to reflect the value that, that product provides.

[Operator Instructions] Our next question will come from Shaul Eyal with TD Cowen.

Congrats on results and guidance. John, with the World Cup having concluded last month, Evolv Express was widely deployed across, I think, 6 stadiums, Penn Station, I think you've mentioned and some additional fan zones. Now that the tournament is over, can you share whether you have seen increased interest from similar event organizers? Maybe also how far in advance of kickoff back in June did the selection process begin?

We're very proud to be able to support an international event of that scale and show the capabilities that the organization has, not only in our core weapon screening technologies, but also the services and support that back what we do. We see more opportunities and see continued demand for short-term events of that nature. And our Gen1 fleet is well purposed for many of those events, and we've been using it for events of that scale, and we'll continue to do that.

Obviously, not every event is the size of a World Cup that occurs every 4 years. But there are many events that occur on a regular basis where somebody needs units for a temporary period. And we both have a network of partners that specialize in short events as well as now our own fleet that we can make available either to them or for us to provide customers. Hopefully, that answers the first part of your question, but there was a second part that I want to make sure I get to as well. Could you repeat that?

Sure. So just kind of thinking out loud, any views you can share with us how far ahead of the tournament, the kickoff, did the negotiations start with the various stadiums you guys have been providing the Evolv Express with?

I won't provide specifics around any particular customer negotiation, but I would say that we did support the FIFA Club World Cup in the prior year.

Understood. Got it. And maybe just any views you can offer us regarding the competitive landscape? It would appear you're gaining share, but curious to hear your views about this topic.

To be concise, I would say overall, we haven't seen a change in the competitive environment. We're continuing to focus on providing the best solution that we can, which we believe is both a combination of the technology and constantly innovating to increase throughput, lower friction by lowering false positive rates, the services that we provide with the product and the software experience that provides our customers what we believe are unique capabilities to make our devices a part of the overall security workflow that we have. So I have not seen a change in the competitive environment. We like the position that we have, and we are focused on maintaining what we think is a leadership position in terms of the overall solution that we provide.

Operator, are there any other questions in the queue?

Yes. We have one question from [ Andrew McIntosh from HUI. ]

Can you hear me okay?

Yes.

One more time, Andrew, could you please unmute your line and ask your question?

Can you hear me now?

Yes, we can hear you.

Okay. I'm sorry. With the Northwestern deal, have you talked to any other Big 10 schools or any other large universities about -- and I know you can't name names or anything like that, but about getting your products into their venues as well. I happen to be down -- I happen to be at the University of Florida and senior products in other venues, not in the football stadium, but around campus and so forth. And I'm just wondering what kind of opportunities you have in that area?

We're really excited about the opportunity in NCAA outside of Northwestern's Ryan Field, which feel privileged to be part of that revolutionary new deployment, we cited several other NCAA wins in recent months. You asked about the Big 10 specifically. We had a press release a few months ago about the University of Washington and being their fan screening partner for the Huskies. I believe as NCAA looks to continue to differentiate their experience, they'll look to what's happening in professional sports. I think the new Ryan Field is a great example of that.

And we feel good about our ability to offer a differentiated experience for these locations as they want to make fan entry, which is the first thing that a fan does experience when they're coming into a statement into a stadium, be as good as it can be. So we like the position that we have, but we think the opportunity is still largely ahead of us there.

I think we have time for one more question here.

Yes. We have Michael Latimore with Northland Capital.

Just want to circle back to the Fortune 500 wins. Are you getting placed in both the corporate headquarters and the retail locations of those 2 wins?

I'll just speak about Fortune 500 in general and what we see, because we didn't share specifics on the wins mentioned. We see both. There was an increased focus on corporate headquarters, specifically after the merger of the UnitedHealthcare CEO a couple of years ago, and we definitely saw an uptick of interest and engagement with security teams that continues to this day following that. But also these locations and these businesses are interested in protecting their other facilities. I'd say most notably, what we see is distribution centers at warehouses, busy locations that they have and concerns around workplace violence there.

Yes, makes sense. And then on the slight increase or shift towards purchase subscription, any factors there? Is it just kind of vertical strength or more eXpedite or something?

I think it's just the customer mix as it happens to be landing. It depends -- different customers have different reasons for wanting to treat it as CapEx versus OpEx. But we still think long term, 50% to each is probably the right thing for long-term planning, but we certainly see that heading to 60% purchase subscription in this year.

That was your last question. I would now like to turn the call over to John for closing remarks.

Thank you again for joining us today and for your continued interest in Evolv. We are encouraged by the momentum we're seeing across the business and believe our second quarter results reflect continued progress against the long-term framework we outlined at Investor Day. We remain focused on expanding our leadership position in AI-powered weapons detection, one of the largest and least penetrated segments of the public safety market.

Just as importantly, we believe our differentiation goes well beyond software, combining proprietary hardware, AI machine learning, data, services and long-term customer relationships into a platform designed to deliver valuable security outcomes. Supported by growing recurring revenue, a substantial base of contracted future revenue and strong customer demand across our end markets, we remain confident in the opportunity ahead. Thank you for your support, and we look forward to updating you on our progress next quarter.

Thank you for joining. This concludes today's call. You may now disconnect.

Please welcome Brian Norris, Senior Vice President, Finance and Investor Relations.

Good morning, everybody. Good morning. Thank you so much for joining us for Evolv Technology Investor Day 2026. My name is Brian Norris. I'm the Senior Vice President of Finance and Investor Relations for the company. We are thrilled to have you here, the folks here in the room as well as the many folks that are joining us online today. Thanks for joining us as we take a deeper look into our business.

Very briefly on my background, I've been with the company for 5 years now. I lead the FP&A, treasury, BI and IR functions for the company. I have about 30 years of experience working for category-leading technology companies, including several hardware-enabled businesses with recurring revenue models, and you're going to hear a lot about that today. In just a minute, I'm going to go through some safe harbor statement and the use of non-GAAP measures. It's standard, but it's important. Then I'm going to review today's agenda, briefly highlight the speakers of the day, then have a few housekeeping items to review with you. I know this is familiar territory for you. Please bear with me.

Today's presentation is going to include forward-looking statements under the Private Securities Litigation Reform Act of 1995. Those statements reflect our current views as of today and are subject to risks and uncertainties that could cause our actual results to differ materially from those that we talk about today. For a discussion of those risks and uncertainties, we'd encourage investors to take a look at our SEC filings, including our Form 10-K for the year 2025 as well as our 10-Q for the first quarter of 2026.

The forward-looking statements that we make today are current as of June 9, 2026, and we specifically disclaim any obligation to update those. We're also going to be referring to non-GAAP financial measures today. You're going to easily recognize those by terms such as adjusted gross profit, adjusted gross margin, adjusted operating expenses, adjusted operating income, adjusted EBITDA. These are non-GAAP measures. They're not prepared in accordance with GAAP, and they shouldn't be considered in isolation of or as a substitute for non-GAAP -- or excuse me, of GAAP measures. I'll let you know that there is a reconciliation of all non-GAAP measures to their most directly comparable GAAP measure in the end of today's presentation. And of course, it's also included in every earnings release the company publishes, including the one that we issued on May 12, 2026, covering our Q1 results.

We're also going to be reviewing certain operating metrics like annual recurring revenue or ARR and RPO or remaining performance obligation, which, again, we believe are useful for investors to track the progress of our company. I caution you that any of the metrics in those definitions could be different than other terms, similar terms that are used by other companies. So please bear that. Let me take a moment just to anchor you on a few of the key messages that we're building on today.

First, we believe we're building the leader in advanced screening. Second, we believe we have a highly differentiated business model and product portfolio that combines proprietary hardware, software, AI and real-world data, which together, we believe, creates durable high-margin recurring revenue. Third, we operate in a very large and under-penetrated market with meaningful growth opportunities, we believe, in the verticals and the geographies that we compete in. Fourth, we're focused on creating customers for life. That's from lead development to customer acquisition to deployment to expansion and renewal. We believe that the value of that compounds over time.

And finally, we have a business -- we believe we have a business model designed to deliver sustained long-term profitable growth. I'm not going to go through every one of the speakers. They're all actually listed in the booklet in front of you, so you have a very good sense of the executive leadership team who will be here presenting today. We're thrilled to have them with us, obviously. Okay. Very briefly, let me walk you through how the next few hours are going to flow.

We're going to be here until about 12:00 with a short break. In just a minute, John Kedzierski, our President and CEO, is going to open things up with a deep review of the company's growth strategy and market opportunity. Owais and Sean will then lead us through a discussion about how our innovation strategy supports the global corporate growth strategy. Next, Robert and Alex are going to walk us through the market opportunity and how we believe we're best organized to accelerate market adoption. We're then going to take a short break from 10:35 to 10:45. That's a great opportunity for you to go across the hall, get a little bit or outside, get some coffee or maybe spin by the demo room, but we're not going to have a lot of room for demos at that point. Hopefully, you saw them just a few minutes ago.

When we come back, Jill Lemond is going to come on stage, and she's going to put the focus on spotlight education. And she's going to take us into that market opportunity, which, of course, is the largest single market for the company. We're then going to be joined by one of our customers, Regina Lombardo, from the Metropolitan Museum of Art. She is going to be on stage with Anil Chitkara for a virtual -- for a fireside chat. Then we're going to have Chris Kutsor, our CFO, who's going to walk us through our business model and our financial update.

Okay. Just a couple of housekeeping things. Number one, there's wireless access into everybody in the room. There should be a tag somewhere in front of you, so you can get on the Internet. There's also power at every desktop, so you have an opportunity to charge all the electronics that you brought today. As I mentioned, there's a demo room right across the way. We'll have time very briefly at the break. But moreover, I encourage you to go over there at lunchtime, the lunch hour, 12:00. We're going to have demos of both Express and eXpedite available to you. There are restrooms directly across the hall if you need a break. I'll also tell you that and I'll be remindful of you that this event is being webcast live for all people that can't be with us.

In terms of Q&A, we have a lot to cover. So we're not going to have Q&A sessions with every presentation. So -- but there will be opportunities at the break and at lunch to ask some questions of the executive team. All presentation materials will be available online as well. Lunch, last one, and it's important. You all should have a name tag in that name tag is a ticket for lunch, and we have some of Waltham's finest that we're going to be having right outside here at 12:00, and you'll need that ticket. Okay.

Again, welcome to Evolv Technology Investor Day 2026. We're thrilled to have you with us.

[Presentation]

Please welcome John Kedzierski, President and Chief Executive Officer.

Thank you for joining us here at our headquarters in Waltham, Massachusetts for Evolv Investor Day 2026. My name is John Kedzierski. I'm the President, Chief Executive Officer and a member of the Board of Directors of Evolv. I've been CEO for approximately 18 months. Prior to that, I had a 23-year career at Motorola Solutions, where I held a variety of executive roles. Most recently, I had the privilege of leading building Motorola Solutions physical security business, which is video cameras and access control systems. I've spent pretty much my entire career either in public safety or security. I'm a computer engineer by background and technology is always near and dear in just a personal interest of mine. And that lines up extremely well with Evolv. Evolv has a very clear mission, and we're going to elaborate on what that means for us, our investors and our customers, today, and we're addressing an immensely difficult problem, trying to detect weapons, differentiate them from many everyday benign items and doing that without changing how we all live.

Where is Evolv today? A lot has changed in the last 18 months. We have over 1,300 customers around the world, but predominantly here in the United States. They have about 9,000 units of ours. Every one of those units generate a subscription. And that recurring revenue base is a key foundation into our growth, the visibility we have into future revenues, and you're going to hear a lot about how we continue to leverage that today. Those subscriptions at the end of Q1 represented over $127 million of annual recurring revenue. And those subscriptions are long term.

Our most typical arrangement is a 4-year contract. And the total remaining performance obligation, that is revenue that is contracted, but we have not yet delivered or recognized was almost $300 million, once again, putting an exclamation point on the visibility we have into what the future looks like for us financially. We're here to make the world a safer place, and we'll talk about the origin of the company really briefly. And this mission to make the world safer for us to live, to work, to learn, to play is not just lip service. It's in the very DNA of the company. It's why we're able to draw great talent into the organization, really out hitting our weight. It drives all the decisions that we make.

And I'll share a quick story on that of what that personally means for me. My daughter just graduated high school. She attended a public school in the city of Chicago, a very, very large one. Over 4,000 kids attend there. They use legacy screening technology. So walk-through metal detectors, legacy X-ray with somebody staring at an image as they go by. But because there's so many students there, they can't screen every day. And when they do screen, they can't screen all the kids. They approximately pick out 1 out of 10, at least that was her estimate when she told me the story. Even when they do that, with all the best intentions, they can't screen everybody.

They get this line outside the door. And why is this line a problem? It's a soft target. It stretches out to a very large intersection that's very close by. It takes 30 minutes to get through that line. And now somebody doesn't need a weapon to create a tragedy. They just need to yank the wheel on the steering wheel and something horrible happens that day. And it's a great example of what we'll talk about later in terms of the protection paradox and how all the best intentions can create a challenge. And that mission is what we're here around to enable that compromise of security and not having all the inconvenience and the other challenges. And it's in the very lifeblood of the company and how we were founded.

We're founded by Anil Chitkara and Mike Ellenbogen, who are still with the company today. Anil, our Chief Growth Officer, and Mike is on our Board of Directors. The company was founded in 2013 in the shadows of the Boston Marathon bombing. Anil knew somebody who was personally impacted at that event. And they set about a challenge of how do we use technology to try to prevent this kind of situation happening again. How do you screen all of these masses of people, whether they're going into an enclosed venue or an open area such as this. And they created a company around this very goal and building the purpose that we have. And so what have we done?

We've created a new category. And what do I mean by a new category? When we approach customers, very often, we are replacing nothing at all. Remind yourself about how you got here today. Many of you flew. And so think about that air travel experience and the security experience that you have. Think back to how much space did that lane of security, the metal detector and the bag scanner next to it, occupy. Was it 30 linear feet, 40, 50? How many people operated that? How long did you wait in line? Did you get selected for a secondary screening and what was that experience like? And now imagine, can you take what I just described, what you went through and put it into the lobby of my daughter school.

Can you put it into the entrance of an emergency room? Can you stick it in the entrance of this building, our headquarters, where we're having this meeting? And you can quickly come to a conclusion that, that practically will be very difficult to go do. And as another example of what I mean by a new category, Think about when Steve Jobs held up his hand and showed the world an iPhone. Do you have to convince you that a cellular phone was a good thing to have? No, BlackBerry, Nokia and Motorola had already all done that. Steve showed you a much better phone. When we're meeting with clients, we're often showing them something they could not do before with the technology that was available, and there are a few greenfield opportunities in markets like that. We created the market that we're actually going after with that technology, and we think that's a really exciting not only purpose but investable opportunity because there's few clear fields like that ahead for many companies. And where is the goal? We believe that ultimately, most buildings that prohibit weapons will screen with technology like ours. As we continue to iterate on the efficacy of our product, and that's all about alert rate and driving that as low as possible.

As we iterate on form factors and shapes to make sure that we cover this entire 700,000 entry opportunity, I think just like you see sprinkler systems or airbags and cars or rearview cameras or fire alarms, these types of technologies will become standardized, and that's the future that we're building to. And we already make an impact every day. 500 firearms daily, 7 days a week, 365 days a year. And this is our customers going on the app that they have in front of our system, tagging real weapon found. We get the news articles where our customers tell the world about how our technology is helping protect their students, their patients, their employees and the anecdotes that we hear directly from our clients. So what we did is use technology to make the protection paradox better.

We could have done a hand search of every single person that came into this facility and created a pretty high level of assurance that there's no weapon inside this room. But that isn't very practical. It isn't very convenient. It requires that everybody changes how they live. And when people are going into a house of worship or a museum or their office, they don't want it to feel like they're going to the airport or they're going into a jail or they're visiting a courthouse. And Evolv created technology to try to make this compromise not the same level of compromise that it has always historically been. And because of our deployment in sports and entertainment, there's a good chance you've experienced what Evolv looks like.

The crowd on the left-hand side of this slide, we also remember that. A lot of people waiting in a line, a very clear line and not as many people behind it. And the experience that now Evolv has, thanks to all the partnerships with the sports teams that we've been privileged to serve, you can wait at that tailgate longer. You don't stress, am I going to miss kickoff. The stadium operator knows they put themselves in the best position to get people from the street to the seat, so they can experience all the wonderful amenities and concessions that they have. And we did this by using sensors and AI, edge compute to be able to differentiate a phone from a firearm, but we didn't just stop there.

We have a mission to make things safe. And just differentiating that phone from that firearm is step one. But the red light that goes off on the system doesn't stop the weapon from coming inside. It's all on the guard and that security operator. So we also focus on how do we use technology to make that security operator better. The security guard industry turns over as much as 3 times per year. So we use video cameras. We continue to iterate on those algorithms to be able to locate the threat on the person so that we can provide the best information that we can to that security guard, to that gym teacher that might be showing up early to man security systems that day. So the conversation isn't, let me wand your entire body, hold your arms out, but it's what's in your right hit pocket. And we truly believe that makes the security outcome safer because you're directing that attention. And if somebody is wanding a person top to bottom all day long, it's difficult to hold your attention.

We also made the solutions cloud connected so that the security screening could be a source of intelligence for your operations teams, your facilities teams. How many people came in door 1 versus door 2? What was their average throughput, so I can compare how efficient my teams are. How many people stopped? -- for an alert or a secondary screening. How many real threats because we find 500 every day, did they find on those individuals, being able to manage the systems remotely, software upgrades are pushed into the field, being able for us to be able to do remote diagnostics for our customers so we can keep uptime as high as possible, given the ability for our customers to share these alerts, whether it's a mobile app and an image of somebody that might have been caught with a threat or being able to change the algorithms, which we call sensitivity settings on the fly based on whatever risk intelligence is being provided.

Evolv's first deployments when the company went public were predominantly in sports and entertainment venues. It was also during COVID and a lot of facilities were looking for ways to reopen, keep security, but do screening in a much more touchless and less intimate way. And Evolv had the opportunity to deploy in many of these iconic locations. But the security industry is event-driven. Just like the Boston Marathon bombing triggered Anil and Mike to build a company of how to use technology to enable screening in a totally different way, the pandemic of school shootings continued. That headline is from Uvalde. And Evolv got pulled into by customers into schools, into the education market, deploying Express and now our single largest vertical that we are in.

Over 70% of workplace violence incidents occur in the health care industry, in hospitals and inside ERs. And now Evolv is in ERs around the country do its best to protect the patients and the workers that operate there. About a year ago, we saw a tragic event with a person with a long rifle breaking into a building in Midtown Manhattan. And Evolv is now what they want for the product is different, and it's always an opportunity to learn. But there's one thing that's common on the requirements that they have. And that is the alert rate.

This chart is how we score ourselves internally, and we're developing algorithms, evaluating new sensing technologies. It is the rate of false alarms, false positives to true positives. How often is it real gun versus a false alarm. And our goal is to get to that green dot, perfect. You always detect a threat and you never false alarm. Now that's most likely physically impossible. Nothing is perfect, and we never attest to being so. But that's how we -- that's where we work. And we spend an enormous amount of effort, and you're going to hear about that today to get as close to that goal. Now why is that important? Remember, we're a brand-new category. We're often replacing nothing.

It's a greenfield in front of us. That also means there's nobody to man the door when the system is there. And the lower the alert rate is, it's directly correlated to how much staff you have to have to deal with the secondary screening because when the system goes off, whether it's Express on your person or eXpedite for your bag, somebody has to check that bag. And so how we think about it, that alert rate and how low you can get it, it's analogous to what we saw inside electric cars, at least what I believe.

If you look at the first modern electric cars, the ones that are available today or look similar to them, they were first, came in the market 10, 15 years ago. Who bought them? Well was tech nerds like me. I'm an early adopter. I like technology, self-driving, all those things, even the first basic versions, and I have one. What did it take for everybody else to buy one? And I believe it was range. When you got rid of the anxiety that I'm going to run out of juice before I get home and the car started having 300, 400 miles of range per charge, it crossed the chasm for everybody to buy one. That's how we think about alert rate. And as we got into these new verticals, we learned. We learned about challenges, challenges that through the laws of physics affect everybody inside the industry.

You can walk through Express with all your belongings. But I'm going to keep picking on my daughter. Her backpack has a school-issued Chromebook. And often those Chromebooks are ruggedized. They have extra metal in them because you don't want to screen the cracks and make it less flexible and all that. She doesn't take notes on a pen and paper. She does it on an iPad. That's in that backpack. You have to have the really cool Stanley water bottle in there, another big chunk of metal, right? And I mean, there's no chance that you can miss a post on Instagram and Snap. So you got to have charging bricks, cables and potentially a spare battery in that bag, too. That is a whole lot of metal, a whole lot of electronics, and we're looking for the proverbial needle in a haystack to find a weapon or a gun inside that bag. And so we take safety and our mission very serious. If we're not sure, we're going to alert. And so the result, if you walk through with all that stuff, that alert rate that might be single digits or low double digits in a stadium. So 90% plus of people are clearing.

Now that might be 75% clear rate and you're stopping 25% of the people. So we worked on this. We worked on it with our customers, and there is a simple solution that you see here that is done by a lot of our clients, which is take the laptop out of the bag. Pretty simple. You see people are getting in really quick and that alert rate and that clear rate goes up. But we're a tech company. We created this category, and we wanted to do better than this, and we did. We launched Evolv eXpedite about a year ago now, the first in January or so of last year Q1, and it completely changed the experience.

We applied the same thinking to creating eXpedite that we did to Express. -- use AI to make discrimination decisions between threat and benign object. And you notice on eXpedite, there's no screen. There's no place to review an image. That's important for more things than speed and convenience. To operate a traditional X-ray machine, you need a trained X-ray operator because an X-ray image doesn't look like a regular image, and we're back to that staffing challenge. By using AI, we eliminated having to have a trained person like the equivalent of the radiologist at your doctor's office.

AI can also make decisions called inference really fast. How fast? Fast enough that the belt does not stop unless a threat is detected. It's doing the inference in real time at belt speed and continue to focus on staff, show the alerts from eXpedite in the same place you show them for Express to try to minimize staff burden, and that enables an experience like this. People are walking into a facility. They're dropping their bag. And you notice they never have to stop unless a threat is detected. It's continuous. You don't break stride. And we believe -- there is nothing else like this on the marketplace that we're aware of that offers this kind of throughput, this kind of clear rate, meaning stopping the minimum number of people, and we will continuously work on how we innovate new products, form factors, algorithms to make this experience better and better, driving it to be as close to invisible as we can.

When I got here 18 months ago, there were some very well-publicized challenges around Evolv. We worked incredibly hard to fix those. I learned a lot about the culture of this company during that process. When we filed our restated financials in the end of April of 2025, it was 10 quarters of financials that we filed. So the equivalent of 10 Qs. -- over 2.5 years, so 3Ks. And think about how long a public company typically takes to file after the end of a quarter. And imagine that you did that 10 times. This team completed that in five months. And you don't do that unless you care. You don't do that unless you're willing to sacrifice times in the weekends, times with your family, vacations, being willing to do a check-in seven days a week because that's what we did. And I underestimated what kind of a tailwind it is to an organization to have a purpose and to have a mission. So on top of building a foundation, for the company for the future, making sure we have the right balance sheet, proving to our investors, to our customers that we can make positive adjusted EBITDA that we can generate cash last year.

We focused on our team and updated our values to double down on that core strength of high performance and innovation driven by the tailwind of a mission that matters and that you can get behind. We updated the leadership team as well. new CEO, new CFO, new Chief Revenue Officer, new Chief Marketing Officer, new Chief Product Officer, new General Counsel, new Head of Supply Chain, People who have been there, done that, seen what good looks like with the right experiences and background to augment a chief of engineering that built this product from the ground up and brought it into this market to augment our Head of HR, Liza, who created and fostered that culture inside the company that we talked about.

We have the right team to take this company forward. And what do we think forward looks like? 18 months in, we believe we can triple this company. Triple its revenue and take it to $500-plus million, operating at a Rule of 50 in 5 years. And we say rule of 50, you can do the math that equates an approximately a 25% compound annual growth rate and a 25-plus percent EBITDA margin. But if we see the opportunities to grow. We're confidently in a Rule of 50, but we might invest more to drive the growth rate higher. And in the first few years, that growth rate might not be exactly there as we're building for the future and expanding our sales team and our products. So how do we get there?

We're going to get there by taking our story to every customer that's a potential good fit, making sure that we have the right sales and marketing coverage for that total available market to execute on that vision that most buildings that prohibit weapons will screen for weapons with a technology like ours. And that's here and around the world. We're going to extend the product portfolio just like we prove to ourselves with the eXpedite product that we can innovate, find new ways to solve this incredibly hard problem. And as long as we're driving alert rate down, creating great experience for students, for patients, for visitors, for fans that we can bring new products to market. And we have one goal in that R&D team, I'm sorry, 2, get alert rate as close to 0 as possible, get to that green dot on the chart and make sure that we have the right product, shape, appearance, fit and price for every potential customer in the 700,000 entryway TAM.

The core fundamentals of our business and the key drivers are pretty simple. Add units, keep that customer happy so they stay and then continue to add units, whether it's adding new customers or expanding them. And if we do that, we will generate what we believe are outsized returns long into the future. That's the brilliance of a subscription-based ARR business. Now our contracts are 4 years long. We haven't had a lot of history and statistics to share, especially that are meaningful and significant around renewals. Last year, we had about 400 units, not customers, units that came up for renewal. We ended last year with 8,000 units. 400 is not very significant. But we did learn to give ourselves the confidence that this is going to be a business that has a net revenue retention that is over 100% and over 100% in a healthy way.

Why do we believe that? 50% approximately of our new unit bookings come from existing customers that are expanding their fleet. They're adding entry ways with Express and now they're adding new products as we're upselling them to eXpedite. eXpedite has been available for approximately a year. In that 1 year of time, now 6% of all our customers have the product. In 17% -- sorry, in Q1, 17% of our new logos purchased eXpedite. We really like that trend. And I want to show you what that looks like in a customer example.

Bank of America, they deployed Express Gen 1 back in 2021, so 4 years ago. They deployed 17 systems across their facility. During the course of their original contract, their 4-year contract, they screened 8.5 million people with those 17 systems, and then it take time to renew. And they didn't just renew. They upgraded to our latest version of Express, Express Gen 2 that incorporated many learnings over those 4 years of how to make the customer ownership experience better and delivered a noticeable improvement in alert rate. But they didn't just upgrade to Gen 2. They added five units, and now they have 22 from 17 to 22 Express, but they didn't stop there. They added four eXpedite units as well, and now they're screening back of house and a lot of their office spaces.

