Weave munications(WEAV) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial information for Weave Communications, Inc. for the quarter ended June 30, 2025 Item 1. Financial Statements (Unaudited) This section presents Weave Communications, Inc.'s unaudited condensed consolidated financial statements and accompanying notes for the quarter ended June 30, 2025 Condensed Consolidated Balance Sheets The balance sheets detail the company's financial position, including assets, liabilities, and equity at specific reporting dates | ASSETS (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Total current assets | $99,373 | $120,739 | | TOTAL ASSETS | $204,344 | $188,926 | | LIABILITIES (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Total current liabilities | $81,271 | $76,620 | | Total liabilities | $125,467 | $121,958 | | Total stockholders' equity | $78,877 | $66,968 | - Total assets increased from $188.9 million at December 31, 2024, to $204.3 million at June 30, 2025, primarily driven by the acquisition of Vidurama, Inc. (TrueLark) which added intangible assets and goodwill[13][42][43] Condensed Consolidated Statements of Operations and Comprehensive Loss This statement outlines the company's revenues, expenses, and net loss over specific periods, reflecting operational performance | (in thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $58,470 | $50,586 | $114,279 | $97,759 | | Gross profit | $41,951 | $36,124 | $81,896 | $69,111 | | Loss from operations | $(10,186) | $(9,255) | $(19,506) | $(17,410) | | Net loss | $(8,711) | $(8,553) | $(17,536) | $(15,756) | | Net loss per share - basic and diluted | $(0.11) | $(0.12) | $(0.23) | $(0.22) | - Revenue increased by 16% for the three months ended June 30, 2025, and 17% for the six months ended June 30, 2025, compared to the respective prior periods, while net loss slightly increased for both periods[15][153][162] Condensed Consolidated Statements of Stockholders' Equity This statement tracks changes in stockholders' equity, including common stock, additional paid-in capital, and accumulated deficit | (in thousands, except share amounts) | Balance - December 31, 2024 | Issuance of common shares upon the acquisition of Vidurama, Inc. | Stock-based compensation | Net loss | Balance - June 30, 2025 | | :----------------------------------- | :-------------------------- | :--------------------------------------------------------------- | :----------------------- | :------- | :---------------------- | | Common Stock Shares | 73,225,253 | 928,691 | — | — | 76,893,957 | | Additional Paid-in Capital | $358,549 | $10,041 | $17,494 | — | $387,641 | | Accumulated Deficit | $(291,013) | — | — | $(17,536) | $(308,549) | | Total Stockholders' Equity | $66,968 | $10,041 | $17,494 | $(17,536) | $78,877 | - Total stockholders' equity increased from $66.9 million at December 31, 2024, to $78.8 million at June 30, 2025, primarily due to equity issued for the Vidurama acquisition and stock-based compensation, partially offset by net loss[19][43] Condensed Consolidated Statements of Cash Flows This statement summarizes cash inflows and outflows from operating, investing, and financing activities over specific periods | (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $5,226 | $2,975 | | Net cash (used in) provided by investing activities | $(10,127) | $9,515 | | Net cash used in financing activities | $(2,030) | $(11,587) | | CASH AND CASH EQUIVALENTS, END OF PERIOD | $44,665 | $51,659 | - Cash provided by operating activities increased to $5.2 million for the six months ended June 30, 2025, from $3.0 million in the prior year[21][185] Investing activities shifted from providing cash to using cash, primarily due to the TrueLark acquisition[21][187] Notes to the Condensed Consolidated Financial Statements These notes provide detailed explanations of the company's business, accounting policies, and specific financial statement items Note 1. Description of the Business This note describes Weave Communications, Inc.'s core business, its software platform, and target market - Weave Communications, Inc. provides a vertically-tailored customer experience and payments software platform for small and medium-sized healthcare businesses, combining patient engagement, payments, and operational software with VoIP phone services[22] Note 2. Basis of Presentation and Summary of Significant Accounting Policies This note outlines the accounting principles and policies used in preparing the financial statements, including recent accounting pronouncements - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP and SEC rules for interim reporting, consistent with annual statements[23][24] The company operates as one reportable segment[25] - Significant accounting policies include business combinations (acquisition method), amortization of finite-lived intangibles (5-7 years), and annual goodwill impairment testing[28][30][32] The company adopted ASU 2023-07 retrospectively for enhanced segment disclosures and is evaluating ASU 2023-09 and ASU 2024-03[37][38][39] Note 3. Business Combinations This note details the acquisition of Vidurama, Inc. (TrueLark), including purchase price allocation and related financial impacts - On May 16, 2025, Weave acquired Vidurama, Inc. (TrueLark), an AI-powered receptionist platform, for $35.8 million[42] The acquisition included $23.5 million cash, $10.0 million in equity, and $2.2 million in holdback amounts[43] Preliminary Purchase Price Allocation (in thousands) | Preliminary Purchase Price Allocation (in thousands) | Amount | | :----------------------------------- | :----- | | Total purchase consideration | $35,763 | | Identifiable assets acquired | $8,935 | | Liabilities assumed | $2,485 | | Goodwill | $29,313 | - Goodwill of $29.3 million was recorded, attributable to expected synergies and assembled workforce value[44] Acquired intangible assets include developed technology (5-year amortization), customer relationships (7-year amortization), and trademarks/trade names (7-year amortization)[44] - Performance-based restricted stock unit awards (PRSUs) for TrueLark employees, totaling up to $10.0 million, will vest based on revenue milestones and continued employment, recognized as operating expense post-acquisition[45] Note 4. Goodwill and Intangible Assets This note provides information on the company's goodwill and intangible assets, including amortization schedules and balances Goodwill Activity (in thousands) | Goodwill Activity (in thousands) | Amount | | :------------------------------- | :----- | | Balance as of December 31, 2024 | $— | | Additions (Note 3) | $29,313 | | Balance as of June 30, 2025 | $29,313 | Intangible Assets (in thousands) | Intangible Assets (in thousands) | Weighted-Average Remaining Useful Life | Net (June 30, 2025) | | :------------------------------- | :------------------------------------- | :------------------ | | Trademarks and Trade Names | 82 months | $1,375 | | Developed Technology | 58 months | $4,195 | | Customer Relationships | 82 months | $2,274 | | Total | | $7,844 | - Amortization expense for intangible assets was $0.2 million for the three and six months ended June 30, 2025[47] Estimated future amortization expense is $0.7 million for the remainder of 2025 and $1.38 million annually from 2026-2029[47][48] Note 5. Revenue This note details the company's revenue recognition policies and disaggregation of revenue by source - The Company recognized $20.8 million and $31.7 million in revenue from deferred revenue balances for the three and six months ended June 30, 2025, respectively[50] - Amortization expense for deferred contract costs was $3.7 million and $7.2 million for the three and six months ended June 30, 2025, respectively, included in sales and marketing[51] Disaggregation of Revenues (in thousands) | Disaggregation of Revenues (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Subscription and payment processing | $56,005 | $48,513 | $109,420 | $93,605 | | Onboarding | $833 | $943 | $1,721 | $1,903 | | Phone Hardware (embedded lease) | $1,632 | $1,130 | $3,138 | $2,251 | | Total revenue | $58,470 | $50,586 | $114,279 | $97,759 | Note 6. Fair Value Measurements This note describes the fair value measurements of financial assets and liabilities, including valuation methodologies Assets Measured at Fair Value (in thousands) | Assets Measured at Fair Value (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------------- | :------------ | :---------------- | | Cash equivalents (Money market funds) | $26,164 | $31,708 | | Short-term investments (US gov/agency securities) | $23,349 | $32,323 | | Short-term investments (Commercial paper) | $9,831 | $15,211 | | Total | $59,344 | $79,242 | - The weighted-average remaining contractual maturities of available-for-sale securities was approximately two months, nineteen days as of June 30, 2025[57] Unrealized losses are considered temporary[59] - Realized gains from discount accretion were $0.3 million and $0.5 million for the three months ended June 30, 2025 and 2024, respectively, and $0.7 million and $1.2 million for the six months ended June 30, 2025 and 2024, respectively[62] Note 7. Property and Equipment This note provides details on the company's property and equipment, including gross amounts, accumulated depreciation, and net book value Property and Equipment (in thousands) | Property and Equipment (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Property and equipment, gross | $24,736 | $24,426 | | Less accumulated depreciation and amortization | $(16,145) | $(15,983) | | Property and equipment, net | $8,591 | $8,443 | - Depreciation and amortization expense on property and equipment was $2.9 million for both three-month periods and $5.7 million and $5.8 million for the six-month periods ended June 30, 2025 and 2024, respectively[63] Note 8. Leases This note outlines the company's lease arrangements, including operating and finance leases, and associated expenses and revenues Lease Expense (in thousands) | Lease Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total lease expense | $3,750 | $3,564 | $7,367 | $7,180 | - The Company leases office space (operating lease, expires Jan 2033) and finances phone hardware (finance leases, 93 active agreements, maturities July 2025 to June 2028)[67][74] Lessor Revenues (in thousands) | Lessor Revenues (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Phone hardware revenue | $1,632 | $1,130 | $3,138 | $2,251 | | Sublease revenue | $219 | $219 | $439 | $439 | | Total | $1,851 | $1,349 | $3,577 | $2,690 | Note 9. Income Taxes This note details the company's income tax provision, effective tax rates, and deferred tax assets and liabilities - The Company recorded an income tax benefit of $1.1 million for the three months ended June 30, 2025 (effective