Weave Communications, Inc.

Greetings and welcome to the Weave Communications Q1 2023 earnings conference call. At this time, all participants are in 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 start and zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mark McArnold, Head of Investor Relations. Over to you, sir.

Thank you, Danae. Good afternoon, and thanks for joining us for our first quarter 2023 earnings conference call. Joining the call today are Brett White, CEO, and Alan Taylor, CFO. Brett will open the call with an overview of WEED's performance, 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 statements. Please refer to the cautionary language in the earnings release and in WEED'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 you all for joining us today. I'll start my remarks by sharing the highlights from the quarter and then follow with a broader company update. I'm very pleased to share that we kicked off the year with strong results. Our total revenue for Q1 was $39.6 million, representing 19% year-over-year growth and above the high end of our guidance for the quarter. Q1 was an important milestone for us as this was the first quarter in which the year-over-year revenue growth rate increased sequentially since 2019. This growth was driven by strong demand for our platform and our growing customer base. In Q1, we also continued to make significant progress toward our profitability goals. Our gross margin for the quarter was 67.6%, up 850 basis points from 59.1% in Q1 2022 and up 90 basis points from last quarter. Additionally, we reduced our operating loss to 10% of revenue from a loss of 30% of revenue one year ago. Our Q1 adjusted EBITDA loss was 5% of revenue compared to 27% of revenue last year. Our operating loss for the quarter was 4 million a 60% improvement over last year, and $1 million above the midpoint of the guidance that we gave in February. In last quarter's earnings call, we shared that we built our plan for 2023 to accelerate our revenue growth and our path to profitability, with the goal of being free cash flow positive by the end of 2023. We are pleased to report that through revenue overachievement and continued operational improvements, For the first time in the company's history, we delivered positive free cash flow in the amount of $587,000 in Q1. I'm proud of the Weave team's intense focus on serving our customers and delivering these excellent results. As these results clearly demonstrate, we are making progress in delivering on this large opportunity, and our business model enables us to deliver a combination of strong revenue growth and improving profitability. I'd like to provide additional color on our top line growth for Q1. In our last earnings call, we shared with you that we experienced improved sales momentum in the third and fourth quarters of last year. We are pleased to report that that momentum continued into Q1 with both the number of new customers sold and the average sales price for new customers increasing over Q4 of last year. Both our digital marketing and our event channel results improved sequentially in Q1 as well. Historically, in-person industry events have been one of our most important sources of new business growth. In Q1, we doubled the amount of in-person event sales compared to the first quarter of 2022, despite attending slightly fewer events. We are investing more in larger events, sending broader teams, not only salespeople to engage with prospective customers, but also customer success teams to engage with current customers. This has resulted in an increase in the number of leads generated and closed from this important channel. We are encouraged by the increased demand that we are seeing coming out of these events and expect to continue our investments in this channel. To handle the increased demand, we continue to grow our go-to-market capacity. We increased the number of sales reps by 15% year-over-year, and 80% of our sales reps are now fully ramped, which represents 41% increase in ramped sales reps year-over-year. Our overperformance also enabled us to accelerate several additional go-to-market initiatives in the quarter. Turning to payments, our payments offering enables our customers to collect their fees faster and with less effort and administrative burden. Our solution streamlines the billing workflow, and we continue to see increased adoption across our customer base. We are encouraged by the trends that we are seeing in the payments data. For example, payments volume per location in Q1 was up over 10% year over year, which speaks to the health of the industries and individual customers that we serve. We announced in March that we signed a multi-year agreement to extend and deepen our partnership with Stripe as our payments processing partner. As part of this agreement, our customers will have access to more Stripe platform, and we plan to leverage additional features later this year as we endeavor to expand our payments offering for our customers. On the new product front, we launched bulk texting on our platform in Q1, which is one of the most requested features by our customers. Bulk texting gives our customers the ability to send a single text message to thousands of their patients at once and helps improve efficiency and boost revenue for practices by engaging more patients with personalized and targeted text messages with much less administrative burden on the practice staff. Text messages have more than a 99% open rate, with 90% of messages being read within the first three minutes of being received. An appointment vacancy can cost the practice up to $200 per occurrence if left unfilled. And bulk texting allows our customers to quickly engage patients that are due for an appointment, increase bookings for the practice, and keep their schedules full. Earlier this week, we also announced Response Assistant, which is a major enhancement to Weave Reviews. Reviews are very important for health care practices, as more than half of patients look at online reviews before scheduling an appointment. Response Assistant is our first AI-driven feature, and it allows our customers to use AI to draft a thoughtful and personalized response to a patient review in just seconds with one click. The users can then edit the reply before submitting if desired, increasing the personalization of the response and improving response time as they manage their critical online reputation. has been a core strength since our founding, and we intend to continue leveraging AI to make patient communication and engagement easier and more effective for our customers. We've continued to receive positive recognition and validation from our customers that our platform delivers best-in-class communications and engagement results. In Q1, we were named a leader in five different categories in G2's 2023 Spring Report. Recognition in the list is based on customer reviews and highlights the best software products for small healthcare businesses. In addition to being named a leader in multiple categories, our platform was also recognized for its return on investment, being named best results in patient engagement software among small businesses. We will continue to listen to our customers to ensure that we are providing an excellent experience and delivering requested feature improvements. In last quarter's earnings call, we introduced the concept of a boomerang customer, one who leaves Weave for a competitive solution only to come back a short time later. In Q1, we saw this customer category accelerate, and we counted 45 new boomerang customers in Q1 alone, compared to approximately 100 in all of 2022. We believe this trend provides another data point and further validates the breadth and value delivered by the Weave solution. Lastly, I'm excited to announce that we have added a key member to our executive leadership team. We announced earlier this week that Marcus Bertelsen has joined Weave as our first-ever Chief Strategy and Services Officer, leading our strategy, onboarding, customer support, and customer success teams. Marcus has nearly two decades of revenue growth and strategy experience. Before joining Weave, he served as the Senior Vice President of Revenue and Strategy at Thumbtack. a home services management platform for the small-medium business, where he successfully led and scaled global revenue, strategy, and customer-facing teams, serving their over 100,000 SMB customers. Prior to Thumbtack, Marcus was with McKinsey & Company, where he collaborated with numerous Fortune 100 clients and specialized in growth strategy, innovation, and company transformations. We are excited to leverage Marcus's experience to seize upon the vast opportunity that we have in front of us. In conclusion, we are very pleased to be off to a great start for 2023. Our customers are the North Star in every decision that we make, and I'd like to thank them for their continued trust in Weave, enabling us to grow together. I'd also like to thank the entire Weave team for their tireless dedication and bringing innovative, industry-leading products and services to our customers every day, enabling them to serve their patients and clients and achieve their professional dreams. With that, I'll turn the call over to Alan to take you through the details of our results and guidance, and then we'll take questions. Alan?