Q1 2023 Weave Communications Inc Earnings Call
Speaker 1: And MAR.
Speaker 1: I that.
Speaker 1: thir that.
Speaker 2: Greetings and welcome to the Weave Communications Q1 2023 earnings conference call.
Speaker 2: At this time, all participants are in listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press start and zero on your telephone keypad. As a reminder, the conference is being recorded.
Speaker 2: It is now my pleasure to introduce your host, Mark McEarnall, Head of Investor Relations, over to you, sir. Thank you, Dene. Good afternoon and thanks for joining us for our first quarter 2023 earnings conference call. Thank you.
Speaker 3: Joining the call today are Brett White, CEO and Alan Taylor, CFO . Brett will open the call with an overview of leaves performance and Alan will discuss our financial results in more detail.
Speaker 3: Q1 was an important milestone for us as this was the first quarter in which the year-over-year revenue growth rate increased sequentially since 2019. This growth was driven by strong demand for our platform and our growing customer base. In Q1, we also continued to make significant progress toward our profitability goals. Our growth margin for the quarter was 67.6% up 850 basis points from 59.1% in Q1, 2022.
Speaker 3: We are pleased to report that that momentum continued into Q1 with both the number of new customers sold and the average sales price for new customers increasing over Q4 last year. Both our digital marketing and our event channel results improve sequentially in Q1 as well. Historically in-person industry events have been one of our most important sources of new business growth. In Q1 we doubled the amount of in-person event sales compared to the first quarter of 2022 despite attending slightly fewer events. We are investing more in larger events.
Speaker 3: sending broader teams not only sales people to engage with prospective customers, but also customer success teams to engage with current customers.
Speaker 3: This is resulted in an increase in the number of leads generated and closed from this important channel.
Speaker 3: We are encouraged by the increased demand that we are seeing coming out of these events and expect to continue our investments in this channel.
Speaker 3: To handle the increased demand, we continue to grow our go-to-market capacity.
Speaker 3: We increase the number of sales reps by 15% year over year and 80% of our sales reps are now fully ramped.
Speaker 3: which represents 41% increase in ramped sales reps year over year. Our overperformance also enabled us to accelerate several additional go-to-market initiatives in the quarter. Turning to payments. Our payments offering enables our customers to collect their feeds faster and with less effort and administrative burden. Our solutions streamline the billing's workflow and we continue.
Speaker 3: We announced in March that we signed a multi-year agreement to extend and deepen our partnership with Stripe as our payments processing partner.
Speaker 3: As part of this agreement, our customers will have access to more strike platform, and we plan to leverage additional features later this year as we endeavor to expand our payments offering for our customers.
Speaker 3: On the new product front, we launched both texting on our platform in Q1, which is one of the most requested features by our customers.
Speaker 3: Both texting gives our customers the ability to send a single text message to thousands of their patients at once.
Speaker 3: and helps improve efficiency and boost revenue for practices.
Speaker 3: by engaging more patients with personalized and targeted text messages.
Speaker 3: An appointment vacancy can cost a practice up to $200 per current if left unfilled, and bulk texting allows our customers to quickly engage patients that are due for an appointment, increase bookings for the practice, and keep their schedules full. Earlier this week, we also announced Response Assistant, which is a major enhancement to Weave Reviews. Reviews are very important for healthcare practices as more than half of patients look at online reviews before scheduling an appointment.
Speaker 3: The sponsor system is our first AI-driven feature and it allows our customers to use AI to draft a thoughtful and personalized response to the patient review in just seconds with one click.
Speaker 3: The users can then edit the reply before submitting if desired, increasing the personalization of the response and improving response time as they manage their critical online reputation.
Speaker 3: Our focus on innovative automation has been a core strength since our founding, and we intend to continue leveraging AI to make patient communication and engagement easier and more effective for our customers.
Speaker 3: We've continued to receive positive recognition and validation from our customers that our platform delivers best in class communications and engagement results.
Speaker 3: In Q1, we are named the leader in five different categories in G2's 2023 Spring Report.
Speaker 3: Recognition in the list is based on custom reviews and highlights the best software products for small healthcare businesses. In addition to being named a leader in multiple categories, our platform was also recognized for its return on investment, being named best results in patient engagement software among small businesses.
Speaker 3: We will continue to listen to our customers to ensure that we are providing an excellent experience and delivering requested feature improvements. In last quarter's earnings call, we introduced the concept of a boomerang customer.
