Weave Communications, Inc. (NYSE:WEAV) Q1 2024 Earnings Conference Call May 1, 2024 4:30 PM ET Company Participants Mark McReynolds - Head, Investor Relations Brett White - Chief Executive Officer Alan Taylor - Chief Financial Officer Conference Call Participants Jacob Staffel - Goldman Sachs Hannah Rudoff - Piper Sandler Alex Sklar - Raymond James Parker Lane - Stifel Mark Schappel - Loop Capital Markets Tyler Radke - Citi Operator Greetings and welcome to the Weave First Quarter 2024 Financial Results Con ...

Weave Announces First Quarter 2024 Financial Results LEHI, Utah—May 1, 2024 – Weave (NYSE: WEAV), a leading all-in-one customer experience and payments software platform for small and medium-sized healthcare businesses, today announced its financial results for the first quarter ended March 31, 2024. "Weave delivered another terrific quarter, providing a strong start to the year with solid top-line performance and significant improvements in gross and operating margin and adjusted EBITDA. Achieving greater ...

Part I [Business Overview](index=8&type=section&id=Item%201.%20Business) Weave Communications, Inc. is a leading all-in-one customer experience and payment software platform provider for small and medium-sized healthcare businesses, enhancing patient experience and optimizing operations through unified communications, online scheduling, payments, and review management. - Weave's mission is to enhance patient experience and improve business operations through a unified platform, enabling healthcare professionals to focus on patient care[23](index=23&type=chunk) - The company offers an all-in-one customer experience and payment software platform integrating phone, messaging, email marketing, insurance verification, online scheduling, reviews, payments, and digital forms[25](index=25&type=chunk)[27](index=27&type=chunk)[29](index=29&type=chunk) Customer Count (as of December 31, 2023) | Metric | Quantity | | :--- | :--- | | Subscription Locations | >31,000 | | Customer Count | >28,000 | | Primary Industries | Dental, Optometry, Veterinary, and other Medical Specialty Services | - The company attracts new customers through a combined strategy of direct sales teams, omnichannel marketing, and business development partnerships[47](index=47&type=chunk)[49](index=49&type=chunk)[50](index=50&type=chunk) - Technologically, the company utilizes a microservices architecture and a highly containerized environment, leveraging Google Cloud Platform (GCP) for cloud-native services to ensure scalability and voice quality[54](index=54&type=chunk)[55](index=55&type=chunk) - The company operates in a highly competitive and fragmented market, primarily competing with combinations of existing single solutions, with competition factors including platform breadth, integrated solutions, ease of use, industry-specific features, and deep integrations[66](index=66&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk) - The company is subject to various regulations, including FCC regulations for VoIP services, consumer protection laws like TCPA and CAN-SPAM, and data protection laws such as HIPAA and CPRA[70](index=70&type=chunk)[72](index=72&type=chunk)[74](index=74&type=chunk) [Risk Factors](index=17&type=section&id=Item%201A.%20Risk%20Factors) This section details significant risks associated with investing in the company's common stock, covering business operations, industry competition, government regulation, intellectual property, taxation, accounting, and common stock ownership. - Company revenue was **$170.5 million** in 2023, **$142.1 million** in 2022, and **$115.9 million** in 2021, but rapid growth does not guarantee future growth and may make assessing future prospects difficult[83](index=83&type=chunk) - The company faces challenges in attracting new customers, retaining existing ones, and increasing platform usage by customers, which are crucial for its future revenue[86](index=86&type=chunk) - The company has incurred losses since its inception, with net losses of **$31 million** in 2023 and **$49.7 million** in 2022, and may not achieve or maintain profitability in the future[96](index=96&type=chunk) - Adverse economic conditions and macroeconomic uncertainties may negatively impact the company's business, operating results, and financial performance, particularly affecting small and medium-sized businesses that constitute its primary customer base[99](index=99&type=chunk)[100](index=100&type=chunk) - The company heavily relies on Google Cloud Platform (GCP) for its platform operations, and any interruptions or disruptions could adversely affect its business, operating results, and financial condition[149](index=149&type=chunk) - The company's products and services must comply with industry standards, FCC regulations, and state, local, national, and international regulations; changes in regulations may require service modifications, increase costs or prices, and harm the business[193](index=193&type=chunk) - The company handles commercial and personal information of customers and employees, subject to HIPAA and other strict and evolving federal, state, and foreign data protection, privacy, and security laws and regulations, with non-compliance potentially leading to liability and reputational damage[213](index=213&type=chunk)[214](index=214&type=chunk) - The company does not intend to pay dividends in the foreseeable future, requiring investors to rely on stock price appreciation for investment returns[258](index=258&type=chunk) [Unresolved Staff Comments](index=61&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company has no unresolved staff comments. - Not applicable[278](index=278&type=chunk) [Cybersecurity](index=61&type=section&id=Item%201C.%20Cybersecurity) The company has established comprehensive processes to identify, assess, and manage cybersecurity threats as part of its risk management system, overseen by a dedicated privacy, security, and safety team. - The company has comprehensive processes to identify, assess, and manage cybersecurity threats, overseen by a dedicated privacy, security, and safety team[279](index=279&type=chunk) - Significant cybersecurity incidents are regularly reviewed by cross-functional working groups and reported to senior management and the audit committee[280](index=280&type=chunk)[281](index=281&type=chunk) - To date, cybersecurity threats have not materially impacted the company's business strategy, operating results, or financial condition, but future impacts cannot be guaranteed[282](index=282&type=chunk) [Properties](index=61&type=section&id=Item%202.%20Properties) As of December 31, 2023, the company leases approximately 180,000 square feet of office space in Lehi, Utah, for its headquarters, with the lease extending until 2033. - As of December 31, 2023, the company leases approximately **180,000 square feet** of office space in Lehi, Utah, for its corporate headquarters, with the lease expiring in 2033[283](index=283&type=chunk) - The company also has an office in Noida, India, and believes its existing facilities are sufficient for current US needs, with additional space available for lease to support future business expansion[283](index=283&type=chunk)[284](index=284&type=chunk) [Legal Proceedings](index=62&type=section&id=Item%203.%20Legal%20Proceedings) As of December 31, 2023, and the date of this consolidated financial statement, the company is not involved in any legal proceedings expected to have a material adverse effect on its financial condition, operating results, or liquidity. - As of December 31, 2023, the company is not involved in any legal proceedings expected to have a material adverse effect on its financial condition, operating results, or liquidity[285](index=285&type=chunk) - The company may face future claims from third parties, including intellectual property infringement claims, and litigation, regardless of outcome, could adversely affect the business due to defense and settlement costs and diversion of management resources[285](index=285&type=chunk) [Mine Safety Disclosures](index=62&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company has no mine safety disclosures. - None[286](index=286&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=63&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock began trading on the New York Stock Exchange under the symbol "WEAV" on November 11, 2021, with 34 registered holders as of March 8, 2024, and no cash dividends have been declared or paid. - The company's common stock began trading on the New York Stock Exchange under the ticker symbol **“WEAV”** on November 11, 2021[289](index=289&type=chunk) - As of March 8, 2024, the company had **34** registered holders of its common stock[290](index=290&type=chunk) - The company has never declared or paid any cash dividends and expects to retain all future earnings for business development and general corporate purposes in the foreseeable future[291](index=291&type=chunk)[258](index=258&type=chunk) - The company has not engaged in unregistered sales of securities or issuer purchases of equity securities[297](index=297&type=chunk)[298](index=298&type=chunk) [Reserved](index=64&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved, with no specific information provided. - This item is reserved[299](index=299&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=64&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section discusses the company's financial condition and operating results for the year ended December 31, 2023, highlighting revenue growth, cost structure, key business metrics, and liquidity. - The company provides an all-in-one customer experience and payment software platform, primarily serving small and medium-sized businesses in dental, optometry, veterinary, and other professional healthcare sectors[302](index=302&type=chunk)[303](index=303&type=chunk) Revenue and Cost Structure (as of December 31, $ thousands) | Item | 2023 ($ thousands) | 2022 ($ thousands) | | :--- | :--- | :--- | | Subscription and Payment Processing Revenue | 162,715 | 136,592 | | Subscription and Payment Processing Costs | (38,194) | (35,008) | | Subscription and Payment Processing Gross Profit | 124,521 | 101,584 | | Subscription and Payment Processing Gross Margin | 77% | 74% | | Onboarding Services Revenue | 3,232 | 1,288 | | Onboarding Services Costs | (8,710) | (9,612) | | Onboarding Services Gross Profit | (5,478) | (8,324) | | Onboarding Services Gross Margin | (169)% | (646)% | | Hardware Revenue | 4,521 | 4,237 | | Hardware Costs | (7,473) | (8,656) | | Hardware Gross Profit | (2,952) | (4,419) | | Hardware Gross Margin | (65)% | (104)% | Key Business Metrics (as of December 31) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Number of Locations | 31,002 | 27,193 | | Dollar-Based Net Retention Rate | 95% | 99% | | Dollar-Based Gross Retention Rate | 92% | 94% | Operating Results Overview (as of December 31, $ thousands) | Metric | 2023 ($ thousands) | 2022 ($ thousands) | Change Amount ($ thousands) | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Revenue | 170,468 | 142,117 | 28,351 | 20% | | Sales and Marketing Expenses | 70,765 | 65,378 | 5,387 | 8% | | Research and Development Expenses | 34,040 | 30,714 | 3,326 | 11% | | General and Administrative Expenses | 45,652 | 42,453 | 3,199 | 8% | | Operating Loss | (34,366) | (49,704) | 15,338 | (31)% | | Net Loss | (31,031) | (49,738) | 18,707 | (38)% | Non-GAAP Financial Measures (as of December 31, $ thousands) | Metric | 2023 ($ thousands) | 2022 ($ thousands) | | :--- | :--- | :--- | | Free Cash Flow | 6,531 | (15,893) | | Free Cash Flow Margin | 4% | (11)% | | Adjusted EBITDA | (7,846) | (27,203) | Cash Flow Overview (as of December 31, $ thousands) | Activity Type | 2023 ($ thousands) | 2022 ($ thousands) | | :--- | :--- | :--- | | Net Cash from Operating Activities | 10,221 | (12,766) | | Net Cash from Investing Activities | (7,739) | (54,026) | | Net Cash from Financing Activities | (13,723) | (7,207) | - As of December 31, 2023, the company had **$50.8 million** in cash and cash equivalents and **$58.1 million** in short-term investments, believing these resources are sufficient to meet working capital and capital expenditure needs for the next 12 months[361](index=361&type=chunk)[363](index=363&type=chunk) - The company repaid the **$10 million** outstanding balance under its Silicon Valley Bank credit facility in November 2023, with the entire **$50 million** credit facility available as of December 31, 2023[380](index=380&type=chunk)[381](index=381&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=80&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discloses the company's market risks, primarily interest rate risk and foreign currency risk, noting that its cash, cash equivalents, and short-term investments are not sensitive to interest rate changes due to their short maturities. - The fair value of the company's cash, cash equivalents, and short-term investments is relatively insensitive to interest rate changes due to their short maturities[386](index=386&type=chunk) - The company's credit facility has a floating interest rate (prime rate plus 0.25% or 3.50%, whichever is higher), so an increase in the prime rate would increase interest costs on any borrowings[387](index=387&type=chunk) - Most of the company's customer subscription agreements are denominated in US dollars, with a small portion in Canadian dollars; some operating expenses are denominated in foreign currencies like Canadian dollars and Indian rupees, subject to exchange rate fluctuations[388](index=388&type=chunk) - Foreign exchange rate fluctuations have not materially impacted the company's historical operating results, and the company currently does not engage in derivative or hedging transactions[388](index=388&type=chunk) [Financial Statements and Supplementary Data](index=82&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section includes the company's consolidated financial statements for the years ended December 31, 2023, and 2022, along with detailed notes explaining organizational structure, accounting policies, revenue recognition, fair value measurements, and other key financial information. - PricewaterhouseCoopers LLP issued an unqualified audit report on the company's consolidated financial statements for the years ended December 31, 2023, and 2022[393](index=393&type=chunk) Consolidated Balance Sheet Overview (as of December 31, $ thousands) | Metric | 2023 ($ thousands) | 2022 ($ thousands) | | :--- | :--- | :--- | | Total Assets | 201,012 | 208,349 | | Total Liabilities | 122,055 | 125,130 | | Stockholders' Equity | 78,957 | 83,219 | Consolidated Statements of Operations Overview (as of December 31, $ thousands) | Metric | 2023 ($ thousands) | 2022 ($ thousands) | 2021 ($ thousands) | | :--- | :--- | :--- | :--- | | Revenue | 170,468 | 142,117 | 115,871 | | Gross Profit | 116,091 | 88,841 | 66,499 | | Operating Loss | (34,366) | (49,704) | (50,391) | | Net Loss | (31,031) | (49,738) | (51,690) | Consolidated Statements of Cash Flows Overview (as of December 31, $ thousands) | Activity Type | 2023 ($ thousands) | 2022 ($ thousands) | 2021 ($ thousands) | | :--- | :--- | :--- | :--- | | Net Cash from Operating Activities | 10,221 | (12,766) | (20,370) | | Net Cash from Investing Activities | (7,739) | (54,026) | (9,800) | | Net Cash from Financing Activities | (13,723) | (7,207) | 110,400 | | Net Increase (Decrease) in Cash and Cash Equivalents | (11,241) | (73,999) | 80,200 | - The company adopted new lease accounting standards (ASC 842) on January 1, 2022, with retrospective adjustments to relevant financial statements[394](index=394&type=chunk)[464](index=464&type=chunk) - As of December 31, 2023, the company had federal and state net operating loss (NOL) carryforwards of approximately **$191.8 million** and **$139.6 million**, respectively, though their utilization may be limited by ownership changes[500](index=500&type=chunk) Stock Option Activity Under Equity Incentive Plans (as of December 31, 2023) | Metric | Number of Stock Options | Weighted-Average Exercise Price | | :--- | :--- | :--- | | Unexercised as of December 31, 2022 | 4,185,876 | $6.32 | | Exercised | (1,756,386) | $7.33 | | Forfeited and Expired | (588,755) | $9.62 | | Unexercised as of December 31, 2023 | 1,840,735 | $4.32 | - As of December 31, 2023, unrecognized share-based compensation expense related to unvested restricted stock units (RSUs) was **$38.4 million**, expected to be recognized over an average period of **2.01 years**[527](index=527&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosures](index=113&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosures) The company has no changes in or disagreements with accountants on accounting and financial disclosures. - None[543](index=543&type=chunk) [Controls and Procedures](index=113&type=section&id=Item%209A.%20Controls%20and%20Procedures) Company management, including the CEO and CFO, concluded that the disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2023, with this report not including an attestation report from an independent registered public accounting firm due to the company's "emerging growth company" exemption. - As of December 31, 2023, company management, including the CEO and CFO, assessed and concluded that the company's disclosure controls and procedures were effective[545](index=545&type=chunk) - As of December 31, 2023, company management assessed and concluded that the company's internal control over financial reporting was effective[546](index=546&type=chunk) - This annual report does not include an attestation report from the independent registered public accounting firm regarding the effectiveness of internal control, as the company qualifies as an "emerging growth company"[546](index=546&type=chunk) - No material changes occurred in the company's internal control over financial reporting during the quarter ended December 31, 2023[547](index=547&type=chunk) - Management acknowledges that all control systems have inherent limitations and cannot provide absolute assurance, potentially failing to prevent or detect all errors and fraud[548](index=548&type=chunk) [Other Information](index=114&type=section&id=Item%209B.%20Other%20Information) During the fiscal quarter ended December 31, 2023, no company director or officer informed the company of the adoption or termination of any "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement". - During the fiscal quarter ended December 31, 2023, no company director or senior officer informed the company of the adoption or termination of any “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement”[549](index=549&type=chunk) [Disclosure Regarding Foreign Jurisdiction that Prevent Inspections.](index=115&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdiction%20that%20Prevent%20Inspections.) The company has no disclosures regarding foreign jurisdictions that prevent inspections. - Not applicable[550](index=550&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=116&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The information required for this item is incorporated by reference into the company's definitive proxy statement for the 2024 Annual Meeting of Stockholders, to be filed with the SEC within 120 days after the fiscal year ended December 31, 2023. - This information is incorporated by reference into the company's definitive proxy statement for the 2024 Annual Meeting of Stockholders[553](index=553&type=chunk) [Executive Compensation](index=116&type=section&id=Item%2011.