This is the formula for how we continue to grow, how we triple the business at Rule of 50 as we continue to land, expand and upsell customers over and over and over again. We created a new category, and there is a pattern that you can see sometimes when you create a new technology that makes safety and security better. And that is that becomes a standard. I talked about the sprinkler systems, airbags, rearview cameras, fire alarms, and you could go on and on. But what about an example that's closer to home? 16 years ago, 2010, body cameras were pretty rare. Now today, they're pretty ubiquitous on law enforcement officers, not just here in the United States, but around the world and with federal agencies as well. Well, what happened? Products out there, security is event-driven, an event occurred, Ferguson, Missouri. A year later, the President of the United States provided grant funding for police departments to deploy body cams. That same year, State of South Carolina became the first state to mandate body cams on police officers that interact with the public. Today, over 34 states have some sort of mandate requiring law enforcement to have body cams.

What's been happening in our space? The state of California passed a law requiring certain hospitals to have advanced weapon screening. The state of Georgia had a bill passed their house. It has not yet passed their Senate that would require every school in Georgia to screen for weapons. And as a parent of three, I absolutely fervently believe every school should screen for weapons, technology to do that and to do it in a practical way, not the airport jail courthouse way, exists and that should happen. We were not involved in any way in California and Georgia. And there are several other states now that have discussions in their legislatures or action around doing similar things without our involvement in any way. And we think it's time for us to get involved to make sure that our voice is heard as we can educate lawmakers, decision-makers, the market on the efficacy of these technologies, especially innovations like eXpedite, and we're going to invest to make sure that our story is well understood with those that make these decisions.

And security is not just a concern here in the United States, whether it's Massachusetts where we're at or the other coast of California. It's a global concern. And now almost every day, you open up an article and you read about something that's occurring. You have geopolitical tensions around the world that are probably as acute as any point in the 47 years that I've been on the planet with what's happening in the Middle East, a continued unresolved situation in Ukraine, geopolitical tensions inside Southeast Asia and the constant threat of violence, whether that's a shooting at a well-known tourist site in Mexico or bladed weapon attacks inside the U.K., there is a need. We have technology that we believe can help, and we're going to be much more deliberate in our international investments.

In 2025, less than 4% of our revenue came from outside the United States. It's a big planet. There's many places to go. Deliberate means making the investments in the product portfolio because we have hardware that bases our subscription to get it into the countries where we see the right opportunity and making sure we have the sales and service coverage in those places to do that successfully in the way Evolv expects our customers to be treated.

We occupy a really interesting piece of real estate. We have a hardware platform with edge compute, sensors, AI, cloud connectivity at the entry way of a building where almost everybody who walks into the building goes through it. There's a lot of interesting things that happen around that point of real estate, whether that's ticketing or credentialing or access control or visitor management or it's the video that's most often viewed, at least in the security operations centers that I've been to, around the entrances, there's a lot of opportunities that we see in front of us, whether they are to make the experience for the person coming in, the student, the fan, the patient, the visitor, the teacher, the employee better or to continue to try to improve security outcomes by moving more and more before what we do or after in case something does occur and how do you put first responders in the best position to resolve it, or to drive efficiency in security operations because for most of our clients, it's not lost on us that security is a cost center. And if you can do things to make them more efficient, that's attractive.

And across these opportunities, we'll look at a decision criteria of do we partner and leverage our open APIs and integration ecosystem. Do we build something organically or if something really makes sense and there's a great opportunity that we make an acquisition to accelerate growing this portfolio. But I want to be clear, the biggest opportunity we see and the highest return on invested capital is to get into those 700,000 entry ways to make sure we have the right product, the right sales coverage, the right service and the right structure to go do so. And that's how we get to tripling the business, Rule of 50 in 5 years.

Continue to innovate on lowering alarm rates, the range of this industry, have the right sales coverage, continue to make sure that we keep customers happy, we land them, renew them, expand them, make sure that we have the right products and continue to grow our successful introduction of new products like we did with eXpedite with new variations of those so that we have something for all the customers that we think we can help drive the story that we have into decision-makers because I believe many facilities like schools should all be required to screen and take the story around the world.

And as you sit there through the rest of today and listen to the rest of the team, I want you to ask yourself, do you believe in our vision? Do you believe that just like there are sprinkler systems inside this building, one day, buildings that prohibit weapons will all screen. They will all screen for weapons at the door. And if you believe that vision like we do, which company do you think is best positioned to capture that market and the growth and the financial opportunity that it will create. Thank you, and I hope you enjoy the rest of this Investor Day.

Please welcome Owais Hassan, Chief of Engineering.

R&D Labs. I'm Owais Hassan. I'm Head of R&D at Evolv. Some brief background about myself. Over 30 years of career in high-tech R&D, delivering multiple mission-critical systems, often first of the kind in the industry. I will share the two with you. The Internet core switches I built is behind the streaming and multimedia boom. My initial work on WiFi brought Internet connectivity to your mobile devices. This is my eighth year at Evolv. And I'm advancing the most complex concealed weapon detection platform. This is the hardest problem I have worked on and the most meaningful one. [.

I'm going to talk very briefly about what is Evolv Identity, our technical moat, but going to spend more time on our products and solution, give you a deeper insight there and also going to talk about the innovation pipeline ahead. Let's start with a simple question first. What is Evolv's identity? Let's think about the durable tech companies you know of, like NVIDIA, Apple, Exxon, what all of them have in common. They have the deep hardware and software integration. You cannot separate the two. That full stack control is their moat. Evolv has a similar resilient moat, and we are a physical AI company. And our moat is our hardware, our proprietary hardware, our own software, the data we built for the AI model. All these four components are all are fused together. They all work in tandem, inseparable by design. That full stack is our moat. As John said, we are the category creator in concealed weapon detection technology, physical AI company, enabling a future where most public buildings are protected by Evolv.

Let me give you some insight about what it takes to build this kind of a company. Since our inception roughly about 13 years ago, we have spent $100 million in R&D. This year alone, we are spending over $20 million in R&D, focusing on AI and new form factor development. This is not a fractional investment. Every dollar we spend raises the bar high and widens our moat as we go after 700,000 doorways ahead of us. The Hexagon you see on the slide, it's our world-class R&D capabilities, covering the full tech stack and 100 engineers and scientists led by a domain expert who has been building products 0 to 1 for years.

We are solving genuinely hard problems and hard problems build durable companies. So I'm going to talk a little bit more about our products now, give you some insight. Let's start with the basics. This is our people screening product, Express, okay? And the concealed weapon detection is performed in real time as -- without disrupting the flow. The people continue to move as they go. They are simple red and green light on the towers. They provide early intel for guards to manage the flow. And you have seen on the video that we have connected tablets at the distance. They are there for threat resolution. You've seen our red box technology. The illustration that you see on this slide, the colored waves that you see is to describe how this technology works. So this is going to provide a little bit more deeper insight about these technologies.

So Express is an active system. And what is active system? It has a transmitter and a receiver. And we generate an electromagnetic field between the towers. The color waves you see within the electric magnetic field is the multiple frequencies we use. It's not a single frequency system. And what it does, it helps with better object discrimination. So that colored field that you see between the tower is the scanning zone where people walk through. And it is invisible. And imagine that someone is going through this electromagnetic field, carrying a conceal object on them. You carry a phone, keys and laptop or a potential weapon. So when it happens, it interacts with that field and it disturb the field. It generates secondary signals, which are picked up by the sensors in all of these towers. And these -- once they pick up these signals, they digitize and fed to our machine learning algorithm inside. So the ML algorithm is making one decision, threat or no threat. And if it has a high confidence that it is not a threat, then the green light on these towers stays on and people just continue to flow through the system.

If it turned out to be a potential threat, then those green light immediately turns red. And the systems decorate or pinpoint a threat on a person where it found and it generate a red box alert with a video image, we call it evidence that goes to the guard who has the tablets at the distance, so they can do a more informed threat resolution, making sure that person is not entering into the venue. So stop that. So all of these decisions are happening in real time in a quarter of a second, while we're not stopping the flow, people continue to move into the venues. The operations sound incredibly simple by design. but there is a lot of complex technology underneath.

We have worked extremely hard to even make it work in a control lab environment. And then we have to deal with making it work in a real operating environment, dealing with many different environmental conditions, windy conditions, rain, snow, sleet, Arizona sun loading, even interferences or noise that you see in venues from HVAC equipment, power lines, outdoor fast-moving trains, all of it, every one of them, every single day across our large fleet. So we have built not only making the functionality work, but a lot of robustness in our technology to handle all of it and operate successfully in many of these environments. And this is how Express works. So now I'm going to give you a little bit more insight into our eXpedite technology.

eXpedite is our bag screening product. It uses X-ray technology with AI-based threat detection. AI, as John said, AI is reviewing all images in real time and making decisions in real time. And the belts keep flowing until the potential threat is found. So one thing very -- I wanted to give you some more insight there.

This is a native AI hardware platform. It's not a bolt-on AI that you may see with traditional systems. You know that traditional system uses pseudo-color images. Those are meant for train operator to look at these images. You may see at the airport where you're waiting for your belts back to come out. Those has limited data are not idle for AI processing. So in expedite, we use raw dual energy channels to fully extract the full content that needed for reliable AI detection. That's what is called native AI, Full dense content so that you can reliably do AI threat detection.

We were designing a kind of Ferrari of bag screening. So our bag -- our belt has to run much faster to keep up or match the natural walking speed of Express. And that comes with a lot of technical challenges in all different areas, especially in the hardware design, where we have to make sure that the image that we picked up, the clean image is provided in a consistent and reliable way in all conditions for a much more reliable AI processing. And a lot of complexities we deal with. It require a lot of creative hardware design for us to overcome those challenges. What we went through is a topic for another day. So that's one piece.

And the form factor that we have also on this product is highly compact and it's mobile. It's suitable for both indoor and outdoor applications. So one thing I'm going to talk about, as we talked about, it is an AI-driven threat detection capability. So we build the AI model also from the ground up. And that requires also a massive data development effort, the training data that you need for AI model to be effective. And the training data from the ground up, synthesis data, ground truth data, field data, all of this has been used to train our AI model, a proprietary AI model, edge inference running on the expedite GPU. So all in all, we build this product from ground up, roughly in about 14 months from the start, 0 to 1. The combination of the speed, the AI-based threat detection capability that we have, the bag localization that you see on the screen here and this compact and mobile form factor, we believe this combination is unique to eXpedite product. So we talked about that we built eXpedite to match the speed of Express.

They work great together by design. And the result is a high-performing integrated checkpoint solution that you see. So one of the innovation that we did outside of hardware is the integrated tablet capability that we built in network behind these two products that bring bag alerts and people alert on a same tablet. And that really helps in terms of a unified view, create less stress on the guard. So some of the benchmark that you see, a case study, data from five schools showing high 90s clear rate, unprecedented. And this is meant for a high throughput environment. We believe that the 2% alert rate that you see for this bundled solution is best-in-class in the industry. I did talk about the hardware. Now I'm going to talk about the cloud platform behind our fleet.

We have all ground units, eXpedite and Express. They're all connected through an LTE broadband network, fast and fat pipes. They're all managed through our AWS hosted on AWS and our cloud is a fleet management and a data platform. So a couple of operations I'm going to point out. All the ground units, Express and eXpedite, they're all connected to our cloud. They are providing real-time information about what's happening on these units, the alert rates, the visitor counts. And those are all appearing on the venue inside on a live dashboard that customers can see what is the venue performance there. If the threats are detected by the ground units, those are also pushed out to the cloud, and it stare out to the subscribers whenever the threat is detected and also to our ecosystem partners using OpenAI -- open API. On open API side, we cover all commonly protocols to connect with the partner devices.

The whole operation is bidirectional. When I say bidirectional, there is a fleet management capabilities there that we push software over the air to the ground units. And also, it provides capability to our partner ecosystem who are connected through open API. If they have, say example, a brandish gun alert, it also comes through their device, through our network, all the way down to the tablets on the ground. So the 2 -- the tablet I talked about showing bag alerts and people alert, it can also can have a brandish gun alert on that. So that infrastructure that we built, we can use it for threat intelligence and other things, integrating things. So we build this also from the ground up, the cloud platform, end-to-end networking and DevOp infrastructure, all these pieces. So this gives you some insight into our qualification process. We use -- this is a glimpse of a weapon arsenal we use to qualify the product.

The 3 different key areas I'm describing here, guns from micro compact to long rifles, bladed weapons like knifes and also improvised devices such as pressure cooker bombs and pipe bombs. And this is what gives us and our customer confidence into Evolv product. We do also very, very rigorous qualification testing. There are two areas I'm going to describe. One is the physical testing that we do with real weapons, simulated weapons, internal third-party testing across the weapon categories I talked about.

We also built our own custom test platform that launched suites of functional tests in all areas of functionality, detection, regression, injected alerts, stress testing, performance testing. So two metrics I will share with you. On that platform, today, we have 9,000-plus test cases that runs on our live hardware. Last year alone, we ran a longevity test launched through that platform, all suite of tests that we support over the catalog of capabilities we support, 27,000 hours of operation, which is roughly about three years of continuous round-the-clock operation on the live hardware. We do this because we are deeply committed to our mission, and we're doing our part, ensuring that we provide high quality to our customers.

Our customers are not buying a stand-alone hardware. They have invested into a continually improving platform. So there are a couple of proof points here. As John talked about, since our journey, we have been working on reducing the alarm rate down. So that's -- we bring a lot of capabilities there. You see alarm rate reduction across all verticals. We also brought new capabilities on the software that pushed down to our ground units, which is Express and eXpedite. In 2024, we also brought two new hardware platforms. I talked about eXpedite and also Gen 2. And this is all managed and controlled through our unified cloud platform. So altogether, we are bringing a sustained subscription value year after year.

And what next in terms of ahead, our North Star is invisible security. And that -- what it means that the technology disappear in the environment and just simply works. As John said, two focus area to get there. Number one, continue the journey that we have from the inception into reducing the false surround rate down. We'll be investing into new sensors, new AI, advanced AI, a lot of work investment from that side. The other thing is leverage the IP we built, I call it core IP, our moat, our modular architecture to turn new product faster, multiple segments, multiple form factors and multiple price points. That's the path to 2031. We are not starting from zero. We have 13 years of R&D and operational experience behind these products. The best is ahead of us. That's my last.

Please welcome Sean Mah, Vice President, Machine Learning and Sensors.

Good morning, everyone. My name is Sean Mah. I'm the VP of AI, Machine Learning and Sensors. I joined Evolv in December 2025. Prior to Evolv, I spent 20-plus years developing AIML algorithms and products from zero to one and from one to and scale to global markets. Today, I'm excited to introduce our AML team as well as explain how we build AIML capabilities at Evolv.

I'll start talking about our people, which I believe is one of the most important assets of the company and also the driving force for innovation. Like Owais said, over the past decade, we have built a world-class R&D team with 100-plus engineers and scientists, out of which 15 are in the core AML. Those are people with PhDs and masters from top universities -- they are domain experts with deep knowledge in physics, sensors, AI and machine learning. They also have many years' experience building and scaling physical AI products in industry-leading companies. In just last 12 months alone, we have added 10 more new team members into our team. Next, I'm going to introduce our AI flywheel, which is the engine to drive innovation and keep driving Evolv an industry leader in threat detection.

The flywheel starts with the top, where the sensors start. Like Owais said, we carefully select sensors that sense threats, and those are sensors like magnetic sensors, x-ray sensors, cameras and other modalities. And those sensors will be giving us raw sensor signal that contain useful information and also sometimes contain the real-world challenges like interference, noises. And we feed those sensor data into our data factory where we carefully curate, exam and label and clean and make sure the sensor data becoming a training data with high quality. And the training data is fed into our AI center of excellence, where we do a lot of hard work like hard example mining, feature engineering, solve real-world problems as well as building AML models. And once those new models are built, we deploy them back into our fleet and working together with our real-time hardware and software and making our sensing smarter and smarter sensing will drive more customers to use our sensors, and that actually feedback more sensor data to us. This is really hard to build, but we already built it and put in operation and going through multiple iterations.

Next, I'm going to introduce our deep moat of proprietary data and experiences. Like John and Owais explained so far, we have over 9,000 units deployed at over 1,300 customers. Those are real-world deployment and screening -- 4 million-plus visitors every day. And those are real-world scans that's available for us to use. With permission from our customers, we can use those data to evaluate our AI model as well as train our AI models. Our data grows fast with daily screening. Our data grows faster with more deployment and more customers.

Next, I'm going to explain how we build the AI system and our AI models. It starts with the connected fleets that Owais has mentioned. The fleets will send back data and learnings and feedbacks into our centralized AI learning system, where we build the models and also the model is built to improve over time. And when the model is validated to improve and be better than the last one, we will deploy those models back into our fleet, and those will make our fleet smarter. We use human validated data, and we also use human to validate our model improvement. This is critical because we are building a mission-critical product. We want to make sure the data and the model improvement are validated by human. So I've been talking about our AI flywheel, also what we're building as a scalable AI system.

I'm going to give a little bit preview of what we think the near-term future would be. And of course, these are not the full list and is subject to change because the AI world is evolving really fast, and we will adjust our plan accordingly. And those are all hard problems to solve. At the center, we're going to build Evolv's foundation models. What is the foundation model? GPT built by OpenAI is a foundation model that understand text and language well. What we're building at Evolv is a foundation model that understand threat detection, especially conceived weapon detection well. These two models are different. We're going to build our model based on a large amount of proprietary data that I mentioned previously, built to understand the real-world challenges and how to solve them and also enable us to build more products and applications. This is extremely hard. But we believe by building this foundation, this will widen our technology moat and also keep driving the growth of the company.

To summarize, I've been talking about our people, our AI flywheel, our data, our AI model and also a little bit forward-looking our foundation models. All of these innovations have one common goal, that is to fuel and grow our company. Here's how. When we have new features and AI and software updates, we'll push this back to our fleet, and that will increase the performance of our fleet and also increase the subscription value of our customers. When both those are happening, our customers will be happier. They will continue to use our services and our product, and they will renew with us, and also this will drive more customers to use Evolv's product. Thank you.

Please welcome Robert Marshall, Chief Revenue Officer.

Good morning. So I'm Robert Marshall. I'm the Chief Revenue Officer for Evolv Technology. I've joined the company in March of '25. I have experience in international, enterprise, state and local government and the U.S. federal government space. I currently lead Evolv's go-to-market strategy and execution with clear accountability to new customer acquisition, retention and execution with a focus to drive consistency, predictability and operating discipline. So today, I'm going to cover how we're organized for accelerated adoption of our products and services across our customer base. We're going to talk about our service model and how we leverage that, which is a differentiator for Evolv to ensure that our customers renew, upgrade and expand our products like eXpedite and any new products that we may come out with in the future. And then we're going to talk about how we're investing in growth and building out our sales teams.

So this is a look at our go-to-market model, if you will. We have a channel and a direct sales force. The channel team is focused on some of the mid-market reach, some integration leverage as well as contract vehicles. And then we have a direct sales team that are focused on our top-tier customers in our top target accounts. We have a vertical market team as well. They are dedicated across all of our major verticals, education, health care, professional sports and the industrial workplace. This team is a group of individuals, and you're going to hear from Jill Lemond in a few minutes that have grown up in that space. They were professionals in these verticals. And they -- when they talk to customers, they lead with domain expertise, and it's not just another salesperson in giving a product pitch. So we're very excited about the investments we've made to cover those key verticals.

We have a geographic focus as well. We're focused primarily in the U.S. right now. We -- about 95% of our sales team is in the U.S., but we see a great opportunity in the international space. We do have customers in international markets, and we're looking to continue to grow that. And it's primarily through channel, but we are open to and looking at adding additional direct headcount where needed as the market grows. And then our customer enablement team. This team is a cross-functional group spanning across customer success. They are simply focused on ensuring that our customers are happy throughout their entire relationship with Evolv, ensuring that they renew their contracts and that we have the opportunity to upsell our new products.

At the end of the day, we're expanding our sales capacity and international capabilities to accelerate the revenue growth to the 25% CAGR that you've heard about in several presentations today. So this is our high-touch service model. It's a world-class organization that is focused on providing the best service possible. You see the four service components on the left. And that solution is designed to ensure that our customers see the value and we keep them as a customer for life. On-site service, it's a white glove on-site support at the customer location. We provide it at their location with our direct Evolv employees. This is not subcontracted out. Our employees are there providing that. We have comprehensive customer support, providing both Tier 1, Tier 2 and Tier 3 tech support. This allows us to identify issues that may happen early in the field and ultimately get them to engineering to resolve the customer issues much faster.

And then the software support -- this is software updates that any customer can take advantage of as they're released. This is no additional cost to the customer. It's part of their subscription. The training and certification is something we provide both online as well as here in Waltham or on site at a customer location. And this is to ensure that not only our customers, but our channel partners all have the ability to understand how to operate the system optimally. This is a very highly differentiated model that basically that our customers see value in and truly differentiates Evolv from some of our competitors.

So looking at the TAM, we've heard a lot about the enormous TAM that we have in front of us. And we are investing on our front foot to expand our sales investment to help capture more of the global TAM that you see. And we're going to do that by focusing on high probability accounts, making sure we're spending time in the right accounts where we see the best opportunity, not necessarily chasing every single opportunity out there that may not be the best fit for Evolv, absolutely increasing our sales capacity as the market demands it. And we're doing that by adding quota-carrying reps and optimizing our partner program to expand coverage across those priority accounts. And then scaling the international go-to-market, again, I touched on that. I think that's a nice growth opportunity for us.

Again, this is partner-led expansion that's going to be supported by targeted sales resources and enablement. The bottom line, our TAM is enormous. Our service, our products are proven. And we're now investing on our front foot to ensure that we capture that market going forward. So you're going to now hear from a customer, the Houston Astros on their experience with Evolv and how they expand it. So

[Presentation]

Please welcome Alex Ozerkis, Chief Marketing Officer.

Good morning. I'm Alex Ozerkis, CMO of Evolv Technology. I've spent over two decades driving demand and brand adoption across many different industries, and I joined Evolv in 2022. I'm pleased to be here along with my colleague, Robert Marshall, to talk about the strength of our go-to-market motion and specifically how marketing at Evolv drives growth. I'm going to talk about the market opportunity in front of us. why customers invest in weapons detection in general and why they choose Evolv.

Let me first set the stage by talking about what we believe drives the decision to invest in weapons detection. It could be one scenario is an event -- a violent event takes place at a venue or even the threat of violence. This creates an immediate need to act. Similarly, when an event takes place at a nearby venue or even peer like group, that can create pressure internally politically or amongst stakeholders of the community to do the same. Both of these scenarios tend to open deals. And what pushes deals to close are conversations around legislation or litigation, the potential financial risk of not doing something or when we see the beginnings of mandates, as you heard John talk about, where the discussion shifts from should we do weapons detection to how do we comply. Both of those scenarios tend to push deals to close.

We see security and screening and safety rising on the priority list of both public and private institutions and budgets are following. We believe the market opportunity in front of us is large and mostly untapped. These are the four verticals where we see AI weapons detection hitting the hardest. So the first is schools or K-12, where approximately 35% of our business takes place in any given quarter. School leaders are under pressure to get students in the door quickly, sometimes in under 15 minutes without creating those long lines or soft targets you heard John talk about or enabling a prison-like or airport-like experience for students and staff. Depending on the district, we will work with school resource officers, campus security or law enforcement, ultimately superintendents and school boards, all of whom are trying to create welcoming environments while keeping weapons out. And you'll hear Jill Lemond, our VP of Education, talk more about this in detail after the break.

The second vertical, health care, hospital settings, approximately 15% of our business is where the majority of workplace violence is taking place. We see demand coming from nurses and nursing unions, workers within the hospital system who are asking for safer environments to do their job. Hospitals cannot create a scenario adding security where it could prevent a barrier to care or delay treatment. And in the case of sports and entertainment, about 15% of our business, oftentimes, this is where customers first see Evolv deployed at their favorite ball game or a theme park. These customers are looking to get fans from the street to their seat in as quickly as possible so that they can get their concessions, not miss the first pitch, settle in and enjoy the experience that they paid for. Oftentimes, these customers that we work with are deemed leaders in the security industry, running some of the most robust safety operations around.

And the fourth vertical you see there, which we see as an emerging market is industrial workplaces and corporate office spaces, where the threat of violence is coming from the inside as well as the outside. So why do customers choose Evolv when they're considering weapons detection over other solutions or legacy screening? Well, at our core, Evolv is solving a very hard and very specific problem that you heard John and Owais and Sean talk about. Our customers need to balance three things. They need to balance high confidence weapons detection, throughput, getting people in quickly and experience. So we don't feel like we're going through that airport or a courthouse.

We hear from our customers the importance of that high confidence detection. Our customers, many of whom are former law enforcement or military professionals do not take our word for it. They want to test these systems, try them, attempt to defeat them. And we very much understand the importance of that due diligence in the process, which is why we enable as many demos and pilots and opportunities for them to experience Evolv as possible. And once they've pressure tested our weapons detection and they're able to see that they can add extra layers of security without slowing people down, we then hear about the importance of how our technology is designed to reduce human error.

Oftentimes, those manning security systems are doing so under pressure to get people in the door as quickly as possible. Guard fatigue is real. The ability to be socially engineered is real. Oh, it's my watch or my belt buckle goes off every time or you know me, I'm here for the show every Friday night. Our localized threat detection, that red box you've seen and heard about tells people where to look, who to search. And in the case of expedite, the system does the work for you. There is no need for a trained human operator.

The third buying pillar we hear about is how our systems are portable, durable and reliable. As you heard Owais talk about, our systems are designed to perform reliably across many different environments. That includes the elements of the outdoors as well as the complex physics that take place with inside a building, the metal surrounding me right here, the metal on the elevator bank, the many technological electronics are in an ER. Our systems are designed to perform reliably across those settings. And last, the power of our connected platform enables customers to operationalize their -- to see what's happening in their building, in their system across entry ways and make staffing decisions, operational decisions in real time so they can use data to improve their operational outcomes.

Taken together, this is why we believe over 4.5 billion people worldwide have been screened by Evolv, and we continue to scan over 4 million people each day, which leads me to how we market at scale. Growth happens when sales and marketing move together as one. And from a go-to-market standpoint, we operate a highly targeted data-driven approach. Our marketing and BDR or inside sales teams work in lockstep with our field sellers to identify priority accounts. We use market intelligence, predictive buying signals and an ideal customer profile to reach those targets. And from demand to deployment, we have visibility at every stage.

