Earnings Call Transcript - EVLV Q3 2021

Operator, Operator

As a result of a number of risks and uncertainties including, without limitation, the risk factors set forth under the caption risk factors, and our prospective filed with the SEC on September 3, 2021 and in our other documents filed with or furnished to the SEC. The forward-looking statements made today represent our views as of November 10, 2021. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee the future results, levels of activity, performance, and events and circumstances reflected in the forward-looking statements which will be achieved or will occur. Except as required by applicable law, we disclaim any obligation to update them to reflect future events or circumstances. Before I turn the call over to Peter George, let me briefly bring to your attention a few upcoming investor events. Tomorrow, Thursday, November 11 we will be at the Stifel Midwest Investor Virtual Conference. On Tuesday, November 30th, we will be at the Credit Suisse Technology Conference in Scottsdale, Arizona, and on Wednesday, December 15th, we will be at the Imperial Capital Conference in New York City. We will also be hosting and providing the following live and virtual investor events throughout the quarter. For more information or to schedule a meeting with the Management team at any of these conferences, please contact me at bnorris@evolvtechnology.com. With that, I'd like to turn the call over to Peter. Peter?

Peter George, CEO

Thanks, Brian. Good afternoon, everyone, and thank you for joining us today. We have a lot of exciting news to share regarding the third quarter and our business momentum, but before we start, I want to take a moment to formally introduce Mario Ramos, who joined us last week as Chief Financial Officer and Chief Risk Officer. Mario brings over two decades of executive experience, building and leading high growth companies, and his financial and strategic leadership will be instrumental in supporting our next stage of growth. He's had a very successful career, which included a six-year run at CVS in a variety of executive leadership roles, including CFO of CVS Caremark. Before that, he was Head of CVS' M&A and corporate development group and led the acquisition and integration of the Aetna, which, as you know, is the signature transaction and the transformation that CVS has gone through. He has also served as COO of CVS International and spent over 17 years on Wall Street, primarily at JP Morgan and Lehman Brothers. We're thrilled to have you on board; welcome, Mario.

Mario Ramos, CFO

Thank you, Peter. It's great to be here, and thank you for the warm welcome. I'm excited to join the team, and I look forward to meeting and working with all the members of the investment community. Let me just share a little bit of why I joined the company, which started first and foremost with its mission: I really believe strongly in Evolv's mission of creating a safer world for everyone to work, learn, and play. And also as we continue on our growth trajectory, I believe we will need to continue scaling the business to maximize efficiency and maintain our market-leading position. This means building a solid foundation and infrastructure across the company with a special focus in certain areas like supply chain among others. I'm proud to say I've spent a large portion of my career scaling and leading digital transformations of companies based in the U.S. and abroad. I'm looking forward to putting that experience to work at Evolv, a leader in one of the fastest-growing markets across all of technology.

