Earnings Call Transcript - EVLV Q1 2026

Operator, Operator

Afternoon, and welcome to the Evolve Technology First Quarter Earnings Results Conference Call. All participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's call, Brian Norris, Senior Vice President of Finance and Investor Relations for Evolve Technology. Please go ahead, sir.

Brian Norris, SVP, Finance & Investor Relations

Thank you, and good afternoon. Welcome to today's call. Joined today by John Kedzierski, our President and Chief Executive Officer, and Chris Kutsor, our Chief Financial Officer. Today, after the market closed, we issued a press release detailing our first quarter results and our 2026 outlook. The release is filed with the SEC and available on the Investor Relations section of our website. During today's call, we will make forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 2000. These statements reflect our current expectations and views of future events, including, but not limited to, our business strategy and model, our expectations for future growth and market opportunities, our ability to acquire, renew, and expand customer relationships, our strategic partnership with Plexus, future demand for our products, and our ability to achieve our business outlook. All forward-looking statements are subject to material risks, uncertainties, and assumptions, some of which are beyond our control. Actual events or financial results may differ materially due to multiple factors, including those described under the caption Risk Factors in our annual report on Form 10-K for the year ended 12/31/2025, filed with the SEC on 03/10/2026, and our quarterly report on Form 10-Q filed with the SEC earlier today. The forward-looking statements made today represent our views as of 05/12/2026. Although we believe that the expectations reflected in these statements are reasonable, we cannot guarantee that future results, performance, or the events and circumstances reflected herein will be achieved or will occur. Except as may be required by applicable law, we disclaim any obligation to update them to reflect future events or circumstances. Our commentary today will also include non-GAAP financial measures that we believe provide additional insights for investors. These measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP. Non-GAAP measures discussed today include adjusted gross profit and margin, adjusted operating expenses and operating income, adjusted EBITDA and adjusted EBITDA margin, and adjusted earnings and earnings per diluted share. Reconciliations to the most directly comparable GAAP measures are included in today's press release and our definitions may differ from similarly titled measures used by other companies. We will also discuss other operating metrics, including annual recurring revenue, or ARR, and remaining performance obligation, or RPO, which we believe are helpful in understanding the progress we are making as a business. Before I turn things over to John, I would like to remind investors about Investor Day 2026, which will be held on 06/09/2026. The event will be webcast live on the Investor Relations section of our website. We look forward to providing a deeper update on our strategy, product innovation, and long-term financial framework at that time. With that, I would like to turn the call over to John.

