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What changed in Weave Communications, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Weave Communications, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+414 added−438 removedSource: 10-K (2024-03-13) vs 10-K (2023-03-16)

Top changes in Weave Communications, Inc.'s 2023 10-K

414 paragraphs added · 438 removed · 352 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

63 edited+19 added−15 removed18 unchanged
Biggest changeWeave provides a modern, secure group messaging solution that helps businesses and their team members communicate with each other from their workstations, allowing for faster collaboration to respond to and delight customers. And if key employees are out of the office, the group messaging function allows them to stay in-the-know on everything going on at the office, wherever they are.
Biggest changeIf key team members are out of the office, the group messaging function allows them to stay in the know on everything going on at the office. Weave Mobile App . Practitioners and staff no longer need to be in the office to reach their team and their patients.
Weave Insurance Verification helps office staff spend more time creating an exceptional patient experience and less time calling insurers to verify patient coverage details. Within the Weave platform, users can get up-to-date and accurate patient insurance plan details, all with a click of a button.
Weave Insurance Verification helps office staff spend more time creating an exceptional patient experience and less time calling insurers to verify patient coverage details. Within the Weave platform, users can get up-to-date and accurate insurance plan details, all with a click of a button.
Our culture is underpinned by the Weave Way, which consists of five key values that define our company, approach to people and ultimately guide all of our actions. Our employees are united by our mission and driven by our values: • Stay Hungry. We remain HUNGRY and are never satisfied with the status quo.
Our culture is underpinned by the Weave Way, which consists of five key values that define our company, our approach to people and ultimately guide all of our actions. Our employees are united by our mission and driven by our values: • Stay Hungry. We remain HUNGRY and are never satisfied with the status quo.
We converted into a Delaware corporation in October 2015 under the name Weave Communications, Inc. Our principal executive offices are located at 1331 W Powell Way, Lehi, Utah 84043 and our telephone number is (888) 579-5668. Available Information We maintain a website at https://www.getweave.com.
We converted into a Delaware corporation in October 2015 under the name Weave Communications, Inc. Our principal executive offices are located at 1331 W Powell Way, Lehi, Utah 84043 and our telephone number is +1 (888) 579-5668. Available Information We maintain a website at https://www.getweave.com.
They are the lifeblood of our company, our communities and our economy. We continually innovate the very best products and services with one thing on our mind: our customer. Competition The market for our platform and products is rapidly evolving, significantly fragmented and highly competitive, with relatively low barriers to entry in some segments.
They are the lifeblood of our company, our communities and our economy. We continually innovate the very best products and services with one thing on our mind: our customer. Competition The market for our platform and products is evolving, significantly fragmented and highly competitive, with relatively low barriers to entry in some segments.
We continuously monitor key customer service metrics such as phone hold time, ticket response time and ticket resolution rates, and we monitor the customer satisfaction of our customer support interactions. Research and Development Our engineering and product teams are responsible for the creation and development of high value features and functionality across our platform and the products we support.
We continuously monitor key customer service metrics such as phone hold time, ticket response time, ticket resolution rates, and customer satisfaction of our support interactions. Research and Development Our engineering and product teams are responsible for the creation and development of high-value features and functionality across our platform.
Globally, these regulations continue to be introduced and to change over time. Such regulations can impact our ability to offer services to various customer segments, and our cost to deliver our services. Corporate Information We were organized in Delaware in September 2008 as Recall Solutions, LLC.
Globally, these regulations continue to be introduced and to change over time. Such regulations can impact our ability to offer services to various customer segments, and our cost to deliver our services. 15 Corporate Information We were organized in Delaware in September 2008 as Recall Solutions, LLC.
We have a research and development presence in both the United States and India. Our Technology Weave Software Platform Our platform is composed of microservices in a highly containerized environment, which allows for rapid scaling of resources to meet the demands of our customers.
We have a research and development presence in both the United States and India. 11 Our Technology Weave Software Platform Our platform is composed of microservices in a highly containerized environment, which allows for rapid scaling of resources to meet the demands of our customers.
As electronic messaging increases in popularity, we expect regulations and best practices in this area to continue evolving, which may impact our ability to offer services and our cost to deliver our services. 15 As we expand internationally, we will be subject to laws and regulations in the countries in which we offer our subscriptions.
As electronic messaging increases in popularity, we expect regulations and best practices in this area to continue evolving, which may impact our ability to offer services and our cost to deliver our services. As we expand internationally, we will be subject to laws and regulations in the countries in which we offer our subscriptions.
Additionally, we are subject to several laws in the United States and Canada that regulate communications between businesses and their customers, and protect consumers from unwanted messages and telephone calls.
Additionally, we are subject to several laws in the United States and Canada that regulate communications between businesses and their customers/patients, and protect consumers from unwanted messages and telephone calls.
Our teams use phone, email, web meetings, and in-person events to interact with our current and potential customers. In addition to our direct sales team and marketing teams, we have a business development team that finds, negotiates contracts and manages partner relationships. These partners include technology integration partners, key-opinion leaders, IT-installers, buying groups, affiliates and distributors.
Our teams use phone, online chat, email, web meetings, and in-person events to interact with our current and potential customers. In addition to our direct sales team and marketing teams, we have a business development team that finds, negotiates contracts and manages partner relationships. These partners include technology integration partners, key-opinion leaders, IT-installers, buying groups, affiliates, and distributors.
We are also subject to E-911 surcharges (typically governed by localities and/or state departments of revenue). In Canada, our VoIP service subscriptions are regulated by the Canadian Radio-television and Telecommunications Commission, or CRTC, which, among other things, imposes requirements like those in the United States related to the provision of E-911 services.
We are also subject to E-911 surcharges (typically governed by localities and/or state departments of revenue). In Canada, our VoIP service subscriptions are regulated by the Canadian Radio-television and Telecommunications Commission (“CRTC”), which, among other things, imposes requirements like those in the United States related to the provision of E-911 services.
In addition to these regulations, many states continue to consider enacting privacy legislation that may apply to companies such as us which collect, store, and process many types of data, including personal data. In particular, California has enacted the CPRA.
In addition to these regulations, many states continue to consider enacting privacy legislation that may apply to companies such as Weave which collect, store, and process many types of data, including personal data. In particular, California has enacted the CPRA.
If a patient’s insurance information is unable to be verified, users can contact patients directly through Weave’s two-way text or phone system to get information fast. When combined with Weave’s Digital Forms solution, the new patient intake process is streamlined, saving staff time and reducing long phone calls with insurance companies.
If a patient’s insurance information is unable to be verified, users can contact patients directly through Weave’s two-way text or phone system to get information fast. When combined with Weave’s Digital Forms solution, the new patient intake process is streamlined, saving staff time and reducing long phone calls with insurance companies. 10 Practice Analytics .
The CPRA imposes obligations on qualifying for-profit companies, such as us, doing business in California, and substantially increases potential liability for such companies for failure to comply with data protection rules applicable to California residents.
The CPRA imposes obligations on qualifying for-profit companies, such as Weave, doing business in California, and substantially increases potential liability for such companies for failure to comply with data protection rules applicable to California residents.
In a broad sense, we compete with providers of customer interaction management, customer experience management, marketing solutions, business intelligence, unified communications and telecommunications and customer relationship management solutions. However, in this highly fragmented market landscape, we believe no single competitor provides a comparable comprehensive, vertically integrated customer communications and engagement platform similar to ours.
In a broad sense, we compete with providers of customer interaction management, customer experience management, marketing solutions, business intelligence, unified communications and telecommunications and customer relationship management solutions. However, in this highly fragmented market landscape, we believe no single competitor provides a comparable comprehensive, vertically integrated customer experience and payments software platform similar to ours.
Under such agreements, our employees, consultants and contractors are subject to invention assignment provisions designed to protect our proprietary information and ensure our ownership in intellectual property developed pursuant to such agreements.
Under such agreements, our employees, consultants and contractors are subject to invention assignment provisions designed to protect our proprietary information and ensure our ownership of intellectual property developed pursuant to such agreements.
We ask questions and we’re curious about the world around us, finding inspiration everywhere. We pay attention to the little things. We constantly challenge the old in order to make things better. We are scrappy and resourceful, and we never settle for ordinary. • Do the Right Thing.
