Weave Communications, Inc.

Greetings and welcome to the Weed Communications Q4 and Full Year 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the full more presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to introduce our host, Mark McReynolds, Head of Investor Relations. Thank you, Mark. You may begin.

Thank you, Matt. Good afternoon and welcome to WEAVE's fourth quarter and fiscal year 2024 earnings call. With me on today's call are Brett White, CEO, Alan Taylor, CFO, and Jason Christensen, VP of Finance. During the course of this conference call, we will make forward-looking statements regarding the anticipated performance of our business. These forward-looking statements are based on management's current views and expectations to tell certain assumptions made out of today's data and are subject to various risks and uncertainties described in our SEC file. We've disclaimed any obligation to update or revise any forward-looking statements. Further, on today's call, we will discuss certain non-GAAP metrics that we believe aid the understanding of our financial results. And as otherwise noted, all numbers we talk about today will be on a non-GAAP basis. A reconciliation to comparable GAAP metrics can be found in today's earnings release, which is available on our website and as an exhibit to the Form 8K furnished with the SEC before this call. as well as the earnings presentation on our investor relations website at investors.gitme.com. And with that, I'll now turn the call over to Jack.

Thank you, Mark, and thanks to everyone joining us today. 2024 was a year of remarkable progress and transformation for Weave. I'm excited to share key financial and strategic highlights from the past year, as well as our vision for 2025. We exist to create better healthcare experiences for patients and the practices that serve. Our goal is to make every interaction with a healthcare provider simple, seamless, and positive. For SMB healthcare practitioners, managing a small healthcare business while delivering quality patient care is challenging. We've streamlined operations, making it easier for providers to focus on what matters most, caring for their patients. Our vision is to elevate the patient experience through a unified platform that improves business operations, enabling healthcare professionals to focus on patient care and achieve their dreams. Instead of a fragmented set of tools, we've offered an AI-powered solution that integrates communication, scheduling, forms, payments, and more. Through authorized and supported integrations with leading practice management systems, we unlock deeper functionality without adding complexity. These integrations enable practices to automate and personalize patient communication while embedding FinTech solutions, such as Tech2Pay, Tech2Pay Online Bill Pay, and payment plans directly into the communication workflows. By streamlining payment processes, Weave accelerates collections, reduces write-offs, and improves practice profitability. Technology isn't just about efficiency and revenue growth for healthcare practices. It's a key factor in attracting and retaining top talent. 61% of practitioners agree that hiring high-quality employees is easier when their practice leverages the latest office technology, and almost 70% say that retaining great staff is significantly improved with modern tools in place. Investing in the right technology enhances the workplace experience and reduces burnout. Weave's platform gives practices a competitive edge, not just in patient engagement and payments, but in building strong, successful teams. By helping healthcare practices attract, engage, and retain patients, Weave enables providers to focus on what they do best, delivering excellent care while growing their business. For many, their practice is a lifelong dream, and Weave is here to help them achieve it by simplifying operations, reducing burdens, and empowering them to build thriving patient-centered practices. The dental, optometry, veterinary, and specialty medical verticals we serve give us access to an addressable market that we believe exceeds $7 billion in the U.S. alone. Before Alan shares more details about our financial performance, I want to share a few key highlights. In Q4 24, we delivered another outstanding quarter with strong revenue growth of nearly 19%, and continued improvements of both profitability and free cash flow. Growth margins improved again for the 12th consecutive quarter, reaching 72.6%. Q4 also marked our second consecutive quarter of positive operating income, resulting in full-year profitability for the first time in WEIS history. We achieved $6.1 million in free cash flow in Q4, more than doubling year over year, and representing a free cash flow margin of 11%. We produced free cash flow of $10.4 million for the year, representing nearly 60% year-over-year growth. Finally, we're very pleased to have exceeded the high end of the revenue and profitability guidance we gave a year ago. These results underscore the strong