Evolv Technologies Holdings, Inc. (NASDAQ:EVLV) Q3 2023 Earnings Call Transcript

Evolv Express can now be found in 17 of the Top 100 school districts in the country and is being used in over 700 school buildings to screen about 325,000 students every single day. Nothing represents our mission more than keeping kids safe at school. We’re expecting a strong quarter again in education here in Q4. We continue to extend our early leadership lead in the health care market, which is comprised of over 6,000 hospitals and where 70% of workplace violence takes place. We added over a dozen new health care customers in the third quarter including Parkland Health, one of the largest public hospital systems in the United States; Windsor Regional Health, which is the 15th largest hospital in Ontario and just down the 401 from Toronto; and the University of Missouri Health Care.

For the second consecutive quarter, we saw 50% plus sequential growth in our health care business. Evolv Express is being used in 250 hospital buildings to screen over 400,000 hospital visitors every day compared to just 40,000 a year-ago. We are seeing growing returns in the investments we’re making in the health care and expect the market to be one of our top verticals for quite some time. We delivered our strongest quarter ever in professional sports, which represented about 15% of our activity in the third quarter. We’re proud to now partner with over 40 teams and stadiums across the National Football League, Major League Baseball, the National Hockey League and Major League Soccer. New additions during the third quarter included the Houston Texans of the NFL, the Minnesota Wild of the National Hockey League and the Football Club of Dallas in Major League Soccer.

We also accelerated our entry into college sporting facilities highlighted by our win here at Boston College here in our backyard. We just deployed 16 Evolv Express systems to enhance safety for fans of the Eagles. We’re pleased to announce our recent entry into the National Basketball Association where we are now supporting fans of two NBA teams, including the 2023 NBA champion Denver Nuggets and the Phoenix Suns with more teams expected to come shortly. With our entry into the NBA, we are now in all five major professional sports leagues here in the U.S. and are now screening over 20 million sports fans per quarter. We continue to see accelerated momentum with our channel partners. We’ve been clear about our plan to efficiently and effectively scale the company by leveraging demand through our partners.

We continue to see evidence of our progress here as over 70% of our sales activity in the third quarter came from our channel partners, including Alliance Technology, Johnson Controls, Motorola, Stanley Securitas, Johnson Security, Allied Universal, ICU Technology and many, many others. Throughout the third quarter, we saw an accelerated adoption of our distributor model, which is an important trend as we continue to drive towards profitability. About 30% of all unit bookings in the third quarter were via our distributor model. As Mark will describe more fully, that shift was directly correlated to the gross margin expansion we delivered in Q3. Our new distributor model enables customers that prefer to purchase the hardware component of Evolv Express to do so through our contract manufacturer, Columbia Tech, while simultaneously placing a long-term software subscription contract with us.

We believe this expanded partnership will enable us to fully support the procurement preferences of our customers, particularly those working with grant resources or accustomed to working under a CapEx model. I want to briefly highlight some other important developments during the third quarter. First, on the go-to-market front, we are absolutely delighted to welcome Jay Muelhoefer who recently joined us in the newly created role of Chief Commercial Officer. In this role, Jay will oversee all sales, marketing, alliances, channels and customer success efforts with the aim of expanding brand awareness, driving global revenue and enhancing customer experience. Jay has an extensive background in both domestic and international sales and marketing, SaaS, AI, big data and analytics.

He most recently served as the Chief Marketing Officer at Kinaxis, a supply chain management applications provider. His previous experiences across privately held and publicly traded technology companies includes executive roles at Intralinks, IBM and PTC where he served as VP of Sales. He holds an MBA from Harvard Business School and multiple engineering degrees from MIT. He’s based here in Waltham and I can tell you he’s already making a big difference in our business. So we’re thrilled to welcome Jay to the company. Switching gears to the product side. In Q3, we introduced a new product named Evolv Extend, which is designed to detect individuals with brandished guns as they approach a venue, expanding security well beyond the doorway. Evolv Extend pushes the perimeter out further and addresses the new threat vector, openly brandished firearms.