Weave Communications Q4 2023 Earnings Call Transcript

There are 10 speakers on the call.

Operator

Greetings, and welcome to the Weave 4th Quarter and Fiscal Year 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mark McReynolds, Head of Investor Relations.

Operator

Thank you, Mr. McReynolds. You may begin.

Speaker 1

Thank you, Camilla. Good afternoon and thank you for joining us for our Q4 and full year 2023 earnings conference call. Joining the call today are Brett White, CEO and Alan Taylor, CFO. Brett will open the call with an overview of Weave's performance and Alan will discuss our financial results in more detail. After the prepared remarks, we'll take questions.

Speaker 1

Today's discussion contains forward looking statements that represent our beliefs or expectations about future events. All forward looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward looking statements. Please refer to the cautionary language in the earnings release and in Weave's filings with the Securities and Exchange Commission, including our most recent Form 10 ks and Form 10 Q for additional information concerning factors that could cause actual results to differ materially from the forward looking statements. We'll also discuss financial measures that do not conform with generally accepted accounting principles. For the sake of clarity, unless otherwise noted, all numbers we talk about today will be on a non GAAP basis.

Speaker 1

Information may be calculated differently than similar non GAAP data presented by other companies. A reconciliation between these GAAP and non GAAP financial measures is included in our earnings press release, which can be found on our Investor Relations website at investors. Gitweave.com. And with that, I'll turn the call over to Brett. Thank you, Mark,

Speaker 2

and welcome to everyone joining us this afternoon. I'd like to kick off the call by welcoming David MacNeil to our leadership team as Chief Revenue Officer. David brings over 25 years of experience in scaling SaaS businesses, leading sales, customer success, revenue operations and payments team. He spent 6 years at HubSpot where he was instrumental in leading sales teams as the company grew from $90,000,000 to nearly $1,000,000,000 in annual recurring revenue. He also served as Chief Commercial Officer at Tebra, a leading automation platform for independently owned healthcare practices and in leadership positions at Salesforce and Bank of America.

Speaker 2

We're excited to leverage David's expertise as we continue to execute on the multi year opportunities that we have in front of us. Now I'd like to provide a quick overview of Weave for the benefit of those who are new to our story. Weave provides a vertically tailored software solution to small and medium sized healthcare practices, offering a seamlessly integrated customer experience and payments platform. We empower practitioners to focus their time on patient care, while we streamline communications, engagement and payments. SMBs make up the vast majority of businesses in the U.

Speaker 2

S. And we have spent the past 15 years building a platform specific to the unique requirements of the SMB healthcare practitioners. A dentist, optometrist or veterinarian typically does not employ their own team of IT professionals, so they need software solutions like Weave that are easy to set up and use. Weave unifies the disparate patchwork of point solutions that many of these practitioners presently use simplifying the process of attracting, engaging and retaining patients. Now I'm excited to share some of the highlights from Q4.

Speaker 2

We've delivered another strong quarter capping off a terrific year in which we saw continuous quarterly improvements in revenue growth rate, gross and operating margin, adjusted EBITDA, free cash flow and customer acquisitions. Revenue for Q4 was $45,700,000 representing 21.2% year over year growth. This is the 4th consecutive quarter of an accelerating year over year growth rate. We also exceeded the top end of our revenue guidance for the 8th quarter in a row. Our continued acceleration in revenue growth was driven by the addition of new customers at higher average sales prices, increased payments attach rates and higher net expansion within existing customers.

Speaker 2

Notably, we added over 4.50 more net new customer locations in 2023 than in the previous year. In Q4, we continued to improve the operational efficiency of our business. Gross margin reached 69.7 percent, 300 basis points higher than Q4 of last year, marking the 8th consecutive quarter of gross margin improvement. Our adjusted EBITDA margin improved by over 700 basis points to a negative 1.7 percent of revenue compared to a negative 8.8 percent of revenue a year ago. Finally, we generated $2,900,000 in free cash flow during the quarter, a $6,900,000 improvement over the same quarter last year.

