Greetings and welcome to the Weave Second Quarter 2024 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mark McReynolds, Head of Investor Relations. Thank you. You may begin.

Thank you, Sachi. Good afternoon and welcome to Weave's second quarter 2024 earnings call. With me on today's call are Brett White, CEO; and Alan Taylor, CFO. During the course of this conference call, we will make forward-looking statements regarding the anticipated performance of our business. These forward-looking statements are based on management's current views and expectations, entail certain assumptions made as of today's date, and are subject to various risks and uncertainties described in our SEC filings. We've disclaimed any obligation to update or revise any forward-looking statements. Further on today's call, we will discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results. Unless otherwise noted, all numbers we talk about today will be on a non-GAAP basis. A reconciliation to comparable GAAP metrics can be found in today's earnings release, which is available on our website and as an exhibit to the Form 8-K furnished with the SEC before this call as well as the earnings presentation on our Investor Relations website at investors.getweave.com. And with that, I will now turn the call over to Brett.

Thank you, Mark and thank you to everyone for your participation today. I'd like to start today's call with financial highlights from Q2. I'm thrilled to share that we had an outstanding quarter, continuing our track record of improving financial performance, and setting the stage for a strong second half of the year. We delivered another quarter of solid top line performance, significant gross and operating margin improvements, and for the first time in our company's history, positive adjusted EBITDA. Revenue for Q2 was $50.6 million, representing 21.4% year-over-year growth compared to 19.2% growth last quarter and $1.4 million above the high end of the range that we provided in May. Gross margin reached 71.9%, 400 basis points greater than Q2 of last year, marking our 10th consecutive quarter of gross margin improvement. Additionally, our adjusted EBITDA margin improved by over 700 basis points from last year. These results highlight the continued strong demand for our software and payments platform and our ongoing commitment to business efficiency. Our mission is to enhance healthcare experiences for every practice, patient, and interaction. We have created a comprehensive customer experience software and payments platform tailored to small and medium-sized healthcare practices. Our solution empowers healthcare providers to focus on patient care, while we optimize office operations, manage payment processing, and drive practice growth through enhanced patient communication and engagement. For over 15 years, we've delivered solutions that meet the unique needs of SMB healthcare providers. These providers often lack dedicated IT teams and depend on intuitive software like Weave. Our platform integrates with these practice's system of record and simplifies attracting, engaging, and retaining patients. Our total addressable market in the U.S. exceeds $7 billion, including specialty medical, our third largest and fastest-growing vertical market where growth rates accelerated again in Q2. In…

Thanks, Brett. Good afternoon, everyone. I'm excited to provide some additional color on our financial performance for the quarter. We continued to execute in Q2 resulting in a strong quarter of results. We delivered second quarter revenue of $50.6 million reaccelerating our growth rate to 21.4% year-over-year, compared to 19.2% last quarter. This represents a $1.9 million beat or a 4% beat over the midpoint of the range we provided last quarter. Revenue growth in the quarter was driven by a combination of new customer additions particularly in our specialty medical vertical and increases in average revenue per location. The exciting part of the progress with specialty medical is that despite it being our fastest-growing vertical, we are still less than one-half of 1% penetrated into the total addressable market. Weave's average revenue per customer has steadily increased over the past three years as we have been successful in selling higher-priced bundles. We've seen some impressive performance from the products we have released in the last couple of years. Digital forms bulk messaging and insurance verification have performed really well over the past several quarters and are beginning to contribute meaningfully to total revenue growth. Our net revenue retention rate improved to 97% in Q2, up from 96% last quarter. This includes the results of our up-sell motion and price adjustments, which are periodically made to some customers and products as we continuously deliver additional value and functionality on our platform. Some examples of functionality, we have delivered recently include our AI reviews assistant, voicemail transcription, deepened integration and AI e-mail assistant. Our gross revenue retention rate held steady at 92% among the best-in-class for SMB retention. Logo retention has been very consistent for Weave, with gross revenue retention landing between 91% and 94% every quarter for the last four…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] The first question is from Parker Lane from Stifel. Please go ahead. Q – Parker Lane: Hi, guys. Thanks for taking the question. Brett, you talked about 0.5% of penetration coming from specialty medical. I was wondering if you could talk about what pockets of specialty medical you're seeing the most traction in today and how the go-to-market motion is aligned around those particular areas?

Sure. Thanks, Parker. So where we're seeing the traction is physical therapy, med spa, plastics, general practice. And those are really our four primary focus areas with both sales and marketing and integrations. And our go-to-market is pretty similar to our past history. The only difference being we're new to these spaces. So we have to cede them with some brand marketing and then run our usual marketing motions to generate the inbound leads and then we also have an outbound motion into those segments.