Speaker 3: One who leaves weave for a competitive solution only to come back a short time later. In Q1 we saw this customer category accelerate and we counted 45 new boomerang customers in Q1 alone compared to approximately 100 in all of 2022.
Speaker 3: We believe this trend provides another data point further validates the breadth and value delivered by the WEED solution. Lastly, I'm excited to announce that we have added a key member to our executive leadership team. We announced earlier this week that Marcus Bertelsson has joined WEED as our first ever chief strategy and services officer.
Speaker 3: leading our strategy onboarding customer support and customer success teams.
Speaker 3: Marcus has nearly two decades of revenue growth and strategy experience. Before joining Weave, he served as the Senior Vice President of Revenue and Strategy at Thumbtack.
Speaker 3: a home services management platform for the small medium business, where he successfully led and scaled global revenue, strategy and customer facing teams serving their over 100,000 SMB customers.
Prior to Thumbtack, Marcus was with McKinsey & Company, where he collaborated with numerous Fortune 100 clients and specialized in growth strategy, innovation, and company transformations. We are excited to leverage Marcus' experience to seize upon the vast opportunities that we have in front of us. In conclusion, this is a test. This is a test. This is a test. This is a test. This is a test. This is a test. This is a test. This is a test. This is a test.
We are very pleased to be off to a great start for 2023.
Our customers are the North Star in every decision that we make, and I'd like to thank them for their continued trust and we've enabling us to grow together.
I'd also like to thank the entire WEAVE team for their tireless dedication in bringing innovative, industry-leading products and services to our customers every day, enabling them to serve their patients and clients and achieve their professional dreams. With that, I'll turn the call over to Alan to take you through the details of our results and guide.
or $1.6 million over the midpoint of the range we provided last quarter. Our net revenue retention rate was 97% in Q1. The primary cause of the decline from Q4 is the ongoing impact from our former third party forms provider. We launched our internally developed product and have seen positive adoption by customers, but the transition
we've seen for the last seven quarters.
Moving on to operating results, as a reminder, I'll be referring to non-GAAP results unless it's stated otherwise.
Our Q1 results showed consistent improvement across the board. Gross margin was 67.6%. This represents an 850 basis point increase year over year.
Operating expense was $30.8 million, approximately a $1 million increase from last year, compared to a $6.3 million increase in revenue for the same period.
We have continued our progress in streamlining our operations while continuing to produce steady growth. Our operating loss was $4 million, an improvement of 6.1 million, or 60%, compared to last year, only $1 million over the midpoint of the guidance range we provided last quarter.
The corresponding operating loss margin of 10% is a significant improvement from the operating loss margin of 30% last year.
Our net loss was 3.3 million or 5 cents per share in the first quarter based on 66 million weighted average shares outstanding.
This is compared to a net loss of 10.4 million or 16 cents per share last year.
This represents a $7.1 million improvement due to revenue over achievement and operating efficiencies, coupled with a $1 million increase in interest income related to our Treasury activities.
We also recently entered into a sublease agreement for one floor of our headquarters in Lehigh, Utah This will provide approximately eight hundred thousand dollars annually in other income Additional detail will be provided in the subsequent events section of our Q1 10Q
Adjusted EBITDA loss was $2 million, a $7.2 million improvement year over year. Adjusted EBITDA loss margin of 5% is a significant improvement compared to the 27% loss margin reported a year ago.
We continue to have a very strong balance sheet with 112.6 million dollars of cash and short-term investments on hand as of the end of the quarter.
As you recall, last quarter we had $113.3 million, which means we only use $700,000 in Q1.
I also wanted to provide a quick update on our line of credit with Silicon Valley Bank. As previously disclosed, we maintain a $50 million revolving line of credit with SBB and had borrowed $10 million against it.
The line was set to mature in August of this year. However, we recently extended this line of credit with SBB, now a division of First Citizens Bank, to August 2025 with the same terms moving this borrowing from current to long-term on our balance sheet.
We have no pending plans to utilize any additional funds at this point, but we are pleased to extend this line of credit providing flexibility for potential future strategic initiatives. As Brett mentioned in his remarks, we had our first positive free cash flow quarter in Q1.
Free cash flow was positive $587,000, a $5.7 million improvement over Q1 last year. We expect free cash flow to fluctuate from period to period, and we do not expect our free cash flow to be positive next quarter due to seasonal payroll factors. However, we do reiterate our commitment to achieving free cash flow exiting the year.
