Evolv Technologies Holdings, Inc.

and welcome to the Evolve Technologies third quarter earnings results conference call. At this time, all participants are in listen-only mode. Later, we will have a question-and-answer session, and instructions for queuing up will be provided for you at that time. Should you require operator assistance, press star zero on your phone's keypad. And as a reminder, this conference call is being recorded. I would now like to turn the call over to your host, Mr. Brian Norris, Vice President of Finance and Investor Relations. Please go ahead.

Thank you, John, and good afternoon, everyone, and welcome to our call. I'm joined here today by Peter George, our President and Chief Executive Officer, and Mark Donohue, our Chief Financial Officer. This afternoon, after the market closed, we issued a press release announcing our third quarter results in our business outlook for 2022. This press release is available on major news outlets as well as on the IR section of our website. During today's call, we'll be making forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities and Exchange Act of 1934, and the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 that relate to our current expectations and views of future events including but not limited to statements regarding our future operations, growth and financial results, our potential for growth and ability to gain new customers, demand for our products and offerings, and our ability to meet our business outlook. All forward looking statements are subject to material risks, uncertainties, and assumptions, some of which are beyond our control. Actual events or financial results may differ materially from these forward looking statements Because of a number of risks and uncertainties, including, without limitation, the risk factors set forth under the caption risk factors in our annual report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 28, 2022, and as updated in other documents filed with or furnished to the SEC from time to time. The forward-looking statements made today represent our views as of November 9, 2022. Although we believe that the expectations reflected in these statements are reasonable, we cannot guarantee that future results, performance, or the events and circumstances reflected in our forward-looking statements will be achieved or will occur. Except as may be required by applicable law, we disclaim any obligation to update them to reflect future events or circumstances. Our commentary today will also include non-GAAP financial measures, which we believe provided additional insight for investors. These measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with generally accepted accounting principles. Reconciliations between GAAP and non-GAAP metrics can be found in our press release issued today. Please note that our definition of these measures may differ from similarly titled metrics presented by other companies. As a reminder, as of January 1, 2023, we will no longer be disclosing total contract value of orders booked, a measure we stopped guiding on several quarters ago because we no longer believe it's consistently indicative of the company's prospects. We encourage investors to continue to focus on key metrics such as annual recurring revenue, remaining performance obligation, deployment activity, and total number of subscriptions, which we believe are more indicative of the company's prospects. Remaining performance obligation, or RPO, reflects the difference between contract value and revenue recognized to date for contracted units regardless of installation status. Before I turn the call over to Peter, let me briefly bring to your attention a few upcoming investor events. On Tuesday, November 29th, we will be at the Credit Suisse Technology Conference in Scottsdale, and on Wednesday, December 15th, we will be at the Imperial Capital Conference in New York. We will also be hosting a variety of other live and virtual investor events throughout the quarter. We are also working on plans to host our first-ever Analyst Day in 2023. More details to come on that. For more information on our IR plans, please contact me at bnorris at evolvetechnology.com. With that, I'll turn the call over to Peter. Peter?

Thank you, Brian, and thanks, everyone, for joining us today. We're pleased to be reporting record third quarter results, which reflect our accelerating momentum and scale. We're encouraged by our performance which was highlighted by record growth in revenues, ARR, and RPO, as well as our strong market penetration. These results and our outlook position us well to deliver first-year results above our previous guidance. Revenue in the third quarter was $16.5 million, up 96% year-over-year and 82% sequentially, which we believe reflects strong demand in our core markets and continuing momentum with our channel partners. We acquired 92 new customers in the quarter. We're about one every day. and installed approximately 550 new subscriptions of Evolve Express in the quarter, or about six every day, all quarter long. To highlight the scale and leverage in our business model, consider that our revenues grew 10 times faster than our operating expenses on a sequential basis. We are on pace to deliver revenue growth of at least 100% in 2022 with ARR growth of at least 150%. While we're still in the planning stages for 2023, our preliminary models are focused on delivering another doubling of ARR in 2023. At the core of this industry-leading growth are several key trends that I'd like to take a few moments to discuss. First is escalating gun violence. We all see the daily reports of mass casualty events in what should be considered weapons-free zones, schools, hospitals, warehouses, and houses of worship. These are the places where we gather to