Weave Communications, Inc.

Today, I welcome to the WEAVE's second quarter 2022 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Maria Holcutt. Please go ahead, ma'am.

Thank you, Sharon. Good afternoon, and thank you for joining us for the WEAVE Communications second quarter 2022 earnings call. Joining me on the call today are Roy Banks, Chief Executive Officer, Alan Taylor, Chief Financial Officer, and Brett White, President and Chief Operating Officer. Full details of our results and additional management commentary are available in our earnings release, which can be found on the investor relations section of the website at investors.getweave.com. Please note that this call will be simultaneously webcast on the investor relations section of the company's corporate website. Before we start, I would like to remind you that the following discussion contains forward-looking statements within the meaning of the federal securities laws, including but not limited to statements regarding WEAVE's future financial results and management's expectations and plan for the business. These statements are neither promises nor guarantees and involve risks and uncertainties that may cause the actual results to differ materially from those discussed here. You should not place undue reliance on any forward-looking statements. Factors that could cause actual results to differ from the forward-looking statements can be found in our Form 10Q, filed with the SEC on May 13, 2022, which is accessible on the SEC's website at www.sec.gov and also available on our website at investors.getweave.com, as may be supplemented in subsequent periodic reports we file with the SEC. Any forward-looking statements made in this conference call, including responses to your questions, are based on current expectations as of today and and Weave assumes no obligation to update or revise them, whether as a result of new development or otherwise, except as required by law. The following discussion contains non-GAAP financial measures. For reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP metric, please see our earnings press release, which is available on the IR section on our corporate website at investors.getweave.com. Now I will turn the call over to Roy, Chief Executive Officer of WEAVE. Roy?

