Weave munications(WEAV) - 2023 Q4 - Annual Report

Part I Business Overview 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] - 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][27][29] 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][49][50] - 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][55] - 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][67][68] - 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][72][74] Risk Factors 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] - 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] - 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] - 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][100] - 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] - 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] - 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][214] - The company does not intend to pay dividends in the foreseeable future, requiring investors to rely on stock price appreciation for investment returns[258] Unresolved Staff Comments The company has no unresolved staff comments. - Not applicable[278] Cybersecurity 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] - Significant cybersecurity incidents are regularly reviewed by cross-functional working groups and reported to senior management and the audit committee[280][281] - 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] Properties 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] - 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][284] Legal Proceedings 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] - 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] Mine Safety Disclosures The company has no mine safety disclosures. - None[286] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 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] - As of March 8, 2024, the company had 34 registered holders of its common stock[290] - 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][258] - The company has not engaged in unregistered sales of securities or issuer purchases of equity securities[297][298] Reserved This item is reserved, with no specific information provided. - This item is reserved[299] Management's Discussion and Analysis of Financial Condition and Results of Operations 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][303] 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][363] - 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][381] Quantitative and Qualitative Disclosures About Market Risk 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] - 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] - 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] - 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] Financial Statements and Supplementary Data 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] 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][464] - 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] 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] Changes in and Disagreements With Accountants on Accounting and Financial Disclosures The company has no changes in or disagreements with accountants on accounting and financial disclosures. - None[543] Controls and Procedures 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] - As of December 31, 2023, company management assessed and concluded that the company's internal control over financial reporting was effective[546] - 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] - No material changes occurred in the company's internal control over financial reporting during the quarter ended December 31, 2023[547] - 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] Other Information 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] Disclosure Regarding Foreign Jurisdiction that Prevent Inspections. The company has no disclosures regarding foreign jurisdictions that prevent inspections. - Not applicable[550] Part III Directors, Executive Officers and Corporate Governance 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] Executive Compensation 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] Security Ownership of Certain Beneficial Owner and Management and Related Stockholder Matters 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] Certain Relationships and Related Transactions, and Director Independence 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] Principal Accounting Fees and Services 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] Part IV Exhibits, Financial Statement Schedules 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] - All financial statement schedules have been omitted because the information is not applicable or is included in the financial statements or notes thereto[560] - The company has filed or incorporated by reference a list of exhibits to this annual report[561] Form 10-K Summary The company has no Form 10-K Summary. - Not applicable[567] 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][574] - This section includes a power of attorney authorizing designated individuals to sign any amendments to this annual report on behalf of the signatories[572]