Speaker 2

These outcomes underscore that while our vertically tailored software and payments platform continues to gain traction, the Weave team remains laser focused on operational excellence. Before we dive into 2024, I want to take a look back and share some of the key accomplishments in 2023. In our earnings call last February, I shared our strategic focus areas for 2023, which were built upon a total of over 180 unique projects across the entire business. I'd like to give you a brief recap on how we delivered against them. Accelerating revenue growth was our first focus area in 2023.

Speaker 2

At the beginning of last year, we discussed the flywheel effect of growth within our business model. The team imparted significant energy to accelerate the rotation of that flywheel and we saw that effort pay off as our year over year revenue growth rates grew each quarter 18.9% in Q1, 19.3% in Q2, 20.2% in Q3 and 21.2% in Q4. We accomplished this while simultaneously reducing our annual operating loss margin by 2 thirds. I'm extremely proud of our team and this is again a strategic focus area for 2024. Our second 2023 focus area was building a scalable foundation for profitable growth.

Speaker 2

We are very pleased with the results here of focusing on efficiency in all areas of our business with gross and operating margins improving every single quarter throughout the year. Additionally, last February, we committed to exit 2023 with positive free cash flow. Due to the hard work of the team, we generated positive free cash flow every quarter in 2023, ending the year with a positive $6,500,000 a significant improvement over a negative $15,900,000 in 2022. Our 3rd 2023 focus area was delivering an experience that turns our customers into champions, which involves both product and customer service. Our platform was named the leader in G2's grid for patient relationship management ranked 1st in 27 different categories in G2's winter 2023 report and won 61 different badges including patient scheduling software leader.

Speaker 2

In 2023, our customer NPS improved significantly throughout the year. We accomplished this through excellent customer service, feature improvements and increased intentions increased attention to new integrations which unlock the full potential of our platform from our customers and prospects. We added over 20 new integrations throughout the year unlocking approximately 75,000 locations that we can sell our integrated platform into. We will continue to deepen and expand our integrations in 2024, both our core markets and new adjacent markets. Our product and engineering teams delivered several significant platform improvements in 2023, including enhancements to our payments platform with a deeper partnership with Stripe, a new partnership with Affirm and the addition of online bill pay, mobile tap to pay and scan to pay functionality.

Speaker 2

We also launched innovative AI driven features including review response assistant, voicemail transcription and email assistant. Our gross retention rate remained consistent throughout the year and we experienced higher net expansion within existing customers. This reaffirms our belief that customers prioritize premium solutions that enhance practice productivity and patient satisfaction over cheap alternatives. Our final focus area for 2023 was fostering an effective and engaged team that lives our values. We shared in previous earnings calls that in 2021 2020 2, employee attrition was a significant headwind to our business, a situation not unique to Weave.

Speaker 2

We listened to our employees and aligned our resources, compensation and benefits to address their concerns. Our employee attrition rate decreased by nearly 50% from 2022 to 2023. Average tenure increased, employee NPS improved and I'm pleased to announce that we are named a great place to work for the 5th consecutive year and a top workplace USA for the 2nd consecutive year. Increased employee engagement has translated into improved customer satisfaction and overall business performance. As we look forward to 2024, we have aligned our strategic plan behind 3 focus areas for the year, which I'm very excited about.

Speaker 2

Accelerating revenue growth is once again our first focus area and the key initiatives in 2024 include increasing our penetration into dental, optometry and veterinarian verticals and continuing to expand into adjacent specialty medical verticals such as physical therapy, medical aesthetics, plastic surgery and primary care. We will build new and innovative products that service both single and multi location segments. We will also continue to enhance our payment solution to better serve our customer base and improve their business operations and financial outcomes. In the last month, we added ACH debit and payment plans to our platform. With ACH debit, patients experience enhanced transaction security and healthcare providers benefit from lower transaction costs.

Speaker 2

Payments plans enables healthcare businesses to easily set up and manage recurring payment schedules, making it convenient for the both the business and their patients. Increasing customer value is our 2nd focus area for 2024. Our platform is feature rich and our customers are busy. Internal data shows that many of our customers are not using the most valuable features of our platform. This focus area is centered around a guided customer journey that helps customer extract the full value of our platform as quickly as possible.