%20Executive%20Compensation) The information required for this item is incorporated by reference into the company's definitive proxy statement for the 2024 Annual Meeting of Stockholders, to be filed with the SEC within 120 days after the fiscal year ended December 31, 2023. - This information is incorporated by reference into the company's definitive proxy statement for the 2024 Annual Meeting of Stockholders[554](index=554&type=chunk) [Security Ownership of Certain Beneficial Owner and Management and Related Stockholder Matters](index=116&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owner%20and%20Management%20and%20Related%20Stockholder%20Matters) The information required for this item is incorporated by reference into the company's definitive proxy statement for the 2024 Annual Meeting of Stockholders, to be filed with the SEC within 120 days after the fiscal year ended December 31, 2023. - This information is incorporated by reference into the company's definitive proxy statement for the 2024 Annual Meeting of Stockholders[555](index=555&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=116&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The information required for this item is incorporated by reference into the company's definitive proxy statement for the 2024 Annual Meeting of Stockholders, to be filed with the SEC within 120 days after the fiscal year ended December 31, 2023. - This information is incorporated by reference into the company's definitive proxy statement for the 2024 Annual Meeting of Stockholders[556](index=556&type=chunk) [Principal Accounting Fees and Services](index=116&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) The information required for this item is incorporated by reference into the company's definitive proxy statement for the 2024 Annual Meeting of Stockholders, to be filed with the SEC within 120 days after the fiscal year ended December 31, 2023. - This information is incorporated by reference into the company's definitive proxy statement for the 2024 Annual Meeting of Stockholders[557](index=557&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=117&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements and exhibits included in the company's annual report, with financial statement information incorporated by reference and all financial statement schedules omitted as not applicable or already included. - Financial statement information is incorporated by reference into Item 8, "Financial Statements and Supplementary Data," of Part II of this annual report[560](index=560&type=chunk) - All financial statement schedules have been omitted because the information is not applicable or is included in the financial statements or notes thereto[560](index=560&type=chunk) - The company has filed or incorporated by reference a list of exhibits to this annual report[561](index=561&type=chunk) [Form 10-K Summary](index=120&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company has no Form 10-K Summary. - Not applicable[567](index=567&type=chunk) [Signatures](index=121&type=section&id=Signatures) This annual report is signed by authorized representatives of Weave Communications, Inc., including CEO and Director Brett White and CFO Alan Taylor, on March 13, 2024, and includes a power of attorney. - This annual report is signed by Brett White, Chief Executive Officer and Director, and Alan Taylor, Chief Financial Officer of Weave Communications, Inc., on March 13, 2024[571](index=571&type=chunk)[574](index=574&type=chunk) - This section includes a power of attorney authorizing designated individuals to sign any amendments to this annual report on behalf of the signatories[572](index=572&type=chunk)

Overview - Weave's mission is to elevate the patient experience through a unified platform that improves business operations so healthcare professionals can focus on patient care and realize their dreams[10] - Weave provides an all-in-one customer experience software platform for dental, optometry, veterinary, and medical practices[11] - Weave has a strong balance sheet with $108.8 million in cash and short-term investments as of December 31, 2023[12] Market Opportunity - Weave estimates its total addressable market (TAM) at $12.5 billion, including all US healthcare SMBs and service-oriented SMBs[19] - The company estimates the dental, optometry, and veterinary TAM at $5.0 billion[19] - Weave's trailing twelve months revenue from Q1'23 through Q4'23 was $0.17 billion[19] Product Impact - Weave offices schedule an average of 9 additional patients a week after joining[41] - Weave's texting feature saves offices an average of 2 hours & 50 minutes per day[41] - Weave helps increase revenue by $3,708 per month on average by reducing no-show rates and last-minute cancellations[41] Financial Performance - Weave achieved 21.2% year-over-year revenue growth in Q4 2023[56] - The company has shown 8 consecutive quarters of improving non-GAAP gross margin, with a 300 bps improvement in Q4'23 compared to Q4'22[55] - Weave has also shown 8 consecutive quarters of improving non-GAAP operating margin, with a 740 bps improvement in Q4'23 compared to Q4'22[55] - Weave's Q1-24 revenue guidance is between $45.2 million and $46.2 million, with a non-GAAP loss from operations between $(2.5 million) and $(1.5 million)[86]

[Fourth Quarter and Full Year 2023 Financial Results Overview](index=1&type=section&id=Fourth%20Quarter%20and%20Full%20Year%202023%20Financial%20Results%20Overview) [Company Introduction](index=1&type=section&id=Company%20Introduction) Weave (NYSE: WEAV) is a leading all-in-one customer experience and payments software platform designed for small and medium-sized healthcare businesses - Weave (NYSE: WEAV) is an all-in-one customer experience and payments software platform for **small and medium-sized healthcare businesses**[2](index=2&type=chunk) [CEO Commentary](index=1&type=section&id=CEO%20Commentary) CEO Brett White highlighted Weave's strong performance in Q4 2023 and excellent full-year results, with continuous improvements in revenue growth, gross margin, operating margin, Adjusted EBITDA, free cash flow, and customer acquisition, positioning the company for continued success in 2024 - CEO Brett White noted strong Q4 2023 performance and excellent full-year results, with continuous improvements in **revenue growth, gross margin, operating margin, Adjusted EBITDA, free cash flow, and customer acquisition**[3](index=3&type=chunk) - The company is poised for continued success in 2024, leveraging **growing market opportunities, customer base economic resilience, and platform innovation**[3](index=3&type=chunk) [Fourth Quarter 2023 Financial Highlights](index=1&type=section&id=Fourth%20Quarter%202023%20Financial%20Highlights) Weave achieved strong financial results in Q4 2023, with total revenue increasing 21.2% year-over-year to $45.7 million, positive cash flow from operations and free cash flow, and narrowed GAAP and non-GAAP operating and net losses Key Financial Highlights for Q4 2023 | Metric | Q4 2023 (million USD) | Q4 2022 (million USD) | Y-o-Y Change | Source Chunk | | :--------------------------------- | :---------- | :---------- | :--------- | :---- | | Total Revenue | $45.7 | $37.7 | +21.2% | [4, 5] | | GAAP Gross Margin | 69.1% | 66.2% | +2.9 pp | [5] | | Non-GAAP Gross Margin | 69.7% | 66.7% | +3.0 pp | [5] | | GAAP Operating Loss | $(8.0) | $(9.7) | Improved | [5] | | Non-GAAP Operating Loss | $(1.7) | $(4.2) | Improved | [5] | | GAAP Net Loss | $(7.0) | $(9.3) | Improved | [5] | | GAAP Net Loss Per Share | $(0.10) | $(0.14) | Improved | [5] | | Non-GAAP Net Loss | $(0.8) | $(3.7) | Improved | [5] | | Non-GAAP Net Loss Per Share | $(0.01) | $(0.06) | Improved | [5] | | Net Cash from Operating Activities | $3.7 | $(2.8) | Improved | [4, 5] | | Free Cash Flow | $2.9 | $(3.8) | Improved | [4, 6] | [Full Year 2023 Financial Highlights](index=2&type=section&id=Full%20Year%202023%20Financial%20Highlights) For fiscal year 2023, Weave's total revenue grew 19.9% to $170.5 million, achieving positive cash flow from operations of $10.2 million and free cash flow of $6.5 million, a significant turnaround from 2022's negative figures, with substantially narrowed GAAP and non-GAAP operating and net losses Key Financial Highlights for Full Year 2023 | Metric | FY 2023 (million USD) | FY 2022 (million USD) | Y-o-Y Change | Source Chunk | | :--------------------------------- | :---------- | :---------- | :--------- | :---- | | Total Revenue | $170.5 | $142.1 | +19.9% | [4, 9] | | GAAP Operating Loss | $(34.4) | $(49.7) | Improved | [9] | | Non-GAAP Operating Loss | $(11.5) | $(31.0) | Improved | [9] | | GAAP Net Loss | $(31.0) | $(49.7) | Improved | [9] | | GAAP Net Loss Per Share | $(0.46) | $(0.76) | Improved | [9] | | Non-GAAP Net Loss | $(8.2) | $(31.0) | Improved | [9] | | Non-GAAP Net Loss Per Share | $(0.12) | $(0.48) | Improved | [9] | | Net Cash from Operating Activities | $10.2 | $(12.8) | Improved | [4, 9] | | Free Cash Flow | $6.5 | $(15.9) | Improved | [4, 9] | [Recent Business Highlights](index=2&type=section&id=Recent%20Business%20Highlights) As of December 31, 2023, Weave reported a Dollar-Based Net Revenue Retention (NRR) of 95% and Dollar-Based Gross Revenue Retention (GRR) of 92%, adding 3,809 new customer locations for a total of 31,002, while appointing David McNeil as Chief Revenue Officer, enhancing the platform with ACH debit and payment plans, and receiving multiple industry recognitions Key Business Metrics (as of December 31, 2023) | Metric | Value | Source Chunk | | :--------------------------------- | :------ | :---- | | Dollar-Based Net Revenue Retention (NRR) | 95% | [9] | | Dollar-Based Gross Revenue Retention (GRR) | 92% | [9] | | Cash and Cash Equivalents plus Short-Term Investments | $108.8M | [9] | | New Customer Locations in 2023 | 3,809 | [9] | | Total Customer Locations as of Dec 31, 2023 | 31,002 | [9] | - David McNeil appointed Chief Revenue Officer, bringing over **25 years of SaaS business scaling experience**[9](index=9&type=chunk) - Platform enhanced with **ACH debit and payment plans**, improving transaction security, reducing costs for healthcare providers, and offering flexible payment options for patients[9](index=9&type=chunk) - Recognized by G2 as a leading platform in patient relationship management, ranking **first in 27 different categories**, and named a 'Best Workplace' for the **fifth consecutive year**[9](index=9&type=chunk) [Financial Outlook for Q1 and Full Year 2024](index=3&type=section&id=Financial%20Outlook%20for%20Q1%20and%20Full%20Year%202024) Weave projects total revenue for Q1 2024 to be between $45.2 million and $46.2 million, and for the full year 2024 between $194.0 million and $198.0 million, with non-GAAP operating loss expected to be between $(2.5) million and $(1.5) million for Q1, and between $(6.0) million and $(2.0) million for the full year Financial Guidance for Q1 and Full Year 2024 | Metric | Q1 2024 (million USD) | FY 2024 (million USD) | Source Chunk | | :-------------------------- | :-------------------- | :--------------------------- | :---- | | Total Revenue | $45.2 - $46.2 | $194.0 - $198.0 | [10] | | Non-GAAP Operating Loss | $(2.5) - $(1.5) | $(6.0) - $(2.0) | [10] | | Weighted Average Shares Outstanding | 70.5 | 71.7 | [10] | - Non-GAAP operating loss guidance excludes stock-based compensation expenses, which are difficult to predict and subject to change[11](index=11&type=chunk) [Supplemental Information and Non-GAAP Financial Measures](index=3&type=section&id=Supplemental%20Information%20and%20Non-GAAP%20Financial%20Measures) [About Weave](index=3&type=section&id=About%20Weave) Weave is an all-in-one customer experience and payments software platform designed for small and medium-sized healthcare practices, connecting the entire patient journey from first call to final invoice, helping local healthcare professionals attract, communicate with, and engage patients to grow their businesses - Weave provides an **all-in-one customer experience and payments software platform** serving small and medium-sized healthcare practices[13](index=13&type=chunk) - The platform connects the entire patient journey, helping healthcare professionals **attract, communicate with, and engage patients** to grow their businesses[13](index=13&type=chunk) [Forward-Looking Statements Disclaimer](index=3&type=section&id=Forward-Looking%20Statements%20Disclaimer) This press release contains forward-looking statements, including financial estimates for Q1 and full year 2024, which are subject to risks and uncertainties such as the ability to attract and retain customers, manage growth, economic conditions, competition, and platform enhancements, potentially causing actual results to differ materially, and the company undertakes no obligation to update these statements - This press release contains forward-looking statements, including estimates for **Q1 and full year 2024 revenue and non-GAAP operating loss**[14](index=14&type=chunk) - These statements involve risks and uncertainties, such as the ability to **attract and retain customers, manage growth, economic conditions, competition, and platform enhancements**, which may cause actual results to differ materially from forward-looking statements[15](index=15&type=chunk)[16](index=16&type=chunk) - The company undertakes no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of publication[17](index=17&type=chunk) [Channels for Disclosure of Information](index=4&type=section&id=Channels%20for%20Disclosure%20of%20Information) Weave Communications fulfills its Regulation FD disclosure obligations through its investor relations website, blog posts, press releases, public conference calls, webcasts, and social media platforms (X/Twitter, Facebook, LinkedIn), encouraging investors and media to monitor these channels for information - Weave fulfills Regulation FD disclosure obligations via its **investor relations website, blog, press releases, public conference calls, webcasts, and social media (X, Facebook, LinkedIn)**[18](index=18&type=chunk) [Supplemental Financial Definitions](index=4&type=section&id=Supplemental%20Financial%20Definitions) This section provides definitions for Weave's key supplemental financial metrics, including Dollar-Based Net Revenue Retention (NRR), Dollar-Based Gross Revenue Retention (GRR), and Number of Locations, which help investors understand the company's customer growth and retention [Dollar-Based Net Revenue Retention (NRR)](index=4&type=section&id=Dollar-Based%20Net%20Revenue%20Retention%20(NRR)) NRR is calculated by dividing the adjusted monthly revenue (AMR) of a base group of active customer locations in the same month of the following year (Comparison Month) by their AMR in the Base Month, with annual NRR being the weighted average of monthly net retention rates over the past twelve months, and AMR including subscription revenue and the average recurring payment revenue over the past three months - NRR is calculated by comparing the **adjusted monthly revenue (AMR)** of a base group of active customer locations in the same month of the following year to their AMR in the base month[19](index=19&type=chunk) - AMR includes **subscription revenue** and the **average recurring payment revenue** over the past three months[19](index=19&type=chunk) [Dollar-Based Gross Revenue Retention (GRR)](index=4&type=section&id=Dollar-Based%20Gross%20Revenue%20Retention%20(GRR)) GRR measures the retained revenue from a base group of subscribed customer locations from a Base Month by calculating their remaining AMR twelve months after the Base Month and dividing it by the Base Month's AMR, reflecting revenue reduction due to customer churn but excluding changes from revenue expansion, contraction, or new customer locations - GRR is calculated by comparing the **remaining adjusted monthly revenue (AMR)** of a base group of subscribed customer locations twelve months after the base month to their AMR in the base month[20](index=20&type=chunk) - GRR reflects revenue reduction due to **customer churn**, but excludes changes from revenue expansion, contraction, or new customer locations[20](index=20&type=chunk) [Number of Locations](index=4&type=section&id=Number%20of%20Locations) The number of customer locations refers to the total active subscribed customer locations on the Weave platform at the end of each month, where a single organization with multiple departments, branches, or subsidiaries, each with a separate subscription, is counted as multiple locations, and this information is only provided in annual and Q4 performance reports - 'Number of Locations' refers to the **total active subscribed customer locations** on the Weave platform at the end of each month[21](index=21&type=chunk) - A single organization with multiple subscribed departments or offices is counted as **multiple locations**[21](index=21&type=chunk) - Customer location information is provided only in **annual and Q4 performance reports**[22](index=22&type=chunk) [Non-GAAP Financial Measures Definitions and Limitations](index=5&type=section&id=Non-GAAP%20Financial%20Measures%20Definitions%20and%20Limitations) Weave utilizes several non-GAAP financial measures, such as non-GAAP net loss, gross profit, operating expenses, operating loss, Adjusted EBITDA, and free cash flow, to analyze financial performance and evaluate operational results, providing additional investor insight despite inherent limitations that necessitate they not be viewed in isolation or as substitutes for GAAP reported results - Weave uses non-GAAP financial measures (e.g., **non-GAAP net loss, gross profit, operating expenses, operating loss, Adjusted EBITDA, and free cash flow**) to analyze financial performance and evaluate operational results[23](index=23&type=chunk) - These non-GAAP metrics have limitations and should not be viewed in isolation or as substitutes for GAAP financial results[23](index=23&type=chunk) [Non-GAAP Net Loss, Margin, and Per Share](index=5&type=section&id=Non-GAAP%20Net%20Loss,%20Margin,%20and%20Per%20Share) Non-GAAP net loss is defined as GAAP net loss adjusted to exclude stock-based compensation expense, with non-GAAP net loss margin being the percentage of non-GAAP net loss to revenue, and non-GAAP net loss per share calculated by dividing