WALTHAM, Mass. - Evolv Technology (NASDAQ: EVLV), a company specializing in AI-powered security screening, has announced it will delay its third-quarter financial report due to an internal investigation into its sales practices. The investigation, led by an independent committee of directors, has preliminarily found inaccuracies in the company's revenue recognition, resulting in material misstatements in financial statements between the second quarter of 2022 and the second quarter of 2024.
The committee has identified approximately $4 million to $6 million in revenue that was either prematurely or incorrectly recognized. These findings have led the Board to advise that financial statements and related data from fiscal years 2022 and 2023 should not be relied upon. The company anticipates most of the revenue in question was prematurely recognized and is working to amend its financial statements and filings as quickly as possible.
Evolv has also reported these findings to the SEC, which is conducting a separate, unrelated investigation. The internal investigation is supported by Debevoise & Plimpton LLP, Cleary Gottlieb Steen & Hamilton LLP, and Ankura Consulting Group, who are providing legal and forensic accounting services.
Despite the financial discrepancies, the Board maintains that the demand for Evolv's products aligns with internal forecasts and long-term expectations. The company will file a Form 12b-25 to allow for additional time to complete the investigation and expects to report one or more material weaknesses in internal control over financial reporting.
This news comes as a significant development for the company, which has been recognized for its contributions to security technology and has scanned over a billion people since 2019. The company's statement, based on a press release, clarifies that the fundamentals of its business remain strong and that it is committed to resolving the issues for the benefit of its stakeholders. Further updates will be provided upon the completion of the internal investigation.
In other recent news, Evolv Technology, a leader in AI-based security screening solutions, has been making significant strides. The company reported a 29% year-over-year increase in Q2 revenue to $25.5 million and a 64% rise in annual recurring revenue (ARR) to $89 million. This growth is attributed to the acquisition of 84 new customers, bringing the total to over 800 across 10 vertical markets.
In addition, Evolv Technology secured a new patent titled Personnel Inspection with Threat Detection and Discrimination, which recognizes the company’s method of classifying objects as threats or non-threats using radio frequency (RF) electromagnetic data. This technology is a key component of the Evolv Express system, adopted by more than 800 customers worldwide.
The company also announced a significant partnership with Boston Common Golf, a team in the new TGL golf league. As the Official Partner, Evolv Technology will provide its Evolv Express™ systems to enhance security screening at SoFi (NASDAQ:SOFI) Center in Palm Beach Gardens, Fla., the venue for TGL matches.
Looking ahead, the company is focusing on the industrial warehouse vertical, projected to be a significant revenue contributor in 2025. CEO Peter George expressed confidence in the company's strategy to achieve long-term financial goals, including 25% revenue growth in 2024 and positive adjusted EBITDA by Q2 2025. Evolv Technology also reaffirmed its full-year guidance, expecting revenues and ARR of around $100 million. These are recent developments in the company's operations.
InvestingPro Insights
In light of Evolv Technology's (NASDAQ: EVLV) recent announcement regarding financial discrepancies, it's crucial to examine the company's current financial position. According to InvestingPro data, Evolv's market capitalization stands at $645.96 million, reflecting the market's current valuation of the company amidst these challenges.
Despite the ongoing internal investigation, Evolv has shown some positive financial indicators. The company's revenue for the last twelve months as of Q2 2024 was $89.22 million, with a notable revenue growth of 17.67% over the same period. This growth trend is further emphasized by the quarterly revenue growth of 28.83% in Q2 2024, suggesting strong demand for Evolv's AI-powered security screening products.
However, investors should note that Evolv is not currently profitable, as indicated by its negative P/E ratio of -13.47 for the last twelve months as of Q2 2024. This aligns with an InvestingPro Tip stating that analysts do not anticipate the company to be profitable this year. Another relevant InvestingPro Tip highlights that Evolv holds more cash than debt on its balance sheet, which could provide some financial flexibility as the company navigates through its current challenges.
For those seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for Evolv Technology, providing deeper insights into the company's financial health and market position.
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