Board Decision and Interim Leadership
The company’s board of directors made the decision to dismiss George on Wednesday, with the announcement made public on Thursday. In his place, Michael Allenbogen, the current Chief Innovation Officer, will serve as the interim CEO and president. Evolv emphasized that George’s dismissal was “without cause” and followed months of careful consideration and planning regarding the company’s leadership.
Investigation into Sales Practices
This leadership change follows a recent revelation regarding an internal investigation into Evolv’s sales practices. Just days prior to the announcement, the company alerted shareholders to potential discrepancies in recent financial statements, advising them not to rely on these figures. While the board acknowledged the ongoing investigation, they clarified that their assessment of leadership and performance began months ago, well before the investigation’s findings came to light.
An internal committee had recently identified that some sales personnel were subject to “extra-contractual rules and conditions,” which were not shared with accounting staff. Evolv is currently determining whether these irregularities have impacted revenue reporting and other financial metrics. Preliminary findings suggest that improper sales transactions may have led to an estimated $4 million to $6 million in premature or inaccurate revenue recognition by the end of June.
Legal Troubles and Previous Investigations
This is not the first time Evolv has faced scrutiny; the company has encountered various legal issues over the past few years, including federal investigations into its marketing practices led by the Federal Trade Commission (FTC) and the Securities and Exchange Commission (SEC). Earlier this year, investors filed a class-action lawsuit against the firm, alleging that executives had overstated the capabilities of their security devices, claiming that Evolv could not reliably detect knives or guns.
Evolv gained media attention this summer for a pilot program that utilized its portable weapon scanners in select subway stations in New York City. This initiative faced criticism from civil liberties groups and raised questions about its effectiveness, as recent police data indicated that the scanners failed to detect any firearms and generated over 100 false alerts during the month-long trial.
Stock Market Reaction and Future Plans
Following the news of George’s dismissal, Evolv’s stock price saw a significant dip, dropping nearly 10% in afternoon trading. In response to these challenges, the board has established a succession planning committee aimed at evaluating leadership performance and planning for a CEO transition, indicating that they are actively recruiting candidates and intend to announce an official successor promptly.
In a statement, the board underscored the necessity for leadership change to enhance the company’s culture as it prepares for the next phase of growth. Michael Allenbogen, the new interim CEO, is one of Evolv’s co-founders and previously served as CEO for the first seven years of the company’s existence.
As of August, Evolv reported a second-quarter revenue of $25.5 million, a 29% increase from $19.8 million in the same period the previous year. However, the ongoing sales misconduct investigation has delayed the release of its next earnings report, leaving stakeholders eager for clarity on the company’s financial health moving forward.