non-GAAP net loss by the diluted weighted-average shares outstanding - Non-GAAP net loss is the result of **GAAP net loss excluding stock-based compensation expense**[24](index=24&type=chunk) - Non-GAAP net loss margin is the percentage of non-GAAP net loss to revenue, and non-GAAP net loss per share is calculated by dividing non-GAAP net loss by the **diluted weighted-average shares outstanding**[24](index=24&type=chunk) [Non-GAAP Gross Profit and Margin](index=5&type=section&id=Non-GAAP%20Gross%20Profit%20and%20Margin) Non-GAAP gross profit is defined as GAAP gross profit adjusted to exclude stock-based compensation expense, with non-GAAP gross margin calculated as the percentage of non-GAAP gross profit to revenue - Non-GAAP gross profit is the result of **GAAP gross profit excluding stock-based compensation expense**[25](index=25&type=chunk) - Non-GAAP gross margin is the percentage of **non-GAAP gross profit to revenue**[25](index=25&type=chunk) [Non-GAAP Operating Expenses](index=5&type=section&id=Non-GAAP%20Operating%20Expenses) Non-GAAP operating expenses, whether in total or by component (i.e., sales and marketing, research and development, or general and administrative), are defined as the corresponding GAAP operating expenses adjusted to exclude applicable stock-based compensation expense - Non-GAAP operating expenses (sales and marketing, R&D, general and administrative) are the corresponding GAAP operating expenses excluding **applicable stock-based compensation expense**[26](index=26&type=chunk) [Non-GAAP Loss from Operations and Margin](index=5&type=section&id=Non-GAAP%20Loss%20from%20Operations%20and%20Margin) Non-GAAP loss from operations is defined as GAAP loss from operations less stock-based compensation expense, with the non-GAAP loss from operations margin being this non-GAAP figure as a percentage of revenue - Non-GAAP loss from operations is the result of **GAAP loss from operations less stock-based compensation expense**[27](index=27&type=chunk) - Non-GAAP loss from operations margin is the percentage of **non-GAAP loss from operations to revenue**[27](index=27&type=chunk) [Adjusted EBITDA](index=5&type=section&id=Adjusted%20EBITDA) Adjusted EBITDA is defined as earnings before interest expense, interest income, other income/expense, provision for income taxes, depreciation, and amortization, further excluding stock-based compensation expense, and is used by management and investors to measure financial and operational performance and for budgeting, providing consistency and comparability with past financial results - Adjusted EBITDA is earnings before **interest, taxes, depreciation, amortization, and stock-based compensation expense**[28](index=28&type=chunk)[29](index=29&type=chunk) - This metric provides management and investors with **consistency and comparability** in financial performance, and is used for measuring operational performance and budgeting[29](index=29&type=chunk) [Free Cash Flow](index=6&type=section&id=Free%20Cash%20Flow) Free cash flow is calculated as net cash provided by (or used in) operating activities, less purchases of property and equipment and capitalized internal-use software costs, serving as a useful liquidity measure that, even when negative, provides information about the amount of cash consumed by operating and investing activities - Free cash flow is **net cash from operating activities** less purchases of property and equipment and capitalized internal-use software costs[30](index=30&type=chunk) - It is a useful liquidity metric, providing information on cash consumed by operating and investing activities, even when negative[30](index=30&type=chunk) [Limitations of Non-GAAP Financial Measures](index=6&type=section&id=Limitations%20of%20Non-GAAP%20Financial%20Measures) Non-GAAP financial measures have several limitations, including potential incomparability with other companies' calculations; specifically, free cash flow does not reflect future contractual commitments or total increases/decreases in cash balances, while Adjusted EBITDA excludes non-cash stock-based compensation expense and working capital needs, all of which may reduce their analytical usefulness - Non-GAAP financial information may differ from other companies' calculations, leading to **incomparability**[31](index=31&type=chunk) - Free cash flow does not reflect **future contractual commitments** or total increases/decreases in cash balances[31](index=31&type=chunk) - Adjusted EBITDA excludes **non-cash stock-based compensation expense** and working capital needs, potentially reducing its analytical usefulness[31](index=31&type=chunk) [Condensed Consolidated Financial Statements (GAAP)](index=7&type=section&id=Condensed%20Consolidated%20Financial%20Statements%20(GAAP)) [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of December 31, 2023, Weave's total assets were $201.0 million, down from $208.3 million in 2022, with total liabilities also decreasing from $125.1 million to $122.1 million, and total stockholders' equity at $79.0 million, lower than the previous year's $83.2 million Condensed Consolidated Balance Sheets (Key Data, in thousands USD) | Metric | Dec 31, 2023 (K USD) | Dec 31, 2022 (K USD) | Y-o-Y Change (K USD) | Source Chunk | | :--------------------------------- | :----------- | :----------- | :--------- | :---- | | Total Assets | $201,012 | $208,349 | $(7,337) | [34] | | Total Liabilities | $122,055 | $125,130 | $(3,075) | [34] | | Total Stockholders' Equity | $78,957 | $83,219 | $(4,262) | [34] | | Cash and Cash Equivalents | $50,756 | $61,997 | $(11,241) | [34] | | Short-Term Investments | $58,088 | $51,340 | $6,748 | [34] | | Current Portion of Long-Term Debt | $0 | $10,000 | $(10,000) | [34] | [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For fiscal year 2023, Weave's revenue increased to $170.5 million from $142.1 million in 2022, with gross profit rising from $88.8 million to $116.1 million, and the company significantly narrowed its GAAP operating loss to $(34.4) million from $(49.7) million, and net loss improved from $(49.7) million to $(31.0) million Condensed Consolidated Statements of Operations (Key Data, in thousands USD) | Metric | FY 2023 (K USD) | FY 2022 (K USD) | Y-o-Y Change | Q4 2023 (K USD) | Q4 2022 (K USD) | Q4 Y-o-Y Change | Source Chunk | | :--------------------------------- | :---------- | :---------- | :--------- | :---------- | :---------- | :------------ | :---- | | Revenue | $170,468 | $142,117 | +19.9% | $45,692 | $37,685 | +21.2% | [36] | | Cost of Revenue | $54,377 | $53,276 | +2.1% | $14,111 | $12,751 | +10.7% | [36] | | Gross Profit | $116,091 | $88,841 | +30.7% | $31,581 | $24,934 | +26.7% | [36] | | Total Operating Expenses | $150,457 | $138,545 | +8.6% | $39,574 | $34,679 | +14.1% | [36] | | Loss from Operations | $(34,366) | $(49,704) | Improved | $(7,993) | $(9,745) | Improved | [36] | | Net Loss | $(31,031) | $(49,738) | Improved | $(7,039) | $(9,266) | Improved | [36] | | Net Loss Per Share | $(0.46) | $(0.76) | Improved | $(0.10) | $(0.14) | Improved | [36] | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) In fiscal year 2023, Weave's cash flow from operating activities turned positive at $10.2 million, a significant improvement from negative $12.8 million in 2022, while net cash used in investing activities decreased to $(7.7) million, primarily due to changes in short-term investments, and net cash used in financing activities increased to $(13.7) million Condensed Consolidated Statements of Cash Flows (Key Data, in thousands USD) | Metric | FY 2023 (K USD) | FY 2022 (K USD) | Y-o-Y Change | Q4 2023 (K USD) | Q4 2022 (K USD) | Q4 Y-o-Y Change | Source Chunk | | :--------------------------------- | :---------- | :---------- | :--------- | :---------- | :---------- | :------------ | :---- | | Net Cash from Operating Activities | $10,221 | $(12,766) | Improved | $3,742 | $(2,841) | Improved | [39] | | Net Cash from Investing Activities | $(7,739) | $(54,026) | Improved | $(3,021) | $(51,841) | Improved | [39] | | Net Cash from Financing Activities | $(13,723) | $(7,207) | Increased | $(13,256) | $(1,679) | Increased | [39] | | Net Increase (Decrease) in Cash and Cash Equivalents | $(11,241) | $(73,999) | Improved | $(12,535) | $(56,361) | Improved | [39] | | Cash and Cash Equivalents, End of Period | $50,756 | $61,997 | $(11,241) | $50,756 | $61,997 | $(11,241) | [39] | [Disaggregated Revenue and Cost of Revenue (GAAP)](index=10&type=section&id=Disaggregated%20Revenue%20and%20Cost%20of%20Revenue%20(GAAP)) Weave's primary revenue source, 'Subscription and Payment Processing,' saw significant growth in 2023, with revenue increasing from $136.6 million (74% gross margin) in 2022 to $162.7 million (77% gross margin), while 'Onboarding' and 'Hardware' segments remained at negative gross margins but showed improvement in 2023 compared to 2022 Disaggregated Revenue and Cost of Revenue (GAAP, in thousands USD) | Business Segment | Metric | FY 2023 (K USD) | FY 2022 (K USD) | Y-o-Y Change | Q4 2023 (K USD) | Q4 2022 (K USD) | Q4 Y-o-Y Change | Source Chunk | | :--------------------------------- | :---------- | :---------- | :--------- | :---------- | :---------- | :------------ | :---- | | **Subscription and Payment Processing** | Revenue | $162,715 | $136,592 | +19.1% | $43,726 | $36,163 | +20.9% | [41] | | | Gross Profit | $124,521 | $101,584 | +22.6% | $33,505 | $27,530 | +21.7% | [41] | | | Gross Margin | 77% | 74% | +3 pp | 77% | 76% | +1 pp | [41] | | **Onboarding** | Revenue | $3,232 | $1,288 | +150.9% | $824 | $428 | +92.5% | [41] | | | Gross Profit | $(5,478) | $(8,324) | Improved | $(1,198) | $(1,665) | Improved | [41] | | | Gross Margin | (169)% | (646)% | Improved | (145)% | (389)% | Improved | [41] | | **Hardware** | Revenue | $4,521 | $4,237 | +6.7% | $1,142 | $1,094 | +4.4% | [41] | | | Gross Profit | $(2,952) | $(4,419) | Improved | $(726) | $(931) | Improved | [41] | | | Gross Margin | (65)% | (104)% | Improved | (64)% | (85)% | Improved | [41] | [Reconciliation of GAAP to Non-GAAP Financial Measures](index=11&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Financial%20Measures) [Non-GAAP Gross Profit Reconciliation](index=11&type=section&id=Non-GAAP%20Gross%20Profit%20Reconciliation) For fiscal year 2023, non-GAAP gross profit was $117.1 million, up from $89.6 million in 2022, with non-GAAP gross margin at 69%, an increase from 63% in 2022, primarily achieved by adding back stock-based compensation expense Non-GAAP Gross Profit Reconciliation (in thousands USD) | Metric | FY 2023 (K USD) | FY 2022 (K USD) | Y-o-Y Change | Q4 2023 (K USD) | Q4 2022 (K USD) | Q4 Y-o-Y Change | Source Chunk | | :--------------------------------- | :---------- | :---------- | :--------- | :---------- | :---------- | :------------ | :---- | | GAAP Gross Profit | $116,091 | $88,841 | +30.7% | $31,581 | $24,934 | +26.7% | [44] | | Stock-Based Compensation Expense Add-back | $971 | $723 | +34.3% | $249 | $209 | +19.1% | [44] | | Non-GAAP Gross Profit | $117,062 | $89,564 | +30.7% | $31,830 | $25,143 | +26.6% | [44] | | GAAP Gross Margin | 68% | 63% | +5 pp | 69% | 66% | +3 pp | [44] | | Non-GAAP Gross Margin | 69% | 63% | +6 pp | 70% | 67% | +3 pp | [44] | [Non-GAAP Operating Expenses Reconciliation](index=11&type=section&id=Non-GAAP%20Operating%20Expenses%20Reconciliation) In fiscal year 2023, non-GAAP sales and marketing expenses were $66.5 million, non-GAAP R&D expenses were $28.5 million, and non-GAAP general and administrative expenses were $33.6 million, with all non-GAAP operating expense categories showing year-over-year growth, albeit at a lower rate than GAAP figures due to the exclusion of stock-based compensation expense Non-GAAP Operating Expenses Reconciliation (in thousands USD) | Metric | FY 2023 (K USD) | FY 2022 (K USD) | Y-o-Y Change | Q4 2023 (K USD) | Q4 2022 (K USD) | Q4 Y-o-Y Change | Source Chunk | | :--------------------------------- | :---------- | :---------- | :--------- | :---------- | :---------- | :------------ | :---- | | **Sales and Marketing** | | | | | | | | | GAAP | $70,765 | $65,378 | +8.2% | $18,291 | $16,118 | +13.5% | [45] | | Stock-Based Compensation Expense Exclude | $(4,233) | $(3,436) | +23.2% | $(776) | $(1,105) | -29.8% | [45] | | Non-GAAP | $66,532 | $61,942 | +7.4% | $17,515 | $15,013 | +16.7% | [45] | | **Research and Development** | | | | | | | | | GAAP | $34,040 | $30,714 | +10.8% | $9,133 | $8,185 | +11.6% | [45] | | Stock-Based Compensation Expense Exclude | $(5,590) | $(4,576) | +22.1% | $(1,863) | $(1,654) | +12.6% | [45] | | Non-GAAP | $28,450 | $26,138 | +8.8% | $7,270 | $6,531 | +11.3% | [45] | | **General and Administrative** | | | | | | | | | GAAP | $45,652 | $42,453 | +7.5% | $12,150 | $10,376 | +17.1% | [45] | | Stock-Based Compensation Expense Exclude | $(12,029) | $(10,017) | +20.1% | $(3,359) | $(2,557) | +31.4% | [45] | | Non-GAAP | $33,623 | $32,436 | +3.7% | $8,791 | $7,819 | +12.4% | [45] | [Non-GAAP Loss from Operations Reconciliation](index=12&type=section&id=Non-GAAP%20Loss%20from%20Operations%20Reconciliation) For fiscal year 2023, non-GAAP loss from operations significantly improved to $(11.5) million, down from $(31.0) million in 2022, with the non-GAAP operating loss margin also improving from (22)% to (7)%, primarily due to the exclusion of stock-based compensation expense Non-GAAP Loss from Operations Reconciliation (in thousands USD) | Metric | FY 2023 (K USD) | FY 2022 (K USD) | Y-o-Y Change | Q4 2023 (K USD) | Q4 2022 (K USD) | Q4 Y-o-Y Change | Source Chunk | | :--------------------------------- | :---------- | :---------- | :--------- | :---------- | :---------- | :------------ | :---- | | GAAP Loss from Operations | $(34,366) | $(49,704) | Improved | $(7,993) | $(9,745) | Improved | [47] | | Stock-Based Compensation Expense Add-back | $22,823 | $18,752 | +21.7% | $6,247 | $5,525 | +13.1% | [47] | | Non-GAAP Loss from Operations | $(11,543) | $(30,952) | Improved | $(1,746) | $(4,220) | Improved | [47] | | GAAP Operating Loss Margin | (20)% | (35)% | Improved | (17)% | (26)% | Improved | [47] | | Non-GAAP Operating Loss Margin | (7)% | (22)% | Improved | (4)% | (11)% | Improved | [47] | [Non-GAAP Net Loss Reconciliation](index=12&type=section&id=Non-GAAP%20Net%20Loss%20Reconciliation) For fiscal year 2023, non-GAAP net loss significantly improved to $(8.2) million, down from $(31.0) million in 2022, with non-GAAP net loss per share also improving from $(0.48) to $(0.12), reflecting the exclusion of stock-based compensation expense Non-GAAP Net Loss Reconciliation (in thousands USD, except per share data) | Metric | FY 2023 (K USD) | FY 2022 (K USD) | Y-o-Y Change | Q4 2023 (K USD) | Q4 2022 (K USD) | Q4 Y-o-Y Change | Source Chunk | | :--------------------------------- | :---------- | :---------- | :--------- | :---------- | :---------- | :------------ | :---- | | GAAP Net Loss | $(31,031) | $(49,738) | Improved | $(7,039) | $(9,266) | Improved | [48] | | Stock-Based Compensation Expense Add-back | $22,823 | $18,752 | +21.7% | $6,247 | $5,525 | +13.1% | [48] | | Non-GAAP Net Loss | $(8,208) | $(30,986) | Improved | $(792) | $(3,741) | Improved | [48] | | GAAP Net Loss Per Share | $(0.46) | $(0.76) | Improved | $(0.10) | $(0.14) | Improved | [48] | | Non-GAAP Net Loss Per Share | $(0.12) | $(0.48) | Improved | $(0.01) | $(0.06) | Improved | [48] | [Free Cash Flow Reconciliation](index=13&type=section&id=Free%20Cash%20Flow%20Reconciliation) In fiscal year 2023, Weave achieved positive free cash flow of $6.5 million, a substantial improvement from negative $15.9 million in 2022, primarily driven by the turnaround in cash flow from operating activities and effective capital expenditure management Free Cash Flow Reconciliation (in thousands USD) | Metric | FY 2023 (K USD) | FY 2022 (K USD) | Y-o-Y Change | Q4 2023 (K USD) | Q4 2022 (K USD) | Q4 Y-o-Y Change | Source Chunk | | :--------------------------------- | :---------- | :---------- | :--------- | :---------- | :---------- | :------------ | :---- | | Net Cash from Operating Activities | $10,221 | $(12,766) | Improved | $3,742 | $(2,841) | Improved | [50] | | Less: Purchases of Property and Equipment | $(1,691) | $(1,895) | Improved | $(178) | $(704) | Improved | [50] | | Less: Capitalized Internal-Use Software Costs | $(1,999) | $(1,232) | Increased | $(629) | $(229) | Increased | [50] | | Free Cash Flow | $6,531 | $(15,893) | Improved | $2,935 | $(3,774) | Improved | [50] | [Adjusted EBITDA Reconciliation](index=13&type=section&id=Adjusted%20EBITDA%20Reconciliation) For fiscal year 2023, Adjusted EBITDA significantly improved to $(7.8) million, down from $(27.2) million in 2022, which reflects enhanced operational performance and the exclusion of non-cash expenses like stock-based compensation Adjusted EBITDA Reconciliation (in thousands USD) | Metric | FY 2023 (K USD) | FY 2022 (K USD) | Y-o-Y Change | Q4 2023 (K USD) | Q4 2022 (K USD) | Q4 Y-o-Y Change | Source Chunk | | :--------------------------------- | :---------- | :---------- | :--------- | :---------- | :---------- | :------------ | :---- | | Net Loss | $(31,031) | $(49,738) | Improved | $(7,039) | $(9,266) | Improved | [51] | | Interest Expense | $1,923 | $1,441 | +33.4% | $438 | $436 | +0.5% | [51] | | Provision for Income Taxes | $260 | $104 | +150.0% | $112 | $22 | +409.1% | [51] | | Interest Income | $(2,196) | $(1,155) | +90.1% | $(639) | $(549) | +16.4% | [51] | | Other Income/Expense, Net | $(3,322) | $(356) | +833.1% | $(865) | $(388) | +122.9% | [51] | | Depreciation | $2,441 | $2,609 | -6.5% | $625 | $606 | +3.1% | [51] | | Amortization | $1,256 | $1,140 | +10.2% | $332 | $289 | +14.9% | [51] | | Stock-Based Compensation Expense | $22,823 | $18,752 | +21.7% | $6,247 | $5,525 | +13.1% | [51] | | Adjusted EBITDA | $(7,846) | $(27,203) | Improved | $(789) | $(3,325) | Improved | [51] | [Investor and Media Information](index=3&type=section&id=Investor%20and%20Media%20Information) [Webcast Details](index=3&type=section&id=Webcast%20Details) Weave held a conference call and webcast for analysts and investors on February 21, 2024, at 4:30 PM ET, with a replay available on its investor relations website - The conference call and webcast were held on **February 21, 2024, at 4:30 PM ET**[12](index=12&type=chunk) - A replay of the webcast is available on Weave's investor relations page at **investors.getweave.com**[12](index=12&type=chunk) [Contact Information](index=6&type=section&id=Contact%20Information) Investor Relations contact is Mark McReynolds (ir@getweave.com), and Media Relations contact is Natalie House (pr@getweave.com) - Investor Relations contact: **Mark McReynolds (ir@getweave.com)**[32](index=32&type=chunk) - Media Relations contact: **Natalie House (pr@getweave.com)**[32](index=32&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________ FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number: 001-40998 Weave Communications, Inc. (Exact name of registrant as specified in its charter) (State or ...