Turning now to our guidance, for the second quarter of 2023, we expect total revenue in the range of $39.5 million to $40.5 million and non-GAAP operating loss in the range of $5 million to $4 million.
For the full year 2023, we expect total revenue to be in the range of $160.5 million to $163.5 million.
We expect our full year 2023 non-GAAP operating loss to be in the range of $18.5 million to $15.5 million Which assumes continued progress on our path towards profitability We expect to have a weighted average share count of approximately 67.3
Thank you so, ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and then one now.
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The first question that we have is from Alex Klaw from Raymond James. Please go ahead. Great. Thank you. Brett, I just want to start off asking for just an update on the multi-location opportunity. Can you just give us an update where the product stands today in terms of ability to address that the multi-location and I know you've been making...
number of multi-location offices on the platform using it successfully. I think our next step is it kind of a major push into the multi-location domain and going after larger DSOs and there's a there's a few things that we still want to do to the product just to make it
a little bit easier to use from a centralized kind of command and control perspective, and then some functionality around phone routing and things like that. So look for that to come in the second half. But Q1 was pretty consistent with prior quarters on number of multi accounts.
Okay, great color. Can you elaborate a little bit more, Alan or Bred, who wants to take this one? You referenced higher ASPs in the prepared remarks. I think you've always had a larger land model versus land and expand, but did anything change this quarter in terms of just overall pricing or lack of discounting or...
know, we offer now three bundles that can be sold and purchased by our prospect. So that has definitely helped the ASP. And then also, you know, as our sales teams get more ramped, get more experienced, they're, they're better qualified, better capable of meeting the customers needs and helping them make the right choice. So I think the combination of
higher quality marketing, more targeted marketing, higher performing sales teams, and then just a bundle strategy, all those things together are moving us, moving ASP up a bit.
Okay, great. Thank you very much. I would add to that. Sorry.
Okay great. Thank you very much. I would add to that, sorry, I would just add to that the
The product confidence is just on the self-team side, given the boomerangs that we're seeing, they're able to just hold the line on pricing just because of the quality of the experience our product offers were just competitive.
The product confidence is just on the sales team side, given the boomerangs that we're seeing, they're able to just hold the line on the pricing just because of the quality of the experience our product offers versus competitors. That's great out of color. Thank you both.
Thank you. Next question we have, which from Matt Stockler from William Blair. Please go ahead. Hey guys, this is Alex Vasian from Matt. Thanks for taking our questions. Just a couple quick ones for me. So maybe if we could start with the go-to-market transition, thanks for some of the color on that. That's bad.
not expect us to really ever be more than you know kind of 80% or maybe 90% ramped because now we're actually adding
new reps just due to the demand we're seeing and so we will always have a cohort of reps that are that are in the ramping phase so I think on you know percentage ramp you know we'll probably get to 80 90 percent and then and just continue to grow from there. We're adding new account executives new sales reps now in Q1.
and expect to continue to add them as long as demand continues to grow as we're seeing it. So we're pretty excited about that and you know, we just measure it very very carefully. We look at results daily and weekly and we make our hiring decisions based on that. So hopefully um if
Growth and demand continues, we will always be adding good-of-market capacity.
And then just one more for me, maybe as a broader question, can you talk about any of your updated observations you have on the current macroeconomic environment and any updated observations regarding demand, spend behavior, usage patterns, etc.?
Yeah, so I, you know, we.
The data that we're seeing, you know, we shared one data point in our prepared remarks that that average volume per location is up 10% year over year. So that is terrific to see. So that says that our existing customer base, their business is growing. So that's terrific to see. As far as...
The demand environment, sales cycles, really no change there. They've been pretty consistent the last couple quarters. The product is doing very well, especially competitively. We've got a lot of favorable
progress, especially due to the improvements we've seen in our services offerings. We've seen a lot of improvements in our onboarding functions and our support functions, and those show up as kind of positive sales tools for our teams to use.
No major changes in the macro or the buying environment, I think. Got it understood. Well, thank you for that and I will pass it on.
Thank you. The next question we have is from Mike from Bank of America. Please go ahead.
Yeah, thank you very much and thank you for the questions tonight. First question, just thinking about free cash flow, first great job in that positive metric and in one queue, I had a target. Obviously, always looking for more. Any thoughts and incremental efficiencies you can drive out of the business, understand you very well.
