Evolv Technology today announced that it has resolved the United States Federal Trade Commission’s (FTC) inquiry into certain aspects of the company’s prior marketing claims. While Evolv disagrees with the FTC’s allegations and has not admitted any wrongdoing, it has chosen to resolve the matter to focus on its core mission of protecting lives through innovation and maintaining the trust of its valued customers.
“We worked collaboratively with the FTC to resolve this matter and are pleased that the FTC did not challenge the fundamental effectiveness of our technology and that the resolution does not include any monetary relief. We appreciated the opportunity to demonstrate for the FTC our Evolv Express system and our customers’ diligence in researching, testing, and ultimately deploying our solution in myriad environments,” said Mike Ellenbogen, Interim President and CEO of Evolv Technology. “Our top priority is the safety of people and the communities we serve. To be clear, this inquiry was about past marketing language and not our system’s ability to add value to security operations.”
“This resolution allows us to focus on a small segment of our school customers to ensure they remain satisfied with Express and allows us to move forward without distraction, continuing our important work to help protect our communities,” continued Ellenbogen.
What Parents Should Know
In resolving the inquiry, the FTC did not challenge the core efficacy of Evolv’s products, including the use of artificial intelligence in its technology. Instead, the focus of the inquiry was related to how the technology was described for a period of time in historical marketing materials.
As part of the resolution, Evolv has agreed to offer a limited number of its K-12 education customers the option to cancel the remainder of their current contracts during a 60-day cancellation period. Evolv has consistently encouraged customers to independently test technologies and speak with other users of the technology about their experiences to ensure it will meet their specific needs. A notice will be sent to this limited group of customers about their contract cancellation option.
“We understand the concerns parents have about the safety of their children at school, and we want to reassure them that our technology works and continues to help protect students every day,” said Courtney Cunnane, Chief Marketing Officer for Evolv Technology. “We take our responsibility seriously and remain committed to providing transparent, accurate information about our products so that parents, educators, and administrators can make informed decisions.”
Investing in Trust and Integrity
In line with this commitment, Evolv will continue to refine the way it markets its technology, highlighting capabilities and limitations. These efforts build on the proactive steps the company had already been taking to develop a new brand integrity program centered on transparency and education. Evolv has also appointed a new Director of Advertising Law and Policy to support all go-to-market activities.
“We remain deeply committed to our core safety mission and supporting our valued community of customers,” said Ellenbogen. “The trust and partnership of our customers remain our top priority as we work to democratize security for a safer world. We look forward to working collaboratively with our customers to ensure they identify the right technology solution for their security needs.”
Financial Implications of FTC Resolution
There are no financial penalties or other monetary relief associated with today’s announcement. As part of the resolution announced today:
- Approximately 237 Evolv Express units of certain customers1 could be impacted by the right to cancel, or approximately 4% of the company’s total installed base of 5,323 Evolv Express units as of June 30, 2024.
- Approximately $3.9 million of the Company’s Annual Recurring Revenue2 could be impacted by the right to cancel, or approximately 4% of the Company’s Annual Recurring Revenue as of June 30, 2024.
- Approximately $10.5 million of the Company’s Remaining Performance Obligation3 could be impacted by the right to cancel, or approximately 4% of the Company’s Remaining Performance Obligation as of June 30, 2024.
As noted above, the cancellation option will be provided only to a limited group of K-12 customers that comprise approximately 8% of the company’s total customers.
1 “Customer(s)” means school(s) or school district(s) in the K-12 range that purchased or otherwise contracted for the use of Evolv Express between the period April 1, 2022, to June 30, 2023. Excluded from this definition is any school or school district that: (1) participated in a pilot program of at least 30 days prior to such purchase or contract; (2) purchased 15 or more Evolv Express units; or (3) purchased or contracted for, and deployed, additional Evolv Express units more than 45 days after initially deploying Evolv Express at a school.
2 Evolv defines Annual Recurring Revenue, or ARR, as subscription revenue and the recurring service revenue related to purchase subscriptions for the final month of the quarter normalized to a one-year period. The calculation of ARR is not adjusted for the impact of any known or projected future events (such as customer cancellations, upgrades or downgrades, or price increases or decreases) that may cause any such contract not to be renewed on its existing terms. In addition, the amount of actual revenue that Evolv recognizes over any 12-month period is likely to differ from ARR at the beginning of that period, sometimes significantly. This may occur due to new bookings, cancellations, upgrades, downgrades or other changes in pending renewals, as well as the effects of professional services revenue and acquisitions or divestitures. As a result, ARR should be viewed independently of, and not as a substitute for or forecast of, revenue and deferred revenue. Evolv's calculation of ARR may differ from similarly titled metrics presented by other companies.
3 Evolv defines Remaining Performance Obligation, or RPO, as estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied or partially satisfied as of the end of the quarter.
