Evolv Technologies Holdings, Inc.EVLV
Evolv Technologies Holdings, Inc. Stock Compensation Disclosure
Stock-Based Compensation
2021 Equity Incentive Plan
The Company’s 2021 Equity Incentive Plan (the “2021 Plan”) provides for the Company to grant incentive stock options or nonqualified stock options, restricted stock awards, restricted stock units, performance stock units, and other stock-based awards to employees, officers, directors, and non-employees of the Company. A total of 21,177,295 shares of common stock were initially authorized under the 2021 Plan, subject to annual evergreen increases of up to 5% of total common shares outstanding as of the end of the prior year. As of December 31, 2024, 16,670,634 shares were available for future grant under the 2021 Plan. Shares, units, and options that are expired, forfeited, canceled, or otherwise terminated without having been fully exercised will be available for future grant under the 2021 Plan. In addition, shares of common stock that are tendered to the Company by a participant to exercise an award are added to the number of shares of common stock available for future grants.
The 2021 Plan is administered by the Board of Directors or, at the discretion of the Board of Directors, by a committee of the Board of Directors. The exercise prices, vesting, and other restrictions are determined at the discretion of the Board of Directors, or its committee if so delegated, except that the exercise price per share of stock options may not be less than 100% of the fair market value of a share of common stock on the date of grant and the term of the stock option may not be greater than ten years. Stock options granted to employees, officers, members of the Board of Directors and non-employees vesting terms are determined on an individual basis on the date of grant. Prior to the closing of the Merger, the Company’s Board of Directors valued the Company’s common stock, taking into consideration its most recently available valuation of common stock performed by third parties as well as additional factors which may have changed since the date of the most recent contemporaneous valuation through the date of grant. After the closing of the Merger, the fair value of each share of common stock underlying stock-based awards is based on the closing price of our common stock as reported by Nasdaq on the date of grant.
Stock Options
The following table presents, on a weighted average basis, the assumptions used in the Black-Scholes option-pricing model to determine the grant-date fair value of stock options granted during the years ended December 31, 2024 and 2023:
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Risk-free interest rate | 4.1 | % | 4.2 | % | |||||||
| Expected term (in years) | 6.1 | 6.1 | |||||||||
| Expected volatility | 90.0 | % | 87.5 | % | |||||||
| Expected dividend yield | 0.0 | % | 0.0 | % | |||||||
The following tables summarize the Company’s stock option activity under the 2021 Equity Incentive Plan (in thousands, except for share and per share data):
| Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value | ||||||||||||||||||||
Outstanding as of December 31, 2023 | 20,324,528 | $ | 1.04 | ||||||||||||||||||||
| Granted | 2,725,625 | 3.63 | |||||||||||||||||||||
| Exercised | (2,557,792) | 0.71 | |||||||||||||||||||||
| Forfeited | (2,296,608) | 3.39 | |||||||||||||||||||||
| Expired | (69,816) | 0.74 | |||||||||||||||||||||
Outstanding as of December 31, 2024 | 18,125,937 | $ | 1.18 | 3.8 | $ | 50,186 | |||||||||||||||||
Vested and expected to vest as of December 31, 2024 | 18,125,937 | $ | 1.18 | 3.8 | $ | 50,186 | |||||||||||||||||
Options exercisable as of December 31, 2024 | 16,096,510 | $ | 0.90 | 3.2 | $ | 49,028 | |||||||||||||||||
The aggregate intrinsic value of options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those options that had exercise prices lower than the fair value of the Company’s common stock.
The weighted average grant date fair value of stock options granted was $2.77 and $2.35 during the years ended December 31, 2024 and 2023, respectively. The aggregate intrinsic value of the stock options exercised was $7.3 million and $8.7 million during the years ended December 31, 2024 and 2023, respectively.
Restricted Stock Units
The following table summarizes the Company’s restricted stock units activity under its existing restricted stock unit plan:
| Number of Shares | Grant Date Fair Value | ||||||||||
Outstanding as of December 31, 2023 | 13,046,679 | $ | 3.49 | ||||||||
| Granted | 8,974,392 | 3.54 | |||||||||
| Vested | (5,354,197) | 3.60 | |||||||||
| Forfeited | (4,551,217) | 3.45 | |||||||||
Outstanding as of December 31, 2024 | 12,115,657 | $ | 3.50 | ||||||||
During the years ended December 31, 2024 and 2023, the aggregate grant-date fair value of restricted stock units issued under the 2021 Plan was $31.8 million and $33.0 million, respectively. RSUs generally vest ratably over a three year period subject to the grantee's continued service through the applicable vesting date. During the year ended December 31, 2024 and 2023, the total fair value of shares vested was $19.3 million and $10.1 million, respectively.