Peter George, CEO

Thanks, Mario, great to have you on board. I also want to take a moment to thank Peter Faubert for all of his contributions to the business over the last two years and all the contributions he will make as he takes on the challenges of his new role as Senior Vice President of Strategic Finance. In this capacity, he will play an important role in the company's growth initiatives. We're pleased to be reporting strong third quarter results, highlighted by a record total contract value of orders booked and record revenues. We continue to extend our leadership position with dozens of new customers and expansions of existing customers, strong new product introduction, and acceleration with our key channel partners. We remain on track for a strong finish in 2021 and are well-positioned to deliver on our TCV and market expansion goals. Two of the KPIs that we consider to be key measures of our progress, our TCV of orders booked and revenue. We delivered record results in both metrics in Q3 and are already off to a strong start here in Q4. TCV was $16.9 million in the third quarter, up 365% year-over-year. Revenue was $8.4 million in the third quarter, up 473% year-over-year, while we don't plan to share this level of detail every quarter; we wanted to provide some additional context around the momentum we're currently enjoying. We saw a record number of new customers in the third quarter, a seven-fold increase compared to the third quarter of last year. We had a record number of units booked, more than a five-fold increase compared to the third quarter of last year. We reported five transactions of at least $1 million in the third quarter, compared to none in the third quarter of last year and four seven-figure transactions in the previous four quarters combined. Our ASPs, which is a proxy for average deal size, increased by over 50% compared to the third quarter of last year. I am particularly pleased that we saw broad diversification of our TCV activity across nearly 10 target vertical markets, and no one transaction amounted to more than 15% of TCV in the quarter. About a third of our TCV came from professional sports with important contributions from the NFL's Carolina Panthers and Tennessee Titans. Three other vertical markets each contributed about 10% to TCV in the quarter, including performing arts centers, convention centers in factory warehouses. We also saw important contributions from hotels and casinos as well as two other rapidly emerging markets: healthcare and government. In summary, by any measure whatsoever: TCV in revenues, accelerating sales cycle, growing ASPs, and the volume of seven-figure transactions, the accelerated investments we've been making in our customer-facing functions and in our channel partners are paying dividends. This gives us greater confidence to continue with the strategy on our path to meet our 2022 and 2023 growth plans. We continue to make great progress on our goal of winning the professional sports market, a market we began investing in just a year ago. At that time we had virtually no brand awareness and we had no customers. I'm delighted to report that as of the end of the third quarter, 15% of Major League Baseball franchises, including the Chicago Cubs and the San Francisco Giants, are now screening all entering fans with Evolv Express. During the MLB season, we scanned upwards of 250,000 baseball fans on any given night at stadiums across the country. Further, a full 10% of all National Football League stadiums have now adopted Evolv Express to screen all entering fans, including the home venues of the Atlanta Falcons, the Carolina Panthers, and most recently the Tennessee Titans. On any given Sunday in the NFL, we are now screening over 200,000 professional football fans. The professional sports market is a relatively small part of our $20 billion total addressable market or TAM. It's part of a $2 billion regulated market along with aviation, which currently uses outdated analog metal detectors. Our progress in this market reflects our unique ability to deliver vastly improved venue security and transform the fan experience while reducing the need to hire defined security personnel. We're also seeing more and more team executives, guest services personnel, and fans themselves demanding this solution. These early beachheads across the MLB, the NFL, and now MLS are important because of the visitors that attend events at these facilities. These include economic buyers, safety leaders, facility operators, and other verticals, including distribution warehouses, performing arts, casinos, and schools. We believe that all of this newfound awareness is part of the network effect and force multiplier for Evolv Technology. Let me tell you a little about a few of these customers. The Tennessee Titans had previously been using walkthrough metal detectors and handheld guns that required over 280 security personnel to work the gates at Nissan Stadium. The Titans installed 17 SaaS-based Evolv Express units, which have been active now for the last several home games. The result has been a remarkable 66% reduction in the number of security personnel needed at their gate and a dramatic improvement in the overall guest experience. Over the last three home games, we've stopped 54 guns, knives, and other prohibited items from entering Nissan Stadium. And on a scale of zero to five, the average guest gate entry rating has more than doubled from 2.23 to 4.6. This is a perfect example of why