Speaker 2

As mentioned earlier, integration with patient management systems strengthen our product market fit and is another key to success in this focus area. For example, in November, we released our integration with Dentrix Ascend platform. Since the release, we've seen strong demand for this integration from both new and existing customers. Powerful integrations and a seamless and personalized adoption journey will result in increased value for our customers, better customer retention and more advocacy for our brand. Our 3rd focus area for 2024 is investing in our future, which represent a continued focus on developing Weave talent and operational excellence in our business execution.

Speaker 2

Fundamentally, this means we're investing in our people and empowering them to elevate our customer experience and deliver results that are best in class. To conclude, I'm incredibly proud of all of our team accomplished in Q4, capping off an excellent year. We accelerated revenue growth, We built a scalable foundation to improve profitability. We delivered an experience that continues to solve real problems for our customers. We have an incredible team that is engaged in firing on all cylinders.

Speaker 2

A big thank you to our customers, our team members and our shareholders for your support of Weave. We're excited for 2024 and intently focused on building on the momentum we gained in 2023. With that, I'll turn the call over to Alan to provide more detail on our financial results and review our outlook for 2024. Alan?

Speaker 3

Thanks, Brett, and good afternoon, everyone. We had an excellent quarter delivering 4th quarter revenue of $45,700,000 reflecting 21.2% growth year over year. This represents $1,700,000 or 4% beat over the midpoint of the range we provided in November. Our net revenue retention rate remained at 95% in Q4. As a reminder, the NRR calculation is a trailing 12 month calculation.

Speaker 3

On a monthly and quarterly basis, we are already seeing NRR improving and we expect to see our reported metric improve in 2024, primarily due to positive adoption of payments and software upsell. Our gross revenue retention rate remained at 92% for Q4, among the best in class for SMB retention and logo retention has been consistent for over 2 years. Moving on to operating results. As a reminder, I will be referring to non GAAP results unless stated otherwise. Our Q4 results showed significant improvement across the board.

Speaker 3

Gross margin was 69.7%. This represents a 300 basis point increase year over year. Our engineering and operating teams are focused on providing an exceptional customer experience and doing so while remaining efficient and expanding our margins. In Q4, operating expenses were $33,600,000 a $4,200,000 increase from last year compared to an $8,000,000 increase in revenue for the same period. Our operating loss was $1,700,000 an improvement of $2,500,000 or 59% compared to last year and $800,000 better than the midpoint of the guidance we gave in November.

Speaker 3

The corresponding operating loss margin of 3.8% is a significant improvement from the operating loss margin of 11.2% last year. Our net loss was $800,000 or $0.01 per share in the 4th quarter based on 69,700,000 weighted average shares outstanding. This is compared to a net loss of $3,700,000 or $0.06 per share last year. This represents a $2,900,000 improvement due to revenue acceleration and operating efficiencies. Adjusted EBITDA loss was $800,000 a $2,500,000 improvement year over year.

Speaker 3

Adjusted EBITDA loss margin of 1.7% is a significant improvement compared to the 8.8% loss margin reported a year ago. Turning to the balance sheet and cash flow, we ended the year with $108,800,000 in cash and short term investments. In Q4, we paid down $10,000,000 on our line of credit, which remains open, but with no outstanding balance. Net cash was essentially unchanged quarter over quarter. We generated $3,700,000 in cash from operations, a $6,600,000 improvement year over year.

Speaker 3

Free cash flow was $2,900,000 and free cash flow margin was 6.4%. This compares to free cash flow of negative $3,800,000 and a free cash flow margin of negative 10% in the Q4 of 2022. We are pleased with our progress. Our initial goal was to achieve positive free cash flow by Q4 of 2023 and we overachieved and produced positive free cash flow each quarter and for the full year 2023. We expect free cash flow to be positive again for the full year 2024, but as we are paying out our annual 2023 employee bonuses in Q1, we expect that free cash flow will be negative in Q1 of 2024.

Speaker 3

Before reviewing our guidance, I'll provide a brief recap of the full year results. In 2023, total revenue grew by 19.9% to $170,500,000 and our gross margin improved to 68.7%, up from 63% last year. Our operating margin improved to negative 6.8%, a significant improvement over the negative 21.8% in 2022. We made substantial progress on free cash flow ending the year having generated 6 $500,000 up from negative $15,900,000 last year. We're pleased with this progress and we would like to thank all of our team members at Weave, our customers and partners for their contributions through the year.