John Kedzierski, President & CEO

Thank you, Brian. And thanks to everyone for joining us today. As we reflect on our first quarter results, the message is straightforward: we continue to execute on what we said we would do. The progress we are making starts with the trust and partnership of our customers, and it is being delivered through the steady, disciplined work of our team. We continue to strengthen the consistency and reliability of our operations while scaling a hardware-enabled subscription business that is producing increasingly predictable and durable outcomes. We are doing this in a global security environment that is more complex than it was a few years ago. Threat levels across schools, health care facilities, workplaces, and public venues remain elevated. That is being reinforced by instability and violence playing out globally. From ongoing unrest in the Middle East to high-profile attacks at public sites abroad, like the recent shooting at an archaeological site near Mexico City, and the attempted attack at the White House Correspondents' Dinner. Against that backdrop, customers are increasingly focused on solutions that are not just effective, but scalable, consistent, and operationally reliable. Last quarter, we touched on the broader market conversation around generative AI and how quickly it is changing the software landscape. We will not revisit that discussion today, but the takeaway remains relevant: differentiation comes from owning the full solution. Evolve was never built as a pure software company. Our platform combines proprietary hardware and sensors, the software that runs on that hardware, and our highly differentiated AI models. Because our systems are deployed at scale, with our customers' permission, we can evaluate new models using real-world data. That feedback loop, combined with operational learning in the field, helps improve performance over time and supports long-term customer relationships. We deliver this capability as weapons detection as a service, which includes the hardware, software, use of AI models, and the on-site services required to keep systems operating as designed. We remain on track to be comfortably over 10,000 units deployed by the end of this year, reflecting sustained customer demand and our ability to scale responsibly. As our installed base grows, the platform becomes more valuable, supporting better detection performance, deeper customer integration, and stronger recurring revenue visibility through multiyear subscription contracts. As we look ahead, we believe we are still in the early innings of building scale in our business. While the company previously shared a long-term target of 10% to 15% adjusted EBITDA margins at its 2023 Investor Day, we are increasingly confident there is potential for much greater leverage over time. That leverage is driven by a growing installed base, growing adoption of Expedite, improved customer acquisition efficiency, and operating scale across both our platform and services. We will share much more detail on these dynamics at our Investor Day on June 9th. With that context, let me briefly summarize our first quarter results. Revenue in the first quarter was $46.3 million, up 45% year over year. Our growth reflected new customer wins, strong unit deployments, continued expansion within existing customers, and a step-up in product revenue resulting from our decision to directly fulfill purchase subscriptions, which provides a year-over-year one-time benefit. We ended the quarter with annual recurring revenue of $127.3 million, reflecting 20% year-over-year growth as our subscription base continues to scale. Adjusted EBITDA margin expanded to 8.5% in Q1 compared to 6.4% in the first quarter of last year. We welcomed nearly 50 new customers during the quarter, and now serve approximately 1,300 customers globally. Finally, remaining performance obligation was up 18% year-over-year to $299 million, reflecting continued end demand and strong upgrades to our Gen2 Express platform. Beyond the financial results, we continue to see our platform deliver practical, real-world value to the communities that rely on Evolve every day. Weapon screening is not just about what is detected; it is about helping organizations establish environments where safety is taken seriously and people can go about their daily lives with confidence. By serving as a critical layer within broader safety strategies, our technology supports environments where students can learn, patients can receive care, employees can work, and communities can gather — helping make the world a better place to live, learn, work, and play. Over the past several months, we have seen multiple instances in education where Evolve systems flagged firearms and knives during student arrival screening, allowing school staff and law enforcement to intervene early and prevent weapons from entering school buildings. In these situations, teams are able to respond quickly and allow the school day to continue without escalation, underscoring the value of preventative, operationally reliable screening. These events are occurring alongside broader policy discussions, including in Georgia, where House Bill 23 recently passed the House and is now under consideration in the Senate. The bill would require weapons screening at primary student entry points across public schools statewide. We are not assuming any specific legislative outcome; we are monitoring this development as one example of how policy discussions and day-to-day security challenges continue to reinforce long-term demand for proactive layered weapon screening. In 2026, we continue to see steady demand across our core end markets, beginning with education where safety priorities, operational scale, and daily throughput make reliability essential. During the quarter, we added over a dozen new education customers, including K-12 districts and municipalities across Arkansas, California, Michigan, Mississippi, New Mexico, New York, North Carolina, Pennsylvania, Tennessee, and Texas. These wins span a wide range of district sizes and operating environments, reflecting the applicability of our solutions across diverse geographies and education systems. In health care, we continue to build momentum with new customers across a range of hospital and health