Weave Communications, Inc. (NYSE:WEAV) Q4 2023 Earnings Call Transcript

Weave Communications, Inc. (NYSE:WEAV) Q4 2023 Earnings Call Transcript February 21, 2024

Weave Communications, Inc. beats earnings expectations. Reported EPS is $-0.01, expectations were $-0.03. Weave Communications, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Greetings, and welcome to the Weave Fourth 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. [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. Mr. McReynolds, you may begin.

Mark McReynolds: Thank you, Camilla. Good afternoon, and thank you for joining us for our fourth quarter 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 will take questions. 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-K and 10-Q for additional information concerning factors that could cause these results to differ materially from the forward-looking statements.

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

Brett White: Thank you, Mark, and welcome to everyone joining us this afternoon. I’d like to kick off the call by welcoming David McNeil 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 six years at HubSpot, where he was instrumental in leading sales teams as the company grew from $90 million to nearly $1 billion in annual recurring revenue. He also served as the Chief Commercial Officer at Tebra, a leading automation platform for independently owned healthcare practices, and in leadership positions at Salesforce and Bank of America. We’re excited to leverage David’s expertise as we continue to execute on the multiyear 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.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. Weave 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 $45.7 million, representing 21.2% year-over-year growth. This is the fourth consecutive quarter of an accelerating year-over-year growth rate. We also exceeded the top end of our revenue guidance for the eighth 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 rate, and higher net expansion within existing customers.

Notably, we added over 450 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%, 300 basis points higher than Q4 of last year, marking the eighth consecutive quarter of gross margin improvement. Our adjusted EBITDA margin improved by over 700 basis points to a negative 1.7% of revenue, compared to a negative 8.8% of revenue a year ago. Finally, we generated $2.9 million in free cash flow during the quarter, a $6.9 million improvement over the same quarter last year. 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. 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 payoff 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 two-thirds.

I’m extremely proud of our team, and it is — this is again a strategic focus area for 2024. Our second 2023 focus area was building a scalable foundation for profitable growth. We are very pleased with the results here, and 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 $6.5 million, a significant improvement over our negative $15.9 million in 2022. Our third 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 first in 27 different categories in G2’s Winter 23 report, and won 61 different badges, including patient scheduling software leader. In 2023, our customer MPS improved significantly throughout the year. We accomplished this through excellent customer service, feature improvements, and 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. 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 and 2022, employee attrition was a significant headwind to our business, a situation not unique to Weave. 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 MPS improved, and I am pleased to announce that we are named a Great Place to Work for the fifth consecutive year and a Top Workplace USA for the second 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 three focus areas for the year, which I’m very excited about.

Accelerating revenue growth is once again our first focus area, and the key initiatives in 2024 include increasing our penetration into dental, optometry, and veterinary 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 outcome. 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.

Payment Plans enables healthcare businesses to easily set up and manage recurring payment schedules, making it convenient for both the business and their patients. Increasing customer value is our second 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. 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 third 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. Fundamentally, this means we are 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, and we have an incredible team that is engaged in firing on all cylinders. 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 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?

Alan Taylor: Thanks, Brett, and good afternoon, everyone. We had an excellent quarter, delivering fourth-quarter revenue of $45.7 million, reflecting 21.2% growth year-over-year. This represents $1.7 million, 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. 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 two 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. 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 $33.6 million, a $4.2 million increase from last year, compared to an $8 million increase in revenue for the same period. Our operating loss was $1.7 million, an improvement of $2.5 million, or 59% compared to last year, and $800,000 better than the midpoint of the guidance we gave in November. 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 fourth quarter based on 69.7 million weighted average shares outstanding. This is compared to a net loss of $3.7 million dollars or $0.06 per share last year. This represents a $2.9 million improvement due to revenue acceleration and operating efficiencies. Adjusted EBITDA loss was $800,000, a $2.5 million improvement year-over-year. Adjusted EBITDA loss margin of 1.7% is a significant improvement compared to the 8.8% loss in margin reported a year ago. Turning to the balance sheet and cash flow, we ended the year with $108.8 million in cash and short-term investments. In Q4, we paid down $10 million on our line of credit, which remains open, but with no outstanding balance. Net cash was essentially unchanged quarter-over-quarter.