We now have much more robust models to support staffing levels on the COG side for support, for onboarding. We are, you know, the efficiencies and the economies of scale that we get on our...
the data centers costs and the telecom costs associated with supporting our customers, we continue to drive costs out there. So we're not done by any stretch. I do think that the pace may slow down a little bit. Given the 150 basis points we've seen over basically the last year, but we'll continue to drive those out. And then on the operating expense side,
We've got, I think that we're trending towards kind of best in class benchmarks on several of those areas. And as Brett had mentioned, we're going to continue to invest in the go-to market side as we can while still delivering, moving quickly towards profitability. So there's...
there's additional room to drive the cost out and to deliver full cash flow and profitability.
Now, thank you for that. And then, on a pair of remarks you mentioned, positive momentum carried over into first quarter, or, you know, I think in terms of both customer additions and pricing, on the customer additions, are there any geographic regions or customer verticals to call out that are driving that strength, or is it relatively broad-based?
I would say it's relatively consistent. So, you know, our big geodes, so we're...
You know vast majority primarily all of our businesses in the US our big GEOs are not surprising, California New York, Texas, Florida Florida so that's you know continued
of continues to be pretty, you know, weighted, pretty consistent with what we've seen over the last several quarters. So, dance will be number one optometry, veterinary and specialty medical.
Sure, and let me give a little bit more color to Alan's response. The operating model that we have developed internally on finding efficiency is, kind of the deal we've struck with the team is, let's go find waste.
and inefficient spend and every dollar that we find
We will take some of that and put it back into
spend that we know works that we can really calculate weekly, monthly, we know that spend works. So we've got a pretty passionate team here, pretty focused on running waste and inefficiency out of the business because they just know we'll meet with some of that back to growth investments.
And that's part of the question as well, you know, as you're seeing better demand trends, you know, the kind of desire, the focus on reinvesting back into the growth engine of the business as that improves. So I think you answered that question, thank you.
Thank you. Thank you. The next question we have is from Tyler Radke from 50 Group. Please go ahead. Hi, this is Kylie Tobin on for Tyler Radke. Nice quarter and you had a really nice beat and raise on the quarter. Guidance raised more than you beat. Is this driven by your new product releases and potential upsell within your proscue?
or something else. And just on that note, have you disclosed what percent of your client base is on that proskyo? Thanks.
So it does represent that and just the continued confidence that as we've just continued that acceleration of execution across the board. It was only a year ago when we did the sales re-platforming. We now have got that dialed in and as...
even though we're fully ramped, we will still see some additional efficiencies as we continue forward. That's a pattern that we've seen in the past with some of our more seasoned reps. And so we'll see both the product enhancements that will be coming forward and just the performance of the sales team. So, and remind me the second part of your question.
Yeah, sure. It was just if you disclosed what percent of your client base is on that proscue. Yeah, just we haven't described the percentage as suffice it to say that we land very heavy on the we delete bundle is what we're calling it now or in the past is that we've plus with premium features.
and the vast majority of our customers usually land on that package. Okay, great. Thank you. And just one more. Is your newly launched response assistant solution, is that leveraging generative AI LLMs?
And is this something that would just be available in that ProSkew? And just on that note, we would love to hear more about the opportunities you feel like you have within the pricing and packaging as you continue to add these new features. Thanks.
Yeah, I'll start and then Brett can add in, but yes, the answer is yes, it is using the Ron exhibit by quite a while.
I think the
This introduction of response assistant on the reviews is just the beginning. There are so many things that can be done with respect to chat, appointment scheduling and responses. The AI is all the rage as you know and this really represents something that can
take a significant burden out of people making them able to edit instead of create and personalize information. So that gives them much more efficient way of really personalizing and engaging directly with each customer.
Thank you.
Thanks for taking our questions. So just two from us. So as you think about the investments you've made on the go-to-market front, how should we think about how that will affect your net retention metrics as we kind of go throughout the year? And just trying to figure out if 100% except third party dynamic is kind of a starting point for the year or is there just not enough visibility on that front yet? And then in my second question.
Just wondering if there's any qualitative commentary you can provide on how customer conversations or in-person events trended in April . So why don't I take the NRR one and then maybe Brett conduct the customer events and I'll join in. On the NRR I think that we will see some further degradation there until we clear-
But then we should be able to start taking that back up. As a trailing 12-month average, it takes a while to turn that around, and particularly given the forums issue that we've been talking about now for three-quarters. So that's where we see that going, but we do have plans in place to get that turned around.