tax rate 11.3%), compared to an expense of $0.1 million in 2024[76] For the six months, a benefit of $1.0 million (effective tax rate 5.57%) was recorded, versus an expense of $0.1 million in 2024[76] - The tax benefit was primarily due to a $1.28 million discrete release of a valuation allowance on deferred tax assets, supported by a deferred tax liability from the TrueLark acquisition's intangible assets[77] - The Company continues to maintain a full valuation allowance on its remaining U.S. deferred tax assets and is evaluating the impact of the 'One Big Beautiful Bill' signed into law on July 4, 2025[78][79] Note 10. Debt This note describes the company's debt arrangements, including its revolving line of credit and compliance with covenants - The Company has a revolving line of credit with Silicon Valley Bank (SVB) with a $50.0 million capacity, maturing in August 2027[80] The agreement was amended in July 2025, including EBITDA financial covenants and liquidity requirements[81] - As of June 30, 2025, there were no outstanding borrowings under the line of credit, and the Company was in compliance with all debt covenants[81] Note 11. Stockholders' Equity This note provides details on changes in stockholders' equity, including stock-based compensation and common stock activity Stock-Based Compensation Expense (in thousands) | Stock-Based Compensation Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of revenue | $215 | $244 | $500 | $483 | | Sales and marketing | $1,951 | $1,696 | $3,792 | $2,847 | | Research and development | $3,018 | $2,178 | $5,380 | $4,076 | | General and administrative | $4,068 | $4,173 | $8,565 | $7,657 | | Total | $9,252 | $8,291 | $18,237 | $15,063 | - Total stock-based compensation expense increased to $9.3 million for the three months ended June 30, 2025, from $8.3 million in the prior year, and to $18.2 million for the six months, from $15.1 million in the prior year[82] - As of June 30, 2025, there was $54.9 million of unrecognized stock-based compensation expense related to outstanding RSUs, expected to be recognized over a weighted-average period of 2.2 years[93] Note 12. Related Party Transactions This note discloses any transactions between the company and its related parties - There were no related-party transactions during the three and six months ended June 30, 2025 and 2024, apart from payments under the non-employee director compensation program[97] Note 13. Commitments and Contingencies This note outlines the company's commitments and potential liabilities from legal proceedings or other contingent events - The Company is not involved in any legal proceedings that could have a material adverse effect on its business as of June 30, 2025[99] - The Company enters into standard indemnification arrangements in the ordinary course of business, including for intellectual property infringement claims, but the maximum potential amount of future payments is not determinable[100] Note 14. Net Loss Per Share This note presents the calculation of basic and diluted net loss per share, including factors affecting dilutive shares Net Loss Per Share | Net Loss Per Share | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(8,711) | $(8,553) | $(17,536) | $(15,756) | | Weighted-average common shares outstanding | 75,842,852 | 71,291,801 | 74,830,541 | 70,872,372 | | Net loss per share, basic and diluted | $(0.11) | $(0.12) | $(0.23) | $(0.22) | - Potentially outstanding common shares, including options, ESPP shares, TrueLark indemnification shares, and RSUs, were excluded from diluted net loss per share computation as their inclusion would have been antidilutive[102] Note 15. Segment Reporting This note provides financial information about the company's operating segments, confirming it operates as one reportable segment - The Company operates as one reportable segment: the Weave platform, providing communications and payments services to customers in North America under software-as-a-service arrangements[104] Segment Financials (in thousands) | Segment Financials (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $58,470 | $50,586 | $114,279 | $97,75 | | Net loss | $(8,711) | $(8,553) | $(17,536) | $(15,75) | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and operational results for the quarter ended June 30, 2025 Overview This section provides a high-level summary of Weave's business model, platform, and strategic focus on small and medium-sized healthcare businesses - Weave is a leading all-in-one customer experience and payments software platform for small and medium-sized healthcare businesses, integrating communication, patient engagement, and FinTech solutions like text-to-pay[109][110] - The platform leverages AI-powered solutions and integrates with practice management systems (PMS) and electronic health record systems (EHR) to automate communications and streamline payment processes[110] Supplemental Financial Information — Disaggregated Revenue and Cost of Revenue This section breaks down revenue and cost of revenue by service type, highlighting profitability of different offerings - Recurring subscription fees and payment processing services accounted for 91% of revenue for the three months ended June 30, 2025, and 91% for the six months ended June 30, 2025[112] - Non-recurring onboarding services and phone hardware (embedded lease) are used as customer acquisition tools, often resulting