learn, to work, play, and to live. But it's in these very same places where we expect to see yet another year of tragic gun violence. In fact, there have already been two mass shootings every day of the year here in 2022. Our customers turn to Evolve Express. and its powerful sensor technology, advanced AI-based algorithms, cloud-enabled connectivity, and comprehensive data insights to reduce the threat of these mass casualty events at their venues. This includes a customer like a Tier 1 automaker that experienced a gun-related incident at one of its manufacturing facilities earlier this year. The plant was immediately closed at great opportunity costs until Evolve Express was deployed. Next, we're seeing a clear acceleration in our business. Over the last six months, we've seen a significant increase in market exposure and awareness, pipeline build, transaction volume, linearity, and ASPs. That is best measured by our bookings, which increased by 105% sequentially. We had seven transactions of at least $1 million in the third quarter, compared to five in the third quarter of last year. And we had our first single transaction of greater than $5 million. Our pipeline has grown significantly, with a coverage ratio of more than three times our operating goals. These measures reinforce the momentum in the business. Next, we're seeing an acceleration in our customer acquisition activities. We added 92 new customers in the quarter, up from our previous record of 53, which we delivered in the prior quarter. We now have over 400 customers across our key vertical markets. our customer acquisition activity continues to separate us from others in the market. Keep in mind that our new customer count is a conservative view because one new customer could mean 20 or more school buildings in one new district or five hospitals within one new healthcare system. Another trend we are seeing is expanding deployments. Customers are building on the success of their initial Evolve Express deployment and are expanding to other venues and locations. Our largest transaction in Q3 was a 90-plus unit expansion order for the Charlotte-Mecklenburg School District in North Carolina as they accelerated their move beyond the district high schools and into the middle schools. Within just nine months, that district has gone from being a qualified lead to our single largest education customer with over 160 Evolve Express units deployed across dozens of buildings. And remember, we consider Charlotte-Mecklenburg School District as one customer in our customer count. The combination of our accelerating customer deployments and the overall growth in gun ownership are driving the collection of an unprecedented amount of visitor data across our customer base. With our advanced AI-based algorithms, we're able to leverage this data and over time improve our detection accuracy, which we believe makes our customers' venues safer than ever before. We screened more than 100 million people in the third quarter alone, or more than a million per day compared to 53 million people in the third quarter of last year. We just surpassed 425 million visitors screened, second only to the TSA in North America. What's more, we detected over 52,000 concealed weapons in the third quarter, including more than 30,000 guns and more than 22,000 knives at the entrances of our customers' venues. Another trend we're seeing is the growing momentum with our channel partners, which helps us extend our reach into certain geographies or vertical markets. We're seeing broad activity across our dozens of authorized channel partners, including several strategic global partners such as Johnson Controls, the newly formed Securitas Technology, and Motorola Solutions. We've been clear about our plan to efficiently scale the company by leveraging the demand environment with 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. One final trend to highlight is the direct result of our growth strategy targeted at key geographic markets in the United States. We are starting to become the AI-enabled weapons detection security screening provider that venue visitors in key geographies are coming to expect. We're quickly becoming the standard for visitors in markets like Pittsburgh, Nashville, New York, and Atlanta, where the desire for weapons-free zones is beginning to emerge. In Pittsburgh, we secure the homes of the Pittsburgh Steelers and the Pittsburgh Pirates, as well as the Pittsburgh Cultural Trust. In Nashville, we secure the homes of the Tennessee Titans, the Grand Ole Opry, the Nashville Soccer Club, and now the Nashville Predators, our first entry into the NHL. This trend is becoming a force multiplier for other verticals in this geographic market. most notably schools and hospitals, around these iconic venues. This is what we mean by democratizing security becoming ubiquitous and making it available to everyone who wants it. We believe we can continue to replicate the model of becoming the de facto standard in other markets. The market for AI-based weapons detection is one of the largest and fastest-growing markets across the technology space, and we're well positioned as its leader. It's a $20 billion market across 10 key verticals with an estimated 700,000 entrances, which we refer to as digital thresholds. We are the market leader with over 1,600 units deployed. representing a penetration rate today of less than 1%, and we're just getting started. In time, we may look back at 2022 as an inflection point in our growth trajectory. We are focused on leveraging our first mover advantage to capture the market and effectively scale the business. We expect to end the year with over 2,000 units deployed, to double that in 2023 and reach 10,000 units deployed in 2025. We have a lot of work to do to get there, but we're confident