settings. Notable additions included BronxCare Health System and the West Virginia University Health System. Additional wins with regional systems and community hospitals further expanded our footprint in health care, reflecting a focus on safety solutions that preserve patient access and experience. In professional sports and live entertainment, we added several high-profile venues during the quarter, including Subaru Park, which is a state-of-the-art stadium for professional soccer. We also added one of professional football's most established franchises, as well as a major multiuse arena in the Western U.S., which is home to both professional basketball and hockey. These environments require security approaches that perform consistently at scale without disrupting the fan experience. As the playoffs begin this spring, Evolve was proud to serve as the weapon screening partner for 50% of all playoff teams across professional basketball and hockey. This reflects sustained trust from leagues and franchises operating large-scale, high-visibility events. We are also seeing growing momentum in the enterprise workspace. Across corporate campuses, headquarters, manufacturing facilities, and distribution centers, security leaders are increasingly focused on protecting employees and visitors while maintaining efficient operations. During the quarter, we added several large-scale enterprise customers, including one of the world's most valuable and recognizable technology companies, as well as another Fortune 500 corporation. Today, we are proud to serve as the trusted weapon screening partner for more than 30 Fortune 500 companies, highlighting our expanding role in supporting safer workplaces. The momentum we are seeing across these markets reinforces the trust customers place in Evolve as a long-term partner and validates our strategy to expand the platform beyond walk-through screening. Expedite, our autonomous AI-based bag screening solution, continues to gain traction in environments where customers want to screen bags without slowing entry or increasing staffing requirements. Increasingly, customers are looking to conduct bag screening as part of a single integrated security workflow, and Expedite is purpose-built for that model. When deployed alongside Evolve Express, we believe this combination offers customers with substantial bag and backpack usage — and specifically bags that have items like laptops in them — the most effective screening solution available, enabling high throughput while delivering remarkably low alarm rates. In fact, in a specific school deployment of Express and Expedite, one customer reported an Expedite average alert rate of less than 2% on over 300,000 scanned bags over a six-month period. We believe the market is increasingly recognizing this type of performance. We now have over 75 Expedite customers, representing approximately 6% of our total customer base, up from roughly 1% a year ago. In the first quarter, 19% of new customers purchased Expedite, almost always alongside Express, which stacks ARPUs while optimizing customer acquisition costs. As customers increasingly see the value in operating both walk-through and bag screening through a single cloud-connected platform, we see meaningful opportunity for account expansion and deeper subscription stickiness over time. Following a period of 18 months of meaningful progress in the business and building momentum, my focus has increasingly shifted toward positioning the company for long-term success. Recently, I have been able to spend more of my time focused on leadership and organization development as we prepare for our next stage of growth. We strengthened the organization with experienced talent across AI and algorithms, product management, services, and IT to support the long-range needs of a growing customer base while continuing to drive more innovation and execute with discipline. In parallel, we are increasing investments in the foundational capabilities required to operate at greater scale: upgrading core back office systems, strengthening our process and controls, and tightening key operating processes across the company. These investments are deliberate and are reflected in our outlook that expects to deliver expanded adjusted EBITDA margins in 2026, ensuring that increased organizational rigor and financial discipline progress hand in hand. Turning to operations, we remain on track with our strategic partnership with Plexus, our new global contract manufacturing partner. Onboarding is progressing as planned, and we expect to complete that work by the end of the quarter. The Plexus partnership positions us to expand production capacity, extend our global reach, and further strengthen operational resilience as we continue to scale. With respect to supply chain, while semiconductor supply constraints have been well documented across the industry, we have been able to largely mitigate these challenges and expect to maintain our delivery plans for the near term. We continue to expect to execute against our full-year unit deployment targets. Importantly, when we provided our guidance earlier this year, we proactively considered the impact of premium pricing for components, and those assumptions were embedded into our outlook. As a result, while we remain vigilant, we believe we appropriately planned for these dynamics and are positioned to manage them through the year. Before I turn things over to Chris, I want to share some context around our outlook. We continue to see strong momentum across the business. Our pipeline remains healthy and execution is tracking well. For those reasons, we are raising our outlook for 2026. We continue to expect to end 2026 with comfortably over 10,000 units deployed. We are raising full-year revenue guidance and now expect $175 million to $180 million, up from $172 million to $178 million, representing growth of 20% to 23% year over year. While we continue to invest in innovation and operations, we expect to deliver expanded adjusted EBITDA margins in 2026. As we move forward, our focus remains squarely on execution and scale: delivering consistently today while building the foundation for durable long-term growth. With that, I will turn it over to Chris to walk through our first quarter financial results and outlook in more detail.