in negative gross profit due to competitive pricing[113] Disaggregated Revenue and Cost of Revenue (in thousands) | Disaggregated Revenue and Cost of Revenue (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Subscription and payment processing: | | | | | | Revenue | $56,005 | $48,513 | $109,420 | $93,605 | | Cost of revenue | $(12,590) | $(10,696) | $(24,671) | $(21,232) | | Gross profit | $43,415 | $37,817 | $84,749 | $72,373 | | Gross margin | 78 % | 78 % | 77 % | 77 % | | Onboarding: | | | | | | Revenue | $833 | $943 | $1,721 | $1,903 | | Cost of revenue | $(2,075) | $(2,032) | $(4,067) | $(3,864) | | Gross profit | $(1,242) | $(1,089) | $(2,346) | $(1,961) | | Gross margin | (149)% | (115)% | (136)% | (103)% | | Phone Hardware: | | | | | | Revenue | $1,632 | $1,130 | $3,138 | $2,251 | | Cost of revenue | $(1,854) | $(1,734) | $(3,645) | $(3,552) | | Gross profit | $(222) | $(604) | $(507) | $(1,301) | | Gross margin | (14)% | (53)% | (16)% | (58)% | Factors Affecting Our Performance This section discusses key internal and external factors influencing the company's financial performance and strategic direction - Key performance drivers include attracting new customers, retaining and expanding within the existing customer base, adding new products, and expanding into new industry verticals[116] Attract New Customers This section outlines strategies and factors critical for expanding the company's customer base and market reach - Customer acquisition depends on effective pricing, marketing, channel partners, PMS/EHR integrations, and market growth[117] The enhanced web-based Weave platform and Weave Enterprise (for multi-location organizations) were introduced in 2024[118] - The acquisition of TrueLark in May 2025 provides an additional opportunity to expand the customer base among medium-sized businesses, particularly multi-location SMBs, through AI-powered workflow automation[119] Retain and Expand Within Our Customer Base This section focuses on strategies for maintaining existing customer relationships and increasing revenue from current clients - Customer retention and revenue expansion are driven by platform satisfaction, new features, and cross-selling add-on products like Bulk Texting, Forms, and Call Intelligence[120] - Subscription and payment processing gross margin was 78% for the three months ended June 30, 2025 and 2024, and 77% for the six months ended June 30, 2025 and 2024, indicating stable profitability in core services[121] Add New Products This section highlights the importance of continuous product innovation and development for business growth and market competitiveness - Continued investment in new products and functionality, including AI-enabled features and platform partnerships, is crucial for attracting new SMB customers and deepening market penetration in core specialty healthcare verticals[122] Expand to New Industry Verticals This section discusses the company's strategy for exploring and entering new market segments beyond its current core verticals - The Company evaluates additional expansion opportunities beyond its core specialty healthcare verticals (dental, optometry, veterinary) by assessing product-market fit and establishing integration partnerships[123][124] Components of Results of Operations This section details the individual revenue and expense categories that contribute to the company's overall financial results Revenue This section explains the sources and recognition policies for the company's revenue streams - Revenue is primarily generated from recurring subscription fees for software and phone services, and embedded lease revenue on phone hardware[125] Most subscriptions are month-to-month, with some 1-3 year terms[125] - Payment processing services generate revenue share from third-party facilitators, recognized net of transaction fees[126] Non-recurring installation fees for onboarding are recognized upon completion[127] Cost of Revenue This section describes the direct costs associated with generating the company's revenue - Cost of revenue includes data center, cloud infrastructure, payment processing, amortization of finance lease ROU assets, application provider fees, voice/messaging fees, and amortization of internal-use software and acquired technology[128] - Personnel-related expenses for onboarding and customer support staff, along with allocated overhead, also contribute to cost of revenue[128] Acquired technology is amortized over five years[128] Operating Expenses This section categorizes and explains the various operating expenses incurred by the company - Operating expenses comprise sales and marketing, research and development, and general and administrative expenses[131] Personnel costs (salaries, benefits, bonuses, stock-based compensation, sales commissions) are the most significant component[131] Sales and Marketing This section details expenses related to customer acquisition, brand promotion, and market development efforts - Sales and marketing expenses include personnel costs, lead-generating activities, advertising, trade shows, and amortization of acquired customer relationships and trade names (seven years)[132] - These expenses are expected to increase in absolute dollars but decrease as a percentage of revenue in 2025 and over time[133] Research and Development This section outlines costs associated with developing new products, enhancing existing