Financial Data and Key Metrics Changes - Revenue for Q3 2023 was $43.5 million, representing a 20.2% year-over-year growth, exceeding the top end of revenue guidance for the seventh consecutive quarter [6][16] - Gross margin improved to 69.3%, a 470-basis-point increase from the previous year [7][18] - Operating loss margin reduced to 4.2%, significantly improved from 18% a year ago [20][21] - Free cash flow was $2.1 million, with a free cash flow margin of 4.8%, compared to negative $4.6 million in Q3 2022 [23] Business Line Data and Key Metrics Changes - Continued strong demand from digital channels and in-person events, with increased capacity in the sales team [7] - The company saw growth in customer base, reaching over 30,000 active locations, indicating strong customer acquisition and retention [12] - The average revenue per location (ARPU) is trending up, particularly with the highest bundle, Weave Elite, being the majority of sales [28] Market Data and Key Metrics Changes - The net revenue retention (NRR) rate was 95% in Q3, with improvements noted in monthly metrics [17] - Gross revenue retention rate remained at 92%, indicating strong customer loyalty [17] Company Strategy and Development Direction - The company is focused on enhancing its vertically tailored software platform to meet the needs of small and medium-sized healthcare businesses [5] - A new partnership with Henry Schein One will enhance integration with their cloud-based practice management software, Dentrix Ascend, targeting multi-location practices [9][38] - The company is committed to balancing growth with a path towards profitability, aiming for a long-term gross margin of 75% [39] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the continued demand for their platform and the effectiveness of their sales strategies [32] - The outlook for Q4 2023 anticipates revenue in the range of $43.5 million to $44.5 million, with a non-GAAP operating loss expected between $3 million to $2 million [25] - Management noted that the transition from a third-party digital forms product to an in-house solution is expected to stabilize NRR metrics in the coming year [34] Other Important Information - The company has been recognized as a leader in G2's fall 2023 report, ranking first in 34 categories, reflecting strong customer satisfaction [12] - A personnel change was announced with the Chief Revenue Officer leaving, and the VP of Sales will assume the interim role [14] Q&A Session Summary Question: Initial purchasing patterns for new bundles - Management confirmed that the majority of sales are from the highest bundle, Weave Elite, which has helped maintain ARPU [28] Question: Q4 revenue guidance and macro concerns - Management clarified that the Q4 guidance reflects a consistent methodology and does not indicate any seasonal or macroeconomic concerns [32] Question: Stabilization of NRR post-transition - Management indicated that NRR will stabilize sometime next year as the impact of the transition diminishes [34] Question: Go-to-market strategy for multi-location businesses - A separate sales team is dedicated to multi-location businesses, which have a longer sales cycle, and product enhancements are being rolled out [38] Question: Sales force productivity and ramp-up - Management reported significant improvements in sales force efficiency, with new sales reps ramping up faster than before [41] Question: Market size for Dentrix Ascend integration - The potential market includes around 100,000 locations, with a focus on long-term opportunities as legacy customers transition to cloud solutions [43] Question: Adoption of payment products - Approximately 20% to 25% of new customers are signing up for payment solutions at the point of sale, with efforts to enhance adoption [46]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________ or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number: 001-40998 Weave Communications, Inc. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) Delaware 26-3302902 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITI ...

[PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents Weave Communications, Inc.'s unaudited condensed consolidated financial statements and detailed notes for Q1 2023 [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Weave Communications, Inc.'s unaudited condensed consolidated financial statements and detailed notes for Q1 2023 [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a slight decrease in total assets and stockholders' equity, with a minor increase in liabilities | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (vs Dec 31, 2022) | | :-------------------------- | :----------------------------- | :----------------------------- | :----------------------- | | Total Assets | $206,018 | $208,349 | $(2,331) | | Total Liabilities | $126,219 | $125,130 | $1,089 | | Total Stockholders' Equity | $79,799 | $83,219 | $(3,420) | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The statement of operations shows significant revenue growth and improved gross profit, leading to a reduced net loss | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (YoY) | | :------------------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | :------------------- | | Revenue | $39,565 | $33,272 | +19.0% | | Cost of revenue | $13,031 | $13,753 | -5.2% | | Gross profit | $26,534 | $19,519 | +36.0% | | Loss from operations | $(8,518) | $(13,509) | -36.9% | | Net loss | $(7,859) | $(13,838) | -43.2% | | Net loss per share (basic and diluted) | $(0.12) | $(0.21) | -42.9% | [Condensed Consolidated Statements of Comprehensive Loss](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) The statement details the net loss and other comprehensive income/loss components, resulting in a reduced total comprehensive loss | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (YoY) | | :------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | :------------------- | | Net loss | $(7,859) | $(13,838) | -43.2% | | Change in foreign currency translation, net of tax | $(34) | $54 | N/A | | Net unrealized gains on investments, net of tax | $18 | $0 | N/A | | Total comprehensive loss | $(7,875) | $(13,784) | -42.9% | [Condensed Consolidated Statements of Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity decreased due to net loss, partially offset by stock-based compensation increasing additional paid-in capital | Metric | Balance Dec 31, 2022 (in thousands) | Balance March 31, 2023 (in thousands) | | :------------------------------------ | :------------------------------------ | :------------------------------------ | | Additional Paid-in Capital | $314,884 | $319,339 | | Accumulated Deficit | $(231,636) | $(239,495) | | Accumulated Other Comprehensive Loss | $(29) | $(45) | | Total Stockholders' Equity | $83,219 | $79,799 | - Stock-based compensation contributed **$4.513 million** to additional paid-in capital for the three months ended March 31, 2023[22](index=22&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash flows show improved operating activities, increased investing outflows, and a net decrease in cash and equivalents | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (YoY) | | :------------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | :------------------- | | Net cash provided by (used in) operating activities | $1,541 | $(4,171) | +$5,712 | | Net cash used in investing activities | $(5,439) | $(908) | $(4,531) | | Net cash used in financing activities | $(2,018) | $(2,017) | $(1) | | Net decrease in cash and cash equivalents | $(5,916) | $(7,096) | +$1,180 | | Cash and cash equivalents, end of period | $56,081 | $128,900 | $(72,819) | [Notes to the Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of the company's business, accounting policies, and specific financial statement items [1. Description of the Business](index=12&type=section&id=1.%20Description%20of%20the%20Business) Weave Communications, Inc. provides an integrated communications platform with software and VoIP services for SMBs - Weave Communications, Inc. sells subscriptions for its integrated communications platform, combining software communication and analysis tools with Voice over Internet Protocol ("VoIP") phone services[28](index=28&type=chunk) [2. Basis of Presentation and Summary of Significant Accounting Policies](index=12&type=section&id=2.%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines the company's single operating segment, significant accounting estimates, and recent accounting policy adoptions - The Company operates as one operating and reportable segment, with the chief operating decision maker evaluating financial information on a consolidated basis[31](index=31&type=chunk) - Significant estimates in the financial statements include valuation allowance against deferred tax assets, allowance for credit losses, recoverability of long-lived assets, fair value of stock-based compensation, and amortization period of deferred contract costs[32](index=32&type=chunk) - The Company adopted Topic 326 (Credit Losses) as of January 1, 2023, which did not materially impact the unaudited condensed consolidated financial statements[54](index=54&type=chunk) [3. Revenue](index=16&type=section&id=3.%20Revenue) Revenue is primarily from subscriptions and payment processing, with detailed breakdown and deferred revenue recognition | Revenue Category | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (YoY) | | :----------------------------- | :----------------------------------------------- | :----------------------------------------------- | :------------------- | | Subscription and payment processing | $37,692 | $31,950 | +17.97% | | Onboarding | $784 | $262 | +199.24% | | Hardware (embedded lease) | $1,089 | $1,060 | +2.74% | | Total revenue | $39,565 | $33,272 | +19.06% | - The Company recognized **$16.7 million** in revenue from deferred revenue balances in Q1 2023, up from **$15.1 million** in Q1 2022[57](index=57&type=chunk) - Amortization expense for deferred contract costs was **$3.0 million** for the three months ended March 31, 2023, compared to **$2.6 million** for the same period in 2022[58](index=58&type=chunk) [4. Fair Value Measurements](index=17&type=section&id=4.%20Fair%20Value%20Measurements) This section details the fair value of cash equivalents and short-term investments, primarily money market and government securities | Asset Category | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----------------------------- | :----------------------------- | :----------------------------- | | Cash equivalents (Money market funds) | $46,257 | $41,213 | | Short-term investments (US government and agency securities) | $36,382 | $36,607 | | Short-term investments (Commercial paper) | $20,147 | $14,733 | | Total Fair Value | $102,786 | $101,533 | - As of March 31, 2023, the weighted-average remaining contractual maturities of available-for-sale securities was approximately **5 months**[63](index=63&type=chunk) [5. Property and Equipment](index=19&type=section&id=5.%20Property%20and%20Equipment) Property and equipment, net, saw a slight decrease, with details on depreciation and amortization expenses | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change | | :-------------------------- | :----------------------------- | :----------------------------- | :------- | | Property and equipment, net | $10,621 | $10,773 | $(152) | - Depreciation and amortization expense on property and equipment was **$3.0 million** for Q1 2023, down from **$3.4 million** in Q1 2022[67](index=67&type=chunk) - **$1.9 million** of the depreciation and amortization expense in Q1 2023 was related to phone hardware finance ROU assets and data center equipment, included in cost of revenue[67](index=67&type=chunk) [6. Accrued Liabilities](index=19&type=section&id=6.%20Accrued%20Liabilities) Accrued liabilities, primarily payroll-related, increased slightly from December 2022 to March 2023 | Accrued Liability | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change | | :------------------------ | :----------------------------- | :----------------------------- | :------- | | Payroll-related accruals | $10,048 | $8,747 | +$1,301 | | Total Accrued Liabilities | $14,798 | $13,636 | +$1,162 | [7. Leases](index=19&type=section&id=7.%20Leases) This section details lease expenses, cash outflows from finance and operating leases, and weighted-average lease terms | Lease Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (YoY) | | :------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | :------------------- | | Total lease expense | $3,641 | $3,863 | $(222) | | Operating cash outflow from finance leases | $273 | $204 | +$69 | | Financing cash outflow from finance leases | $1,960 | $2,176 | $(216) | | Operating cash outflow from operating leases | $1,385 | $841 | +$544 | | Lease revenues (phone hardware) | $1,089 | $1,060 | +$29 | - As of March 31, 2023, the weighted-average remaining lease term for operating leases was **9.8 years** with a discount rate of **3.9%**, and for finance leases, it was **2.0 years** with a discount rate of **9.1%**[70](index=70&type=chunk) [8. Income Taxes](index=23&type=section&id=8.%20Income%20Taxes) The company reports a provision for income taxes and maintains a full valuation allowance against U.S. deferred tax assets | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :-------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Provision for income taxes | $19.9 | $32.5 | | Effective tax rate | (0.3)% | (0.2)% | - The Company maintains a full valuation allowance against all U.S. deferred tax assets due to historical losses[79](index=79&type=chunk) [9. Current and Long-Term Debt](index=23&type=section&id=9.%20Current%20and%20Long-Term%20Debt) Details on the revolving line of credit with Silicon Valley Bank, including outstanding balance and recent amendments - The Company has a revolving line of credit with Silicon Valley Bank with a total borrowing capacity of up to **$50.0 million**[80](index=80&type=chunk) - As of March 31, 2023, the total outstanding balance on the line of credit was **$10.0 million**, classified as a long-term liability due to the ability and intent to refinance on a long-term basis[80](index=80&type=chunk) - In April 2023, the credit agreement was amended to extend the maturity date from August 2023 to August 2025 and set new EBITDA financial covenants for fiscal year 2023[80](index=80&type=chunk) [10. Stockholders' Equity](index=23&type=section&id=10.%20Stockholders'%20Equity) This section details stock-based compensation expense, unrecognized compensation, and recent RSU grants | Stock-Based Compensation | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (YoY) | | :----------------------------- | :----------------------------------------------- | :----------------------------------------------- | :------------------- | | Total stock-based compensation | $4,513 | $3,425 | +31.8% | - As of March 31, 2023, unrecognized stock-based compensation expense for stock options was **$7.5 million** (weighted-average vesting period of 1.3 years) and for RSUs was **$32.1 million** (weighted-average period of 2.2 years)[87](index=87&type=chunk)[92](index=92&type=chunk) - In April 2023, the Company granted 2,056,200 RSUs with a combined grant date fair value of **$10.2 million**, vesting over three years[105](index=105&type=chunk) [11. Related Party Transactions](index=26&type=section&id=11.%20Related%20Party%20Transactions) No related-party transactions were reported for the three months ended March 31, 2023, and 2022 - There were no related-party transactions during the three months ended March 31, 2023, and 2022[98](index=98&type=chunk) [12. Commitments and Contingencies](index=26&type=section&id=12.%20Commitments%20and%20Contingencies) The company is not involved in material legal proceedings and has standard indemnification arrangements - The Company is not involved in any legal proceedings anticipated to significantly impact its financial condition, results of operations, or liquidity[99](index=99&type=chunk) - The Company enters into standard indemnification arrangements, but the maximum potential future payments are not determinable, and no costs have been incurred to date[100](index=100&type=chunk) [13. Net Loss Per Share](index=26&type=section&id=13.%20Net%20Loss%20Per%20Share) This section provides basic and diluted net loss per share, along with weighted-average common shares outstanding | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net loss per share - basic and diluted | $(0.12) | $(0.21) | | Weighted-average common shares outstanding - basic and diluted | 65,954,521 | 64,583,714 | - 11,563,536 potential common shares were excluded from diluted net loss per share calculation as of March 31, 2023, due to their antidilutive effect[102](index=102&type=chunk) [14. Subsequent Events](index=27&type=section&id=14.%20Subsequent%20Events) Key events after the reporting period include a sublease agreement, credit facility amendment, and RSU grants - The Company entered into a Sublease Agreement commencing April 2023 for office space, expecting **$0.7 million** in sublease income for 2023[103](index=103&type=chunk) - The revolving line of credit with SVB was amended in April 2023, extending the maturity date to August 2025 and setting new EBITDA financial covenants[104](index=104&type=chunk) - In April 2023, 2,056,200 Restricted Stock Units (RSUs) with a combined grant date fair value of **$10.2 million** were granted, vesting over three years[105](index=105&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition, operations, revenue growth, gross margin improvement, and liquidity for Q1 2023 [Overview](index=28&type=section&id=Overview) Weave is a leading all-in-one customer communications and engagement software platform for small and medium-sized businesses - Weave is a leading all-in-one customer communications and engagement software platform for small and medium-sized businesses (SMBs)[108](index=108&type=chunk) - The platform offers an all-in-one solution spanning communications and customer engagement, including phone, scheduling, text reminders, client reviews, payments, and email marketing campaigns[109](index=109&type=chunk) - Product offerings have expanded to include analytics (2019), payments (2019), forms (2021), and buy-now-pay-later (2022), with expansion into verticals like veterinary and specialized healthcare[110](index=110&type=chunk) [Supplemental Financial Information — Disaggregated Revenue and Cost of Revenue](index=28&type=section&id=Supplemental%20Financial%20Information%20%E2%80%94%20Disaggregated%20Revenue%20and%20Cost%20of%20Revenue) This section disaggregates revenue and cost of revenue by category, highlighting recurring revenue and gross margins | Category | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Gross Margin 2023 | Gross Margin 2022 | | :----------------------------- | :----------------------------------------------- | :----------------------------------------------- | :---------------- | :---------------- | | Subscription and payment processing Revenue | $37,692 | $31,950 | 76% | 72% | | Subscription and payment processing Cost of Revenue | $(8,978) | $(8,821) | | | | Onboarding Revenue | $784 | $262 | (171)% | (887)% | | Onboarding Cost of Revenue | $(2,125) | $(2,586) | | | | Hardware Revenue | $1,089 | $1,060 | (77)% | (121)% | | Hardware Cost of Revenue | $(1,928) | $(2,346) | | | - Recurring revenues (subscription and payment processing) accounted for **92% of total revenue** for the three months ended March 31, 2023[112](index=112&type=chunk) - Onboarding services and phone hardware are utilized as customer acquisition tools and are priced competitively, often resulting in negative gross profit for these categories[113](index=113&type=chunk) [Factors Affecting Our Performance](index=29&type=section&id=Factors%20Affecting%20Our%20Performance) Future performance depends on attracting new customers, retaining existing ones, expanding products, and entering new verticals - Future financial performance is driven by the ability to attract new customers, retain and expand within the existing customer base, add new products, and expand into new industry verticals[115](index=115&type=chunk) - The company aims to expand its customer base among medium-sized businesses, with a particular focus on core specialty healthcare verticals, and has introduced multi-office functionality[116](index=116&type=chunk) - Customer retention significantly impacts future financial performance and gross margin, with subscription and payment processing gross margin improving from **72% in Q1 2022 