Evolv Technology (EVLV) Announces Resolution of FTC Inquiry

Evolv Technology (NASDAQ: EVLV), a leading security technology company pioneering AI-based solutions designed to create safer experiences, 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.”

The Evolv Express has demonstrated that it works in real-life situations and has helped to detect and prevent dangerous weapons from entering schools and places where they are prohibited, supporting our customers in providing a safer environment for learning. Recent examples of situations in which the Evolv Express has enabled school users to detect illicit firearms are available here and here. “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. The Company has confidence that most customers are satisfied with their deployment of Evolv Express as they recognize the value that the systems bring to enhancing safety and security. 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.

Commitment to Customer Community

Evolv’s customer relationships are driven by trust, demonstrated through the performance of the Company’s technology at scale. Approximately 45% of the Company’s sales in any given quarter come from existing customers that are expanding their deployments of Evolv Express. Beyond enhanced governance and compliance, the Company has made significant new investments to educate the communities it serves about how technology may be one part of a layered approach to reducing the potential for gun violence.

“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.

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