We generated $3.7 million in cash from operations, a $6.6 million improvement year-over-year. Free cash flow was $2.9 million, and free cash flow margin was 6.4%. This compares to free cash flow of negative $3.8 million, and a free cash flow margin of negative 10% in the fourth quarter 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. Before reviewing our guidance, I’ll provide a brief recap of the full-year results.

In 2023, total revenue grew by 19.9% to $170.5 million, 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 $6.5 million, up from negative $15.9 million 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. Turning now to our outlook for the first quarter and full-year 2024, for the first quarter of 2024, we expect total revenue in the range of $45.2 million to $46.2 million, and non-GAAP operating loss in the range of $2.5 million to $1.5 million.

I would 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 on to our platform. We increased these non-recurring onboarding revenues by 150% last year. In Q1 of last year, we also signed a multiyear 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 nonrecurring 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. For the full-year 2024, we expect total revenue to be in the range of $194 million to $198 million. We expect the range for our full-year 2024 non-GAAP operating loss to be from $6 million to $2 million. We expect to have a weighted average share count of approximately 71.7 million shares for the full-year.

To summarize, we delivered strong results every quarter in 2022 — 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.

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Q&A Session

Operator: Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Alex Sklar with Raymond James. Please proceed with your question.

Alex Sklar: Great, thank you. Brett, a lot of investment into the integrations in multi-office functionality that you kind of alluded to in your prepared remarks, specifically as in regards to the 75,000 locations you added to the integrated platform in the past year, I’m curious if you can just provide some color on tangible results from adding those locations? Are you seeing an increasing mix of customers coming on that have that functionality with the integrated functionality built in? Thanks.

Brett White: Sure. So, what we — 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 that 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. But we’ve been focusing a lot on specialty medical outside of dental optometry that — and that’s actually our fastest growing segment right now. And it actually just passed veterinarian as our number three vertical. So, we’re definitely seeing tangible results in our additional integration work that we’re doing, both in dental and vet, and especially medical.

Alex Sklar: And that’s great context. And maybe I’ll kind of follow up on that — your answer to that last point. As specialty medical passes into that number three 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 increase as the year progressed? 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.

Brett White: 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 four verticals now, dental, optometry, vet, and specialty medical, with specialty medical being the higher growth one. I’m thinking that dental was still the major contributor. Yes, 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.

Alex Sklar: Okay, great. Thank you very much.

Brett White: Thank you.

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

Brent Bracelin: Thank you. Good afternoon, great to [indiscernible] the quarter here, fast, solid execution. Brett, I wanted to double-click into the new hire. Obviously David brings a lot of scaling expertise. What do you have him focused on and what are his priorities as you think about the opportunity in 2024?

Brett White: Yes, thanks, Brett. 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, is nothing. Sales function is executing really well, it’s very well managed. So, that gives us the opportunity to leverage David’s talent in really helping us get our business from where we are now, $170 million to $500 million. He’s seen growth and scale, HubSpot from $90 million to $1 billion; he’s had senior roles at Salesforce. And so, his role really is focusing on scale. Some of the scale opportunities we have right now are we’re on a multi-year journey with a 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 the mid last year, we were definitely an inside sales organization. And I think partnerships are going to be an 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 he’ll spend his time, but really just being a been-there-done-that person helping us scale.

Brent Bracelin: Absolutely helpful color there. And then one quick follow-up on specialty medical, a 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? Just curious what’s driving the outsized success here in specialty medical here this quarter? Thanks.

Brett White: Sure, 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.

Brent Bracelin: Helpful color. Thank you.

Brett White: Thank you.

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

Unidentified Analyst: Excellent. Hi, this is Matt on for Mike Funk. Appreciate the question. So, sounds like you’re going to be facing some tougher comps on the payment side, starting in 1Q. But can you help us understand the shape of expected revenue growth in ’24? And then can you breakdown a little further the components driving the fiscal ’24 guidance between location, ASP growth, retention-expansion, et cetera, and where you see the highest potential for upside? Thanks.

Brett White: Sure.

Alan Taylor: 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 2023 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. I think that the — you mentioned payments, but there the bigger actually piece of the difficult compare in Q1 has to do with the onboarding revenues that we recognized. If you look at the information in the disaggregated revenues, you’ll see that that was 150% growth year-over-year in those onboarding revenues.