that we have the talent, the technology, the strategy, the capital, and the momentum to capture the market opportunity. We're exceptionally well positioned in the major vertical markets that have been the earliest adopters of our technology. and which constitute the greatest market opportunity in 2023, specifically education, healthcare, and professional sports. The education market is exceptionally large, with nearly 130,000 schools across the nation serving the needs of 56 million students every single day. About half of those schools are middle schools and high schools where the threat of gun violence is the highest. Most of these schools have no real weapons detection solution at all, despite the availability of legacy metal detectors for the last hundred years. These solutions have been widely evaluated and dismissed for a variety of reasons that we all know. Nearly 95% of all public schools in the United States do not have a metal detector, yet over 90% have security cameras. So clearly, there's a demand for security and safety in schools, but to date, no viable solution for weapons detection until evolved. We believe there's a fundamental need for student safety at rural, urban, suburban, charter, and private schools across the nation. This need is driving growing demand by students, parents, teachers, administrators, and communities for advanced safety solutions and we're meeting that demand. Just a year ago, we had a handful of customers in the education market. Today, more than 200 schools across the nation have evolved express. We are now in six of the top 100 school districts in the country, five of which we added in the third quarter of 2022. We've made a lot of progress over the last year and we're just getting started. There are nearly 15,000 school districts in the United States. We estimate that just the 200 largest could drive demand for 25,000 Evolve Express units. We believe students and teachers have a right to safety in the classroom. We'll continue our focus on empowering safer learning at schools, as this is at the center of our mission and purpose as a company, and we're well-intentioned to deliver on it. Another major market for Evolve continues to be healthcare. as a growing number of the nation's 6,000 hospitals are making investments to enhance patient and staff safety. Over 70% of workplace violence in the U.S. involves healthcare workers, and major healthcare unions have raised violence in the workplace as a top issue, specifically calling out the low levels of security at healthcare facilities. A recent survey by the American College of Emergency Physicians found that two-thirds of ER physicians have been assaulted in the past year alone, and many hospitals are seeing growing turnover by staff seeking a safer environment. This is another market which long ago could have deployed metal detectors but chose not to due to various limitations. Like education, this is a huge market where we've gained traction and momentum. A year ago, we had a very light presence in healthcare. Today, we're deployed at 70 hospitals across the United States. We added over a dozen new healthcare customers in the third quarter, including University Hospital in Newark, New Jersey, which receives on average over 200 emergency room visits every day, the Regional One Health Network, an acute care regional hospital in the Mid-South, and Southern Ohio Medical Center. In hospitals, our healthcare workers, who have also been our first responders during COVID, deserve to come to work every day, free from weapons, and we're focused on helping them achieve that. One more market to highlight is professional sports. Evolve Express is transforming the guest experience at stadiums and ballparks all over the country. We enable fans to enjoy a faster, more convenient, and more secure screening experience. Long waits and entry lines are all but eliminated, helping to reduce anxiety for guests and staff alike. We now have screened fans of 23 major league sports teams across the NFL, MLS, MLB, and NHL. New customers in the third quarter included SoFi Stadium, home of the LA Chargers and LA Rams, as well as First Energy Stadium, which is home to the Cleveland Browns, and Accreture Stadium, home of the Pittsburgh Steelers. We also secured the Pittsburgh Pirates in Major League Baseball, as well as Bridgestone Arena, which is home to the Nashville Predators. We expect that these three markets, education, healthcare, and professional sports, along with warehouses and tourist sites, will be central to our expansion plans in 2023. I spend lots of time in the field listening to our customers' customers, including parents, students, factory workers, theater patrons, and sporting fans. And I know that they're relying on us and our solutions more than ever before to help make their schools, hospitals, and favorite venues safer. This is our mission and we intend to fulfill it as we are the human security company. So in summary, we're reporting strong third quarter results highlighted by record revenues, ARR, and RPO. We continue to see strong market momentum and evidence of leverage in our business model. We remain well capitalized and believe that the strength of our balance sheet will enable us to reach cash flow break even without any additional capital. Based on the strength of our results, and the momentum in the business, we are raising our outlook for 2022 and providing a peak into 2023, which is centered on, again, doubling our ARR. Finally, I'd like to thank our customers who put their trust in us, and I also want to thank all the talented, dedicated, and devoted Evolvers who work tirelessly every day to make the world a safer place for everyone. With that, let me turn things over to Mark, who will take you through our financial results and our outlook. Mark?