We ask questions and we’re curious about the world around us, finding inspiration everywhere. We pay attention to the little things. We constantly endeavor to challenge the old to make things better. We are scrappy and resourceful, and we never settle for ordinary. • Do the Right Thing.
Our phone systems leverage our cloud infrastructure providers to provide multiple redundant regions and lowest latency routing to ensure superior voice quality on calls to and from the entire United States and Canada. We provide our customers with advanced business phones from a leading cloud-based communications hardware manufacturer.
Our phone system leverages our cloud infrastructure providers to deliver multiple redundant regions and lowest latency routing to ensure superior voice quality on calls to and from the entire United States and Canada. We provide our customers with advanced business phones from a leading cloud-based communications hardware manufacturer.
We democratize enterprise customer communications and engagement capabilities for SMBs, saving them time and allowing them to effectively and efficiently communicate with their customers. • Unified Communications and Engagement .
We democratize enterprise-grade customer communications and engagement capabilities for SMBs, saving them time and allowing them to effectively and efficiently communicate with their patients. • Unified Communications and Engagement .
The collection, use, processing, or disclosure of personal information may be subject to United States and Canadian federal, state and provincial regulations, including, but not limited to, the Health Insurance Portability and Accountability Act, or HIPAA; the California Privacy Rights Act, or CPRA (California); US state data breach notification laws; and the Personal Information Protection and Electronic Documents Act, or PIPEDA (Canada).
The collection, use, processing, or disclosure of personal information may be subject to United States and Canadian federal, state and provincial regulations, including, but not limited to, the Health Insurance Portability and Accountability Act (“HIPAA”); the California Privacy Rights Act (“CPRA”) (California); US state data breach notification laws; and the Personal Information Protection and Electronic Documents Act (“PIPEDA”) (Canada).
Weave Payments is a comprehensive payment processing solution for businesses that offers multiple contactless payment options, allowing their customers to pay the way they want, whether they are in the office or miles away, and whenever it is most convenient for them.
Weave Payments is a comprehensive payment processing solution for practices that offers multiple contactless payment options, allowing patients to pay the way they want, whether they are in the office or miles away, and whenever it is most convenient for them.
We believe the principal competitive factors in our market include: • platform breadth; • all-in-one solution package; • ease of deployment and use; 14 • industry-specific capabilities and workflows with best-in-class product functionality; • depth of integration with leading systems of record; • ability to enable differentiated customer insights and engagement; • cloud-based delivery architecture; • customer service; • advanced payments capabilities; • brand recognition; and • pricing and total cost of ownership.
We believe the principal competitive factors in our market include: • platform breadth; • all-in-one solution; • ease of deployment and use; • industry-specific capabilities and workflows with best-in-class product functionality; • depth of integration with leading systems of record; • ability to enable differentiated customer engagement; • proprietary integrated phones; • cloud-based delivery architecture; • customer service; • advanced payments capabilities; • brand recognition; and • value and total cost of ownership.
Regulatory In the United States, at the federal level, we are subject to regulation by the Federal Communications Commission, or FCC, as a provider of Voice over Internet Protocol, or VoIP, as well as state and local regulations applicable to VoIP providers.
Regulatory In the United States, at the federal level, we are subject to regulation by the Federal Communications Commission (“FCC”) as a provider of Voice over Internet Protocol (“VoIP”) as well as state and local 14 regulations applicable to VoIP providers.
Most of our sales teams are focused on attracting new customers and are trained to sell into multiple SMB verticals, organized by the sales motion (e.g., inbound, outbound, upsell, and mid-market) of each sales cycle. In addition, we have a sales team specifically focused on expanding usage within our existing customer base.
Most of our sales teams are focused on attracting new customers and are trained to sell into multiple SMB healthcare verticals, organized by sales motion (inbound, outbound, upsell, and mid-market). In addition, we have a sales team specifically focused on customer success and expanding usage within our existing customer base.
We use multiple security technologies to monitor for intrusions and known vulnerable or insecure configurations of our use of cloud infrastructure providers, systems, and applications. Our security team members monitor for, and respond to incidents, events, and insecure configurations that may lead to the potential compromise of our products or customer data.
We use multiple security technologies to monitor for intrusions and known vulnerabilities as well as insecure configurations in our cloud infrastructure, systems, and applications. Our security team members monitor for, and respond to incidents, events, and insecure configurations that may lead to the potential compromise of our products or customer data.
Weave provides a smarter phone system that helps businesses identify whether incoming calls are from new or current customers, provides helpful and actionable information at every call and manages heavy call times.
Customized Phone System. Weave provides a smarter phone system that helps practices identify whether incoming calls are from new or current patients, provides helpful and actionable information at every call, and manages heavy call times.
Our goal is to ensure equitable people processes with hiring, compensation, performance management, promotions and personal development. We reinforce these values by promoting an inclusive culture through trainings/ 13 speaker series, sponsoring people resource groups, amplifying voices of underrepresented individuals, and community involvement.
Our goal is to ensure equitable hiring, compensation, performance management, promotions and personal development processes. We reinforce these values by promoting an inclusive culture through training, sponsoring people resource groups, amplifying the voices of underrepresented individuals, and community involvement.
In many cases, our primary competition is the combination of existing point solutions, such as messaging, phone service, marketing tools, payments, CRM, analytics and social media management, that potential customers may already use to manage their businesses and in which they have made significant investments.
In many cases, our primary competition is the 13 combination of existing point solutions, such as messaging, phone service, marketing tools, payments, CRM or PMS platforms, analytics and reviews management, that potential customers may already use to manage their practices and in which they have made significant investments.
Customer Success and Support We offer phone, AI-driven support solutions, web-chat and email-based support staff to resolve technical and operational issues for our customers, if and when such issues arise. All customer success, customer support, customer training and customer onboarding team members are currently located in the United States and India (email and chat).
Customer Success and Support We offer customer support via phone, online chat, and email to resolve technical and operational issues for our customers, if and when such issues arise. All customer success, customer support, customer training and customer onboarding team members are currently located in the United States, and India.
Our team members implement a robust suite of security policies and standards to execute processes, operations, and development in a secure manner consistent with industry standards outlined by ISO 27001, AICPA Trust Service Principles, and the NIST Cybersecurity Framework. At the physical and infrastructure layers, our platform and products are hosted on Google Cloud Platform.
Our team members implement a robust suite of security policies and standards to execute processes, operations, and development in a secure manner consistent with industry standards, best practices and the NIST Cybersecurity Framework. At the physical and infrastructure layers, our platform and products are hosted on Google Cloud Platform (GCP).
This functionality gives businesses the flexibility to respond when it is convenient for them and their customers and prospects, and enables multiple conversations at once. Payments.
This functionality gives practices the flexibility to respond when it is convenient for them, and enables multiple conversations at once. Billing and Payments.
Security We employ multiple layers of security to protect our systems, processes, buildings, our data and customer data, and other assets. At an organization-wide level, we have a dedicated security team with security compliance, security engineering, security operations, and application security expertise to influence the secure handling of customer data, and secure development and operation of our products.
At an organization-wide level, we have a dedicated security team with security compliance, security engineering, security operations, and application security expertise to influence the secure handling of customer data, and secure development and operation of our products.
We make available free of charge, on or through our website via the Investor Relations section at https://investors.getweave.com/, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after filing such material electronically or otherwise furnishing it to the Securities and Exchange Commission, or the SEC.
We make available free of charge, on or through our website via the Investor Relations section at https://investors.getweave.com/, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, and any amendments to such reports or other information filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we file such material electronically or otherwise furnish it to the U.S.
These laws include, but are not limited to, the Telephone Consumer Protection Act, or TCPA, Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, or CAN-SPAM, and Canada’s Anti-Spam Law, or CASL.
These laws include, but are not limited to, the Telephone Consumer Protection Act (“TCPA”), Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (“CAN-SPAM”), and Canada’s Anti-Spam Law (“CASL”).
We demonstrate our commitment to the professional development of all Weavers by offering department-specific trainings, manager development courses/tracks, executive coaching and external professional development offerings. We also recognize that fostering a diverse and inclusive workforce makes us stronger as a company and is a key element of our employee recruitment, engagement and retention strategy.
We demonstrate our commitment to the professional development of all Weave employees by offering professional and skill development resources and manager development courses/tracks. We also recognize that fostering a diverse and inclusive workforce makes us stronger as a company and is a key element of our employee recruitment, engagement and retention strategy.
