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Weave Communications, Inc. (WEAV) Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue grew 18.6% YoY to $54.2M, with GAAP gross margin at 72.1% and non-GAAP operating income of $1.8M; free cash flow was $6.1M, marking a second consecutive quarter of non-GAAP operating profit and strong cash generation .
  • Results were above the high end of Q3-issued Q4 revenue guidance ($52.6–$53.6M) and at the high end of non-GAAP operating income guidance ($0.9–$1.9M), a positive surprise versus management’s own range .
  • Initial 2025 outlook calls for $232–$237M revenue and $2–$6M non-GAAP operating income (Q1: $54–$55M revenue; non-GAAP operating income $(0.7)–$0.3M), reflecting continued investment in medical verticals, mid-market, partnerships, payments, and AI; expect tougher Q2 comp due to 2024 pricing actions and seasonal Q1 cash outflows .
  • Leadership transition announced: CFO Alan Taylor to retire end of Q1’25, with VP Finance Jason Christiansen to assume CFO role; succession characterized as planned and seamless .

What Went Well and What Went Wrong

  • What Went Well

    • Revenue and profitability ahead of internal guide: Q4 revenue above the high end of guidance and non-GAAP operating income at the high end; gross margin expanded for the 12th straight quarter. CEO: “Weave delivered another excellent quarter… with improvements in gross margin, cash flow, and operating income (loss)” .
    • Payments, partnerships, and mid-market traction: Dedicated teams and comp changes (AEs now have a payments number and residuals) plus integrations (e.g., Patterson Dental) and a notable multi-location win (Affordable Care) bolster the growth pipeline .
    • Cash generation: Q4 operating cash flow of $6.7M and FCF of $6.1M, with FY FCF of $10.4M and cash + short-term investments at $99.1M, enhancing balance sheet flexibility .

  • What Went Wrong

    • Retention nudged lower: GRR at 91% (down 20–30 bps sequentially and YoY), still within a historical 91–94% band for SMB but a datapoint to monitor .
    • 2025 investment and compliance costs temper near-term margins/FCF cadence: Expect higher SOX 404(b) compliance and audit fees, seasonal Q1 expense step-up, and likely negative Q1 FCF due to bonus timing despite aiming for positive FY operating income and FCF .
    • Tough Q2’25 comp from 2024 pricing; management not planning similar price increases in 2025, implying less price tailwind and placing the onus on execution across growth vectors (payments, partnerships, mid-market, AI) .

Financial Results

Revenue, EPS, and Margins

MetricQ2 2024Q3 2024Q4 2024
Revenue ($M)$50.6 $52.4 $54.2
YoY Revenue Growth21.4% 20.3% 18.6%
GAAP Gross Margin %71.4% 72.0% 72.1%
Non-GAAP Gross Margin %71.9% 72.5% 72.6%
GAAP Operating Margin %(18.3)% (12.7)% (13.6)%
Non-GAAP Operating Margin %(1.9)% 2.7% 3.3%
GAAP EPS$(0.12) $(0.08) $(0.09)
Non-GAAP EPS— $0.03 $0.03
Operating Cash Flow ($M)$22.7 $4.5 $6.7
Free Cash Flow ($M)$21.2 $3.5 $6.1

Disaggregated Revenue (and Segment Gross Margins)

SegmentQ2 2024Q3 2024Q4 2024
Subscription & Payment Processing Revenue ($M)$48.513 $50.375 $52.126
Subscription & Payment Processing Gross Margin %78.0% 78.3% 78.1%
Onboarding Revenue ($M)$0.943 $0.845 $0.799
Onboarding Gross Margin %(115.5)% (137.4)% (140.7)%
Hardware Revenue ($M)$1.130 $1.166 $1.244
Hardware Gross Margin %(53.5)% (47.6)% (44.6)%

Key KPIs and Balance Sheet

KPIQ2 2024Q3 2024Q4 2024
Dollar-Based NRR97% 98% 98%
Dollar-Based GRR92% 92% 91%
Customer Locations (period-end)——34,997
Cash + Short-term Investments ($M)$99.0 $98.2 $99.1

Q4 2024 Actuals vs Q4 2024 Guidance (issued 10/30/24)

MetricPrior Guidance (Q4’24)ActualResult
Revenue ($M)$52.6–$53.6 $54.2 Above high end (beat)
Non-GAAP Operating Income ($M)$0.9–$1.9 $1.8 At high end