market demand for our solution, driven by the disciplined execution and a clear commitment to efficient growth. At the start of 2024, we identified several key focus areas to open up and expand new vectors of growth, including expanding into specialty medical verticals, strengthening integration partnerships, enhancing solutions for multi-location practices, elevating payments as a core component of our product, and delivering AI-powered innovations. Today, alongside our financial performance, I'm excited to share the significant progress we've made in each of these areas. In 2024, we laid the groundwork for success, and we're already seeing strong early traction. As a result, in 2025, we will be expanding these initiatives and investing to further accelerate momentum. Let me provide some additional color into each of these key growth factors. In 2024, we identified a set of specialties within the SMB medical vertical at strategic expansion opportunities. Revenue from specialty medical practices led by primary care, med spa, plastic surgery, and physical therapy grew at twice the rate of the overall company revenue in 2024. Specialty medical remained our fastest growing market segment in Q4 with more active medical locations added than in any previous period. Our momentum in this space was fueled by the release of new authorized integration with practice management software, including eClinical Works, Athena Health, Dr. Crono, and NextGen, expanding our reach and deepening the value of our platform. The SMB medical market in the U.S. spans 29 specialties, representing an addressable opportunity that is more than twice the size of the dental, optometry, and veterinary markets combined. With less than 1% market penetration in this vertical, we are only beginning to unlock its vast potential. We began 2025 with the launch of authorized integrations with prompts and practice fusion, further expanding our presence in the medical vertical. At the same time, we are expanding our go-to-market efforts by broadening our target specialties, increasing demand generation investments, and advancing sales enablement programs. These initiatives will accelerate our growth in high-potential medical specialties and solidify Weave's position as a category leader while expanding our market share. Turning to partnerships, in early 2024, we launched a dedicated partnerships team led by an experienced executive to drive new growth opportunities. This investment expanded our serviceable market by over 100,000 locations through new and enhanced integrations across all of our vertical markets. Our strategic partnership with Patterson Dental announced in June significantly broadened our market reach through co-marketing and co-selling efforts resulting in increased bookings and payments revenue in the latter half of 2024. Additionally, our commercial and integration partnership with Prompt, which launched this month, marks a major milestone in our expansion into the physical therapy market. Since launch, we have actively driven adoption through co-marketing efforts, engaging both shared customers and new prospects. To build on this momentum, we are launching a dedicated partner sales team in 2025 that will work closely with our commercial partners. By embedding within their go-to-market strategy, we aim to deepen collaboration, increase engagement, drive referrals, and accelerate revenue growth. Given the strong early success of our partnership strategy, we will continue to invest in 2025, strengthening both sales and marketing resources to further expand our market presence and accelerate growth. Another key focus of our strategy this year is expanding our mid-market customer base. In Q2 of 24, we launched an enterprise solution on our platform to meet the unique needs of multi-location practices. We added a proven sales leader in Q3 to accelerate our progress, and in Q4, Affordable Care, the nation's largest dental service organization for tooth replacement, shows Weave as its platform of record for patient engagement and payment. In 2025, we are expanding our mid-market sales capacity and increasing our marketing investments. These efforts will deepen engagement and expansion in existing accounts, drive pipeline growth, and position we for sustained success in this segment. In line with our other focus areas, we are seeing strong traction in our payments business. In 2024, we pointed a general manager of payments and doubled the size of our operations and an engineering team. We integrated payments with some of the largest practice management systems in our space, including Open Dental and Patterson's EagleSoft and Fuse, to deliver more streamlined communication and collection workflows for our customers. We enhanced our payments product suite with payment plans and payment reminders, which helped improve case acceptance and reduce outstanding accounts receivables for our customers. Timely payments are crucial for the financial health of any practice, and Weave Payments is designed to make that easier. 