Annual report pursuant to Section 13 and 15(d)

Revenue Recognition

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Revenue Recognition
 12 Months Ended
Dec. 31, 2022
Revenue Recognition and Deferred Revenue [Abstract]  
Revenue Recognition Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification 606 – Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In order to achieve this core principle, the Company applies the following five steps when recording revenue: (1) identify the contract, or contracts, with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when, or as, performance obligations are satisfied.

The Company derives revenue from (1) subscription arrangements generally accounted for as operating leases under ASC 842 (and ASC 840 prior to adoption of ASC 842) and (2) from the sale of products, inclusive of SaaS and maintenance and (3) professional services. The Company’s arrangements are generally noncancelable and nonrefundable after ownership passes to the customer for product sales and upon installation or delivery for subscriptions. Revenue is recognized net of sales tax.

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, 2022.

Less than 1 year Greater than 1 year Total
Product revenue $ 8,686  $ —  $ 8,686 
Subscription revenue 26,763  57,602  84,365 
Service revenue 13,969  37,541  51,510 
Total revenue $ 49,418  $ 95,143  $ 144,561 

The amount of minimum future leases is based on expected income recognition. As of December 31, 2022, future minimum payments on noncancelable leases are as follows (in thousands):

Year Ending December 31:
2023 26,763 
2024 25,412 
2025 21,388 
2026 10,689 
Thereafter 113 
$ 84,365 
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, 2022 and December 31, 2021, the Company had $2.9 million and $1.5 million in current portion of contract assets and $1.4 million and $3.4 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 $6.6 million during the year ended December 31, 2022 that was included in the 2021 deferred revenue balance. The Company recognized revenue of $2.3 million during the year ended December 31, 2021 that was included in the 2020 deferred revenue balance.

The following table provides a rollforward of deferred revenue (in thousands):
Balance at December 31, 2020 $ 4,242 
Revenue recognized in relation to the beginning of the year contract liability balance (2,300)
Revenue deferred 7,132 
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 

The following table presents the Company’s components of lease revenue (in thousands):
Twelve Months Ended
December 31,
2022 2021
Revenue from sales-type leases $ 1,123  $ — 
Interest income on lease receivables 224  — 
Lease income - operating leases 17,569  7,803 
Total lease revenue $ 18,916  $ 7,803 

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 as other income (expense), net 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.
Disaggregated Revenue

The following table presents the Company’s revenue by revenue stream (in thousands):

Twelve Months Ended
December 31,
2022 2021
Product revenue $ 31,985  $ 13,631 
Leased equipment 17,569  7,803 
SaaS, maintenance, and other revenue 4,665  846 
Professional services 976  1,113 
Total revenue $ 55,195  $ 23,393 

The following table presents the Company's revenue by geographical region based on customer location (in thousands):

Twelve Months Ended
December 31,
2022 2021
United States $ 53,815  $ 22,254 
Foreign 1,380  1,139 
Total revenue $ 55,195  $ 23,393 

Contract Acquisition Costs

The Company incurs and pays commissions on product sales. The Company applies the practical expedient for contracts less than one year 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 $9.0 million and $5.4 million as of December 31, 2022 and December 31, 2021, respectively. During the years ended December 31, 2022 and 2021, the Company amortized commission expense of $4.1 million and $2.7 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, 2022, the Company donated six Evolv Express units to schools, resulting in $0.2 million in general and administrative expense in the Company’s consolidated statements of operations and comprehensive loss. No Evolv Express units were donated during the year ended December 31, 2021.