It starts with multichannel demand generation. So that may be the many trade shows we participate in, the demos you heard me talk about, co-marketing with our channel partners, digital marketing, content marketing, where we leverage our network of experts in schools, in hospitals, in sports and entertainment to deliver informational content to our buyers. All of this drives inbound demand to our website where leads are captured and responded to quickly as well as enables effective outbound prospecting campaigns. All of this is tracked through our marketing funnel from lead to nurture, to meeting, to order. And that is what makes our model so strong.

We have built a fully closed-loop marketing engine that gives us visibility from the moment a lead enters our system through to order. And to that point, data drives our marketing decisions. We layer on ROI tracking across every major marketing motion so that we can track performance across channels, scaling the tactics that drive quality pipeline over quantity and directly impact revenue and pulling back on those that don't. One quick example of how this works in practice is our fleet of demo trucks. You may have seen one outside of this building. If you haven't, I encourage you to go take a look during lunch and experience of all for yourself. So we run a fleet of demo trucks. This is a cost-effective way for us to bring our brand and our systems across the country to enable as many demos as possible.

We may have a field seller, partner with one of our BDRs, our inside sales reps and a channel partner, identify a group of priority accounts in a specific geography, plan, promote, host an event there, bring our demo truck, bring in an outside expert on a timely topic. We are then able to track the leads, the opportunities and ultimately, the impact on revenue directly from that event. That is an example of the power of that closed-loop marketing engine I talked about.

Let me bring this all to life with a real-world example. Spartanburg School District 5 in South Carolina was an early school customer of Evolv. They initially deployed in 2022, ultimately scaling across all 14 schools in the district, upgrading to Gen 2, renewing and most recently adding expedite to their fleet. That is an example of that renewal and expand motion you see at the bottom of the slides here. The district decided to survey their students and staff about how they felt about having weapons detection in their school. And the results are what we believe is illustrative of the power of a leading indicator of long-term adoption of new technology, specifically technology that had never been screened or used in a school setting like this before for Spartanburg. Nearly 95% of respondents said Evolv was easy to use, easy to navigate. Over 92% said they felt either neutral or positive about having weapons detection in their school and over half said they felt safer with Evolv in the building.

Similarly, the operational data showed smooth throughput during the peak morning arrival times, which we know is the most complicated time for a school customer. We believe this is illustrative of the power of those four buying pillars that I talked about playing out in a real-world outcome as well as an example of our customer loyalty arc. That is advocacy, expansion and renewal, the exact customer journey that we are working to scale across our customer base. And I think it's always best to hear directly from our customers. So with that, Spartanburg School District 5.

[Presentation]

Let's take a 10 minutes coffee break and continue shortly.

[Break]

Please welcome Jill Lemond, Vice President, Education.

Good morning. I'm excited to be here with all of you today. I'm really proud to lead our schools vertical. I have two other individuals on my team that I couldn't do this work without, but I want to mention. I did have the opportunity to meet some of you about three years ago at Fenway Park, and you got to hear my story, sort of my origin story of how I came to Evolv. But for those of you who are not aware, I was an assistant superintendent in a school district in Southeast Michigan. And in 2021, we experienced the worst. We had four of our students taken from us with a gun incident on campus and seven others who were injured. I was an assistant superintendent at that time and took over safety and security post incident and really met some of the individuals in this room during the worst period in my life.

I'm a little ashamed to say I was not my nicest self when I met them, and I'll explain to you why. That is because our first gunshots were at 12:51 p.m. It could not have been 3:00, where we were still in active threat lockdown with the fear of a second potential shooter. And I was starting to receive vendor messages as a school employee. I had equal parts messages coming in from my family, Honey, are you okay? Are you safe? Where are you at? And then I would get an e-mail. Hey, we heard you've had loss of life on your campus. If only you had our blank, this might not have happened. And that tone-deaf inhumane attitude stuck with me. Fortunately, when I met Evolv, was a very different experience.

I was on a Zoom call at the time, I think back to the COVID days. I had my arms crossed, I remember distinctly. And I have been told that I needed to talk to these people because they had something I needed. Well, I had already been through that probably about 20 times at that point of pitches of all these other products that somebody knew I needed. And those people had a really insulting attitude. They didn't honor the work that I had already done that my colleagues had already done with regards to safety and security and just assumed that we were a blank slate who had never had discussions about this before. In complete opposition to that, when the Evolv team came on the camera, I actually did not know what they sold for a long time. Instead of pitching me products and talking to me about solutions, they started asking me real questions. How are you human being? Did you know any of the students? Were you impacted? Are you safe? How is your family? And then the next point being we have a broad security network of experts across the country. What can we do for you? How can we help you?

I didn't even know what the thing was at the time, and now we have more than one thing, right? What the thing was that they could give me. And after they provided that for me and for my school, I watched in action how that transformed the culture of safety in that community and how it went from, oh my goodness, we can't believe a horrific thing happened here to we are going to do everything within our power to stop something like this from happening again. And I'm really privileged to go into different school communities across the country and have conversations like that. My favorite conversations are in the preventative space where we're talking proactively. But unfortunately, my team and myself have been on site after some incidents as well and experienced the opposite side of that coin as the vendor myself. And so we bring that experience and that understanding of what these schools are going through into every conversation, ensuring that we're not having fear-based sales conversations, but real ones and honoring the work that's already been done in these communities.

It's important because I'm not in the classroom and I'm not in an administrative role at this moment, but the longer I'm outside of it, I need to stay rooted in the data for me. I need to make sure I have the pulse of those schools because I'm no longer working in one, right? So I'm always looking to the numbers. And while I'm discussing with you a particular mass casualty incident, that is not the most likely scenario for our schools, and they know that. The research shows on the K-12 school shooting database, if you have the opportunity to check it out, we're keeping track of how many individuals are injured, how many people are killed and what's happening on our school campuses. And that data shows that of the last 300 gun incidents on campus, the majority of them were escalations of a dispute. The second highest on that list was accidental firings of a firearm.

What does that say to me? That says to me that the majority of our school professionals know that their students do not have nefarious intent. They're not expecting a mass casualty incident, and they probably hopefully will not experience one. But what is more likely to happen from a data-driven perspective is that students are habitually carrying these guns on campus, probably with no intention of using them. And then when they have a dispute, when something occurs between two adolescents, it quickly becomes catastrophic simply because they have proximity to that weapon and access. And so I dedicated the second half of my career to preventing gun violence in schools, and I'm excited to be here in a place where that mission is woven into everything that we do. It's in the fiber of who we are and the people that I have the privilege of working beside every day.

Firearm-related injuries continue to be the #1 cause of death of our children. I have four of my own kids, and I don't accept that. I'm not okay with that. I don't want to live in a place where that's the case. And so I'm committed to changing that alongside all of the people in this room, right? 55 schools gunfire incidents that was just as of last week when the slide was created. I imagine by this point, there's already more that hasn't been captured yet. And we know that our schools are these nuanced environments to protect. You heard a lot about that this morning. I don't want to be duplicative, but I do want to paint a picture for you. We heard about that line outside of John's daughter's school, right? And I've been in many of these schools, and I've seen those lines. I've seen what can happen when you use legacy screening techniques and students start to build up as outside of the building. And I've watched those security operators who are put sometimes in impossible situations where they're standing at the door, the bell has gone off, and there are still many, many students waiting to get to class.

Particularly in our public schools, those students have a right to get into those seats and to receive that education. And that operator has a pressure on them that is very different than other environments that we try to protect. That person needs to get those kids in the building. And what I've seen happen too often is that operator saying, "Okay, honey, come on. I know you. Let's go -- let's -- we got to get to class. We got to get in the building. And when we talk about discrimination or bias in the processes, that is where I've seen it creep in. It can creep in at that point because then who does get stopped.

If we're using a metal detection system and our students is carrying a phone through and the majority of our kids have access, whether it's a Chromebook or what have you, and most of them are going to set it off, and I'm the operator and I don't have time to go through that search with every kid. I'm put in a position where I have to choose which students to stop, which students to search. And unfortunately, that's where we can see bias. And there's no shortage of research that's been done on the school to prison pipeline and what it can look like in a metal detection situation. And that's why. These are well-meaning people who are put in difficult situations.

We're trying to relieve that pressure. We're trying to help them to quickly locate the potential threat and allow for a very targeted search of that student that minimizes that invasion of privacy and helps to restore their sense of dignity as they're coming into school. Our schools need to feel good. Culture and climate are actually one of the leading predictors of potential violence. So it needs to feel good at school. We want it to feel good at school. And I don't want us to forget that in most of these cases, we're talking about children, screening children. And so I see my job and the role of my staff, we're looking at this through the lens of is this good for kids, the screening process, this new technology as we're doing R&D. And is it good for teaching and learning. We have to get to the business of school once they get inside. So we don't want there to be fear and anxiety as people are coming in the buildings every day. We don't want them to lose their dignity and to have every single item emptied from their bag every single day. That does not feel good. We know that as adults, but particularly for children.

We've seen a lot of different districts, Alex talked about it, where they have that it can't happen here mentality until it does. Many cases, that's finding a weapon, whether a student through word of mouth talked about I saw Johnny had a gun today, et cetera. or God forbid, something actually happens, there's an event on campus and there's loss of life or injury. We meet customers a lot of times that way. But what we're hearing from our customers is the sense of anxiety. If you look at the research, we had a mass exodus of teachers and educational professionals from the field. There are many reasons for that. One of those reasons that's frequently cited is anxiety. And I'll take that a step further. I believe it's related to gun or violent anxiety in those classrooms. So this is not only a technology that's helping to keep our students safe and our children safe, like I mentioned, but also for staff. I've seen schools list the fact that they are evolved screening in their actual postings for jobs, using it as a recruitment tool or a retention tool in their teachers' contracts because teachers want to work in places that are safe. And as we continue to show them and to prove ourselves in the market, our systems are helping to keep those spaces safer.

We're also seeing peer adoption. It becomes this pressure that Alex mentioned where if your sister school district or someone nearby is doing it, man, I went to a football game, and I noticed they had the screening system, why aren't you using Evolv? So then we also get into districts that way as well where we explain it. And that's why we really like to take schools on the road. Come and see us, seeing is believing with our system. It's hard to describe how it's different and why it's different for kids. We love to invite schools to other school districts where they can watch their peers who have similar wants and needs, bringing students into the building quickly and safely in the morning using our systems. And then, of course, that liability risk after an incident or after an incident nearby, we start to talk about what is the cost of safety and what is the cost of having an incident. And those are really unfortunate conversations to have, but they're very real out in the workplace right now.

So as we continue to build our reputation in education, it's been important to me that we work in nonprofit spaces. Why is that? I told you that I want to keep learning. I also think it's important to help contribute to that space, some of the things, lessons that I learned in the hardest ways and to meet those people who are also trying to solve this very hard problem. This is one layer of safety and security for our schools. If I were to put up a screen here of all the other things that they're trying to prioritize from a funding perspective, from a time and energy perspective, and again, we're trying to get to curriculum. We're trying to get to teaching. We're trying to get to learning. That's the ultimate goal is that we are in a space that is so safe that we can all relax and get back to business. And that's what we're trying to do for these schools.

I love to be involved in those advisory boards and talking with these nonprofits and better understanding the schools. I would prefer to go to those events speaking for myself and a trade show any day because I'm learning at the same time, right? We also see our schools come to us because they saw us at a game. They saw us somewhere else. They were aware of our technology through a different venue. And then the ease of use, I don't want to speak broadly across every single school customer because some of our school districts have the opportunity to hire robust security teams, but many of our school districts do not. Many of the districts that we interact with are -- their security operation is being run by individuals like I was in that role as the Assistant Superintendent of Safety and Security with an English language arts degree, a teaching certification and an MBA. That's much more common, but I'm interacting with someone who has the educational leadership masters who is saying, maybe I don't even want to do this, right? I didn't sign up for this. I don't know how to do this. And we are put in a position to help to educate them. That's a very big responsibility that we take seriously.

I think very personally, actually in those conversations with our schools. And as they're balancing all of these different security considerations with staffing concerns and all of the other things, they need a mission partner. They need someone that they can trust who's going to come in and not sell them a thing, but learn about them, ask them the same types of probing questions that Evolv asked me to better understand the great work they've already done and the goals that they have for their particular campuses. I have a very close friend in the school industry outside of Evolv, who always says, if you've been in one school, you've been in one school.

Even within a school district, campus by campus, some of our building -- the older building versus the brand-new build or what have you, every building presents its own unique challenges. And I'm proud of our staff who go into those buildings, who ask the questions, who survey the situation and actually watch the students come in, in the morning and roll up their sleeves and do that work beside the school districts. Those are my favorite days that evolved going out in the field and doing those things. That red box really is a differentiator. I talked about the potential bias.

When I was a system operator at the school right before I left, I had teenagers question me, if you can believe that. Why did you stop me and not my friend? And what I loved as an operator was the opportunity to show those students why. Honey come on over here, let's look at the tablet. I didn't stop you. The system saw something that appeared threatening right here where this red box is. Let's find out what it is. And presuming it's not a gun and not a bladed weapon, let's not bring it to school tomorrow. Let's find out an alternative way for you to use that item because I don't want to stop you every day. But our system is not looking at people. It's not looking at faces, it's looking at shapes and it's looking at things. And so it's letting the people who operate it make those important interactions with students, make that eye contact with kids.

We have an attendance problem across this country. I want kids to know that we're happy they came to school today. I don't want to make it any more difficult to get them to their seats. So learning their names, spending that time at the front door, connecting with kids and doing what most of those people who are operating the system were trained to do, is really, really valuable to our customers. That's what we hear all the time. Thank you for letting the people do the people things again, and that's important. That white glove customer service, like I said, we don't just drop a box off at our schools. Instead, we're there with them, not just me and not even often me, but a team of people who come in and say, I'm not leaving until you're successful. I'm not leaving until you're comfortable operating the system on your own. I'm going to hold your hand on day one. And then I'm going to step back on day two and I'm going to watch you guys do it, and I'm going to answer questions, and we're going to debrief or do a hot wash is what we call it, to talk about what happened that day to make sure that you feel safe and you feel confident in the operations of the system when Evolv leaves the building.

I'm really proud of the way that we deliver that stellar customer service to our schools. And then again, the fact that we're constantly multiple times a year, having software updates. This is not just a piece of equipment. This is something that is getting smarter over time for those schools. You've already seen some of these numbers, but I do think the fact that we're screening over 1 million school students and visitors every day is a fantastic stat to be aware of. That's huge. These students are experiencing our system. And instead of seeing it as something that's happening at them or to them, it's something that's happening with them and it's something that's happening for them. And I think that's a really important mindset shift.

There are no better days here at this company than when we're sitting and we get a text message or a phone call that a gun has been stopped at a doorway. That kind of energy will keep me here for as many years as they'll have me because it is the best feeling to know that we're stopping weapons. And you saw how many we're stopping on a very regular basis. We are in over 20 of the top 100 school districts across the country. That's an important piece of information. But I also want you to know that we're in rural districts. We're in tribal schools. We're in small school districts. We're in big school districts. Violence does not know a particular type of school. And so we have to be ready and able to protect and help all of them. And I love having those conversations again, whether it's at a trade show or more importantly, on their campus.

We talked a little bit about how schools buy. There are many different stakeholders. It can be a difficult sales process in terms of the amount of time and energy that needs to be put in to educate, particularly like John said, they were doing nothing and we're replacing nothing. Having them understand why we're doing what we're doing, what can the system do? And maybe just as important, what are its limitations? What is it capable of? And what is it not doing for you?

That requires communicating with not only the decision-makers in the district, but also the parents who are really tuned into the safety conversation as they should be. That means answering really hard questions on community nights or showing up for school board meetings and being brought up to the podium and ask questions that are difficult to answer. That's what we want to do. We want to spend that time educating our buyers so that they know what they're getting. And again, they know the limitations of the technology as well. Our channel has been exceptionally important in the way we deliver excellence. That's because they have, in many cases, relationships with the end users in their regions. And so a lot of times, we are meeting the schools through our channel partners.

And then again, pilots. I just want to talk real briefly about pilots and demos, seeing is believing. We want our schools to see our system in action. We want to get up at 5-something in the morning, which a lot of my teammates and myself do and go with a potential customer to a current customer site so they can watch what it looks like when real children with real backpacks are walking through our systems. And then this expedite product, you've already seen some school people talk about how it changed their particular operations. But as we discussed, some of us three years ago, schools are very high clutter environments, and they are nuanced.

We want them to feel open. We want them to feel inviting. We want them to feel welcoming at the same time, keeping that protection paradox in mind, right? And what we are seeing day in and day out now is our students who are dropping not only their backpacks like we saw in the video, but their band equipment, their sport and athletic equipment, all of the stuff that kids bring. We were at one deployment and one of my partners came up to me and said, "Did you know that some girls bring curling irons to school? I say, yes, some schools are offering breakfast, but our kids are getting ready in the morning. Who knows what could be in these backpacks? But to say they're challenging to screen is an understatement, and that expedite system has been a game changer in those districts who have adopted it.

We've seen early receptivity, in many cases, an extreme sense of excitement around the expedite product. And what I see it as is an opportunity to revisit those 350 customers who already trust us and say, how are we doing and could we do better? Is there something we could do that would offer you an even higher level of safety and security every day and let you run your operations more smoothly? In particular, I mentioned my sort of origin story in my school district without my help intentionally and outside of the sales process on my own -- for my own personal reasons, they chose to expand. So I haven't been there in over four years now. And not only do they have the Express, but that's a small district, a single high school district that expanded and has our eXpedite at both their high school and their middle school locations. I'm proud of that.

We've talked a little about what's changing with regards to safety potential mandates. We've seen that not only in the U.S., but also in some countries abroad, in particular, in the Latin American countries, looking at potential safety and security mandates regarding weapons detection in schools. And then we also are hearing from our schools hey, why do we have this at the high school and not the middle school? Or my child has a sibling, and I want this at the sibling school as well. So we're hearing a sense overwhelmingly of standardization and access across grade levels in our school. That's been a strong conversation out in the market as well.

And I want to leave you just with the quote of this customer in a district that I feel particularly close to for reasons because of how they experienced Evolv. They also had a violent incident occur, and I was there with teammates on day three post incident. This district in Metro Nashville school found five weapons in their first five months of screening. And I think an even more interesting stat, they found three in one of the first few weeks. So again, did every one of those students have nefarious intent? I can't speak to that, but I doubt it personally. What is much more likely is there are more guns on our campuses than we realize, that are being brought habitually to school, that we need to keep out of our buildings and that's something that we wake up everyday, committed to doing here at Evolv.

[Presentation]

Please welcome Anil Chitkara, Co-Founder & Chief Growth Officer, and Regina Lombardo, Deputy Chief Security Officer, the Metropolitan Museum of Art.

John shared the catalyst that was the founding of Evolv, the Boston Marathon bombing. I was there. I was there with my kids. My wife was running it, and she came across. As John mentioned, a good friend was severely injured there, and I went and visited them. About 4 months and 1 day prior to that was the Sandy Hook tragedy. And in the days in between those 2 events were 51 mass shootings. It became very clear that we needed to do something about that, and that's why we started Evolv and created the mission we're on. We've done a lot of good, but there's much more to do. And as we look forward, I spend my time looking and working on growth initiatives with John and the executive team.

What you've heard earlier from Owais and from Sean on the products we've built and the technology we're developing and from Robert and from Alex on how we reach our customers is what we need to do. As we think about new products and new opportunities, the answers for that are not upstairs in our office. The answers for that are outside with security professionals talking to venues about the challenges that they're trying to face and address. We are inspired and informed by those customers. We have various ways to get input from them, both formal and informal ways. And today, we're privileged to have one of those customers, Regina Lombardo, here with us today. Regina spent about 30 years at the Bureau of Alcohol, Tobacco, Firearms and Explosives. She finished that tenure as the Acting Director and has tremendous experience there. And thank you for that service.

Welcome. Thank you.

She spent about over the last 5 years as Chief Security Officer of...

Sorry about...

In looking at their security and revamping the security there. Thank you for joining us.

Welcome.

Many of us have heard about ATF, but may not know about it. If you could just spend a minute or 2 describing the mission and focus of ATF and some of the work that you did there.

Well, I could tell you that ATF is probably one of the most complex agencies.

We enforce the federal gun laws, regulate the gun industry. So as you can imagine, we're the only agency that enforces a law that's attached to the Constitution. So it's a little bit complex. I started out as a street agent enforcing the gun laws, but for the most part, started my career in Miami. And next thing I know was sitting at the seat as a Director of ATF. So not only do we -- of course, for public safety, I was a special agent in many, many cases, but also when you become a director, you're also dealing with the firearms industry, which could be kind of challenging. I would say -- the right to bear arms, yes, it's very red, very blue on both sides of the aisle, but I think everybody will agree on gun violence, and it's the crime guns that we like to go after.

So I spent 30 years in my career doing that.

So with your time at ATF and then more recently at the Met, you've seen the threat environment, and it's changed over time. It's certainly quite a dynamic environment today. How would you characterize the threat environment today and how it's been different over the last 5 years?

Well, I guess coming from a public safety background and you're instilled inside you as far as it's always mitigating risk. So you're constantly looking at the threats, whether you're in law enforcement, you're constantly preparing for undercover operations or any type of operations. So you're constantly evolving into what's the threat that's happening and how do we protect the public. So that -- you sort of bring that thread through to The Met.

And so now at the Metropolitan Museum of Art, many people don't quite understand that it's -- I always say it's a living, breathing organism in Met, right? And so the threats change so often on any given day really from one moment, it could be climate activism. One moment, it could be just who's coming in to visit The Met and having those threats change is something that keeps us sort of on our toes and constantly reevaluating of what we need to mitigate those risks. Currently right now, I -- when I started the position, it's what is the greatest risk that the Met faces. And me as the Chief Security Officer, what do I own? What do I own? What is my responsibility?

And that -- what I went into thinking is not the same as it was at the reality of it, what I inherited. Of course, coming out of COVID, your threats were different. Maybe it was workforce, learning how to the shortage of workforce, but also then it evolved into emerging threats and whether it's happening around the world, geopolitical. And now we've evolved into after the (Louvre hiest), our threats have changed. Now we have to look at our massive amount of capital projects and construction with an increase of 400 contractors coming in besides the 20,000 a day -- so it's -- what I would say is very dynamic in how we look at the threat.

And every day, it changes. Unlike some of the same, you can see the trends, patterns, whether it's ball fields or other institutions, buildings that many of your customers have. For us, it changes on a -- sometimes a given day. Yes.

So I want to get into The Met itself, but there's some very topical news this week and this summer. The World Cup is starting tomorrow in Mexico and then a couple of days later in the U.S.

We have America 250 and all the celebrations there. In general, how do security professionals think about securing those types of events?

So I think New York is very fortunate that we are very integrated all chief security officers from banks to cultural properties from Broadway, Yankee Stadium, City Field. We are very integrated. And we also are very much in partnership in the preparing of it with the FBI, JTTF and many of the other organizations in DHS, every state, local, federal, we've already had many massive meetings on how it affects the public, yes, public sector, but also the private sector with that amount of influx of people from 250 entertainment, what's happening around 4th of July to the FIFA at the same time, each of the venues have been meeting on a monthly basis as far as even the increase in people.

I always say the threat sort of begins to have ripple effects, right? At the Met, we will have increase in tourism. We will have increase in people. And when there's that amount of momentum happening in the city, it really takes a collaborative effort of all state, local and federal that has to be integrated. And so we're preparing for that has many aspects from the traffic patterns to frozen zones like yesterday during the Knicks game, right? We have frozen zones that people can't move the traffic gets bottled up. And that creates an additional threat. It creates additional threat because you have people that have intentions that like to hijack, what I call hijack events for us, it's the steps of The Met that's pretty iconic for those who watch TV and movies, we do a lot of that there.

So it's a very high-profile place as well. So it's not just a museum. And for this, we've each had a piece of FIFA as far as the 250. We're going to -- we have snipers on the roof for the 4th of July every year. When we have St. Patrick's Parade, we do the same preparing. We use a lot of our new cameras on the outside, AI integrated into those cameras with operators on the roof as well. Yes.

So let's talk about The Met a little bit. Can you first give us some context? It's a massive museum. It's got lots of people coming in it. It's got a lot of artwork. Can you just give us some context for what it is and then what you're dealing with?

I will say it's like a small city, 21 buildings put together, 2.2 million square feet. So there is not just we say it's -- there's a living, breathing organism in that. It's like a living soul. So you have people from every -- all around the world that have nothing in there could ever be replaced, right? So we would have maybe one Van Gogh that's a $998 million for one painting and there's millions and millions of what do we call collection, right? So figuring out my first responsibility walking in was it's not just the building that you're protecting, like your stadiums, you have millions of people going in and out. And for us, the people is all day in and out. All day, every -- we have 6 different entrances, 3 for the public, 2 for staff.

And so trying to find the best way to access control. But keeping that what I call, we're not -- in policing, it's very authoritative and you have to have control. And buildings like to be -- show that force and control. For us, it's restraint. It's about not having so much visible control. It's allowing for experience and you're preserving an experience. And that's the biggest difference between a lot of my colleagues who work in different buildings and venues. We're preserving an experience that people come from all over the world.

And you have people from school children, like we heard of earlier, lots of tour groups that come in, people that want to be there because they want to pray to a certain object from their country or family and relevance and generations and generations have been passed down to whether it's cry over the fact that they have this beautiful collection there. So -- on any given day, it could be chaotic and crazy. And then the next moment, it could be a sanctuary where it's very peaceful and very calming. And so learning how to navigate the different areas of that. That's the day. At night, we did 375 events last year. We're obviously well known for the most famous event. It's very a global event, watch more than the Super Bowl and more than the Oscars, which is The Met Gala, because it is international.

And that's our -- we call our Super Bowl, right? We wait all year and the preparation for that is enormous. And each year, you start to learn what was the risk -- last year, we didn't do very well in this area. We didn't have a lot of -- we didn't have the tent set up enough where I felt confident that we had Fifth Avenue locked down that we had the areas that we feel that we had some attempted crashers, which is, in my book, it's a failure if I have a crasher. -- it's something that we really pride ourselves in. So on any given day, it could be your day to day to day, which is 20,000 a day.

On the weekends, we'll get 20,000, 30,000, holidays, 40,000 max on the Christmas before Christmas a day. So our systems have to be efficient enough to allow for that experience, that rapid, rapid, rapid. And it's unlike events where there's a time on it. Here's your ticket, school starts at a certain time. This is a constant. This is all day. This is all day in and out. And then at night, with a flip of a switch. We close and the whole place transforms into this beautiful elaborate. We have the greatest artists in the world that make these events spectacular, and it turns into that kind of a space at night.

And we also have to do access control for the many of the people that walk through those doors to include your A-Listers, your most famous football players, baseball players, stars, actors, actresses, singers, you name it, and we do access control of every person that goes through there.