Our Customers As of December 31, 2022, we had more than 27,000 locations under subscription and more than 25,000 customers in the United States and Canada. These customers represented many industries with the majority being in dental, optometry, veterinary, medical specialty services, home services, physical therapy, audiology, and podiatry. No one single customer represents more than 5% of our revenue.
Our Customers As of December 31, 2023, we had more than 31,000 locations under subscription and more than 28,000 customers in the United States and Canada. These customers represent many healthcare industries with the majority being in dental, optometry, veterinary, and other medical specialty services. No one single customer represents more than 5% of our revenue.
Information on or that can be accessed through our websites or these social media channels is not part of this report, and the inclusion of our website addresses and social media channels are inactive textual references only. 17
Information on or that can be accessed through our websites or these social media channels is not part of this Annual Report on Form 10-K and shall not be deemed incorporated by reference. The inclusion of our website addresses and social media channels are inactive textual references only. 16
We offer competitive compensation and benefits packages and strive to promote the well-being of our employees and their families by offering generous parental and other leave policies as well as flexible paid time-off policies to accommodate individual circumstances.
We continued expanding our presence abroad during 2023 by hiring additional engineers and support representatives in India. We offer competitive compensation and benefits packages and strive to promote the well-being of our employees and their families by offering generous parental and other leave policies as well as flexible paid time-off policies to accommodate individual circumstances.
We protect our intellectual property through a combination of domain names, copyright, trade secrets and trademarks, as well as through contractual provisions, our information security infrastructure and restrictions on access to or use of our proprietary technology.
We believe we compete favorably based on the factors described above. Intellectual Property Our intellectual property is an important part of our business. We protect our intellectual property through a combination of domain names, copyright, trade secrets and trademarks, as well as through contractual provisions, our information security infrastructure and restrictions on access to or use of our proprietary technology.
We have democratized powerful communications and engagement capabilities previously only available to enterprises, made them intuitive and easy to use and put them in one place – always within reach of the SMB. Our cloud-based software platform streamlines the day-to-day operations of running a small business.
We have democratized powerful communication and engagement capabilities previously only available to enterprises, made them intuitive and easy to use and put them in one place. Our verticalized software platform streamlines the day-to-day operations of running an SMB healthcare practice.
Our platform enables business owners to maximize the value of their customer interactions and minimize the time and effort spent on manual or mundane tasks by bringing multiple workflows together into an all-in-one platform.
Our platform enables healthcare practitioners to maximize the value of their patient interactions and minimize the time and effort spent on manual or mundane tasks by bringing multiple workflows together into a single software platform.
Businesses can send a broad array of communications ranging from birthday messages and appointment reminders to requests to pay overdue balances. Weave Missed Call Text . With Missed Call Text, businesses can take action in real time upon notification of a missed call.
Practices can send a broad array of communications ranging from personalized birthday messages and appointment reminders to requests to pay overdue balances. In addition, our Bulk Texting feature allows for mass communications from the practice phone number. Missed Call Text. With Missed Call Text, practices can take action in real time upon notification of a missed call.
At the data layer, data is encrypted in transit over public networks and at rest in our backend databases and object stores using industry accepted encryption protocols (TLS 1.2 or higher; AES-256 or higher) with known strong ciphers. Customer images, voicemails, and call recordings are encrypted with unique encryption keys for each customer.
GCP undergoes regular independent verification of its security, privacy, and compliance controls At the data layer, data is encrypted in transit over public networks and at rest in our backend databases and object stores using industry-accepted encryption protocols (TLS 1.2 or higher; AES-256 or higher) with known strong ciphers.
We use these channels, as well as social media, including our Twitter account (@getweave), our newsroom (www.getweave.com/newsroom), our LinkedIn page (www.linkedin.com/company/weave-communications), our Instagram account (@getweave), and our Facebook page (https://www.facebook.com/search/top?q=weave), to communicate with investors and the public about our company, our products and services and other matters.
We use these channels to routinely communicate important information with investors and the public about our company, our products and services and other matters via our website (www.getweave.com), our newsroom (www.getweave.com/newsroom), LinkedIn (www.linkedin.com/company/weave-communications), Instagram (https://www.instagram.com/getweave/), Facebook (https://www.facebook.com/search/top?q=weave), TikTok (https://www.tiktok.com/@getweave), and X (https://twitter.com/getweave), and to comply with our disclosure obligations under Regulation Fair Disclosure.
We consolidate telephony, messaging, scheduling, payments, employee collaboration, digital forms, insurance verification, customer review management and marketing into one simple, easy and elegant solution. We allow SMBs to facilitate and manage customer interactions in a unified, modernized and personalized manner that best fits their customers’ needs and preferences.
Our Platform Weave helps SMB healthcare practices manage essential patient interactions. We consolidate telephony, messaging, scheduling, payments, staff collaboration, digital forms, reviews, and email marketing into one simple, easy and elegant solution. We allow practitioners to facilitate and manage patient interactions in a unified, modernized and personalized manner that best fits their patients’ needs and preferences.
These services are built using cloud-native technologies, which allows us to take full advantage of the infrastructure- and platform-as-a-service offerings from our cloud service providers.
These services are built using cloud-native technologies, which allows us to take full advantage of the infrastructure- and platform-as-a-service offerings from our cloud service providers. We develop multiple client-side experiences, including web, mobile, and desktop clients, and integrate them with our phone system to provide a seamless experience.
References to website addresses in this report are intended to be inactive textual references only, and none of the information contained on our website is part of this report or incorporated in this report by reference. 16 We announce material information to the public using SEC filings, press releases, public conference calls, and on the investor relations page of our website at https://investors.getweave.com/.
We announce material information to the public using SEC filings, press releases, public conference calls, and on the investor relations page of our website at https://investors.getweave.com/.
This results in increased customer loyalty and retention. • Improved Ability to Attract New Customers . Our platform helps businesses attract new customers more easily by collecting and managing online reviews and eliminating the friction typically associated with scheduling appointments, filling out forms and making payments. • Consumer-Driven Communication Modalities .
This results in increased patient loyalty and retention. • Improved Ability to Attract New Patients . Our platform helps practices attract new patients by collecting and managing online reviews, ensuring practices do not miss a call or text, and eliminating the friction typically associated with scheduling appointments and completing forms. • Personalized Communication and Payments .
Sales and Marketing We employ an efficient go-to-market strategy that combines a productive sales organization with a diverse marketing and business development strategy to support their work. 11 Our marketing team focuses on generating demand and increasing brand awareness through multiple strategies and a multi-channel process.
Sales and Marketing We employ an efficient go-to-market strategy that combines a productive sales organization with omnichannel marketing and business development strategy to support their work.
We develop multiple client-side experiences, including web, mobile, and desktop clients, and integrate them with our phone system to provide a seamless experience for customers. 12 Weave Phone System Our phone system is highly-customized, cloud-based and integrated into our software platform. We built our phone systems in-house, providing capabilities commonly found in expensive licensed hardware offerings.
Weave Phone System Our phone system is highly customizable, cloud-based and integrated into our software platform. We built our phone systems in-house, providing capabilities commonly found in expensive licensed hardware offerings.
Encryption keys are stored only in memory by our services, and are encrypted on disk behind our key management system. Human Capital As of December 31, 2022, we had 806 employees. We continued expanding our presence abroad during 2022 by hiring additional engineers and support representatives in India.
Customer images and call recordings are encrypted with unique 12 encryption keys for each customer. Encryption keys are stored only in memory by our services, and are encrypted on disk behind our key management system. Human Capital As of December 31, 2023, we had 844 employees.
Weave’s scheduling product, when integrated with the office’s system of record, allows businesses to send automatic scheduling reminders via text message or email reminders at any time, any date and personalizes each reminder for the customer. This functionality allows businesses to schedule more appointments, reduce no-shows and fill their schedule more efficiently.
Weave’s scheduling product, when integrated with the healthcare practice’s system of record, allows patients to schedule appointments from the practice’s website, send automatic scheduling reminders via text message, and personalize each reminder for the patient. This functionality keeps schedules full, reduces no-shows, and fills schedules more efficiently. Insurance Verification.
