Weave munications(US:WEAV)2024-08-07 20:25Part I. Financial Information Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for Weave Communications, Inc. as of June 30, 2024, including balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows, along with accompanying notes, reporting a net loss of $8.6 million for Q2 2024, an improvement from $9.0 million in Q2 2023 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $51,659 | $50,756 | | Short-term investments | $47,383 | $58,088 | | Total current assets | $121,103 | $129,778 | | TOTAL ASSETS | $191,199 | $201,012 | | Liabilities & Equity | | | | Deferred revenue | $40,562 | $38,850 | | Total current liabilities | $74,053 | $72,853 | | Total liabilities | $121,376 | $122,055 | | Total stockholders' equity | $69,823 | $78,957 | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $50,586 | $41,667 | $97,759 | $81,232 | | Gross Profit | $36,124 | $28,041 | $69,111 | $54,575 | | Loss from operations | $(9,255) | $(9,833) | $(17,410) | $(18,351) | | Net loss | $(8,553) | $(8,988) | $(15,756) | $(16,847) | | Net loss per share | $(0.12) | $(0.13) | $(0.22) | $(0.25) | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,975 | $3,145 | | Net cash provided by (used in) investing activities | $9,515 | $(7,781) | | Net cash used in financing activities | $(11,587) | $(5,236) | | Net increase (decrease) in cash | $903 | $(9,872) | Notes to the Condensed Consolidated Financial Statements The notes provide detailed information supporting the financial statements, covering business description as a customer experience and payments software platform for healthcare SMBs, revenue recognition, disaggregation of revenue, leases, debt facilities, and stock-based compensation, with the company operating as a single reportable segment - The company's business is providing a vertically tailored customer experience and payments software platform, combining customer engagement, payments, and VoIP phone services for small- and medium-sized healthcare businesses15 Disaggregation of Revenue (in thousands) | Revenue Source | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Subscription and payment processing | $48,513 | $39,696 | $93,605 | $77,388 | | Onboarding | $943 | $867 | $1,903 | $1,651 | | Hardware (embedded lease) | $1,130 | $1,104 | $2,251 | $2,193 | | Total revenue | $50,586 | $41,667 | $97,759 | $81,232 | Stock-Based Compensation Expense (in thousands) | Expense Category | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Cost of revenue | $244 | $251 | $483 | $464 | | Sales and marketing | $1,696 | $1,219 | $2,847 | $2,183 | | Research and development | $2,178 | $1,323 | $4,076 | $2,253 | | General and administrative | $4,173 | $3,083 | $7,657 | $5,489 | | Total | $8,291 | $5,876 | $15,063 | $10,389 | - The company has a $50.0 million revolving line of credit with Silicon Valley Bank, which was undrawn as of June 30, 2024. The facility matures in August 2025 and is subject to financial covenants, including minimum liquidity and adjusted EBITDA levels if unrestricted cash falls below $100.0 million6667 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, highlighting a 21% year-over-year revenue increase for Q2 2024, primarily driven by new customer acquisition, improved gross margin to 71% from 67% due to cost efficiencies, and narrowed loss from operations despite increased operating expenses, also covering key business metrics, liquidity, and non-GAAP measures like Adjusted EBITDA, which showed significant improvement Overview and Key Business Metrics Weave provides a unified customer experience and payments platform for healthcare SMBs, with performance driven by attracting new customers, retaining and expanding within the existing base, adding new products, and expanding into new verticals, showing an improvement in customer retention - The company's strategy focuses on attracting new customers, retaining and expanding revenue from the existing customer base, adding new products like Weave Payments, and expanding into new healthcare verticals939496 Key Business Metrics | Metric | June 30, 2024 | June 30, 2023 | | :--- | :--- | :--- | | Dollar-based net retention rate | 97% | 96% | | Dollar-based gross retention rate | 92% | 92% | Disaggregated Gross Margin Analysis | Category | Q2 2024 Gross Margin | Q2 2023 Gross Margin | | :--- | :--- | :--- | | Subscription and payment processing | 78% | 76% | | Onboarding | (115)% | (162)% | | Hardware | (53)% | (67)% | Results of Operations For Q2 2024, revenue increased 21% to $50.6 million, driven by new customer locations, with gross margin improving to 71% from 67% YoY due to reduced third-party costs and efficiencies, while operating expenses rose, with Sales and Marketing up 25% to $21.9 million, R&D up 16% to $10.0 million, and G&A up 14% to $13.5 million, reflecting investments in growth, and the net loss narrowed slightly to $8.6 million from $9.0 million in Q2 2023 Revenue Comparison (Q2 2024 vs Q2 2023, in thousands) | Period | Revenue | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | | Q2 2024 | $50,586 | $8,919 | 21% | | Q2 2023 | $41,667 | | | - Gross margin improved from 67% in Q2 2023 to 71% in Q2 2024. This was driven by successful efforts to reduce third-party costs for platform features, overall data usage, and realized efficiencies in customer support and onboarding124125 Operating Expense Comparison (Q2 2024 vs Q2 2023, in thousands) | Expense Category | Q2 2024 | Q2 