to 76% in Q1 2023**[119](index=119&type=chunk) [Key Business Metrics](index=31&type=section&id=Key%20Business%20Metrics) This section presents dollar-based net retention rate and gross retention rate, indicating customer revenue growth and retention | Metric | March 31, 2023 | March 31, 2022 | | :-------------------------- | :------------- | :------------- | | Dollar-based net retention rate | 97 % | 103 % | | Dollar-based gross retention rate | 93 % | 94 % | - The Dollar-Based Net Retention Rate (NRR) provides insight into the ability to retain and grow revenue from customer locations, while the Dollar-Based Gross Retention Rate (GRR) reflects customer retention without considering revenue expansion or contraction[125](index=125&type=chunk)[126](index=126&type=chunk) [Components of Results of Operations](index=31&type=section&id=Components%20of%20Results%20of%20Operations) This section details revenue sources, cost of revenue components, and operating expenses, primarily personnel costs - Revenue is primarily generated from recurring subscription fees (**90% in Q1 2023**, excluding payments and hardware) and recurring embedded lease revenue on hardware provided to customers[128](index=128&type=chunk) - Cost of revenue includes direct costs such as data center and cloud infrastructure, payment processing, amortization of finance lease right-of-use assets, and personnel-related expenses for onboarding and customer support staff[131](index=131&type=chunk) - Operating expenses consist of sales and marketing, research and development, and general and administrative expenses, with personnel costs being the most significant component[133](index=133&type=chunk) [Results of Operations](index=33&type=section&id=Results%20of%20Operations) This section summarizes key financial results, including revenue, gross profit, operating loss, and net loss, both in absolute terms and as a percentage of revenue | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :-------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Revenue | $39,565 | $33,272 | | Gross profit | $26,534 | $19,519 | | Loss from operations | $(8,518) | $(13,509) | | Net loss | $(7,859) | $(13,838) | | Metric (as % of revenue) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Gross profit | 67 % | 59 % | | Sales and marketing | 44 % | 49 % | | Research and development | 19 % | 22 % | | General and administrative | 26 % | 29 % | | Loss from operations | (22)% | (41)% | | Net loss | (20)% | (42)% | [Comparison of the Three Months Ended March 31, 2023 and 2022](index=35&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20March%2031,%202023%20and%202022) This section provides a detailed year-over-year comparison of revenue, costs, gross margin, and operating expenses | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (Amount) | Change (Percentage) | | :-------------------------- | :----------------------------------------------- | :----------------------------------------------- | :---------------- | :------------------ | | Revenue | $39,565 | $33,272 | $6,293 | 19 % | | Cost of revenue | $13,031 | $13,753 | $(722) | (5)% | | Gross margin | 67 % | 59 % | +8 ppts | N/A | | Sales and marketing | $17,218 | $16,220 | $998 | 6 % | | Research and development | $7,694 | $7,204 | $490 | 7 % | | General and administrative | $10,140 | $9,604 | $536 | 6 % | | Total other income (expense), net | $679 | $(297) | $976 | (329)% | - The **19% revenue increase** was approximately **92% attributable to new customers** acquired subsequent to March 31, 2022, and **8% to existing customers**[148](index=148&type=chunk) - The decrease in cost of revenue was primarily due to a **$0.4 million decrease** in direct costs (cloud infrastructure, phone hardware, telecom) and a **$0.3 million decrease** in personnel-related costs, reflecting efficiencies[149](index=149&type=chunk)[150](index=150&type=chunk) - The increase in other income was primarily due to additional earnings generated on market securities and other short-term investments, and a rise in average interest rates[155](index=155&type=chunk) [Non-GAAP Financial Measures](index=37&type=section&id=Non-GAAP%20Financial%20Measures) This section presents non-GAAP financial measures, including free cash flow and Adjusted EBITDA, with their definitions | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (YoY) | | :-------------------------- | :----------------------------------------------- | :----------------------------------------------- | :------------------- | | Free cash flow | $587 | $(5,079) | +$5,666 | | Free cash flow margin | 1 % | (15)% | +16 ppts | | Adjusted EBITDA | $(1,963) | $(9,123) | +$7,160 | - Free cash flow is defined as net cash provided by (used in) operating activities, less purchases of property and equipment and capitalized internal-use software costs[159](index=159&type=chunk) - Adjusted EBITDA excludes interest expense, provision for income taxes, depreciation (excluding finance lease ROU assets), amortization (capitalized internal-use software), and stock-based compensation expense[160](index=160&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's principal sources of liquidity, cash flow from operations, and future capital sufficiency - As of March 31, 2023, principal sources of liquidity were **$56.1 million** in cash and cash equivalents and **$56.5 million** in short-term investments[167](index=167&type=chunk) - Cash provided by operating activities was **$1.5 million** for the three months ended March 31, 2023, a significant improvement from cash used in operating activities of **$4.2 million** in the prior year[170](index=170&type=chunk)[171](index=171&type=chunk) - The Company believes its current cash, cash equivalents, short-term investments, and available borrowing capacity under its senior secured credit facility will be sufficient to meet working capital and capital expenditure requirements for at least the next 12 months[169](index=169&type=chunk) [Critical Accounting Estimates](index=41&type=section&id=Critical%20Accounting%20Estimates) This section highlights significant estimates in financial statements, such as revenue recognition and deferred tax assets - Significant estimates in preparing financial statements include revenue recognition, stock-based compensation, valuation allowance against deferred tax assets, and recoverability of long-lived assets[32](index=32&type=chunk)[365](index=365&type=chunk) - No material changes to critical accounting estimates were made compared to the 2022 Annual Report on Form 10-K, other than changes to lease accounting policies[183](index=183&type=chunk) [Recently Adopted Accounting Pronouncements](index=41&type=section&id=Recently%20Adopted%20Accounting%20Pronouncements) This section details the adoption of new accounting standards for leases and credit losses, and their impact - The Company adopted ASU 2016-02, Leases (Topic 842), on January 1, 2022, requiring lessees to recognize right-of-use assets and corresponding lease liabilities for leases with terms greater than twelve months[184](index=184&type=chunk) - ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), was adopted on January 1, 2023, which did not materially impact the unaudited condensed consolidated financial statements[185](index=185&type=chunk) [Emerging Growth Company and Smaller Reporting Company Status](index=42&type=section&id=Emerging%20Growth%20Company%20and%20Smaller%20Reporting%20Company%20Status) The company qualifies as an emerging growth and smaller reporting company, allowing for reduced disclosure requirements - The Company qualifies as an "emerging growth company" and a "smaller reporting company," allowing it to take advantage of reduced reporting and disclosure requirements[187](index=187&type=chunk)[188](index=188&type=chunk) - The Company has elected to use the extended transition period for complying with new or revised accounting standards, which may make its financial statements not comparable to other public companies[187](index=187&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risks](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risks) The company's market risk exposure, including interest rate and foreign currency risks, remains materially unchanged since year-end 2022 - As of March 31, 2023, the Company's exposure to market risk has not materially changed since December 31, 2022[189](index=189&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of disclosure controls and internal control over financial reporting as of March 31, 2023 [Evaluation of Disclosure Controls and Procedures](index=42&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2023, ensuring timely and accurate reporting - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective as of March 31, 2023, providing reasonable assurance for timely and accurate reporting[190](index=190&type=chunk) [Changes in Internal Control over Financial Reporting](index=42&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) No material changes in internal control over financial reporting were identified during the period covered by the report - No changes in internal control over financial reporting were identified during the period covered by the report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[191](index=191&type=chunk) [Inherent Limitations on Effectiveness of Controls](index=43&type=section&id=Inherent%20Limitations%20on%20Effectiveness%20of%20Controls) Management acknowledges that controls provide reasonable, not absolute, assurance, and may not prevent all errors or fraud - Management acknowledges that disclosure controls and internal control over financial reporting are designed to provide reasonable, not absolute, assurance, and that inherent limitations mean errors or fraud may occur and not be detected[193](index=193&type=chunk) [PART II. OTHER INFORMATION](index=43&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, exhibits, and signatures related to the company's operations and financial standing [Item 1. Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in material legal proceedings, though future litigation, including IP claims, is possible - The Company is not presently a party to any legal proceedings that, if determined adversely, would individually or taken together have a material adverse effect on its business, results of operations, financial condition, or cash flows[195](index=195&type=chunk) - Future litigation may be necessary to defend against or establish intellectual property rights, and regardless of outcome, litigation can be costly and divert management resources[195](index=195&type=chunk) [Item 1A. Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) This section outlines significant risks related to business, industry, regulation, intellectual property, tax, accounting, and stock ownership [Risk Factors Summary](index=44&type=section&id=Risk%20Factors%20Summary) Key risks include growth challenges, customer acquisition/retention, managing expansion, historical losses, and market competition - Key risks include the potential for future growth not matching past rapid growth, challenges in attracting and retaining customers, managing growth efficiently, and serving small and medium-sized businesses (SMBs)[198](index=198&type=chunk) - Other risks involve a history of losses, fluctuating quarterly results, maintaining brand awareness, the evolving market for the platform, expanding into new verticals, and intense market competition[198](index=198&type=chunk) [Risks Related to our Business and our Industry](index=45&type=section&id=Risks%20Related%20to%20our%20Business%20and%20our%20Industry) Risks include sustaining growth, reliance on single-source suppliers, cloud infrastructure dependence, and product defects - The Company's recent rapid growth may not be indicative of future growth, and sustaining it depends on effective pricing, product expansion, customer retention, and market penetration[199](index=199&type=chunk)[200](index=200&type=chunk)[203](index=203&type=chunk) - The Company relies on single-source suppliers for critical hardware (Yealink phones) and payment processing (Stripe), and any disruption or failure from these third parties could adversely affect operations[252](index=252&type=chunk)[258](index=258&type=chunk) - Substantial reliance on Google Cloud Platform (GCP) for cloud infrastructure means any disruption of or interference with GCP services would adversely affect the business, operating results, and financial condition[267](index=267&type=chunk) - Defects or errors in the Company's platform or products could diminish demand, harm its brand and reputation, erode customer trust, and subject it to liability[271](index=271&type=chunk) [Risks Related to Governmental Regulation](index=69&type=section&id=Risks%20Related%20to%20Governmental%20Regulation) Risks involve compliance with VoIP and data protection regulations, potential for increased costs, and call blocking issues - As a provider of interconnected VoIP services, the Company is subject to various international, federal, state, and local regulations, including those from the FCC, with potential for increased regulation and compliance costs[311](index=311&type=chunk)[313](index=313&type=chunk)[314](index=314&type=chunk) - Efforts to address robo-calling and caller ID spoofing (e.g., STIR/SHAKEN framework) could cause competitive harm by leading to calls being blocked or flagged, making services less desirable for customers[315](index=315&type=chunk)[318](index=318&type=chunk) - Compliance with stringent and changing data protection laws like HIPAA, CCPA, and CPRA is critical, and failures could lead to civil liability, fines, reputational damage, and increased compliance costs[333](index=333&type=chunk)[336](index=336&type=chunk)[340](index=340&type=chunk)[342](index=342&type=chunk) [Risks Related to Intellectual Property](index=76&type=section&id=Risks%20Related%20to%20Intellectual%20Property) Risks include failure to protect IP, infringement claims, and unanticipated conditions from open-source software use - Failure to protect or enforce intellectual property rights (trademark, copyright, trade secret) could impair the ability to protect internally-developed technology and brand, adversely affecting the business[346](index=346&type=chunk)[347](index=347&type=chunk) - The Company could incur substantial costs from claims of infringement of another party's intellectual property rights, leading to litigation, license fees, or the need to redesign products[349](index=349&type=chunk)[351](index=351&type=chunk) - The use of "open source" and third-party software could impose unanticipated conditions or restrictions on commercializing solutions and subject the Company to possible litigation, including claims for intellectual property infringement or breach of contract[353](index=353&type=chunk)[354](index=354&type=chunk) [Risks Related to Tax Matters](index=79&type=section&id=Risks%20Related%20to%20Tax%20Matters) Risks include additional income tax liabilities from law changes or challenges, and limitations on Net Operating Losses - The Company may have additional income tax liabilities due to changes in tax laws, challenges to tax positions by authorities, or the requirement to collect additional sales, value-added, or similar taxes[357](index=357&type=chunk)[358](index=358&type=chunk) - The ability to use Net Operating Losses (NOLs) to offset future taxable income may be subject to certain limitations under Section 382 of the Internal Revenue Code and similar state laws, or due to regulatory changes[362](index=362&type=chunk) [Risks Related to Accounting Matters](index=81&type=section&id=Risks%20Related%20to%20Accounting%20Matters) Risks involve ineffective controls, incorrect critical accounting estimates, and adverse impacts from changes in accounting standards - A failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting could adversely affect the ability to produce timely and accurate financial statements and harm investor confidence[364](index=364&type=chunk) - If estimates or judgments relating to critical accounting estimates prove to be incorrect, the Company's results of operations could be adversely affected[365](index=365&type=chunk) - Changes in financial accounting standards or practices may cause adverse, unexpected financial reporting fluctuations and affect the Company's results of operations[367](index=367&type=chunk) [Risks Related to Ownership of our Common Stock](index=82&type=section&id=Risks%20Related%20to%20Ownership%20of%20our%20Common%20Stock) Risks include stock price volatility, future equity dilution, potential sales by existing holders, and concentrated ownership - The stock price of the Company's common stock may be volatile or decline regardless of operating performance due to various factors, including market conditions, financial projections, and competitive actions[370](index=370&type=chunk) - Future equity issuances, whether under incentive plans or for investments/acquisitions, could dilute the percentage ownership held by existing stockholders[374](index=374&type=chunk) - Sales of substantial amounts of common stock by existing holders, particularly directors, executive officers, and principal stockholders, or the perception of such sales, could cause the market price to decline[375](index=375&type=chunk) - The concentration of share ownership (approximately **65.0%** as of March 31, 2023) in pre-IPO stockholders, including executive officers and directors, may limit other stockholders' ability to influence corporate matters[379](index=379&type=chunk) [General Risks](index=87&type=section&id=General%20Risks) General risks include costly legal proceedings, unfavorable economic conditions, and disruptions from catastrophic events - Any legal proceedings or claims against the Company, even if unmeritorious, could be costly, time-consuming, and harm its reputation, diverting management's attention and resources[395](index=395&type=chunk) - Unfavorable conditions in the industry or global economy, including inflation and geopolitical developments, could reduce demand for the Company's products and adversely affect its financial condition, particularly impacting SMB customers[396](index=396&type=chunk) - The business is subject to risks from natural catastrophic events (e.g., earthquakes, fires, floods, pandemics) and man-made problems (e.g., power disruptions, computer viruses, data security breaches, terrorism), which could interrupt operations and harm the business[397](index=397&type=chunk)[398](index=398&type=chunk)[399](index=399&type=chunk) [Item 6. Exhibits](index=90&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Quarterly Report on Form 10-Q, including agreements, certifications, and XBRL financials - Key exhibits filed include the Second Amended and Restated Loan and Security Agreement, Chief Executive Officer and Chief Financial Officer Certifications, and financial statements formatted in Inline XBRL[403](index=403&type=chunk) [Signatures](index=91&type=section&id=Signatures) The report is signed by Brett White (CEO) and Alan Taylor (CFO) on behalf of Weave Communications, Inc. on May 9, 2023 - The report was signed by Brett White (Chief Executive Officer and Director) and Alan Taylor (Chief Financial Officer) on May 9, 2023[409](index=409&type=chunk)