74% of practices believe they get paid faster by offering text-to-pay, and 62% say it helps prevent overdue invoices. Affordable Care selected the Weave Enterprise solution to improve collections and reduce write-offs with integrated digital payment solutions like text-to-pay. By leveraging mobile terminals, flexible payment options, and embedding payments into patient communication workflows, Affordable Care practices using Weave have seen significant revenue cycle management improvements. In 2025, payments will be a core element of our product and go-to-market strategy. Payments are now seamlessly integrated into our initial sale, reducing time to value for our customers. We are also investing in dedicated payments teams focused on adoption and increasing usage within our customer base. We believe that these resources will result in a scalable, resilient payments business that is well-positioned to drive continued growth in the coming years. Another important aspect of our strategy is AI. Last year, we made meaningful strides in this area. We launched our AI power platform for both single and multi-location practices. Weave AI is embedded throughout our platform to help streamline communications between a practice and its patients through review responses, email marketing creation, message tagging and prioritization, and voicemail transcriptions. In Q4, we announced our AI-powered call intelligence product. This revolutionary technology transforms how healthcare practices analyze and leverage call data, enabling them to elevate patient experiences, boost operational efficiencies, and unlock new revenue streams. 88% of practices say technology is crucial to delivering a great patient experience. In 2025, we will continue advancing AI-powered solutions to transform patient engagement and optimize complex practice operations. By automating workflows and enhancing communication, Weave is leading the way in intelligent, automated healthcare solutions, making our platform an essential tool for the modern healthcare practice. In summary, in 2024, we laid the foundation for expansion, achieving early success across multiple growth areas. In 2025, we will continue making disciplined, strategic investments where we see the greatest opportunity and a clear path to winning your business. medical vertical markets, mid-market, partnerships, payments, and AI. The traction we gained in 2024 reinforces our confidence that these investments will strengthen our market leadership and unlock new revenue streams. With a strong team, a clear vision, and proven ability to execute, Weave is well-positioned to accelerate growth and drive long-term success. Finally, Weave continues to earn recognition for our dedication to delivering exceptional customer experiences and the outstanding performance of our team and our platform. In G2's Winter 2025 report, Weave ranked first of 23 categories and was once again named the leader in the grid for patient relationship management. Weave was also selected as an Inc. Power Partner Award winner. We are committed to fostering an exceptional workplace, and Weave was named a Top Workplaces Culture Excellence winner in 2024 for innovation, employee appreciation, employee well-being, leadership, and compensation and benefits. In closing, I'm deeply proud of the Weave team's accomplishments over the past year. We achieved robust top-line growth, advanced profitability, and introduced groundbreaking products that address the evolving needs of our customers. These results highlight our unwavering focus on delivering value and driving innovation. As I sit here today, I am more confident in our opportunities and outcomes than I was just 12 months ago. A heartfelt thank you to our customers, partners, team members, and shareholders for their continued trust and support. Before I turn the call over, I'd like to take a moment to address the announcement we made earlier today. Our Chief Financial Officer, Alan Taylor, will be retiring at the end of this quarter. As part of a planned succession, Jason Christensen, Weave's Vice President of Finance, will be replacing Alan as Weave's new Chief Financial Officer and will join the executive team upon Alan's retirement. I would like to thank Alan for his significant contributions to the company. During his nine years at Weave, he built our finance function and guided Weave along the journey from startup to successful public company. I want to express my gratitude for his partnership and for his commitment to ensuring smooth transition before he embarks on his well-deserved retirement. I've had the privilege of working closely with Jason throughout his four-year tenure at Weave. His extensive experience in our business, understanding of our strategy, and deep insights into our customers make him the ideal successor. Having personally been and served as a CFO for over 20 years, I'm confident in Jason's ability to continue to scale Weave and drive continued growth and performance for many years to come. With that, I'll turn the call over to Adam.

