Summary
Weave Communications reported second quarter fiscal 2022 revenue of $34.9 million, up 24.5% from the prior-year quarter. Gross profit rose 32.1% to $21.2 million, and gross margin expanded to 60.6%, up 3.5 percentage points. For the first six months of fiscal 2022, revenue was $68.2 million, up 26.9% year over year. The company remained unprofitable. Operating loss widened to $14.6 million, and operating margin was negative 41.8%, up 8.6 percentage points. Net loss widened to $14.8 million. Diluted EPS loss narrowed to $0.23. On a non-GAAP basis, loss from operations was $10.1 million, compared with a non-GAAP loss from operations of $8.9 million in the prior-year quarter.
Operational metrics show mixed retention trends. Dollar-based net retention rate was 102% as of June 30, 2022, down from 104% a year earlier. Dollar-based gross retention rate was 94%, up from 92%. Management said the NRR decline reflected an anticipated comparison against the strong Weave Payments rollout and upsell efforts in the first half of 2021. The company also pointed to customer prepayments: about 41% of customer locations elected annual prepayments as of June 30, 2022, compared with about 43% as of June 30, 2021. Weave launched several platform additions in the quarter, including Insurance Verification and a Buy Now, Pay Later offering for small healthcare practices. It also announced a Fuse Dental practice management software integration. The company continues to target specialty healthcare verticals and adjacent markets such as home services. Recurring subscription and payment processing services drove most of revenue.
Leadership changes dominated the quarter's corporate news. Brett White, President and Chief Operating Officer, was named Interim CEO effective August 15, 2022. The board is evaluating candidates for the permanent CEO role. Roy Banks stepped down for health and family reasons but will remain in an advisory role and on the board through September 2, 2022. The board chair credited Roy Banks with improving market position and building a strong leadership team. The company also added Erin Goodsell as Chief Legal Officer and George Scanlon to its board of directors. It was named to a list of 50 Most Inspiring Workplaces in North America and was recognized as a leader in five categories in the G2 Summer Report. Risks include the leadership transition, the company's ability to attract and retain talent, attract new customers, retain and expand within its customer base, manage growth, and compete effectively. COVID-19 continues to weigh on SMBs, and trade shows and conferences have not returned to pre-pandemic quantity and attendance levels.
Cash generation improved modestly. Operating cash flow was negative $1.73 million, up 2.3% from the prior-year quarter. Capital expenditures fell 77.1% to $0.38 million. Free cash flow, a non-GAAP measure, was negative $2.4 million. Deferred revenue was $32.29 million, and remaining performance obligations were $1.80 million.
Guidance points to continued growth but ongoing losses. For the third quarter, Weave guided revenue to $35.0 million to $36.0 million. For the full year 2022, it guided revenue to $141.0 million to $143.0 million. It expects a non-GAAP loss from operations of $9.5 million to $8.5 million for the third quarter and $38.0 million to $36.0 million for the full year. Weighted average share count is expected to be 65.6 million for the third quarter and 65.4 million for the full year. The guidance is for the next quarter and the full fiscal year. Management said it cannot provide a reconciliation of non-GAAP loss from operations to GAAP loss from operations on a forward-looking basis without unreasonable effort because stock-based compensation depends on future hiring and stock price. The company faces execution risk around its CEO search, product rollout, and sales and marketing optimization, along with broader economic uncertainty affecting small businesses.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2022 | Q1 FY2022 | QoQ | Q2 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $34.9M | $33.3M | +5.0% | — | — |
| Gross profit | $21.2M | $19.5M | +8.5% | — | — |
| Gross margin | 60.6% | 58.7% | +2.0 pp | — | — |
| Research & development | $7.4M | $7.2M | +3.1% | — | — |
| Sales & marketing | $16.7M | $16.2M | +3.2% | — | — |
| General & administrative | $11.6M | $9.6M | +20.8% | — | — |
| Total operating expenses | $35.8M | $33.0M | +8.3% | — | — |
| Operating income (loss) | -$14.6M | -$13.5M | -8.0% | — | — |
| Operating margin | -41.8% | -40.6% | -1.2 pp | — | — |
| Net income (loss) | -$14.8M | -$13.8M | -7.1% | — | — |
| Net margin | -42.4% | -41.6% | -0.8 pp | — | — |
| Diluted EPS | -$0.23 | -$0.21 | -$0.02 | — | — |
| Net retention rate | 102.0% | 103.0% | -1.0 pp | — | — |
Risks
The company disclosed identified material weaknesses in internal control over financial reporting and warned it may identify additional material weaknesses, which could result in material misstatements or failure to meet periodic reporting obligations.
Revenue is derived from SMBs, and the majority from small businesses, which the filing says are more likely to fail, have more limited financial resources, and have been disproportionately adversely impacted by the COVID-19 pandemic.
COVID-19 continues to adversely affect customers and SMBs, and the company experienced unexpected challenges with sales and installation activities due to the Omicron variant beginning in December 2021, with a continued slowdown in new customer acquisition and subscription renewals since the first half of 2020.
The dollar-based net retention rate decreased to 102% at June 30, 2022 from 104% at June 30, 2021, and most customers pay monthly with no contractual renewal obligation, so terminations or reduced spending could slow or reduce revenue.
The company relies on single-source suppliers including Yealink for phones and Stripe for point-of-sale devices and payment processing, with no long-term supply agreements for phone hardware and only a small amount of inventory, making it vulnerable to price increases and supply chain constraints.
Weave Payments depends on Stripe payment service provider agreements, and if Stripe terminates its relationship or suffers disruptions, the company could incur substantial delays and expense finding an alternative and may lose revenue.
A substantial majority of cloud infrastructure is outsourced to Google Cloud Platform, which may terminate upon 30 days prior written notice, and the company cannot easily switch providers, so disruptions or termination could interrupt platform availability.
Trade shows and industry events, a significant historical source of customer pipeline, have not returned to pre-pandemic quantity or attendance levels even as some returned in the second quarter of 2022, constraining lead generation and marketing.
The company experienced high employee turnover, particularly in customer service and sales in 2021, and over half of current customer service and support staff have been employed for less than one year, contributing to increased hold times and customer dissatisfaction.
The company relies on integration relationships including with Dentrix, whose contract provides integration through July 2026, and QuickBooks; if partners amend, terminate, or prioritize competing offerings, the value of the platform could decline.
The company relies on network service providers with no long-term committed contracts, fees can change daily or weekly while customer pricing does not, and it has experienced higher fees associated with text messaging in recent periods.
The market is intensely competitive with low barriers to entry in some segments, and larger competitors may bundle competing products at little or no incremental cost or offer lower prices, potentially reducing margins.
Products must comply with industry standards, FCC regulations, and HIPAA and other data protection laws, and changes may require service modifications, increase costs, or expose the company to penalties.
Executive officers, directors, and holders of more than 5% of capital stock beneficially owned approximately 69.4% of total shares outstanding as of June 30, 2022, giving them control over management and corporate matters.
SaaS KPIs
All quarters →Net Revenue Retention
Dollar-Based Gross Retention Rate
Summary, forecast, risks and KPIs are extracted from Weave Communications, Inc.'s SEC filings for Q2 FY2022 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.