PART I [Item 1. Business](index=9&type=section&id=Item%201.%20Business) Weave Communications, Inc. offers an all-in-one customer communications and engagement software platform for SMBs, streamlining operations and enhancing customer interactions across various sectors - Weave offers a cloud-based, all-in-one customer communications and engagement software platform for SMBs, integrating telephony, messaging, scheduling, payments, and marketing[24](index=24&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk) - Key benefits of the platform include ease of use, unified communications, low total cost of ownership, high ROI, industry-specific capabilities, reduced customer churn, and improved customer acquisition[27](index=27&type=chunk)[35](index=35&type=chunk) [Overview](index=9&type=section&id=Overview) Weave provides a cloud-based, all-in-one customer communications and engagement software platform for SMBs to streamline operations and enhance customer interactions - Weave provides an all-in-one customer communications and engagement software platform for SMBs, streamlining operations and enhancing customer interactions[24](index=24&type=chunk)[25](index=25&type=chunk) [Our Platform](index=9&type=section&id=Our%20Platform) Weave's platform unifies telephony, messaging, scheduling, payments, and marketing into a single solution, integrating with existing systems to improve customer interactions and retention - The platform consolidates telephony, messaging, scheduling, payments, employee collaboration, digital forms, insurance verification, customer review management, and marketing into one solution[26](index=26&type=chunk) - Key benefits include ease of use, unified communications, low total cost of ownership, high ROI, and improved ability to attract and retain customers[27](index=27&type=chunk) [Our Products](index=10&type=section&id=Our%20Products) Weave offers a comprehensive product suite covering the entire customer journey, including phone systems, messaging, payments, and marketing tools - Products include a customized phone system with WeavePop, two-way text messaging, Missed Call Text, and Weave Team for internal collaboration[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk) - The platform also features a mobile app, Weave Reviews for online reputation, Email Marketing, Text Connect for website interaction, Weave Payments, Customer Insights, Digital Forms, Online Scheduling, and Insurance Verification[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk) [Our Customers](index=11&type=section&id=Our%20Customers) As of December 31, 2022, Weave served over 27,000 locations and 25,000 customers in specialized healthcare verticals across the U.S. and Canada Customer Base as of December 31, 2022 | Metric | Value | | :----------------------- | :------ | | Locations under subscription | >27,000 | | Customers | >25,000 | | Primary Industries | Dental, Optometry, Veterinary, Medical Specialty Services, Home Services, Physical Therapy, Audiology, Podiatry | [Sales and Marketing](index=11&type=section&id=Sales%20and%20Marketing) Weave employs a multi-channel go-to-market strategy, combining direct inside sales with diverse marketing and business development efforts for customer acquisition and expansion - Marketing generates leads through paid advertising, digital events, sponsorships, direct mail, email campaigns, social media, and organic searches[45](index=45&type=chunk) - Subscriptions are primarily sold by a direct inside sales team, with specialized teams for new customer acquisition and expanding existing customer usage[46](index=46&type=chunk) - A business development team manages technology integration partners, key-opinion leaders, IT-installers, buying groups, affiliates, and distributors for commissioned referrals and channel partnerships[47](index=47&type=chunk) [Customer Success and Support](index=12&type=section&id=Customer%20Success%20and%20Support) Weave offers comprehensive customer support via multiple channels, emphasizing high-quality service and continuous monitoring to promote retention and referrals - Customer support is offered via phone, AI-driven solutions, web-chat, and email, with staff in the U.S. and India[48](index=48&type=chunk) - The company monitors key customer service metrics (phone hold time, ticket response/resolution rates, satisfaction) to ensure high quality and promote retention[49](index=49&type=chunk) [Research and Development](index=12&type=section&id=Research%20and%20Development) Weave's R&D teams develop high-value features and customized solutions for SMB verticals, integrating in-house and open-source technologies, with operations in the U.S. and India - Engineering and product teams focus on developing high-value features and functionality, delivering tools for meaningful customer engagements[50](index=50&type=chunk) - Products are designed for a broad customer base with customized features for specific SMB verticals, integrating open-source technologies with in-house code[50](index=50&type=chunk) - Research and development operations are maintained in both the United States and India[51](index=51&type=chunk) [Our Technology](index=12&type=section&id=Our%20Technology) Weave's cloud-native technology platform, hosted on GCP, provides a scalable microservices architecture and an in-house phone system, secured by industry-standard practices and data encryption [Weave Software Platform](index=12&type=section&id=Weave%20Software%20Platform) Weave's software platform uses microservices in a cloud-native environment for rapid scaling, supporting integrated web, mobile, and desktop client experiences - The platform uses microservices in a highly containerized, cloud-native environment for rapid scaling and leverages cloud service providers' offerings[52](index=52&type=chunk) - It integrates web, mobile, and desktop clients with the phone system to provide a seamless customer experience[52](index=52&type=chunk) [Weave Phone System](index=13&type=section&id=Weave%20Phone%20System) Weave's in-house cloud-based phone system offers advanced business capabilities, leveraging cloud infrastructure for superior voice quality and seamless updates across North America - Weave's in-house developed cloud-based phone system offers advanced business phone capabilities, leveraging cloud infrastructure for redundancy and superior voice quality[53](index=53&type=chunk) - The system provides unlimited local and long-distance voice calling within the U.S. and Canada via SIP Trunking interconnects[54](index=54&type=chunk) [Security](index=13&type=section&id=Security) Weave employs multi-layered security, including a dedicated team and industry-standard policies, to protect systems and data through encryption and continuous monitoring - Weave employs multiple layers of security, including a dedicated security team, to protect systems, data, and customer information[55](index=55&type=chunk)[56](index=56&type=chunk) - Security policies and standards are consistent with ISO 27001, AICPA Trust Service Principles, and NIST Cybersecurity Framework[57](index=57&type=chunk) - Data is encrypted in transit (TLS 1.2+) and at rest (AES-256+) on Google Cloud Platform, with unique encryption keys for customer images, voicemails, and call recordings[58](index=58&type=chunk) [Human Capital](index=13&type=section&id=Human%20Capital) As of December 31, 2022, Weave had 806 employees, with expanded operations in India, offering competitive benefits and fostering a diverse, inclusive culture - As of December 31, 2022, Weave had **806 employees**, with expanded engineering and support presence in India[59](index=59&type=chunk) - The company offers competitive compensation, benefits, parental leave, flexible PTO, and professional development opportunities[60](index=60&type=chunk) - Weave fosters a diverse and inclusive workforce, promoting equitable processes and an inclusive culture guided by the 'Weave Way' values[61](index=61&type=chunk)[63](index=63&type=chunk) [Competition](index=14&type=section&id=Competition) Weave operates in a rapidly evolving, fragmented, and highly competitive market, competing on platform breadth, ease of use, industry-specific capabilities, and customer service against existing point solutions - The market is rapidly evolving, fragmented, and highly competitive, with primary competition often being a combination of existing point solutions[62](index=62&type=chunk) - Key competitive factors include platform breadth, all-in-one solution, ease of deployment, industry-specific capabilities, integration depth, customer insights, cloud architecture, customer service, advanced payments, brand recognition, and pricing[64](index=64&type=chunk)[68](index=68&type=chunk) [Intellectual Property](index=15&type=section&id=Intellectual%20Property) Weave protects its intellectual property through domain names, copyright, trade secrets, trademarks, contractual provisions, and information security, relying on unpatented innovation - Weave protects its intellectual property using domain names, copyright, trade secrets, trademarks, contractual provisions, and information security infrastructure[66](index=66&type=chunk) - The company relies on unpatented trade secrets, confidential know-how, and continuous technological innovation to maintain its competitive position[66](index=66&type=chunk) - Confidentiality and invention assignment agreements are in place with employees, consultants, and contractors to protect proprietary information[66](index=66&type=chunk) [Regulatory](index=15&type=section&id=Regulatory) Weave is subject to extensive regulations as a VoIP provider, including FCC, CRTC, TCPA, CAN-SPAM, CASL, HIPAA, CPRA, and PIPEDA, governing communications and data protection - Weave is regulated by the FCC and CRTC as a VoIP provider, subject to E-911 requirements, phone number porting, customer data protection, and disability access rules[67](index=67&type=chunk) - The company must comply with laws regulating communications, including TCPA, CAN-SPAM, and CASL, and provides features to help subscribers manage compliance[68](index=68&type=chunk) - Weave collects, stores, and processes personal data, including Protected Health Information (PHI), subjecting it to HIPAA, CPRA, US state data breach notification laws, and PIPEDA (Canada)[70](index=70&type=chunk)[71](index=71&type=chunk) [Corporate Information](index=16&type=section&id=Corporate%20Information) Weave Communications, Inc., organized in Delaware in 2008 and renamed in 2015, maintains its principal executive offices in Lehi, Utah - Weave Communications, Inc. was organized in Delaware in September 2008 as Recall Solutions, LLC and converted to its current name in October 2015[74](index=74&type=chunk) - The principal executive offices are located at 1331 W Powell Way, Lehi, Utah 84043[74](index=74&type=chunk) [Available Information](index=16&type=section&id=Available%20Information) Weave provides SEC filings and material information on its Investor Relations website and through press releases, public calls, and social media - Weave's SEC filings (10-K, 10-Q, 8-K) are available on its Investor Relations website: https://investors.getweave.com[75](index=75&type=chunk) - The company uses SEC filings, press releases, public conference calls, and social media (Twitter, LinkedIn, Instagram, Facebook) to communicate material information[76](index=76&type=chunk) [Item 1A. Risk Factors](index=18&type=section&id=Item%201A.%20Risk%20Factors) Investing in Weave's common stock involves significant risks related to its business model, growth, competition, third-party dependencies, cybersecurity, and regulatory compliance - Weave's rapid growth may not be indicative of future growth, making future prospects difficult to evaluate and increasing business risk[79](index=79&type=chunk)[82](index=82&type=chunk) - The company has a history of net losses (**$49.7 million** in 2022, **$51.7 million** in 2021) and may not achieve or sustain profitability due to increased costs and expenses[93](index=93&type=chunk)[94](index=94&type=chunk) - Significant risks include dependence on attracting and retaining SMB customers, managing growth, intense competition, reliance on third-party integrations (e.g., Dentrix, Stripe, network providers, GCP), cybersecurity threats, and compliance with evolving regulations (FCC, TCPA, HIPAA, CPRA)[83](index=83&type=chunk)[88](index=88&type=chunk)[90](index=90&type=chunk)[110](index=110&type=chunk)[112](index=112&type=chunk)[130](index=130&type=chunk)[133](index=133&type=chunk)[135](index=135&type=chunk)[142](index=142&type=chunk)[185](index=185&type=chunk)[195](index=195&type=chunk)[207](index=207&type=chunk)[214](index=214&type=chunk) [Risks Related to our Business and our Industry](index=18&type=section&id=Risks%20Related%20to%20our%20Business%20and%20our%20Industry) Weave faces business risks from sustaining growth, SMB customer acquisition/retention, third-party dependencies, intense competition, cybersecurity threats, and international expansion complexities - Weave's revenue growth rate is expected to decline, and its ability to forecast future operating results is difficult due to factors like pricing, COVID-19 impact, product expansion, customer retention, and sales personnel productivity[80](index=80&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk) - The company's success is critical on attracting new customers, retaining existing ones (majority on monthly subscriptions), and increasing platform usage, with customer acquisition costs potentially rising[83](index=83&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk) - Weave relies on integrations with third-party practice management systems (e.g., Dentrix) and payment service providers (Stripe), and disruptions or adverse changes in these relationships could significantly impact its platform's value and operations[110](index=110&type=chunk)[133](index=133&type=chunk) - The market is highly competitive and fragmented, with competitors ranging from existing point solutions to larger companies with greater resources, potentially leading to pricing pressures and reduced margins[112](index=112&type=chunk)[116](index=116&type=chunk)[118](index=118&type=chunk) - Cybersecurity breaches, system interruptions, and reliance on Google Cloud Platform (GCP) for infrastructure pose risks of data loss, reputational damage, and service unavailability[130](index=130&type=chunk)[142](index=142&type=chunk)[147](index=147&type=chunk) - International expansion (currently U.S. and Canada, with operations in India) exposes Weave to regulatory, economic, and political risks, potentially leading to lower gross margins for international customers[167](index=167&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk) [Risks Related to Governmental Regulation](index=42&type=section&id=Risks%20Related%20to%20Governmental%20Regulation) Weave is subject to extensive governmental regulations as a VoIP provider, including FCC, CRTC, TCPA, CAN-SPAM, CASL, HIPAA, CPRA, and PIPEDA, with non-compliance posing significant risks - As a VoIP provider, Weave is subject to FCC and CRTC regulations, including E-911 requirements, and potential reclassification as a telecommunications service, which could increase regulatory burdens and costs[185](index=185&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk)[188](index=188&type=chunk) - Efforts to combat robo-calling and caller ID spoofing (STIR/SHAKEN framework) could harm Weave's business if its solutions are not interoperable or if calls are blocked/flagged, making services less desirable[189](index=189&type=chunk)[191](index=191&type=chunk)[192](index=192&type=chunk) - Weave's messaging services expose it to risks under consumer protection laws like TCPA, CAN-SPAM, and CASL, with potential for fines and litigation if customers misuse the platform for unauthorized or illegal communications[193](index=193&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk)[196](index=196&type=chunk)[199](index=199&type=chunk) - The company processes business and personal information, subjecting it to stringent data protection laws (HIPAA, CPRA, PIPEDA), with non-compliance potentially leading to civil liability, fines, and reputational damage[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk)[214](index=214&type=chunk)[216](index=216&type=chunk) [Risks Related to Intellectual Property](index=50&type=section&id=Risks%20Related%20to%20Intellectual%20Property) Weave's success depends on protecting its intellectual property, facing risks of infringement, costly litigation, and potential issues from open-source or third-party software usage - Failure to protect or enforce intellectual property rights (trademarks, copyrights, trade secrets) could impair Weave's ability to protect its technology and brand, potentially leading to misappropriation by third parties[220](index=220&type=chunk)[221](index=221&type=chunk) - Weave faces risks of intellectual property infringement claims, which could result in costly litigation, diversion of management resources, unfavorable settlements (e.g., license fees), or the need to redesign products[222](index=222&type=chunk)[223](index=223&type=chunk) - The use of open-source and third-party software may impose unanticipated conditions, expose Weave to claims of non-compliance with licenses, or introduce security risks, potentially requiring re-engineering or incurring significant legal expenses[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk)[228](index=228&type=chunk) [Risks Related to Tax Matters](index=52&type=section&id=Risks%20Related%20to%20Tax%20Matters) Weave faces tax risks from changing laws, challenges to tax positions, and potential limitations on utilizing net operating loss carryforwards, which could increase liabilities - Weave may incur additional income tax liabilities if tax laws change, authorities challenge its tax positions, or estimates prove incorrect, impacting financial results[229](index=229&type=chunk) - The company could be required to collect additional sales, value-added, or similar indirect taxes in more jurisdictions, increasing customer costs and administrative burdens, and potentially affecting sales[230](index=230&type=chunk)[231](index=231&type=chunk) - Weave's ability to use its federal and state NOL carryforwards (**$179.2 million** and **$127.1 million**, respectively, as of Dec 31, 2022) may be limited by Section 382 of the Internal Revenue Code or other regulatory changes, potentially increasing future tax liabilities[233](index=233&type=chunk)[234](index=234&type=chunk) [Risks Related to Accounting Matters](index=54&type=section&id=Risks%20Related%20to%20Accounting%20Matters) Weave faces accounting risks from maintaining effective internal controls, reliance on management estimates, and potential fluctuations due to changes in financial accounting standards - Failure to maintain effective disclosure controls and internal control over financial reporting could adversely affect financial statement accuracy and investor confidence, potentially leading to SEC investigations or litigation[235](index=235&type=chunk)[236](index=236&type=chunk) - Weave's results of operations could be adversely affected if estimates or judgments related to critical accounting policies (e.g., revenue recognition, stock-based compensation) prove incorrect[237](index=237&type=chunk)[238](index=238&type=chunk) - Changes in financial accounting standards (e.g., ASC 606) or their interpretations may cause unexpected financial reporting fluctuations and affect business operations[240](index=240&type=chunk)[241](index=241&type=chunk) [Risks Related to Ownership of our Common Stock](index=55&type=section&id=Risks%20Related%20to%20Ownership%20of%20our%20Common%20Stock) Weave's common stock faces volatility, dilution risks from future issuances, potential price declines from large sales, and limited investor influence due to concentrated ownership - The market price of Weave's common stock is volatile and can fluctuate significantly due to factors like market performance, financial projections, competition, and regulatory changes[242](index=242&type=chunk)[243](index=243&type=chunk) - Future equity issuances (e.g., under incentive plans, for acquisitions) and sales of substantial amounts of common stock by existing holders could dilute ownership and cause the stock price to decline[245](index=245&type=chunk)[247](index=247&type=chunk)[249](index=249&type=chunk) - Concentrated share ownership (**65.5%** by executive officers, directors, and >5% holders as of Dec 31, 2022) may limit other stockholders' ability to influence corporate matters[250](index=250&type=chunk) - As an 'emerging growth company' and 'smaller reporting company,' Weave benefits from reduced reporting requirements, which might make its common stock less attractive to some investors[251](index=251&type=chunk)[253](index=253&type=chunk) - Weave does not intend to pay dividends in the foreseeable future, meaning investors must rely on stock price appreciation for gains[254](index=254&type=chunk) [General Risks](index=61&type=section&id=General%20Risks) Weave faces general risks from legal proceedings, unfavorable economic conditions, natural disasters, and man-made problems, which could disrupt operations and impact financial performance - Legal proceedings and claims, even if unmeritorious, can be costly, divert management attention, and harm Weave's reputation[266](index=266&type=chunk) - Unfavorable industry or global economic conditions (recession, inflation, geopolitical conflicts, pandemics) could reduce demand from SMB customers, impacting revenue and financial performance[267](index=267&type=chunk) - The business is subject to risks from natural disasters, power disruptions, computer viruses, data security breaches, and terrorism, which could cause operational interruptions and data loss[268](index=268&type=chunk)[270](index=270&type=chunk)[271](index=271&type=chunk) - Weave's risk management strategies may not be fully effective in mitigating all risks in a rapidly changing industry, potentially leading to uninsured liability or reputational harm[272](index=272&type=chunk) [Item 1B. Unresolved Staff Comments](index=62&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) No unresolved staff comments are applicable to the registrant - No unresolved staff comments are applicable to Weave Communications, Inc[273](index=273&type=chunk) [Item 2. Properties](index=62&type=section&id=Item%202.