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ET

Evolv Technologies Holdings, Inc. (EVLV)·Q2 2025 Earnings Summary

Executive Summary

  • Revenue was $32.5M (+29% YoY) with adjusted EPS of $(0.02); both beat S&P Global consensus (Revenue: $30.95M, EPS: $(0.078)). Guidance raised to FY25 revenue of $132–$135M (+27–30%), and management reiterated positive full-year adjusted EBITDA with mid-single-digit margins and cash flow positive in Q4 2025 . Values retrieved from S&P Global.*
  • Adjusted EBITDA was $2.0M (6.3% margin), the third straight positive quarter; liquidity improved sequentially to ~$37M, and the company closed a non-dilutive $75M credit facility to support subscription growth .
  • KPIs showed durable traction: ending ARR of $110.5M (+27% YoY) and RPO of ~$275M vs ~$261M in Q1; new customers were 63, and recurring revenue reached $26.7M .
  • Stock-relevant catalysts: guidance upgrade, DOJ confirming the company is no longer a subject of investigation, and a class-action settlement-in-principle with limited expected direct cost (~$1M retention), plus strong education wins and a go-to-market shift that raises lifetime ARR per unit despite near-term margin headwinds .

What Went Well and What Went Wrong

What Went Well

  • “We reported our third consecutive quarter of positive adjusted EBITDA…with adjusted EBITDA margin of 6%,” while cash increased sequentially—a first—reflecting cost reductions and stronger collections .
  • Raised FY25 revenue outlook to $132–$135M (+27–30%) and reaffirmed full-year positive adjusted EBITDA and Q4 cash flow positivity on stronger backlog and multi-quarter pipeline visibility .
  • Commercial momentum across verticals: >60 new customers; marquee wins and renewals in education, healthcare, sports/entertainment (e.g., Inter Miami stadium, FIFA Club World Cup deployment, ASM Global venues) and industrial workplace; early upgrades to Gen2 and Expedite traction (20 customers since launch) .

What Went Wrong

  • GAAP gross margin declined to 49.8% (vs 58.5% YoY) and adjusted gross margin to 54.9% (vs 59.0% YoY), impacted by a $1.8M non-cash inventory reserve and mix shift toward in-house direct purchase fulfillment; management guided 54–56% adjusted gross margin for the remainder of 2025 .
  • GAAP net loss was $(40.5)M with EPS $(0.25), driven largely by non-cash fair value changes (earn-out, contingently issuable stock, warrants) and legal/regulatory costs, despite adjusted profitability improvements .
  • Near-term margin headwind expected from higher direct purchase mix and Expedite scaling, though management emphasizes superior ARR/gross profit dollars and better NPV over time .

Financial Results

Quarterly Performance vs Prior Periods

MetricQ2 2024 (oldest)Q1 2025Q2 2025 (newest)
Revenue ($USD Millions)$25.22 $32.01 $32.54
GAAP Net Income (Loss) ($USD Millions)$3.42 $(1.69) $(40.54)
GAAP Diluted EPS ($USD)$0.02 $(0.01) $(0.25)
Adjusted EBITDA ($USD Millions)$(7.97) $1.74 $2.05
GAAP Gross Margin (%)58.5% 59.8% 49.8%
Adjusted Gross Margin (%)59.0% 60.8% 54.9%

Revenue Breakdown

Revenue Component ($USD Millions)Q2 2024 (oldest)Q1 2025Q2 2025 (newest)
Product$1.95 $2.32 $2.53
Subscription$15.66 $19.24 $20.20
Service$5.57 $6.73 $6.69
License fee & other$2.05 $3.72 $3.13
Total Revenue$25.22 $32.01 $32.54

KPIs and Cash

KPIQ2 2024 (oldest)Q1 2025Q2 2025 (newest)
Ending ARR ($USD Millions)$87.01 $105.99 $110.52
Recurring Revenue ($USD Millions)$21.02 $25.75 $26.68
New Customers (units)84 54 63
RPO ($USD Millions)—~$261 ~$275
Cash, Cash Equivalents & Mkt Securities ($USD Millions)—$35.0 $36.9
Cash Flow from Operations ($USD Millions)$(21.6) $(2.54) $2.1

Q2 2025 vs S&P Global Consensus

MetricConsensus (Q2 2025)Actual (Q2 2025)
Revenue ($USD Millions)$30.95*$32.54
Primary EPS ($USD)$(0.078)*$(0.02)*

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious Guidance (May 20, 2025)Current Guidance (Aug 14, 2025)Change
Total Revenue ($USD Millions)FY 2025$125–$130 $132–$135 Raised
Total Revenue Growth (%)FY 2025+20–25% +27–30% Raised
Adjusted EBITDA MarginFY 2025Low–mid single digits Mid single digits Raised
Adjusted Gross Margin (%)H2 2025—54–56% (remainder of year) New detail
Cash FlowQ4 2025Positive free cash flow in Q4 Cash flow positive in Q4 Maintained
Interest Expense (new facility)Aug–Dec 2025—~$0.25M/month expected New detail