This feature enables businesses to rapidly engage with their customers after hours or when otherwise unavailable by providing an immediate automatic text message asking how their office can help. Weave Team.
Immediately after missing a patient’s call, this feature sends a message to the patient asking how the healthcare practice’s office can help and enables practices to rapidly engage with their patients after hours or when otherwise unavailable by phone. Missed Text Auto-Reply.
As trade shows and other events are beginning to return to pre-pandemic levels of activity, we expect to increasingly rely on participation at these events to drive demand as a primary component of our sales strategy. Subscriptions are primarily sold through our direct inside sales team based in Lehi, Utah.
Weave also generates demand and sells directly to healthcare practices at trade shows and other industry events. Subscriptions are primarily sold through our direct inside sales team based in Lehi, Utah.
Weave Mobile App. With Weave’s mobile app, offices can text customers, request payments, receive and make calls from their own office number from anywhere through an Android device or iPhone. This provides businesses and their team members flexibility to continue communicating with customers and team members and operating key business functions without having to be in the office. Weave Reviews.
With Weave’s mobile app, offices can connect, collaborate, and stay on top of office operations from anywhere through an iPhone or Android device. With the mobile app, Weave customers can make and receive calls and send texts from an office number, check schedules, check payment status, request and receive payments, send reminders, and use team chat.
Our engineering and product teams strategically approach the design of products to serve our broad customer base while also developing customized features and products to meet the specific needs of each SMB vertical we compete in. Our engineering team also coordinates the use of open source technologies with code developed in-house to provide a cohesive experience to the customer.
Our teams strive to continuously deliver value to our customers, serving our broad customer base while also developing customized experiences and integrations to meet the specific needs of each healthcare SMB vertical we serve.
Item 1. Business Overview Weave is a leading all-in-one customer communications and engagement software platform for small and medium-sized businesses, or SMBs. We are creating a world where SMB entrepreneurs can utilize state-of-the-art technology to transform how they attract, communicate and engage customers, grow their business and realize their dreams.
Item 1. Business Our Mission Our mission is to elevate the patient experience through a unified platform that improves business operations so healthcare professionals can focus on patient care and realize their dreams. Overview Weave is a leading all-in-one customer experience and payments software platform for small- and medium-sized (“SMB”) healthcare businesses.
In addition, we maintain an online self-help center and customer discussion community to assist our customers with routine matters. We strive to maintain an exceptional quality of customer service to promote customer retention and referrals.
We also have outsourced supplemental customer support operations in the Philippines. In addition, we maintain an extensive training and self-help content hub on our website. We also offer certifications to develop Weave experts within a practice. We strive to maintain an exceptional quality of service to promote retention and referrals.
Our platform engages with customers in the manner that is easiest and most comfortable for them. Our Products We provide an all-in-one customer communications and engagement platform for SMBs. From the first phone call to the final invoice and every touchpoint in between, we connect the entire customer journey.
Our platform engages with patients in the manner that is easiest and most comfortable for them. • Purpose-Built for SMB Healthcare Practices . Our platform is designed to address the specific needs of each industry vertical that we serve. Our Products Weave provides an all-in-one customer experience and payments software platform for SMB healthcare businesses.
Weave Reviews helps businesses automatically request, collect, monitor and respond to reviews on sites such as Google, Facebook and Yelp. Weave Reviews helps businesses get discovered, rank higher in searches and grow their customer base. 10 Weave Email Marketing . Weave provides a robust but easy-to-use email system built for non-experts.
Weave Reviews and Response Assistant. Weave Reviews helps practices automatically request, collect, monitor, and respond to Google and Facebook reviews. Weave Reviews helps practices get discovered, rank higher in online searches, and grow their customer base. Weave’s Response Assistant uses generative AI technology to create custom, relevant responses to patient reviews to increase reputation management efficiency.
We offer an all-in-one platform spanning all forms of communications and customer engagement ranging from answering phones, to scheduling appointments, to sending text reminders, to requesting client reviews, to collecting payments, to sending email marketing campaigns, to verifying insurance. We bring small businesses and the people they serve closer together by unifying, modernizing and personalizing customer interactions.
Our platform spans all forms of communication and engagement including physical and softphones, messaging, email marketing, insurance verification, online appointment scheduling, reviews, payments, digital forms, and more. We bring practitioners and the patients they serve closer together by unifying, modernizing, and personalizing interactions. Our platform helps practitioners improve communications, attract and engage more patients, and increase patient retention.
Leads are generated primarily through our website through traffic driven to our website in multiple ways, including paid advertising, digital events, sponsorships, direct mail, ad placements, email campaigns, social media, free content, blogs and organic searches.
Our marketing team focuses on increasing brand awareness and generating demand through digital and physical channels, including paid and organic social media, paid and organic search, digital advertising, third-party industry advertising and sponsorships, direct mail, and digital events. Leads are driven to the Weave website and sent to our direct inside sales team.
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Our platform helps improve communications, attract more customers, keep customers engaged and increase overall retention. Our Platform We help SMBs manage essential customer interactions. Our platform helps improve communications, attract more customers, keep customers engaged and increase overall retention.
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From the first phone call to the final invoice, Weave connects the entire patient journey. Our solutions transform how local healthcare practitioners attract, communicate with and engage patients to grow their practice.
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We set SMBs free to do what they do best: to serve their customers. Before Weave, SMBs were forced to focus much of their time on entering data forms, scheduling, collecting payments, responding to missed calls and finding new customers.
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We set practitioners and their staff free to do what they do best: care for their patients. The key benefits of our platform include: • Easy to Use and Intuitive . SMBs typically do not have dedicated technology staff, so they need solutions that are easy to implement and manage. Our platform is designed to be simple and intuitive.
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Now, we allow them to use their time to focus on their customers, grow revenue, expand profitability and pursue their dreams. The key benefits of our platform include: • Easy to Use and Intuitive . Our platform is designed to be simple and intuitive.
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Weave integrates with dozens of healthcare practice systems of record, including practice management systems (“PMS”), patient relationship management (“PRM”) platforms, electronic health record (“EHR”) systems, enterprise resource planning software, or other third-party applications.
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We create a comprehensive communications hub by integrating with an SMB’s system of record, whether a practice management system, customer relationship management (“CRM”) or enterprise resource planning software – and other third party applications – and providing a unified platform for answering phones, scheduling appointments, sending text reminders, requesting client reviews, collecting payments and managing email marketing, all in one place. • Low Total Cost of Ownership and High ROI .
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Our platform unifies phones, text messaging, 8 appointment scheduling, staff collaboration, email marketing, requesting reviews, collecting payments, and digitizing forms, all in one place. • High ROI . Our platform helps our customers attract new patients, reduce appointment cancellations, keep schedules full, increase treatment acceptance rates, and improve staff efficiency and effectiveness.
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Our platform can help our customers reduce cancellations, increase appointments, and increase customer growth. Furthermore, our solution provides greater functionality and costs significantly less than what the combined point solution patchwork would require. 9 • Purpose-Built for Our Industry Verticals .
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Weave provides more functionality at a significantly lower cost than the combined cost of point solutions. • Reduced Churn for Our Customers . Our platform helps our customers’ practices keep their patients engaged through multi-channel communications—phone, text messaging, or email, and reduces friction with online appointments, digital forms, and convenient payments.
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To maximize the value from our solution, we design our platform and products to address the specific needs of each industry vertical that we target. • Reduced Churn for Our Customers . Our platform helps businesses keep their customers engaged by interacting with them through their modality of choice, whether by phone, text, email or chat.
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From the first phone call to the final invoice, we connect the entire patient journey. Unified Phone Number. All communications from the Weave platform, including calls and texts, are sent from a single phone number. Patients can save this office number to their contacts, no personal cell phone numbers are used, and multiple team members can manage conversations.
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Our software solutions transform how local businesses attract, communicate with and engage customers to grow their business. All of our communications features, including text, leverage a single phone number. This means all messages come from the business phone number, so no personal cell phone numbers have to be used and multiple team members can manage conversations. Customized Phone System.
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Weave Phones show key patient information at the outset of each call, including the caller's name, upcoming appointment information, when they are due for an appointment, overdue balances, tasks, special notes, and follow-ups. Softphones. With Softphones from Weave, practices can make and receive calls from anywhere in the United States or Canada with an internet connection.