%20Properties) Weave leases approximately 180,000 square feet for its Utah headquarters and maintains offices in India, with current facilities deemed adequate for expansion - Weave leases approximately **180,000 square feet** for its corporate headquarters in Lehi, Utah, with a lease expiring in 2033[274](index=274&type=chunk) - The company also maintains offices in Noida, India, and plans to lease additional space there to support growth[274](index=274&type=chunk)[275](index=275&type=chunk) [Item 3. Legal Proceedings](index=62&type=section&id=Item%203.%20Legal%20Proceedings) Weave is not currently involved in material legal proceedings, but future claims, including IP infringement, could be costly and divert management resources - Weave is not currently involved in any legal proceedings that would materially adversely impact its business, financial condition, or results of operations[276](index=276&type=chunk) - Future litigation, including intellectual property infringement claims, could be costly, time-consuming, and divert management resources[276](index=276&type=chunk)[277](index=277&type=chunk) [Item 4. Mine Safety Disclosures](index=63&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine Safety Disclosures are not applicable to the company - Mine Safety Disclosures are not applicable to the company[278](index=278&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=64&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Weave's common stock began trading on the NYSE in November 2021, with 33 holders of record as of March 2023, no dividends paid, and **$107.5 million** net IPO proceeds - Weave's common stock began trading on the NYSE under 'WEAV' on November 11, 2021, after its IPO[281](index=281&type=chunk) - As of March 10, 2023, there were **33 holders of record** for the common stock[282](index=282&type=chunk) - The company has never declared or paid cash dividends and does not intend to in the foreseeable future, prioritizing retention of earnings for business growth[283](index=283&type=chunk) IPO Proceeds and Use | Metric | Amount (Millions) | | :-------------------------------- | :---------------- | | Shares Sold in IPO | 5.0 | | Price per Share | $24.00 | | Underwriting Discounts/Commissions | $8.4 | | Offering Expenses | $4.1 | | Net Proceeds to Company | $107.5 | - There were no issuer purchases of equity securities[290](index=290&type=chunk) [Market Information for Common Stock](index=64&type=section&id=Market%20Information%20for%20Common%20Stock) Weave's common stock began trading on the NYSE under 'WEAV' on November 11, 2021, following its initial public offering - Weave's common stock began trading on the NYSE under 'WEAV' on November 11, 2021, with no prior public market[281](index=281&type=chunk) [Holders of Record](index=64&type=section&id=Holders%20of%20Record) As of March 10, 2023, Weave Communications, Inc. had 33 holders of record for its common stock, excluding beneficial holders - As of March 10, 2023, there were **33 holders of record** for Weave's common stock[282](index=282&type=chunk) [Dividend Policy](index=64&type=section&id=Dividend%20Policy) Weave has never paid cash dividends and plans to retain future earnings for business development, with future dividend decisions at board discretion - Weave has never paid cash dividends and does not intend to in the foreseeable future, planning to retain earnings for business development[283](index=283&type=chunk) [Stock Performance Graph](index=64&type=section&id=Stock%20Performance%20Graph) A stock performance graph compares Weave's common stock return from its November 2021 IPO to December 2022 against the S&P 500 and Russell 2000 indices - A stock performance graph compares Weave's common stock return from November 11, 2021, to December 31, 2022, against the S&P 500 and Russell 2000 indices[285](index=285&type=chunk) - The graph assumes a **$100** initial investment and reinvestment of dividends, with a disclaimer that historical data does not forecast future performance[285](index=285&type=chunk)[286](index=286&type=chunk) [Use of Proceeds from Registered Securities](index=65&type=section&id=Use%20of%20Proceeds%20from%20Registered%20Securities) Weave's IPO on November 15, 2021, generated **$107.5 million** in net proceeds from selling 5 million shares at **$24.00**, with no material change in planned use IPO Proceeds and Use | Metric | Amount (Millions) | | :-------------------------------- | :---------------- | | Shares Sold in IPO | 5.0 | | Price per Share | $24.00 | | Underwriting Discounts/Commissions | $8.4 | | Offering Expenses | $4.1 | | Net Proceeds to Company | $107.5 | - No material change in the planned use of IPO proceeds has occurred since the final prospectus[289](index=289&type=chunk) [Issuer Purchases of Equity Securities](index=65&type=section&id=Issuer%20Purchases%20of%20Equity%20Securities) Weave Communications, Inc. did not make any issuer purchases of its equity securities during the reported period - There were no issuer purchases of equity securities[290](index=290&type=chunk) [Item 6. [Reserved]](index=66&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=66&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes Weave's financial condition and results of operations for 2022 and 2021, detailing revenue, costs, expenses, key metrics, liquidity, and critical accounting estimates - Weave's revenue increased by **23%** to **$142.1 million** in 2022, driven by new and existing customer locations[337](index=337&type=chunk) - The company reported net losses of **$49.7 million** in 2022 and **$51.7 million** in 2021, with an accumulated deficit of **$231.6 million** as of December 31, 2022[93](index=93&type=chunk)[335](index=335&type=chunk) Key Financial Metrics (2022 vs. 2021) | Metric | 2022 (in thousands) | 2021 (in thousands) | Change (%) | | :---------------------------------- | :------------------ | :------------------ | :--------- | | Revenue | $142,117 | $115,871 | 23% | | Cost of Revenue | $53,276 | $49,372 | 8% | | Gross Profit | $88,841 | $66,499 | 34% | | Gross Margin | 63% | 57% | 6 ppts | | Sales and Marketing Expenses | $65,378 | $58,244 | 12% | | Research and Development Expenses | $30,714 | $27,009 | 14% | | General and Administrative Expenses | $42,453 | $31,637 | 34% | | Net Loss | $(49,738) | $(51,690) | -4% | | Free Cash Flow | $(15,893) | $(30,182) | -47% | | Adjusted EBITDA | $(25,692) | $(33,271) | -23% | [Overview](index=66&type=section&id=Overview) Weave is a leading all-in-one customer communications and engagement platform for SMBs, expanding its product offerings and vertical reach since 2011 - Weave provides an all-in-one customer communications and engagement software platform for SMBs, unifying and modernizing customer interactions[294](index=294&type=chunk)[295](index=295&type=chunk) - Since 2011, the platform has expanded to include analytics (2019), payments (2019), forms (2021), and buy-now-pay-later (2022), and has grown into new verticals like veterinary and specialized healthcare[296](index=296&type=chunk) [Supplemental Financial Information — Disaggregated Revenue and Cost of Revenue](index=66&type=section&id=Supplemental%20Financial%20Information%20%E2%80%94%20Disaggregated%20Revenue%20and%20Cost%20of%20Revenue) Weave disaggregates revenue and cost of revenue into recurring (**95%** in 2022) and non-recurring categories, with non-recurring services often incurring negative gross profit for customer acquisition - Recurring subscription and payment processing revenues accounted for **95%** of total revenue in 2022 and **94%** in 2021[299](index=299&type=chunk) - Non-recurring onboarding and hardware services historically result in negative gross profit, serving as customer acquisition tools[300](index=300&type=chunk) Disaggregated Revenue and Cost of Revenue (2022 vs. 2021) | Category | 2022 Revenue (in thousands) | 2022 Cost of Revenue (in thousands) | 2022 Gross Margin | 2021 Revenue (in thousands) | 2021 Cost of Revenue (in thousands) | 2021 Gross Margin | | :-------------------------- | :-------------------------- | :-------------------------- | :---------------- | :-------------------------- | :-------------------------- | :---------------- | | Subscription & Payment Processing | $136,592 | $(35,008) | 74% | $108,841 | $(29,452) | 73% | | Onboarding | $1,288 | $(9,612) | (646)% | $3,687 | $(10,942) | (197)% | | Hardware | $4,237 | $(8,656) | (104)% | $3,343 | $(8,978) | (169)% | [Factors Affecting Our Performance](index=68&type=section&id=Factors%20Affecting%20Our%20Performance) Weave's performance is driven by attracting new customers, retaining and expanding within the existing base, adding new products, and strategically expanding into new industry verticals - Performance is driven by attracting new customers through effective pricing, products, marketing, and channel partners, with a focus on multi-location and medium-sized businesses[302](index=302&type=chunk)[303](index=303&type=chunk) - Customer retention and expansion within the existing base depend on satisfaction, platform enhancements, and cross-selling add-on products like Weave Payments[304](index=304&type=chunk) - Adding new products and functionality, both internally developed and through partnerships, is key to winning new SMB customers and broadening use cases[306](index=306&type=chunk)[307](index=307&type=chunk) - Expansion into new industry verticals, leveraging a repeatable playbook and establishing key partnerships, diversifies end-market exposure and creates a flywheel effect[308](index=308&type=chunk) [Attract New Customers](index=68&type=section&id=Attract%20New%20Customers) Customer acquisition depends on effective pricing, products, marketing, and channel partners, with a growing focus on medium-sized and multi-location businesses - Customer acquisition depends on pricing, product effectiveness, marketing, and channel partners, targeting both small and medium-sized businesses, especially in core healthcare verticals[303](index=303&type=chunk) Customer Locations (2022 vs. 2021) | Metric | December 31, 2022 | December 31, 2021 | | :----------------------- | :------------------ | :------------------ | | Number of locations | 27,193 | 23,831 | [Retain and Expand Within Our Customer Base](index=68&type=section&id=Retain%20and%20Expand%20Within%20Our%20Customer%20Base) Retaining and expanding revenue from existing customers is crucial, driven by satisfaction, platform enhancements, cross-selling, and the stickiness of the Weave phone system - Customer retention and revenue expansion are critical, influenced by satisfaction, platform enhancements, and cross-selling add-on products like Weave Payments[304](index=304&type=chunk) - The deployment of the Weave phone system increases customer stickiness and loyalty[304](index=304&type=chunk) Subscription and Payment Processing Gross Margin (2022 vs. 2021) | Metric | 2022 | 2021 | | :---------------------------------- | :--- | :--- | | Subscription and Payment Processing Gross Margin | 74% | 73% | [Add New Products](index=69&type=section&id=Add%20New%20Products) Continuous addition of new products and functionality is vital for broadening use cases, attracting SMB customers, and ensuring future success through innovation and partnerships - Continuous addition of new products and functionality is crucial for broadening use cases and attracting new SMB customers[306](index=306&type=chunk) - The depth of the platform's functionality relies on internally-developed technology and platform partnerships/integrations[306](index=306&type=chunk) - Future success is partially driven by the timely development and delivery of new, innovative products to SMBs[307](index=307&type=chunk) [Expand to New Industry Verticals](index=69&type=section&id=Expand%20to%20New%20Industry%20Verticals) Weave plans to expand into new industry verticals by leveraging its flexible platform, establishing partnerships, and developing vertical-specific functionality to diversify market exposure - Weave plans to expand into new industry verticals using its flexible platform and a repeatable playbook, which includes establishing partnerships and developing vertical-specific functionality[308](index=308&type=chunk) - Successful expansion into adjacent markets diversifies end-market exposure and creates a 'flywheel effect' for growth[308](index=308&type=chunk) [Key Business Metrics](index=69&type=section&id=Key%20Business%20Metrics) Weave evaluates performance using key business metrics including Number of Customer Locations, Dollar-Based Net Retention Rate (NRR), and Dollar-Based Gross Retention Rate (GRR) - Weave evaluates its business using key metrics: Number of Customer Locations, Dollar-Based Net Retention Rate (NRR), and Dollar-Based Gross Retention Rate (GRR)[309](index=309&type=chunk) Key Business Metrics (2022 vs. 2021) | Metric | December 31, 2022 | December 31, 2021 | | :-------------------------- | :------------------ | :------------------ | | Number of locations | 27,193 | 23,831 | | Dollar-based net retention rate | 99% | 103% | | Dollar-based gross retention rate | 94% | 94% | [Number of Customer Locations](index=69&type=section&id=Number%20of%20Customer%20Locations) The Number of Customer Locations metric indicates market penetration, business growth, and future opportunities, counting active customer locations under subscription - The number of customer locations indicates market penetration, business growth, and future opportunities[311](index=311&type=chunk) - Locations are counted as total active customer locations under subscription at month-end, with multi-location organizations counted per subscription[311](index=311&type=chunk) [Dollar-Based Net Retention Rate](index=69&type=section&id=Dollar-Based%20Net%20Retention%20Rate) NRR measures Weave's ability to retain and grow revenue from existing customer locations, reflecting churn, contraction, expansion, and pricing changes - NRR provides insight into Weave's ability to retain and grow revenue from existing customer locations and their potential long-term value[312](index=312&type=chunk) - NRR is calculated by dividing AMR of Base Locations in the Comparison Month by AMR in the Base Month, reflecting churn, contraction, expansion, and pricing changes[312](index=312&type=chunk) Dollar-Based Net Retention Rate (2022 vs. 2021) | Metric | December 31, 2022 | December 31, 2021 | | :-------------------------- | :------------------ | :------------------ | | Dollar-based net retention rate | 99% | 103% | [Dollar-Based Gross Retention Rate](index=70&type=section&id=Dollar-Based%20Gross%20Retention%20Rate) GRR assesses Weave's ability to retain customers by measuring adjusted monthly revenue from a base cohort, reflecting terminations but excluding expansion or contraction - GRR provides insight into Weave's ability to retain customers and evaluate if the platform addresses customer needs[313](index=313&type=chunk) - GRR reflects the effect of customer terminations but excludes changes in revenue due to expansion, contraction, or new customer additions[313](index=313&type=chunk) Dollar-Based Gross Retention Rate (2022 vs. 2021) | Metric | December 31, 2022 | December 31, 2021 | | :-------------------------- | :------------------ | :------------------ | | Dollar-based gross retention rate | 94% | 94% | [Limitations and Reconciliation of Non-GAAP Financial Measures](index=70&type=section&id=Limitations%20and%20Reconciliation%20of%20Non-GAAP%20Financial%20Measures) Weave uses non-GAAP measures like Free Cash Flow and Adjusted EBITDA to supplement GAAP results, acknowledging their limitations and advising investors to review reconciliations - Non-GAAP measures (Free Cash Flow, Free Cash Flow Margin, Adjusted EBITDA) are used to evaluate performance but have limitations, as they may not be comparable to other companies and exclude certain costs[314](index=314&type=chunk) - Adjusted EBITDA excludes non-cash stock-based compensation and does not reflect working capital needs[314](index=314&type=chunk) Non-GAAP Financial Measures (2022 vs. 2021) | Metric | 2022 (in thousands) | 2021 (in thousands) | | :-------------------------- | :------------------ | :------------------ | | Free Cash Flow | $(15,893) | $(30,182) | | Free Cash Flow Margin | (11)% | (26)% | | Adjusted EBITDA | $(25,692) | $(33,271) | [Free Cash Flow and Free Cash Flow Margin](index=70&type=section&id=Free%20Cash%20Flow%20and%20Free%20Cash%20Flow%20Margin) Free cash flow, defined as net cash from operations minus capital expenditures, and its margin are useful liquidity indicators, even when negative - Free cash flow is net cash used in operating activities, less purchases of property and equipment and capitalized internal-use software costs[353](index=353&type=chunk) - It serves as a useful liquidity indicator, providing information on cash consumed by operating and investing activities[353](index=353&type=chunk) Free Cash Flow and Margin (2022 vs. 2021) | Metric | 2022 (in thousands) | 2021 (in thousands) | | :-------------------------- | :------------------ | :------------------ | | Net cash used in operating activities | $(12,766) | $(20,373) | | Less: Purchase of property and equipment | $(1,895) | $(7,376) | | Less: Capitalized internal-use software | $(1,232) | $(2,433) | | Free cash flow | $(15,893) | $(30,182) | | Free cash flow margin | (11)% | (26)% | [Adjusted EBITDA](index=71&type=section&id=Adjusted%20EBITDA) Adjusted EBITDA, a non-GAAP measure, excludes interest, taxes, depreciation, amortization, and stock-based compensation, providing consistency for financial performance and budgeting - Adjusted EBITDA is defined as earnings before interest expense, income taxes, depreciation (excluding finance lease ROU assets), amortization (of capitalized internal-use software), and stock-based compensation[354](index=354&type=chunk) - It provides consistency and comparability for financial performance and budget preparation, excluding non-cash impacts[354](index=354&type=chunk) Adjusted EBITDA (2022 vs. 2021) | Metric | 2022 (in thousands) | 2021 (in thousands) | | :-------------------------- | :------------------ | :------------------ | | Net loss | $(49,738) | $(51,690) | | Interest on outstanding debt | $1,441 | $1,184 | | Tax expense (benefit) | $104 | $60 | | Depreciation | $2,609 | $2,269 | | Amortization | $1,140 | $815 | | Stock-based compensation | $18,752 | $14,091 | | Adjusted EBITDA | $(25,692) | $(33,271) | [Components of Results of Operations](index=71&type=section&id=Components%20of%20Results%20of%20Operations) This section details Weave's revenue, cost of revenue, and operating expenses, with personnel costs being the most significant component across all categories - Revenue is primarily generated from recurring subscription fees for software and phone services (**95%** of total revenue in 2022) and payment processing services[318](index=318&type=chunk)[319](index=319&type=chunk) - Cost of revenue includes data center, cloud infrastructure, payment processing, voice connectivity, messaging fees, and personnel-related expenses for onboarding and customer support[321](index=321&type=chunk) - Operating expenses (sales & marketing, R&D, G&A) are significantly driven by personnel costs, including salaries, benefits, bonuses, and stock-based compensation[323](index=323&type=chunk) [Revenue](index=71&type=section&id=Revenue) Weave's revenue primarily derives from recurring subscription fees for software and phone services, embedded hardware leases, and payment processing, with non-recurring installation fees - Primary revenue sources are recurring subscription fees for software and phone services, and recurring embedded lease revenue on hardware[318](index=318&type=chunk) - Recurring revenue (excluding Weave Payments) accounted for **95%** of total revenue in 2022 and **94%** in 2021[318](index=318&type=chunk) - Payment processing services generate revenue net of transaction fees, recognized when transactions occur[319](index=319&type=chunk) - Non-recurring installation fees for onboarding customers are recognized upon completion of installation[320](index=320&type=chunk) [Cost of Revenue](index=72&type=section&id=Cost%20of%20Revenue) Cost of revenue includes direct platform