Speaker 3

Turning now to our outlook for the Q1 and full year 2024. For the Q1 of 2024, we expect total revenue in the range of $45,200,000 to $46,200,000 and non GAAP operating loss in the range of $2,500,000 to $1,500,000 I'd like to provide a little more color regarding our Q1 revenue guide. Leading into last year and throughout 2023, we implemented a more disciplined approach to collecting onboarding revenues for new customers. These are the implementation fees we collect from customers as we bring them onto our platform. We increased these non recurring onboarding revenues by 150% last year.

Speaker 3

In Q1 of last year, we also signed a multi year agreement to extend and deepen our partnership with Stripe for payment processing. That agreement increased our take rate on payments volume and increased our payments revenue. Both the improvement in non recurring onboarding revenue and the improvement in our take rate for payments remain in place this year, but we do not expect to see the same growth rate in these components of our revenue as last year and we will lap the impact of both improvements in Q1 of 2024. As such, we expect to see a modest decrease in our year over year growth rate in Q1 versus our Q4 year over year growth due to lapping the initial impact that each of these initiatives had last year. Our growth rate in payments is still significantly higher than our total revenue growth rate and we continue to see strong demand for our subscription products which had improving growth rates throughout 2023.

Speaker 3

For the full year 2024, we expect total revenue to be in the range of $194,000,000 to $198,000,000 We expect the range for our full year 2024 non GAAP operating loss to be from $6,000,000 to $2,000,000 We expect to have a weighted average share count of approximately 71,700,000 shares for the full year. To summarize, we've delivered strong results every quarter in 2023. Our performance demonstrates strong demand for our platform. We remain excited about the opportunity ahead and we will continue to drive our business to maximize long term value. And with that, we'll take your questions.

Operator

Thank you. We will now be conducting a question and answer Our first question comes from the line of Alex Sklar with Raymond James. Please proceed with your question.

Speaker 4

Great. Thank you. Brett, a lot of investment into the integrations and multi office functionality that you kind of alluded to in your prepared remarks. Specifically, as it regards to the 75,000 locations you added with to the integrated adding those locations? Are you seeing an increasing mix of customers coming on that have that functionality with the integrated functionality built in?

Speaker 4

Thanks.

Speaker 2

Sure. So we obviously track return on investment in all of our integration activities on the dev side and throughout the business. And what we've seen is specialty medical, which is where we are pretty deeply penetrated from an integration perspective in dental optometry vet, probably our latest and most significant integration there was the Dentrix Ascend platform. I mentioned in my prepared remarks, we picked up pretty strong demand, both existing customers and new customers since we've released that integration. So that's one proof point.

Speaker 2

But we've been focusing a lot on specialty medical outside of dental optometry vet and that's actually our fastest growing segment right now. And it actually just passed veterinarian as our number 3 vertical. So we're definitely seeing tangible results in our additional integration work that we're doing both in dental and vet and in specialty medical.

Speaker 4

Okay. That's great context. Maybe I'll kind of follow-up on your answer to that last point. As Specialty Medical kind of passes into that number 3 vertical, what's the right way to think about the linearity of location growth that occurred in 2023? As you formally stood up Specialty Medical, did you see your location count on a growth basis kind of increase as the year progressed?

Speaker 4

And then with that, as we think about the 2024 outlook, what was the right way to think about what you're embedding into the outlook from location standpoint? Thanks.

Speaker 2

Sure. So, linearity, I think, on location count. So I mentioned in my prepared remarks that customer acquisition improved each and every quarter. So each quarter was a little bit better than the other one. And that came from a mix of what I'll call our 4 verticals now, dental, optometry, vet and specialty medical with specialty medical being the higher growth one.

Speaker 2

I'm thinking that dental was still the major contributor. I got a nod from Alan there. And then how we're thinking about unit growth in 2024, I think we just continue to plan to add both on an increasing basis, gross and net new customers throughout the year. And I think you can probably just maybe back into it from the revenue guide.

Speaker 4

Okay, great. Thank you very much.

Speaker 2

Thank

Operator

you. Our next question comes from the line of Brent Bracelin with Piper Sandler. Please proceed with your question.

