Annual report pursuant to Section 13 and 15(d)

Revenue Recognition

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Revenue Recognition
 12 Months Ended
Dec. 31, 2023
Revenue Recognition and Deferred Revenue [Abstract]  
Revenue Recognition Revenue Recognition
Remaining Performance Obligations
The following table includes estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially satisfied) as of December 31, 2023.

Less than 1 year 1 - 2 years More than 2 years Total
Product revenue $ 997  $ —  $ —  $ 997 
Subscription revenue 56,819  52,188  63,265  172,272 
Service revenue 21,255  20,948  24,898  67,101 
License fee and other revenue 143  —  —  143 
Total revenue $ 79,214  $ 73,136  $ 88,163  $ 240,513 
The amount of minimum future leases is based on expected income recognition. As of December 31, 2023, future minimum payments on noncancelable leases are as follows (in thousands):

Year Ending December 31:
2024 $ 56,819 
2025 52,188 
2026 41,088 
2027 21,118 
Thereafter 1,059 
$ 172,272 
Contract Balances from Contracts with Customers
Contract assets arise from unbilled amounts in customer arrangements when revenue recognized exceeds the amount billed to the customer and the Company’s right to payment is conditional and not only subject to the passage of time. As of December 31, 2023 and December 31, 2022, the Company had $3.7 million and $2.9 million in current portion of contract assets and $0.5 million and $1.4 million in contract assets, noncurrent on the consolidated balance sheets, respectively.
Contract liabilities represent the Company’s obligation to transfer goods or services to a customer for which it has received consideration (or the amount is due) from the customer. The Company has a contract liability related to service revenue, which consists of amounts that have been invoiced but that have not been recognized as revenue. Amounts expected to be recognized as revenue within 12 months of the balance sheet date are classified as current deferred revenue and amounts expected to be recognized as revenue beyond 12 months of the balance sheet date are classified as deferred revenue, noncurrent. The Company recognized revenue of $19.1 million during the year ended December 31, 2023 that was included in the 2022 deferred revenue balance. The Company recognized revenue of $6.6 million during the year ended December 31, 2022 that was included in the 2021 deferred revenue balance.
The following table provides a rollforward of deferred revenue (in thousands):
Balance at December 31, 2021 $ 9,074 
Revenue recognized in relation to the beginning of the year contract liability balance (6,632)
Revenue deferred 33,526 
Balance at December 31, 2022 $ 35,968 
Revenue recognized in relation to the beginning of the year contract liability balance (19,104)
Revenue deferred 54,626 
Balance at December 31, 2023 $ 71,490 
The following table presents the Company’s components of lease revenue (in thousands):
Twelve Months Ended
December 31,
2023 2022
Revenue from sales-type leases $ —  $ 1,123 
Interest income on lease receivables 197  224 
Lease income - operating leases 37,247  17,569 
Total lease revenue $ 37,444  $ 18,916 
The revenue from sales-type leases is related to the Evolv Express units where the lease term is for the major part of the economic life of the underlying equipment and is classified as product revenue in the consolidated statements of operations and comprehensive loss. The interest income on lease receivables is classified under interest income in the consolidated statements of operations and comprehensive loss. The lease income from operating leases is related to the leased equipment under subscription arrangements and is classified as subscription revenue in the consolidated statements of operations and comprehensive loss. Revenue related to leases entered into with related parties were $0.9 million and $0.6 million during the years ended December 31, 2023 and 2022, respectively.
Disaggregated Revenue
The following table presents the Company’s revenue by revenue stream (in thousands). Certain prior period amounts have been reclassified to conform to current period presentation:

Twelve Months Ended
December 31,
2023 2022
Product revenue $ 21,977  $ 31,985 
Leased equipment 37,247  17,569 
Service revenue 16,141  4,331 
License fees 2,963  — 
Professional services and other revenue 2,090  1,310 
Total revenue $ 80,418  $ 55,195 
The following table presents the Company's revenue by geographical region based on customer location (in thousands):

Twelve Months Ended
December 31,
2023 2022
United States $ 78,556  $ 53,815 
Foreign 1,862  1,380 
Total revenue $ 80,418  $ 55,195 
Commissions
The Company incurs and pays commissions on product sales. The Company applies the practical expedient for contracts less than one year in duration to expense the commission costs in the period in which they were incurred. Commissions on product sales and services are expensed in the period in which the related revenue is recognized. Commissions on subscription arrangements and maintenance are expensed ratably over the life of the contract. The Company had a deferred asset related to commissions of $11.4 million and $9.0 million as of December 31, 2023 and December 31, 2022, respectively. During the years ended December 31, 2023 and 2022, the Company recognized commission expense of $5.6 million and $4.1 million, respectively.
Give Evolv LLC
Upon the closing of the Merger, the NHIC Founders transferred 517,500 shares of its common stock to Evolv NewHold Benefit LLC (“ENHB”), which represented the initial contribution to be used to pay for the donation of Evolv’s Express units to public venues and institutions, primarily schools in locations that might not otherwise be able to afford weapon detection security screening systems and related products and services. In September 2021, ENHB was renamed to Give Evolv LLC (“Give Evolv”). Give Evolv is deemed an entity under common control and a consolidating entity as it is under the same management as the Company. As such, the shares held by Give Evolv are not considered outstanding or issued.
For such arrangements, Give Evolv generally purchases the related products and services from Evolv through an intercompany transaction using the available donated proceeds from the transfer of common stock upon the closing of the Merger. Evolv will be responsible for the delivery of the units, in addition to providing related services, such as installation, training, and maintenance. Consideration transferred to Evolv for the related products and services may be in the form of common stock or cash. Shares of common stock may be sold to generate funds for the purposes of paying for the donated goods and services. The sales transactions between Evolv and Give Evolv eliminate in consolidation.
During the year ended December 31, 2023, the Company donated five Evolv Express units to schools resulting in $0.2 million in general and administrative expenses in the Company's consolidated statements of operations and comprehensive loss. During the year ended December 31, 2022, the Company donated six Evolv Express units to schools, resulting in $0.2 million in general and administrative expenses in the Company's consolidated statements of operations and comprehensive loss.