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Sales and marketing | $21,889 | $17,455 | $4,434 | 25% | | Research and development | $9,958 | $8,585 | $1,373 | 16% | | General and administrative | $13,532 | $11,834 | $1,698 | 14% | Non-GAAP Financial Measures The company uses non-GAAP measures, including Free Cash Flow and Adjusted EBITDA, to evaluate performance, with Free Cash Flow at $21.2 million in Q2 2024, a significant increase from $0.9 million in Q2 2023 due to deferred billings collection, and Adjusted EBITDA improving to a positive $5,000 from a loss of $3.0 million in Q2 2023, reflecting better gross margins and operating leverage Non-GAAP Financial Measures (in thousands) | Measure | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Free cash flow | $21,217 | $929 | $698 | $1,516 | | Adjusted EBITDA | $5 | $(3,032) | $(353) | $(6,146) | - The significant increase in free cash flow for Q2 2024 was largely due to the collection of approximately $15.0 million in subscription billings that were deferred from March 2024 following the implementation of a new billing system139 Liquidity and Capital Resources As of June 30, 2024, Weave's principal sources of liquidity were $51.7 million in cash and cash equivalents and $47.4 million in short-term investments, with a $50.0 million undrawn revolving credit facility with SVB, and management believes existing cash, investments, and available credit will be sufficient to meet working capital needs for at least the next twelve months - As of June 30, 2024, the company's principal sources of liquidity included $51.7 million in cash and cash equivalents and $47.4 million in short-term investments146 - The company has a $50.0 million revolving line of credit with SVB, which matures in August 2025. As of June 30, 2024, there was no outstanding balance, the full amount was available for borrowing, and the company was in compliance with all covenants155157 Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that the company's exposure to market risks, including changes in interest rates and foreign currency rates, has not materially changed since the fiscal year ended December 31, 2023 - The company's exposure to market risk, primarily related to interest rates and foreign currency, has not changed materially since December 31, 2023162 Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2024, with no material changes in internal control over financial reporting during the quarter - Management concluded that as of June 30, 2024, the company's disclosure controls and procedures were effective to provide reasonable assurance that required information is recorded, processed, and reported in a timely manner163 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls164 Part II. Other Information Item 1. Legal Proceedings The company reports that it is not currently a party to any legal proceedings that would be expected to have a material adverse effect on its business, financial condition, or results of operations - As of the reporting date, Weave is not involved in any legal proceedings anticipated to have a material adverse effect on its business, financial condition, or cash flows166 Item 1A. Risk Factors This section outlines significant risks to the company's business, including its history of net losses and potential inability to achieve profitability, dependence on attracting and retaining small and medium-sized healthcare business (SMB) customers, intense market competition, reliance on third-party infrastructure like Google Cloud Platform (GCP) and payment processors, and substantial regulatory risks related to communications (TCPA, FCC) and data privacy (HIPAA, CCPA) - Business & Financial Risks: The company has a history of losses and may not achieve or sustain profitability. Its growth depends on attracting and retaining SMB customers, who are more susceptible to economic downturns and have higher churn rates179182 - Competitive & Market Risks: The market is highly competitive and fragmented, with competition from both point solutions and larger systems of record (e.g., Practice Management Systems) that could integrate competing functionalities204206 - Technology & Infrastructure Risks: The business substantially relies on third-party providers, including Google Cloud Platform (GCP) for hosting and Stripe for payment processing. Any disruption with these single-source suppliers could materially harm operations228237 - Regulatory & Compliance Risks: The company is subject to complex regulations, including HIPAA for protecting health information, the TCPA for telemarketing, and various FCC rules. Non-compliance could result in significant fines, penalties, and reputational damage283292301 Item 5. Other Information This section discloses that during the quarter, Chief Legal Officer Erin Goodsell and Chief Financial Officer Alan Taylor each adopted a Rule 10b5-1 trading plan for the potential sale of company shares - During Q2 2024, Chief Legal Officer Erin Goodsell (May 16) and Chief Financial Officer Alan Taylor (June 7) each adopted a Rule 10b5-1 trading plan for the sale of company stock370371 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the CEO and CFO certifications as required by the Sarbanes-Oxley Act (Sections 302 and 906) and the financial statements formatted in Inline XBRL - The exhibits filed with this report include certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Rules 13a-14(a) and 18 U.S.C. Section 1350 (Sarbanes-Oxley Act of 2002)372