Speaker 5

Thank you. Good afternoon. Great to see another quarter here with solid execution. Brett, I wanted to double click into the new hire. Obviously, David brings a lot of scaling expertise.

Speaker 5

What do you have him focused on and what are his priorities as you think about the opportunity in 2024?

Speaker 2

Yes. Thanks, Brent. It's a great question. So when I was interviewing CRO candidates, pretty much every single one of them asked me what's broken, what do I need to fix? And the answer is nothing.

Speaker 2

Sales function is executing really well. It's very well managed. So that gives us the opportunity to leverage David's talent and really helping us get our business from where we are now, dollars 170,000,000 to 500,000,000. Dollars He's seen growth and scale HubSpot from $90,000,000 to $1,000,000,000 He's had senior roles at Salesforce. And so his role really is focusing on scale.

Speaker 2

Some of the scale opportunities we have right now are we're on a multi year journey with the multi location business segment. We have a payments business that I think we can do a better job at and we frankly haven't had a dedicated leader in payments. So that's one of the top priorities. And then also, being the revenue partner on strategic partnerships, we're just starting to scratch the surface on growing the partner side of our business. I think through maybe mid last year, we were definitely an inside sales organization.

Speaker 2

And I think partnerships are going to be important part of our future over the next several years. So David partnering with our Chief Strategy Officer and our Strategic Partners Group is hopefully where they'll spend his time. But really just being a been there, done that person helping us scale.

Speaker 5

Absolutely helpful color there. And then one quick follow-up on specialty medical, little surprised that actually is growing fast enough to overtake veterinarian. What's driving the momentum there? Is it just a much larger TAM and it's now just starting to overtake that? Is it some partnerships that have sparked some interest?

Speaker 5

Just curious what's driving the outsized success here in specialty medical here this quarter? Thanks.

Speaker 1

Sure.

Speaker 2

I'd say it's a few things. So TAM for sure. Our inbound has always been pretty meaningful for Specialty Medical and that inbound demand has been growing. So when we layer on integrations into specialty medical, we can actually now offer the full functionality of Weave into some of these adjacent verticals where we've been seeing inbound demand, but haven't really been able to satisfy that demand with a fully integrated product. So it's a combination of TAM, growing number of integrations and product market fit around that and then just the increasing inbound demand that we're seeing from that segment.

Speaker 5

Helpful color. Thank you.

Speaker 2

Thank you.

Operator

Thank you. Our next question comes from the line of Mike Funk with Bank of America. Please proceed with your question.

Speaker 6

Excellent. Hi, this is Matt on for Mike Funk. I appreciate the question. So it sounds like you're going to be facing some tougher comps on the payment side starting in 1Q. But you help us understand the shape of expected revenue growth in 2024?

Speaker 6

And then can you break down a little further the components driving the fiscal 2024 guidance between locations, ASP growth, retention expansion, etcetera, and where you see the highest potential for upside? Thanks.

Speaker 2

Sure.

Speaker 3

Sure. Thanks, Matt. First of all, with respect to the shape of the revenue growth, I think you're going to see some consistency with what you've seen in 2020 3. In terms of that revenue growth, there's the partner team and their efforts on both the integrations front as well as other avenues of partnerships that we're looking into is probably the biggest source of upside for the year. And so we're looking at that.

Speaker 3

I think that the you mentioned payments, but there's the bigger actually piece of the difficult compare in Q1 has to do with the onboarding revenues that we recognize. If you look at the information in the disaggregated revenues, you'll see that that was 150% growth year over year in those on boarding revenues. We're now at a healthy spot and while we'll see growth consistent with kind of the growth in onboarded customers, it's just not at this going to be at the same rate as the rest of them. So again, shape fairly consistent, upside is going to be around partnerships and the comps are just normal course of business where we'll continue to see those benefits. They just won't be as big in Q1 as they were last year.

Speaker 5

Super helpful. Thank you.

Speaker 3

You bet. Thanks, Matt.

Operator

Our next question comes from the line of Parker Lane with Stifel. Please proceed with your question.