features, and maintaining platform infrastructure - Research and development expenses primarily consist of employee-related costs for software engineers, supporting platform reliability, availability, and scalability[134] Costs not eligible for capitalization are expensed[134] - These expenses are expected to increase in absolute dollars but remain consistent as a percentage of revenue over time, with fluctuations due to capitalized internal-use software development costs[135] General and Administrative This section covers overhead expenses supporting overall business operations, including finance, legal, and human resources - General and administrative expenses include personnel costs for finance, legal, HR, facilities, and administrative staff, along with external professional services, software, and corporate expenses[136] - These expenses are expected to increase in absolute dollars but decrease as a percentage of revenue over time[137] Interest Income This section describes income earned from cash, cash equivalents, and short-term investments - Interest income is primarily derived from cash, cash equivalents, and short-term investments[138] Interest Expense This section details expenses incurred from borrowings and finance lease obligations - Interest expense results from borrowings and finance lease obligations, with rates based on prime rate or implicit lease agreements[139] Other Income (Expense), Net This section covers miscellaneous non-operating income and expenses, including gains/losses on investments and foreign currency - Other income (expense), net, includes gains/losses on short-term investments, foreign currency transactions, and sublease income[140] Provision for Income Taxes This section explains the company's income tax expense or benefit and related tax positions - Income tax provision primarily relates to foreign and state jurisdictions[141] A $1.1 million income tax benefit was recorded for Q2 2025, mainly due to a partial valuation allowance release from a deferred tax liability related to the TrueLark acquisition[142] Key Business Metrics This section presents non-GAAP metrics used by management to evaluate the company's operational performance and growth - Key metrics exclude the impact of TrueLark subsequent to acquisition[144] Key Business Metrics | Key Business Metrics | June 30, 2025 | June 30, 2024 | | :------------------- | :------------ | :------------ | | Dollar-based net retention rate | 96 % | 97 % | | Dollar-based gross retention rate | 90 % | 92 % | Dollar-Based Net Retention Rate This metric measures the percentage of revenue retained from existing customer locations, including expansion and contraction - NRR measures revenue retention and growth from existing customer locations, including churn, contraction, expansion, and pricing changes, but excludes new customer locations[146][147] Dollar-Based Gross Retention Rate This metric indicates the percentage of revenue retained from existing customer locations, excluding any expansion revenue - GRR indicates customer retention by measuring AMR from base locations still under subscription after twelve months, reflecting churn but not revenue expansion or new customer additions[148] Results of Operations This section provides a detailed analysis of the company's financial performance for the reported periods | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $58,470 | $50,586 | $114,279 | $97,759 | | Gross profit | $41,951 | $36,124 | $81,896 | $69,111 | | Net loss | $(8,711) | $(8,553) | $(17,536) | $(15,756) | Stock-Based Compensation (in thousands) | Stock-Based Compensation (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total stock-based compensation | $9,252 | $8,291 | $18,237 | $15,063 | Amortization of Acquisition-Related Intangibles (in thousands) | Amortization of Acquisition-Related Intangibles (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total amortization of intangibles | $156 | $— | $156 | $— | Comparison of the Three Months Ended June 30, 2025 and 2024 This section compares the company's financial performance for the three-month periods ended June 30, 2025 and 2024 Revenue This section analyzes revenue performance for the three months ended June 30, 2025, compared to the prior year | Revenue (in thousands) | 2025 | 2024 | Change Amount | Change Percentage | | :--------------------- | :-------- | :-------- | :------------ | :---------------- | | Revenue | $58,470 | $50,586 | $7,884 | 16 % | - The $7.9 million increase in revenue was primarily driven by new customer locations acquired (92%) and existing customer locations (8%)[153] Cost of Revenue and Gross Margin This section examines changes in cost of revenue and gross margin for the three months ended June 30, 2025, versus the prior year | Cost of Revenue & Gross Margin | 2025 | 2024 | Change Amount | Change Percentage | | :----------------------------- | :-------- | :-------- | :------------ | :---------------- | | Cost of revenue (in thousands) | $16,519 | $14,462 | $2,057 | 14 % | | Gross margin | 72 % | 71 % | 1 % | | - Increase in cost of revenue due to $1.3 million in direct costs (cloud infrastructure, application provider fees, connectivity) and $0.5 million in personnel-related costs[154] Gross margin improved due to favorable customer mix (depreciated phone hardware), third-party cost efficiencies, and increased higher-margin payments revenue[155][156] Sales