Chris Kutsor, CFO

Thanks, John, and good afternoon, everybody. I am going to review our first quarter results in more detail and then share more about our outlook for 2026. Revenue in Q1 was $46.3 million, an increase of 45% year over year. This reflected strong end market demand for our solutions, as well as growth in product revenue related to the transition to the direct fulfillment model, which provides a one-time year-over-year benefit, as we are recognizing more product revenue per given deal compared to a year ago. ARR at 03/31/2026 was $127.3 million, reflecting growth of 20% year over year. This was fueled by new customer growth and expanding deployments across our customer base. Adjusted gross margin was 52% in Q1, compared to 61% in the same period last year. As we have noted before, our intentional shift of purchase subscriptions to direct fulfillment creates an initial gross margin headwind. This outcome is fully aligned with our strategy. Although margin stepped down in the first quarter of a new deployment, the direct model produces superior long-term returns including higher total gross profit, increased revenue and ARR, and better cash flow than our prior distribution approach. Moving down the P&L, Q1 adjusted operating expenses, which exclude stock-based compensation, loss on impairment of equipment, and certain other one-time expenses, were $26.9 million compared to $23.2 million in the first quarter of last year, reflecting growth of 16%. The increased spend includes investments across R&D, our sales team, higher commissions commensurate with revenue, as well as adding G&A roles and system investments to help with efficiencies and scale. Q1 adjusted EBITDA, which excludes stock-based compensation and other one-time items, was a positive $3.9 million compared to $2.1 million in the first quarter of last year. This resulted in adjusted EBITDA margin of 8.5% compared to 6.4% in the first quarter last year. Remaining performance obligation, or RPO, was $299 million at the end of the first quarter compared to $253.5 million at the end of Q1 of last year, reflecting growth of 18% year over year. We continue to see a strong trend of customers upgrading to our Gen2 Express platform. These upgrades, together with solid end market demand, drove this year-over-year growth. We continue to expect RPO growth to begin to accelerate, supported by increasing end market demand, a ramp up of renewals going forward, and by bringing more revenue back in house through our direct purchase fulfillment motion, which we have discussed with investors over the last nine months. Turning to the balance sheet: as we previously forecasted, cash, cash equivalents, and marketable securities decreased by about $8 million sequentially to $61 million. This primarily reflected the timing of the company's annual incentive payments associated with our strong 2025 performance. This distribution typically occurs in March of each year. I will remind investors that we expect to be cash flow positive in 2026. Turning to 2026: as John highlighted, the fundamentals of our business remain strong, with robust customer demand, and the foundational changes we made to our business model are taking hold. We are raising our full-year 2026 outlook for revenue to $175 million to $180 million compared to our prior guidance of $172 million to $178 million, representing year-over-year growth of approximately 20% to 23%. Our upwardly revised revenue outlook reflects three factors. First, a higher mix of purchase subscriptions, which increases year-one revenue of a contract. Second, incremental contributions from short-term rental that expand customer access to our technology. And third, continued strength in pricing and ARPU trends. We continue to expect to exit 2026 with ARR of approximately $145 million to $150 million, representing growth of 20% to 25% year over year. As we have been saying for the past year, the fulfillment model and pricing changes we made in mid-2025 are important factors in understanding our revenue trends. Q1 came in above the high end of our prior guidance, with revenue up 45%. That performance was driven by strong demand and the installation of record backlog that was more heavily weighted toward purchase subscription transactions, which by definition include more upfront one-time product revenue. During our last earnings call, we discussed our thoughts for the shape of revenue for the year, and it is coming along as expected. We continue to expect a sequential decline in Q2 revenue simply because the prior year purchase subscription backlog was largely shipped in Q1. This is a timing dynamic related to backlog mix and fulfillment timing and not a reflection of end market demand, which remains strong. Turning to the second half of the year, we still expect H2 total revenue to be modestly higher than H1 and up year over year, with ARR growth outpacing revenue growth in H2. This reflects the changes to our pricing and fulfillment model implemented in mid-2025 as discussed on prior earnings calls. These changes shift a portion of contract value away from upfront product revenue and toward recurring revenue, which impacts the timing of revenue recognition. As a result, for a given purchase subscription unit, we expect to realize approximately 20% less upfront product revenue and roughly 20% more ARR. Beginning in 2026, we continue to expect strong unit growth with deployments in H2 exceeding H1 deployments and H2 unit deployments growing over 25% year over year. In summary, we expect that H2 2026 will reflect the final period of meaningful impact from these pricing and fulfillment changes, after which our revenue profile is expected to become more normalized. Overall, our 2026 outlook reflects a business that is capturing more of the economic value it creates while continuing to build a larger base of recurring revenue, increasing visibility through ARR and RPO, and delivering a more durable and predictable revenue profile over time. We remain committed to investing in growth and in the foundational capabilities required to operate at greater scale. We plan to do this in a disciplined way that grows expenses below our revenue growth rate. We continue to expect to deliver expanded adjusted EBITDA margins with full-year adjusted EBITDA margins in the high single digits for 2026 compared to 7.6% in 2025. Finally, a brief comment on our long-term operating model. As we have shared on prior earnings calls, the framework from three years ago that contemplated 10% to 15% long-term adjusted EBITDA margins is no longer reflective of how we see the business evolving. Based on continued growth and operating improvements, we now see the opportunity for greater long-term leverage. We look forward to sharing more detail about this at our Investor Day on June 9th. For more information on that event please feel free to reach out to Brian. With that, I will turn it back over to you, Brian. Thank you.

Brian Norris, SVP, Finance & Investor Relations

Thank you, Chris. Operator, at this time, we would 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

We will now begin Q&A. For today's session, we will be utilizing the raise hand feature. If you would like to ask a question, simply click on the raise hand button at the bottom of your screen. Once you have been called on, please unmute yourself and begin to ask your question. Please limit yourself to one question and one follow-up before jumping back into the queue. Thank you. I will now pause a moment to assemble the queue. Our first question comes from Jeremy Hamblin with Craig-Hallum Capital Group.