Speaker 2

Hi, guys. Thanks for taking

Speaker 7

the question. Congrats on the quarter and the continued acceleration here. Lots of new payments capabilities being launched the second half of the last year. Curious if you could give us an idea of the impact that you expect that to have on adoption and attach rates of payments and just the overall expectation around payments growth when you look out over the next few years?

Speaker 2

Sure. So I'll start with an answer. So I think I continue to believe that we have a really significant opportunity in payments and it's really the key to that is getting Weave's payments functionality integrated into the workflow of the office. And the way we do that is we add more of these terrific features, functionality, just make it a much more compelling offering. And then training the offices on the functionality and helping them make the move.

Speaker 2

And it's really they don't really care which platform they process on. They just want it to work really well. So as we develop more of this functionality and then integrate it better into their office workflow is where we'll see continued adoption. So, we're currently less than 10% of revenue is payments, because if we were more, you would see it in our financials. But it's growing as a percentage of revenue.

Speaker 2

It's growing faster than subscription revenue, even though subscription revenue has accelerated. And we expect it to continue to do that. The other thing we're working on, as I mentioned, one of the activities that David MacNeil is going to overtake is payments is going to report directly to him and one of his top priorities is recruiting a dedicated general manager of payments for us who just walks the floor every day figuring out how do we get more integrated into the workflow, get greater adoption, greater usage. And then I think that those are kind of a couple of key pieces necessary for our success. And I really think we can grow payments both in total, but also as a percentage of our revenue pretty meaningfully over the next several years.

Speaker 7

Got it. Very helpful. And then you also called out a pretty material improvement in employee attrition rates from 2022 to 2023. I wonder if you can go into a little bit more detail on what measures you undertook to actually achieve that outcome and how that's translating into productivity gains across different areas of business?

Speaker 2

Sure. So I'll give my opinion and Alan you can give your opinion because you've been here a lot longer than I have. A few years ago when I joined, it was I think we lacked real clarity on what it is we are trying to accomplish as a business. What were our priorities, what we were going to work on, what we were not going to work on. And then also really pushing down ownership of business operations.

Speaker 2

So over starting last year, we brought the whole company together in a kickoff. We were very explicit in what our top priorities are. We announced our 4 focus areas for last year. And then we built projects across those focus areas that every single employee who is part of that project work knew what they were working on, why they were working on it and what the expected outcome was and how it impacted the company. And then we also started increasing accountability and ownership by a number of different tools.

Speaker 2

One of them we call Vital Signs. It's every Tuesday morning, the leadership of the company gets together and spends 30 to 45 minutes going through all of the results of the business for the previous week. And it really, really created synergistic understanding and behaviors where all the functions were working together to kind of generate the desired outcomes and it was measured every single week. So people could see success, where functions were having challenges, teammates jumped in to help them. And it's really it's actually frankly been magical to watch.

Speaker 2

So I'll pass it up to Alan.

Speaker 3

Yes. All of those things that Brett mentioned are absolutely key to what we've been doing. Since its inception, the founders of Weave said, hey, people are the real heart of why we can grow and make this a great business. When Brett came in, his mantra as he introduced himself was be kind to people and be tough on the business and that serves us very well. We want to be aggressive, but we love being around people.

Speaker 3

We love working together. We want a collaborative environment. And so we've done that. And then obviously, you know, just a macroeconomic environment, we've had been growing in 2023 adding personnel as we've gone through the year. And that's been somewhat unique not only nationwide, but here along the Wasatch Front where we're located and that always a benefit with respect to the employee environment that you can create.

Speaker 3

So those are the that's what I would add to that question.

Speaker 7

Understood. Thanks guys. Congrats again.

Operator

Our next question comes from the line of with Goldman Sachs. Please proceed with your question.

Speaker 8

A lot of good questions ahead of me. So just want to wrap up maybe a couple more admin things here. But in 4Q, 1Q, 2Q and 3Q, you all noted Boomerang customers. And unless I missed it on the call, I don't think it was noted. So first question would just be around how many Boomerang customers did you see this quarter or any color you can give around that would be great?

Speaker 2

Sure. I'll take a crack at that. So the reason we introduced the concept, the Boomerang customer was really in response to a competitive question. We got a competitive question and we said, well, let's actually dive in there and understand what's happening. So we introduced the comment, the concept and we talked about it, I think you're right for 4 quarters in a row.

