A Case for Long-Term Growth in the AI-Powered Sports Security Sector

The sports security market is undergoing a quiet revolution. As stadiums and arenas grapple with the dual challenges of terrorism threats and fan expectations for seamless entry experiences, AI-driven solutions are becoming indispensable. At the forefront of this transformation is Evolv Technologies (NASDAQ: EVLV), a company that has combined cutting-edge artificial intelligence with a relentless focus on client retention to position itself as a leader in a high-growth niche. For investors, the interplay of renewed customer loyalty and sector expansion offers a compelling case for long-term upside.

The Power of Recurring Revenue and Client Retention

Evolv’s financials tell a story of disciplined growth. In Q1 2025, the company reported $32 million in revenue, a 44% increase year-over-year, with annual recurring revenue (ARR) surging 34% to $106 million. This growth is not just about winning new clients but retaining and expanding with existing ones. A standout example is the renewed contract with Major League Soccer’s Columbus Crew, which now deploys Evolv’s Express systems at all entrances to Lower.com Field. This renewal, along with the deployment of systems at over 50 pro and collegiate venues in the U.S. and England, underscores Evolv’s ability to lock in high-profile clients.

The company’s 54 new customers in Q1 2025—combined with a 36% increase in recurring revenue—highlight its strength in converting one-time buyers into long-term partners. For SaaS investors, this is critical: recurring revenue models provide predictable cash flows and reduce the volatility of growth. Evolv’s focus on this model has driven a net loss reduction from $11.3 million in Q1 2024 to $1.7 million in Q1 2025, while adjusted EBITDA turned positive at $1.7 million.

Sector Expansion: From Sports to Global Security

While sports venues remain Evolv’s core focus, the company’s expansion into other high-traffic environments—such as schools, hospitals, and public spaces—has broadened its addressable market. This diversification is not just a hedge against sector-specific risks; it’s a catalyst for scaling. Evolv’s systems have scanned over 2 billion people since 2019, a testament to their reliability and scalability.

The company’s recognition by the U.S. Department of Homeland Security (DHS) as a Qualified Anti-Terrorism Technology (QATT) has further opened doors. This designation, coupled with awards from the Security Industry Association (SIA), positions Evolv as a trusted brand in a market where trust is paramount. With 12 professional soccer teams in the U.S. already using its technology, the potential for replication in other leagues—both domestically and internationally—is vast.

A Path to Profitability and Strategic Investments

Evolv’s 2025 guidance—$125–$130 million in revenue (20–25% growth)—is underpinned by a disciplined approach to capital allocation. The company plans to invest $2 million in systems and processes to enhance operational efficiency, a move that signals confidence in its ability to scale without sacrificing margins. These investments are expected to drive positive full-year Adjusted EBITDA and free cash flow by Q4 2025. For investors, this trajectory suggests a transition from growth-at-all-costs to a more balanced focus on profitability.

However, challenges remain. Evolv’s history of accounting restatements and reliance on a concentrated customer base (e.g., U.S. sports teams) pose risks. Yet, the company’s proactive governance overhaul and focus on expanding into new sectors mitigate these concerns.

Investment Implications

Evolv Technologies is not a high-margin tech unicorn, but its combination of recurring revenue, sector expansion, and improving margins makes it an intriguing long-term play. The sports security market, valued at over $10 billion globally, is expected to grow as venues prioritize safety without compromising fan experience. Evolv’s AI-driven solutions, which reduce screening times and enhance threat detection, are uniquely positioned to benefit from this trend.

For investors seeking exposure to the AI security boom, Evolv offers a mix of growth and defensiveness. While short-term volatility is possible—especially with its recent history of losses—the company’s progress in client retention and profitability metrics suggests a turning point. With a forward P/E ratio that remains attractive relative to its growth trajectory, EVLV could outperform broader tech indices if it maintains its momentum.

Conclusion

The future of sports security is being rewritten by companies like Evolv Technologies. By marrying AI innovation with a client-centric approach, the company has created a flywheel of growth: satisfied customers drive word-of-mouth referrals, while sector expansion opens new revenue streams. For investors, the key takeaway is clear: Evolv’s ability to retain clients and scale its solutions across industries makes it a compelling candidate for long-term investment. As the demand for smarter, faster security solutions grows, so too does the potential for EVLV to deliver outsized returns.