customers deploy our technology. Our ability to deliver dramatically increased security posture greatly improves the guest experience and lowers the venue's operating costs; primarily security labor costs. Another example is the Pittsburgh Cultural Trust, which selected us to provide improved weapons detection and overall guest experience across multiple theaters, performance halls, galleries, and other venues in the historic entertainment district. Our expresses are now in place at four of the performance halls and theaters in the cultural district as well as the State Visual Arts Gallery. This deployment builds on our success at Pittsburgh Symphony Orchestra, Heinz Hall, where we were able to reduce the security screening footprint in the lobby by 60%, while also eliminating outdoor cues where guests previously waited in poor weather. One of the most important elements of our long-term growth objectives is, of course, the leverage we gain from our channel partnerships. Today we have nearly 36 authorized channel partners and several strategic global partners in Motorola Solutions, our OEM, Johnson Controls, and Stanley Black & Decker. I'm delighted to report that our channel program contributed to one-third of our TCV order activity in the third quarter. Let me share a few other highlights of our indirect go-to-market efforts. Let's start with our partnership with Motorola Solutions. Since announcing the partnership late in Q2, we've made great progress on cross-training, enablement, activation, and certification of the Motorola Solution sales and sales engineering teams. While it's still early, we're encouraged not only by the early wins we've secured but by the momentum in the pipeline. We now have nearly 60 qualified opportunities in our pipeline with Motorola across professional sports, schools, hotels and casinos, healthcare factories, warehouses, and government, where they have such a strong market position. More to come there, but we're excited about the accelerated opportunities and business that we're finding together. In addition, we recently worked with Stanley to secure an important win at the Indianapolis Symphony Orchestra. One of the most iconic performing arts venues in the nation. Evolv Express was installed at this historic Hilbert Circle Theatre to create a seamless and safer entry experience for the ISO's audiences, museums, musicians, and staff. We're proud to partner with them on the journey to digitally transform their physical security and delight their patrons. We also have a very strong regional partners which have close, longstanding customer relationships. In many cases, deep vertical market expertise in the markets we're focused on. A great example of this is VTI Security based in Minnesota, where we're seeing growing traction, particularly in the healthcare market. We worked together with VTI to secure several new customers in the third quarter, including the Mayo Clinic Health System, which has dozens of locations in several states. We're now being deployed in emergency entrances of their hallmark location in Rochester, Minnesota to provide patient and staff safety. Our success landing that initial location in the third quarter has led directly to expansion opportunities at other Mayo Clinic locations. This is a perfect example of our land-and-expand strategy coming together with our scale through partner approach. As first and foremost, we're a technology company. I want to close with a few comments about some exciting technical innovations we introduced in the third quarter. We're very excited about the latest release of Evolv Insights, our web-based portal companion to Evolv Express, which helps companies advance venue security with the power of data analytics to make venues smarter. Evolv Insights is three things: number one, on-demand, new mobile access to key metrics and remote scanner management, enabling security and operations leaders to make better data-driven decisions about their security posture from any location for more responsive management. Number two is data-driven: the new analytics and Evolv Insights allows for the integration and interrogation of threat types and alarm rates, informed decisions around sensitivity settings, and better understanding of present characteristics, improving security posture, staffing and training, and venue resource planning. And number three, it's connected. The new remote management capabilities allow administrators to access Evolv Express systems for remote configuration and monitoring, including important notifications and system changes regardless of where they are in the world. I want to thank our entire R&D team for their incredible work, which continues to deliver ever-increasing value to our customers through our AWS-enabled cloud offering and continues to set the standard for innovation across the industry. So in summary, we're pleased to be reporting strong third-quarter results highlighted by record total contract value of orders booked and record revenues. We continue to extend our leadership position with a record number of new customers and expansions of existing customers, strong new product introduction, and acceleration with our key channel partners. We remain on track for a strong finish in 2021 and believe that we are well positioned to deliver on our TCV and market expansion goals. So with that, let me turn it over to Peter Faubert to review our financial results in more detail and on our outlook for the balance of the year. Peter?

Peter Faubert, CFO

Thanks, Peter, and good afternoon, everyone. Today I'll cover our financial results for the third quarter and our outlook for the balance of the year. I'll start with our third-quarter results. The total contract value of orders booked or TCV was $16.9 million in the third quarter, up 365% year-over-year reflecting strong new customer additions. Total revenue was $8.4 million, up 473% year-over-year reflecting strong new customer additions across our core vertical markets as well as an expanded cohort of customers that chose to purchase hardware upfront. Product revenue was approximately $5.3 million compared to $300,000 in the third quarter of last year, reflecting the decision of two large customers, the Carolina Panthers of the National Football League, and a Major New England Area Convention Center to purchase Evolv Express at the beginning of the subscription period. These two transactions resulted in about $3 million of product revenue in the third quarter of 2021. Looking ahead, we expect a greater percentage of our revenue to shift to pure subscription revenue, which tends to provide much higher recurring revenue. Subscription revenue was $2.3 million, up 190% year-over-year, primarily reflecting the strong new customer additions in growth in systems and services. Service revenue, which primarily consists of professional services and training, was approximately $700,000, up 125% year-over-year reflecting an increased volume of installations. Subscription gross margin expanded to 53% in the third quarter from 43% in the second quarter, as we saw continued benefit from our scaling operations. Product gross margin increased to 45% in the third quarter from 15% in the second quarter, primarily due to certain credits we received from our contract manufacturer for inventory that we had provided to them. Excluding this benefit, our product gross margin would have been 25% in the third quarter, which again would have demonstrated solid improvement from the 15% in Q2. Total gross margin was 50% compared to 25% in the second quarter of 2021. Excluding the product cost of goods sold benefit that I just described, gross margin would have been 36% in the third quarter. Total operating expenses were $20.8 million in the third quarter, up 205% year-over-year. The primary drivers of the increase were headcount additions across the company, most notably in revenue-generating sales as well as technical talent for our engineering team, stock-based compensation expense, transaction costs associated with the offering, as well as a modest impairment charge for the write-down of certain assets. We exited the third quarter with approximately 160 employees compared to approximately 50 employees at March 31, 2021. Our loss from operations was $16.6 million in the third quarter, compared to $6.2 million in the third quarter of last year. Finally, we reported net income of $23.2 million or $0.15 per diluted share compared to a net loss of $6.3 million or $0.70 per diluted share in the year-ago period. Now turning to the balance sheet. We ended the quarter with approximately $334 million in cash and cash equivalents compared to $4.7 million at December 31, 2020. This increase reflects the completion of our public offering in the third quarter of 2021; more specifically, our financing activities in the third quarter included $300 million in PIPE proceeds and approximately $51.2 million in proceeds from the closing of our merger with NewHold. We ended the quarter with net accounts receivable of $7.3 million compared to $1.4 million at December 31, 2020, reflecting strong new customer acquisition and billing activity. We ended the third quarter with property and equipment of $17.8 million compared to $9.3 million at December 31, 2020. This growth reflects strong customer adoption of solutions via our pure subscription pricing model under which we retain title of Evolv Express. I'll close with a few comments on how we're thinking about the rest of the year. I want to remind you that these forward-looking statements represent our views only as of today. Based on the strength of our third-quarter results and our outlook for the balance of the year, we are raising our previously issued guidance for both TCV and revenue. Our current expectations are for full year total contract value or TCV of between $53 million and $57 million compared to our previously issued outlook of $53 million to $55 million. Relatively speaking, we practice providing our business outlook on an annual basis with only one quarter to go in the year. Our outlook by extension calls for TCB of between $17 million and $21 million in the fourth quarter of 2021. Our current expectations for full year revenue of between $20 million and $23 million compared to our previously issued outlook of $20 million to $21 million. Again, only with one quarter left to go into the year, our outlook by extension calls for revenue between $3 million and $6 million in the fourth quarter of 2021. This reflects our expectation that more customers will be traditional subscription transactions versus the greater contribution of purchase subscription transactions that we saw in Q2 and Q3. The core drivers that support our overall growth opportunity are intact. The key trends of escalating gun violence, venue reopening, and the demand by visitors for a more frictionless and touchless guest experience are all powerful drivers for growth for us. We expect to continue to invest across the business, mostly in revenue-generating and revenue-supporting headcount, as well as in engineering resources to continue to extend our leadership position. We believe all of these investments will put us in an excellent position to continue to capture the opportunity in 2023 and beyond. We'll provide a detailed outlook during our fourth-quarter earnings call in March of 2022. So in summary, we're pleased with our strong third-quarter results. We're excited about our plans for the fourth quarter and the opportunity ahead in 2022.

Operator, Operator

At this time, we'd like to open the call up for Q&A. Again, we ask participants to limit themselves to one question and one follow-up. Operator?

Operator, Operator

And our first question will come from Mike Latimore with Northland Securities Markets. Please go ahead.

Mike Latimore, Analyst

Yes. Congratulations on a great quarter there. Great momentum in the business.

Peter George, CEO

Thank you.

Mike Latimore, Analyst

I liked the emergency room example; that seems like that's a logical one we can kind of go everywhere.

Peter George, CEO

Yes.

Mike Latimore, Analyst

So you gave generally an employee headcount updates. How is the sales hiring going? Is that on track and what kind of background are the people you are seeing there?

Peter George, CEO

Yes. Thanks Mike. Good to have you on the call. So just your point about the emergency room, we saw healthcare as one of the big emerging verticals in Q3 that we think is going to be one of the biggest verticals for the company going forward. You may remember last quarter; we talked about casinos and theme parks as being big parts of our growth. This quarter it was healthcare. So that's a natural place for us. We're excited about that and what that means. To capture that demand, we're continuing to add new people across the company. We started the year, as you know, with about 50 people. We're going to exit this year with about 180. We're adding people in every part of the organization, in particular, quota-carrying salespeople to capture the demand in the market. So we should exit this year with 25 to 30 quota-carrying salespeople in conjunction with another 10 to 15 solution engineers; they team sell with our customers. And then, of course, you heard the work that we're doing to activate the channel. We were thrilled to see the channel represent one-third of our business in the quarter. We expect that to continue, and of course our channel partners like Motorola and Stanley; these are big companies with hundreds of salespeople.

Mike Latimore, Analyst

Yes. Perfect. And then you talked a little bit about more bookings in the subscription category in the fourth quarter relative to product. Is that tied to vertical mix or channel versus direct or is it just kind of a bottoms-up?

Peter Faubert, CFO

Yes. Hi Mike, it's Peter Faubert. Again, we talk about a lot of the purchase subscription deals that we're closing being in professional sports. If we just look at the pipeline in Q4, a lot of the pipeline is coming from that $18 billion TAM, the Greenfield opportunities. So we expect that there will be a little bit of a shift more towards the subscription deals in Q4.

Mike Latimore, Analyst

Got it. Okay. Great. Thanks so much. Good luck.

Peter George, CEO

Thanks Mike.

Peter Faubert, CFO

Thanks Mike.

Operator, Operator

Operator, we're ready for the next question, please.

Operator, Operator

And next we'll go to the line of Brad Reback with Stifel. Please go ahead.

Brad Reback, Analyst

Great. Thanks very much. Peter, as you think about this really large opportunity within professional sports, it seems like the customer experience gain is so substantial. What's the gating factor for these facilities not to move even faster?

Peter George, CEO

Yes. So look, we – when we thought about our business, we thought about the $18 billion TAM, which are those people that thought about security but didn't want to take the only technology available at the time, which is a metal detector, so they ended up doing nothing, and we began our business going after that market. The truth is we found great success now in professional sports, which is the other regulated area other than prisons and aviation. So now that we've made good progress with some of the teams and the fan experience in those stadiums is so different than the other fan experiences in the other teams. Obviously, the physical security people know each other from each of the teams. They're talking to each other, and we think there's going to be a lot of momentum across the leagues, all the leagues and professional sports. That's going to drive a lot of business for us going forward. So we're really excited about that. So excited that we're standing up a professional sports division.

Brad Reback, Analyst

That's great. And then it wouldn't be a conference call nowadays if someone didn't ask about hardware and supply chain. So maybe you can give us an update on where you guys stand in your ability to procure the necessary hardware to meet orders for the rest of this year and into next? Thanks.

Peter Faubert, CFO

Yes. Thanks, Brad. This is Peter Faubert. Again as we talked about last quarter; we're still identifying long lead time items, we're aggressively placing purchase orders against those through our contract manufacturer. We're trying to stock up on raw materials inventory. From a raw materials perspective, we're in great shape through at least the mid-point of 2022. That said, the supply chain issues continue. As we ramp into 2022, we're going to continue with that same approach, but some of these supply chain issues as we're scaling may not allow us to aggressively stock up on these raw materials like we were able to do this year. So it remains to be seen; we're in good shape for now, and we're still actively managing the process.

Brad Reback, Analyst

Great. Thanks a lot.