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenue ($M)FY 2024$201.0–$203.0 (7/31/24) $202.7–$203.7 (10/30/24) Raised
Non-GAAP Operating Income ($M)FY 2024$(3.8)–$(1.8) (7/31/24) $0.0–$1.0 (10/30/24) Raised
Total Revenue ($M)Q1 2025—$54.0–$55.0 New
Non-GAAP Operating Income ($M)Q1 2025—$(0.7)–$0.3 New
Total Revenue ($M)FY 2025—$232.0–$237.0 New
Non-GAAP Operating Income ($M)FY 2025—$2.0–$6.0 New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2024)Trend
AI/TechnologyLaunched new AI-powered platform; Call Intelligence unveiled; platform integrates AI assistant for review responses, emails, voicemail transcription .Announced AI-powered Call Intelligence; plan to keep advancing AI embedded across workflows in 2025 .Accelerating productization and adoption.
PartnershipsPatterson Dental commercial partnership to expand reach (~100k locations); numerous integrations (eClinicalWorks, ezyVet) .Partnerships a key growth vector; launching dedicated partner sales team; Prompt integration launched to expand in physical therapy .Expanding channel leverage.
PaymentsHired GM of Payments; goal to broaden payments penetration .AEs comped on payments and residuals; doubled eng/ops; integrating workflows; expect accretive growth and margin impact in 2025 .Increasing attach and monetization.
Mid-market (multi-location)Launched Weave Enterprise in June to standardize operations across multi-location practices .Affordable Care selected Weave; expanding mid-market sales/marketing capacity in 2025 .Early wins; building capacity.
Pricing / NRRNRR 97% (Q2), 98% (Q3) .NRR 98%; 2024 price actions create tough Q2’25 comp; less price action planned in 2025 .Core NRR stable; price tailwind moderating.
Compliance/Costs—2025 will include SOX 404(b) compliance with higher audit fees; seasonal Q1 expense reset .Incremental cost headwind.

Management Commentary

  • Strategic priorities: “In 2025, we expect to continue to make strategic investments in medical vertical markets, mid-market, partnerships, AI, and payments” .
  • Profitability and cash: “Q4 also marked our second consecutive quarter of positive operating income… We achieved $6.1M in free cash flow in Q4… representing a free cash flow margin of 11%” .
  • Growth vectors detail: Specialty medical grew at 2x company rate in 2024; expanding integrations (eClinicalWorks, athenahealth, NextGen, Prompt, Practice Fusion) and broader go-to-market in 2025 .
  • Payments monetization: “All of our sales account executives now have a payments number… and payment residuals… it will definitely continue to have an accretive effect in ’25 for both our growth and our margins” .
  • Mid-market traction: “Affordable Care… chose Weave as its platform of record for patient engagement and payments” .
  • Outlook balance: Investments are “very targeted small team investments… we’re going to deliver more profit next year… growth [to] accelerate in the second half” .

Q&A Highlights

  • Investment vs. profitability: Management emphasized targeted team builds across growth vectors; expects more profit YoY and H2 acceleration despite near-term investments .
  • Payments strategy: Expanded workflows, integrations, revamped AE compensation to include payments/residuals; payments expected to be accretive to growth and margins in 2025 .
  • Guidance philosophy and comps: Guide maintains historical conservatism; toughest YoY comp in Q2 due to 2024 price actions; less price contribution in 2025 .
  • Mid-market focus: Pipeline currently primarily dental given brand and PM software partnerships, with plans to extend to optometry, vet, specialty medical .
  • AI pricing/upsell: Call Intelligence monetized in higher bundles and as upsell; ASPs trending up with bias to higher bundles; balancing price with platform migration .
  • Retention drivers: NRR supported by payments and upsells; NRR measured per-location (logo expansion doesn’t inflate NRR) .

Estimates Context

  • We attempted to retrieve S&P Global consensus estimates for Q4 2024; however, the request could not be fulfilled due to a data access limit this session. As a result, we are not presenting Street consensus comparisons and instead benchmarked results against the company’s prior guidance, where Q4 revenue came in above the high end and non-GAAP operating income at the high end of guidance .

Key Takeaways for Investors

  • Quality beat vs. internal guide: Q4 revenue above the high end and non-GAAP operating income at the high end, with continued gross margin expansion, supports the improving operating model and potential positive estimate revisions once Street data are available .
  • 2025 set-up: Expect growth to be more back-half weighted due to Q2 comps and stepped-up investments; near-term headline risk from Q1 seasonal expenses and likely negative FCF, but management targeting positive FY operating income and FCF .
  • Payments as a lever: Compensation alignment, deeper integrations, and workflow embedding should lift attach, ARPU, and margins—watch payments KPIs and commentary for evidence of accelerating monetization .
  • Mid-market traction: Affordable Care win validates enterprise motion; scaling sales and marketing could drive incremental bookings and payments revenue in H2’25 and beyond .
  • Retention resilient but watch churn: GRR ticked down to 91% (within historical band); monitor retention stability as price tailwinds moderate in 2025 .
  • Balance sheet provides runway: ~$99M in cash and short-term investments supports continued investment in AI, payments, and partnerships without dilutive financing .
  • Leadership transition: Planned CFO succession reduces execution risk; nonetheless, monitor any changes in capital allocation or disclosure cadence through the transition .

Additional Context and Cross-Checks

  • Q3 2024 performance and guide raised FY 2024 ranges (both revenue and non-GAAP operating income), which Q4 then exceeded/validated—an element supportive of credibility in outlook setting .
  • Q2 2024 outsized OCF/FCF reflected deferred March billings collections; normalize your FCF trend analysis accordingly .

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