and Marketing This section details the changes in sales and marketing expenses for the three months ended June 30, 2025, compared to the prior year | Sales and Marketing (in thousands) | 2025 | 2024 | Change Amount | Change Percentage | | :--------------------------------- | :-------- | :-------- | :------------ | :---------------- | | Sales and marketing | $25,245 | $21,889 | $3,356 | 15 % | - Increase driven by $2.4 million in personnel-related expenses (salary/commission adjustments, headcount, stock-based compensation) and $0.8 million in demand generation expenses (digital media, partner marketing, influencer marketing)[157] Research and Development This section analyzes the changes in research and development expenses for the three months ended June 30, 2025, versus the prior year | Research and Development (in thousands) | 2025 | 2024 | Change Amount | Change Percentage | | :-------------------------------------- | :-------- | :-------- | :------------ | :---------------- | | Research and development | $11,988 | $9,958 | $2,030 | 20 % | - Increase due to $2.0 million in personnel-related expenses, including $1.1 million from increased headcount and salary increases, and $0.9 million in stock-based compensation[158] General and Administrative This section details the changes in general and administrative expenses for the three months ended June 30, 2025, compared to the prior year | General and Administrative (in thousands) | 2025 | 2024 | Change Amount | Change Percentage | | :---------------------------------------- | :-------- | :-------- | :------------ | :---------------- | | General and administrative | $14,904 | $13,532 | $1,372 | 10 % | - Increase primarily from $0.8 million in personnel-related expenses (salary increases, headcount, offset by lower stock-based compensation) and $0.7 million in professional services fees, including $0.5 million for the TrueLark acquisition[159] Other Income (Expense), Net This section analyzes changes in other income and expense, net, for the three months ended June 30, 2025, versus the prior year | Other Income (Expense), Net (in thousands) | 2025 | 2024 | Change Amount | Change Percentage | | :----------------------------------------- | :------ | :------ | :------------ | :---------------- | | Total other income (expense), net | $369 | $754 | $(385) | (51)% | - Decrease largely due to lower realized gains on short-term investments, resulting from a lower average daily balance due to assets used for the TrueLark acquisition and, to a lesser extent, decreased average interest rates[161] Comparison of the Six Months Ended June 30, 2025 and 2024 This section compares the company's financial performance for the six-month periods ended June 30, 2025 and 2024 Revenue This section analyzes revenue performance for the six months ended June 30, 2025, compared to the prior year | Revenue (in thousands) | 2025 | 2024 | Change Amount | Change Percentage | | :--------------------- | :--------- | :-------- | :------------ | :---------------- | | Revenue | $114,279 | $97,759 | $16,520 | 17 % | - The $16.5 million increase in revenue was primarily attributable to new customer locations (82%) and existing customer locations (18%)[162] Cost of Revenue and Gross Margin This section examines changes in cost of revenue and gross margin for the six months ended June 30, 2025, versus the prior year | Cost of Revenue & Gross Margin | 2025 | 2024 | Change Amount | Change Percentage | | :----------------------------- | :-------- | :-------- | :------------ | :---------------- | | Cost of revenue (in thousands) | $32,383 | $28,648 | $3,735 | 13 % | | Gross margin | 72 % | 71 % | 1 % | | - Increase in cost of revenue due to $2.6 million in direct costs (telecommunications, credit card processing, cloud infrastructure) and $1.0 million in personnel-related costs[163] Gross margin improved due to favorable customer mix and third-party cost efficiencies[165] Sales and Marketing This section details the changes in sales and marketing expenses for the six months ended June 30, 2025, compared to the prior year | Sales and Marketing (in thousands) | 2025 | 2024 | Change Amount | Change Percentage | | :--------------------------------- | :-------- | :-------- | :------------ | :---------------- | | Sales and marketing | $48,771 | $41,519 | $7,252 | 17 % | - Increase primarily from $4.5 million in personnel-related expenses (stock-based compensation, commission/bonus, headcount, salary adjustments) and $2.4 million in demand generation expenses (influencer marketing, partnerships)[165] Research and Development This section analyzes the changes in research and development expenses for the six months ended June 30, 2025, versus the prior year | Research and Development (in thousands) | 2025 | 2024 | Change Amount | Change Percentage | | :-------------------------------------- | :-------- | :-------- | :------------ | :---------------- | | Research and Development | $23,141 | $19,603 | $3,538 | 18 % | - Increase due to $3.6 million in personnel-related expenses, including $2.2 million from increased headcount and salary increases, and $1.4 million in stock-based compensation[166] General and Administrative This section details the changes in general and administrative expenses for the six months ended June 30, 2025, compared to the prior year | General and Administrative (in thousands) | 2025 | 2024 | Change Amount | Change