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q2 2025)Trend
Liquidity and leverageQ1: cash $35M; plan to invest ~$2M in controls/processes Cash rose to ~$37M; closed $75M non-dilutive facility ($30M drawn) Improving balance sheet capacity
Gross margin outlookQ1: 59.8% GAAP; 60.8% adjusted Guide 54–56% for remainder of 2025; headwinds from in-house purchase fulfillment and Expedite scaling; $1.8M reserve Near-term compression, strategic mix shift
Go-to-market mixQ1: subscription focus, early Gen2 upgrades Shift purchase activity back to direct fulfillment; higher ARR/LTV vs distribution Mix moving to subscription + direct purchase
Legal/regulatory overhangQ1: remediation and control investments; FTC resolution referenced in renewal metrics DOJ: no longer subject to investigation (8/7); class-action settlement in principle; ~$1M retention expected Overhangs easing
Education momentumQ1: strong pipeline; 6,600+ subscriptions ~20 new districts; $15M Gwinnett County win; larger multi-quarter deployments Accelerating
Product roadmapQ1: Expedite launched Q4’24; early momentum Expedite at 20 customers; large order (>100 systems); Gen2 upgrades Scaling

Management Commentary

  • CEO: “We reported our third consecutive quarter of positive adjusted EBITDA…total cash…up $2,000,000 sequentially…a clear sign of progress.”
  • CEO: “We’re raising our outlook for 2025…We now expect to grow revenue by 27 to 30%…and continue to expect positive full year adjusted EBITDA…committed to generating positive cash flow in Q4.”
  • CFO: “Adjusted gross margin was 55% in Q2…includes a noncash $1,800,000 inventory reserve…for the remainder of the year, we expect adjusted gross margin to be in the 54 to 56% range.”
  • CEO on strategy: shifting to direct purchase fulfillment, “offers us clear advantages…higher revenue, higher lifetime value, greater cash flow, and…higher ARR on a per unit basis.”
  • Legal update: DOJ no longer investigating (8/7), class action settled in principle with expected direct exposure “no more than $1,000,000.”

Q&A Highlights

  • Mix outlook: Longer-term shift toward more subscription; near-term mix can skew with large orders; aiming for more balance by 2026, with distribution purchase phased down .
  • Certified pre-owned (Evolv Flex): Early program; first orders received; focus on reasonable refurbishment cost and customer experience .
  • Headcount/OpEx: Targeted hiring (R&D, services); OpEx roughly flat through year with slight uptick for SOX/automation investments; service delivery insourced .
  • Renewals: ~400 units up for renewal in 2025; ~200 actioned in 1H; net unit retention >100% due to expansions; FTC resolution referenced (94% net unit retention on prior cohort) .
  • Margin and ARR economics: Near-term adjusted GM headwind from in-house direct purchase and Expedite scaling; however, direct purchase drives higher ARR, revenue, and gross profit dollars; positive NPV and stronger renewals at higher rates .

Estimates Context

  • Q2 2025 beats: Revenue $32.54M vs $30.95M consensus; Primary EPS $(0.02) vs $(0.078) consensus, both better than expected. Consensus EBITDA appears not directly comparable to company-reported adjusted EBITDA; we therefore anchor on revenue and EPS for comparability . Values retrieved from S&P Global.*
  • Forward consensus implies continued growth: Q3 2025 Revenue $33.68M; Q4 2025 Revenue $36.42M; EPS around $(0.07) for Q3–Q4. Given raised FY revenue guidance and large education deployments (with a heavier direct purchase mix), top-line consensus may need upward revision, while near-term margin expectations should adjust down modestly to reflect the 54–56% adjusted GM guide . Values retrieved from S&P Global.*
MetricQ3 2025Q4 2025Q1 2026Q2 2026
Revenue Consensus Mean ($USD Millions)33.68*36.42*37.33*39.27*
Primary EPS Consensus Mean ($USD)$(0.07)*$(0.07)*$(0.067)*$(0.067)*

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Revenue and adjusted EPS beat expectations; FY guidance raised—supportive of near-term positive sentiment and potential estimate revisions upward on revenue . Values retrieved from S&P Global.*
  • Near-term margin compression is a strategic trade-off: in-house direct purchase and Expedite scaling lower adjusted GM to 54–56% but drive higher ARR/LTV and gross profit dollars (positive NPV) .
  • Subscription durability improving: ARR +27% YoY to $110.5M; RPO ~$275M; renewals and Gen2 upgrades increasing stickiness .
  • Balance sheet strengthened: first sequential liquidity increase to ~$37M and new $75M facility; expect ~$0.25M/month interest expense Aug–Dec .
  • Legal overhangs easing: DOJ no longer investigating; class-action settlement in principle with limited direct cost (~$1M retention) .
  • Vertical traction: education (including $15M Gwinnett County), healthcare, sports/entertainment, and industrial workplace underpin pipeline visibility through H2 .
  • Trading lens: Guidance upgrade and overhang resolution are catalysts; watch Q3 mix (direct purchase vs subscription) and Expedite scale for margin trajectory and ARR growth cadence .