Summary
Weave reported $30.3 million of revenue for the fiscal 2021 third quarter and $84.0 million for the nine months. Gross profit rose 43.2% to $17.4 million in the quarter and 52.9% to $48.3 million for the nine months. Gross margin was 57.5% for both periods. The bottom line remained under pressure. Operating loss was $13.9 million in the quarter, with an operating margin of negative 45.9%, and net loss was $14.2 million. Diluted EPS was negative $1.03. For the nine months, operating loss was $36.8 million, net loss was $37.6 million, and diluted EPS was negative $2.97. Those losses widened from the prior-year periods.
Customer locations under subscription totaled 22,553 as of September 30, 2021. The company said it had approximately 21,000 customers in the United States and Canada and more than 22,500 customer locations under subscription. The company said the location count represented a 31% increase over the 17,214 locations it had a year earlier. Dollar-based net retention rate was 104% at September 30, 2021, up from 102% a year earlier. Dollar-based gross retention rate was 93%, up from 91%. Recurring revenue accounted for 93% of revenue in the quarter, compared with 94% in the prior-year quarter, and 93% for the nine months, compared with 95% in the prior-year period. The company phased out its installation program during the third quarter and fully discontinued it as of September 30, 2021. New customers now use third-party independent contractors for hardware configuration, software installation and upgrades. Onboarding and hardware gross margins remained negative.
Cash generation remains a work in progress. Operating cash flow for the nine months was negative $10.3 million, up $4.8 million from negative $15.1 million in the prior-year period. For the quarter, operating cash flow was negative $3.3 million. Capital expenditures were $5.7 million for the nine months, up 403.5% from $1.1 million, largely for the new corporate headquarters. Deferred revenue was $28.4 million as a current liability. Free cash flow was negative $6.4 million in the quarter, compared with negative $2.8 million a year earlier, and negative $18.0 million for the nine months. Free cash flow margin was negative 21% in the quarter and negative 21% for the nine months. Adjusted EBITDA was negative $9.1 million in the quarter, compared with negative $5.0 million a year earlier, and negative $23.6 million for the nine months.
Management flagged several risks. COVID-19 related cancellation or postponement of trade shows and conferences created headwinds in lead generation, which the company said negatively affected growth rates throughout 2020 and 2021. Weave underwent a reduction of force of approximately 9% of its total workforce, but it has been hiring and increasing headcount period over period since those terminations. The company expects sales and marketing expenses to increase and remain its largest operating expense category, though it expects sales and marketing, research and development, and general and administrative expenses to decrease as a percentage of revenue over time. It also expects operating cash flows to improve as operational efficiency and economies of scale grow. The company maintains a full valuation allowance against its deferred tax assets. Its amended credit facility includes covenants that require $20 million in minimum liquidity if unrestricted cash at Silicon Valley Bank falls below $100 million. Other risks include regulatory fees on texting and phone calls and indemnification obligations tied to data compromise, including protected health information.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2021 | Q2 FY2021 | QoQ | Q3 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $30.3M | — | — | — | — |
| Gross profit | $17.4M | — | — | — | — |
| Gross margin | 57.5% | — | — | — | — |
| Research & development | $6.2M | — | — | — | — |
| Sales & marketing | $16.0M | — | — | — | — |
| General & administrative | $9.1M | — | — | — | — |
| Total operating expenses | $31.3M | — | — | — | — |
| Operating income (loss) | -$13.9M | — | — | — | — |
| Operating margin | -45.9% | — | — | — | — |
| Net income (loss) | -$14.2M | — | — | — | — |
| Net margin | -46.9% | — | — | — | — |
| Diluted EPS | -$1.03 | — | — | — | — |
| Net retention rate | 104.0% | — | — | — | — |
Risks
The company experienced high employee turnover, particularly in its customer service and success organization, over the last two quarters. Over half of current customer service and support staff had been employed less than one year, contributing to increased hold times and some customer dissatisfaction.
The company has identified material weaknesses in its internal control over financial reporting. These could result in material misstatements, failure to meet periodic reporting obligations, or impaired access to capital markets.
The company relies on single-source suppliers and key partners, including Yealink for phones, Stripe for Weave Payments, and Bandwidth and Telnyx for texting, and on integration with Dentrix for a significant portion of its customer base. Termination or disruption could delay or reduce revenue.
The company identified a failure of authorization in prior charter amendments and may have issued preferred stock that was not validly authorized. It filed a certificate of validation in September 2021, but claims that the defective corporate acts are void or that ratification is ineffective could lead to liability to preferred holders, including monetary damages and rescission rights.
The COVID-19 pandemic has disproportionately affected SMBs, which account for substantially all revenue, and cancellation or postponement of trade shows and conferences created lead generation headwinds through September 2021. A majority of customers are on monthly subscriptions and can terminate on short notice.
The platform must comply with industry standards, FCC regulations, HIPAA and state, local and international privacy rules. The company specifically cites increased regulatory fees on texting and phone calls as a factor that could affect cost of revenue.
The company expects its growth rate to decline and says recent rapid growth may not be indicative of future growth. Expansion into medium-sized and multi-location businesses may involve higher costs and longer sales cycles, and new vertical markets require investments ahead of revenue.
The market is intensely competitive and fragmented with low barriers to entry, and the company often competes against existing point solutions. Larger competitors with greater resources may bundle competing products at lower prices, which could reduce margins or force price decreases.
The company's net loss widened to $37.62 million year to date from $31.04 million in the prior-year period. Operating cash flow was negative $10.32 million year to date, capital expenditures rose to $5.73 million year to date, up 403.5% from the prior year, and it may need additional capital.
Substantially all outstanding securities are subject to lock-up and market standoff agreements that begin to expire after the IPO, and future equity issuances under incentive plans or for acquisitions could dilute existing holders. Pre-IPO holders beneficially owned approximately 75.7% of shares outstanding as of September 30, 2021.
SaaS KPIs
All quarters →Free cash flow margin
Adjusted EBITDA
Net Revenue Retention
Dollar-Based Gross Retention Rate
Number of locations (at period end)
Total customers
Summary, forecast, risks and KPIs are extracted from Weave Communications, Inc.'s SEC filings for Q3 FY2021 (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.