costs, indirect customer support and onboarding staff expenses, and allocated overhead, expected to increase with customer growth - Cost of revenue includes data center, cloud infrastructure, payment processing, application provider fees, voice connectivity, messaging fees, and amortization of internal-use software[321](index=321&type=chunk) - Indirect costs include personnel-related expenses for onboarding and customer support staff, and allocated overhead[321](index=321&type=chunk) - Cost of revenue is expected to increase with customer growth but may fluctuate as a percentage of revenue due to regulatory fees, phone hardware, and stock-based compensation[322](index=322&type=chunk) [Operating Expenses](index=72&type=section&id=Operating%20Expenses) Operating expenses, primarily personnel-related costs, include sales and marketing, R&D, and G&A, all expected to increase in absolute dollars - Operating expenses consist of sales and marketing, research and development, and general and administrative expenses[323](index=323&type=chunk) - Personnel costs (salaries, benefits, bonuses, stock-based compensation, sales commissions) are the most significant component of operating expenses[323](index=323&type=chunk)[324](index=324&type=chunk) - Sales and marketing expenses are expected to increase in absolute dollars but decrease as a percentage of revenue over time[325](index=325&type=chunk) - R&D expenses are expected to increase in absolute dollars but remain consistent or slightly decrease as a percentage of revenue[327](index=327&type=chunk) - G&A expenses are expected to increase in absolute dollars but decrease as a percentage of revenue over time, due to public company operating costs[330](index=330&type=chunk) [Interest Expense](index=73&type=section&id=Interest%20Expense) Interest expense primarily arises from floating-rate borrowings and finance lease obligations, with rates based on prime or incremental borrowing rates - Interest expense primarily results from interest payments on borrowings and finance lease obligations[331](index=331&type=chunk) - Borrowing interest is based on a floating rate above prime, while finance lease interest depends on the incremental borrowing rate or implicit lease rate[331](index=331&type=chunk) [Other Income (Expense), Net](index=73&type=section&id=Other%20Income%20%28Expense%29%2C%20Net) Other income primarily consists of interest income earned on Weave's cash, cash equivalents, and short-term investments - Other income primarily consists of interest income earned on cash, cash equivalents, and short-term investments[332](index=332&type=chunk) [Provision for (Benefit from) Income Taxes](index=73&type=section&id=Provision%20for%20%28Benefit%20from%29%20Income%20Taxes) The provision for income taxes primarily relates to foreign and state jurisdictions, with a full valuation allowance on domestic deferred tax assets due to realization uncertainty - Provision for income taxes primarily relates to foreign and state jurisdictions[333](index=333&type=chunk) - A full valuation allowance is maintained for domestic net deferred tax assets due to uncertainty of realization, including net operating loss carryforwards[333](index=333&type=chunk) [Results of Operations (Comparison of the Years Ended December 31, 2022 and December 31, 2021)](index=74&type=section&id=Results%20of%20Operations) Weave's 2022 results show a **23%** revenue increase to **$142.1 million**, improved gross margin to **63%**, and a net loss of **$49.7 million**, a slight improvement from 2021 Consolidated Statements of Operations (2022 vs. 2021) | Metric | 2022 (in thousands) | 2021 (in thousands) | | :-------------------------- | :------------------ | :------------------ | | Revenue | $142,117 | $115,871 | | Cost of revenue | $53,276 | $49,372 | | Gross profit | $88,841 | $66,499 | | Sales and marketing | $65,378 | $58,244 | | Research and development | $30,714 | $27,009 | | General and administrative | $42,453 | $31,637 | | Loss from operations | $(49,704) | $(50,391) | | Net loss | $(49,738) | $(51,690) | Stock-Based Compensation Expense (2022 vs. 2021) | Category | 2022 (in thousands) | 2021 (in thousands) | | :-------------------------- | :------------------ | :------------------ | | Cost of revenue | $723 | $526 | | Sales and marketing | $3,436 | $1,962 | | Research and development | $4,576 | $3,545 | | General and administrative | $10,017 | $8,058 | | Total | $18,752 | $14,091 | [Revenue](index=75&type=section&id=Revenue) Revenue increased by **$26.2 million (23%)** to **$142.1 million** in 2022, driven by new (**57%**) and existing (**43%**) customer locations, which grew to **27,193** Revenue Growth (2022 vs. 2021) | Metric | 2022 (in thousands) | 2021 (in thousands) | Change Amount (in thousands) | Change Percentage | | :------- | :------------------ | :------------------ | :--------------------------- | :---------------- | | Revenue | $142,117 | $115,871 | $26,246 | 23% | - **57%** of the revenue increase was from new customer locations, and **43%** from existing customer locations[337](index=337&type=chunk) - Customer locations increased from **23,831** in 2021 to **27,193** in 2022[337](index=337&type=chunk) [Cost of Revenue and Gross Margin](index=75&type=section&id=Cost%20of%20Revenue%20and%20Gross%20Margin) Cost of revenue increased by **$3.9 million (8%)** in 2022, while gross margin improved from **57% to 63%** due to favorable customer mix and cost management Cost of Revenue and Gross Margin (2022 vs. 2021) | Metric | 2022 (in thousands) | 2021 (in thousands) | Change Amount (in thousands) | Change Percentage | | :------------- | :------------------ | :------------------ | :--------------------------- | :---------------- | | Cost of revenue | $53,276 | $49,372 | $3,904 | 8% | | Gross margin | 63% | 57% | 6 ppts | | - Increase in cost of revenue was driven by **$3.6 million** in personnel costs and **$1.7 million** in direct customer usage costs, partially offset by a **$2.5 million** decrease from the Installation Program phase-out[338](index=338&type=chunk)[339](index=339&type=chunk) - Gross margin improvement resulted from a favorable customer mix (more fully depreciated phone hardware) and cost management[340](index=340&type=chunk) [Sales and Marketing](index=76&type=section&id=Sales%20and%20Marketing) Sales and marketing expenses increased by **$7.0 million (12%)** in 2022, primarily due to higher personnel-related costs, including compensation adjustments and stock-based compensation Sales and Marketing Expenses (2022 vs. 2021) | Metric | 2022 (in thousands) | 2021 (in thousands) | Change Amount (in thousands) | Change Percentage | | :------------------ | :------------------ | :------------------ | :--------------------------- | :---------------- | | Sales and marketing | $65,378 | $58,244 | $7,134 | 12% | - The increase was primarily due to a **$7.0 million** rise in personnel-related expenses, including compensation adjustments, salaries, sales commissions, and stock-based compensation[341](index=341&type=chunk) [Research and Development](index=76&type=section&id=Research%20and%20Development) Research and development expenses increased by **$3.7 million (14%)** in 2022, driven by personnel costs and allocated overhead, despite a decrease in capitalized software costs Research and Development Expenses (2022 vs. 2021) | Metric | 2022 (in thousands) | 2021 (in thousands) | Change Amount (in thousands) | Change Percentage | | :-------------------------- | :------------------ | :------------------ | :--------------------------- | :---------------- | | Research and development | $30,714 | $27,009 | $3,705 | 14% | - Increase primarily due to **$2.5 million** in personnel-related costs (stock-based compensation, salary adjustments) and **$0.4 million** in allocated overhead[342](index=342&type=chunk) - Capitalized internal-use software costs decreased by **$0.9 million** in 2022 compared to 2021[342](index=342&type=chunk) [General and Administrative](index=76&type=section&id=General%20and%20Administrative) General and administrative expenses increased by **$10.8 million (34%)** in 2022, primarily due to higher personnel costs, professional fees, and insurance expenses related to public company operations General and Administrative Expenses (2022 vs. 2021) | Metric | 2022 (in thousands) | 2021 (in thousands) | Change Amount (in thousands) | Change Percentage | | :-------------------------- | :------------------ | :------------------ | :--------------------------- | :---------------- | | General and administrative | $42,453 | $31,637 | $10,816 | 34% | - Increase driven by **$4.3 million** in personnel-related expenses (**$2.4 million** payroll, **$2.0 million** stock-based compensation)[343](index=343&type=chunk) - Professional fees increased by **$2.3 million** and insurance expense by **$2.3 million** due to public company operations[343](index=343&type=chunk) [Other Income (Expense), Net](index=77&type=section&id=Other%20Income%20%28Expense%29%2C%20Net) Interest expense increased in 2022, while other income, net, significantly rose due to earnings on IPO capital invested in market securities and higher interest rates Other Income (Expense), Net (2022 vs. 2021) | Metric | 2022 (in thousands) | 2021 (in thousands) | Change Amount (in thousands) | Change Percentage | | :-------------------------- | :------------------ | :------------------ | :--------------------------- | :---------------- | | Interest expense | $(1,441) | $(1,184) | $(257) | 22% | | Other income (expense), net | $1,511 | $(55) | $1,566 | -2847% | | Total Other income (expense), net | $70 | $(1,239) | $1,309 | -106% | - Interest expense increased due to additional phone hardware finance lease agreements[346](index=346&type=chunk) - Other income increased significantly due to earnings on IPO capital invested in market securities and short-term investments, and rising interest rates[347](index=347&type=chunk) [Provision for Income Taxes](index=77&type=section&id=Provision%20for%20Income%20Taxes) The provision for income taxes increased immaterially in 2022, driven by foreign operations growth, with long-term increases anticipated from international subsidiary expansion Provision for Income Taxes (2022 vs. 2021) | Metric | 2022 (in thousands) | 2021 (in thousands) | Change Amount (in thousands) | Change Percentage | | :-------------------------- | :------------------ | :------------------ | :--------------------------- | :---------------- | | Provision for income taxes | $(104) | $(60) | $(44) | 73% | - The increase in income tax provision was immaterial, driven by growth in foreign subsidiary operations and expenses[348](index=348&type=chunk) - Income tax expense is expected to increase long-term with international subsidiary growth[348](index=348&type=chunk) [Non-GAAP Financial Measures (Summary Table)](index=77&type=section&id=Non-GAAP%20Financial%20Measures) Weave uses non-GAAP measures like Free Cash Flow and Adjusted EBITDA to provide additional insights into financial performance and operational trends for management and investors - Weave uses Free Cash Flow, Free Cash Flow Margin, and Adjusted EBITDA as non-GAAP measures to enhance understanding of financial performance and evaluate growth trends[349](index=349&type=chunk)[354](index=354&type=chunk) Non-GAAP Financial Measures (2022 vs. 2021) | Metric | 2022 (in thousands) | 2021 (in thousands) | | :------------------------------------------ | :------------------ | :------------------ | | Net cash used in operating activities | $(12,766) | $(20,373) | | Net cash used in investing activities | $(54,026) | $(9,809) | | Net cash provided by (used in) financing activities | $(7,207) | $110,480 | | Free cash flow | $(15,893) | $(30,182) | | Net cash used in operating activities as a percentage of revenue | (9)% | (18)% | | Free cash flow margin | (11)% | (26)% | | Net loss | $(49,738) | $(51,690) | | Adjusted EBITDA | $(25,692) | $(33,271) | [Liquidity and Capital Resources](index=78&type=section&id=Liquidity%20and%20Capital%20Resources) Weave's liquidity as of December 31, 2022, included **$62.0 million** in cash and **$51.3 million** in short-term investments, deemed sufficient for 12 months, with improved operating cash flow - Weave has financed operations through equity issuances and subscriptions, with an accumulated deficit of **$231.6 million** and negative operating cash flows as of December 31, 2022[355](index=355&type=chunk) Liquidity Sources (as of December 31, 2022) | Metric | Amount (Millions) | | :-------------------------- | :---------------- | | Cash and cash equivalents | $62.0 | | Short-term investments | $51.3 | | Current deferred revenue | $34.1 | | Outstanding borrowings (line of credit) | $10.0 | - The company believes current liquidity is sufficient for at least the next 12 months, with the Silicon Valley Bank closure having an immaterial impact on its cash holdings[357](index=357&type=chunk)[359](index=359&type=chunk)[419](index=419&type=chunk)[420](index=420&type=chunk) Summary of Cash Flows (2022 vs. 2021) | Activity | 2022 (in thousands) | 2021 (in thousands) | | :------------------------------------------ | :------------------ | :------------------ | | Net cash used in operating activities | $(12,766) | $(20,373) | | Net cash used in investing activities | $(54,026) | $(9,809) | | Net cash provided by (used in) financing activities | $(7,207) | $110,480 | [Operating Activities](index=79&type=section&id=Operating%20Activities) Cash used in operating activities decreased to **$12.8 million** in 2022, driven by a net loss adjusted for non-cash charges and changes in operating assets and liabilities Cash Used in Operating Activities (2022 vs. 2021) | Metric | 2022 (in thousands) | 2021 (in thousands) | | :-------------------------- | :------------------ | :------------------ | | Net cash used in operating activities | $(12,766) | $(20,373) | | Net loss | $(49,738) | $(51,690) | | Non-cash charges | $46,800 | $36,000 | | Net cash outflows from changes in operating assets/liabilities | $(9,900) | $(4,700) | - Changes in operating assets and liabilities included a **$12.3 million** increase in deferred contract costs and a **$1.0 million** increase in accounts receivable, partially offset by a **$4.6 million** increase in deferred revenue[360](index=360&type=chunk) [Investing Activities](index=79&type=section&id=Investing%20Activities) Cash used in investing activities significantly increased to **$54.0 million** in 2022, primarily due to **$50.9 million** in short-term investment purchases Cash Used in Investing Activities (2022 vs. 2021) | Metric | 2022 (in thousands) | 2021 (in thousands) | | :-------------------------- | :------------------ | :------------------ | | Net cash used in investing activities | $(54,026) | $(9,809) | | Purchases of short-term investments | $(50,915) | $0 | | Purchases of property and equipment | $(1,895) | $(7,376) | | Capitalized internal-use software costs | $(1,232) | $(2,433) | - The significant increase in cash used in investing activities in 2022 was primarily due to purchases of short-term investments[361](index=361&type=chunk) [Financing Activities](index=80&type=section&id=Financing%20Activities) Cash used in financing activities was **$7.2 million** in 2022, a shift from **$110.5 million** provided in 2021, primarily due to finance lease payments and IPO costs Cash Flows from Financing Activities (2022 vs. 2021) | Metric | 2022 (in thousands) | 2021 (in thousands) | | :------------------------------------------ | :------------------ | :------------------ | | Net cash provided by (used in) financing activities | $(7,207) | $110,480 | | Principal payments on finance leases | $(8,709) | $(7,860) | | Proceeds from stock option exercises | $1,315 | $4,166 | | Proceeds from IPO, net | $0 | $111,600 | | Paid offering costs | $(671) | $(3,426) | | Proceeds from ESPP | $858 | $0 | - 2022 financing cash outflow was primarily due to finance lease principal payments and IPO offering costs[364](index=364&type=chunk) - 2021 financing cash inflow was primarily driven by **$111.6 million** net proceeds from the initial public offering[365](index=365&type=chunk) [Critical Accounting Estimates](index=80&type=section&id=Critical%20Accounting%20Estimates) Weave's financial statements rely on significant management judgments and estimates for deferred contract costs, stock-based compensation, and income taxes, including valuation allowances - Significant judgments and estimates are required for deferred contract costs, stock-based compensation, and income taxes[366](index=366&type=chunk)[367](index=367&type=chunk) - Deferred contract costs (e.g., sales commissions) are amortized over an estimated three-year benefit period, based on technology life cycle and customer relationship period[368](index=368&type=chunk) - Stock-based compensation fair values are estimated using the Black-Scholes model for options and ESPP, and closing market price for RSUs, with subjective assumptions[369](index=369&type=chunk)[372](index=372&type=chunk) - Income tax estimates involve recognizing deferred tax assets/liabilities and a valuation allowance, with a full allowance on domestic deferred tax assets due to cumulative losses[373](index=373&type=chunk) [Contractual Obligations and Commitments](index=81&type=section&id=Contractual%20Obligations%20and%20Commitments) Weave's principal commitments include obligations under the Silicon Valley Bank Credit Facility, operating and finance leases, and non-cancellable purchase commitments - Principal commitments include obligations under the Silicon Valley Bank Credit Facility, operating leases for office space, finance leases for phone equipment, and non-cancellable purchase commitments[374](index=374&type=chunk) [Indemnifications](index=81&type=section&id=Indemnifications) Weave indemnifies partners, customers, directors, and officers against liabilities like IP infringement and data compromise, with no significant historical costs incurred - Weave indemnifies partners, resellers, and customers against liabilities from data compromise (especially PHI) and intellectual property infringement[375](index=375&type=chunk) - Directors and officers are also indemnified against liabilities arising from their service, excluding willful misconduct[501](index=501&type=chunk) - No significant costs or accrued liabilities related to indemnification obligations have been incurred historically or as of December 31, 2022[375](index=375&type=chunk)[500](index=500&type=chunk)[501](index=501&type=chunk) [Silicon Valley Bank Credit Facility](index=81&type=section&id=Silicon%20Valley%20Bank%20Credit%20Facility) Weave has a **$50.0 million** revolving line of credit with SVB, with **$10.0 million** outstanding as of December 31, 2022, and expects it to be honored despite SVB's closure - Weave has a **$50.0 million** revolving line of credit with SVB, with **$10.0 million** outstanding as of December 31, 2022[377](index=377&type=chunk)[503](index=503&type=chunk)[504](index=504&type=chunk) - The agreement includes financial covenants requiring minimum liquidity and specified EBITDA levels if unrestricted cash at SVB falls below **$100.0 million**[378](index=378&type=chunk)[503](index=503&type=chunk) - Weave was in compliance with all debt covenants as of December 31, 2022[378](index=378&type=chunk)[503](index=503&type=chunk) - Following SVB's closure, the company's cash at SVB was immaterial, and the credit facility is expected to be honored by Silicon Valley Bridge Bank, N.A[378](index=378&type=chunk)[534](index=534&type=chunk)[535](index=535&type=chunk) [Off-Balance Sheet Arrangements](index=82&type=section&id=Off-Balance%20Sheet%20Arrangements) Weave Communications, Inc. had no off-balance sheet financing arrangements or relationships with unconsolidated entities during the reported periods - Weave did not have any off-balance sheet financing arrangements or relationships with unconsolidated entities during the reported periods[379](index=379&type=chunk) [Recently Adopted Accounting Pronouncements](index=82&type=section&id=Recently%20Adopted%20Accounting%20Pronouncements) Weave adopted Topic 842, Leases, on January 1, 2022, recognizing ROU assets and lease liabilities on the balance sheet using the modified retrospective method - Weave adopted Topic 842, Leases, on January 1, 2022, using the modified retrospective method[461](index=461&type=chunk) - The adoption resulted in the recognition of cumulative operating lease liabilities of **$52.8 million** and operating ROU assets of **$48.5 million**[461](index=461&type=chunk) - Capital lease obligations of **$15.0 million** and related assets of **$12.4 million** were rec