Evolv Technologies (NASDAQ:EVLV) reported record third-quarter revenue of $47.3 million, up 10% from a year earlier, and raised the bottom end of its 2026 revenue outlook as its shift toward recurring revenue continued to take hold.
The weapons-screening company said annual recurring revenue rose 20% to $140.5 million at September 30. Recurring revenue reached $32.5 million in the quarter, or about 69% of total revenue.
President and CEO John Kedzierski said the company expects revenue growth of at least 20% in 2027, even as pricing changes shift more contract revenue into future periods. Evolv expects those changes to reduce reported revenue growth by approximately 3 to 4 percentage points next year.
Pricing Changes Shift Revenue Over Time
Evolv has lowered the hardware price and increased the software and services component by the same amount for customers that purchase equipment, CFO Chris Kutsor said. The changes leave total contract value unchanged but move revenue that would have been recognized upfront into recurring revenue over the contract term.
Kutsor said the pricing changes and a roughly $3 million contribution from the company’s largest-ever contract in the year-earlier quarter affected the comparison. Adjusting for those factors, he estimated third-quarter revenue growth at approximately 18% to 19%.
Remaining performance obligation, a measure of contracted revenue expected to be recognized in the future, rose 12% year over year to $325.8 million. Evolv expects to recognize $132 million of that amount as revenue over the next 12 months.
Net revenue retention was 108%, reflecting renewals and expansion among existing customers. Kutsor said approximately 60% of the quarter’s business came from existing customers and that deployments were split roughly evenly between subscription and purchase deals.
Profitability and Cash Flow
Third-quarter adjusted EBITDA fell to $4.7 million from $5.1 million a year earlier, while the adjusted EBITDA margin declined to 10% from 12%. Kutsor attributed the decline primarily to investments in research and development, sales and marketing, and internal systems and controls associated with ongoing SOX remediation.
GAAP gross margin was 49.7%, consistent with the prior-year period. Product gross margin fell to 8.7% from 13.9%, primarily because of the pricing model, while subscription gross margin rose to 59.8% from 51.8%.
Cash flow from operations increased to $18 million from $3.5 million a year earlier, helped by stronger collections and improved inventory and working capital management, Kutsor said. Free cash flow was $3.2 million. Cash, cash equivalents, marketable securities and restricted cash totaled $66.9 million at quarter-end.
2026 Outlook and Growth Investments
Evolv tightened its full-year revenue forecast to $182 million to $185 million, from $180 million to $185 million. The updated range represents approximately 25% to 27% growth from 2025. The company reaffirmed its year-end annual recurring revenue forecast of approximately $148 million to $150 million and expects an adjusted EBITDA margin in the high single digits, compared with 7.6% in 2025.
For 2027, Kedzierski said reported growth should build through the year as difficult first-half comparisons ease and new sales hires become more productive. He said Evolv expects to deploy more units next year than in 2026, with incremental units from its investments anticipated in the second half. The company also expects annual recurring revenue growth to exceed revenue growth in 2027.
Kutsor said the 2027 operating plan has not been finalized, but the company currently expects modest adjusted EBITDA margin expansion. Management plans to provide a fuller outlook when it reports fourth-quarter results in February.
Customer Adoption and Products
Kedzierski said healthcare accounted for 23% of units booked during the quarter, up from 18% over the preceding 12 months. New healthcare customers included Bellin Health, TidalHealth, St. John’s Riverside Hospital and Southwest Healthcare. Evolv also added more than a dozen customers across K-12 and higher education.
The company has more than 115 customers for its eXpedite bag-screening product, representing about 9% of its customer base, up from 3% a year earlier. Approximately 88% of new customers purchasing eXpedite in the third quarter also purchased Evolv Express, Kedzierski said.
Evolv has released eXpedite 3.0 software, which highlights where operators should search when a bag triggers an alert. Kedzierski said the company is also testing Express 11.0 with a cohort of customers and is encouraged by early signs that it can maintain or improve detection while reducing alerts.
Most sales and marketing investment is going toward frontline sellers, Kedzierski said. Evolv is also investing in international opportunities, including product and regulatory compliance, although management expects international business to be a small contributor to 2027 results.
About Evolv Technologies (NASDAQ:EVLV)
Evolv Technologies develops security screening systems designed to detect weapons and other threats in public spaces. Its products combine sensors and artificial intelligence to screen people without requiring the same stop-and-check process used by traditional metal detectors. The company’s offerings include Evolv Express, a screening system for people entering venues, and Evolv eXpedite, which is designed to screen bags and other belongings. Evolv also provides software and analytics tools to help customers manage screening operations.