So you talked about the threat environment. We've seen violence, vandalism and heists and particularly in museums. You talked about sort of 2 halves of what you deal with as I think about it the day and then the night and the very difference there. How do you organize all of these threats? How do you figure out the impact they might have? And ultimately, how do you figure out how to prioritize your resources, your technology, your team so that you can address those threats in a holistic manner as possible?

Sure. I will tell you, because of how complex it is, we have to really reevaluate and look where am I -- what are my blind spots? What am I missing? For events, something like The Met Gala, an incident, one incident that can happen at that event far exceeds the cost of any system that I can purchase. Between your brand reputation, your business continuity, your -- the fact that, that event alone makes $40 million a day, one event. So I look at what is the top -- what are those priorities that I really have to tighten up and focus more. So we may have to shift in the ones that we know have more high profile. But the everyday person that goes in deserves that level of experience, too, deserves that.

I feel today having the team that I have and many of the security officers that work there on the guard level are actually not law enforcement or security backgrounds. They -- most of them are artists. And so they have a great devotion to protecting this type of building. And so I looked at my workforce, we're about 560 in security, 400 are union. So I have to deal with some of the complexities with union staffing. But sitting back and now looking at a new operations center that we're constructing 5,500 square feet, 40-foot video monitoring wall. And I've sort of modeled how I worked in policing.

In policing, if you walk into police departments, you'll see real-time crime centers. That's how -- that's how I start to really -- I want to see everything that's happening. So instead of real-time crime, I just change that into real-time incidents. What's happening in the building at any given moment, whether it's an art touch, whether it's a slip and fall, someone had a heart attack, fire in another building. And I'm able to now be able to see that and have all of my systems, including Evolv, integrated into our operations center and of course, AI-driven where I can now see it in real time. And that has allowed me to sort of see the bigger picture in where I need to send my workforce.

How do I change my workforce when we have exhibitions. Exhibitions bring in a lot more people. They're only there for a limited amount of time, whether it's a Van Gogh exhibition. Now we have the Raphael exhibition from Italy. And for that, it's changing the workforce and maybe being more proactive in moving our frontline staff to be more efficient in that. When I started, I'll end with this. When I went into this position, I looked at having to reorganize the structure of the operational structure. And it was about frontline efficiency. It's where your systems come in.

How do I become more efficient in the front line and back-of-the-house intelligence. It's all about, for me, intelligence-driven. And if we're following the intelligence, it will tell you where you need to work and where you need to focus. So that's in a roundabout way, I hope I answered your question, but it's really -- it's about having the right operational structure and the organizational structure for better oversight and accountability. In federal government, it's really about oversight and accountability as making sure that we are delivering for the American people.

So you mentioned it, I want to talk a little bit about advanced weapon screening and Evolv, the use of Evolv there. Here's 2 examples of us screening there. So The Met and you and your team have worked with our products for, I think, 5 years or more now. You initially decided to move forward with us. If you can look back or reflect now, what are the key requirements and considerations for weapon screening? And how do we do? What's different about us? How are we doing? How are you -- how do you see Evolv relative to other options you could consider?

I've educated myself before I started at The Met to understand a bit more about Evolv. And I've been aware of it in the past. I have friendships with the National Football League, Head of Security for football and for baseball. And what are people using? So I was very pleased to see that they were using Evolv. I will say for me personally, you know I always say, hey, no one's got it locked down, right? I say no one's got locked down. Every single year a contract comes up, I am pulling it apart. I'm looking at other options. I want to make sure I have the best product. But the best product for The Met might not be the best product for someone else.

But I always say for what I need and that's being able to listen to the customer. For us, it's what I talked about that quiet that more -- when you don't see security heavy is when you're doing a good job, especially if it's in cultural properties and giving that experience to people. And so utilizing the system for me was first learning it.

When I had some hiccups, it was -- I learned very quickly, it was because it was user error. It was us. It was us maybe not understanding what we needed to do, and I would say we had to do our part. And so I have to say what allows me to stay with client customers is customer service, to be honest with you. And the product still works, it's efficient. It does -- for me, the difference in others, and I've been to every stadium you could think of every company that's out there. I've met with every CEO of every company that's out there that was trying to sell me different products. But I particularly appreciate the efficiency of people just being able to walk through, but also being very specific on not taking the time to stop and look and wondering where this alarm went off, where could it be and being a little bit more efficient and efficient in where that -- where the red box shows up.

And then it became teaching my -- the staff a bit more, educating them on the calibration and the testing every day, -- and I think once we kind of found our rhythm, it took a little bit because I think that when they got the systems, it was just let people walk through and I don't think they understood -- there was no SOPs written, and I'm a huge believer in SOPs.

You have to write from the minute you start your shift, post your post order and working with the Evolv system, it's certain people are better at it, right? And so now I start to watch the patterns of people who are working there and what's missing in that. So, so far, it's been great. I have to say I'm always looking for the future because the threats change, things I need, my mind is going a mile a minute, sitting here listening because there's so many things I want to chat with you about on some new things that we're doing at The Met that I would love to partner and try to figure out how to do it better.

Yes. And so you mentioned you're always looking last year, our initial contract came up, and I know we had the conversations and you thought hard about what to do next and you renewed with us and you upgraded to the Gen 2 product. Any quick thoughts on how that's working or...

I remember the day that it was a big to-do that we -- we were launching and you didn't -- the whole -- the company was great in that process of us meeting -- you have to deal with all the, I would say, the nuts and bolts, you have procurement, you have lawyers. You have all these, what I call, you get to go white water rafting until you get the contract signed, but I didn't lose faith that it happened.

There were some rapids, though.

There were some rapids, but it was never a product issue. It was trying to get over hurdles of red tape, I call it, changing of people who were once familiar with the contract and have to redo it again. But you graciously were able to allow me to continue working and deliver the product even though we were still kind of nailing down. So I'll share that with you.

Working -- I love the fact that as soon as we had the new, they installed it, they were there, very efficient, very professional. And then I take -- we're armed. I have a few of us that are armed at work. There's about 12, 13 of us that carry. And my first thing is I'm testing it. I'm testing it, I'm testing it, and I'm testing it. And I was super excited when I had a gun on the ankle, another one up here, products, different places, and it popped up on 2 different places, locations, which for us even better. I love the data. I would say that the data I get from the system helps educate -- I'm learning how to teach the people who are working in the front, the security officers, how to use that data and to make sure that you're hitting the box that says it's a gun, you're hitting the box that's an umbrella, you're hitting the box that says it's a water bottle or something that's heavy metal.

So it doesn't know the difference, I say, between a firearm, a bomb, a pipe bomb and the umbrella sometimes it's telling you, you have where to look. So it's been great to Gen 2, super -- I'm a fan.

Good. Thank you. So -- and thank you for your continued support and confidence in us. As you look at other areas within The Met starting to touch on this, and you think about -- we've got Express, we have the eXpedite for bag screening and you've got a sneak peek upstairs of some of the product concepts. So without getting into the products themselves, how do you think about us and what we're building and how it may play a role in your expansion plans as you're trying to continue the security evolution there?

I think it's what I love about especially our relationship, I've known you now 5 years. And I want to share something new that we're doing where we have a new challenge. And I think what I feel the most comfortable is having that ability to share it with you and ask me how do I how do we fix this? So because The Met right now is under massive construction, 2 issues and 2 products pop in my mind. Yes, 400 additional contractors are coming in. So I'm looking at the rapid bag, the drop-in Express come in. So I'm looking at, okay, that's a great solution. And now we're going to be opening up a fine dining high-end restaurant on Fifth Avenue. And our new retail store right off of Fifth Avenue. So I'm looking for a better way because it's a museum that happens to have a restaurant. So I still have to figure a way to have sort of a professional, a smoother way into the restaurant where people aren't feeling this sense of I'm getting a weapons detection before I go into a fine dining restaurant.

So complicated, but I think there's working with you guys to figure out something that's less conspicuous or a way to kind of make it still not feel that you're going to be secure. So looking at the future, and of course, I popped in here last time I drove through just to say, "Hey, what's new? What do you have -- what are you guys working on?" Because I think that if you're not staying ahead of things or more aligned with what's happening in the world, especially coming out of law enforcement then I stay current. I try -- I still make sure that I go to IACP, International Association Chiefs of Police, here the Major city chiefs, I'm on many boards, here the National Center for Policing.

And many of the things that I learned there, I try to bring here and say, "Hey, this is a new weapon, Ghost guns. I say as the head of the organization, I was constantly being challenged with how come we don't enforce the ghost guns with ATF. Well, there was lots of complications to that because it technically had to meet definition of a firearm and all sorts of things. So I have the background to share with you to say there's so many different pieces within that, that will still be able to go off. So that's something new that we're looking at, too. How do I figure out that piece that maybe I think that we may have a little piece that I want to fix. So new things, I'd love to come and chat with you about these things and have your research and I call your brainy acts, your research and developers figure things out for me.

Yes. Good. So one final brief question as we close. You get a lot of people looking at our technology, looking at our company. I'm sure they're asking you, tell me about Evolv, tell me about their products. How do you -- what are the snapshot descriptions? Or what do you convey to them?

Well, I would tell them, I always say to anybody who tries to get my business, get calls every day is to listen to the customer, to listen to what our -- everyone feels special. Everyone knows that their industry, they're building, their school, museum is unique. And to listen to that, when I tell customers, I tell people that I've gone and say, Evolv, the people at Evolv, the leadership, I can sit and have conversations for hours with them and share what you need and be able to actually work through those challenges as opposed to them telling me what I need.

There's a big difference for me. Similar to the lack of compassion at the school that you mentioned, and there was -- there's not -- there's a partnership feeling. And I would say it's like a relationship you have to build. I won't go in first, someone is going to call me and tell me what I need. I stop them and say, they don't know my world. They don't understand the challenges. Let me share with you first. And I think that, that doesn't happen often in sales. And that's my pet peeve they will never get my business. Even if the product is great, I have to look past it and say, let me share what our profession is and what I need. And I think that your company don't lose sight of that because that's probably something I think that lot of people really embrace that I spoken to.

Thank you. Thank you for what you're doing, keeping The Met and New York safe, and for your confidence in us and for sharing your experience with us today.

[Presentation]

Please welcome Chris Kutsor, Chief Financial Officer.

Good morning. Thanks for being here. I'm Chris Kutsor, Chief Financial Officer of Evolv Technology. I've been with the company a little bit more than a year. That follows about a 30-year career in global tech. And I can say without a doubt that the past year with Evolv has been a tremendously energizing experience so far. And I'm pleased to share with you today our 5-year view of our financial model and plans. You've heard a lot about it today. I want to put that into context of our business model, the unit economics that underpin that business model.

I'll talk about certainly our prioritization of capital allocation and how that lands with our target operating model over the next 5 years. It's important I start with a brief Q1 update and talk as well about the shape of our 2026 revenue because there were a number of changes that we've made that impact revenue in different ways. And understanding that context is important for -- as you think about our growth rates going forward. So we started off with a very strong Q1. Growth, growth metrics and margins across the board were healthy. The revenue growth of 45% that you see here had the benefit, which we've talked about in prior earnings that I want to make sure everybody understands, especially our new investors. And that included a change in how we fulfilled our hardware for purchase subscription models.

And what we did was we brought that revenue back in-house that used to be provided directly by our contract manufacturer direct to our customer. So to a customer, no real change in economics, but to Evolv, at the second half of last year in July of 2025, we brought that revenue back in-house. And that brought with it more revenue, more cash flow, more gross profit dollars, albeit at a lower gross margin because we were not just taking the revenue, but we were taking the cost of that hardware for that onetime purchase in-house as well. And keep that in mind as we think about 2026 and how it helped Q1 of '26, but was not there for the prior year compare in Q1 of '25.

The other thing is I want to reaffirm our 2026 guidance. We said before and we continue to expect 20% to 23% revenue growth with adjusted EBITDA margins in the high single digits. I do want to point out that is inclusive of some incremental investments that you've heard us talk about earlier today, and that will keep us on our guide inclusive of those incremental investments. This is a reference slide for -- probably for later, but I want to summarize there are 3 variables that affect revenue, and I'll hit on them just briefly because it is not new information.

As I mentioned before, there's the direct fulfillment of hardware portion of our purchase subscription units where, again, it's a step-up in revenue that will continue going forward. So that, again, was implemented in the second half of 2025 and continuing. The other thing that impacted the second half of 2025, which is we secured and delivered the largest contract in the history of the company to one of our large education customers. And in doing so, that customer chose to purchase the hardware direct from us. And as I said, that brought with it significant onetime product revenue for that very large contract.

The other thing we did in the second half of '25 was we announced a pricing change. Now that pricing change won't take effect impacting our financials until the second half of '26. But that pricing change that we made was we lowered the onetime hardware or the product revenue for the direct fulfillment of hardware to our customers. And we offset that reduction in hardware with an increase to the software and services or recurring portion of the contract. So no net change to the customer. But for every similar unit that we sell effective in the second half of '26, we'll be taking approximately 20% less onetime product revenue, but we'll be gaining 20% more recurring revenue.

And that's a trade-off that we are pleased to make for the long-term benefit of the company. When you put it all together, this is the shape of our 2026 revenue. So because of some of the dynamics that I just described, the year-over-year compare is a little bit distorted. We think in a good way because we're going to be driving more recurring revenue going forward. But make no mistake about it. We expect H2 unit growth to be up more than 25%. Let me say that again. The second half of 2026 unit growth will be up more than 25%, but you won't see that reflected in our revenue profile because of the 3 variables that I just mentioned before. And specifically, for every contract that we sell through that contract direct purchase motion, we will take 20% less hardware onetime revenue, but 20% more recurring revenue.

Let me zoom out a little bit and talk about some of the fundamentals of our business, which you've heard a little bit about today. We contract with our customers over 4-year initial non-cancelable contracts. At the end of those 4 years, we typically offer customers the chance to renew those contracts for 2 years, and they would keep their existing equipment in place. The alternative is, as you've heard Regina and others talk about upgrading their systems to our next generation.

If they make an upgrade, we would sign them to a new 4-year contract. So initial investment, renew for 2 years, keeping that equipment or upgrade to new equipment with a new 4-year contract. We like those 4-year long-term contracts for obvious reasons, provides durability and predictability for the business. The revenue that we take over those 4 years is primarily taken in a ratable fashion that gives us predictability and visibility to our financial forecast and expectations. We bill annually in advance to our customers. So that's a healthy cash flow dynamic that we like. And we certainly have a growing installed base of these long-term contracts.

We want to make it easy for them to renew and extend those contracts. And that helps with our land and expand of our growing and recurring revenue base. I want to get into unit economics a little bit as well because I think it's really important to understand the economic drivers of this recurring business model because it's compelling. So we'll start with simple pricing. Assume the end price to a customer is around $100,000, give or take, for that 4-year subscription. Then you think about the way we're selling to that end customer, the configuration, are they buying a single lane or a dual lane Express? What vertical is it in?

There's different pricing depending on the vertical and the setup and the structure, of course. You put that through those variables and you end up with the net price to Evolv of an ARPU, as we'll refer to it, average revenue per unit over that 4-year time frame of a $65,000 to $80,000 price range. If you keep that in mind for modeling, it will inform it here in a few slides as well. So the other thing I wanted to do was walk us through an illustrative unit economic example of the 2 subscription models that we offer, the 2 ways that the customers contract with us. The first on the left-hand side is a pure subscription contract. In that case, the customer owns nothing.

We provide over those 4 years, the entirety of the hardware, the software to run it and upgrade and the services needed to keep the system running when necessary. The right side is our purchase plus subscription model, where the customer prefers to buy the hardware and own it for lots of reasons, but that also comes with a 4-year subscription of software and services attached to that hardware. And if you think of the long-term economics of these 2 models, they're very similar. They do differ by the shape and the timing. And if you look at the bottom left-hand side of Pure subscription, you can see the revenue recognition there is ratable.

It's simply the 4-year ARPU divided by 4, and that's your revenue spread evenly over that 4-year cycle. If you think of the cash flow for that pure subscription, it turns positive early in year 2. Remember, we're billing annually in advance, but we're financing that equipment for the customer. If you compare that to the purchase plus subscription on the right-hand side, and again, looking at the bottom right chart, you can see the revenue recognition has more upfront revenue in year 1, where we're taking the revenue associated with that hardware purchase that the customer prefers plus the 4-year software and services subscription that accompanies it.

From a cash flow perspective, that purchase motion is cash flow pretty much immediately from day 1, depending on how quickly we collect that upfront invoice versus paying our contract manufacturer, but it's very good for cash flow. The last thing I want to talk about is the adjusted gross margins between these 2 models. And let me be clear what adjusted gross margin means. Adjusted means we are excluding the very small amount of share-based compensation for our team members that are in cost of goods sold. But it does include and is fully burdened with depreciation and software amortization and every other cost to deliver that unit to our customers.

And in those gross -- adjusted gross margins, you can see from a pure subscription, it's more than 70% over each of those 4 years. And if the customer renews for 2 years, like many of ours do, it would be 70% continuing. If you compare that to the purchase plus subscription, it's the adjusted gross margins start out lower at around 40%. And the reason for that is because we take the entirety of the cost of that unit in year 1 in addition to the software and services costs that continue. So what that means, each year that goes by, -- for a purchase plus subscription model, the right-hand side, the gross margin cumulatively improves because all that's left to deliver in years 2, 3, 4, all the way through 7 because we have a 7-year useful life on these units, that gross margin is near 80-plus percent for that software and services margin on the remainder of that useful life.

All of that leads to a very attractive and healthy view of our remaining performance obligation. John touched on it earlier, and it's a really important concept. Remaining performance obligation is the value of future contracted revenue that we have simply left to deliver, but it's under contract. At the end of Q1 2026, the value of our RPO was $299 million. That's almost 170% of the full year revenue outlook we have for this year.

And the assumed adjusted gross margin within that RPO of $299 million is a very healthy 66%. So said differently, if we don't sell another unit and just let this RPO flow through over time, we're going to get $299 million in revenue and approximately 66% adjusted gross margin from that remaining contracted revenue. Now one other point that's important. We began shipping the second generation of our Express units in Q4 of 2024. And when we started doing that, it came with the benefit of about a 40% lower cost of goods sold profile. compared to its predecessor Gen 1.

So for every new contract we have today and we deploy new units, those are Gen 2 units with a 40% improvement in cost of goods sold, which means this RPO every day that goes forward, we're putting in a new Gen 2 and replacing an older Gen 1 with a much higher cost profile. I think that's really encouraging as we think ahead as this is going to continue to grow. And we expect remaining performance obligation to accelerate in growth from here. One of the key reasons it's going to accelerate in growth from here is some of those pricing and fulfillment changes that I just mentioned a few minutes ago, where we're trading some onetime product revenue for more recurring revenue that's going to compound more and more over time. All right. Last modeling question -- or last modeling slide for now, I think.

So I also wanted to make sure because we get this question a lot, how do I model a full year revenue? What are the puts and takes? And these are the basics. Again, it's a leave behind slide. It will be available for everybody afterwards. But key assumptions you need to make to model the year. How many units are we going to -- new units are we going to deploy? What's the mix of them between the 2 contract vehicles and ways we fulfill and at what ARPU. If you use the assumptions there at the top, I've built a model here to share that happens to land about in the middle of our outlook guidance. Now there are many models that can get you there, and I have no intention of updating this slide with guidance in the future, just to be clear.

This is one of many ways to get to the same answer, but I think it should help you understand some of the drivers of the business. So when we entered the year January 1, 2026, we brought in recurring revenue, our ARR balance of $120.5 million. We're going to capture that revenue on day 1, whether if we don't sell another unit the rest of the year. So start there with your ARR balance at the beginning of the year. Then, of course, you need to add, well, how many new units am I going to deploy? And for pure subscription, let's assume it's 45% of the volume.

That new subscription revenue is that 4-year ARPU of $70,000 we're assuming here divided by 4. So that's simple. But then you have to say, well, I'm going to sell some in the first half of the year, and I'm going to sell some in the second half of the year because it's -- the revenue is recognized monthly over that year. So a proxy to use is 6 months because you're going to sell some in the first half, some in the second half, so use 6 months as a proxy. Likewise, let's think about the new product revenue that we're going to get from the purchase plus subscription model I described a few minutes ago.

You have to take the onetime revenue that's associated with the customer buying that hardware from the beginning. And when you do that, you want to take today, it's about 38% that's attributed to that product onetime revenue out of the entire ARPU. So that will get you to the $35 million there in the middle of the page for that hardware onetime product revenue for those types of contracts. Then you layer on, again, the software and services associated with those units, and that will give you the service revenue accompanying that part of the contract fulfillment. Lastly, we've got other revenue.

Other revenue are things like accessories, things like short-term rentals, -- and it includes any churn you might be expecting to that ARR from the beginning of the year or changing in the price of renewals when customers do that. It's a small number, but important. And you add that all up and you happen to land in the middle of our guidance range. So I hope this is useful for those in the room and the new investors that are trying to figure out how to put this all together. As I mentioned, our recurring revenue, our installed base, our customers for life, you've heard us talk about that throughout the day. That is really important. So customer retention, we think, the most important way to measure is 2 metrics, Net Unit Retention and Net Revenue Retention.

The definition is here, but simply put, we look at our cohort of customers in a year ago period. We take those same customers in today's period, and we compare the units and we compare the revenue, that same cohort of customers is providing. And we're pleased to share that as of today, I think John mentioned it earlier as well, that's more than 100% retention across units and revenue. Now it is important to note we're very early in the renewal cycle. We really just started shipping in volume about 4 years ago.

So we're in the hundreds of units of data sample. So we will have more to say with more description later in the year as that sample size grows because we're getting more and more each quarter that are coming up for renewal. However, we are pleased with what we're seeing so far. One other interesting way to look at our installed base and serving our customers is the expansion part of our land and expand strategy and execution. And we've got about 1,300 customers in our installed base. Of those 1,300 customers, about 32% of them have expanded with us over time. And if you look at the bottom left-hand chart, you can see they've expanded with us across all of our verticals in a healthy and diversified way. That's a good signal to us that we are pleasing our customers in various ways in all of our verticals.

Maybe one other part that is really compelling, I think, is the top right box. And what that tells us is of the 32% of those 1,300 customers who have expanded their initial investment with us, about 1/3 of them have expanded 3x or more. Again, that's a really strong signal, we believe, that tells us customers are choosing to invest at the beginning of the relationship, but they're continuing to expand on that investment with more units and more doorways and in more ways as we've served them over their life cycle.

So putting the growth you've heard us talk about and the investments we're going to make into perspective is certainly important. So we wanted to share our capital allocation framework with you today. As you might expect, after hearing all my predecessors speak, we are investing in organic growth as a primary focus. And that organic growth will include both selling and marketing investment as well as R&D investment to help protect the moat that we already have and expand it further and expand our product offerings.

We intend to do so with a disciplined balance sheet. And that means when we talk about the target operating model between now and 2031, we expect to need no further debt capacity than what the company has access to today. We will keep an eye open, as John mentioned, to accretive and opportunistic M&A. Of course, if that opportunity presents itself, it may have its own debt or equity financing requirements, but that will stand on its own merits and business case on its own. The target model that we've been talking about throughout today is an organic plan that, again, does not require any additional debt capacity beyond what we have. And finally, we certainly intend to manage shareholder dilution thoughtfully and responsibly. So what does this mean? I want to put that target operating model into a little bit more perspective with some details.

The investments that you've been hearing us talk about in selling and marketing and R&D is an incremental $20 million over the next 2 years. We expect that incremental investment of $20 million to grow beyond that as the business continues to grow and scale from there. We expect that, that incremental investment will yield for us an incremental $250 million in revenue over that 5-year period than we otherwise would have earned without that investment. Certainly, we expect a return on that investment and any investment we make is subject to gauging more or less over time. The result, which you've heard about, is a 5-year revenue growth CAGR of approximately 25%.

Now approximately means just that. It could be a couple of points below in some years, it could be a couple of points above in some years. But by 2031, we're expecting approximately 25%. We also expect, certainly, it will vary year-by-year, but ramp over the long term with higher revenue, all else being equal in the later years as our ARR model compounds more over time. Likewise, our adjusted EBITDA margins is expected to achieve 25% or more by 2031. We also expect those adjusted EBITDA margins to expand each year annually as we grow year-over-year profitably.

And like the revenue profile, we expect adjusted EBITDA margins to also ramp faster in the later years as our business compounds with that growth. Simply put, what does it mean? We expect to triple the size of the business organically over the next 5 years with a Rule of 50. And as John mentioned, the rule of 50 means if we have the opportunity to invest more, we will to grow that top line faster and adjusted EBITDA margins may be a little lighter. And on the inverse, if we're not getting the returns that we think, we will scale back on the investment where -- responsibly but where it makes sense, and we should expect more on the bottom line to keep us within that Rule of 50 by 2031.

Let me leave you with just a few thoughts. The company is in good shape. We're ready to take the next step in growth. We expect to do so as a leader in weapons detection technology, underpinned by a very strong unit economics and recurring revenue model to drive and compound that growth and profitability over the next 5 years. We expect to do so responsibly, thoughtfully and win more and more of this very, very large and underpenetrated market. And we expect to do so by prioritizing and delivering long-term profitable growth for our shareholders. Thank you. John will come up with a few closing comments.

[Presentation]

Thank you for coming [Technical Difficulty] and our outlook for the future. I'm going to keep it brief with a few comments. You heard today how we created this category. We created the category and the total available market that came with that category. The opportunity in front is still largely greenfield. It's there for us to go get. You heard from Owais and Sean how differentiating concealed weapons at the pace of life with all your possessions on you or in your bag is hard. It's an immensely difficult challenge. We've been at it for 13 years with multiple iterations of product to try to make that experience as good as possible, and we're going to continue to do that, continue to build that moat because hard problems, they create durable companies.

We're convicted in our strategy. We believe in this TAM. We believe in the difference that we can make in the world, and we're going to put the gas pedal down on investments in a responsible way as hopefully this management team has gained credibility with you that we can do. That means increasing our sales and marketing investment to get better coverage and get that story and our mission to as many customers around the world as we can. That means leveraging what we learned with introducing new products and new form factors like eXpedite to expand our portfolio and be an increasing multiproduct company beyond the two form factors that we offer today. Relative to that and to our products, I'm pleased to announce that we just received Safety Act designation from the Department of Homeland Security for eXpedite, which means now that both of our technologies are officially recognized as qualified anti-terrorism technology underneath the Safety Act.

What does that mean? That means that 25% compound annual growth rate, tripling the business, growing to $500-plus million while being responsible and operating as a Rule of 50 company. We're building a future where most public buildings that prohibit weapons are going to be screened by Evolv. Thank you. Thank you very much for joining us today, and I hope you enjoy lunch.