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With features such as WeavePop, businesses can instantly see a desktop pop-up display that shows information such as who is calling, who needs an appointment and who has a balance on their account. Weave Text Messaging. Our two-way texting function allows businesses to communicate with customers in a way that is easy, simple and accessible.
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Staff members can work from home, on the road, or in different office locations without missing any calls. Softphones do everything Weave Phones can do, but they operate in the cloud and do not require dedicated telephone hardware. Text Messaging . Our two-way texting function allows practices to communicate with patients in a way that is easy, simple and accessible.
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Businesses can choose from a constantly-expanding library of pre-written email templates and a library of free images, to automatically send updates and promotions to segments of their customer and prospect base. Text Connect. Weave’s Text Connect enables businesses to interact with their existing and potential customers online directly through their websites.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeShould the IRS or other tax authorities assess additional taxes as a result of examinations, we may be required to record charges to operations that could adversely affect our results of operations and financial condition. 52 We could be required to collect additional sales, value added or similar taxes or be subject to other tax liabilities that may increase the costs our customers would have to pay for subscriptions to our platform and products and adversely affect our results of operations.
Biggest changeWe could be required to collect additional sales, value added or similar taxes or be subject to other tax liabilities that may increase the costs our customers would have to pay for subscriptions to our platform and products and adversely affect our results of operations. We collect sales, value added or similar indirect taxes in a number of jurisdictions.
Our current and potential competitors may also develop and market new products and services with comparable functionality to our products, and this could lead to us having to decrease prices in order to remain competitive.
Our current and potential competitors may also develop and market new products and services with comparable functionality to our products, and this could lead to us having to decrease our prices in order to remain competitive.
In addition, the various state privacy laws may limit how we may use personal information we collect, particularly with respect to marketing and the use of online advertising networks.
In addition, the various state privacy laws may limit how we use personal information we collect, particularly with respect to marketing and the use of online advertising networks.
The market price of our common stock has and will likely continue to fluctuate significantly in response to numerous factors in addition to the ones described in the preceding Risk Factors, many of which are beyond our control, including: • overall performance of the equity markets and the economy as a whole; • changes in the financial projections we may provide to the public or our failure to meet these projections; • actual or anticipated changes in our growth rate relative to that of our competitors; • changes in the anticipated future size or growth rate of our addressable markets; • announcements of new products and services, technological and platform updates or enhancements, or of acquisitions, strategic partnerships, joint ventures or capital-raising activities or commitments, by us or by our competitors; • disruptions to our products and services or our other technology; • additions or departures of board members, management or key personnel; 55 • failure of securities analysts to initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company or our failure to meet these estimates or the expectations of investors; • rumors and market speculation involving us or other companies in our industry; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • lawsuits threatened or filed against us or investigations by governmental authorities; • other events or factors, including those resulting from war, incidents of terrorism, or responses to these events; • health epidemics, such as the COVID-19 pandemic, influenza, and other highly communicable diseases; and • sales of shares of our common stock by us or our stockholders.
The market price of our common stock has and will likely continue to fluctuate significantly in response to numerous factors in addition to the ones described in the preceding risk factors, many of which are beyond our control, including: • overall performance of the equity markets and the economy as a whole; • changes in the financial projections we may provide to the public or our failure to meet these projections; • actual or anticipated changes in our growth rate relative to that of our competitors; • changes in the anticipated future size or growth rate of our addressable markets; • announcements of new products and services, technological and platform updates or enhancements, or of acquisitions, strategic partnerships, joint ventures or capital-raising activities or commitments, by us or by our competitors; • disruptions to our products and services or our other technology; • additions or departures of board members, management or key personnel; • failure of securities analysts to initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company or our failure to meet these estimates or the expectations of investors; • rumors and market speculation involving us or other companies in our industry; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • lawsuits threatened or filed against us or investigations by governmental authorities; • other events or factors, including those resulting from war, incidents of terrorism, or responses to these events; • health epidemics, such as the COVID-19 pandemic, influenza, and other highly communicable diseases; and • sales of shares of our common stock by us or our stockholders.
These anti-takeover provisions include: • a classified board of directors so that not all members of our board of directors are elected at one time; • the ability of our board of directors to determine the number of directors and to fill any vacancies and newly created directorships; • a requirement that our directors may only be removed for cause; 59 • a prohibition on cumulative voting for directors; • the requirement of a super-majority to amend some provisions in our amended and restated certificate of incorporation and amended and restated bylaws; • authorization of the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; • an inability of our stockholders to call special meetings of stockholders; and • a prohibition on stockholder actions by written consent, thereby requiring that all stockholder actions be taken at a meeting of our stockholders.
These anti-takeover provisions include: • a classified board of directors so that not all members of our board of directors are elected at one time; • the ability of our board of directors to determine the number of directors and to fill any vacancies and newly created directorships; • a requirement that our directors may only be removed for cause; • a prohibition on cumulative voting for directors; • the requirement of a super-majority to amend some provisions in our amended and restated certificate of incorporation and amended and restated bylaws; • authorization of the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; • an inability of our stockholders to call special meetings of stockholders; and • a prohibition on stockholder actions by written consent, thereby requiring that all stockholder actions be taken at a meeting of our stockholders.
Any of these events or other outcomes may: • materially and adversely affect our business and results of operations; • result in the loss of a substantial number of existing customers or prohibit the acquisition of new customers; • cause us to pay license fees for intellectual property we are deemed to have infringed; • cause us to incur costs and devote valuable technical resources to redesigning our products or platform; • cause our cost of revenue to increase; • cause us to accelerate expenditures to preserve existing revenue; • cause existing or new vendors to require pre-payments or letters of credit; • materially and adversely affect our brand in the marketplace and cause a substantial loss of goodwill; • cause us to change our business methods; • require us to cease certain business operations or offering certain products or features; and • lead to our bankruptcy or liquidation.
Any of these events or other outcomes may: • materially and adversely affect our business and results of operations; • result in the loss of a substantial number of existing customers or prohibit the acquisition of new customers; • cause us to pay license fees for intellectual property we are deemed to have infringed; • cause us to incur costs and devote valuable technical resources to redesigning our products or platform; • cause our cost of revenue to increase; • cause us to accelerate expenditures to preserve existing revenue; 49 • cause existing or new vendors to require pre-payments or letters of credit; • materially and adversely affect our brand in the marketplace and cause a substantial loss of goodwill; • cause us to change our business methods; • require us to cease certain business operations or offering certain products or features; and • lead to our bankruptcy or liquidation.
We process business and personal information of our customers and employees, which subjects us to HIPAA and other stringent and changing federal, state and foreign laws, regulations, industry standards, information security policies, self-regulatory schemes, contractual obligations, and other legal obligations related to data processing, protection, privacy, and security, and our actual or perceived failure to comply with such obligations could harm our business, financial condition, results of operations, and prospects and could expose us to liability.
We process business and personal information of our customers and employees, which subjects us to HIPAA and other stringent and changing federal, state and foreign laws, regulations, industry standards, information security policies, self-regulatory schemes, contractual obligations, and other legal obligations related to data processing, protection, privacy, and security, and our actual or perceived failure to comply with such obligations could harm our 45 business, financial condition, results of operations, and prospects and could expose us to liability.
While we improve our own technology and work closely with email service providers to maintain our deliverability rates, the implementation of new or more restrictive policies by email service providers may make it more difficult to deliver our customers’ emails, particularly if we are not given adequate notice of a change in policy or are unable to update our platform or products to comply with the changed policy in a reasonable amount of time.
While we improve our own technology and work closely with email service providers to maintain our deliverability rates, the implementation of new or more restrictive policies by email service providers may make it more difficult to deliver our customers’ emails, particularly if we are not given adequate notice of a change in policy or are unable to update our platform or products to comply with the changed policy in a reasonable amount of 36 time.
Our actual or perceived failure to comply with Data Protection Laws, Privacy Policies, and Data Protection Obligations could also subject us to litigation, claims, proceedings, actions, or investigations by governmental entities, authorities, or regulators that could require changes to our business practices, diversion of resources and the attention of management from our business, regulatory oversights and audits, discontinuance of necessary processing, or other remedies that adversely affect our business.