Thanks, Brad, and good afternoon, everyone. It's been a great privilege to serve as CFO at Weave for the last nine years and to work with such an incredible team. I'm looking forward to the next stage in my life, and I have enormous confidence in Jason as he takes the reins as CFO. Jason's extensive finance experience and leadership were integral to our IPO and the last few years' business transformation and growth. In addition to leading financial planning and analysis, Jason has played a central role in driving strategic corporate initiatives, including business technology and business intelligence, and developing our payments, business strategy, and advanced hiring certificate in general management. Jason's deep understanding of we, his alignment with our mission, and his embodiment of our core values make him well-suited for this role. Jason will join us for Q&A after my prepared remarks. Starting with Q4, we had an quarter and continue to execute well across the board. In Q4, we delivered revenue of $54.2 million, reflecting nearly 19% growth year-over-year, exceeding the midpoint of our guidance by $1.1 million, or 2% each. Revenue growth was driven by new customer acquisitions, payments, upsells, and ongoing momentum in our specialty medical verticals, which continues to grow Notable successes were achieved among the primary care, med spa, plastic surgery, and physical therapy verticals. Our net revenue retention rate is 98% this year, up from 95% last year. This reflects the positive contributions from AIMS customers and price adjustments for additional functionality made to select customer components and products throughout 2024. Gross revenue retention, or GR, remains strong and relevant to 91% in Q4, which is a minor decrease of 20 basis points from Q3 2024 and 30 basis points from a year ago. Our GRR has consistently reached between 91% and 94% over the past four years, positioning us among the top performers in SMB retention. Turning to operating results, I'll be referring to non-GAAP figures unless otherwise stated. In Q4, gross margin increased to 72.6%, representing a 290 basis point increase year-over-year and our 12th quarter of sequential improvement. Our total operating expenses as a percent of revenue improved to 69% this quarter, down from 73% in Q4 of 2023, reflecting discipline, cost management, and operational efficiencies. We saw the biggest improvement in general administrative expenses, which were $9.3 million, or 17% revenue, down from 19% of revenue last year. Sales and marketing expenses came in at $20 million, or 37% of revenue, a slight decrease from 38% in the same period last year. Research and development expenses for the quarter totaled $8.3 million, representing 15% of revenue, down from 16% of revenue that year ago. These improvements highlight and focus on efficiency and productivity. In Q4, we achieved our second consecutive quarter of non-GAAP operating income with $1.8 million of profit, a $3.5 million improvement compared to last year, and $800,000 higher than the top end of our guidance. The corresponding operating income margin of 3.3% is a significant improvement to the operating loss margin of 3.8% last year. Our net income was $2.4 million, or 3 cents per share in million weighted average shares outstanding, reflecting a $3.2 million improvement year-over-year. Adjusted either dollar for Q4 was $2.6 million, improving by $3.4 million year-over-year due to revenue growth and operating efficiencies. Turning to the balance sheet, the cash flow ended the year with $99.1 million in cash for short-term investments, up from $98.2 million last quarter. Cash flow generated from operations in Q4 was $6.7 million, a $2.9 million improvement year-over-year. Pre-cash flow was $6.1 million in the fourth quarter, representing year-over-year growth of 109%. We're particularly pleased with the profitability and pre-cash flow progress that we made in 2024. We anticipate our green income and pre-cash flow will remain positive for the full year 2025. though Q1 will likely show negative pre-task flow due to the timing of the payout of annual employee bonuses and certain one-time remittances. Before reviewing our guidance, I'll provide a brief recap of the full year results. In 2024, total revenue grew 20% to $204.3 million. The skirts entertainment revenue grew 21% up from 68.7% last year. Our operating margin improved to a positive 0.4% as we delivered the first year of operating income in company history. A significant improvement with an immediate 6.8% margin in 2023. We made substantial progress on pre-cash flow, ending the year having generated $10.4 million, up from $6.5 million last year. We ended the year