Evolv Technology, the US security tech company whose products are used in stadiums and arenas across the world, has fired its president and CEO, Peter George, amid an internal investigation into its sales and financial reporting practices.
George joined Evolv in February 2019 as chief commercial officer, before being promoted to CEO in January 2020. In a statement yesterday (Thursday), Evolv said his contract had been terminated, without cause, as of October 30.
The Evolv board has appointed Michael Ellenbogen, chief innovation officer and a member of the board, as interim president and CEO. Ellenbogen co-founded the company in 2013 and, before taking up the CIO role in 2021, served as CEO for approximately seven years.
Evolv said yesterday’s announcement followed “months of careful planning and deliberation” by its board. In May, the board formed a succession planning committee to evaluate leadership performance and effectiveness and plan for an orderly CEO transition.
With the assistance of an executive search firm, Evolv said the committee has been “actively recruiting and interviewing” CEO candidates adding that, following yesterday’s decision, the board intends to announce a new CEO “expeditiously”.
Financial report delayed
Yesterday’s announcement followed Evolv’s declaration on October 25 that shareholders and others should not rely upon certain of the company’s previously issued financial statements and that it would delay filing its quarterly report for the period ending September 30, 2024.
Evolv said an ad hoc committee of independent directors of the board is conducting an internal investigation that is focused on the company’s sales practices, including whether certain sales of products and subscriptions to channel partners and end users were subject to extra-contractual terms and conditions that impacted revenue recognition and other metrics, and if so, when senior company personnel became aware of these issues.
Evolv said the committee had made a preliminary determination that certain sales, including sales to “one of its largest channel partners”, were subject to extra-contractual terms and conditions, some of which were not shared with the company’s accounting personnel, and that certain company personnel engaged in misconduct in connection with those transactions. Furthermore, these extra-contractual terms and conditions were withheld from Evolv’s audit committee and its public accounting firm, PricewaterhouseCoopers (PwC).
As a result of these preliminary findings, the committee determined that the accounting for certain sales transactions was inaccurate and that, among other things, revenue was prematurely or incorrectly recognised in connection with financial statements prepared for the periods between the second quarter of 2022 and the second quarter of 2024.
The committee determined that these misstatements were material for certain financial statements prepared for these periods and that the recognition of revenue in the proper periods will impact each of those financial statements. Evolv said the committee currently estimates that, on a net basis through June 30, 2024, the sales transactions at issue have resulted in premature or incorrect revenue recognition of approximately $4m (£3.1m/€3.68m) to $6m. Evolv added that the committee anticipates that the vast majority of this revenue was “prematurely rather than incorrectly recognised”.
Evolv noted that the “fundamentals of our business remain strong”, but added that it had self-reported these issues to the Division of Enforcement of the U.S. Securities and Exchange Commission (SEC), which had been conducting a previously disclosed and unrelated investigation.
Regaining the trust of investors
Commenting on the internal investigation yesterday, Evolv said: “The board has been evaluating leadership and performance for several months – long before we became aware of any potential issues relating to the company’s sales practices and financial reporting.
“With respect to that ongoing investigation, the board remains committed to completing a thorough investigation as expeditiously as possible. Our goal is to ensure the company’s financial reports are always current and reliable and that our organisational culture reflects our values of integrity and honesty. That is the only way we can regain the trust and confidence of our investors.”
The company added: “We appreciate Peter’s years of dedication to our company and his significant contributions to the company’s mission. We wish him well in his future endeavours. That said, we have determined that a change in leadership is needed to improve the company’s culture as we prepare for the next phase of growth.
“We continue to believe that the fundamentals of our business remain strong. But we are also convinced that the company can do even better.
“The board and leadership team are committed to ensuring a smooth transition, and we are grateful that we’ll be able to benefit from Mike’s experience and perspective at this time. The board will remain actively engaged with Mike and the rest of the leadership team to ensure the company remains on the right path.”
One of Evolv’s most recent contracts saw it announced as the official fan screening provider of the Charlotte Hornets NBA team. As part of the deal, Evolv Express systems will be used to screen fans at Spectrum Center’s entrances. The partnership ties in with the Re!magine Spectrum Center renovation project.
The Associated Press notes that Evolv has faced other legal issues in recent years, including separate federal probes into its marketing practices led by the Federal Trade Commission and the SEC. Earlier this year, investors filed a class-action lawsuit, accusing company executives of overstating the capabilities of the company’s products and claiming that “Evolv does not reliably detect knives or guns.”
