Weave munications(WEAV) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Q1 2022 unaudited financials report 30% revenue growth to $33.3 million, a widened net loss of $13.8 million, and total assets of $226.2 million Condensed Consolidated Balance Sheets Total assets increased to $226.2 million by March 31, 2022, primarily due to ASC 842 adoption, while cash and cash equivalents decreased to $128.9 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $128,900 | $135,996 | | Total current assets | $146,187 | $154,447 | | Total assets | $226,200 | $187,485 | | Total current liabilities | $59,604 | $54,307 | | Total liabilities | $123,699 | $75,184 | | Total stockholders' equity | $102,501 | $112,301 | - The significant increase in non-current assets and liabilities is primarily due to the adoption of lease accounting standard ASC 842 on January 1, 2022, resulting in the recognition of operating lease right-of-use assets and corresponding liabilities[13][46] Condensed Consolidated Statements of Operations Q1 2022 revenue grew 30% to $33.3 million, but net loss widened to $13.8 million due to a 40% increase in operating expenses Statement of Operations Summary (in thousands) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Revenue | $33,272 | $25,668 | | Gross Profit | $19,519 | $14,866 | | Total Operating Expenses | $33,028 | $23,575 | | Loss from Operations | $(13,509) | $(8,709) | | Net Loss | $(13,838) | $(8,983) | | Net Loss per Share | $(0.21) | $(0.79) | Condensed Consolidated Statements of Cash Flows Q1 2022 saw net cash used in operating activities improve to $4.2 million, with overall cash and cash equivalents decreasing by $7.1 million Cash Flow Summary (in thousands) | Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(4,171) | $(5,272) | | Net cash used in investing activities | $(908) | $(2,321) | | Net cash used in financing activities | $(2,017) | $(1,569) | | Net decrease in cash | $(7,096) | $(9,162) | Notes to the Condensed Consolidated Financial Statements Notes detail accounting policies, ASC 842 adoption, disaggregated revenue, a $50 million credit line, and $3.4 million in stock-based compensation - The company adopted lease accounting standard ASC 842 on January 1, 2022, using the modified retrospective approach, resulting in the recognition of cumulative operating lease liabilities of $52.8 million and operating right-of-use assets of $48.5 million[46] Disaggregated Revenue (in thousands) | Revenue Source | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Subscription and payment processing | $31,950 | $23,899 | | Onboarding | $262 | $1,038 | | Phone hardware lease | $1,060 | $731 | | Total revenue | $33,272 | $25,668 | - The company has a $50 million revolving line of credit with Silicon Valley Bank, with $10 million outstanding as of March 31, 2022, subject to financial covenants if unrestricted cash falls below $100 million[71][72] - Total stock-based compensation expense was $3.4 million for Q1 2022, up from $1.8 million in Q1 2021, with $21.6 million of unrecognized expense related to RSUs as of March 31, 2022[74][82] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2022 performance, highlighting 30% revenue growth, improved retention rates, increased net loss, and strong liquidity - Weave's business model focuses on an all-in-one customer communication and engagement software platform for small and medium-sized businesses (SMBs), expanding into new verticals like home services[92][95] Key Business Metrics | Metric | March 31, 2022 | March 31, 2021 | | :--- | :--- | :--- | | Dollar-based net retention rate | 103% | 102% | | Dollar-based gross retention rate | 94% | 92% | Non-GAAP Financial Measures (in thousands) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Free cash flow | $(5,079) | $(7,593) | | Free cash flow margin | (15)% | (30)% | | Adjusted EBITDA | $(9,123) | $(6,335) | Results of Operations Q1 2022 revenue grew 30% to $33.3 million, primarily from new customers, while operating expenses increased 40% due to higher personnel and public company costs - Revenue grew by $7.6 million (30%) year-over-year, with approximately $7.0 million (92%) of the increase attributable to new customers acquired after March 31, 2021[145][146] - Sales and marketing expenses increased by 38% to $16.2 million, primarily due to a $3.4 million increase in personnel-related expenses from higher headcount[148] - General and administrative expenses saw the largest percentage increase (60%) to $9.6 million, driven by higher personnel costs, a $0.8 million increase in liability insurance, and a $0.7 million increase in professional fees following the IPO[150][151] Liquidity and Capital Resources The company maintains strong liquidity with $128.9 million in cash, financed by equity and subscriptions, and expects sufficient funds for the next 12 months - The company had an accumulated deficit of $195.7 million and cash and cash equivalents of $128.9 million as of March 31, 2022[154][155] - Net cash used in operating activities for Q1 2022 was $4.2 million, an improvement from $5.3 million in Q1 2021, primarily driven by the net loss of $13.8 million offset by non-cash charges and working capital changes[159][160][161] Quantitative and Qualitative Disclosures About Market Risk Market risk exposure, including interest rate and foreign currency risks, remains materially unchanged since December 31, 2021 - There have been no material changes in the company's exposure to market risk, including interest rate and foreign currency risks, since the end of the previous fiscal year[177] Controls and Procedures Disclosure controls were ineffective as of March 31, 2022, due to ongoing material weaknesses in internal financial reporting, with a remediation plan in progress - Management concluded that disclosure controls and procedures were not effective as of March 31, 2022, due to ongoing material weaknesses in internal control over financial reporting[179] - The material weaknesses include not maintaining an effective control environment with sufficient accounting personnel and not maintaining effective controls for complex transactions like capitalization of contract costs and stock option valuation[181] - A remediation plan is in progress, which involves hiring more finance and accounting staff, using external consultants for complex accounting matters, and providing ongoing training[182] PART II. OTHER INFORMATION Legal Proceedings No material legal proceedings are currently anticipated to adversely affect the company's business or financial condition - As of the report date, Weave is not involved in any legal proceedings anticipated to have a significant impact on its financial condition or operations[187] Risk Factors Key risks include historical losses, SMB customer reliance, COVID-19 impact, competition, system security, third-party dependencies, and regulatory compliance - The company has a history of net losses, including $13.8 million for Q1 2022, and may not achieve or sustain profitability in the future as it continues to invest in growth[211] - The business is subject to risks associated with serving Small and Medium-sized Businesses (SMBs), which have higher failure rates and are more susceptible to economic downturns[208] - The ongoing COVID-19 pandemic could continue to adversely impact the business by causing a slowdown in new customer acquisition, reduced customer demand, and delayed sales cycles[192][193][194] - Material weaknesses in internal control over financial reporting have been identified and are being remediated, with failure to maintain effective controls potentially resulting in material misstatements of financial statements[357][358] - The company is subject to extensive government regulation, including FCC rules for VoIP services, TCPA for messaging, and data privacy laws like HIPAA, which expose it to compliance costs and potential liability[306][315][327] Exhibits The exhibits section lists filed documents, including employment agreements, compensation policies, and CEO/CFO certifications - The exhibits filed with the report include management compensation plans, employment agreements, and certifications by the CEO and CFO as required by the Sarbanes-Oxley Act[401]