Performance Stock Units
The following table summarizes the Company's performance stock units activity under its existing performance stock units plan:
| Number of Shares | Grant Date Fair Value | ||||||||||
Outstanding as of December 31, 2023 | 380,000 | $ | 2.64 | ||||||||
| Granted | — | — | |||||||||
| Vested | (380,000) | 2.64 | |||||||||
| Forfeited | — | — | |||||||||
Outstanding as of December 31, 2024 | — | $ | — | ||||||||
Based upon the terms of the award agreements and achievement of the performance goal, 50% of the applicable performance stock units vested on January 1, 2023 and 50% on January 1, 2024, subject to the grantee’s continued service through the applicable vesting date.
2021 Employee Stock Purchase Plan
In July 2021, the Company’s Board of Directors adopted the 2021 Employee Stock Purchase Plan (“2021 ESPP”), which was subsequently approved by the Company’s stockholders and became effective on July 16, 2021. The 2021 ESPP authorizes the initial issuance of up to 3,435,748 shares of the Company’s common stock to eligible employees of the Company or, as designated by the Company’s Board of Directors, employees of a related company. The 2021 ESPP provides that the number of shares reserved and available for issuance under the 2021 ESPP will automatically increase each January 1, beginning on January 1, 2022 and ending on (and including) January 1, 2032, by an amount equal to the lesser of (i) 1% of the outstanding number of shares of common stock on the immediately preceding December 31 and (ii) such smaller number of shares as determined by the Company’s Board of Directors. As of December 31, 2024, 7,828,349 shares of the Company’s common stock were available for future issuance. The Company’s Board of Directors may from time to time grant or provide for the grant to eligible employees of options to purchase common stock under the 2021 ESPP during a specific offering period. As of December 31, 2024, no offerings have been approved.
Finback Common Stock Warrants
The Company utilized a Black-Scholes pricing model to determine the grant-date fair value of the Finback Common Stock Warrants. The assumptions used are presented in the following table:
| Warrants - Black Scholes | |||||
| Risk-free interest rate | 0.4 | % | |||
| Expected term (in years) | 3.0 | ||||
| Expected volatility | 23.9 | % | |||
| Expected dividend yield | — | % | |||
In January 2021, the Company granted equity classified warrants (the "Finback Common Stock Warrants") to purchase 2,552,913 shares of the Company's Class A common stock at an exercise price of $0.42 per share to Finback Evolv OBH, LLC ("Finback"), a consulting group affiliated with one of the Company's stockholders. The Finback Common Stock Warrants vest upon meeting certain sales criteria as defined in a business development agreement (the "Finback BDA"), which has a term of 3 years. The Finback BDA expired on January 1, 2023, subject to a 1-year "tail period" expiring on January 1, 2024. During the tail period, the Finback Common Stock Warrants continued to vest related to any sale consummated by the Company for which it was determined Finback provided services prior to January 1, 2023 in furtherance of the sale. The Finback Common Stock Warrants expire in January 2031. The Finback Common Stock Warrants are accounted for under ASC 718 Compensation – Stock Compensation as the warrants vest upon certain performance conditions being met.
As of December 31, 2024, 117,423 Finback Common Stock Warrants were exercisable at a total aggregate intrinsic value of $0.4 million, and there were no Finback Common Stock Warrants that were unvested, given the expiration of the 1-year tail period on January 1, 2024. The Company recognized compensation expense for the Finback Common Stock Warrants when the warrants vested based on meeting the specified sales criteria. During the year ended December 31, 2024, there was no stock-based compensation expense within sales and marketing expense related to the Finback Common Stock Warrants. During the year ended December 31, 2023, the Company recorded $3.1 million of stock-based compensation expense within sales and marketing expense related to the Finback Common Stock Warrants.
Stock-Based Compensation
Stock-based compensation expense was classified in the consolidated statements of operations and comprehensive loss as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| (Restated) | (Restated) | ||||||||||||||||
| Cost of revenue | $ | 788 | $ | 583 | $ | 829 | |||||||||||
| Research and development | 4,520 | 4,302 | 3,775 | ||||||||||||||
| Sales and marketing | 10,946 | 9,381 | 10,044 | ||||||||||||||
| General and administrative | 8,502 | 9,863 | 7,872 | ||||||||||||||
| Total stock-based compensation expense | $ | 24,756 | $ | 24,129 | $ | 22,520 | |||||||||||
Stock-based compensation expense by award type recognized in the consolidated statements of operations and comprehensive loss was as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| (Restated) | |||||||||||||||||
| Stock options | $ | 3,767 | $ | 2,925 | $ | 1,594 | |||||||||||
| Earn-out shares | 11 | 2,053 | 6,519 | ||||||||||||||
| Warrants | — | 3,147 | 4,523 | ||||||||||||||
| RSUs and PSUs | 20,978 | 16,004 | 9,884 | ||||||||||||||
| Total stock-based compensation expense | $ | 24,756 | $ | 24,129 | $ | 22,520 | |||||||||||
Total unrecognized compensation expense related to stock options and restricted stock units as of December 31, 2024, was $32.9 million, which is expected to be recognized over a weighted average period of 1.8 years. Total unrecognized compensation expense related to earn-out shares associated with the share-based compensation arrangement as of December 31, 2024, was $0.1 million, which is expected to be recognized over a weighted average period of 0.8 years.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.