Percentage | | :---------------------------------------- | :-------- | :-------- | :------------ | :---------------- | | General and administrative | $29,490 | $25,399 | $4,091 | 16 % | - Increase primarily from $2.8 million in personnel-related expenses (bonus incentives, salary adjustments, stock-based compensation) and $1.4 million in professional fees, including $1.1 million for the TrueLark acquisition[167] Interest Expense and Other Income (Expense), Net This section analyzes changes in interest expense and other income (expense), net, for the six months ended June 30, 2025, versus the prior year | Interest Expense & Other Income (Expense), Net (in thousands) | 2025 | 2024 | Change Amount | Change Percentage | | :------------------------------------------------------------ | :------ | :------ | :------------ | :---------------- | | Total other income (expense), net | $935 | $1,720 | $(785) | (46)% | - Increase in interest expense due to more finance leases for phone hardware[169] Decrease in other income (expense), net, mainly from lower realized gains on short-term investments due to assets used for the TrueLark acquisition and lower average interest rates[169] Non-GAAP Financial Measures This section presents and reconciles non-GAAP financial measures used to evaluate the company's performance - The Company uses non-GAAP financial measures like free cash flow, free cash flow margin, and Adjusted EBITDA to supplement GAAP results, evaluate growth, and assess operating performance[170] Non-GAAP Financial Measures (in thousands) | Non-GAAP Financial Measures (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Free cash flow | $4,478 | $21,217 | $3,416 | $698 | | Free cash flow margin | 8 % | 42 % | 3 % | 1 % | | Adjusted EBITDA | $1,059 | $5 | $2,079 | $(353) | Free Cash Flow and Free Cash Flow Margin This section defines and explains the calculation of free cash flow and free cash flow margin as non-GAAP liquidity indicators - Free cash flow is net cash from operating activities minus property/equipment purchases and capitalized internal-use software costs[172] It indicates liquidity and cash consumed by operating and investing activities[172] Adjusted EBITDA This section defines Adjusted EBITDA as a non-GAAP measure of operational performance, excluding specific non-cash and non-recurring items - Adjusted EBITDA excludes interest, taxes, depreciation (excluding finance lease ROU amortization), amortization (capitalized software/cloud computing), stock-based compensation, acquisition transaction costs, and acquisition-related intangible asset amortization[173] Limitations and Reconciliation of Non-GAAP Financial Measures This section discusses the inherent limitations of non-GAAP measures and provides reconciliations to their most directly comparable GAAP counterparts - Non-GAAP measures have limitations as analytical tools, may not be comparable to other companies, and do not reflect all costs or contractual commitments[175] Investors are encouraged to review GAAP measures and reconciliations[175] Liquidity and Capital Resources This section assesses the company's ability to generate and manage cash to meet its financial obligations and fund operations - The Company has historically financed operations through subscriptions and equity issuances, generating losses and negative operating cash flows[179] Future capital needs depend on revenue growth, customer usage costs, and R&D expenses[179] - As of June 30, 2025, liquidity sources included $44.7 million in cash/cash equivalents and $33.2 million in short-term investments[180] The TrueLark acquisition reduced available cash by $25.0 million[180] - Deferred revenue was $39.3 million as of June 30, 2025[181] Management believes current liquidity and the SVB credit facility are sufficient for the next twelve months[182] Operating Activities This section details cash flows generated from or used in the company's primary business operations - Cash provided by operating activities was $5.2 million for the six months ended June 30, 2025, driven by net loss adjustments for non-cash charges and net cash outflows from changes in operating assets and liabilities[185] - Key changes in operating assets/liabilities included increases in deferred contract costs and accrued liabilities, and decreases in prepaid expenses, accounts payable, operating lease liabilities, and deferred revenue[185] Investing Activities This section describes cash flows related to the acquisition and disposal of long-term assets and investments - Cash used in investing activities was $10.1 million for the six months ended June 30, 2025, primarily due to $23.3 million for business acquisitions (TrueLark), partially offset by short-term investment maturities and purchases[187] Financing Activities This section outlines cash flows from debt, equity, and dividend transactions - Cash used in financing activities was $2.0 million for the six months ended June 30, 2025, mainly due to $3.6 million in principal payments on finance lease obligations, partially offset by proceeds from ESPP and stock option exercises[189] Contractual Obligations and Commitments This section details the company's future payment obligations under various contracts and agreements - During the six months ended June 30, 2025, the Company acquired $4.3 million of additional right-of-use assets through new finance lease obligations[192] No other material