Our actual or perceived failure to comply with Data Protection Laws, Privacy Policies, and Data Protection Obligations could also subject us to litigation, claims, proceedings, actions, or investigations by governmental entities, authorities, or regulators that could require changes to our business practices, 47 diversion of resources and the attention of management from our business, regulatory oversights and audits, discontinuance of necessary processing, or other remedies that adversely affect our business.
In addition, we will face risks in doing business internationally that could adversely affect our business, including: • the difficulty of managing and staffing international operations and the increased operations, travel, infrastructure and legal compliance costs associated with servicing international customers and operating numerous international locations; • our ability to effectively price our products in competitive international markets; • new and different sources of competition or other changes to our current competitive landscape; • understanding, reconciling and complying with different technical standards, telecommunications and payment processing regulations, registration and certification requirements outside the United States, which could prevent customers from deploying our platform and products and limit the features and functionality we may be able to provide or limit their usage; • potentially greater difficulty collecting accounts receivable and longer payment cycles; • higher or more variable network service provider fees outside of the United States; • the need to adapt and localize our products for specific countries; • the need to offer customer support in various languages; • difficulties in understanding and complying with local laws, regulations and customs in non-U.S. jurisdictions; • export controls and economic sanctions administered by the Department of Commerce Bureau of Industry and Security and the Treasury Department’s Office of Foreign Assets Control; • compliance with various anti-bribery and anti-corruption laws such as the Foreign Corrupt Practices Act; • changes in international trade policies, tariffs and other non-tariff barriers, such as quotas and local content rules; • more limited protection for intellectual property rights in some countries; • adverse tax consequences; • fluctuations in currency exchange rates, which could increase the price of our products outside of the United States, increase the expenses of our international operations and expose us to foreign currency exchange rate risk; • fluctuations in exchange rates and the resulting impact on our business; • restrictions on the transfer of funds; • deterioration of political relations between the United States and other countries; • the impact of natural disasters and public health epidemics or pandemics such as COVID-19 on employees, contingent workers, partners, travel and the global economy and the ability to operate freely and effectively in a region that may be fully or partially on lockdown; and 38 • political or social unrest or economic instability in a specific country or region in which we operate, which could have an adverse impact on our operations in that location.
In addition, we will face risks in doing business internationally that could adversely affect our business, including: 37 • the difficulty of managing and staffing international operations and the increased operations, travel, infrastructure and legal compliance costs associated with servicing international customers and operating numerous international locations; • our ability to effectively price our products in competitive international markets; • new and different sources of competition or other changes to our current competitive landscape; • understanding, reconciling and complying with different technical standards, telecommunications and payment processing regulations, registration and certification requirements outside the United States, which could prevent customers from deploying our platform and products and limit the features and functionality we may be able to provide or limit their usage; • potentially greater difficulty collecting accounts receivable and longer payment cycles; • higher or more variable network service provider fees outside of the United States; • the need to adapt and localize our products for specific countries; • the need to offer customer support in various languages; • difficulties in understanding and complying with local laws, regulations and customs in non-U.S. jurisdictions; • export controls and economic sanctions administered by the Department of Commerce Bureau of Industry and Security and the Treasury Department’s Office of Foreign Assets Control; • compliance with various anti-bribery and anti-corruption laws such as the Foreign Corrupt Practices Act; • changes in international trade policies, tariffs and other non-tariff barriers, such as quotas and local content rules; • more limited protection for intellectual property rights in some countries; • adverse tax consequences; • fluctuations in currency exchange rates, which could increase the price of our products outside of the United States, increase the expenses of our international operations and expose us to foreign currency exchange rate risk; • fluctuations in exchange rates and the resulting impact on our business; • restrictions on the transfer of funds; • deterioration of political relations between the United States and other countries; • the impact of natural disasters and public health epidemics or pandemics on employees, contingent workers, partners, travel and the global economy and the ability to operate freely and effectively in a region that may be fully or partially on lockdown; and • political or social unrest or economic instability in a specific country or region in which we operate, which could have an adverse impact on our operations in that location.
If a significant portion of our network service providers stop providing us with access to their infrastructure, fail to provide these services to us on a cost-effective basis, cease operations, or otherwise terminate these services, the delay caused by qualifying and switching to other network service providers could be time-consuming and costly and could adversely affect our business, results of operations and financial condition.
If a significant 30 portion of our network service providers stop providing us with access to their infrastructure, fail to provide these services to us on a cost-effective basis, cease operations, or otherwise terminate these services, the delay caused by qualifying and switching to other network service providers could be time-consuming and costly and could adversely affect our business, results of operations and financial condition.
Effective June 30, 2021, the FCC required that all voice service providers implement the Secure Telephone Identity Revisited (“STIR”) and Signature-based Handling of Asserted Information Using toKENs (“SHAKEN” and, together with STIR, “STIR/SHAKEN”) caller ID authentication framework in the internet protocol (“IP”), portions of their networks and that non-facilities-based voice providers comply fully with STIR/SHAKEN effective June 30, 2022.
Effective in June 30, 2022, the FCC required that all voice service providers implement the Secure Telephone Identity Revisited (“STIR”) and Signature-based Handling of Asserted Information Using toKENs (“SHAKEN” and, together with STIR, “STIR/SHAKEN”) caller ID authentication framework in the internet protocol (“IP”), portions of their networks and that non-facilities-based voice providers comply fully with STIR/SHAKEN.
Although these systems do not currently offer the broad functionality provided by our platform or products, if the providers of these systems were to seek to integrate some or all of the functionality offered by our platform or products in the future, either by building that functionality into their systems or through partnerships with third parties, existing or potential customers that use these systems may choose to use that functionality rather than to subscribe to our platform and products.
Although these systems do not currently offer the broad functionality provided by our platform or products, if the providers of these systems were to seek to integrate some or all of the 25 functionality offered by our platform or products in the future, either by building that functionality into their systems or through partnerships with third parties, existing or potential customers that use these systems may choose to use that functionality rather than to subscribe to our platform and products.
Accordingly, if our cybersecurity measures or those of GCP or our service providers, fail to protect against unauthorized access, attacks (which may include sophisticated cyberattacks), compromise or the mishandling of data by our employees and contractors, then our reputation, customer trust, business, results of operations and financial condition could be adversely affected.
Accordingly, if our cybersecurity measures or those of GCP or our service providers, 29 fail to protect against unauthorized access, attacks (which may include sophisticated cyberattacks), compromise or the mishandling of data by our employees and contractors, then our reputation, customer trust, business, results of operations and financial condition could be adversely affected.
The notification must include the fact that 911 has been dialed, and where technically 46 feasible, a valid callback number and information about the caller’s location. Similar regulations exist in a number of states and Canada’s CRTC recently finalized recommendations for MLTS owners, operators, providers, and/or resellers to adopt MLTS best practices.
The notification must include the fact that 911 has been dialed, and where technically feasible, a valid callback number and information about the caller’s location. Similar regulations exist in a number of states and Canada’s CRTC recently finalized recommendations for MLTS owners, operators, providers, and/or resellers to adopt MLTS best practices.
Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware and, to the extent enforceable, the federal district courts of the United States of America as the exclusive forums for certain disputes between us and our stockholders, which will restrict our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers, or employees.
Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware and, to the extent enforceable, the federal district courts of the United States of 58 America as the exclusive forums for certain disputes between us and our stockholders, which will restrict our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers, or employees.
In addition, even if we are able to identify equivalent hardware, software or services or are able to internally develop a replacement solution, integrating any new hardware, software or service could be costly and time-consuming and may not result in an equivalent solution, any of which could adversely affect our business, results of operations and financial condition.
In addition, even if we are able to identify replacement hardware, software or services or are 28 able to internally develop a replacement solution, integrating any new hardware, software or service could be costly and time-consuming and may not result in an equivalent solution, any of which could adversely affect our business, results of operations and financial condition.
While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring such a claim arising under the Securities Act against us, our directors, officers, or other 60 employees in a venue other than in the federal district courts of the United States of America.
While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring such a claim arising under the Securities Act against us, our directors, officers, or other employees in a venue other than in the federal district courts of the United States of America.
Enhancements and new products that we develop may not be introduced in a timely or cost-effective manner, may contain errors or defects, may require reworking features and capabilities, may have interoperability difficulties with our platform or other products or may not achieve the broad market acceptance necessary to generate significant revenue.