Speaker 2

And this quarter was basically the similar results that we've seen all year, maybe a little bit more. But we really kind of said, well, let's just stop talking about it because we've proven our point. The trend is the same and it's really not a key metric that we focus on internally in the business. It was good to watch. We do keep an eye on it, but we just it's not a key metric.

Speaker 2

So we're just not going to report it anymore, mostly because it's just a continuing pretty consistent trend.

Speaker 8

Got you. Okay. That makes perfect sense. And then the other question I had was around the assumptions that were baked in into guidance. If I look at the progression of growth in 2023.

Speaker 8

Initial guidance was for 11% and you all ended growing 2023 at 20%. So can you just talk about the guidance assumptions that you're making for initial guidance and where there might be upside or continued pressure that we should be aware of as we progress throughout fiscal 2024?

Speaker 2

Sure. So let me start by just talking philosophy. The business is doing well. You saw in Q4, the business continued to do well. Demand continues to grow.

Speaker 2

We continue to execute well. So that's I'd say the probably the most important point to take away. The sales team is performing very well. We saw good customer volume growth. So if you look at like year over year almost average volume per customer that grew in 23.

Speaker 2

So the customers businesses are doing well. But we are very focused on providing guidance that we have high confidence that we can deliver on. And our philosophy has not changed. It worked for us in 'twenty two, it worked for us in 'twenty three. We kind of beat it 8 quarters in a row.

Speaker 2

So we're sticking with that guidance philosophy in 'twenty four and I can let Alan fill in any details if you'd like.

Speaker 3

Jacob, I think Brett nailed it. No change in the philosophy. We are going to continue to just have high conviction about what we present to the Street and continue on the march forward.

Speaker 8

Perfect. Thank you so much guys. I really appreciate it.

Operator

Our next question comes from the line of Tyler Radke with Citi. Please proceed with your question.

Speaker 9

Thanks for taking the question. So on the specialty medical vertical, can you just talk about some of the integrations that you're working on kind of other product specific capabilities that you think could be an unlock for that vertical? And then I guess is there any further you have motions around things like plastic surgery, medical spas, physical therapy, or is there any kind of other further segmentation that you're planning within specialty medical? Thank you.

Speaker 2

Sure. So, I'll start. The I think there's maybe 20 sub verticals in specialty medical. Yes. And so I called out 4 of them, physical therapy, medical aesthetics, med spa, general practice and those are the ones that I'd say we're primarily focused on building product market fit around those.

Speaker 2

As far as the work that was done and also plastic, sorry. The work that's done is really on 2 fronts. Well, really three fronts. Building the integrations, so integrating to their practice management or EMR software and integrating them to leave. That's number 1.

Speaker 2

Number 2, deepening existing integrations. So, there are different levels of integration that you can write and the more integrated you get, the more valuable the product is. So deepening existing integrations, the 3 the 3rd piece is really developing very crisp go to market and brand recognition. A lot of these newer or especially medical sub verticals that are new to us, we don't have great brand recognition. And so building that brand recognition in a very focused way is important to us and I think driving a lot success.

Speaker 2

So that's why we kind of take the 20 plus break it down to 3 or 4 that we're really going to focus on now and then just go through and knock them off.

Speaker 3

So I'll just add one a couple of things to that. Number 1, we are developing these relationships with these integration partners and the fax management, EHRs, PIM providers going in the front door. We're developing those relationships. We got we want to have deep and we're not doing the backdoor stuff like some of the competitors do. The second thing that I would add is just with the leadership of the group that's heading that up under our Chief Strategy Officer, we now have a much more disciplined approach to the way that we're going after this.

Speaker 3

We've got a roadmap, we've got objectives, we've got know the targets. We can't speak publicly about all of those, but as we continue to delve in there, I see great things ahead with respect to the opportunities to both deepen and create those new interactions and integrations that will open up TAM for us.

Speaker 2

Just let me add one more comment here. Just the difference between front door back integration and a backdoor integration is pretty important. The frontdoor integration is where we have an agreement with the software provider, the Praxis management software provider and our integration is supported. They approve of it. We only do things that we're supposed to do and are allowed to do and they actually support us in that integration, they support their customers.

