Overview of Weave’s Financial Performance

Weave is a leading all-in-one customer experience and payments software platform for small and medium-sized healthcare businesses. The company reported strong financial results for the three months ended March 31, 2025, with revenue increasing 18% year-over-year to $55.8 million. This growth was driven by a combination of new customer additions and increased revenue from the company’s existing customer base.

Weave’s gross margin improved to 72% in the first quarter of 2025, up from 70% in the same period last year. This margin expansion was driven by favorable customer mix, with a greater portion of customers having fully depreciated phone hardware, as well as improved efficiencies in third-party costs and increased payments revenue, which has higher gross margins than the company’s other offerings.

Revenue and Profit Trends

Weave generates the majority of its revenue from recurring subscription fees, which accounted for 91% of total revenue in the first quarter of 2025. The company also derives revenue from non-recurring installation fees and embedded leases on phone hardware provided to customers.

Table: Weave’s Revenue and Cost of Revenue Breakdown

The company’s subscription and payment processing business, which represents the majority of revenue, maintained a strong 77% gross margin in both Q1 2025 and Q1 2024. However, the onboarding and phone hardware segments continued to operate at negative gross margins, as the variable costs associated with these offerings exceed the related revenue. Weave views these as important customer acquisition tools, with the net costs included as part of the company’s overall sales and marketing strategy.

Strengths and Weaknesses

Key strengths of Weave’s business model include:

• Recurring revenue base: 91% of revenue comes from subscription fees, providing predictability and visibility.
• Improving gross margins: The subscription and payments business has maintained strong 77% gross margins, and the company is driving efficiencies in other cost areas.
• Expanding customer base: Weave added new customers at a healthy pace, contributing 88% of the year-over-year revenue growth.
• Successful platform enhancements: The launch of the enhanced Weave platform and Weave Enterprise solution for multi-location customers has expanded the company’s addressable market.

Potential weaknesses and challenges include:

• Negative gross margins in onboarding and phone hardware: These customer acquisition costs are a drag on overall profitability, though Weave views them as necessary investments.
• Increasing operating expenses: Sales and marketing, R&D, and G&A costs all grew faster than revenue, putting pressure on the bottom line.
• Reliance on core healthcare verticals: While this focus has driven success so far, over-dependence on a few industries could expose the company to risks.
• Integration and execution risks from the TrueLark acquisition: The $35 million deal to acquire the AI-powered receptionist platform will require successful integration and synergy capture.

Outlook and Future Prospects

Looking ahead, Weave is well-positioned for continued growth, driven by several key factors:

• Expansion into medium-sized businesses: The enhanced Weave platform and Weave Enterprise solution position the company to better serve multi-location organizations, broadening its customer base.
• New product development: Weave continues to invest in enhancing its platform with new features and functionality, including AI-powered capabilities, to drive increased adoption.
• Vertical expansion: While focused on healthcare currently, the company may explore opportunities to expand into adjacent industries that could benefit from its customer experience and payments solutions.
• Acquisition synergies: The TrueLark acquisition is expected to bolster Weave’s AI and automation capabilities, potentially enhancing the value proposition for both new and existing customers.

However, the company will need to carefully manage its operating expenses to maintain profitability as it scales. Continued investment in sales, marketing, and R&D will be crucial to driving customer acquisition and retention. Additionally, the successful integration of TrueLark will be a key priority for Weave’s management team in the coming quarters.

Overall, Weave’s strong financial performance, expanding customer base, and strategic initiatives position the company well for future growth and success in the small and medium-sized business software market.