Enhancements and new products that we develop may not be introduced in a timely or cost-effective manner, may contain errors 26 or defects, may require reworking features and capabilities, may have interoperability difficulties with our platform or other products or may not achieve the broad market acceptance necessary to generate significant revenue.
The identification of suitable acquisition candidates can be difficult, time-consuming, and costly, and we may not be able to complete acquisitions on favorable terms, if at all. If we do complete acquisitions, we may not ultimately strengthen our competitive position or achieve the goals of such acquisition, and any acquisitions we complete could be viewed negatively by customers or investors.
The identification of suitable acquisition candidates can be difficult, time-consuming, and costly, and we may not be able to complete acquisitions on favorable terms, if at all. If we complete acquisitions, we may not ultimately strengthen our competitive position or achieve the goals of such acquisition, and any acquisitions we complete could be viewed negatively by customers or investors.
Regulations to which we may be subject address the following matters, among others: • license requirements that apply to providers of communications services in many jurisdictions; • acceptable marketing practices; • our obligation to contribute to various Universal Service Fund (“USF”) programs, programs for funding access to relay services and number administration, including at the state level; • monitoring on rural call completion rates; • safeguarding and use of Customer Proprietary Network Information; • U.S. and Canadian regulations concerning access requirements for users with disabilities; • our obligation to offer 7-1-1 abbreviated dialing for access to relay services; • compliance with the requirements of U.S. and foreign law enforcement agencies, including the Communications Assistance for Law Enforcement Act and cooperation with local authorities in conducting wiretaps, pen traps and other surveillance activities; • the ability to dial 9-1-1 (or corresponding numbers in regions outside the U.S.), auto-locate E-911 calls (or corresponding equivalents) when required, and access emergency services; • the transmission of telephone numbers associated with calling parties between carriers and service providers like us; • regulations governing outbound dialing, including the Telephone Consumer Protection Act; and • FCC and other regulators efforts to combat robo-calling, caller ID spoofing, and robo-texting.
Regulations to which we may be subject address the following matters, among others: • license requirements that apply to providers of communications services in many jurisdictions; • acceptable marketing practices; • our obligation to contribute to various Universal Service Fund (“USF”) programs, programs for funding access to relay services and number administration, including at the state level; 41 • monitoring on rural call completion rates; • safeguarding and use of Customer Proprietary Network Information; • U.S. and Canadian regulations concerning access requirements for users with disabilities; • our obligation to offer 7-1-1 abbreviated dialing for access to relay services; • compliance with the requirements of U.S. and foreign law enforcement agencies, including the Communications Assistance for Law Enforcement Act and cooperation with local authorities in conducting wiretaps, pen traps and other surveillance activities; • the ability to dial 9-1-1 (or corresponding numbers in regions outside the U.S.), auto-locate E-911 calls (or corresponding equivalents) when required, and access emergency services; • the transmission of telephone numbers associated with calling parties between carriers and service providers like Weave; • regulations governing outbound dialing, including the Telephone Consumer Protection Act; and • FCC and other regulators efforts to combat robo-calling, caller ID spoofing, and robo-texting.
Efforts to address robo-calling and caller ID spoofing could cause us competitive harm. 43 In June 2019, the FCC ruled that providers of voice services may by default (subject to opt-out by subscribers) block voice traffic based on reasonable analytics designed to identify unwanted calls.
Efforts to address robo-calling and caller ID spoofing could cause us competitive harm. In June 2019, the FCC ruled that providers of voice services may by default (subject to opt-out by subscribers) block voice traffic based on reasonable analytics designed to identify unwanted calls.
For example, Utah and Michigan prohibit the sending of email messages that advertise products or services that minors are prohibited by law from purchasing (e.g., alcoholic beverages, tobacco products, illegal drugs) or that contain content harmful to minors (e.g., 44 pornography) to email addresses listed on specified child protection registries.
For example, Utah and Michigan prohibit the sending of email messages that advertise products or services that minors are prohibited by law from purchasing (e.g., alcoholic beverages, tobacco products, illegal drugs) or that contain content harmful to minors (e.g., pornography) to email addresses listed on specified child protection registries.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of 54 revenue and expenses that are not readily apparent from other sources.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources.
In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct the problem. In addition, we may not carry insurance sufficient to compensate us for any losses that may result from claims arising from defects or disruptions in our products.
In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources to help correct the problem. In addition, we may not carry insurance sufficient to compensate us for any losses that may result from claims arising from defects or disruptions in our products.
We expect to continue to expend substantial financial and other resources on, among other things: • sales and marketing, including the continued expansion of our direct sales organization and marketing programs and expanding our programs directed at increasing our brand awareness among current and new customers; • increased labor and compensation expenses; • investments in our customer support teams; • improvements in regulatory compliance and risk management, including security and data protection; 21 • investments in our engineering team and the development of new products, features and functionality and enhancements to our platform, including developing the features and functionality required by new vertical markets that we choose to address in the future; • expansion of our operations and technology infrastructure; • international expansion; and • general administration, including legal, accounting and other expenses related to being a public company.
We expect to continue to expend substantial financial and other resources on, among other things: • sales and marketing, including the continued expansion of our direct sales organization and marketing programs and expanding our programs directed at increasing our brand awareness among current and new customers; • increased labor and compensation expenses; • investments in our customer support teams; • improvements in regulatory compliance and risk management, including security and data protection; • investments in our engineering team and the development of new products, features and functionality and enhancements to our platform, including developing the features and functionality required by new vertical markets that we choose to address in the future; 20 • expansion of our operations and technology infrastructure; • international expansion; and • general administration, including legal, accounting and other expenses related to being a public company.
Non-compliance with these laws could subject us to investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, 49 damages, other civil and criminal penalties or injunctions, adverse media coverage and other consequences. Any investigations, actions, or sanctions could harm our business, results of operations and financial condition.
Non-compliance with these laws could subject us to investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, adverse media coverage and other consequences. Any investigations, actions, or sanctions could harm our business, results of operations and financial condition.
If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.
If our estimates or judgments relating to our critical accounting estimates prove to be incorrect, our results of operations could be adversely affected. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.
The market in which we participate is highly competitive, and if we do not compete effectively, our business, results of operations and financial condition could be harmed. The market for our platform and products is rapidly evolving, significantly fragmented and highly competitive, with relatively low barriers to entry in some segments.
The market in which we participate is highly competitive, and if we do not compete effectively, our business, results of operations and financial condition could be harmed. The market for our platform and products is evolving, significantly fragmented and highly competitive, with relatively low barriers to entry in some segments.
We may not be able to successfully identify suitable acquisition, partnership, or integration candidates in the future, and if we do, they may not provide us with the benefits we anticipated. Penetrating new vertical markets may also prove to be more challenging or costly or take longer than we may anticipate.
We may not be able to successfully identify suitable acquisition, partnership, or integration candidates in the future, and if we do, they may not provide us with the benefits we anticipated. Penetrating new healthcare vertical markets may also prove to be more challenging or costly or take longer than we may anticipate.
In addition, we cannot guarantee that these agreements will not be breached, that we will have adequate remedies for any breach, or that the applicable counterparties to such agreements will not assert rights to our intellectual property rights, internally-developed technology or other proprietary information arising out of these relationships.
In addition, we cannot guarantee that these agreements will 48 not be breached, that we will have adequate remedies for any breach, or that the applicable counterparties to such agreements will not assert rights to our intellectual property rights, internally-developed technology or other proprietary information arising out of these relationships.
We may require additional capital to support the growth of our business, and this capital might not be available on acceptable terms, if at all. Historically, we have financed our operations and capital expenditures primarily through sales of our capital stock and debt securities that are convertible into our capital stock.
We may require additional capital to support the growth of our business, and this capital might not be available on acceptable terms, if at all. 56 Historically, we have financed our operations and capital expenditures primarily through sales of our capital stock and debt securities that are convertible into our capital stock.
In addition, any delay in creating integrations with providers of systems or software used by our customers or potential customers could delay or impair our ability to enter new vertical markets or enhance the functionality of our platform and products, and reduce their competitiveness. Any such delay could adversely affect our business.
In addition, any delay in creating integrations with providers of systems or software used by our customers or potential customers could delay or impair our ability to enter new healthcare vertical markets or enhance the functionality of our platform and products, and reduce their competitiveness. Any such delay could adversely affect our business.