Yeah, and I'm hesitant to kind of report on April . I don't really want to set that precedent, but we're pretty happy with how the year is shaping up.
Okay, thank you very much. Thank you. The next question we have is from Kasharangan from Golden Socks. Please go ahead. Okay, thank you.
Hey guys, this is Jacob off the cache. Appreciate taking the question. I apologize if this was addressed already. I just hopped from another call. I know the original goal was, I believe, and correct me if I'm wrong, was free cache will break even by 4Q and that was brought up by well, three quarters into 1Q it looks like. So can you just touch on the dynamics that really allowed you to work with that?
post-break even pre-cash with this quarter and how you expect that to trend going throughout the year. Yeah, so Jacob, the execution of the team, the overperformance on the top line, you know, those are the things that really drove us into the pre-cashable positive position. We mentioned in the prepared remarks that we don't anticipate seeing that again in Q2.
There are seasonal payroll factors that enter in associated with the way we manage our employees that will make it so that we won't achieve that necessarily in Q2, but we do intend fully on exiting the year in Q4 as cashflow positive as well. So we're excited about that. It's the first time in company history, obviously, and that it helps us to turn that corner.
and move rapidly towards both pre-cash flow positive as well as gap profitability.
Awesome, okay, no I appreciate that color, thank you so much guys.
No, I appreciate that, caller. Thank you so much, guys. Thank you.
The next question we have is from Parkalaine from Spicell. How does Matt Pickert on for Parker? Thanks a lot for taking my questions and congrats on the quarter. You mentioned digital forms. I'm curious what's been the reception like for your new digital forms product and the success rate been about what you're anticipating. Payton.
And is there any incremental interest in this solution over the previous partnership and their solution for any new customers that are new to a digital forms product?
Yeah, thanks, Matthew. First of all, we are pleased with the ramp of the digital forms. We're also pleased with the trajectory we're on with respect to retention of the digital forms. I think that the solution that we are offering and the deeper integration that we offer versus our prior third-party alternative is going to make us a more compelling solution as we move forward.
because we've got the right back capability into many of the practice management solutions that we are tied to. And so that makes it so that when you go into your dentist or your doctor and you fill out the paperwork online in that digital form, there's an automatic right back capability into the practice management solution. So there's no transcription errors, there's no wasted time in reentering data, and all of those things are...
features that these customers are really enjoying and that make their offices run much more efficiently. Okay, got it. And then secondly, after your announcement of continued relationship with Stripe for payment processing, do you envision payments becoming a larger part of the Weed Growth story once again?
or is it more of an added feature for the clients? Could you talk a bit about your payments vision there? Sure, so I'll start.
So yes, we expect payments to be a bigger part of the lead story. You know, payments currently is growing significantly faster than subscription revenue. But were
We're quite, I'd say, under-penetrated in our customer base with our payment solution. Getting greater breadth and greater depth into the Stripe platform with the Weave Stripe integrations offers our customers more functionality, which is terrific.
And then also we're just getting more focus internally on our payments business and driving our payments functionality into a larger percentage of our customer base. So definitely look forward to our payments business continuing to grow.
rapidly and grows a percentage of revenue as well. Terrific. Thank you very much.
Thank you. The last question we have is from Mark Shaffle from Luke Capital Market. Please go ahead. Please.
Hi, this is Tim Greenstone for Mark Chappelle. Thank you for taking the question. I wanted to ask with respect to improving the gross margin and streamlining your infrastructure has been a priority, particularly in optimizing the Google Cloud.
both in terms of the efficiency with which we use the Google Cloud, the efficiency in our telecom.
operations with our bandwidth providers and in our data centers overall. The engineering team is focused on this, as Brett mentioned, the energy around the whole team really looking for opportunities to drive out the waste.
is really what we're after. So everyone is really looking at this on the support side and onboarding side. We've got teams that are engaged, that are creative, that are really putting in the work to make sure that we're able to leverage.
Attracting customers, getting them on board, and then servicing them. Okay, great. Thank you. Thank you. Ladies and gentlemen, that concludes the question-answer session. Thank you for joining us today. You may now disconnect your lines.
Of that time, the for that we cur to.