Weave Communications, Inc.

Good day, everyone, and welcome to today's Weave's third quarter fiscal year 2022 earnings call. Today's call is being recorded. And now at this time, I'd like to turn the call over to Maria Hokut. Please go ahead.

Thank you, April. Good afternoon, and thank you for joining us for the Weave Communications third quarter 2022 earnings call. Joining me on the call today are Brett White, Chief Executive Officer, and Alan Taylor, Chief Financial 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 these future financial results and management's expectations and plans 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 10-Q, filed with the SEC on August 12, 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 we've assumed no obligation to update or revise them, whether as a result of new developments 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 of our corporate website at investors.getleave.com. Now, I will turn the call over to Brett White, Chief Executive Officer of Weave. Brett?

Thank you, Maria. And thank you, everyone, for joining us today. And welcome to our third quarter financial results conference call. I'm very pleased to address you today as Weave's new CEO. My tenure with Weave started when I joined the board of directors in July of 2020 and continued when I joined the executive team this past April. My history with WE plus my prior C-suite experience with SMB software and payments companies has made for a smooth transition into my new role. As CEO, I'll have laser focus on delivering experience that our customers love, building a scalable foundation for profitable growth, and fostering an effective and engaged team that lives our core values. I'm extremely thankful. for the overwhelming support that I've received from our board, our investors, and our week team members since joining the management team, and I am very optimistic and excited about our future. Before Alan provides details on our Q3 financial results, I wanted to share some highlights from the quarter. We saw continued improvement in our go-to-market execution and results throughout the quarter following the changes that we made earlier this year. This contributed to our record Q3 revenue of $36.2 million, representing year-over-year growth of 20%. The team has been hard at work improving the efficiency of all aspects of our business, which is reflected in our Q3 results. Year-over-year, we've improved our non-GAAP gross profit by 33%. We've reduced our non-GAAP operating loss by 34%. and our non-GAAP operating loss margin from negative 33% of revenue to negative 18% of revenue. Meanwhile, we've increased subscription and payments revenue 6.6 million with only addition of 2.4 million in operating expense, much of which was due to us becoming a public company in November of last year. These trends demonstrate that we are proving our business efficiencies and driving positive results. For those that may be newer to the Weave story, I'd like to provide a little background on our key revenue drivers and their evolution over the past couple of years. Like most SaaS companies, our revenue model is like a big flywheel that you must continue to impart energy upon for it to accelerate its rotation. For our business, the largest source of new energy that accelerates our flywheel is new customer acquisition. Prior to the COVID pandemic, a major source of new customer acquisition for Weave was in-person industry trade shows and events. These in-person events effectively halted in early 2020, which had a significant negative impact on our new customer acquisition channel and contributed to the declining revenue growth rate that we've seen since that time. I'm pleased to report that in the latter half of Q3 of this year, we saw these in-person industry events continue to come back and translate into sales for us. Even though these in-person events are still below pre-pandemic levels, we view these as green shoots that bode well for our future. Additionally, as we outlined in our March 2021 earnings call, we put into effect a new sales model at the beginning of the year, the goal of which was to better align resources across our sales processes. The transition to the sales model was expected to take six to nine months and ultimately drive the long-term productivity of our sales team. we are pleased to report that we improved sales performance in Q3 relative to the first half of the year in the form of increased sales, reduced sales team attrition, increased number of ramped sales reps, lower customer acquisition costs, and better sales lead close results. And while this is clearly another green shoot benefit that we are seeing and adds to new customer and revenue acquisition, we will continue to aggressively focus on go-to-market efficiency to continue this positive trend. I'm sharing these two go-to-market updates to help stakeholders understand some of the positive momentum we are seeing in our business that, due to the size of our flywheel, may not become visible in the form of revenue growth in the near term. However, as we continue to capitalize on these positive indicators in our sales motion and double down on operational improvements throughout the business, we do expect to enjoy a meaningful sales momentum in 2023 and continued progress towards profitability. Moving on to technology enhancements. The pandemic and economic uncertainty that caused rapid changes in the operating