Got it. That makes sense. And then in terms of the rollout of the new platform is there a timeline by which you're planning to sort of get that in customers' hands? And what sort of enhanced features do you think are coming to the table that would potentially drive expansion or further retention momentum going forward?

Sure. So we developed an entirely new product platform we call the new Weave experience and built on that are really two products; Weave Enterprise, which is a product focused almost – well primarily almost exclusively on multi-locations. And so that product offers those customers the ability to manage multiple locations through one application, through one login. So that will be very, very helpful. They can also multitask. They can also use the application to take up as much or little real estate on their screen as they like. So that is really the opportunity, the product opportunity that we now have to really move in a big way into multi-location sales. We already have about one-third of our customers in multi-location but we really haven't had a great dedicated tool that meets all their needs or dedicated product and now we do. So with this release we are sharing this product. We are demoing this product currently with multi-location opportunities and it's getting quite a bit of interest and excitement on the multi-location opportunity side. On the second side of the Weave new experience is we've also enabled the new version of the SMB app. And really the big – the new features there that will be – I think we're really excited about is the ability to change – to dynamically change the size and configuration of the app. Historically, our app was limited to kind of like an iPhone four size. And so you can retain that functionality or you can expand it have it pick up your whole screen you can have different types of views. So that should be very helpful. Also it's got auto update features so that the app just auto updates like a modern app versus having to go and download it and delete and replace. And that was historically a source of some challenges certainly on the support side because you couldn't guarantee all the customers are running the same version of the app. So that should be very helpful. I think we have about 7,000 customers currently using the SMB Weave app and I think they toggle back and forth. They can use the legacy app if they want. They can use the new one. But we've got about 7,000 on it now. The other interesting thing about the new app for the SMB actually both products is you can run them on Chrome, which historically we couldn't do. They're very browser friendly and/or you can just download the app. So hopefully that helps.

Okay. Thanks, Brett. Appreciate all the color there.

The next question is from Alex Sklar from Raymond James. Please go ahead.

Great. Thank you. Brett or Alan just in terms of all the added integration work you've announced over the last year, can you just frame the size of your installed base today that's not on one of your integrated bundles but they now have access to one of those plans given all the work you've done in the past several years. And then with that what does that back-to-base motion look like as you try and upsell some of these customers to your elite plan? Thanks.

So I'll start. Alex about 10% of our customers are now on a non-integrated product. And so we continue to penetrate into that given these integrations and it opens that up. And so the upsell team can then take that as soon as that integration is done. Give them a call, describe what now can be accomplished including just the call pop feature depending on the level of the integration. Obviously, we read from that integration. In some cases we have the write-back capability for appointment reminders and with deep enough integrations obviously, we can go clear through to payments. So that upsell motion becomes fairly compelling, given the new integrations and that the process is really one through our upsell team to dig in there.

Yes. I would add Alex that in addition to new integrations, we've spent a lot of time deepening integration. So, a customer maybe on just a base Weave package. But as we add deepened integrations then other upsells, other higher-end bundles become much more interesting to them, because they just work better as we deepen an integration. So that'd be one point. And then the second point is events. One thing we found is when we're in an event and we put up a banner that says now integrates with XYZ BPMS, we get a lot of interest and a lot of activity. So, it's not really an upsell but it is taking prospects, who are interested in Weave but haven't yet pulled the trigger, because we didn't have the integration, it makes that a much more compelling opportunity for them.

Okay. Great color on that new logo piece too. And so it sounds like probably more than 10% like in terms of the upsell opportunity but the customers that are not on integrated products are 10%. But this is more than just the integration of the upsell. Is that right?

That's right.

Okay. And then just as a follow-up, I want to ask kind of following-up on Parker's first question but just in terms of top off funnel growth and you've got the more formal expansion into specialty medical now that TAM is larger than your other ones you talked about. How is that top of funnel kind of lead gen tracked relative to your overall kind of 20% top line growth? And where have kind of been the biggest incremental lead gen successes over the last year?

So, lead gen continues to grow. We've got strong performance over the -- definitely over the last six months on generating new leads in our now four core verticals. Dental continues to be our largest. That's the largest part of our -- in just sheer numbers largest part of our install base, largest source of leads, largest number of new customers closed. But I would say we're fairly well distributed on lead gen versus kind of our install base with the exception of medical. Medical is much stronger on a kind of percentage of growth and just number of leads relative to the base perspective.

Okay. Thank you, both.

The next question is from Brent Bracelin from Piper Sandler. Please go ahead.

Good afternoon. Thank you for taking my questions here. I guess, Brett, I want to start with just the demand trends in the quarter. Subscription and payment revenue looks like it was up the most sequentially over $3 million here in well over three years. What's driving the strength here? Again, it was pronounced increase here sequentially. What drove the upside this quarter? Thanks.