Thank you, everybody. Good morning. Thank you for joining us for the first day of our TMT conference. We are delighted to host management team from Evolv Technologies. Joining us are CEO, John Kedzierski; CFO, Chris Kutsor. Gents, thank you so much for joining us this morning.

Thank you for having us.

We're going to kick it off. It's a fireside chat session. But by all means, if you're interested in asking questions, do not hesitate to raise your hands. Maybe kicking it off for the benefit of the audience slightly less familiar with Evolv, can you maybe share with us briefly what is it that Evolv does?

Yes. So I assume many of you might have flown here and gone through an airport and experienced what the legacy security screening paradigm looks like. It's the walk-through metal detector, the x-ray machine next to it, how much physical space that occupies, how many linear feet, how many people operate those devices to make sure that you're safe when you get on to that airplane. And you can quickly imagine that you could not take that operation and put it into the lobby of a school or the lobby of an office building, the entrance to an emergency room, a distribution center or in front of a house of worship.

So Evolv was created to address that gap to enable people to do something they could never do before, which is a screen for weapons at scale in a way that was minimally invasive, not having to empty your pockets and take out your wallet and your keys or take off your belt buckle, be able to have people walk through just as they normally do, not single file, but with the regular pace of humanity as it gets around. Evolv went public now 5 years ago. We have 2 products in market to address that specific need.

Evolv Express is our walk-through product. We're present in many professional sports stadiums across North America. So you very well have experienced it. You just walk in like you normally do, keep all your things in pace, and we try to get minimal nuisance as you do that. Secondly, we introduced a product for verticals like schools, workplaces that have a lot of bags and bags like the ones that you have with you today with your laptop and your tablet and so forth inside and enable that same kind of seamless paradigm that we have with Express. No human operates the eXpedite machine. There's no screen to review x-ray images that is all done with AI.

Now 5 years after being public, we had over 8,000 of those units deployed, approaching 9,000 at the end of Q1, which we just released. We are across our largest verticals of education, health care, sports and stadiums, and we've screened over 4 billion people. On a daily basis, more than 4 million people on average walk through our devices, which is more than are screened by the TSA every day.

That's great. And I'm happy you brought up the verticals you guys serve from where we sit -- when we think about the drivers, world, unfortunately, it's not becoming a safer place, complying some regulatory frameworks. It would appear as if it's all coming in your direction as tailwinds. Is that the right way to be thinking about it?

Yes. Our company exists to make the world a safer place to live, to learn, to work, to play. And unfortunately, when those events occur, people look for solutions. The security industry has historically been event-driven. I made the analogy to the airport earlier. Air travel and air security changed dramatically after 9/11. An event happens and the security industry tries to think about how do you do things to try to prevent it from going on again. If you look at the story arc of Evolv, we started in stadiums, and we have a very nice position in stadiums that we're very proud of. We partner with many teams across the NFL, NBA, NHL, MLS and MLB. That's when the company started. It was a slam dunk product market fit. People can get into the stadium faster and in a much more convenient way than they did before with not getting padded down and emptying pockets.

Events like Uvalde that happened after the company went public and Evolv got pulled into education, which is a very significant market for us now. And unfortunately, we all too often open the newspaper and read about another school shooting in another event. So school boards, parents are looking for answers and Evolv has been there to provide products, starting with the Express product, but then the eXpedite product because schools think about what your kids bring into the high school and they have a bag with a ton of clutter on it that could generate more nuisance alarms inside the walk-through product. So we added eXpedite , and we've had some very nice deployments. Last year, we highlighted the largest contract in the company's history with Gwinnett County Public Schools that went one for one, Express and eXpedite at every entryway into the high schools and middle schools in the Gwinnett County, which is the largest school district in Georgia.

Health care has been a strong market for us for quite some time. Health care and specifically emergency rooms are the most dangerous workplace in the United States in terms of on-employee violence, just think about the people that come in to an emergency room. They're not there for a good day. It could be a mental health patient. It could be somebody suffering from drug addiction and unfortunately, violent matters occur. So we've seen some significant growth in health care over the last few years.

And as I mentioned, securities event-driven right here in Manhattan a couple of years ago now, you had the murder of the UnitedHealthcare CEO. That drove interest from corporate security teams in terms of how they secure their own facilities. But top verticals, sports and entertainment, education, health care, they rotate around, for example, where in summer, education was always strong for us in the summertime as schools do improvements before students get back into the fall. And yes, when unfortunate events occur, security teams look for answers, and we try to provide those.

Maybe a good point to segue into your just recent results, solid beat raise into '26 as the year unfolds. Can you maybe talk to us about the revenue contributors that you have seen this quarter? And how do you see that being sustained into 2026?

Sure. Yes. Thanks, Shaul. I'll talk about revenue a little bit. In Q1, we posted $46 -- just over $46 million in revenue, which was up 45% year-on-year. That year-over-year comparison was driven by strong customer demand, and John talked about the different verticals driving it, of course. We had strength in our pricing across the board. We also had a onetime positive effect where we changed our purchasing method from the prior year that gives us a year-over-year favorable comparison. And we've been talking about that for months. This isn't new information, but that also contributed to the year-over-year compare. But when we put that in context for the full year, we also raised expectations for 2026 to $175 million to $180 million in full year revenue, and that's up from $172 million to $176 million. So we felt good in starting the year off in Q1, and we see that flowing through the rest of the year as well.

We've been getting on that purchasing -- we've been getting questions from investors about the mix between purchase and subscription deals during the first quarter as well as obviously the implications on gross margins. Maybe can we double-click on both these items?

Sure. So we talked about revenue a little bit. It was up year-over-year. It was also, as you said, it matters on the mix, whether a customer chooses to do a purchase subscription in which they buy the hardware themselves because some customers prefer or have procurement preferences of owning the equipment, but it still comes with a 4-year services and software agreement with it. And that's our purchase subscription model. That's a little bit more front-loaded with revenue, but again, has a 4-year subscription that accompanies it. The other option that customers can choose is just a 4-year full year subscription, in which case they do not own the hardware, it's leased from us in addition to our software and services that come with it as well.

And that's a more ratable, smoother 4-year recognition of revenue. So in the purchase subscription, we had a higher mix in Q1 that drove some of the revenue contribution in Q1 of purchase subscription. So higher mix of purchase subscription brings a little bit more lumpiness of revenue, but we knew that going into Q1. So that wasn't the reason for the good start to the year. It was contemplated in our prior guidance. We had a significant amount of that backlog coming into Q1, and we deployed that backlog that produced some of the Q1 revenue. But as we think about the year, we also told investors, we are seeing right now a slightly higher mix of the purchase subscription flavor from our customers for the year.

And so we're estimating 55% of our revenue or the mix will come from purchase subscription, where we started the year at about 50-50. And when we think long term, we generally assume a 50-50 mix of purchase versus pure subscription because it's ultimately the customers that make that decision, and we try to make it seamless for them to choose what's best for their particular deployments.

Got it. So maybe even building on that, how should investors be thinking about Evolv's cash flow into 2026?

So we mentioned a few things on our last call. We ended Q1 down about $8 million in cash flow compared to the prior quarter, and that was expected, and that was primarily driven by the prior year's -- the 2025 incentive payments. That was the difference of the $8 million of cash change in Q1. And we said we expect to be cash flow positive in the second half of the year. So we didn't say anything specifically about Q2. But if you think of Q1 down single digits, second half where we expect to be positive, you can fill in the blanks to see year-over-year, probably not a lot of change. That's just simple math.

Got it. John, can we talk about eXpedite's traction and how it differs from some of the competing solutions out there? And maybe as customers deploy both Express and eXpedite, does that expansion motion improve customer stickiness over time?

Thank you for those questions. I'm very, really excited about the eXpedite product. It provides a brand-new paradigm and it allows places that could not deploy traditional x-ray to do so. The reason being you do not need a trained X-ray operator to use it. And that's the largest fundamental difference between eXpedite and other solutions in the market, and I'll get into some other ones. What do I mean by a trained -- security operators trained in X-ray. Think about when you go to the radiologist, X-ray images don't look like regular images, they're specifically trained to look at the image of your knee and tell you if there's something wrong with it.

The same applies for looking for the barrel of a gun or a knife or an explosive component inside a bag. So we developed our own proprietary data set. There are not public sources available for x-ray images of every type of bag with every type of weapon that we can get our hands on to go inside it. So we built that data set, trained our own models, built the machine from the ground up. It's our own design. It's not an ODM, OEM type design to enable that kind of autonomous operation. Secondly, on a difference is speed. Because we do not have a human reviewing the machine, we can run the belt much faster. Think because there's various X-ray solutions on the market, but think like 4x faster, a traditional X-ray machine, if you run the belt without stopping it, which is a big without it.

It runs at about 500 bags an hour, and we're upwards of 2,000 bags per hour because we're not relying on a human to go look at it. In terms of the stickiness, we've integrated eXpedite into the ownership experience that people have with Express. Our solutions are cloud connected. So they're not just screening at the door, but they're providing valuable data to our customers as well. How many people came in, what entrants? How many people were stopped for a secondary screening? How often do they find a real weapon. On average, our devices find about 500 real firearms every single day. They get all that information. They can get after action reports to compare a security team from one to another.

They can do what if analysis. If I raise the thresholds and have look for smaller and smaller threats, which can come with a compromise of alert rate, they can actually do that inside our portal and see what the results would be because we gather the same data every single time, and you can actually run a different algorithm against yesterday's scans and tell you exactly how many people you would stop. We built eXpedite into that. So you see all the eXpedite data as well, managed software, configurations and most importantly, for staffing. Often, the largest encumbrance into deploying a solution like ours is you have to have somebody at the door manning it. It's an incremental cost.

So we integrated the alerts from Express and eXpedite into the same user interface so that one operator can see alerts, hey, I need to stop this person and look in their right hip pocket that's walking in, and I need to stop that bag and examine that bag, and we do that in one place to make it as sticky as possible. In terms of the traction, the product first started being shipped into the market January of last year. So it's been in the market just over a year. Now 6% of our customer base has eXpedite. I think that's pretty good traction in a year, especially in the security industry. And we continually report on the attach rates with customers, which I'm very pleased with. In Q1, we had 9 new customers that bought eXpedite, 8 of them bought Express as well. And I think that's a pretty good attach rate.

Absolutely. So 500 firearms a day? And by the way, is that mostly on the education vertical or it's pretty much uneven.

It's all over. And that's the firearms that our customers tag. So we take their verification that I did a search, I found a real weapon, they tag it. We have that data in our portal. There's a lot of weapons coming into buildings, especially in the U.S. every day.

Yes. We've said the world is not becoming a safer place. AI has been topic du jour the past 2 years now. Can you talk about how you guys are deploying AI internally? That's on the one hand and as well as maybe tailwinds that it could be providing for overall demand you are seeing or you could be seeing?

We view AI, generative AI, large language models as a tailwind overall. We have the benefit of being a full stack technology provider. You can't go into pick your LLM of choice and say, create a weapon screening system and get one. We design our own hardware. We design the software that runs on that hardware. We build our own data sets and train our own proprietary models. You have to have all of those pieces to be able to make our solution work. I think that builds a pretty substantial moat in terms of our disruptive threat from LLM.

And so as a result, we view Gen AI as a tailwind to operations in terms of building efficiency, allowing us to service our customers in a more effective way, helping us bring innovation to customers faster because the productivity of our engineers is improved since they're no longer remembering, do I need -- did I close that forward loop or do I need a semicolon at the end of this because AI can write code for you. And we're leaning in hard. We're pushing across the organization to leverage these capabilities to bring innovation to our customers faster and serve them in a more efficient way.

Chris, as we think about your improved 2026 guidance -- revenue guidance, how are you guys balancing that growth on the one hand with -- given rising hardware cost, I would even say memory cost and that being put against some of your EBITDA targets?

Yes. Thanks for the question. It's obviously a topic du jour out there. We were fortunate enough that we contemplated premium pricing in our guidance we had for the year. In fact, John talked about in a question we got at our earnings filing that we contemplated that, and we're still within that envelope that we contemplated. So like everybody else, there is pressure out there. We do see it. We had planned for it. And we plan for it not just to accept it from the market, but there are things, of course, we can do internally with options and engineering swaps and what have you. So all of that was contemplated and is still contemplated in our guidance.

Yes. So very proud of the planning that the team did, and they thought about it, right? We disclosed that we had put $1 million into our guidance to account for purchase price variance and premium pricing for semiconductors. And we still -- Chris said, we still feel good that we're going to live within that envelope, and that's contemplated in the modest EBITDA expansion that we've guided to the Street.

Got it. Can you also maybe talk about your current cash position on the balance sheet? How do you see that? Do you feel comfortable with it? Any potential kind of strategic thoughts down the road in terms of expanding the platform longer term?

Yes. Thanks for the question on that. So the latter part of your question, how do we think about this long term expanding the business, please tune in June 9. We have an Investor Day planned where we'll be talking about capital allocation and our long-term growth rates and everything that falls within there to the longer term.

In the short term, we feel very good about our cash position, the strength of the balance sheet. It was about a year ago where we put in place our financing. And we've got about $60 million, give or take, which quarter you're looking at in cash. About $30 million of that is debt, $30 million is cash, and we have capacity for another $45 million to tap into should we need it. But you take all of that, we feel very good about -- I talked about being cash flow positive in the second half of the year. The business is certainly in a good spot foundationally to think about the next step, as you said, which we'll have more to say June 9.

Questions from the audience before we proceed. [Hugh] go ahead.

Can you talk about the contract manufacturing arrangements with Plexus.

Yes. So we do not have our own manufacturing plants. We have used contract manufacturing since the inception of the company. We had a contract manufacturer, a single location one in Massachusetts, relatively conveniently located to the office, which was great for the company as it grew from a start-up into a publicly traded company. Last year, we disclosed that we signed a contract with Plexus, a publicly traded global scale contract manufacturer and that we would be onboarding them through the first half of this year with entering scale manufacturing for that meeting specifically that the majority of our units will be coming out of Plexus in the second half of 2026.

It's been a good partnership. I personally meet with the leadership team there on a regular basis to see how it's going, and it's going on track. That is also implied within our guidance of modest EBITDA expansion as we commented on the last earnings call, moderate gross margin expansion through the back half of the year to the mid-50s.

Got it. One of the questions that we often get, so folks clearly understand all the verticals, John, that you guys have addressed. What about airports? Where does that sit strategically within your thinking for the next several years? It would appear as if it's a massive opportunity.

It's a question that comes up often. I mean I gave the example of TSA screening because people are very familiar with it, and it's an easy way to paint the picture of what our technology...

[Audio Gap]

While they check you out for narcotics, while they check you out to see if you're on a list with a warrant or whatever else might be there, right? They do a lot of things slowly, one person at a time on purpose. We're the antithesis of that where how do you fill a stadium of 80,000 people quickly? How do you fill a school when the bell rings at 8:00 a.m. quickly and efficiently and still scan for weapons, right? And so that's a different paradigm. Now that's not to say there aren't some places where we can make some penetration or help change that paradigm in the airport. But to John's point, given all the other things in front of us, there's some wide open TAM for us to go tackle in the meantime versus changing the way airports run security. If you think about that dichotomy.

Got it. Got it. No, absolutely. Makes a whole lot of sense. In addition, it would appear that your competitive landscape is fairly limited, maybe high barriers of entry. Talk to us a little bit if you have been detecting any changes, any new entrants or not?

Evolv created a category, a brand-new category. We enabled people to do something they weren't doing before. What's very unique about our business is outside of a stadium, when we're selling to a client, as far as I can tell, most often, we're replacing nothing at all. It's very different even than some innovation that we're used to in our lives like the iPhone, right? Steve Jobs when he showed you the iPhone didn't have to convince you that a mobile phone is a good thing to carry. BlackBerry, Motorola and Nokia had already all done that, just showed you a better phone. In our case, we're showing something to people for the first time. So we created a category.

We've been successful in penetrating into that category, and that's attracted competition. I think that's a great sign. That's a sign when you have venture capital firms that are investing in start-ups for technology to compete with us that they see the same market opportunity that we do. I believe as we continue to iterate on this technology, make it smaller, have different variants at various cost prices, continue to increase the efficacy and the efficacy is all about lowering nuisance alarm rates. So it's like a smoke alarm. When a smoke alarm goes off, people pay attention because it usually doesn't false alarm.

As we continue to do that, I believe most large public buildings will have a technology like ours because why wouldn't you? Why would you -- if you could simply prevent with a lot of inconvenience, weapons coming from your facility, why would you do that? So that's attracted competitors because that market opportunity is there, and there's a lot of precedents for those kind of markets building. When I was driving my first car in high school in the mid-90s, it didn't have airbags. All cars have airbags. It didn't have a rearview camera. Now you can't sell one without it and they become standard place. I believe technology like ours will follow that same scale. That's an attractive market. Competitors come in, but we like the position that we have.

No incumbents, which is good news.

We're the incumbent now.

Yes. No, no. Absolutely. Maybe with that in mind, what's going on like, let's say, outside of the United States in that respect? I know Europe, slightly more fragmented, different regulatory environments, languages.

Things are different. The profile of threats are different, but the core drive for people feeling secure in public places without inconveniencing how they live is the same globally. So we do have a business outside the United States. It's nascent, pretty small, but something, as Chris talked about capital allocation, and we talked about at Investor Day, we're thinking about into the future. We have systems deployed in several countries around the world. It's hundreds, not the thousands that we have inside North America. And we believe there's plenty of places where we have good product market fit with what we have today.

How should we be thinking about the buyer from the -- when we talk about enterprises, who's the buyer? Who's like the purchasing body. When we think about it from Evolv's perspective, who's -- when you go and pitch to your clients, who do you talk to?

So it does vary by vertical. If you go into enterprise-like verticals like health care, corporate workplaces and even stadiums, there's a head of security that's there. And that's who we engage with. Most commonly, that person has a law enforcement background and they think about security. It's a show-me sale. I'm not aware of a customer who's bought this product site and scene. Most likely, there's a demo that's involved. And now you have this ex-law enforcement individual who doesn't take your word for it, they walk through it. They bring every weapon they have. They try to pull it any way that they can. That's what those sales typically look like.

For example, we invest in a fleet of demo trucks to make it cost effective from a customer acquisition cost to go do this and they go on tours -- through city where we can test the technologies. You get into education vertical, and it can be different. In a large school district, like Gwinnett County Public Schools that I mentioned, the largest school district in Georgia, it's in the Atlanta area. They actually have their own police department, and there's a police chief. That's involved and that can look similar. You can get in the smaller school districts where it's the superintendent or it's the principal of a school that's making those decisions or its school board driven by parents. So the education vertical can be most different. Otherwise, it's typically a security buyer.

Got it. John, Chris, just before we wrap it up, what's the key message you'd like investors to walk away from this session, maybe without front-running your June 9 analyst event.

Been consistent. This is a new market. This is still a nascent market, and we're very early in this technology adoption curve. If you look at the units that we've penetrated into that 700,000-plus entryway TAM and to provide some scale on that number, there's 130,000 school buildings in the United States alone, and they have more than one door. I asked ChatGPT the other day, how many buildings are in the world. There's 2.7 billion. 700,000 is not some far-fetched number.

We have -- we finished last year with over 8,000, right? And we added hundreds of units to that in Q1. We're 1% penetrated into this TAM. And if you look at traditional S curves, right, there's a long way to go to get to 80% even SAM adoption in this marketplace. And I can think of the cases like access control systems, the key cards that you use to get into your office building are now here in this hotel that you use. And the pace of those that came in were very early. There's a ton of greenfield in front of us. And I think we're just tapping in what the opportunity is.

Got it. With that, gentlemen, thank you so much for joining us.

Thank you.

Thank you.

Good afternoon, and welcome to the Evolv Technology First Quarter Earnings Results Conference Call [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's call, Brian Norris, Senior Vice President of Finance and Investor Relations for Evolv Technology. Please go ahead, sir.

Thank you, and good afternoon. Welcome to today's call. I'm joined today by John Kedzierski, our President and Chief Executive Officer; and Chris Kutsor, our Chief Financial Officer. Today, after the market closed, we issued a press release detailing our first quarter results and our 2026 outlook.

The release is filed with the SEC and is available on the Investor Relations section of our website. During today's call, we will make forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

These statements reflect our current expectations and views of future events, including, but not limited to, our business strategy and model, our expectations for future growth and market opportunities, our ability to acquire, renew and expand customer relationships, our strategic partnership with Plexus, future demand for our products and our ability to achieve our business outlook.

All forward-looking statements are subject to material risks, uncertainties and assumptions, some of which are beyond our control. Actual events or financial results may differ materially due to multiple factors, including those described under the caption Risk Factors in our annual report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 10, 2026, and our quarterly report on Form 10-Q filed with the SEC earlier today.

The forward-looking statements made today represent our views as of May 12, 2026. Although we believe that the expectations reflected in these statements are reasonable, we cannot guarantee that future results, performance or the events and circumstances reflected herein will be achieved or will occur. Except as may be required by applicable law, we disclaim any obligation to update them to reflect future events or circumstances.

Our commentary today will also include non-GAAP financial measures that we believe provide additional insights for investors. These measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP. Non-GAAP measures discussed today include adjusted gross profit and margin, adjusted operating expenses and operating income, adjusted EBITDA and adjusted EBITDA margin and adjusted earnings and earnings per diluted share.

Reconciliations to the most directly comparable GAAP measures are included in today's press release and our definitions may differ from similarly titled measures used by other companies. We will also discuss other operating metrics, including annual recurring revenue, or ARR, and remaining performance obligation, or RPO, which we believe are helpful in understanding the progress we are making as a business.

Before I turn things over to John, I'd like to remind investors about Investor Day 2026, which will be held on June 9, 2026. The event will be webcast live on the Investor Relations section of our website. We look forward to providing a deeper update on our strategy, product innovation and long-term financial framework at that time.

With that, I'd like to turn the call over to John.

Thank you, Brian, and thanks to everyone for joining us today. As we reflect on our first quarter results, the message is straightforward. We continue to execute on what we said we would do. The progress we're making starts with the trust and partnership of our customers and it's being delivered through the steady, disciplined work of our team.

We continue to strengthen the consistency and reliability of our operations while scaling a hardware-enabled subscription business that is producing increasingly predictable and durable outcomes. We're doing this in a global security environment that is more complex than it even was a few years ago.

Threat levels across schools, health care facilities, workplaces and public venues remain elevated. That's being reinforced by instability and violence playing out globally from ongoing unrest in the Middle East to high-profile attacks at public sites abroad, like the recent shooting at an archaeological site near Mexico City and the attempted attack at the White House Correspondent Dinner.

Against that backdrop, customers are increasingly focused on solutions that are not just effective, but scalable, consistent and operationally reliable. Last quarter, we touched on the broader market conversation around generative AI and how quickly it is changing the software landscape. We won't revisit that discussion today, but the takeaway remains relevant.

Differentiation comes from owning the full solution. Evolv was never built as a pure software company. Our platform combines proprietary hardware and sensors, the software that runs on that hardware and our highly differentiated AI models. Because our systems are deployed at scale, with our customers' permission, we can evaluate new models using real-world data.

That feedback loop, combined with operational learning in the field helps improve performance over time and supports long-term customer relationships. We deliver this capability as weapons detection as a Service, which includes the hardware, software, use of AI models and the on-site services required to keep systems operating as designed.

We remain on track to be comfortably over 10,000 units deployed by the end of this year, reflecting sustained customer demand and our ability to scale responsibly. As our installed base grows, the platform becomes more valuable, supporting better detection performance, deeper customer integration and stronger recurring revenue visibility through multiyear subscription contracts.

As we look ahead, we believe we are still in the early innings of building scale in our business. While the company previously shared a long-term target of 10% to 15% adjusted EBITDA margins at its 2023 Investor Day, we are increasingly confident there is a potential for much greater leverage over time. That leverage is driven by a growing installed base, growing adoption of expedite, improved customer acquisition efficiency and operating scale across both our platform and services.

We'll share much more detail on these dynamics at our Investor Day on June 9. With that context, let me briefly summarize our first quarter results. Revenue in the first quarter was $46.3 million, up 45% year-over-year. Our growth reflected new customer wins, strong unit deployments, continued expansion within existing customers and a step-up in product revenue resulting from our decision to directly fulfill purchase subscriptions, which provides a year-over-year onetime benefit.

We ended the quarter with annual recurring revenue of $127.3 million, reflecting 20% year-over-year growth as our subscription base continues to scale. Adjusted EBITDA margin expanded to 8.5% in Q1 compared to 6.4% in the first quarter of last year. We welcomed nearly 50 new customers during the quarter and now serve approximately 1,300 customers globally.

Finally, remaining performance obligation was up 18% year-over-year to $299 million, reflecting continued end market demand and strong upgrades to our Gen 2 Express platform. Beyond the financial results, we continue to see our platform deliver practical real-world value to the communities that rely on Evolv every day.

Weapon screening isn't just about what's detected. It's about helping organizations establish environments where safety is taken seriously and people can go about their daily lives with confidence. By serving as a critical layer within broader safety strategies, our technology supports environments where students can learn, patients can receive care, employees can work and communities can gather. -- helping make the world a better place to live, learn, work and play.

Over the past several months, we've seen multiple instances in education where Evolv systems flagged firearms and knives during student arrival screening, allowing school staff and law enforcement to intervene early and prevent weapons from entering school buildings. In these situations, teams are able to respond quickly and allow the school day to continue without escalation, underscoring the value of preventative, operationally reliable screening.

These events are occurring alongside broader policy discussions, including in Georgia, where House Bill 1023 recently passed the House and is now under consideration in the Senate. The bill would require weapon screening at primary student entry points across public schools statewide.

While we are not assuming any specific legislative outcome, we are monitoring this development as one example of how policy discussions and day-to-day security challenges continue to reinforce long-term demand for proactive layered weapon screening. In the first quarter of 2026, we continue to see steady demand across our core end markets, beginning with education, where safety priorities, operational scale and daily throughput make reliability essential.

During the quarter, we added over a dozen new education customers, including K-12 districts and municipalities across Arkansas, California, Michigan, Mississippi, New Mexico, New York, North Carolina, Pennsylvania, Tennessee and Texas. These wins span a wide range of district sizes and operating environments, reflecting the applicability of our solutions across diverse geographies and education systems.

In health care, we continue to build momentum with new customers across a range of hospital and health settings. Notable additions included BronxCare Health System and the West Virginia University Health System. Additional wins with regional systems and community hospitals further expanded our footprint in health care, reflecting a focus on safety solutions that preserve patient access and experience.

In professional sports and live entertainment, we added several high-profile venues during the quarter, including Subaru Park, which is a state-of-the-art stadium for professional soccer. We also added one of professional football's most established franchises as well as a major multi-use arena in the Western U.S., which is home to both professional basketball and hockey.

These environments require security approaches that perform consistently at scale without disrupting the fan experience. As the playoffs begin this spring, Evolv was proud to serve as the weapon screening partner for 50% of all playoff teams across professional basketball and hockey. This reflects sustained trust from leads and franchises operating large-scale, high visibility events.

We are also seeing growing momentum in the enterprise workspace across corporate campuses, headquarters, manufacturing facilities and distribution centers. Security leaders in these environments are increasingly focused on protecting employees and visitors while maintaining efficient operations.

During the quarter, we added several large-scale enterprise customers, including one of the world's most valuable and recognizable technology companies as well as another Fortune 500 corporation. Today, we are proud to serve as the trusted weapon screening partner for more than 30 Fortune 500 companies, highlighting our expanding role in supporting safer workplaces.

The momentum we're seeing across these markets reinforces the trust customers place in Evolv as a long-term partner and validates our strategy to expand the platform beyond walk-through screening. Expedite, our autonomous AI-based bag screening solution continues to gain traction in environments where customers want to screen bags without slowing entry or increasing staffing requirements.

Increasingly, customers are looking to conduct bag screening as part of a single integrated security workflow and Expedite is purpose-built for that model. When deployed alongside Evolv Express, we believe this combination offers customers with substantial bag and backpack usage and specifically bags that have items like laptops in them, one of the most effective screening solutions available, enabling high throughput while delivering remarkably low alarm rates.

In fact, in a specific school deployment of Express and Expedite, one customer reported an expedite average alert rate of less than 2% on over 300,000 scanned bags over a 6-month period of time. We believe the market is increasingly recognizing this type of performance. We now have over 75 expedite customers, representing approximately 6% of our total customer base, up from roughly 1% a year ago.

In the first quarter, 19% of new customers purchased expedite almost always alongside Express, which stacks ARPUs while optimizing customer acquisition costs. As customers increasingly see the value in operating both walk-through and bag screening through a single cloud-connected platform, we see meaningful opportunity for account expansion and deeper subscription stickiness over time.

Following a period of 18 months of meaningful progress in resetting the business and building momentum, my focus has increasingly shifted toward positioning the company for long-term success. Recently, I've been able to spend more of my time focused on leadership and organization development as we prepare for our next stage of growth.

We strengthened the organization with new experienced talent across AI and algorithms, product management, services and IT to support the long-range needs of a growing customer base while continuing to drive more innovation and executing with discipline. In parallel, we are increasing investments in the foundational capabilities required to operate at greater scale, upgrading core back-office systems, strengthening our process and controls and tightening key operating processes across the company.

These investments are deliberate and are reflected in our outlook that expects to deliver expanded adjusted EBITDA margins in 2026, ensuring that increased organizational rigor and financial discipline progress hand-in-hand. Turning to operations. We remain on track with our strategic partnership with Plexus, our new global contract manufacturing partner.

Onboarding is progressing as planned, and we expect to complete that work by the end of the quarter. The Plexus partnership positions us to expand production capacity, extend our global reach and further strengthen operational resilience as we continue to scale. With respect to supply chain, while semiconductor supply constraints have been well documented across the industry, we've been able to largely mitigate these challenges and expect to maintain our delivery plans for the near term, and we continue to expect to execute against our full year unit deployment targets.

Importantly, when we provided our guidance earlier this year, we proactively considered the impact of premium pricing for components and those assumptions were embedded into our outlook. As a result, while we remain vigilant, we believe we are appropriately planned for these dynamics and are positioned to manage them through the year. Before I turn things over to Chris, I want to share some context around our outlook.

We continue to see strong momentum across the business. Our pipeline remains healthy. Execution is tracking well. And for those reasons, we are raising our outlook for 2026. We continue to expect to end 2026 with comfortably over 10,000 units deployed. We are raising full year revenue guidance and now expect $175 million to $180 million, up from $172 million to $178 million, representing growth of 20% to 23% year-over-year.

While we continue to invest in innovation and operations, we expect to deliver expanded adjusted AUM margins in 2026. As we move forward, our focus remains squarely on execution and scale, delivering consistently today while building the foundation for durable long-term growth.

With that, I'll turn it over to Chris to walk through our first quarter financial results and outlook in more detail.

Thanks, John, and good afternoon, everybody. I'm going to review our first quarter results in more detail and then share more about our outlook for 2026. Revenue in Q1 was $46.3 million, an increase of 45% year-over-year.

This reflected strong end market demand for our solutions as well as growth in product revenue related to the transition from the direct fulfillment model, which provides a onetime year-over-year benefit by recognizing more product revenue for a given deal compared to a year ago. ARR at March 31, 2026, was $127.3 million, reflecting growth of 20% year-over-year.

This was fueled by new customer growth and expanding deployments across our customer base. Adjusted gross margin was 52% in Q1 compared to 61% in the same period last year. As we've noted before, our intentional shift of purchase subscriptions to direct fulfillment creates an initial gross margin headwind. This outcome is fully aligned with our strategy.

Although margin stepped down in the first quarter of a new deployment, the direct model produces superior long-term returns, including higher total gross profit, increased revenue and ARR and a better cash flow than our prior distribution approach. Moving down the P&L. Q1 adjusted operating expenses, which excludes stock-based compensation, loss on impairment of equipment and certain other onetime expenses were $26.9 million compared to $23.2 million in the first quarter of last year, reflecting growth of 16%.

The increased spend includes investments across R&D, our sales team, higher commissions commensurate with revenue as well as adding critical G&A roles and system investments to help with efficiencies and scale. Q1 adjusted EBITDA, which excludes stock-based comp and other onetime items, was a positive $3.9 million compared to $2.1 million in the first quarter of last year.

This resulted in adjusted EBITDA margin of 8.5% compared to 6.4% in the first quarter last year. Remaining performance obligation, or RPO, was $299 million at the end of the first quarter compared to $253.5 million at the end of Q1 of last year, reflecting growth of 18% year-over-year. We continue to see a strong trend of customers upgrading to our Gen 2 Express platform.

These upgrades, together with solid end market demand drove this year-over-year growth. We continue to expect RPO growth to begin to accelerate, supported by increasing end market demand, a ramp-up of renewals going forward and by bringing more revenue back in-house through our direct purchase fulfillment motion, which we've discussed with investors over the last 9 months.

Turning to the balance sheet. As we previously forecasted, cash, cash equivalents and marketable securities decreased by about $8 million sequentially to $61 million. This primarily reflected timing of the company's annual incentive payments associated with our strong 2025 performance. This distribution typically occurs in March of each year. I will remind investors that we expect to be cash flow positive in the second half of 2026.

Turning to 2026. As John highlighted, the fundamentals of our business remain strong with robust customer demand and the foundational changes we made to our business model are taking hold. We are raising our full year 2026 outlook for revenue to $175 million to $180 million compared to our prior guidance of $172 million to $178 million, representing year-over-year growth of approximately 20% to 23%.

Our upwardly revised revenue outlook reflects 3 factors: first, a higher mix of purchase subscriptions, which increases year 1 revenue of a contract; second, incremental contributions from short-term rental subscriptions that expand customer access to our technology; and finally, continued strength in pricing and ARPU trends. We continue to expect to exit 2026 with annual recurring revenue of approximately $145 million to $150 million, representing growth of 20% to 25% year-over-year.

As we've been saying for the past year, the fulfillment model and pricing changes we made in mid-2025 are important factors in understanding our revenue trends. Q1 came in above the high end of our prior guidance with revenue up 45%. That performance was driven by strong demand and the installation of a record backlog that was more heavily weighted toward purchase subscription transactions, which, by definition, include more upfront onetime product revenue.

During our last earnings call, we told you about our thoughts for the shape of revenue for the year, and it is coming along as expected. We continue to expect a sequential decline in Q2 revenue simply because the prior year purchase subscription backlog was largely shipped in Q1. This is a timing dynamic related to backlog mix and fulfillment timing and not a reflection of end market demand, which remains strong.

Turning to the second half of the year. We still expect H2 total revenue to be modestly higher than H1 and up year-over-year, with ARR growth outpacing revenue growth in H2. This reflects the changes to our pricing and fulfillment model implemented in mid-2025 as discussed on prior earnings calls. These changes shift a portion of contract value away from upfront product revenue and toward recurring revenue, which impacts the timing of revenue recognition.

As a result, for a given purchase subscription unit, we expect to realize approximately 20% less upfront product revenue and roughly 20% more ARR beginning in the second half of 2026. We continue to expect strong unit growth with deployments in H2 exceeding H1 deployments and H2 unit deployments growing over 25% year-over-year. In summary, we expect that H2 '26 will reflect the final period of meaningful impact from these pricing and fulfillment changes, after which our revenue profile is expected to become more normalized.

Overall, our 2026 outlook reflects a business that is capturing more of the economic value it creates while continuing to build a larger base of recurring revenue, increasing visibility through ARR and RPO and delivering a more durable and predictable revenue profile over time. We remain committed to investing in growth and for foundational capabilities required to operate at greater scale.

We plan to do this in a disciplined way that grows expenses below our revenue growth rate. We continue to expect to deliver expanded adjusted EBITDA margins with full year adjusted EBITDA margins in the high single digits for 2026 compared to 7.6% in 2025. Finally, a brief comment on our long-term operating model. As we've shared on prior earnings calls, the framework from 3 years ago that contemplated 10% to 15% long-term adjusted EBITDA margins is no longer reflective of how we see the business evolving.

Based on continued growth and operating improvements, we now see the opportunity for greater long-term leverage. We look forward to sharing more detail about this at our Investor Day on June 9. For more information on that event, please feel free to reach out to Brian.

With that, I'll turn it back over to you, Brian.

Thank you, Chris. Operator, at this time, we'd like to open the call up for Q&A. [Operator Instructions]

[Operator Instructions] Our first question comes from Jeremy Hamblin with Craig-Hallum Capital Group.

Congratulations on the record results. I thought I would start with just understanding the contract momentum. You noted lots of success across verticals. But wanted to get a better sense for the mix of deals. You noted that this quarter included a bunch of purchase deals.

I wanted to see if you could add a little more color to that. What portion of the mix was purchase deals versus full subscription deals? And then as you look ahead to Q2 and the second half of the year, how you expect that balance of mix to play out?

Thanks, Jeremy. I appreciate it. As far as the mix, traditionally, you've seen as we moved into the year. In Q1, we saw a different about 60-40. Traditionally, it's been 50-50.

You note inside our press release -- earnings release, we actually said that in our guidance for the year, we expect it to go to about 55% purchase, 45% subscription. So we're seeing a change that seems to be sticky and we reflected that in our guidance.

Got it. And then as a follow-up, in terms of thinking about the pricing change that you made last year, you provided some nice color about the 20% increase in ARR values.

But in terms of thinking about the kind of the rule of thumb as we are going forward in the second half of the year and into '27 and beyond, if you had, let's say, a representative $100,000 deal on a unit, what portion of that mix would you expect for ARR on a purchase deal and then what portion on a full subscription deal?

Full subscription deal, the entire value, Jeremy, is inside ARR. On the purchase deal, we recognize the revenue upfront upon shipment, you see that inside our product line.

And then the balance you'll see within services where we deliver both the software and the services we provide like service to our customers those systems. In terms of your proportion question, if we take your hypothetical $100,000, it would be about 30% to 40% of that as product revenue and then the balance of it would be in recurring revenue.

Got it. If I could sneak one in real quick. Your adjusted gross margin, 52%, the highest you've seen here in a few quarters since you made the pricing change. Should we expect your adjusted gross margin to continue to track higher here in Q2 and then in the second half of the year?

Jeremy, this is Chris. I'll take that. Yes, it was 52% here in Q1. We're expecting closer to the mid-50s for the balance of the year. So I'd give you more of the -- I don't want to get into quarter-by-quarter, but for the full year, closer to the mid-50s, which would obviously indicate improvement from where we are now.

And just as a reminder for you and everybody else, gross margin is also dependent on our mix. And as the customer demand dictates, more subscription mix will mean better gross margins because those COGS are spread over the full 7-year useful life. a purchase deal, of course, we recognize that hardware cost upfront in period 1 instead of over time. So again, that's just the dynamic and why we call out the mix that's built within the forecast we give.

Our next question comes from Eric Martinuzzi with Lake Street Capital Markets.

Yes. I just wanted to revisit the guidance. Is the upward revision to the revenue and the unchanged on the adjusted EBITDA margin because that's primarily purchase driven?

Yes. Yes. That is a significant driver and why you're seeing that effect for the same reasons Chris just mentioned. more purchase subscription deals do bring in more revenue into the period, and you're seeing that reflected partially in the call on the guidance that we have, but it comes with additional costs in the period, which is why you're seeing what you're seeing in that.

Right. And John also mentioned some investments in critical talent and hiring as well as well as our systems and processes, which we talk about. But the purchase mix is the biggest driver to your question.

Okay. And then just the expedite success, it was great to see those stats that you pointed out, that was very helpful. Does your -- do any of your competitors have a similar product to expedite?

There are other X-ray bag scanning products in the market. That market has been quite mature have been around for a long time. We really believe in the products that we have and the combination of autonomous.

And what we mean by that, it does not require a human to review x-ray images that's done completely by our proprietary AI model that we deploy to the machine. The speed, we designed the machine from ground up, so we can run the conveyor at a significantly higher speed because no human has to review the images. There's actually not even a screen to look at the images on the device. It's also integrated to our overall security platform.

What does that mean in latest terms? That means one operator can look at alerts from both the walk-through system and Express as well as from Expedite. You don't have to add extra tablets or potentially depending on the operating environment for people to look at different screens. If I have a bag alert, I have a personal alert, I see both of that in one place.

And then finally, it's integrated to a single cloud portal. So customers can see statistics on how many people entered, how many got stopped as well as for the bags inside. And when you think about all of those things together, we think we have a very differentiated solution.

[Operator Instructions] We'll take our next question from Shaul Eyal with TD Cowen.

Congrats on a solid start to 2026 and the improved revenue guidance. John, how are you using AI internally at Evolv? And maybe as my follow-up, thanks for the color on beefing of your bench. Can I ask also what are the rest of your hiring plans for fiscal '26 as you balance growth and profitability?

Yes. Let's go through both the questions. Your first question about using AI in operations, and I assume you're talking about generative AI and the various platforms that are available. First, I would say that we are not a pure SaaS company.

And what I mean by that is we have a combination of hardware that we design from the ground up, the software that runs on that hardware, the AI models that actually make decisions if something is not a threat or nonthreat. All of that is designed and built in-house and we control that stack end-to-end, which we believe is a strong position to go at the end.

I say that because we look at generative AI as a tailwind to our business in terms of what efficiency gains it can bring in terms of time to market for products, in terms of automating the tedious and the mundane -- and we're leaning in using those capabilities inside our company to make it a better business and make it as efficient as we can be as well as part of the work that we're putting in, in terms of governance around those new solutions and guardrails to make sure we do so in an appropriate way.

So in short, we see it as an opportunity as we scale to grow efficiency within the organization. On your second question about the comments that I made and hiring plans, it was a considerable effort here in Q1, looking at what the needs of the business are going forward. And I'm personally thrilled about the people we brought in across the organization. And these are senior leadership positions that I outlined.

In my prepared comments, and I'm really hopeful that the impact they're going to make over the course of the year. As far as hiring plans for the rest of the year, they're really around scaling the business, these critical talent hires that we have. And as we look forward, just balancing the commitment that we've made that we will grow operating expenses at a lower rate than revenue, but we will continue to invest as we've outlined with those kind of guardrails in place because of the opportunity we see in front of us.

Our next question comes from Michael Latimore with Northland Capital Markets.

Congrats on the great results. I guess just maybe talking a little bit about sales cycle this year. Do you see any change in the sales cycle? It seems like a lot of macro events might have raised some incremental concerns.

And then also, when you're selling Expedite and Express together, does that change the sales cycle faster or shorter? Just a little more color on that would be great.

So with regard to sales, we haven't made any specific commentary about any changes, and we won today. What I would say is to some of the specific of your question, in general, I see 2 types of sales cycles that occur. there are the sales cycles that are in response to an acute event that occur, and those can be very rapid.

And we've talked about some of those in few earnings calls, something occurs and a customer wants to do the best that they can to try to prevent that from happening again. And then you have more traditional sales cycles that can take longer than traditional enterprise cycles that have budgeting and approvals in there.

And that's pretty consistent. But I'd say one thing that forget about us is that we do have that dynamic that they sort of fall in one of those 2 camps that occur. I'm sorry if you had a second question.

Let's see. Yes. I guess you've called out the upgrade to Gen2 a couple of times. Can you just elaborate a little bit on that? Is that customers that are upgrading early like before the renewals? And then kind of what's the catalyst for the upgrades? How many have upgraded to that so far?

Yes. So comment that quickly, but I did -- and I remember the second part of your first question, you asked about expedite in terms of sales cycle. eXpedite purpose designed to address a specific problem that we saw customers have, and that is managing alert rates in environments that have a significant amount of bags.

I shared some commentary to what a specific customer in their operating environment has seen. And I just see that as an opportunity, especially in some verticals like education to potentially shorten sales cycles because lower alert rates usually mean less burden and overhead for a client and the things they have to think about when they.

In terms of your questions on upgrades, so far on upgrades that have been actioned, -- this includes renewals that were early. 60% of those customers upgraded to our Gen2 unit, and we're thrilled with that. When they do that, they're committing for a new 4-year subscription, which maximizes the remaining performance obligation that we get.

And so we're pleased with those trends and the overall renewal motion and execution that we're putting together. Mike, this is Chris. I'd add one more thing to your expedite question, just in case it isn't obvious, you talked about sales cycles, but it also allows us to sell often, not always, 2 units instead of 1.

So our customer acquisition costs come down, and we get more subscriptions working to produce in what we believe is a very difficult to match performance in the marketplace.

So when you sell Express and eXpedite together, it's a bigger sales, but that doesn't elongate the sales cycle.

For a given sales cycle for selling 2 units instead of 1 and 2 subscriptions instead of 1, those unit economics are attractive. I guess I would just say it that way. Looking forward to the analyst event.

That was your last question. I would now like to turn the call over to John for closing remarks.

I just want to take a moment to extend my personal thanks to our customers who put their trust and Evolv every day. We recognize with the importance of what we do, and we take that extremely seriously. I want to thank our investors for believing us in the journey that we're on and also for our employees for the support, dedication and sacrifices they make as we continue to grow and mature and evolve.

Our mission is an important one. We focus on that every day. It's not lip service. It is what we do and what drives the decisions that we make. And we focus on that mission and bring to as many of our customers as we can, while at the same time, building the absolute best business and evolve that we can do. Thank you for joining our call.

Thank you for joining. This concludes today's call. You may now disconnect.

Hi. I'm John Kedzierski, CEO and President of Evolv Technology. Yesterday, we released our Q1 2026 earnings report.

Before we reflect on Q1, I'd like to remind everyone about our Investor Day 2026, which will be held on June 9. The event will be webcast live on the Investor Relations section of our website. We look forward to providing a deeper update on our strategy, product innovation and long-term financial framework at that time.

Reviewing our first quarter results, the message is straightforward. We continue to execute on what we said we would do. And we're doing this in a dynamic global security environment that is more complex than it was even a few years ago.

Last quarter, we touched on the broader market conversation around generative AI and how quickly it is changing the software landscape. As a reminder, Evolv was never built as a pure software company. Our platform combines proprietary hardware, the software that runs on that hardware and our proprietary AI models.

As we look ahead, we believe that we are still in the early innings of beginning to scale, driven by a growing installed base, growing adoption of eXpedite, improved customer acquisition efficiency and operating scale across hardware, software and services. We'll share much more detail on these dynamics at our Investor Day on June 9.

Now I'll turn it over to Chris Kutsor, our CFO, to discuss our first quarter results.

Thanks, John. Happy to. Revenue in the first quarter was $46.3 million, up 45% year-over-year. Our growth reflected new customer wins, continued expansion within existing customers and a step-up in product revenue resulting from our decision to directly fulfill purchase subscriptions, which provides a year-over-year onetime benefit. Annual recurring revenue was $127.3 million, up 20% year-over-year. Adjusted EBITDA margin expanded to 8.5%, and remaining performance obligation, or RPO, was $299 million at the end of Q1, up 18% year-over-year.

Turning to 2026. As John highlighted, the fundamentals of our business remain strong with robust customer demand, and the improved foundational changes to our business are taking hold. We're raising our full year 2026 outlook, and we now expect revenue to be $175 million to $180 million, representing a year-over-year growth rate of 20% to 23%.

We continue to expect to exit 2026 with annual recurring revenue of approximately $145 million to $150 million, representing growth of 20% to 25%, and we remain committed to investing in a disciplined way that grows expenses below our revenue growth rate. So while we are investing in the business, we continue to expect 2026 adjusted EBITDA margins to be in the high single digits.

Thanks, Chris. Following a period of 18 months of meaningful progress resetting the business and building momentum, we continue to focus on positioning the company for long-term success and our next stage of growth. We've strengthened the organization by adding experienced talent across AI and algorithms, product management, services and IT to support the long-range needs of a growing customer base while continuing to drive more innovation and executing with discipline. In parallel, we are increasing investments in systems and processes that underpin the foundation required to operate at greater scale.

These investments are deliberate and reflected in our outlook that expects to deliver expanded adjusted EBITDA margins in 2026, ensuring that increased organizational rigor and financial discipline progress hand-in-hand. By serving as a critical layer within broader safety strategies, our technology continues to support environments where students can learn, patients can receive care, employees can work and communities can gather, helping make the world a better place to live, learn, work and play.

Thank you to the nearly 1,300 customers who continue to put their trust in the Evolv team as we work to build a safer world. 2026 is off to a strong start. We look forward to sharing more at Evolv Technology Investor Day 2026 on June 9. Thank you.

Good afternoon, and welcome to the Evolv Technology Fourth Quarter Earnings Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's call, Brian Norris, Senior Vice President of Finance and Investor Relations for Evolv Technology. Please go ahead, sir.

Thank you, operator, and good afternoon, everybody. Welcome to today's call. I'm joined by John Kedzierski, our President and Chief Executive Officer; and Chris Kutsor, our Chief Financial Officer.

Earlier today, after the market closed, we issued a press release detailing our fourth quarter results and our 2026 outlook. The release is filed with the SEC and available on the Investor Relations section of our website.

During today's call, we will make forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements relate to our current expectations and views of future events, but not limited to, statements regarding our expectations for future growth, our ability to gain new customers and renew and expand existing customers, future demand for our products and our ability to meet our business outlook. All forward-looking statements are subject to material risks, uncertainties and assumptions, some of which are beyond our control. Actual events or financial results may differ materially from these forward-looking statements because of a number of risks and uncertainties, including, without limitation, the risk factors set forth under the caption Risk Factors in our annual report on Form 10-K for the year ended December 31, 2025, filed with the SEC earlier today.

The forward-looking statements made today represent our views as of March 10, 2026. Although we believe that the expectations reflected in these statements are reasonable, we cannot guarantee that future results, performance or the events and circumstances reflected therein will be achieved or will occur. Except as may be required by applicable law, we disclaim any obligation to update them to reflect future events or circumstances.

Please note that our commentary today will also include non-GAAP financial measures, which we believe provide additional insights for investors. These measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP. These measures include adjusted gross profit, adjusted gross margin, adjusted operating expenses, adjusted operating income, adjusted EBITDA and adjusted EBITDA margin, along with adjusted earnings and adjusted earnings per diluted share. Reconciliations between these non-GAAP measures and the most directly comparable GAAP measures can be found in the press release that we issued earlier today. Please note that our definition of these measures may be different than similarly titled metrics presented by other companies. We will be discussing other metrics such as annual recurring revenue, or ARR, and remaining performance obligation, or RPO, both of which we believe are helpful to investors in understanding the progress we are making as a business.

Before I turn things over to John, I'd like to highlight an upcoming event for our investors. We will be hosting our 2026 Investor Day on June 9, 2026. The event will be webcast live on the Investor Relations section of our website, and we will share additional details as we get closer to the date. We look forward to providing a deeper update on our strategy, product innovation and long-term financial framework at that time.

With that, I'd like to turn the call over to John.

Thank you, Brian, and thanks to everyone for joining us today. As I reflect on the progress we made in 2025, I'm reminded that everything we achieved began with the trust and partnership of our customers and was made possible by the steady determined efforts of our entire team. Over the past year, we strengthened the consistency and stability of our operations while continuing to build a scalable, high-growth hardware-enabled subscription business with increasingly predictable and durable results. We're doing this in a global security environment that is materially more complex than it was even a few years ago. Threat levels across public venues, schools, workplaces and critical infrastructure have continued to escalate, increasing the importance of security solutions that are not only effective but scalable, consistent and operationally reliable. That backdrop reinforces our belief that customer demand for modern technology-enabled security solutions will continue to expand.

I want to take a moment to address all the discussion of generative AI and what I believe that means for the future of software and Software-as-a-Service or SaaS. It's incredible what the latest large language models can do. It's hard to utilize those models, especially in the area of software creation and not ask yourself if pure SaaS is vulnerable to disruption. We are not pure SaaS. We are unique. We use a tight combination of hardware, sensors, proprietary data sets and software that enables our AI models to make rapid decisions at customer locations. We control our full solution stack. We design our own hardware from the ground up, from the geometry of the coils we use to generate our electromagnetic fields to how we capture and process the data those fields create. We develop a software that runs on that proprietary hardware. We are able to use the unique data our systems create to train proprietary AI models that make rapid decisions to differentiate many types of weapons from many everyday benign items. Our thousands of deployed systems are cloud connected. So we have access with our customers' permission to the data created by those systems. We use that data to evaluate our new models against real, not simulated scans so that we can best understand what their real-world impact is likely to be. Our solution stack is truly end-to-end. We believe that companies that control their end-to-end solution stack of hardware, software and data will have a moat that can be defended. Our stack is ours. We have spent more than a decade building it. We control it.

We sell our solution to customers as weapons detection as a Service. By signing up for that service, customers gain access to the hardware, the software that runs it, the AI models that make threat determinations and our on-site services to keep our systems operating as designed. At the end of 2025, all of that translated into 8,000 systems deployed, screening over 4 million people per day. And since the launch of Evolv Express, our technology has been used to screen more than 4 billion people worldwide. Yes, that's billion with a B. The more customers that sign up, the more real-world data we can use to evaluate our AI models in different verticals and environments. That data is not useful to anyone but Evolv and its customers. Because without our unique hardware and software, you simply could not use it. Over time, this combination of deployed systems, operational learning and long-term customer relationships supports recurring revenue through multiyear subscription contracts, drives ARR growth and builds RPO or remaining performance obligation.

Our fourth quarter results reflect continued execution of this approach. We ended 2025 with annual recurring revenue, or ARR, of $120.5 million, reflecting growth of 21% year-over-year. As we will discuss in more detail momentarily, we expect this rate of growth to accelerate in 2026 as growth in our recurring revenue base begins to outpace growth in total revenue.

Revenue in Q4 was $38.5 million, up 32% year-over-year. For the full year, revenue was $145.9 million, representing growth of 40% year-over-year. Growth in the fourth quarter and the full year reflected strong new customer acquisitions, continued expansion within existing customers and a step-up of approximately $15 million in the second half of product revenue resulting from our decision to directly fulfill purchase subscriptions. We reported our fifth consecutive quarter of positive adjusted EBITDA with adjusted EBITDA margin of 4.7% in Q4 and 7.6% for the full year. We reported positive adjusted EBITDA of $11.1 million in 2025, compared to a loss of $21 million in 2024, a $32 million improvement in adjusted EBITDA on an absolute dollar basis.

Total cash, cash equivalents and marketable securities increased by $12.8 million sequentially in Q4 '25 to $69 million, reflecting strong cash collection effort and discipline around working capital management. We believe this highlights the cash-generating potential of the business over the long term. We welcomed over 60 new customers in Q4 and now serve over 1,200 customers globally. We continue to see a strong trend of existing customers upgrading to our Gen2 Express platform. These upgrades, together with solid end market demand drove a 13% year-over-year increase in RPO to $293.4 million at the end of Q4.

Beyond the financial results, we continue to deliver real measurable value to the growing number of communities that rely on us. That starts with our customers detecting and tagging an average of 500 firearms daily. At its core, weapon screening isn't just about what's detected. It's about creating a culture of safety where students, staff and families know that violence prevention is taken seriously. By serving as a visible everyday layer in a comprehensive school safety plan, our technology can help deter threats before they escalate and reinforce expectations for a safe learning environment, even on days when no weapon is found. Just last month at a Georgia school customer, a student arrived on campus carrying a knife. Our system flagged the threat and when school police investigated further, they discovered a loaded handgun and drugs in the student's car. Parents there described the incident as a clear message to the community that the system works. And in a high school in Oregon, our solutions identified a student attempting to bring a loaded handgun through the school entrance. Staff were able to intervene immediately, secure the weapon and keep the school operating without ever needing to initiate a lockdown. These are 2 more examples from opposite sides of the country that demonstrate how proactive weapon screening not only stops dangerous items from entering schools, but also strengthens overall campus safety every single day.

In the fourth quarter, we added 12 new school districts across the U.S. as well as 3 universities in New York, Massachusetts and Texas. For the year, we added 65 new education customers, and we're proud to have screened approximately 300 million students and visitors.

In the health care sector, we are advancing a critical industry transformation by enabling hospitals to strengthen safety through a rigorous layered security model designed to address one of their most pressing risk areas. Hospitals remain among the most dangerous workplaces in the United States, accounting for nearly 70% of all reported workplace violence incidents. Our solutions provide threat detection at key access points while maintaining efficient patient-centric entry experiences. Recent customer additions include William P. Clements Jr. University Hospital in Texas, the University of Oklahoma Medical Center and Mosaic Life Care at St. Joseph in Missouri. As adoption in health care continues to expand, our technology now supports the screening of over 1 million patients, health care workers and visitors each day across medical facilities nationwide.

Staying in health care, we are pleased to announce a new partnership with the American Hospital Association, under which Evolv has been designated a preferred provider for hospitals and health systems nationwide. This designation marks an important milestone in our health care strategy and validates the critical role our technology plays in protecting patients, clinicians and visitors. Through this collaboration, we will engage directly with AHA's nearly 5,000 member hospitals and 43,000 individual members across events, thought leadership platforms and key industry forums, reinforcing our shared commitment to safer, more secure and more welcoming health care environments.

Shifting to sports and live entertainment. We continue to expand our presence with over a dozen new customers in the fourth quarter, including 7 professional football teams, reflecting continued demand for modern, efficient screening solutions across practice and training facilities. Teams are increasingly turning to Evolv as they look for ways to manage high-volume entry points with speed, reliability and a better experience for players, staff, media and fans. Each new deployment reinforces our position as a trusted partner in complex high-throughput settings where security and efficiency must coexist. Our market leadership extends well beyond the 5 major professional leagues where we have already established a leadership position. We added 65 new sports and live entertainment customers in 2025. We also saw continued strength in renewals and Gen2 upgrades in this market as well. TD Garden, home to the Boston Celtics and the Boston Bruins, upgraded to Gen2 Express for walk-through screening and added 4 expedite systems for autonomous x-ray screening of bags. Crypto.com Arena upgraded to Gen 2 and added an additional eXpedite. Other notable renewals and upgrades include the Houston Astros, Houston Texans, St. Louis City Soccer Club and the Philadelphia Eagles. Across this segment, the combination of new customers, expanding partnerships and high-value Gen2 upgrades highlights the strength of our market position. Today, we proudly screen nearly 1.5 million sports and live entertainment visitors every day.

Another key market where we are seeing growing momentum is in the workplace. Across commercial office buildings, distribution centers, warehouses and manufacturing facilities, security leaders are increasingly focused on protecting employees and visitors in environments where high-volume foot traffic can create real operational risk. Companies are under growing pressure to strengthen corporate security programs without disrupting productivity. Our ability to provide fast and effective screening is resonating with enterprises that are modernizing outdated systems. In the fourth quarter, we added multiple new Fortune 500 companies, including one of the 10 largest banks in the world, a top 25 U.S. retailer, a Fortune 100 health care innovator, a major insurance and financial services company and a multinational medical technology company. These wins underscore the growing demand we're seeing from large-scale enterprises that view workplace safety as a strategic imperative, and they highlight our growing role in securing the modern workplace. We are proud to be the trusted security provider for over 30 of the Fortune 500. The momentum we're seeing across these key markets reinforces the trust customers are placing in Evolv as their long-term security partner. Building on that foundation, we've continued to invest in broadening our product portfolio and nowhere is that more evident than the early success of eXpedite, our autonomous AI-based bag screening solution. EXpedite is resonating across environments where [ patrons ] bring bags and our customers want to screen 100% of those bags without slowing down entry, whether in education, health care, industrial workplaces or sports and entertainment. After just its first full year in market, we now have 65 eXpedite customers or about 5% of our base of 1,200 customers. Adoption is coming from both existing and new customers. In the fourth quarter, 16 brand-new Evolv customers purchased eXpedite and 11 of them also purchased Express, creating meaningful customer acquisition cost tailwinds as we land multiproduct relationships from day 1. Early deployments show a strong promise in balancing threat detection with a significantly lower false alarm rates. This helps security teams focus on real threats while maintaining a smooth flow for students, staff and visitors. We continue to believe eXpedite will drive stronger attach rates, customer expansion and deeper subscription stickiness by enabling organizations to run all screening operations through a single cloud-connected platform.

Before I hand things over to Chris, I want to share some context around our outlook. We continue to see strong momentum across the business. Our pipeline remains healthy and execution is tracking well. For those reasons, we are raising our initial outlook for 2026. We expect to end 2026 with comfortably over 10,000 units deployed. We are modeling full year revenue of $172 million to $178 million, above the $160 million to $165 million range we shared last November, with ARR growth in the range of 20% to 25%.

While we continue investing in innovation and our product portfolio, we also expect to deliver modestly expanded adjusted EBITDA margins to the high single digits. 2025 is about strengthening our foundation, clarifying priorities, sharpening execution and positioning the company for the future. As we look ahead, 2026 is about building the engine for durable, long-term growth. We believe weapon screening could become as common in certain types of buildings as sprinkler systems and intrusion alarms are today, not as a luxury, but a standard infrastructure. Getting there will require relentless innovation in weapon detection accuracy, form factor and cost. And we believe we are well positioned to lead the industry on all 3. Through continued investment in AI, expansion within our installed base, new product adoption and disciplined market expansion, we are building the long-term architecture of a scaled global security platform.

With that, I'll turn it over to Chris to walk through our financial results and the details behind our outlook.

Thanks, John, and good afternoon, everybody. I'm going to review our fourth quarter and full year results in more detail and then walk through our thoughts for 2026. Q4 revenue was $38.5 million, an increase of 32% year-over-year. All of our Q4 revenue streams performed in line with our expectations. Product revenue declined slightly from Q3, reflecting some of the onetime benefit in Q3 and trail off into Q4 from what was the largest deal in the company's history and had a heavier product mix.

Subscription revenue was modestly lower due to the timing of a short-term subscription contract in connection with a major international sporting event in the summer of 2025, which provided a lift in both Q2 and Q3.

License fee and other revenue declined as we completed the transition away from our legacy distributor licensing model.

Overall, our top line results demonstrate solid underlying growth and continued consistency in the business. Adjusted gross margin was 50% in Q4 compared to 62% in the same period last year. There are a couple of drivers worth digging into. First, as we discussed on our last call, the shift to direct fulfillment of our purchase subscription orders creates near-term gross margin headwind. This dynamic is exactly what we plan for. While it brings lower gross margin in the initial quarter of a new transaction, the direct model delivers higher gross profit dollars over the life of the contract, along with higher revenue, ARR, RPO and cash flow compared to the legacy distribution model.

Another driver to gross margins in the period was an accrual for approximately $1 million for a targeted parts upgrade and proactive field service work.

Moving down the P&L. Q4 adjusted operating expenses, which excludes stock-based compensation, loss on impairment of equipment and certain other onetime expenses were $23.8 million compared to $23.1 million in the fourth quarter of last year, reflecting growth of 3% year-over-year. This contrasts with our 32% year-over-year growth in revenue in Q4, highlighting the leverage in our business model. Q4 adjusted EBITDA, which excludes stock-based compensation and other onetime items, was a positive $1.8 million in Q4 '25 compared to $400,000 in the fourth quarter of last year. This resulted in adjusted EBITDA margin of 4.7% in the fourth quarter of '25. Visibility improved again in Q4, driven by another strong booked-to-deployed unit ratio. As a result, we began 2026 with a record level of units in backlog.

Looking at a summary of our full year results. As John mentioned, ARR at December 31 was $120.5 million, reflecting growth of 21% year-over-year. This was fueled by new customer growth and expanding deployments across our customer base. Total revenue was $145.9 million, reflecting growth of approximately $42 million, up 40% year-on-year, primarily driven by strength in demand. The growth was further compounded by approximately $15 million of year-over-year growth in revenue from our shift to directly fulfilling the hardware portion of our purchase subscription orders, which we told you about in Q3. This change captured more revenue and more gross profit dollars, albeit at a lower gross margin percentage in the second half of 2025.

Adjusted EBITDA for the full year '25 was $11.1 million or 7.6%. This is up $32.1 million from the prior year loss of $21 million on higher revenue and improved margins.

Remaining performance obligation, or RPO, was $293.4 million at the end of the fourth quarter, compared to $259.1 million at the end of Q4 last year. We continue to see a strong trend of customers upgrading to our Gen2 Express platform. These upgrades, which include a new 4-year subscription term, together with solid end market demand, drove this 13% year-over-year increase. Moving forward, we expect RPO growth to begin to accelerate, supported by increasing end market demand and by bringing back more revenue in-house through our direct purchase fulfillment motion, which we've discussed with investors over the last 6 months.

Turning to the balance sheet. Cash, cash equivalents and marketable securities increased $12.8 million sequentially to $69 million. This primarily reflected enhanced cash conversion in the quarter, driven by stronger collection activity and continued discipline around working capital management.

Turning to 2026. As John highlighted, the fundamentals of our business remains strong with robust customer demand. And when combined with the foundational changes we made to our business model, we expect ARR growth to begin outpacing revenue growth. Let me expand on the context behind our outlook for 2026. We are currently modeling full year '26 revenue of approximately $172 million to $178 million compared to our prior guidance of $160 million to $165 million, representing year-over-year growth of approximately 18% to 22%. We are currently modeling about a 50-50 mix between purchase subscription and pure subscription in 2026. Changes in mix will affect revenue, ARR, RPO and our margins. We expect to exit 2026 with annual recurring revenue of approximately $145 million to $150 million, representing growth of about 20% to 25% year-over-year. I want to remind investors that we ended 2025 with about $120 million in ending ARR. So that creates a solid baseline for 2026, which means we're coming into the year with about 70% of our revenue guidance in hand on day 1. As we think about revenue growth across '25 and into '26, it's helpful to frame how that profile is being shaped by the fulfillment model change we implemented in mid-2025, which we've discussed the past several quarters. In light of that, this is how we see the year unfolding. In Q1, we expect revenue growth rate to be in the high 30s due to the installation of the record backlog we entered the year with and the step-up in onetime product revenue on direct purchase transactions compared to the prior year. As we move into Q2, we expect modest sequential revenue decline as prior year product backlog is consumed in Q1. As we enter the second half of the year, we will mark the 1-year anniversary of our purchase fulfillment change. And despite the expiration of the step-up effect on product revenue, we still expect second half revenue to be modestly higher than the first half.

Overall, our '26 outlook reflects a business that is capturing more of the economic value that it creates while continuing to build a larger base of recurring revenue, increasing visibility through ARR and RPO and delivering a more durable and predictable revenue profile over time. We remain committed to investing in growth in a responsible way that grows revenues faster than total expenses in 2026 and are modeling full year adjusted EBITDA margins to expand from 7.6% in 2025 and to grow into the high single digits for the full year 2026, which includes approximately a $1 million headwind on memory chip costs.

Finally, a word on our long-term operating model. As we've shared with investors on prior earnings calls, that model, which previously showed long-term adjusted EBITDA margins in the range of 10% to 15% is now outdated. We now believe continued growth and operational improvements will drive greater long-term leverage in the business. We look forward to sharing more information on that topic at our Investor Day June 9. More to come.

Before we open the call for Q&A, let me turn the call back over to John for a few closing remarks.

[Audio Gap] customers, dedication of our employees, the support of our partners and the confidence of our shareholders. As we look ahead, we see significant opportunity to further scale the platform and unlock additional leverage, and we look forward to sharing more at our 2026 Investor Day. We are proud to be building technology that truly matters, helping keep people safe where they work, learn, live and play.

And with that, we're happy to open the call for questions.

Terrific. Operator, we'd like to open the call now for Q&A.

[Operator Instructions] Your first question comes from Jeremy Hamblin with Craig-Hallum.

Congratulations to the team on a great year and quarter. I wanted to just start by understanding you raised the revenue guidance pretty significantly. And want to understand the context for you had a bit more modest sequential ARR growth in Q4. Now you are raising your ARR growth from 20% to 22.5% at the midpoint. But just want to understand, there's been a lot of change in your pricing model and the fulfillment, obviously, for purchase deals. Can you help us just to understand how that's likely to play out in terms of maybe ARR per unit, how that's played out in '25 and now into '26? Are you likely to get ARR acceleration in the back half of the year as you're getting higher value per unit installed. But color that you can share, again, in context of the very strong raise of revenue guidance.

Yes, Jeremy, that's correct. We do anticipate ARR to accelerate throughout the year. The changes that we made last year in bringing purchase subscription back in-house. At the same time, we also changed pricing where we lowered the upfront price of hardware, the onetime price, and we raised the price of our software and services that will take time to go out through the year. I'll remind you that mix also drives the rate of ARR growth as subscription compared to purchase subscription where subscription is higher ARR.

Got it. That's helpful. And then I just want to understand, and it's a little bit related, I'm thinking from the last question. But in terms of your gross margin curve, you saw your subscription gross margins sequentially improve like 700 basis points. Your service gross margins, however, declined about 900 basis points. And overall, gross margins were a little bit lower than Street expectations. Again, is that captured by the change in pricing model? And how should we be thinking about overall adjusted gross margins to trend over the course of 2026?

Thanks, Jeremy. I'll take this one to start. We do expect gross margins to be in line or slightly better in '26 versus '25, first of all. Related to the first part of your question, we -- there is more gross profit dollars now being pushed into RPO in future periods compared to where it has been in the past because of everything we just talked about. So I won't revisit that, but that is a conscious and direct effect of the actions we took, that we're pleased with because, of course, more dollars come with it, more gross profit dollars, more revenue, et cetera. Otherwise, we have, of course, the other thing we highlighted, about $1 million accrual for some targeted service costs that we incurred in the period as well. It was a one timer.

Got it. Last one for me, and then I'll hop out of the queue. But you also have your Plexus relationship that's going to turn on here in 2026. When do you expect production from Plexus to begin? And in what quarter do you think that it will start to flow into the financials given inventory turns in your current position?

So when we announced the Plexus deal in Q3 and Q4, we stated that the schedule was to get to full ramp with Plexus in the second half of 2026. I'm pleased, Jeremy, that we're on that schedule. We still expect that same timing. We do expect that transition, as we've said before, to be a slight tailwind to gross margin over time. And I think there's some working capital improvements that can be had there as well.

Your next question comes from Eric Martinuzzi with Lake Street Capital Markets.

Yes. The cash flow was very good in Q4 for the year, obviously, the $18.7 million in 2025. Just curious to try and see if there's any linkage here that we can draw because there are so many moving parts in the revenue between the adjusted EBITDA forecast for 2026, which I'm coming up with a midpoint of $14 million in 2026 for adjusted EBITDA. Is there any way to connect that to your expectations for cash from ops in '26?

Yes. Thanks, Eric. There's a couple of things there. We did have a very strong Q4 cash generation quarter, which we're proud of. That was both working capital efficiency, but a very strong focus and delivery of cash collections. We talked about '25 being a foundational year, implementing new process and improvements and cash flow and cash collections was one of those areas. So we did take some steps there that were more 2025 and won't be repeated going into 2026. So the quarter was a very strong cash collection, some of which isn't repeatable going forward.

In terms of cash flow for '26, we haven't shaped '26 or forecasted it at this point. I would say, however, a couple of things. Very proud of Q4. We do expect to be cash flow positive in the second half of '26. The first half is going to be shaped as well by our Q1 incremental cash cost of our incentive payments from the prior year. And when you take all of that, John and I are very focused on improving cash flow going forward, both in '26 and beyond. So with all of that baked in, I think you can expect improved trajectory with more specifics to come.

Is the expectation that cash flow will be greater in '26 than '25?

Absent, again, the incremental $7 million that I'm expecting in Q1 for prior year incentives, that's incremental compared to the prior year payments. I am expecting cash flow improvement. I think it's going to be close. I'll get back to you later in the year on whether I'm going to call that slightly down or cash flow neutral.

[Operator Instructions] your next question comes from Shaul Eyal with TD Cowen.

Congrats on strong completion of 2025. Can you guys talk to us about the mix between new logos and existing customers this quarter? I know you touched on that briefly, but maybe any additional color will be greatly appreciated.

We added about 60 new customers in the quarter, and that took our total count to over 1,200 customers, which we're extremely proud of and reflects the strength we're seeing in customer adoption of our solution. Historically, we're always seeing close to a 50-50 split of our new orders coming from new customers and existing customers expanding, which we think is a great testament to the strength of our solution. We highlighted that we now have over 30 Fortune 500 customers, and we're really encouraged by the uptake of eXpedite, not only the new logos that we're bringing on with eXpedite, but also the attachment that we're seeing between eXpedite and Express.

Got it. Got it. And Chris and John, what are the hiring plans for fiscal '26 as the business is clearly scaling and accelerating, but also EBITDA is gradually nicely expanding. So just thinking out loud here, what are your hiring plans in terms of headcount?

We're encouraged by what we're seeing inside the market and the security environment overall, and we are investing to capture that growth, and that's reflected in us raising guidance here as we look into 2026. So we are going to make investments in R&D and sales and marketing. We still have some work to do in G&A on the operational side of the business, as Chris communicated in the middle of last year. But we're committed to doing that in a responsible way. And what does that mean to us? We're going to grow top line, faster than we grow expenses, and you see that in us expanding our EBITDA margins in '26.

So one piece of color I would add here, especially if you dig into the [ K ] at all and you look at actual headcount. Our headcount is approximately flat to where we left -- where we started the year despite the reduction in force that was put in place in Q1. But a significant amount of the people that were added back were brought in-house for what used to be done by expensive consultants and contractors. So we in-sourced a significant amount of services of our customers, and that's something we want to control and touch our customers directly with anyway. So that's a net trade from paying contractors to adding people in-house. We did the same thing on a few G&A places as well where we added headcount instead of paying external consulting firms to do the work for us. So while some headcount might shift, it doesn't commensurate with additional spend, underpinning what John said, but I wanted to triangulate that in case you're looking at some headcount numbers in the [ K ].

Your next question comes from Alex Latimore with Northland.

Alex Latimore here on for Mike Latimore. Great call here. I just had 2 questions. First one is, what percent of bookings are you seeing from current customers versus new customers throughout the year? And what do you expect in '26?

It's been approximately 50-50 of customers expanding versus new -- net new customer acquisition, and we anticipate that to continue.

Awesome. And then one other unrelated question here. Do you see the AHA certification that you have now accelerating the hospital deals this year?

We're very excited about that partnership. And absolutely, as we look forward, we continue to think that health care is going to be a growth vertical. I'll provide this as an additional tailwind on top of what you saw in the state of California, where they've mandated advanced weapon screening across that state to be implemented by 2027. We also recently saw what's happening in Georgia, where Georgia has a bill going through the legislation that has not yet passed, that would mandate weapon screening inside all schools. We firmly believe that all schools should have weapon screening. We look at these 2 case examples where regulations are coming down, mandating technology as ours as a tailwind as we look into 2027 and the future of our business and beyond.

John, you want to close [ it ] up?

Thank you. We're really excited about where we left 2025. And as we look forward in 2026, you see the excitement and the strength that we see in our business and our pipeline, the improved execution that we built in Q4 in raising our overall guide, the changes that we put into the business, allowing us to capture all the revenue on purchase subscriptions and adjust pricing for long-term value are coming into the market as we had forecast. As we look into the second half of the year, building additional scale with our new contract manufacturing partner, Plexus, makes us very optimistic.

Overall, we're building a very strong business. This is a hardware-enabled SaaS business that combines our proprietary hardware that generates proprietary data that we can use to continue to strengthen our models, and we monetize that in long-term recurring revenue as you see in our RPO or remaining performance obligation. We look forward to sharing more details about the long-term outlook of our business at our upcoming Investor Day. Thank you very much for your participation.

Thank you for joining. This concludes today's call. You may now disconnect.

Good afternoon, and welcome to the Evolv Technology Third Quarter Earnings Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's call, Brian Norris, Senior Vice President of Finance and Investor Relations for Evolv Technology. Please go ahead, sir.

Thank you, Megan, and good afternoon. Welcome to today's call. I'm joined by John Kedzierski, our President and CEO; and Chris Kutsor, our CFO. Earlier today, after market close, we issued a press release detailing our third quarter 2025 results and full year outlook. The release is filed with the SEC and available on the Investor Relations section of our website, where you will also find a supplementary slide highlighting the benefits of our transition to our direct distribution model, which we'll reference during the call.

During today's call, we will make forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements relate to our current expectations and views of future events, including, but not limited to, statements regarding our future operations, growth and financial results, our potential for growth and ability to gain new customers, demand for our products and offerings and our ability to meet our business outlook.

All forward-looking statements are subject to material risks, uncertainties and assumptions, some of which are beyond our control. Actual events or financial results may differ materially from these forward-looking statements because of a number of risks and uncertainties, including, without limitation, the risk factors set forth under the caption Risk Factors in our annual report on Form 10-K for the year ended December 31, 2024, filed with the SEC on April 28, 2025, and our quarterly report on Form 10-Q for the 3 months ended September 30, 2025, filed with the SEC earlier today.

The forward-looking statements made today represent our views as of November 13, 2025. Although we believe the expectations reflected in these statements are reasonable, we cannot guarantee that future results, performance or the events and circumstances reflected therein will be achieved or will occur.

Except as may be required by applicable law, we disclaim any obligation to update them to reflect future events or circumstances.

Our commentary today will also include non-GAAP financial measures, which we believe provide additional insights for investors. These measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP. These measures include adjusted gross profit, adjusted gross margin, adjusted operating expenses, adjusted operating income, adjusted EBITDA and adjusted EBITDA margin, adjusted earnings and adjusted earnings per diluted share.

Reconciliations between these non-GAAP measures and the most directly comparable GAAP measures can be found in our press release issued today. Please note that our definition of these measures may differ from similarly titled metrics presented by other companies.

We will be discussing key operating metrics such as annual recurring revenue, or ARR, remaining performance obligation, or RPO, both of which we believe are helpful to investors in understanding the progress we are making in this business.

One last item, we have an active IR schedule coming up, including the Craig-Hallum Alpha Select Conference next week in New York and 2 events in December, the UBS Technology Conference in Scottsdale and the Northland Capital Conference, which is being held virtually.

We will also be on the road this quarter at several financial centers across the country. For more information, please contact me at [email protected]. With that, I'd like to turn the call over to John.

Thank you, Brian, and thanks to everyone for joining us today. Our results throughout the year demonstrate meaningful progress toward greater consistency and stability across the organization.

We're moving closer to our goal of building a scalable, high-growth business with predictable performance.

Our focus remains on disciplined execution and an unwavering commitment to our customers' success. Our Q3 results reflect the latest steps on that journey.

Revenue was $42.9 million, up 57% year-over-year, driven by strong new customer acquisition and expanded deployments within existing customers as well as higher onetime product revenue associated with certain customer wins, including the largest customer contract in the company's history.

We have also benefited from the completion of certain short-term subscription contracts, including the premier international soccer tournament we supported over the summer.

Chris will get into more detail on revenue in a few minutes. Our overall visibility continued to strengthen with Q3 marking the strongest booked-to-deployed unit ratio in the company's history. Thanks to the changes we have been sharing with investors in our go-to-market model, we expect 2026 to be an inflection point where Evolv's ARR growth will outpace revenue growth.

Let me explain that encouraging trend a bit further, which we introduced to investors on our prior call. While we are delighted with 57% year-over-year revenue growth, it is important to note that our deployed unit count grew by about 30% year-over-year, which we believe provides a more normalized view of the fundamentals of the business.

The gap between revenue growth and unit growth is primarily based on 2 factors. First, it reflects the trailing impact of our legacy distribution fulfillment model, which results in a higher proportion of the total contract value taken in the immediate period, lower ARR and lower total contract revenue as compared to direct purchase fulfillment.

The second factor driving the delta between revenue growth and unit growth is a higher proportion of purchase versus subscription sales or our mix.

Specifically, units purchased by our customers represented 57% of unit activity in Q3 compared to 41% in the year ago period.

