The details surrounding George’s dismissal remain unclear, but Evolv stated that it was a “without cause” termination that followed months of careful planning and deliberation by the board. This announcement comes just days after Evolv revealed a probe into its sales operations, cautioning shareholders to refrain from relying on recent financial statements.
While acknowledging the ongoing investigation, the board emphasized that it had been evaluating leadership and performance related to the company’s sales practices and financial reporting well before issues were uncovered. An internal committee recently shared preliminary findings that indicated some sales personnel were subject to non-standard terms and conditions, some of which had not been disclosed to accounting staff. Evolv is currently assessing whether this misconduct has affected revenue reporting and when senior personnel became aware of these issues.
The potential financial impact is significant; the internal investigation estimated that sales transactions could have prematurely or inaccurately recognized between $4 million and $6 million in revenue by the end of June. Evolv has pledged to take corrective action as necessary.
Evolv has faced legal challenges in the past, including separate federal inquiries led by the Federal Trade Commission and the Securities and Exchange Commission regarding its marketing practices. Earlier this year, the company was hit with a class-action lawsuit from investors alleging that executives overstated the capabilities of its security devices, with claims that “Evolv does not reliably detect knives or guns.”
The company, which specializes in AI-powered security screening technology, drew attention this summer during a pilot program that utilized its portable weapon scanners at select subway stations in New York City. The initiative received significant backlash from civil liberties groups and raised questions about its effectiveness, with recent police data indicating the scanners failed to detect any firearms and generated over 100 false alerts during the month-long test.
Following the announcement of George’s termination, Evolv’s shares plummeted nearly 10% on Thursday afternoon. In a bid to prepare for future leadership changes, the board had previously formed a succession planning committee to assess leadership performance and initiate CEO transition strategies. Evolv confirmed it is actively recruiting candidates for the CEO position and intends to announce a permanent successor “swiftly.”
In a statement, the board emphasized that leadership changes were essential to improve the company’s culture as it gears up for the next stage of growth. Allenbogen, who co-founded Evolv, previously served as CEO for the first seven years of the company’s existence.
In August, Evolv reported second-quarter revenues of $25.5 million, a 29% increase from $19.8 million during the same period last year. However, due to the ongoing sales misconduct investigation, the release of its next earnings report has been delayed.