with nearly 35,000 customer locations on our platform, landing at 34,997, up 15% year-over-year. We are pleased with our progress this year and would like to thank all of our team members and we, our customers and partners for their contributions throughout the year. I'd like to provide some color regarding Outlook for 2025. As we outlined in 2024, we continuously refine our pricing strategy to align with market dynamics and business objectives. While we will continue to make adjustments as necessary, we do not anticipate the same magnitude of price changes in 2025 as we implemented in 2024. The most significant pricing updates occurred in Q2 of 2024, making Q2 our toughest year over year comparison. of 2025, as we lack the effects of that cohort. However, excluding these activities, we anticipate growth in our core business in 2025 to exceed 2020. As Brett mentioned, we are investing in payments and AI to deliver innovative workflow-based solutions, which we believe will unlock greater lifetime value and expand wallet share in the next few years. Additionally, in 2024, we launched a new platform secure some transformative partnerships, and make great strides in our mid-market business. We are still in the early stages of these opportunities, and we're encouraged by the green sheets we see, but we're not assuming significant contributions in the first half of 2025 from these new vectors grown. On the expense side, 2025 will be the first year that we will be required to comply with Section 404B of the Sarbanes-Oxley Act. And as a result, we are expecting an increase finance and opportunities compared to 2024. To add more color on expenses, there are seasonal factors that result in a sequential increase in expenses in Q1, including the reset of payroll tax returns, benefits renewals, taking effects, and the timing of the annual product fees, which are weighted more heavily in Q1. For the first quarter of 2025, we expect total revenue in the range of $54 million to $55 million. and non-GAAP operating income in the range of negative $0.7 million, positive $0.3 million. For the full year 2025, we expect total revenue to be in the range of $232 million to $237 million. We expect the range for our full year 2025 non-GAAP operating income to be from $2 million to $6 million. We expect to have a weighted average share count of approximately 75.9 million shares for the full year. As we wrap things up in this final earnings call for me, may I express how incredibly fortunate I am to have been a part of the WE team for nearly nine years. This last chapter of my business career started with an opportunity to work with the founders of WE. Brandi Roth, Jared Rodney, and Clint Barry. They are remarkable people and capable leaders. And the success that we presently enjoy finds its root in their vision and determination to build something extraordinary. Brandon is one of the most serious and optimistic people I've ever met, and I'm tremendously grateful for the opportunity he gave me to work with him. Finding his team is best in class. Committed and a delight to work with, and I will miss him. The investors and board members are sharp and insightful, as well as being great friends and mentors. What we do at Weave is a vital part of how healthcare practitioners and their staff take care of people. Our people and our platform help them deliver a better experience to their patients. That's an important goal, and it's been hugely rewarding to watch what this great Weave team has done to realize that. Weave has been able to tap into a market with great potential, the greatest portion of which is still ahead. For me, retirement means I can look forward to spending more time with my sweetheart, Paula, who, like every family member or loved one of those who work a week, make their own special contributions to our success through their love, sacrifice, patience, and support. I'm grateful for Paula and for the extended week family who are such an important part of making it all happen. Paula and I look forward to spending more time together than with our 16 grandchildren, so I'm fairly confident I'll have plenty to keep you busy. Brett and this great management team that is in place will not be defeated if they are joined by Jason, who has already won their respect because they have witnessed his capacity and performance for four years. Looking ahead, I'm very confident that we will continue to capitalize on new opportunities because the entire organization is passionate about the mission and will be disciplined in executing that mission. We use exceptional wealth and position to grow and succeed in years to come. With that, I'll turn the call over to the operator for QA.

