Touchless security screening firm Evolv Technology’s $1.7 billion merger with SPAC NewHold Investment Corp. was announced in early March and set inboxes buzzing from Wiesbaden to Hawthorne. We offer some initial thoughts on the deal.
The interesting thing (to us at least) about Evolv’s merger with SPAC NewHold Investment Corp. is not its $1.7B valuation on $22M in 2020 actual bookings — that’s downright conservative by 2021 standards.
It’s their FY 2023 projected gross margin of 82%. That projected margin is a doubling of its 2020 actual 41% gross margin.
As the chart above suggests, it’s hard to get to a > 80% gross margin selling security screening hardware and service contracts (just ask Smiths Detection and OSI Systems whose current gross margins are less than half what Evolv projects).
Evolv has a different business model. It plans to sell high-tech “security screening as a service” and a whole set of software-based, AI-enabled — and revenue-generating — capabilities layered on top. initially targeting the commercial event security market. That market has been stubbornly labor-intensive for a reason: people are useful in dynamic, unpredictable, security environments, so It will be interesting to see if Evolv can realize its vision.