changes to contractual obligations since December 31, 2024[192] Indemnifications This section describes the company's indemnification agreements and potential liabilities arising from them - The Company's agreements include indemnification provisions for intellectual property infringement and data compromise, but no costs have been incurred or accrued historically[193] Silicon Valley Bank Credit Facility This section provides information on the company's revolving line of credit with Silicon Valley Bank - The $50.0 million revolving line of credit with SVB, maturing August 2027, was amended in July 2025 to include financial covenants for liquidity and EBITDA[194] As of June 30, 2025, no outstanding balance and full capacity available[194] Critical Accounting Estimates This section highlights accounting estimates that require significant judgment and could materially impact financial results - No material changes to critical accounting estimates compared to the 2024 Form 10-K, except as disclosed in Note 2[196] Recently Adopted Accounting Pronouncements This section provides information on new accounting standards adopted by the company and their impact - Refer to Note 2 for information on recently adopted and pending accounting pronouncements[197] Emerging Growth Company Status This section explains the company's status as an "emerging growth company" and its implications for financial reporting - The Company is an 'emerging growth company' under the JOBS Act, electing to use the extended transition period for new accounting standards, which may affect comparability with other public companies[198] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section describes the company's exposure to market risks, such as interest rate and foreign currency fluctuations - Market risk exposure has not materially changed since December 31, 2024[199] Item 4. Controls and Procedures This section reports on the effectiveness of the company's disclosure controls and internal control over financial reporting - Disclosure controls and procedures were effective as of June 30, 2025[200] - No material changes in internal control over financial reporting were identified[201] - Management acknowledges inherent limitations in control systems, providing reasonable but not absolute assurance against errors or fraud[202] PART II. OTHER INFORMATION This section includes additional information not covered in the financial statements, such as legal proceedings and risk factors Item 1. Legal Proceedings This section discloses any material legal actions or claims involving the company - No current legal proceedings are expected to have a material adverse effect on the business[204] - Future litigation, including intellectual property claims, is possible and could be costly and resource-intensive[204] Item 1A. Risk Factors This section details significant risks and uncertainties that could adversely affect the company's business, financial condition, and results of operations Risk Factors Summary This section provides a concise overview of the primary risks facing the company - Recent growth rates may not be indicative of future growth, making future prospects difficult to evaluate[206] - Failure to attract, retain, and expand customer use of the platform would harm the business[206] - Inability to successfully manage growth efficiently could adversely affect business, financial condition, and results of operations[206] - Focus on small and medium-sized healthcare businesses subjects the company to associated risks[206] - History of losses and uncertainty about achieving or sustaining profitability[206] - Unfavorable economic conditions and macroeconomic uncertainties may continue to adversely impact the business[206] - Quarterly results may fluctuate, potentially leading to a decline in stock price if expectations are not met[206] - Failure to maintain and enhance brand and market awareness could adversely affect the business[206] - Evolving market for the platform and products may decline or experience limited growth[206] - Inability to expand market share in existing verticals or penetrate new ones would inhibit growth and profitability[206] - Failure to attract new customers cost-effectively would adversely affect the business[206] - Highly competitive market; ineffective competition would harm the business[206] - Failure to continuously enhance the platform and introduce new, accepted products could adversely affect the business[206] Risks Related to our Business and our Industry This section outlines risks inherent to the company's operations and the industry in which it competes - The Company's recent growth rates may not be indicative of future performance, and managing growth effectively is crucial to avoid adverse impacts on revenue and profits[207][211][216] - Reliance on attracting new customers, retaining existing ones, and expanding platform usage is critical, but customer churn, especially among SMBs, and competition pose significant risks[212][213][214] - The Company has a history of net losses and may not achieve or sustain profitability due to increased costs from sales, marketing, R&D, and infrastructure investments[222][223] - Unfavorable economic conditions, including inflation and interest rate trends, can decrease customer spending and demand for the platform, particularly among SMBs, impacting operating results[224][225](index=225&type=chu