Great, thank you. At this time, we will be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. First question here is from Alex Sklar from Raymond James. Please go ahead.

Great. Thank you. Alan, congratulations on the retirement and Jason on the new role. First question for me is just on the 2025 guide. It implies kind of a step back in the rule of framework. I know we saw something similar with how you approach the 2024 outlook, but it could just provide some more color on what you're factoring from an incremental investment perspective and when we could expect those to contribute to growth.

Alex, thanks. Hey, I'll start. So we made it clear last year, this year, and going forward that our bias is going to be towards growth. And so the investment profile with all of the things that we have in terms of the partnerships, the new markets we're going into, especially medical markets, our investments in AI, those are the areas where we will continue to invest so that we can lay the groundwork for just continuing growth. And so that's in terms of the way that we'll plan on going forward with growth.

Yeah, Alex, maybe I'll add to that. So I know the word investment can be a scary word sometimes when giving guidance. So let me just give a little color. You know, in each of these vectors of growth where we're really starting to see the green shoots growing, in order to really capture the opportunity to accelerate them, each of them needs a team. And so instead of having the existing team turn out, you know, work on partnerships or work on payments. We're actually setting up dedicated teams. They're small teams to get us started and to grow. So we're not going crazy. We're just making very targeted small team investments in each one of these growth sectors to really get the kind of traction that we think we can. But these are really important multi-year growth opportunities. And so we're seeding those now with some teams to really get them going. And we mentioned, you know, we're going to be more, deliver more profit next year than we did this year. We're going to see growth accelerate in the second half. So don't be scared by the investment words. It's just a few teams, but we're, you know, we're levering those up, you know, this quarter to really to hit the end of the year, to hit the second half of the year at stride.

Okay, thank you both for that color. Just one maybe follow-up then on one of those growth vectors, payments. So you've had a new head of payments in place now. It's a top priority. You're talking about seeding more of the team there. Can you just kind of update us on where that solution stands in terms of how creative it's been to growth? And just given some of the learnings from Patterson, how do you view the payments opportunity for 2025 versus 24?

Yeah, so we're, you know, the key for us for payments is getting the workflow payments integrated into the office workflow. And so much of this year was hiring a head of payments. Actually, Jason was our acting head of payments for the first half of the year. And then we hired a head of payments, and they've really been assembling the team, put together the risk team. We've doubled the size of the engineering. We've built in some new integration flows. We're working with ACI to – to bring their payments over to our platform. So I think we've got all the pieces in place and now the rest of the work really is building out the workflows. And then the other major change we've made this year is we've changed the sales compensation model. So starting January, all of our sales account executives now have a payments number. They all get paid on closing payments, and they also get paid on payment residuals. So we've changed the go-to-market model. We've changed the sales model. We've got many of the integrations done. There's still work to be done. I think we'll be working on the workflow for quite a while, but we make incremental improvements there. We're getting traction with new ads. We're getting traction with partners. So I would say... Everything is proceeding nicely, and it will definitely continue to have an accretive effect in 2025 for both our growth and our margins.

All right, great. Thank you both.

Our next question is from Brent Priestland from Piper Sandler. Please go ahead.

Good afternoon, Alan. It's been a pleasure working with you. Best of luck in retirement. 16 grandchildren. Sounds like you're going to remain pretty active. Jason, congrats on the new role. Much deserved. Maybe, Alan, we'll double-click into the guide. If I go back, your initial guide for 23 was 11%. Actual was 19.9%. 2024 initial guide was 15%. Actual growth, 19.9%. Are you trying to flag the 15% growth as some near-term challenges you see to growing in 2025, or should we think about the guide as kind of a typical conservative amount of conservatism in the guide this year? Just trying to parse that out, if there's something specific you're trying to flag to us, or if this is kind of the normal cadence of guidance you give. Thanks.

So, Brent, first of all, thank you very much. It's been a pleasure to work with you as well. The only thing that I would point out is what we mentioned in the prepared remarks, which is that we do have a typical comp in Q2, but other than that, this is the same philosophy that we've been using. And so I appreciate that setup. It's very germane to this conversation in terms of the way that we look at growth. The only other thing I would add is the green shift that we've been talking about These are pretty exciting things. I'm very convinced that we've got some opportunity for things that we will have a growing conviction about as the year progresses. But I would read it as status quo with respect to the philosophy behind the guide with one quarter just compared to Q2.

