Evolv Technologies CFO Mark Donohue resigned from his position effective Nov. 21, a move that comes as an investigation by the company into certain sales practices wraps up, according to a securities filing.
The company has engaged David Rawden, a director with business advisory firm AlixPartners, to serve as interim CFO until a successor is found, according to the filing. Donohue will depart the company without benefits or severance payments, Evolv said Thursday.
Donohue’s departure follows after the Waltham, Massachusetts-based company terminated its CEO Peter George without cause effective immediately on Oct. 30, according to a separate filing with the Securities and Exchange Commission.
Evolv appointed Chief Innovation Officer and board member Michael Ellenbogen as interim CEO and president until a permanent successor is found, also effective as of Oct. 30, according to the filing. A co-founder of Evolv, Ellenbogen served as CEO for seven years before moving to his current role as CIO, according to the company.
Evolv also reported preliminary results of its investigation into the affected sales in a separate press release Thursday. As well as Donohue’s departure, “to date, as a result of the investigation, four other employees, including personnel from its sales, accounting and finance departments, were terminated or resigned,” the company said.
The departure of Evolv’s CFO and the four unnamed employees are the latest leadership shifts as it finalizes an investigation first disclosed in late October. The investigation delved into whether certain sales of its products and subscriptions to channel partners and end users “were subject to extra-contractual terms and conditions that impacted revenue recognition and other metrics, and if so, when senior Company personnel became aware of these issues.”
Donohue has served as CFO of the company, which provides security solutions including weapon scanners to schools, hospitals and sports arenas, for two years, according to his LinkedIn profile. Donohue’s total compensation last year reached $2.8 million, including a base salary of $400,962, according to the company’s latest proxy filed in April.
In stepping in as interim CFO, Rawden, 67, will not receive direct compensation from Evolv in association with his services, the company said. Evolv will pay a weekly fee of $50,000, plus “reasonable expenses” to AlixPartners in association with its agreement for Rawden’s services, the company said in the filing announcing the CFO appointment. AlixPartners will also assist Evolv with the “timely preparation” of restated financial statements related to certain accounting inaccuracies, the company said.
During his time at AlixPartners, Rawden has undertaken several interim CFO positions, including serving as interim finance chief for pharmaceutical company Simtra, educational program provider Academic Partnerships, and oil and gas holding company Southland Royalty, according to the filing.
Rawden will take the interim seat after an ad hoc committee of independent directors concluded accounting for certain transactions — including a sale to one of its largest channel partners — was inaccurate as a result of Evolv’s investigation. Among other errors, “revenue was prematurely or incorrectly recognized in connection with financial statements prepared for the periods between the second quarter of 2022 and the second quarter of 2024,” the company said in its release of the investigation’s preliminary findings,
The committee also concluded “certain accounting personnel” were aware of the extra-contractual terms, and that “related allegations were raised internally in July 2024 and known to senior finance and accounting personnel,” according to the release. However, such allegations “were not escalated to the Audit Committee or the Board” or communicated to the company’s independent auditor, Big Four firm PricewaterhouseCoopers, prior to the filing of Evolv’s Q2 2024 financial statements, according to the release of the findings.
Evolv did not respond to requests for comment on Donohue’s resignation, or on the departure or termination of the four other employees who left as a result of the investigation. The leadership shifts and personnel departures come as the company’s board “has determined that new leadership is critical to moving the company forward,” Evolv said in its investigation announcement.
While the inaccuracies did not impact the company’s cash position or debt, the transactions under issue have resulted in “premature or incorrect” revenue recognition between $4 million to $6 million through June 30, the committee expects. The investigation is nearly complete, and directors do not expect the findings to change, the company said.
For its Q2 ended June 30, Evolv reported revenue of $25.5 million, a 29% boost year-over-year. The company also reported an adjusted earnings loss of $11.1 million for the quarter, ending with cash and cash equivalents of $56.7 million and free of debt, according to its earnings report.
In a separate press release, Evolv also provided strategic updates for the quarter ended Sept. 30, with interim CEO Ellenbogen noting the “fundamentals of our business remain strong” in a statement included in the release. Among other metrics, the company added about 465 new multi-year subscriptions to its Evolv Express product, a security screening solution, and noted its technology was used to screen an average of 3 million visitors per day.
The update and leadership shifts are both occurring as Evolv’s weapons scanners have fallen under increased scrutiny by regulators and media. In SEC filings earlier this year, Evolv also disclosed to investors inquiries by the SEC and FTC regarding its marketing practices, while reports have swirled surrounding their scanners’ effectiveness.
Citing the results of a 52-page private report, NBC 5 reported earlier this month that Evolv’s scanners have missed certain weapons and showed mixed results with others. The company also conducted a one-month pilot for AI-powered scanners in New York City subways with lukewarm results, according to an October Associated press report. During the pilot, Evolv’s scanners did not identify any passengers with firearms, but gave false alerts more than 100 times, AP reported.
“As I look at the future of our company we can create together, I want to be clear in my immediate priorities, each one anchored to building back trust,” Ellenbogen said in a video statement posted Thursday to the company’s YouTube channel.
“What I want to underscore is not one of the challenges our company has faced has to do with the effectiveness of our technology,” he said.