Jeremy Hamblin, Analyst, Craig-Hallum Capital Group

Thanks, and congratulations on the record results. Thought I would start with just understanding the contract momentum. You noted lots of success across verticals but wanted to get a better sense for the mix of deals. You noted that this quarter included a bunch of purchase deals. Could you add a little more color to that? What portion of the mix was purchase deals versus full subscription deals? And then as you look ahead to Q2 and the second half of the year, how do you expect that balance of mix to play out?

John Kedzierski, President & CEO

Thanks, Jeremy. I appreciate it. In Q1 we saw about a 60% purchase to 40% subscription mix. In our guidance for the year we expect the mix to be about 55% purchase and 45% subscription. So we are seeing an increase in purchase deals versus prior periods, and we have reflected that in our guidance.

Jeremy Hamblin, Analyst, Craig-Hallum Capital Group

Got it. And then as a follow-up, in terms of thinking about the pricing change that you made last year, you provided some nice color about the 20% increase in ARR values. But looking ahead into the second half of the year and into 2027 and beyond, if you had a representative $100,000 deal on a unit, what portion of that mix would you expect for ARR on a purchase deal versus on a full subscription deal? Specifically for a full subscription deal.

John Kedzierski, President & CEO

Higher value is inside ARR. On the purchase deal, we recognize product revenue upfront upon shipment — you will see that in the product line — and then the balance will be in recurring revenue where we deliver both the software and the on-site services. In terms of a rule of thumb for your hypothetical $100,000 deal, roughly 30% to 40% would be product revenue and the balance would be recurring revenue.

Jeremy Hamblin, Analyst, Craig-Hallum Capital Group

Got it. If I could sneak one in real quick: your adjusted gross margin was 52%, the lowest you have seen here in a few quarters since you made the pricing change. Should we expect your adjusted gross margin to continue to track higher here in Q2 and then in the second half of the year?

Chris Kutsor, CFO

Jeremy, this is Chris. Q1 was 52%. For the full year we expect closer to the mid-fifties. I do not want to get into quarter-by-quarter guidance, but for the full year, closer to the mid-fifties, which would indicate improvement from where we are now. As a reminder, gross margin is also dependent on mix. More subscription mix will generally mean better gross margins because those costs are spread over the full useful life of the asset, whereas for a purchase deal we recognize the hardware cost upfront in period one instead of over time. That dynamic is built into our forecast.

Jeremy Hamblin, Analyst, Craig-Hallum Capital Group

Thanks so much for taking the questions.

John Kedzierski, President & CEO

You bet, Jeremy.

Chris Kutsor, CFO

Thank you.

Operator, Operator

Our next question comes from Eric Martinuzzi with Lake Street Capital Markets. Please unmute your line and ask your question.

Eric Martinuzzi, Analyst, Lake Street Capital Markets

Yeah. I just wanted to revisit the guidance. Is the upward revision to the revenue and the unchanged adjusted EBITDA margin because that is primarily purchase-driven?

Brian Norris, SVP, Finance & Investor Relations

Yes. That is a significant driver and why you are seeing that effect. More purchase subscription deals do bring in more revenue into the period, and you are seeing that reflected in the revision to our guidance, but it comes with additional costs in the period, which is why you see the adjusted EBITDA margin guidance remain where it is.

John Kedzierski, President & CEO

And we also mentioned investments in critical talent, hiring, and systems and processes. Those are additional factors, but the purchase mix is the biggest driver.

Brian Norris, SVP, Finance & Investor Relations

To your question.

Eric Martinuzzi, Analyst, Lake Street Capital Markets

Okay. And then just on Expedite successes, it was great to see those stats you pointed out; that was very helpful. Do any of your competitors have a similar product to Expedite?

John Kedzierski, President & CEO

There are other X-ray bag scanning products in the market; that market has been around for a long time. What we believe differentiates Expedite is that it is autonomous — it does not require a human to view X-ray images; that is done completely by our proprietary AI model that we deploy to the machine. We designed the machine from the ground up so we can run the conveyor at a significantly higher speed because no human has to review the images. There is actually not even a screen to look at images on the device. It is also integrated to our overall security platform. In practical terms, one operator can look at alerts from both the walk-through system Express and from Expedite. You do not have to add extra tablets or extra people to look at different screens. If I have a bag alert and a personal alert, I see both in one place. Finally, it is integrated to a single cloud portal so customers can see statistics on how many people entered and how many were stopped, as well as bag statistics. When you think about all those things together, we believe we have a very differentiated solution.

