Weave Communications, Inc. (WEAV) Q2 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call highlights strong growth in specialty medical, successful integration of TrueLark, and positive customer feedback. The company's strategic investments in R&D and sales/marketing, along with raised revenue guidance, indicate a positive outlook. While there are some uncertainties regarding AI adoption and macroeconomic impacts, overall, the sentiment is positive due to strong demand, growth opportunities, and strategic plans. The Q&A section reinforces confidence in the company's direction, with analysts showing interest in growth strategies and integration progress.

Key Financial Performance

Revenue $58.5 million, representing 15.6% year-over-year growth. The growth was attributed to a record sales quarter, an acceleration in sequential revenue added, and the impact of TrueLark acquisition.

Gross Margin 72.3%, an improvement of 40 basis points year-over-year and 20 basis points quarter-over-quarter. The improvement reflects ongoing efficiency initiatives.

Free Cash Flow $4.5 million, reflecting disciplined execution and the efficiency and scalability of the business.

Gross Profit $42.3 million, an increase of nearly $6 million year-over-year. This was driven by revenue growth and improved gross margin.

Sales and Marketing Expenses $23.2 million or 40% of revenue. The increase was due to targeted investments in mid-market partnerships and specialty medical growth initiatives, including accelerated hiring of sales account executives.

Research and Development Expenses $8.9 million or 15% of revenue. The focus was on integrating TrueLark and bringing AI-powered workflow solutions to the market.

General and Administrative Expenses $10.1 million or 17% of revenue, an improvement from 19% in Q2 2024. This reflects scaling of the business and gaining operating leverage.

Operating Income $70,000, an improvement of $1 million compared to Q2 2024. This was driven by disciplined execution and efficiency initiatives.

Cash and Short-term Investments $77.8 million at the end of the quarter. This includes $23 million deployed for the acquisition of TrueLark.

Cash from Operating Activities $5.4 million, contributing to the strong free cash flow performance.

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Operating Highlights

AI-powered patient interaction platform: Weave delivers a platform tailored to small and medium-sized healthcare practices, unifying communications, scheduling, payments, and practice insights.

TrueLark acquisition: Acquired TrueLark, an AI-powered workflow automation platform, for $25 million in cash and $10 million in equity. TrueLark enables 24/7 online scheduling, missed call response, and marketing lead conversion.

AI integration: Integrating TrueLark with Weave to offer AI-powered workflow automation, including joint selling to mid-market dental groups and plans to offer TrueLark as an add-on within Weave's unified inbox.

Specialty Medical vertical growth: Specialty Medical became the second-largest vertical by customer count, driven by growth in medical aesthetics, primary care, and physical therapy.

New integrations: Launched integrations with Veradigm, Practice Fusion, Prompt, Ortho2 Edge, and IDEXX Neo, expanding reach to thousands of new locations.

Mid-market expansion: Signed two multi-site physical therapy management service organizations, representing over 70 clinic locations.

Revenue growth: Delivered $58.5 million in revenue, a 15.6% year-over-year growth, marking the 14th consecutive quarter exceeding revenue guidance.

Gross margin improvement: Gross margin rose to 72.3%, up 40 basis points year-over-year.

Cash flow performance: Generated $4.5 million in free cash flow, reflecting disciplined execution and scalability.

AI-driven operational efficiency: AI has the potential to automate up to 45% of administrative tasks in healthcare, creating capacity and reducing costs.

Focus on technology adoption: 80% of fast-growing practices attribute growth to new office technology, with over 60% saying it eases hiring.

Leadership change: Promoted Abhi Sharma to Chief Technology Officer to accelerate innovation and scale the platform.

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Risk or Challenges

Labor constraints and inflationary pressure: SMB health care practices face challenges in keeping up with demand for services while maintaining margins due to labor shortages and inflationary pressures.

Shifting payer-provider dynamics: Changes in payer-provider relationships could impact revenue cycles and financial health of SMB health care practices.

Integration of TrueLark: The integration of TrueLark into Weave's platform requires significant effort and alignment across product and go-to-market teams, posing operational risks.

Competitive pressures in technology adoption: Practices that fail to adopt digital-first technologies risk falling behind in competitive local markets.

Economic uncertainties: General economic conditions, including inflation and labor market challenges, could impact the financial performance of SMB health care practices.

Revenue retention risks: While gross revenue retention is strong, maintaining this level consistently poses a challenge, especially in a competitive SaaS market.

Mid-market expansion risks: Efforts to expand into mid-market and specialty medical verticals require significant investment and carry execution risks.

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Guidance & Outlook

Revenue Projections: For Q3 2025, revenue is expected to be in the range of $60.1 million to $61.1 million. For the full year 2025, revenue is projected to be between $236.8 million and $239.8 million, reflecting accelerated growth in the second half of the year.

Operating Income Projections: Non-GAAP operating income for Q3 2025 is expected to range from breakeven to $1 million. For the full year 2025, non-GAAP operating income is projected to be between $1.2 million and $3.2 million.

Profitability Outlook: Profitability is anticipated to improve in the second half of 2025, driven by revenue growth and a continued focus on operating efficiency.

Gross Margin: Gross margin is expected to continue improving modestly through the remainder of 2025.

Strategic Growth Vectors: The company is focusing on mid-market partnerships and specialty medical growth initiatives, with accelerated hiring of sales account executives to capitalize on these opportunities.

AI and Workflow Automation: The integration of TrueLark and the development of AI-powered workflow solutions are expected to drive future growth and operational efficiency.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:What are the commonalities in terms of success within specialty medical, and how do these lands compare to dental, optometry, and vet lands?