Operator, Operator

Thanks, Brad. See you at the conference this quarter. Next question, please operator.

Operator, Operator

Next question comes from Sandy Badri at Credit Suisse. Please go ahead.

Sandy Badri, Analyst

Hi. Thank you for the question. You open with some of the drivers of your business, and I think one of the most critical is, as I said, much of the strength of your business is the post-COVID recovery dynamic versus the organic, and kind of to say, of course you are going to see any ways in your business? That's question number one. Question number two is, when you think about your five deals that were $1 million plus, how many of those actually include channel partners? And I'm specifically trying to get at or trying to figure out is, is Motorola an enabler for you to push deals that are much larger than you've ever seen before?

Peter George, CEO

Sure. Well first of all, welcome and thanks for your question. Your first question broke up a little bit, but let me see if I have it right, if not, ask me again. So, a couple of big secular tailwinds impacting the growth that we're having in the demand and the business. Number one, everyone during the pandemic has gone through an accelerated digital transformation in every part of their business. Well, that's what we do for physical security. We take that dumb analog device called a metal detector and transform it into a digital platform. And so that accelerated, I think people thinking about when it was time to return, they knew that their employees, their fans, their patrons wanted to return in a different way and digitally transforming their platform and their threshold allows them to do that in a touchless way. So we've gotten the benefit of post-pandemic of people having the time to rethink how they want to do security in their venue. And when they understand that we can not only increase their security posture but make their lines go away and make sure that the experience is such that you walk right into the venue without breaking stride, and nobody has to touch your belongings, well, that's transformative for every venue, which is why we're having such great success as North America is opening up. We see hundreds of thousands of thresholds of places that are going to want us going forward. So excited about that. Most of the reopening and our business is happening in North America right now, and the international market still has a bit of a COVID hangover. As that begins to open up next year, we expect to feel that same kind of momentum. So the combination of digital transformation, the pandemic, people wanting to return in a new way without any friction in a touchless experience, and then get into the venue and be safe, safe from the anxiety and the proliferation of weapons in North America. There were 400 million guns in North America, and when people get together, they want to get together and know they're safe from all kinds of threats, not just COVID-19, but also people that have a weapon on them and that's what we do for them. So we're excited about what lies ahead of us. These secular tailwinds are impacting all the verticals we're focused on and we're seeing great traction and there's a lot of room there. But the second question I think was about these number of million dollar deals and getting them through the channel. So out of those five million dollar deals that we did, three of them were with the channel and two of them were direct. And yes, the answer is companies like Motorola, Stanley, Black and Decker, and JCI. They have been selling too many of the professional sporting teams, schools, theme parks for years; they've been selling lots of security equipment and lots of other equipment. They have contracts, they have relationships, and so it gives us not only access, but a fast path to deploy our systems. So we expect those partnerships to play an increasing role in helping us penetrate professional sports, amateur sports, but all the other venues that they have a great position in like schools. Motorola has a phenomenal position in the federal government, right? And we want to work with them to make sure that we can reach all the markets in the federal government that we haven't staffed for yet.

Sandy Badri, Analyst

Got it. Thank you for the color. And then, so thank you for clarifying that and five, $1 million plus deals versus I think you – I believe you said none versus the prior year. Is there an internal bar or expectation on the number of $1 million plus deals that you guys want to hit on a quarterly basis going forward?

Peter George, CEO

We track all the metrics that you might imagine, all the SaaS metrics, because we're a SaaS company, that's one of them, which is the number of seven-figure deals. So we're excited about what our pipeline looks for that and all the leading indicators like ASP growing, sales cycle contracting, up-sell opportunities with our customers, all those metrics, including seven-figure deals we track. We feel very good about what's ahead of us. In terms of the pipelines, what's really interesting is because the competitive landscape is not very aggressive right now. We like to have three times the pipeline in the forward quarters to feel comfortable about landing our numbers. We have a really good marketing team and channel team helping us build that pipeline. At the end of the quarter, the deals that we don't get, we may lose a few, but we don't lose a few to competition. We lose a few to no budget. But the deals that we don't get in the quarter typically move to the next quarter. So we have this really great quarter of pipeline deals to go after every quarter and if it doesn't close this quarter, then it normally moves to the next one. It gives us a lot of confidence that we can continue to grow at the rate that we're growing.