Got it very clear. So the Q2 compare is the only kind of thing kind of factoring in to the guide that's super helpful color. Brett, for you, you're clearly excited by these, you know, four or five new initiatives, especially medical partner of payments. When do you think those can start to actually drive an acceleration in growth? I ask because we've had good stabilization in growth the last two years and when do you think the green shoots could be material enough to drive actually an acceleration in top line?

Yeah, thank you, Brent. So in some areas it's already happening, but you kind of can't see it yet. I think one of the points I wanted to make sure that came through is, you know, as Alan mentioned, you know, we're lapping our price adjustments from last year, which will happen in the final quarter in Q2. And we're not planning the same level of price adjustments in our 25 guides. So absence of price increases, we believe our core business will grow faster in 25 than in 24. So I think it's already showing up in the numbers in the business that we really look at. And then I think the second half is when we'll see market acceleration relative to these initiatives. Definitely on the partnership front, definitely on the multi-location front, definitely on the specialty medical front. So I think, you know, if we're able to screen through the pricing adjustments, I think you'd be seeing more of it now. But, you know, net of all that, I think you'll see it mostly in the second half.

Thank you. Absolutely. Thank you.

Yeah. Thank you. Next question is from Parker Lane from Spiegel. Please go ahead.

Hi, guys. Thanks for taking the question. And, Alan, I'll echo my congrats on the successful career and environment here. Maybe the questions for Brett here, when you look at the multi-location and enterprise motion, how much of that is aimed at largely the dental vertical where you have the biggest exposure and the history there versus the broader swath of the go-to-market motion?

I would say currently, if you look at our pipeline, in our focus areas is primarily dental. And it's just because we've got the brand, we've got the product, we've got the partnerships with the big practice management software vendors. And frankly, that's where we get the most inbound. So, you know, we've totally changed the go-to-market motion. We've totally changed the team. We're going to be changing the events we go to. So it's it's a major, um, rebuild of that function and, and it's, it's off to a great start. So, you know, kind of like the rest of our, uh, SMB business, we'll start in dental, get our traction there and then, and then move into probably other areas of, you know, dental optometry and that, and then specialty medical.

Understood. And then Alan, I know you referenced the, um, the pricing increase last year impacting 2Q. When you look at some of the AI functionality you're bringing, things like call recording, et cetera, why isn't there an opportunity to take more price on those feature sets that you're bringing to the market here in 2025? Or is that something you think about in longer terms? Or simply just customer success and differentiating the platform?

Yeah, Parker, I think there will be. The AI functionality that we're doing, we're overseeing, via capability, call intelligence, for instance, is doing well. We're seeing that uplifted, but when we're talking about price, specifically just increasing the price on existing products or existing customers, I think we're kind of separating that out a little bit. And so we will take advantage of just some price increases this year, but that does not limit what we can do on the AI products and the other upsell products that are presently being sold and will be introduced.

Can I add something to that? We also don't want to do price increases that inhibit our ability to move customers onto the new platform. We are seeing greater adoption and higher NPS and better customer response from that platform, and we know that's something that we want to move customers towards. And so, you know, we're trying to be very careful and cautious in how we balance those two in 2025.

Understood. Thanks for the feedback, guys.

Thanks, Laura.

Next question is from Tyler Radke from Citi. Please go ahead.

Hi, this is Kylie on for Tyler. Congratulations, echoing the congrats for Alan on your retirement. And thanks again for the question. NRR uptick nicely through the year. I'd just love to hear any directional comments for expectations on NRR trends for FY25.

So NRR will continue to be fed by improvements in payments. We obviously had some NRR improvements through pricing last year. Payments is probably our strongest lever right now, but the upsells are doing well. And so we've got a few vectors that can help us to improve the NRR. I think it's important for everybody on the call to make sure they understand, you know, we price our offering on a location basis. And so some of the NRR, and we land very heavy in the processes that we go into. And so some of the NRR we take up front as just the full features that these offices want. and yet we still have the opportunity to continue to improve as we add in penetration within our customer base, and we continue to improve the opportunities for them to take advantage of these actual products like call intelligence and insurance certification and both texting and so on.