By transitioning away from our legacy distribution model, we now capture 100% of the average revenue per unit or ARPU. This shift increases recurring revenue over the 4-year subscription term and delivers back to Evolv a higher level of cash per unit.

To illustrate the differences between distribution and direct fulfillment, we've created a chart and posted it on our Investor Relations website.

While we have largely completed the move away from the distribution fulfillment model, and we have also repriced our solutions effective July 1 to emphasize software and ARR, it will take some time for our revenue recognition to match our new pricing. As a result, in Q3, we saw higher onetime product revenue related to the prior distribution model and associated revenue recognition treatment.

Over time, our revenue recognition will more closely match our pricing and the majority of our ARPU will be in ARR instead of onetime product revenue.

In summary, the trailing effects of distribution fulfillment and a higher proportion of purchase units drove revenue to outpace unit and ARR growth and why we believe 30% is a more meaningful measure of year-over-year growth.

We finished the quarter with annual recurring revenue, or ARR, at $117.2 million, reflecting growth of 25% year-over-year. While our ARR growth trailed revenue growth in Q3, we expect this ratio to begin to flip in 2026 with faster ARR growth relative to total revenue growth, as I mentioned.

We reported our fourth consecutive quarter of positive adjusted EBITDA with adjusted EBITDA margins of 12% in Q3.

We welcomed over 60 new customers in Q3 and are raising our year-end estimate for active subscriptions to between 8,000 and 8,100. This continues to represent a very small slice of the hundreds of thousands of entrances that advanced weapons detection can help protect.

We continue to see a strong trend of customers proactively upgrading to our Gen2 Express platform. These upgrades typically reset the subscription churn with fresh 4-year commitments. Gen2 upgrades also helped drive a sequential 8% increase in RPO, which stood just shy of $300 million at the end of Q3.

eXpedite, our new autonomous AI-powered bag screening solution continued to gain strong traction since its Q4 2024 launch. In Q3 alone, we added 12 new customers, primarily in schools where we are beginning to see one-for-one deployments of eXpedite and Express to help streamline security by lowering alarm rates and enhancing the student experience.

We believe the combination of Express plus eXpedite provides an exceptional security experience in terms of threat detection capabilities and false alarm rates. Based on early deployment data across education customers, Evolv eXpedite has shown an alert rate of approximately 2%, demonstrating strong promise in balancing detection with the goal of keeping false alarm rates low.

Beyond the numbers, we are making a real difference in the communities we serve. Every day, we screen on average more than 3 million people. And since the launch of Evolv Express, we have screened over 3 billion visitors.

Evolv eXpedite introduced just a few quarters ago, has already been used to screen more than 1 million bags. On average, our technology helps customers detect and tag 500 firearms daily.

What does that look like in real life? In August, at a high school in Nashville, our system identified and helped intercept a loaded handgun at the door.

In October, Evolv Express detected a loaded firearm in a student's backpack at a high school in Georgia.

And just 2 weeks ago, our solution identified a concealed firearm during morning arrival at a high school in Atlanta.

These 3 examples provide a small glimpse into the impact we are having on education.

In the third quarter, we added over a dozen new school districts across the U.S. These included 2 new districts in New Jersey, 2 in Michigan, 2 in California and 1 each in Wisconsin, Tennessee, South Carolina, Nevada, Montana, Louisiana, Iowa and Connecticut.

In health care, we are driving meaningful change by helping hospitals elevate safety standards while minimizing the impact on patient and visitor experience.

Our solutions are enabling smoother and faster entry while enhancing threat detection at critical access points.

With growing demand across the sector, we are now screening hundreds of thousands of visitors daily in medical facilities nationwide.

A few recent wins in this market include WellSpan Health, UC Davis Health and Seattle Children's Hospital.

Shifting to sports and live entertainment, we expanded our presence in professional hockey with -- the Buffalo Sabres, who entered a multiyear subscription agreement to deploy 9 Evolv Express Gen2 systems at KeyBank Center. This deployment is part of a broader 2025 arena upgrade initiative aimed at improving ingress and egress for fans.

In Collegiate Athletics, the University of North Carolina at Chapel Hill is deploying Evolv Express to enhance safety and streamline entry at its athletic venues.

In the world of professional football, Bank of America Stadium, home to the Carolina Panthers and Charlotte Football Club, recently completed a long-term renewal upgrading to Gen2 of Evolv Express.

The venue now operates 19 systems and has added Evolv eXpedite for enhanced bag screening and faster guest entry.

Staying in professional football, our technology is now being deployed at nearly a dozen practice and training facilities league-wide. This initiative includes both Evolv Express and Evolv eXpedite. We believe this is a strong endorsement of our ability to deliver a superior security experience for a variety of entry flows, covering fans, staff members, players, media and VIP guests. These wins reinforce our ability to penetrate diverse markets and deliver trusted solutions that drive long-term growth.

We welcome all our newest customers and take sacred the trust they have placed in us.

We look forward to the challenge of earning their business every day.

Shifting into business operations. We're excited to announce a new strategic partnership with Plexus -- a collaboration that expands production capacity, global reach and operational resiliency.

Plexus is a global leader in design, manufacturing and supply chain services that brings the infrastructure and expertise to support the next phase of our growth.

With 26 facilities and more than 20,000 team members worldwide, they'll help deliver our technology to the places people gather every day.

I want to shift gears for a moment and share some exciting developments on the product development front.

I'm pleased to share that we recently released the latest versions of our software, Evolv Express 9.0, Evolv eXpedite 1.2 and – MyEvolv Portal and Evolv Insights 6.0. These updates reflect our ongoing commitment to improving performance and user experience for our customers, now numbering over 1,000 globally.

With this release, we've introduced several enhancements aimed at supporting security teams in their day-to-day operations.

Among the highlights is a new integrated tablet interface, which brings together the workflows of Express and eXpedite into a single streamlined user interface. We also released the integration of eXpedite into the -- MyEvolv Portal, enabling customers to see operational data for walk-through and now bag screening in a single location.

With these enhancements, we have strengthened the bundled customer ownership experience for Express plus eXpedite.

We've also expanded alert tagging and added sensitivity tuning, giving our customers more control in how they manage their security operation. These improvements are the results of listening closely to our customers and continuing to push the boundaries of what's possible in safety and efficiency.

Through our subscription model, we're able to deliver these software capabilities seamlessly via the cloud, enabling innovation to reach the field without disruption.

With each release, we aim to raise the bar, not just for ourselves, but also for the entire industry. Before I hand things over to Chris, I want to take a moment to share a bit of context around our outlook.

We're seeing strong momentum in the business. Our backlog continues to grow, and we've got a healthy pipeline. For those reasons, we are raising our 2025 outlook.

We now expect to grow revenue by about 37% to 40% in 2025 compared to our previous guidance of 27% to 30% growth.

I would point out that our upwardly revised revenue forecast for the year of between $142 million to $145 million includes certain onetime benefits, in particular, related to onetime revenue recognition from our legacy fulfillment and pricing models that I mentioned earlier.

Excluding these short-term revenue items, we will be forecasting total revenue growth in 2025 of about 30% year-over-year.

We continue to expect to deliver positive full year adjusted EBITDA with full year margins in the high single digits.

We remain committed to generating positive cash flow in Q4.

Looking ahead to 2026, let me start with this fundamental principle. We're planning to add more units in 2026 than we did in 2025 with ARPU trends remaining stable. As a reminder, our 2025 results included the largest customer contract in the company's history, more than 250 units. We plan to grow on top of that order.

The changes in our distribution fulfillment model and pricing structure will allow us to capture 100% of contract ARPU, shift more of that ARPU from onetime revenue into ARR and RPO and create an opportunity to maximize leverage in the business over time.

We estimate that the subtle but powerful shifts of emphasizing ARR over short-term product revenue will defer about $5 million to $10 million of revenue in 2026 that we would otherwise have captured had we not changed our distribution and pricing structure.

We expect that $5 million to $10 million to convert into long-term recurring revenue streams that will benefit future years.

We're currently modeling full year 2026 revenue of between $160 million to $165 million. Importantly, we expect ARR to grow by at least 20%, outpacing total revenue growth in 2026, which is an important pivot for Evolv.

This management team continues to prioritize ARR growth and other long-term value drivers.

With that, I'll turn it over to Chris, who will take you through our financial results and the details behind our outlook.

Thanks, John. Good afternoon, everyone. I'm going to review our third quarter results in more detail and then walk through our updated guidance for the rest of the year as well as context on our early thoughts for next year.

As John mentioned, revenue was $42.9 million in Q3, an increase of 57% year-over-year. This was fueled by strong new customer growth and expanding deployments across our customer base. It also includes a few items that, while positive, aren't expected to recur at the same scale every quarter, as John mentioned.

Let me unpack those a bit further. First, our new contract with Gwinnett County Public Schools, the largest in Evolv's history, contributed approximately $3 million in revenue in Q3, primarily as onetime product revenue.

Second, Q3 included a very high proportion of direct purchase method deployments compared to our legacy distribution motion, which brings more immediate revenue recognition and less ARR, which John covered already.

The nearly $3 million of product revenue recognized for Gwinnett County this past quarter is an example of that effect.

We also recognized approximately $3 million in IP license and other onetime revenue in Q3, primarily tied to our legacy distribution subscription model.

Finally, we had roughly $1.5 million in short-term subscription revenue or rentals. These short-term subscriptions are valuable and remain part of our strategy, but they tend to be episodic in nature.

When adjusting for these specific items, you get a more normalized view of Q3 revenue closer to $35 million to $36 million, which would reflect growth of about 30% year-over-year.

Annual recurring revenue, or ARR, at September 30 was $117.2 million, reflecting growth of 25% year-over-year and 6% sequentially.

Remaining performance obligation, or RPO, was approximately $299 million at the end of the third quarter compared to approximately $275 million at the end of the second quarter and $269 million at the end of Q3 last year.

Adjusted gross margin was 51% in Q3 compared to 64% in the same period last year. There are 3 drivers here worth diving into a little bit deeper.

First, as discussed on our last call, the shift from distribution fulfillment to direct purchase fulfillment creates a near-term gross margin headwind, but it also brings higher gross profit dollars over the term of the contract, along with higher revenue, higher ARR, higher RPO and cash compared to the legacy distribution model.

With the business now delivering a consistent track record of positive adjusted EBITDA, that's an important long-term trade-off we are pleased to make.

Second, we saw the impact of several large education contracts that included significant volumes of our newest product, eXpedite.

eXpedite is still operating at subscale manufacturing cost. We expect eXpedite costs to improve in 2026, which we expect to positively impact future gross margins.

And finally, we recognized approximately $3 million of onetime costs related to inventory and service adjustments.

Moving down the P&L. Adjusted operating expenses, which excludes stock-based compensation, loss on impairment of equipment and certain other onetime expenses were $24.8 million compared to $25.2 million in the third quarter of last year. This modest year-over-year decline in contrast to strong year-over-year growth in units deployed, total revenue and ARR growth reflects the actions we have taken since the start of the year to reduce spend and improve the profitability of the business.

We believe it is also an excellent indicator of the leverage we believe is central to our business model.

Adjusted EBITDA, which excludes stock-based compensation and other onetime items, was a positive $5.1 million in Q3 of '25 compared to a loss of $3 million in the third quarter of last year. This resulted in adjusted EBITDA margin of 12% in the third quarter of 2025.

Turning to the balance sheet. Cash, cash equivalents and marketable securities increased $19 million sequentially to $56 million, up from $37 million at the end of Q2 2025. This primarily reflected proceeds from the new credit facility that we completed in July, along with tighter inventory management and stronger overall collection activity.

I'm going to provide some additional details to our updated 2025 outlook that John mentioned a few minutes ago.

We now expect total revenue to grow by 37% to 40% in 2025 to be between $142 million and $145 million this year. This is up from our prior guidance, which called for revenue between $132 million and $135 million.

A few things we'd encourage investors to consider for context in our '25 revenue estimate.

First, as I mentioned in my earlier commentary, the largest deal in the company's history contributed about $3 million to Q3 revenue, and we expect to contribute more than $5 million for the full year due to higher upfront revenue recognition related to the residual effects of our legacy distribution fulfillment model.

Second, IP license and other revenue was about $3 million in Q3, and we're expecting that to be about $10 million for the full year. That onetime revenue stream is primarily tied to our legacy distribution fulfillment model, which has been phased out. Investors should assume that IP licenses are no longer a driver to revenue growth starting here in Q4.

Third, short-term subscription contracts contributed about $1.5 million to revenue in Q3, and we are expecting that to be about $2 million for the full year. Those opportunities are generally onetime in nature, so it is not something that we plan around.

In light of these 3 factors, we estimate a more normalized revenue growth rate for 2025 would have been about 30% year-on-year growth compared to 2024.

We expect 2025 adjusted gross margin to be in the range of 52% to 54%, not due to ARPU compression or a change in competitive pressure, but because of the shift to direct purchase fulfillment.

To reiterate my previous comment, the direct purchase fulfillment model is a headwind to gross margin in the first year of the new contract. But over the term of the subscription contract, it generates higher total gross profit dollars, higher revenue, higher cash and ARR compared to the distribution fulfillment model and also makes us easier to do business with.

With strong top line growth and continued focus on expense management, we expect to deliver positive full year adjusted EBITDA in 2025 with full year adjusted EBITDA margins in the high single digits compared to our previous guidance, which called for margins in the mid-single digits.

We expect to be cash flow positive in the fourth quarter of 2025.

Turning now to 2026. As John mentioned, we remain encouraged by the changes we made this year, and we expect to see ARR growth begin to outpace revenue growth in the next year. While we are still developing our final plans, let me set some additional context to the 2026 outlook.

The fundamentals of our business remain strong with a robust customer demand and a stable pricing environment.

We expect to add more units in 2026 than we did in 2025, with ARPUs remaining relatively consistent and the trends that we've seen this year continuing.

In other words, we expect continued unit growth and stable pricing.

That said, we expect recent shifts in our distribution fulfillment and pricing model will result in less onetime revenue, but more ARR and RPO in 2026 compared to 2025.

We encourage investors to refer to the presentation material posted on our IR website for a graphical view of the positive impact of pivoting to direct purchase.

We also expect a higher percentage of new units in '26 to be full subscription compared to 2025, which will also lower the '26 growth rates but drive faster ARR growth.

We expect the changes we've made to our direct purchase pricing model, changes that maximize ARR by making the upfront hardware price lower, commensurate with reduction in our manufacturing costs will push at least $5 million to $10 million of revenue out of 2026 and into ARR and RPO.

The higher ARR and associated recurring subscription value will also provide higher ARR rates when those contracts move to renewal discussions 4 years down the road.

We believe all of these are smart changes for the business in the long term.

We are currently modeling full year revenues of about $160 million to $165 million in 2026.

And again, the important news here is that we expect to add more units in '26 than we did in '25 with ARPU trends remaining stable and ARR growing at a faster rate than total revenue.

Specifically, we expect ARR to grow by at least 20% year-over-year.

And to reiterate John's earlier comment, we believe 2026 will be an inflection point for the company as ARR begins to outpace revenue growth.

While we haven't finalized our investment plans, we are committed to growing revenues faster than total expenses in 2026 and therefore, are currently modeling modest expansion of adjusted EBITDA margins.

We will share more thoughts on how we're thinking about 2026 during our Q4 call in March. And in the meantime, we're focused on finishing a strong 2025.

Before we open the call for Q&A, let me turn the call back over to John for a few closing remarks.

Thanks, Chris. We continue to be driven by our mission to make the world a safer place to live, learn, work and play while building a leading IoT SaaS security business.

We believe security is a necessity, not a luxury. We remain highly confident in our market position. We continue to move forward with purpose, guided by a clear strategy and an unwavering commitment to long-term value creation.

We've been intentional and transparent about the adjustments we're making, whether refining our go-to-market and pricing model to maximize ARR and recurring revenue, forging new partnerships to enhance cost efficiency and reduce COGS or evolving our organizational structure to ensure we optimize every investment across the business. Each of these steps underscores our focus on building a scalable, high-growth business with predictable performance.

Our strong Q3 results and the momentum we see across the organization reflect meaningful progress in all of these areas. While we're proud of these results -- as I remind our team often, we will not be complacent. We are moving steadily toward our goal of creating a business that is both scalable and consistently high performing.

We deeply appreciate the partnership of both our customers and our investors in the continued confidence they place in us and more importantly, in the mission we are pursuing.

Thank you, John. At this time, we'd like to open the call up for Q&A. Again, we ask participants to limit themselves to one question and one follow up.

[Operator Instructions] Our first question will come from Jeremy Hamblin with Craig-Hallum.

Congratulations on the very strong results. Just want to come back to the kind of the call outs of some of the onetime items here. Understand certainly for the short-term contracts, the $1.5 million of why you would exclude that and understand kind of the front revenue recognition of some of those deals that are going through distributor. But in terms of thinking about the build overall -- you do have the largest increase you've seen in recurring revenues as well as the largest increase you've had in RPO in a quarter.

So just help me understand in terms of the large contract, how the revenue recognition overall on that will play out on a go-forward basis as an example.

Jeremy, I'll start and Chris can address any other specifics you might have. So as we communicated in the prepared remarks, we just shared, one of the impacts of legacy distribution model is more upfront revenue. We have largely moved away from that and the majority of our purchase subscriptions were executed through our direct fulfillment. But there'll be a tail of effect about how we take revenue on those deals over time, and that will normalize and result in a new pricing that we've already put in place months ago in July 1.

As Chris mentioned, we'll ultimately recognize about $5 million of that order. It's a very significant proportion of the total order that we'll take in the first 2 quarters of a 48-month deal.

Again, we expect that to adjust to the overall longer 48-month revenue recognition as we get into 2026.

Jeremy, just a bit more context to that. This effect is only relevant for purchase subscription orders and doesn't have the effect for full subscription orders. And the effect is due to the hardware pricing that's part of the mix of the contract that we do in a purchase subscription order. So for about half of our business, this is the effect. And the impact, as John was talking about, ties back to GAAP accounting, ASC 606 that requires us to take that amount of upfront revenue in the way that's reflected in our remarks. So hopefully, that gives you the perspective as to why it's happening and the proportion of our business that it happens to.

Understood. That's helpful. Dovetails nicely, though into -- I wanted to ask about the new strategic contract manufacturer agreement you've entered into. In terms of how you expect that to change what your baseline cost is for Gen2 or potentially Gen3 machines on a go-forward basis.

Can you give us a sense for whether or not you expect that to reduce the manufacturing cost for the Gen machines -- I'm sorry, for the Express machines and whether or not they're also going to be manufacturing eXpedite and what that might do for the ramp of that business as well?

Jeremy, we're pleased and looking forward to the partnership with Plexus. We just executed that agreement. We're focused on onboarding them and get them to start manufacturing our product, which we will be focused on through the first half of 2026.

Over time, we look forward to a larger scale and the potential of cost synergies that will come and the ability to be able to leverage their entire footprint.

You should expect our full portfolio to eventually be available at Plexus as well.

As you would expect, we're doing it thoughtfully and carefully.

Understood. And then just one more quick one before I hop out of the queue. In terms of the eXpedite bag scanner product, what is the rough attachment rate that you're getting with that on sales of Express machines? And how does that vary? Are you getting more success with that, let's say, in the education vertical or in the stadium vertical versus a couple of your other verticals?

We're very pleased with the progress of eXpedite -- as we have shared in the prior quarter, a very significant portion of that large education order was eXpedite.

In Q3, we had 12 new additions of eXpedite customers. To answer your question directly, 11 of those also acquired Express. And that's a trend that we're really excited about. We have seen deployments across education, sports, entertainment and health care.

Our next question will come from Eric Martinuzzi with Lake Street Capital Markets.

Yes. So you talked about the number of units growing in '25 versus '24. Is that -- are we talking aggregate units, so Express plus eXpedite in 2025 is greater than '24 and the same thing, '26 versus '25? Are we talking the Express units only?

The aggregate units, of Express and eXpedite, which is consistent with how we've been discussing this year.

Okay. And then can you remind me just the delta between the price of those 2 if someone were to purchase them outright, maybe not the absolute dollar.

We shared before, the unit economics are similar. As Chris commented, we expect the gross margins to be more similar over time. Today, eXpedite is a new product, hasn't benefited from the multiyear manufacturing scale that we built into Gen2. So right now, it's a bit of a headwind on gross margin.

And Eric, remind you, that's also a 4-year subscription go-to-market model for eXpedite as well.

Your next question will come from Shaul Eyal with TD Cowen.

On results, and thanks for the color and transparency on the business and the outlook. As you guys shift away from distribution to direct fulfillment model, just curious, what was the reaction of some of those channel partners involved?

It's very positive. There's one thing I want to make sure we're very clear on. This had no impact on our channel. But the majority of our business as it has, continues to transact from a channel. What the change was is how our channel partners get the product from us. In the past, in the motion that we introduced in 2023, they would purchase it from a distributor. Now they purchase it directly from us, which means that we capture 100% of the ARPU. We did not see the portion that went through distribution.

So from a direct channel partner reaction, we have simplified their buying process. They used to have to buy one solution to an end user by issuing 2 orders, one to our distributor contract manufacturer for the hardware and one to us for the subscription. So their process to do business with us is much simpler.

Got it. This is great. I appreciate it. And maybe the biggest contract that you discussed, those 250 units, yes, we're becoming greedy here. How many of these contracts are currently in the pipeline? I know they don't come too often, but I think we're beginning to see where the business is heading as we start to thinking about '26 and maybe even '27 down the road. Just curious how many of those, call it, triple-digit transactions are out there?

We haven't provided specific outlooks or details on our pipeline. But what I'll reiterate is that in the preliminary '26 guidance we just provided, we're planning to grow units over this year, which included that 250 units [ award ].

[Operator Instructions] Your next question will come from Michael Latimore with Northland Capital Markets.

This is [ Aditya ] on behalf of Mike Latimore. Could you tell me what percentage of your bookings came from existing customers?

Yes, for sure. This is Brian. It was well over 50%. A bit of that was slightly skewed in that one of the largest orders in the company's history was actually an order that started very briefly in Q2. So if I exclude that, it would be right around 50% on the quarter, it was higher because of that. So we're certainly seeing very significant expansions from existing customers to both Express and now eXpedite as well.

Got it. And could you give some color among the new verticals? Are there any promising ones such as the warehouse or office?

Our vertical mix overall has stayed consistent. As we've shared in the past, sports and entertainment, education and health care are our largest verticals.

In Q2, we discussed a large Fortune 500 distribution customer that entered the fold, and we're thrilled for the potential in that area. And we're focused on growing our vertical presence everywhere. And we like the diversity in the mix that we have, but we see opportunities to continue to expand.

That was your last question. I'd now like to turn the call over to John for closing remarks.

Actually, it's Brian. I'm just going to close it out by, again, thanking everybody for joining us today. Again, we have a very active IR program here in the quarter, 3 conferences, multiple other visits to financial centers across the country. Look forward to meeting as many folks as we can each period. Thanks so much, and have a wonderful Thanksgiving.

Thank you for joining. This concludes today's call. You may now disconnect.

Hello. I'm John Kedzierski, Evolv's Chief Executive Officer and President. I'm here with Chris Kutsor, Evolv's Chief Financial Officer. We're pleased to share an update on results of our Q3 2025 earnings call, which we issued yesterday.

We had a strong quarter. We have and will continue to move forward with purpose, driving a clear strategy for long-term value creation. 2025 has been a busy year. We have made many positive changes to the business, which include: putting in place a world-class leadership team, moving to resolve regulatory challenges while restructuring the business to enable profitability, pricing and fulfillment changes to maximize long-term ARR and RPO, putting in place a credit facility to strengthen the balance sheet and enable growth.

We've implemented partnerships to drive value and scale such as a new contract manufacturing announcement with Plexus. These changes have resulted in lifting significant headwinds on the business, enabling consistent growth and the first orders of positive adjusted EBITDA in company history.

Yesterday, we announced our Q3 results, which mark another step toward Evolv's goal of building a consistently high growth business that scales with predictable results, driving long-term shareholder value through precision and execution. Chris, could you please share more details on our Q3 results and our outlook.

You bet. Thanks, John. A couple of Q3 highlights. We landed 60 new customers in the quarter, driving revenue of $43 million. That's up 57% year-over-year, and we posted adjusted EBITDA margins of 12%. This marks 4 consecutive quarters of positive adjusted EBITDA. Our 57% revenue growth had 3 notable items that positively affected Q3 and 2025 revenue. We covered those on the call in more detail, but make no mistake, we're very pleased with the progress.

And as we've consistently shared with investors, our unwavering focus on ARR and RPO as essential KPIs, continue to drive our business forward. Our annual recurring revenue grew 25% year-over-year to $117 million while RPO reached nearly $300 million to end the quarter.

Thanks, Chris. How should investors think about our current momentum and what that means to our outlook?

You bet. Let me summarize first our '25 outlook. We raised expectations for revenue growth to be 37% to 40% on the year. This would have been approximately 30% when normalizing for the onetime items that I just mentioned. We also raised expectations for adjusted EBITDA margins to be in the high single digits for the year, and we expect to be cash flow positive again in Q4.

If I look at 2026, we provided preliminary guidance, which we will update early next year. That guidance includes, first, we expect to deploy more units in 2026 than we did in 2025 on stable pricing. So the underlying business fundamentals remain strong. The shape of our revenue is changing in a positive way with more ARR and RPO going forward. As a result, we expect total revenue growth of 15% to 20% to $160 million to $165 million in 2026 with modest expansion of adjusted EBITDA margins over 2025 levels.

Additionally, we expect ARR to grow by at least 20% and to grow at a faster rate than total revenue growth, which again is by design. It's important to recall that we have been discussing these changes to our go-to-market distribution and pricing structure that is a positive step for the company. We believe these purposeful changes will drive more ARR and RPO, which enables a more predictable business, more opportunity for operating leverage and ultimately, the opportunity for long-term value creation.

Thanks, Chris. Our Q3 results and 2025 outlook demonstrate the momentum we have in our business and the confidence we have looking into 2026. We are driven by our mission to make the world a safer place to live, learn, work and play, while building a leading IoT SaaS security business. We believe security is a necessity, not a luxury.

But we are proud of our progress and our results year-to-date. We will not be complacent. We will be relentless in our focus on innovation and delighting our customers. We will continue to move with purpose towards our goal of building a scalable, predictable long-term value-creating business.

We are thankful for the partnership of our investors and customers who placed their trust in Evolv. We hold that trust sacred, and we work hard to earn your business every day.

I want to take a moment to thank all our team members, the Evolv-ers for their commitment and their execution to get Evolv to this point. We wish everyone a safe and joyful Thanksgiving and a happy holiday season. We look forward to sharing more with you in 2026.