environment for many small and medium healthcare businesses. A recent study found that these offices are becoming short staffed due to the great resignation and burnout. Yet only 27% have invested in technology to aid their employees. We've platform directly addresses this key pain point, streamlining patient engagement, improving the employee experience and overall efficiency. Healthcare practice owners are searching for new ways to automate tedious office tasks to keep their staff happy and productive, and more importantly, provide a positive patient experience. During the third quarter, we continued to expand our technology platform with enhancements and additional products. For example, we improved our online scheduling and text connect features. which give practices a way to let patients schedule appointments directly from their website, saving staff time and letting them capture more business each day. With deeper functionality and integrations for select practice management systems, offices can now customize their online calendar with appointment types, providers, and schedule availability. We added a new feature called Phone Reporting Analytics. for multi-location practices to give office administrators more visibility into their day-to-day operations. With it, they can now monitor important efficiency metrics like missed calls and the busiest hours of the day for phone calls by location. This data can help offices make better staffing decisions to improve both patient and staff experiences. In addition to these feature improvements, our engineering teams have delivered substantial operational efficiencies and cost savings to the business, via several initiatives to streamline our data center infrastructure. We will see future benefits in operational reliability and scalability, both of which will improve the overall customer experience and our gross margins going forward. These enhancements have also increased our capability related to larger multi-location clients. In February, we announced our largest new customer signing ever, an agreement with Dental Care Alliance for over 370 locations across the U.S. As we've concluded our work to implement the Weave platform into these businesses, Dental Care Alliance has opted to expand its contract with us to serve new locations as they become live in their portfolio. These additions to the platform and our ability to innovate have been continually recognized by our customers. In addition to being honored as the best ROI software by G2 this summer, We were named the market leader in five key categories yet again by G2 in its fall 2022 software report, which is driven by verified customer reviews. As part of our commitment to supporting our current customer base and helping them unearth new ways to get the most out of our all-in-one platform, on October 26th, we've hosted its first ever virtual user conference, which featured deep dive discussions into our platform of services and live trainings to help attendees utilize the full value of the Weave offering. Thousands of Weave customers registered for the event, sparking additional interest in some of our latest platform enhancements. The cross-functional effort to launch this event is a great representation of one of our company core values. The customer is everything. You can access this conference content at getweave.com slash connect. As I mentioned earlier, alignment around company values and maintaining high employee engagement continues to be a focus for our leadership team. Weave was recently named a certified great place to work for the fourth year in a row because of our culture, outlook, and career opportunities. Additionally, we are recognized nationally for our diversity, equity, and inclusion practices by Top Workplaces USA. As part of our commitment to the global Weave team, We had our first on-site employee meeting in India consisting of roughly 60 engineers and other technical team members. This is a team that was built in roughly 18 months and reflects a very valuable, highly skilled group working in conjunction with our U.S.-based team to increase our product and engineering innovation throughput. We expect to continue to build these teams and continue to invest in both geographies as it supports our future priorities around technology innovation and enhanced customer experience. In conclusion, I'm very excited to assume the WEED CEO role at this point in our journey, and I'm very optimistic about our future. Although there are many factors in the macro environment that we cannot control, I am thankful for a strong and resilient customer base. We are seeing green shoots in our business results and continuing recovery from the pandemic-related headwinds that have faced us for the last couple years. I am confident in our team and our ability to execute against the initiatives that we do control. While the financial benefits of these positive trends and our outlook on ongoing customer engagement may take time to realize, it is clear that during 2022, we have realigned our capabilities and resources to support the next phase of the company's evolution, including significant year-over-year improvements in both non-GAAP gross margins and operating margins. And we will aggressively focus on profitable growth and continuing improvement in free cash flow with an emphasis on getting to break even. Now Alan will provide details on our third quarter results and our Q4 outlook.