And just one point I would add, just clarification. We measure NRR on a location basis, so we don't measure it on a logo basis. So, for example, As ACI adds locations over time, that does not positively affect the ACI logo NRR per se. So I think that's a really important one to understand. So an ACI location is the same as any other, and they're measured year over year on the individual location basis, not as a number of locations added by a logo.

Makes total sense. Thanks. And then if I could slip in one more, I'd love to hear any comments on demand trends in the quarter. And then keeping in mind that comment that you're more confident than 12 months ago, but just noticing that software revenue did have a slight decel off of 3Q. What drove the revenue upside and the incremental confidence? Thank you.

Yeah. At the beginning of the year, beginning of 24, we laid out our plan and all of our focus areas. Throughout the year, we just kept adding really good leadership and they were tapping into these veins of opportunity and producing results. Lots of green shoots, lots of green lights are coming out of our strategic plan for 24. you know, as I was preparing for our kickoff, our employee kickoff, I kind of looked at on the same stage 12 months later, how's the view from the stage? And it was just a lot better because we have a lot more vectors to pursue. And so really the question is how aggressively do we want to pursue them on an investment basis? So we're being measured in our investment, but we're putting, you know, full teams behind each one of these opportunities. And, you know, You know, demand was terrific in Q4. And so, you know, from my seat, things look pretty darn good.

And our next question is from Mark Chappelle from Loop Capital Markets. Please go ahead.

Hi. Thank you for taking my question. Brett, and first of all, Alan, congrats on your retirement. Question for you, Brett. I appreciate your comments regarding your investment priorities in the coming year. With respect to the sales enablement initiatives to expand your presence, especially medical, is that strategy to go deeper in the current, say, handful of subsegments that you currently plan, or is the plan to maybe expand into other subsegments?

So, you know, kind of the way the model works is we look at demand, we look at product market fit, and then we design our integration timing or integration rollout based on those factors. And so really, where we really start getting traction in the verticals is when we build the integration. So we build our integration roadmap, we start rolling out integrations. And then the go-to-market falls right behind that. And the concept of sales enablement is let's not try to make our old scripts and the old verticals work in the new verticals. Let's actually make them very, very tailored, very pointed, so our sales teams get more efficient more quickly. You know, the previous question was, you know, why the optimism? A year ago, we had – we were looking for integrations to write. We were trying to get partners to sign up with us so we could write the integration. Now we're exactly flipped. Now we have more partners who want to partner with us, more integration agreements signed than we have actually have the capacity to deliver. So we're actively hiring more on the engineering side so we can meet the demand. So it's identified the verticals that are the closest product market fit, build the integration, tailor the go-to-market motion to that vertical, and then unleash the teams.

Great. Thank you. And then with respect to your AI products, specifically Assistant and Call Intelligence, I was wondering if you could just provide some additional color on how you plan to actually monetize those products.

So they're currently – you can correct me. So currently they are included in the top bundle. And then also we can sell them on upsell. So call intelligence is an upsell or it's an additional cost in the higher bundle. And I think the results we've seen recently is where our new sales are more biased towards the higher end bundle. You know, we kind of have the standard good, better, best bundling and ASPs are coming up because our sales, are more biased towards the higher bundle. So call intelligence is not a freebie. Some of the other embedded AI technologies come with the new Weave Experience platform, but that's one of the ways that we're able to deliver value and therefore get price on both the SMB segment, but really importantly, on the multi-market segment or multi-location segment.

Great. Thank you.

This concludes the question and answer session. I'd like to turn it forward back to Brett White for any closing comments.

Well, another big thank you to Alan for all his years of commitment and just being a great partner. And thanks to all of you for joining the call. And thanks again to the entire team.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation.