In this Research Note, we examine Evolv Technology, a US public company providing AI-based weapons detection for security screening. This article covers the firm’s 2023 financial results, partners, vertical market approach, and US government investigations.

It is based on Evolv’s Q4 Earnings Release, Presentation, 2023 10K Report, filed on 29th February 2024 and our analysis.

According to Evolv, unlike traditional walk-through metal detectors, their touchless security screening solutions use AI software, cloud services, and advanced sensors to reliably detect weapons that could be a threat to a crowd of visitors while significantly reducing nuisance alarms from harmless personal items.

This means that most visitors can walk through their solution without stopping, without removing personal items from their pockets or bags, and without having to form a single file line. They state that their products reduce the number of false positive alarms, allowing security staff to focus their attention on high-probability threats.

Evolv 2023 Financial Highlights

Total revenue in 2023 was $80.4 million, an increase of 46% compared to $55.2 million in 2022. Company growth continues to reflect new customer acquisition activity and the continued expansion of the subscription base.

Evolv added nearly 300 new customers and doubled their base of Evolv Express subscriptions to just over 4,500. Further, they grew ARR from $34 million at the end of 2022 to $75 million at the end of 2023, reflecting growth of 120%. Net loss in 2023 was $(106.3) million, compared to net loss of $(86.4) million in 2022.

Go-to-Market Partners

Over 65% of Evolv’s sales activity came through their channel partners and systems integrators in 2023. These are partners that extend their reach into certain verticals or geographies where they have a particularly strong presence.

The company expects to continue to see strong activity with strategic partners such as Johnson Controls, Motorola Solutions, Securitas Technology and many other regional resellers like Alliance Technology Group and Stone Security. These relationships are considered to be central to their plans to scale over time.

Vertical Markets

The major end markets for Evolv are Education, Healthcare and Professional Sports Venues:

• The Education market, which is made up of nearly 130,000 schools across the USA, is Evolv’s number one end market, representing about 45% of their business in 2023. Gun violence in schools is a top issue for district leadership, school administrators, parents, teachers, and students. As of 31 December 2023, over 800 school buildings are protected by Evolv Express and the company screens an average 600,000 school visitors per day.
• Another major market for Evolv continues to be Healthcare, which includes over 6,000 hospitals and where over 70% of workplace violence takes place. Hospital administrators are making investments to enhance patient and staff safety, and the company stands to fill this market need. They now serve about 300 hospital buildings across the USA and are screening almost 500,000 healthcare visitors every day.

One emerging vertical is the industrial warehouse segment, which the company sees as a potential contributor in 2025 and 2026.

FTC & SEC Investigations

According to Evolv’s 10K report for 2023, an ongoing uncertainty for the company in 2024 are the current investigations by US government departments into company practices. For example, the FTC requested information about certain aspects of their marketing practices in October 2023.

Furthermore, in February 2024, they received a subpoena from the SEC, Division of Enforcement, requesting that they produce certain documents and information, much of which is similar to the documents and information previously requested by the FTC.

It is not the first time that Evolv’s marketing methods have undergone scrutiny in the public domain. In November 2022, the BBC published an article citing IPVM research which claimed that they exposed deceptive marketing and hidden test results showing weapons screening failures. And only last week, the BBC reported that Evolv has backtracked on claims its technology has been tested by the UK government.

We can only affirm that the market for AI-based weapons detection is new and evolving and as such, is attracting valid scrutiny by government regulators. While the investigations are ongoing, there have been no conclusions on the merits or shortcomings of Evolv ‘s technology and marketing practices.

This article was written by Daphne Tomlinson, Senior Research Associate at Memoori.