Weave Communications, Inc.

Greetings and welcome to the Weave Communications fourth quarter and full year 2022 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. And as a reminder, this conference is being recorded. It is now my pleasure to introduce to you Mark McReynolds, head of investor relations. Thank you, Mark. You may begin.

Thank you, John. Good afternoon, and thanks for joining us for our fourth quarter and full year 2022 earnings conference call. Joining the call today are Brett White, CEO, and Alan Taylor, CFO. Brett will open the call with an overview of Weave's performance and strategy, and Alan will discuss our financial results in more detail. After the prepared remarks, we'll take questions. Today's discussion contains forward-looking statements that represent our beliefs or expectations about future events. All forward-looking statements involve risks and uncertainties that could cause the actual results to differ materially from the forward-looking financial statements. Please refer to the cautionary language in the earnings release and in WEA's filings with the Securities and Exchange Commission, including our most recent Form 10-K and 10-Q for additional information concerning factors that could cause actual results to differ materially from the forward-looking statements. We'll also discuss financial measures that do not conform with generally accepted accounting principles. For the sake of clarity, unless otherwise noted, all numbers we talk about today will be on a non-GAAP basis. Information may be calculated differently than similar non-GAAP data presented by other companies. A reconciliation between these GAAP and non-GAAP financial measures is included in our earnings press release, which can be found on our investor relations website at investors.getweave.com. And with that, I'll turn the call over to Brett. Thank you, Mark.

Good afternoon, and thank all of you for joining us today. I'll start my remarks with a review of our results for the year before providing a broader company update. I'm pleased with our fourth quarter performance and how we closed out the year. We generated revenue of $142.1 million in 2022, a 23% year-over-year increase and above the high end of the initial guidance that we gave at the beginning of the year and also above the high end of last quarter's guidance. We continue to make significant progress on the path to profitability throughout the year. For example, if we compare Q4 2022 to the same quarter in 2021, we improved our gross margin by over 900 basis points and we improved our operating margin by over 2,200 basis points. Our operating loss for the year was 31 million, a 15% improvement over last year and over 5 million better than the high end of the guidance we gave at the beginning of the year, and 2 million better than the high end of the guidance we gave in November. Our customers have proven to be very resilient in the midst of a challenging macro environment, and we saw demand for Weave increase in the second half of the year as healthcare providers sought out our high ROI solutions to make their operations more efficient. I want to sincerely thank the Weave team for their outstanding work in serving our customers and delivering these results. We have many reasons to be optimistic that 2023 will be a positive momentum-building year, but first I want to look back and share some of what we learned in 2022. We made a number of changes to our go-to-market motion and organization at the beginning of 2022, which when combined with the increased employee attrition from the great resignation, particularly in our sales organization, put us in a place where we had fewer ramped sales reps in early 2022 than we had in Q4 of 2021. Additionally, one of our most important sources of sales leads had historically been in-person events. And due to the COVID-19 pandemic, we had very few in-person events from early 2020 through the first half of 2022, more than two years. These two factors resulted in a challenging first half of the year and a slowing of new customer additions. In the second half of the year, we began to see improvement in a number of key areas of the business. The number of ramp sales reps increased by nearly 60%. We attended more in-person events in the second half of 2022 than in all of 2021. The number of leads steadily improved. The number of new customer additions and the average sales price for new customers increased. And lastly, business efficiency initiatives improved both gross and operating margins dramatically compared to the prior year. By Q4, we had cut our operating loss by more than half from Q1 and Q2 of 2022. In Q4, we also finalized the most robust annual planning process we have ever completed at Weave. The output of that work was a 2023 strategic plan that aligns us around four focus areas in our business. Accelerating revenue growth, building a scalable foundation for profitable growth, delivering an experience that turns customers into champions, and fostering an effective and engaged team that lives our values. This detailed plan was rolled out company wide in January and builds upon the green shoots we experienced at the end of Q4 carrying that momentum into 2023. I want to briefly touch on our plans for each of these focus areas. As I mentioned last quarter, our revenue model is like a big flywheel that you need to continually impart energy upon to accelerate rotation. Our challenging first half resulted in our year over year revenue growth decelerating in 2022. As I noted in my earlier remarks, The second half of 2022, we saw important improvements in key areas of our business. And as a result, we expect revenues to continue to grow sequentially every quarter in 2023. In regards to our scalable foundation for profitable growth, we are intentionally configuring the business for efficient growth in 2023 and beyond with a constant eye on the macro environment. We have built our plans for 2023 to accelerate our path to profitability and we expect to exit the year with positive free cash flow. While we recognize that accelerating our path to profitability may negatively impact revenue growth in 2023, given the uncertainty around macro environments, we believe it is a prudent action to take at this time, and we continue to actively monitor the environment throughout the year. Our third focus area is delivering an experience that turns customers into champions. Custom return has remained stable throughout the year as reflected in our consistent gross retention rate. For the small number of customers that do leave our platform, one of the reasons is that they want to move to a lower-cost solution offered by other vendors. We had close to 100 customers return to Weave this year after leaving for a competitor, and nearly a quarter returned within the same month of leaving. These returning customers are consistently validating our belief from the very beginning that what they really need is a high-quality solution that delivers real, immediate, and measurable business value that makes their office more productive and their patients happy, not a cheap solution. We continue to receive recognition and validation from our customers that our platform delivers best-in-class communication and engagement results. In Q4, we was recognized with key industry awards from each of our three core verticals. In 2022, we doubled down on customer experience and we saw significant improvements in our customer NPS score throughout the year. We accomplished this through creating an excellent customer experience, delivering feature improvements requested by our customers, and increased intention to new integrations. We added new integrations to practice management systems within our core verticals during the quarter and we are focused on continuing to execute our integration playbook in 2023 as we deepen our penetration into our core markets. Our product and engineering teams delivered several important platform improvements in Q4, including the launch of phone reporting analytics for our multi-location customers and a more integrated online scheduling feature to give offices flexibility in scheduling different appointment types and providers. Our fourth focus area is one critical to our success, fostering an effective and engaged team that lives our values. An effective and engaged team translates positively into customer satisfaction and customer retention. I'm happy to share that we've continued to be recognized for our outstanding company culture and our diversity, equity, and inclusion efforts. In Q4, we were named a top workplace by Salt Lake Tribune, We're the only Utah-based company honored nationally for our DE&I practices. Receiving local recognition is important for us as we aim to attract and retain the best talent. I'm proud of what we've accomplished in Q4. 2022 was a challenging but pivotal year for our business. We made a lot of important progress towards configuring our business for growth and success and have taken significant steps to improve our efficiency. I believe that we are set up well to build momentum in 2023 as we continue investing for future growth while remaining focused on delivering strong operational performance. With that, I'll turn the call over to Alan to review our financial results and outlook. Alan?