Speaker 2

A backdoor is kind of an unauthorized integration where a vendor would go in and attempt to connect to the software without agreement with the company, sometimes referred as a hostile integration and our focus is on Frontdoor.

Speaker 9

That's helpful. Thanks for all the comments. So just the last question I had, a couple of follow ups as we think about the outlook. So on the new customer front, encouraging to hear and see the pickup in new adds of locations this year. Do you think that that further accelerates next year now that you're really leading into these TAMs that just frankly have a lot higher locations?

Speaker 9

And then secondly, Alan, appreciate the detail on NRR. Would it be fair to say that you're expecting higher NRR in 2024 versus 2023? Thanks.

Speaker 3

So Tyler, yes. On the second question, as we get into the second half given what we're already seeing, we can say with confidence that we're going to see that in the second half of the year, just given that 12 month trailing metric that the NRR is currently on. And the new customers is I think the new customers will follow the same pattern that we've seen with the exception that we're I do think that the partnership opportunities are going to accelerate.

Speaker 2

Thank

Operator

you. Thank you. Our next question comes from the line of Mark Schappel with Loop Capital Markets. Please proceed with your question.

Speaker 6

Hi, thank you for taking my call and or my question, excuse me, and nice job on the quarter here. Brett, starting with you, on prior earnings calls, you noted that the product development group was working on building your next gen platform. I was just wondering if you could just give us a sense of when that will be released this year and maybe some of the benefits financially you may expect to drive from it in the coming year?

Speaker 2

Sure, you bet. So really, there's 2 desired outcomes from our next gen platform. If you're familiar with our product, current product, it's basically it's an app that sits on the desktop. It kind of looks like an iPhone. And right now, we put all of our functionality into that app.

Speaker 2

So the first outcome that's desired by the next generation platform is to move the current functionality from the legacy app into a more dynamic app. So an app where you can grab the corners and make them larger or smaller and move them around. And that's easier for the customer and it's easier for us because we can move more functionality into the app. We're no longer constrained by real estate. And also the other piece of that is to move that functionality to the web.

Speaker 2

So you can either work in the app, kind of like a Slack or you can pull up the web version of it and getting the functionality the same from the legacy app to the new app to

Speaker 3

the web just as it

Speaker 2

kind of occurs over time. We're the majority of the way there. We're fully done on some functionality and we're the majority of the way down on some of the remaining functionality. So definitely should happen this year, hopefully around mid year. So that's the first outcome.

Speaker 2

And then the second outcome is adding multi functionality. So functionality that is makes the product much more usable and useful to multi location offices. So for example, being able to manage multiple email inboxes at once, doing multiple texting activities. So basically you can pick a pick list and either pick from 1 office or all 10 offices or 3 of the 7 offices, whatever you want to do. So it's really around those two outcomes that we're working on.

Speaker 2

We currently opened it up to early access late last year. I think we've got over 1,000 customers on it using it, testing it, playing with it. And so I would say we're in a very good place there. The responses and the feedback that we've gotten has been quite good. We're not selling it quite yet, but we are showing it to select multi location customers.

Speaker 2

And I think this will continue to improve, embed the legacy functionality into the new platform over throughout 2024.

Speaker 6

Thank you. And then building on an earlier question, I was wondering if you could just give us maybe a little bit of an update on your hiring plans for the year, particularly on the go to market side?

Speaker 2

Right. So, we added sales capacity in 2023. We clicked it up a few notches in Q3 and Q4, so we could make sure that we've got the sales capacity we need kind of every quarter, but certainly throughout 2024. I expect that everything goes the way we hope and plan it will, that we'll continue to add sales capacity throughout 2024. And then I think we've got some additional hiring planned in product and engineering.

Speaker 2

Anything else you want to add, Alan?

Speaker 3

No, I think those are the key elements. We will grow across the board and obviously we will gauge that growth on continued execution and making sure that the metrics support.

Operator

There are no further questions at this time. I would like to turn the floor back over to CEO, Brett White for closing comments.

Speaker 2

Okay. Well, thank you again for your continued support and thank you to the entire Weave team for delivering another terrific quarter and we'll talk to you in our next call.

Earnings Conference Call
Weave Communications Q4 2023
00:00 / 00:00