Weave Communications, Inc. Q3 FY2024 earnings call

• Q3 financial highlights: Delivered solid top-line performance, significant improvements in gross and operating margins, free cash flow, and achieved positive non-GAAP operating income for the first time. Revenue was $52.4M, 20% Y/Y growth, and $1.2M above guidance midpoint. Gross margin at 72.5%, 11th consecutive quarter of improvement.
• Mission: To enhance healthcare experiences for patients and practices with an all-in-one customer experience and payment software platform for small and medium-sized healthcare practices.
• New Weave platform launch: Significant product launch with robust, scalable, and cutting-edge technology. Features include AI-powered Weave Assistant, enhanced user interface, specialized UI for veterinary practices, integration of payments functionality into communication workflows, and powers Weave Enterprise for multi-location practices.
• Partnerships: Affordable Care America, the largest dental support organization for tooth replacement services, selected Weave for patient engagement and payments across its supported dental practices.
• Integrations: Expanded integrations with leading practice management systems, deepened existing integrations, and formed strategic partnerships like with Patterson Dental.

In Q3, Weave achieved revenue of $52.4 million, representing over 20% year-over-year growth. Gross margin reached 72.5%, an improvement from the previous quarter and a 300 basis point increase from Q3 of the prior year, marking the 11th consecutive quarter of gross margin improvement. The specialty medical vertical, including categories like family practice, MedSpa, Plastic Surgery, and Physical Therapy, was the fastest-growing category in Q3. Revenue contribution details weren't explicitly broken down by distinct product segments beyond the vertical focus, but the overall revenue was $52.4M with 20% Y/Y growth and gross margin at 72.5%.

• Raised full-year 2024 revenue guidance to the range of $202.7 million to $203.7 million and expects positive non-GAAP operating income for the full year.
• For Q4 2024, expects total revenue in the range of $52.6 million to $53.6 million and non-GAAP operating income in the range of $0.9 million to $1.9 million.
• Anticipates a weighted average share count of approximately 71.6 million shares for the full year.

Q: When could the new Patterson relationship start to have a bigger impact on the pipeline top of funnel?

A: Brett White responded that it's happening now, with higher conversion rates and growing bookings already showing up as a result of the partnership.

Q: Talk about specialty medical and how the new Weave enterprise platform could expand reach into hospitals?

A: Brett White stated that specialty medical is fragmented with pent-up demand for integrated platforms. The Weave Enterprise platform fits well for multi-location practices like Affordable Care with 450 locations, but currently, they're focused on small and medium-sized practices rather than large hospitals.

Q: Outlook for NRR and biggest opportunities to get it higher?

A: Alan Taylor mentioned payments are a big driver, along with introducing upsell products like call intelligence and bulk messaging. Brett White added that more integrations provide greater opportunity to upsell to existing customers on an integrated platform.

Q: Color on price adjustments and ability to extract more price for premium features?

A: Alan Taylor said price adjustments are done periodically based on cohort and product changes, with customers tolerant of increases as long as value is delivered. Brett White noted the New Weave platform is a superior product available at no additional charge currently but has future opportunity for extracting more value.

Q: Drivers for potential future margin improvement and terminal gross margins?

A: Alan Taylor cited payments product extension, phone component amortization ending, cost management in support and engineering, and sees terminal gross margins in the 75%-80% range as achievable with continued payment success and cost vigilance.