Thank you, everyone, for joining us today and welcome to our second quarterly earnings conference call. In a moment, Alan and I will provide an update to WEAVE's strategic and financial progress. But first, I'd like to address this afternoon's announcement regarding my decision to step away from my role as WEAVE's Chief Executive Officer. I joined WE the CEO in 2020, and since then, the management team and employees have navigated through the challenging COVID pandemic, enhanced our technology platform, and completed our IPO in November 2021, when we successfully raised capital to continue to fund our growth, operations, and pathway to profitability. As a new public company, we face tough equity market conditions, but we continue to improve our competitive position and implemented new go-to-market actions, positioning the company for scalable long-term growth. These efforts have led to positive Q2 financial results and to raise full-year guidance expectations as we will further discuss in today's call. While I'm saddened to take a step back due to personal health and family reasons, I needed to dedicate additional focus to my personal commitment and feel that I can no longer give weed the leadership attention that the company and its stakeholders deserve. As a result, I am stepping down from the CEO role effective August 15th, but will remain in an advisory role through September 2nd to ensure a seamless transition, at which time I will also resign from the Board of Directors. I'm happy to announce that Brett White has been appointed to serve as interim CEO until the Board of Directors appoints the company's next full-time CEO. As you recall, Brett has been a member of our board since July 2020 and became our president and chief operating officer in April of 2022. Brett has significant executive SaaS experience and previously served as the chief financial officer and chief operating officer for MindBody. I'm confident his perspective on Weave's business and deep understanding of our financials and operations will ensure a smooth transition and a bright future ahead. I'd like to thank everyone at Weave who supported me during my tenure with the company. The success Weave has enjoyed is directly attributable to the hard work and dedication of our team. Please know that I remain incredibly bullish about the future prospects for the business under Brett and the rest of Weave's leadership team. With that, I'd like to turn the conversation to our Q2 results and outlook for the rest of the year. As we entered 2022, we were experiencing certain challenges within the macroeconomic environment and also in our business operations. We have since announced several initiatives designed to improve the alignment, productivity, and sustainability of our go-to-market efforts. Although our work to address these challenges is not done and macro uncertainty persists, we are clearly seeing positive results from the new initiatives and improved execution. In the second quarter, we earned revenue of $34.9 million, representing 24% growth year over year. Operationally, we achieved a balance between the desire to closely manage cost levels while also continuing to invest in our go-to-market enhancements and long-term growth efforts. As a result, our non-GAAP operating loss was $10.1 million, reflecting a narrowed loss margin percentage compared to a year ago. Both metrics are favorable to the guidance we provided for the quarter, and with continued cost management and disciplined investments, we expect to achieve continued growth and improved operating margins in the second half of the year. As we progress through the quarter, we saw an evolving and bifurcated economic environment. As many of our specialty health care customers recover from the effects of the COVID pandemic, the developing uncertainty of the economy is starting to take its place. Business owners are increasingly expressing concerns about rising interest rates, inflation, and fears of a broad economic recession. At this time, these concerns are only minimally impacting underlying demand, but are perhaps elongating purchase decisions and increasing sensitivity to pricing. We are keeping a close eye on the situation as changing behavior could impact demand. While we recognize the broad macro uncertainty is concerning, our products and services are designed to help our customers manage through exactly these kinds of challenges, which we believe makes our business model more resilient. Our core customers operate within the specialty healthcare verticals, particularly the dental, optometry, and veterinary sectors, which are viewed as essential services that have shown resilience in the face of the pandemic and previous macroeconomic challenges. These small businesses depend on Weave's platform for essentially every facet of their customer engagement and communication, like acquiring new customers, communicating with existing customers via text, phone, chat, or email, scheduling appointments, sending out appointment reminders, and collecting and processing payments. We remain optimistic about our market opportunity as we expect our existing customers will want to retain the automation and solutions benefits they've become reliant upon. Similarly, we believe that new customers will seek more efficient ways to communicate and engage with their customers, save costs, and operate their businesses more efficiently. We've continued to make investments into our product roadmap and technology platform that will deliver valuable time and cost-saving solutions to our clients. To highlight this progress, I'll briefly point out three recent notable platform enhancements. First, insurance verification. As medical patients yourselves, I'm sure each of you have experienced the frustration of trying to use insurance to pay for your treatment. This frustration is felt by all parties. In fact, we estimate the average dental office spends six plus hours a week trying to verify insurance eligibility. The time, effort, and expense associated with this activity has no benefit to patient care or the growth prospects of the dental office and is purely an overhead cost ripe for reduction. In July, we made an insurance verification enhancement to our platform available to all of our dental locations. This new solution operates within the same Weave platform the dental office already uses and can potentially shorten the time spent on insurance verification by over 50%. Second, enhanced payment solutions. For a small healthcare practice, collecting payments is one of the most important and sensitive patient interactions. For some patients, making financial arrangements can often cause undue stress and sometimes delay treatment. In a recent Weave survey of pet owners, we found one in three have recently delayed procedures or treatment for their pets due to the large upfront cost and the inability to pay over time. In May, we announced the partnership with Sunbit to integrate its Buy Now, Pay Later solution into the Weave payments offering, which now sits alongside our text-to-pay, digital wallet, and card-on-file features. Last week, we launched this product, and it is currently available to all of our customers that leverage our payment solution. And third, continued expansion of our multi-office capabilities. In prior calls, we noted the market demand towards consolidated ownership of multi-office businesses. Earlier this year, we announced the signing of Dental Care Alliance, our largest ever customer, which operates over 370 locations across the country. The onboarding and integration of these offices has been executed according to plan, and we expect to complete this process this fall. We intend to continue to build and adapt our platform capabilities to support the administrative and operational complexity and needs of the multi-office ownership structure. In the second quarter, we launched several platform features with multi-location businesses' needs in mind. These include department groupings for text messaging, multiple time zone fields for organizations operating in multiple states, and unlimited new texting templates. Each of these platform enhancements are specifically addressing market needs and the key pain points experienced by our customers and their patients. As our suite of offerings becomes more and more robust, we anticipate business owners and patients will have increasingly seamless interactions that improve the patient's experience while they improve business automation and efficiencies are expected to provide a quick ROI to the business owners. Our product innovations are increasingly being recognized by our customers and the market. We was named a category leader in five of G2's summer 2022 software report categories, including dental practice management, optometry, patient engagement, HIPAA-compliant messaging, and patient relationship management. Notably, Weave was also named as the best ROI for dental practice management overall and within the small business segment. During the quarter, we made progress on our new go-to-market motion, which will serve as the foundation to our sustained efforts and consistent execution to increase productivity, lower customer acquisition costs, and ultimately help grow our subscription and payment processing volume and revenue. In the first quarter, we implemented many new changes and enhancements to our sales platform to better align our go-to-market motion with our market opportunity and plans for growth. During the second quarter, we began executing this plan while continuing to optimize our efforts and processes. This optimization included adjustments to respond to the macro conditions, customer demand, and the labor market as we hired and trained staff with new skill sets. Now in the third quarter, we are focused on expanding the leverage and execution of our revised go-to-market initiatives within the context of the evolving market environment. During the height of the pandemic, most live industry events, which had been important to our prior sales efforts, were severely impacted. Our plan new actions included more targeted digital marketing campaigns, which have proven very productive in the first half of the year. Internally, our operations change the structure and responsibilities of our sales team to better target specific resources to the opportunities with the highest potential ROI. As these efforts take hold, we will continue to evaluate and adjust our go-to-market operations as appropriate. Going forward, we expect to see improved win rates, lower customer acquisition costs, and improvements in bookings results. Once again, I'm very happy to report another impressive quarter of performance. We made substantial progress in our new product delivery and go-to-market optimization. And while I'm saddened to announce that I'm stepping down, I am extremely proud of what the company has been able to accomplish during my time as CEO. I'd like to add my gratitude and thanks to the board and the entire leadership team and people at Weave for their unwavering support as I made this decision. Their compassion and leadership are perfect examples of how Weave treats everyone as people, not employees. I'm confident that Brett and the rest of Weave's leadership team will guide the company to further successes.