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Revenue Recognition
 9 Months Ended
Sep. 30, 2023
Revenue Recognition and Deferred Revenue [Abstract]  
Revenue Recognition Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification 606 – Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In order to achieve this core principle, the Company applies the following five steps when recording revenue: (1) identify the contract, or contracts, with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when, or as, performance obligations are satisfied.

The Company derives revenue from (1) subscription arrangements generally accounted for as operating leases under ASC 842 and (2) from the sale of products, inclusive of SaaS and maintenance, (3) professional services, and (4) license fees related to a distribution and license agreement with the Company's primary contract manufacturer. The Company’s arrangements are generally noncancelable and nonrefundable after shipment to the customer. Revenue is recognized net of sales tax.

Remaining Performance Obligations

The following table includes estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially satisfied) as of September 30, 2023.
Less than 1 yearGreater than 1 yearTotal
Product revenue$2,469 $— $2,469 
Subscription revenue51,258 108,942 160,200 
Service revenue18,173 40,284 58,457 
Total revenue$71,900 $149,226 $221,126 
The amount of minimum future leases included in subscription revenue in the table above is based on expected income recognition. As of September 30, 2023, future minimum payments on noncancelable leases are as follows (in thousands):
Year Ending December 31:
2023 (three months remaining)$12,988 
202450,800 
202546,632 
202635,489 
202714,291 
$160,200 
Contract Balances from Contracts with Customers

Contract assets arise from unbilled amounts in customer arrangements when revenue recognized exceeds the amount billed to the customer and the Company’s right to payment is conditional and not only subject to the passage of time. As of September 30, 2023 and December 31, 2022, the Company had $3.7 million and $2.9 million in current portion of contract assets and $0.5 million and $1.4 million in contract assets, noncurrent on the condensed consolidated balance sheets, respectively.

Contract liabilities represent the Company’s obligation to transfer goods or services to a customer for which it has received consideration (or the amount is due) from the customer. The Company has a contract liability related to service revenue, which consists of amounts that have been invoiced but that have not been recognized as revenue. Amounts expected to be recognized as revenue within 12 months of the balance sheet date are classified as current deferred revenue and amounts expected to be recognized as revenue beyond 12 months of the balance sheet date are classified as deferred revenue, noncurrent. The Company recognized revenue of $4.4 million and $16.5 million during the three and nine months ended September 30, 2023 that was included in the December 31, 2022 deferred revenue balance. The Company recognized revenue of $1.3 million and $6.0 million during the three and nine months ended September 30, 2022 that was included in the December 31, 2021 deferred revenue balance.
The following table provides a rollforward of deferred revenue (in thousands):
Balance at December 31, 2022$35,968 
Revenue recognized in relation to the beginning of the year contract liability balance(16,507)
Revenue deferred53,058 
Balance at September 30, 2023$72,519 
The following table presents the Company’s components of lease revenue (in thousands):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Revenue from sales-type leases$— $29 $— $1,135 
Interest income on lease receivables49 60 153 170 
Lease income - operating leases10,231 5,198 24,661 12,208 
Total lease revenue$10,280 $5,287 $24,814 $13,513 
The revenue from sales-type leases is related to the Evolv Express units where the lease term is for the major part of the economic life of the underlying equipment and is classified as product revenue in the condensed consolidated statements of operations and comprehensive loss. The interest income on lease receivables is classified under interest income in the condensed consolidated statements of operations and comprehensive loss. The lease income from operating leases is related to the leased equipment under subscription arrangements and is classified as subscription revenue in the condensed consolidated statements of operations and comprehensive loss. Revenue related to leases entered into with related parties were $0.3 million and $0.5 million during the three and nine months ended September 30, 2023, respectively. Revenue related to leases entered into with related parties were $0.2 million and $0.4 million during the three and nine months ended September 30, 2022, respectively.

Disaggregated Revenue

The following table presents the Company’s revenue by revenue stream (in thousands):

Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Product revenue$3,191 $9,839 $19,188 $19,179 
Leased equipment10,231 5,198 24,661 12,208 
SaaS, maintenance, and other revenue4,397 1,180 11,296 2,277 
Professional services360 313 1,440 646 
License fee and other revenue2,012 — 2,012 — 
Total revenue$20,191 $16,530 $58,597 $34,310 
CommissionsThe Company incurs and pays commissions on product sales. The Company applies the practical expedient for contracts less than one year to expense the commission costs in the period in which they were incurred. Commissions on product sales and services are expensed in the period in which the related revenue is recognized. Commissions on subscription arrangements and maintenance are expensed ratably over the life of the contract. The Company had a deferred asset related to commissions of $10.8 million and $9.0 million as of September 30, 2023 and December 31, 2022, respectively. During the three months ended September 30, 2023 and 2022, the Company recognized commission expense of $1.3 million and $1.2 million, respectively. During the nine months ended September 30, 2023 and 2022, the Company recognized commission expense of $4.4 million and $2.4 million, respectively.