Sandy Badri, Analyst

Got it. And then my last question is a technology-related question. Does the Evolv API or information flow directly into say a Motorola command center type software suite? Or is it currently an independent pane of glass type of software or webpage interface?

Peter George, CEO

Yes. It's a great question. So we have an open API, which is one of the things I didn't mention in my remarks, because we're a digital platform and we have an open API we can connect into both the physical and the cyber infrastructure that we go into. So think about connecting to Motorola's CMS system, their video analytics capability, their license plate readers, that whole lineage of premium products that they have, we can connect to. So specifically with our open API, we can send an alert to a Motorola SOC and have that connection happen immediately. So yes, that's available for Motorola, but also through all the other partnerships that we're building as well. That open API allows us to integrate into the physical and the cyber infrastructure of all the different ecosystems that customers deploy. But we're excited about what it's going to mean for the partnership of Motorola because they're creating some premium products on our platform that are going to be unique and compelling and differentiate them in the market in a way that we're excited about. And I know they are too.

Sandy Badri, Analyst

Got it. Great. Thank you.

Operator, Operator

Sandy, thanks for those questions. Look forward to participating in the Credit Suisse Conference next month, or later this month I should say. Operator, I think we have time for one more question.

Operator, Operator

And the next question that comes to the line of Brian Ruttenbur with Imperial Capital. Please go ahead.

Brian Ruttenbur, Analyst

Yes, thank you very much. Okay, hopefully I'm coming through.

Peter George, CEO

Yes. We can hear you, Brian. Go ahead.

Brian Ruttenbur, Analyst

Yes. I'm getting weird feedback. So I apologize. So in terms of EPS, you have been giving guidance of a loss of $0.80, a loss of $0.75 on the 84 million shares outstanding. Is there an update to that?

Peter George, CEO

Yes. Just on the EPS in general, we booked all of our transaction accounting entries obviously when we closed the deal. As part of those entries, we reevaluated a lot of the derivative liability, earn-out liability and common stock, contingent common stock liability balances from the closing date. So the big swing in EPS is really around booking those gains based on the reduction in the stock price. And so that was the big swing in the EPS from the loss to the gain.

Brian Ruttenbur, Analyst

Great. Do you have an update on your adjusted EPS or GAAP EPS?

Peter George, CEO

Yes. We don't really want to talk about it because obviously the stock volatility is outside of our control. So it's really tough to forecast that for the year. All I can say is the EPS swing is not coming from operations; it's really coming from these technical accounting entries.

Brian Ruttenbur, Analyst

Okay. Understand. The last question is on Disney trial. Can you give us an update on whatever happened with the Disney trials? Is there still ongoing trials and what is the overall status there at the theme parks?

Operator, Operator

So, Brian, this is Brian Norris. I don't know that we've ever discussed that as a customer of the company. Obviously, we're very focused on the theme park space in general. I think our technology plays very, very well there, and we're certainly excited to continue to expand our leadership position in the theme park vertical in all parts of the country. How about that?

Brian Ruttenbur, Analyst

Okay. Thank you very much.

Peter George, CEO

Hey, Brian, any other final questions there? Anything else we can help you with? Otherwise, we'll look forward to seeing you in December at the new conference in New York.

Brian Ruttenbur, Analyst

Yes. Thank you very much. That's it.

Operator, Operator

Erica, do any other questions? So we get to all of them, I think we did?

Operator, Operator

And we have no further questions in the queue at this time.

Operator, Operator

Terrific. Okay. Well, on behalf of Peter, Mario, and the whole management team and all employees of Evolv, we thank you for participating in this evening's call. We look forward to reaching as many of you as we can in our outreach period again with three conferences during the period. Feel free to reach out to me at bnorris@evolvtechnology for more information. Thank you so much.

Operator, Operator

And ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using ATT Teleconference. You may now disconnect.