Operator, Operator

As a reminder, if you would like to ask a question, simply click on the raise hand button at the bottom of your screen. Once you have been called upon, please unmute yourself and begin to ask your question. We will take our next question from Shaul Eyal with TD Cowen. Please unmute your line and ask your question.

Shaul Eyal, Analyst, TD Cowen

Thank you so much. Good afternoon. Can you hear me? Thanks. Congrats on a solid start to 2026 and the improved revenue guidance. John, how are you using AI internally at Evolve? And as a follow-up, thanks for the color on beefing up your bench — can I ask what the rest of your hiring plans are for fiscal 2026 as you balance growth and profitability?

John Kedzierski, President & CEO

Yes. On your first question about using AI in operations, we are looking at generative AI and other AI capabilities to drive efficiency. We are not a pure SaaS company; we design software that runs on hardware, and we build the AI models that make threat decisions in-house. That end-to-end control is a strong position. We see generative AI as a tailwind for efficiency gains — time to market, automating tedious tasks, and improving internal processes — and we are leaning into those capabilities while building governance and guardrails to use them appropriately. On hiring, we made considerable efforts in Q1 to assess the needs of the business and bring in senior leadership across AI and algorithms, product management, services, and IT. These are critical talent hires expected to make an impact over the course of the year. Looking forward, hiring plans are focused on scaling the business while maintaining our commitment to grow operating expenses at a lower rate than revenue. We will continue to invest, but with those guardrails in place because of the opportunity we see.

Shaul Eyal, Analyst, TD Cowen

Thank you so much.

Operator, Operator

Our next question comes from Michael Latimore with Northland Capital Markets. Please go ahead and ask your question.

Michael Latimore, Analyst, Northland Capital Markets

All right. Great. Thank you. Congrats on the great results. Just maybe talking a little bit about the sales cycle this year: has there been any change in the sales cycle? It seems like a lot of macro events might have raised some incremental concerns. And when you are selling Expedite and Express together, does that change the sales cycle — is it faster or shorter? Just a little more color on that would be great.

John Kedzierski, President & CEO

We have not observed a uniform change in sales cycle length across the board. Generally, we see two types of sales cycles: those in response to an acute event, which can be very rapid, and more traditional cycles that take longer due to internal approvals and procurement processes. Expedite can help shorten sales cycles in some verticals, like education, because lower alert rates reduce operational burden for customers. That can make the solution more attractive and easier to approve. Regarding upgrades to Gen2, on upgrades that have been actioned so far, about 60% of those customers upgraded to our Gen2 unit, and when they do that they commit to a new full-year subscription, which maximizes remaining performance obligation. We are pleased with those trends and overall renewal execution.

Michael Latimore, Analyst, Northland Capital Markets

I guess you have called out the upgrade to Gen2 a couple times. Are customers upgrading early, before renewals? What is the catalyst for the upgrades and how many have upgraded so far?

John Kedzierski, President & CEO

Customers upgrade for performance and feature improvements. In many cases customers are upgrading early, and as I said, about 60% of customers that have acted on upgrades have moved to Gen2. Those upgrades represent new subscription commitments and improve our RPO profile.

Chris Kutsor, CFO

Mike, I'll add one more point on Expedite. It often allows us to sell two units instead of one in a given deal, which improves customer acquisition economics and lowers effective CAC. The unit economics are attractive when customers buy Expedited bag screening alongside walk-through screening.

Michael Latimore, Analyst, Northland Capital Markets

So when you sell Express and Expedite together it is a bigger sale, but that does not elongate the sales cycle?

Chris Kutsor, CFO

For a given sales cycle, selling two units instead of one typically improves unit economics and does not necessarily elongate the cycle in a material way.

Michael Latimore, Analyst, Northland Capital Markets

Great. Looking forward to the analyst event.

Chris Kutsor, CFO

Great. Yeah, we are too.

Operator, Operator

That was your last question. I would now like to turn the call over to John for closing remarks.

John Kedzierski, President & CEO

I just want to take a moment to extend my personal thanks to our customers who put their trust in Evolve every day. We recognize the importance of what we do and we take that extremely seriously. I want to thank our investors for believing in us and the journey that we are on, and also our employees for the support, dedication, and sacrifices they make as we continue to grow and mature. Our mission is important. We focus on it every day — it is not lip service; it is what we do and what drives the decisions we make. We focus on that mission of bringing our solutions to as many customers as we can while at the same time building the absolute best business in Evolve that we can. Thanks for joining our call.

Operator, Operator

Thank you for joining. This concludes today's call. You may now disconnect.