Sure. So, it was on multiple fronts. Sales, is doing quite well. We've been building on our sales momentum. We had a good quarter. I think it was -- I think this quarter we closed more new sales than previous quarters, certainly in the previous couple of quarters. So I would say, new customer acquisition has been growing. So that's good news. Alan mentioned that we did some price adjustments this quarter and we do them pretty regularly for the last several years, but we have price adjustments this quarter over certain kind of cohorts product types customers, et cetera. And then payments did well. We had a nice payments growth. We had a bit of expansion in our net take rate. Anything else?

I think those are the key elements, yes.

Helpful color there. Just as we think about the -- remember the business, particularly, against a macro environment certainly not getting any better. So it does sound like it's a lot of it is internal got execution stuff that's working for you. I wanted to double-click into the Patterson Dental relationship and what changes. You've had a relationship there. It seems like there's something new and just trying to better understand what that means tapping into that sales force team? What does it do? Is this a strategic relationship that might blossom into incremental net new ACV build next year? Could you start to see things earlier? Any sort of additional details on what that means to the business and the opportunity would be helpful. Thanks.

Sure. So we are really, really excited about the traction we're getting on the partnership side. Every quarter I stand up in front of the team and I talk about the things that get me excited. And for the last couple of quarters, partnerships has definitely been in it. Historically, Weave has not been super, I would say, not partner friendly, but we haven't really gone out of our way to establish an additional channel and partnerships. And we decided about a year ago that we just wanted to kind of change our approach and establish win-win partnerships with the PMS providers. And so we sat down and we talked about all the opportunities, and how we really were interested in win-win. And we hired a new head of channels very clever guy in December, and really just started working with these PMS providers to figure out how we could win together. And we hashed out a deal end of last year with Dentrix and Dentrix Ascend, and then we closed this deal with Patterson and it's terrific. We're going to market together. They -- Patterson has a Weave/Fuse. Fuse is their enterprise cloud solution. They have a Weave-Fuse bundle that they're selling. They're calling on about 100,000 locations and customers. So they're now calling into that with the Weave, Patterson bundle. And also they're sharing leads with us. They're sharing opportunities with us. So really collaborating on selling Weave and Patterson together because it just really is one plus one equals three for the customers. And as far as getting traction, we actually sent a team to their national sales kickoff in June trained their salespeople. Their salespeople are excited about it. We're already getting leads sent over. We've got deals signed. We've got ARR added already kind of from June to today. So it's off to a positive start and we hope to have more partnerships with practice management software providers like this going forward.

Great. Well, it sounds like that partner channel is really starting to blossom for the company. So great to see. Thank you.

Thank you.

The next question is from Mark Schappel from Loop Capital Markets. Please go ahead.

Hi, thanks for taking my question. And nice job on the quarter and the guide. Brett, it's been a couple of quarters now since, I think, you brought on board new sales leadership and often when such leadership comes on board that typically means sales changes or changes to the sales team. I was wondering if you could just give us an update on whether there have been any meaningful changes to sales recently that could be helping drive the upside here?

I would say, the changes that are being -- so, this is David McNeil who joined and he's a very thoughtful person. Spent a lot of time getting to know the people, how the business works. We're a very unique animal and then bringing to bear his lessons learned, his experiences on how we can do better. So, I would say the changes that have occurred have been small. So, very small incremental changes just making observations, making tweaks, making improvements. We're strong believers here that if you just do a little bit better 1% to 2% a month, it adds up over time. And he's taken a very thoughtful approach. One of the motions that he's been very involved with is really getting our middle market business up and running. Historically -- we have a very small group there, and historically, we just haven't had a great specific middle market multi-location product to sell. So he spent a lot of time working with sales leadership ideating on what's the right structure, developing that model for that team. And so now that we actually have a product that works really, really well for that segment, I think, we're well positioned to grow there. He's provided a lot of support to the inbound and outbound leadership. They're cranking away. So, overall, I would say, kind of providing ideas thoughts leadership and just opportunities for incremental improvement, but no big dramatic changes.

Great. Thanks. And then secondly last year Boomerang customers returning to the Weave platform were a big part of the Weave story. And I was wondering if there's anything to report on that front this quarter?

Yes, it continues -- the quantities continue at the same rate. I mean we stopped reporting it because it was basically the same number plus a little bit more. But that phenomenon still occurs. We have -- a competitor will call in and they'll say, hey we can do everything Weave can do for $100 less a month. And the customer says, that sounds great. And they quit and they go there and then they come right back because they find out that they just don't have the functionality the depth of integration, the quality of the Weave solution. So that phenomenon is continuing.