We’re now at a healthy spot. And while we’ll see growth consistent with the growth in onboarded customers, it’s just not 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.

Unidentified Analyst: Super helpful. Thank you.

Alan Taylor: You got it. Thanks, Matt.

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

Parker Lane: Hi, guys. Thanks for taking the question, and congrats on the quarter, and the continued acceleration here, lots of new payments capabilities being launched in 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 rate to payments? And just the overall expectation around payments growth when you look out over the next few years?

Brett White: 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 the — and in training the offices on the functionality and helping them make the move. 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 integrated it better into their office workflow is where we’ll see continued adoption.

So, we’re currently less than 10% of revenue is payments, and because if we were more you would see it in our financials. But it’s growing as a percentage of revenue; 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, as I mentioned, one of the activities that David McNeil is going to overtake is payments is going to report directly 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 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.

Parker Lane: Got it, very helpful. And then, you also called out a pretty material improvement in employee attrition rates from ’22 to ’23. 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?

Brett White: 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 were 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. So, starting last year, we brought the whole company together in a kickoff. We were very explicit in what our priorities are. We announced our four focus areas for last year, and then we built projects across those focus areas that every single employee who was 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. 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. So, I’ll pass it up to Alan.

Alan Taylor: 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. We love working together. We want a collaborative environment, and so we’ve done that. And then, obviously just the macroeconomic environment, Weave has 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 is a benefit with respect to the employee environment that you can create. So, that’s what I would add to that question.

Parker Lane: Understood. Thanks, guys. Congrats again.

Operator: Our next question comes from the line of Jacob Staffel with Goldman Sachs. Please proceed with your question.

Jacob Staffel: Hey, guys. Thanks for the question, and good to see another strong quarter. A lot of good questions ahead of me, so I 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 y’all see this quarter, or any color you can give around that would be great.

Brett White: Sure. I’ll take a crack at that. So, the reason we introduced the concept of 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 four quarters in a row, 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 it’s not a key metric, so we’re just not going to report it anymore, mostly because it’s just a continuing, pretty consistent trend.

Jacob Staffel: 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 initial guidance was for 11%, and y’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 ’24?

Brett White: 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. We continue to execute well. So, that’s, I’d say, 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. So, the customer’s 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 ’22. It worked for us in ’23. We kind of beat it eight quarters in a row. So, we’re sticking with that guidance philosophy in ’24. And I can let Alan fill in any details if you’d like.

Alan Taylor: 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.

Jacob Staffel: 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.

Tyler Radke: Yes, 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, yes, I think you have motions around things like plastic surgery, medical spas, physical therapy. Is there any kind of other further segmentation that you’re planning within specialty medical? Thank you.

Brett White: Sure. So, I’ll start. I think there’s maybe 20 sub-verticals in specialty medical. Yes. And so, I called out four 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. As far as the work that was done, and also plastic, sorry. The work that’s done is really on two fronts. Well, really three fronts. Building the integrations, so integrating to their practice management or EMR software and integrating them into Weave, that’s number one. Number two, deepening existing integrations, so there are different levels of integration that you could write and the more integrated you get, the more valuable the product is, so deepening existing integrations.

The third 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 of success. So, that’s why we kind of take the 20 plus, break it down to three or four that we’re really going to focus on now and then just go through and knock them off.

Alan Taylor: So, I’ll just add one, a couple of things to that. Number one, we are developing these relationships with these integration partners and the practice management, EHRS, PM providers, going in the front door. We’re developing those relationships. 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. We’ve got a roadmap, we’ve got objectives, we’ve got, we 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 the TAM for us.

Brett White: Just let me add one more comment here. Just the difference between a front door integration and a backdoor integration is pretty important. A front door integration is where we have an agreement with the software provider, the practice manager 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 then they actually support us in that integration. They support their customers. 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 to as a hostile integration, and our focus is on front door.

Tyler Radke: That’s helpful. Thanks for all the comments. So, just the last question I had, a couple follow-ups as we think about the outlook, so on the new customer front, encouraging to hear and see the pickup in new ads 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? 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.