A:The company focuses on a few practice areas when entering a new vertical like specialty medical, such as medical aesthetics, physical therapy, and general practice. Initially, ASP is lower, churn may be higher, but over 12-36 months, ASP rises, CAC decreases, and churn reduces. Specialty medical customers often start with nonintegrated solutions, and as integrations deepen, they move up the stack into higher-level packages like Elite and Ultimate bundles.

Q:How has the growth of NRR payments trended relative to overall subscription, and what is the sales team's priority for driving higher attach and usage?

A:Payments continue to grow much faster than the subscription line of business. The sales team has focused on increasing the attach rate of payments within the installed base and capturing customer volume. Progress is being made on both fronts, but there is still significant underpenetration and opportunity for growth.

Q:What is the progress of the integration with the TrueLark team, and what feedback has been received from customers?

A:The integration began after the acquisition in mid-May, focusing on go-to-market and product integration. TrueLark's multi-location sales motion has been combined with Weave's team, enabling joint prospecting. The company is building capabilities to onboard single locations and plans to sell TrueLark into its installed base by Q4 and to new single-location prospects by Q1. Customers have provided positive feedback, and there is inbound interest and partnership opportunities.

Q:What impact has the push to enterprise had on CAC, and what opportunities exist to drive leverage on sales and marketing?

A:The mid-market team has been refreshed, and their CAC is lower than other channels. The multi-location segment in dental is growing faster than the overall market, offering growth opportunities. The company is leveraging TrueLark to enter accounts not ready for telephony stack discussions. Multi-location customers have an NRR over 100%, indicating scalability and operating leverage.

Q:What are the largest opportunities in the specialty medical market, and how does the company plan to grow its share?

A:The company sees opportunities in physical therapy, aesthetics, general practice, and other sub-verticals. Growth is driven by integrations and delivering additional capabilities. The company aims to methodically expand its share from 1% to 5% in the near future.

Q:What is the status of AI integration and customer adoption?

A:Customer adoption of AI is mixed, with early adopters and slower adopters. The company focuses on meeting customers where they are and helping them on their automation journey. Interest in AI is increasing, especially among multi-location organizations, and customers are becoming more comfortable with AI tools.

Q:How macro-resistant is the customer base, and are there any concerns about tariffs or consumer weakness?

A:The impact of tariffs depends on the vertical, with optometry being more affected than dental. The company is not seeing significant consumer demand headwinds and reported record demand and sales this quarter.

Q:What is the progress on engineering hiring for EHR system integrations?

A:Progress has been made, but there is still more capacity to add, especially for TrueLark integration and delivering a unified inbox experience.

Q:What is the trajectory of billings relative to revenue growth, and what is the outlook for the second half and next year?

A:Billings reaccelerated this quarter, driven by targeted investments in growth initiatives. Modest contributions are expected in 2025, with more meaningful progress in 2026.

Q:What is the opportunity for price increases, and how is call intelligence adoption progressing?

A:Price increases will be evaluated based on cohorts and product value, potentially in 2026. Call intelligence adoption is progressing, with new workflows being identified and integrated into the product to deliver more value and efficiency.

Q:Review of Unclear Management Responses

A:Management avoided providing specific metrics or timelines for certain initiatives, such as the exact progress on engineering hiring, the detailed impact of macroeconomic factors on different verticals, and the precise trajectory of billings relative to revenue growth. Additionally, responses about AI adoption and call intelligence usage were somewhat general, lacking detailed data or examples.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

WEAV Transcript

Weave Communications, Inc. (WEAV) Q3 2025 Earnings Call Transcript

Positive10-30

The earnings call highlights strong financial performance, strategic growth through AI and partnerships, and optimistic guidance. While there are concerns about unclear management responses on payment adoption and future investments, the overall sentiment remains positive due to expected revenue growth, profitability improvements, and strategic initiatives. The market strategy and shareholder return plan are well-received, with plans for increased leverage and focus on high-potential verticals. Despite some uncertainties, the positive outlook on growth and profitability, along with strategic developments, suggests a positive stock price movement.

Weave Communications, Inc. (WEAV) Q2 2025 Earnings Call Transcript

Positive8-1

Weave Communications, Inc. (NYSE:WEAV) Q1 2025 Earnings Call Transcript

Positive5-7

The earnings call reveals strong financial performance with 18.3% revenue growth and improved gross margins. The acquisition of TrueLark is seen as a strategic complement, enhancing offerings and driving revenue. Despite increased expenses, operational efficiencies are evident with improved EBITDA. The Q&A section highlights resilience in market demand and competitive advantages. However, regulatory and operational risks are noted. Overall, the positive financial results, strategic acquisition, and market resilience suggest a positive stock price movement.

Weave Communications, Inc. (WEAV) Q1 2025 Earnings Call Transcript

Unknown5-5

The earnings call presents a mixed sentiment. Financial performance shows strong revenue growth and margin improvement, but the anticipated operating loss and negative free cash flow raise concerns. The acquisition of TrueLark is positive, offering cross-sell opportunities and revenue growth potential. The Q&A reveals optimism about market resilience and product integration, but management's lack of clarity on payment solutions' growth potential adds uncertainty. Overall, the sentiment is balanced, leaning neutral due to financial strain and management's vague responses.

WEAV Slides

Weave Q1 2025 presentation slides: 18% revenue growth, TrueLark acquisition

2025-05-05

Weave Communications Q2 2025 slides: 16% revenue growth, AI expansion

2025-07-31

Weave Q3 2025 slides: 17% revenue growth, AI innovations drive healthcare tech expansion

2025-10-30

WEAV Report

Weave Communications, Inc. 10-Q

10-Q

2024-08-07

Weave Communications, Inc. 10-Q

10-Q

2024-05-09

Weave Communications, Inc. 10-K

10-K

2024-03-13

Weave Communications, Inc. 10-Q

10-Q

2023-08-08

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