Great. Thank you.

The next question is from Tyler Radke from Citi. Please go ahead.

Hi. This is Kylie on for Tyler. Congrats on the quarter. And I guess I'll start off with you raised the full year more than DAV. I'd love to hear what gives you the better visibility into the second half? And any comments on the macro changing relative to last quarter? Thanks.

Yes. Thanks, Kylie. Thanks for noticing. It is an important aspect of the business. We were on 10 consecutive quarters of being able to meet and exceed our guidance and we take that seriously providing guides that we have a high conviction around. So it's just indicative of the fact that the business is executing well. The sales performance has been good. It continues to be incrementally better as Brett mentioned. And so we're confident in being able to roll that through and do so with high confidence. On the second thing regarding macro trends they're out there. But I think one of the things that is unique to our small businesses are that dentists optometrists, veterinarians, the medical industries they are very stable and reliable businesses. They are not subject to being -- going out of business at anywhere near the same rate as a typical SMBs. And so from a macro perspective just overall we still need to see our dentists, we still need to see our doctor. We need to take our dogs to the vet. And those things aren't as impacted by the macro trends largely as many others. And so that's really good news for us. And I really think it's one of the things that the market doesn't fully understand or appreciate about Weave is just the strength of the kind of customers and their resiliency through any kind of macro trends that may disrupt other segments of the economy.

Understood. That's helpful. Next I'd love to hear about any feedback you've had on the Call Intelligence product that you guys have released and any margin comments you have on how that compares to the overall business and the attach rates you anticipate?

So Call Intelligence has been -- as we roll out these products we continue to listen to customers and making sure that they are meeting all of the needs of these customers. Call Intelligence has some great promise. And as Brett mentioned we have a better more historical data than just about anybody else with respect to the calls, texts and e-mails associated with our 15 years in the business. And so we're building out these models that allow us to train the AI so that we can show customers when calls are coming in, what their call patterns are, what the emotion is around these calls. And so we're excited about where that's going to go. It's still relatively early and we continue to roll that out. And we believe over time this will become a very important aspect of how our customers really come to understand how their front desk is interacting with their patients and how they can improve that. And really fundamentally it's about making sure that every opportunity for revenue that comes in via a phone call is actually capitalized on.

Thank you.

The next question is from Mike Funk from Bank of America. Please go ahead.

Hi. Great. This is Matt on for Mike. Thanks for taking the question. Great to hear about the revenue reacceleration in specialty medical. Would love some additional color on some of the other verticals? And more specifically did any other verticals reaccelerate during the quarter or was it just specialty Medical?

The reacceleration with respect to the verticals is across the board. Specialty medical is the fastest of those given the new integrations that we've done in that space as well as just the uptake. So we're pleased to see the revenue reacceleration kind of across the board.

Got it. Thank you. And then just one quick follow-up on Weave Enterprise. Anything on just the early learning and early reception since the launch? And then anything we should know in terms of the nuances in terms of the go-to-market plan?

Not a whole lot of insights since the launch. Sales cycles are -- for mid-market are much longer than for the single location SMB. So we are demoing it. Now we're kind of in full demo mode. This is the primary product. Well, it is the only product that we're pointing at our middle market opportunities and that pipeline continues to build. The interest in the product is high. When we show practice leaders the functionality, the multitasking capability, they are -- they express sincere interest. So now we just need to continue to build the pipeline and close those deals. Sorry, what was the second part of the question?

Just the nuances between the go-to-markets which you address.

Yes. Yes, it's a totally different sales cycle. It's a different type of sales team. Yes so, that's -- there you go.

Thank you.

The next question is from Henry Dane from Goldman Sachs. Please go ahead.

Hey guys. Congrats on the great quarter, another great quarter. Just one for me. On NRR another quarter of inflection to 97%, can you just break down where that inflection is coming from just between attrition and upsell/cross sell and where investors could see that metric go in the future?

Yes. Henry, thank you. We've seen our NRR as high as 105% in past quarters. We certainly think we want to get above 100% again. But the things that are driving that are kind of across the board. We don't break them out in a quantitative way but it includes payments it includes our upsells. As we mentioned we're seeing products like forms and bulk messaging and insurance verification become a substantial part of the growing revenue streams that we have and that are available for upsell. So those are the areas that we see coming on and we continue to develop new ones. We -- Call Intelligence is in the works there. They will become we're sure a nice element of upsell. And those are the things that are driving that. So it is a great inflection point. It's nice to see and we intend for it to continue.

Great. Thanks for the color.

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

Okay. Well thank you all for joining the call and thank you again so very much to the Weave team. I'm excited to continue to build on the progress that we've made to deliver improved outcomes for both our customers and our shareholders over coming quarters. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.