We cannot be sure that we will compete as successfully against companies with products that offer solutions in those markets as we have to date. In addition, we cannot be sure we will compete successfully against incumbent providers of solutions with established brands and market presence if we enter new vertical markets and new markets outside the United States.
We cannot be sure that we will compete as successfully against companies with products that offer solutions in those markets as we have to date. In addition, we cannot be sure we will compete successfully against incumbent providers of solutions with established brands and market presence if we enter new healthcare vertical markets and new markets outside the United States.
We substantially rely upon GCP to operate our platform, and any disruption of or interference with our use of GCP would adversely affect our business, results of operations and financial condition. 32 GCP provides a distributed computing infrastructure platform for business operations, or what is commonly referred to as a cloud computing service.
We substantially rely upon GCP to operate our platform, and any disruption of or interference with our use of GCP would adversely affect our business, results of operations and financial condition. GCP provides a distributed computing infrastructure platform for business operations, or what is commonly referred to as a cloud computing service.
Our expansion into new vertical markets also depends upon our ability to adapt our existing platform, develop additional features and functionality to meet the particular needs of each new vertical market, and may depend on our ability to integrate our platform with practice management software or other systems of record.
Our expansion into new healthcare vertical markets also depends upon our ability to adapt our existing platform, develop additional features and functionality to meet the particular needs of each new vertical market, and may depend on our ability to integrate our platform with practice management software or other systems of record.
In addition, some of our customers may choose to use our platform and products and our competitors’ products at the same time. Moreover, as we expand the functionality of our platform and products to include additional solutions, address new vertical markets and enter new markets outside the United States, we may face additional sources of competition.
In addition, some of our customers may choose to use our platform and products and our competitors’ products at the same time. Moreover, as we expand the functionality of our platform and products to include additional solutions, address new healthcare vertical markets and enter new markets outside the United States, we may face additional sources of competition.
In addition, if our security, or that of GCP, is compromised, or our products or platform are unavailable or our users are unable to use our products within a reasonable amount of time or at all, then our business, results of operations and financial condition could be adversely affected.
In addition, if our security, or that of GCP, is compromised, or our products or platform are unavailable or our users are unable to use our products within a reasonable amount of time or at all, then our business, results of operations and financial condition could 31 be adversely affected.
Delays in addressing vertical markets may result in an increase in the investment required to address these markets, delay our ability to derive revenue from these markets and adversely affect our ability to address those markets if other companies are able to address those markets with competitive offerings before we are able to do so.
Delays in addressing healthcare vertical markets may result in an increase in the investment required to address these markets, delay our ability to derive revenue from these markets and adversely affect our ability to address those markets if other companies are able to address those markets with competitive offerings before we are able to do so.
If we are unable to retain and motivate our existing employees and attract qualified employees to fill key positions, we may be unable to manage our business effectively, including the development, marketing and sale of our platform and products, which could adversely affect our business, results of operations and financial condition.
If we are unable to retain and motivate our existing employees and attract qualified employees to fill key positions, we may be unable to manage our business effectively, including the development, marketing 39 and sale of our platform and products, which could adversely affect our business, results of operations and financial condition.
If we fail to maintain our company culture, our business may be adversely impacted. 40 We depend on our senior management team and other key employees, and the loss of one or more of these employees or an inability to attract and retain qualified key personnel could adversely affect our business.
If we fail to maintain our company culture, our business may be adversely impacted. We depend on our senior management team and other key employees, and the loss of one or more of these employees or an inability to attract and retain qualified key personnel could adversely affect our business.
Under those sections of the Code, if a corporation undergoes an 53 “ownership change,” the corporation’s ability to use its pre-change NOL carryforwards and other pre-change attributes, such as research tax credits, to offset its post-change income or tax may be limited.
Under those sections of the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOL carryforwards and other pre-change attributes, such as research tax credits, to offset its post-change income or tax may be limited.
Because we fulfill email delivery on behalf of our customers, blocklisting of this type could undermine the effectiveness of our customers’ transactional email, email 36 marketing programs and other email communications, all of which could have a material negative impact on our business, financial condition and results of operations.
Because we fulfill email delivery on behalf of our customers, blocklisting of this type could undermine the effectiveness of our customers’ transactional email, email marketing programs and other email communications, all of which could have a material negative impact on our business, financial condition and results of operations.
If such claims are successful, our business and results of operations could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and harm our business, results of operations, and financial condition.
If such claims are successful, our business and results of operations could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and 57 resources necessary to resolve them, could divert the resources of our management and harm our business, results of operations, and financial condition.
In addition, a significant percentage of our operating expenses is fixed in nature and is based on forecasted revenue trends. Accordingly, in the event of a revenue shortfall, we may not be able to mitigate the negative impact on our loss and margins in the short term.
In addition, 22 a significant percentage of our operating expenses is fixed in nature and is based on forecasted revenue trends. Accordingly, in the event of a revenue shortfall, we may not be able to mitigate the negative impact on our loss and margins in the short term.
The success of our business strategy relies, in part, on our ability to form and maintain these integrations with such partners on customary terms in order to facilitate and permit the integration of our platform and products into the systems or software used by our customers.
The success of our business strategy relies, in part, on our ability to form and maintain these integrations with such partners on customary terms in order to facilitate and permit the integration of our platform and 24 products into the systems or software used by our customers.
Moreover, we will need to make investments to enter new markets in advance of deriving revenue from those markets, and, if we are unable to derive incremental revenue from new vertical markets in which we make investments to earn an adequate return on our investments, our business and results of operations will suffer.
Moreover, we will need to make investments to enter new markets in advance of deriving revenue from those markets, and, if we are unable to derive incremental revenue from new healthcare vertical markets in which we make investments to earn an adequate return on our investments, our business and results of operations will suffer.
For example, a settlement may require us to obtain a license to continue practices found to be in violation of a third-party’s rights, which may not be available on reasonable terms and may significantly increase our 50 operating expenses. A license to continue such practices may not be available to us at all.
For example, a settlement may require us to obtain a license to continue practices found to be in violation of a third-party’s rights, which may not be available on reasonable terms and may significantly increase our operating expenses. A license to continue such practices may not be available to us at all.
Additional risks and uncertainties not currently known to us or that we currently believe are not material may also impair our business, financial condition, results of operations and growth prospects. Risks Related to our Business and our Industry Our recent rapid growth may not be indicative of our future growth.
Additional risks and uncertainties not presently known to us or that we currently believe are not material may also impair our business, financial condition, results of operations and growth prospects. Risks Related to our Business and our Industry Our recent rapid growth may not be indicative of our future growth.
While we have experienced significant revenue growth in recent periods, we are not yet profitable and this growth rate may decline in future periods and you should not rely on the revenue growth of any given prior period as an indication of our future performance.
While we have experienced significant revenue growth in recent periods, we are not yet profitable and our revenue growth rate may decline in future periods and you should not rely on the revenue growth of any given prior period as an indication of our future performance.
As a result, our gross margin may be adversely impacted and fluctuate as we expand our operations and customer base worldwide. Our failure to manage any of these risks successfully could harm our international operations, and adversely affect our business, results of operations and financial condition.
As a result, our gross margin may be adversely impacted and fluctuate as we expand our operations and customer base worldwide. 38 Our failure to manage any of these risks successfully could harm our international operations, and adversely affect our business, results of operations and financial condition.
As a result of the complexity involved in complying with the rules and regulations applicable to public companies, our management’s attention may be diverted from other business concerns, which could harm our business, 58 results of operations, and financial condition.
As a result of the complexity involved in complying with the rules and regulations applicable to public companies, our management’s attention may be diverted from other business concerns, which could harm our business, results of operations, and financial condition.
Health concerns or political or governmental developments in countries in which we or our customers, partners and service providers operate could result in economic, social or labor 61 instability and could have an adverse effect on our business and our results of operations and financial condition.
Health concerns or political or governmental developments in countries in which we or our customers, partners and service providers operate could result in economic, social or labor instability and could have an adverse effect on our business and our results of operations and financial condition.
In addition to threats from traditional computer hackers, malicious code (such as malware, viruses, worms, and ransomware), employees theft or misuse, password spraying, phishing, credential stuffing, and denial-of-service attacks, we also face threats from sophisticated organized crime, nation-state, and nation-state supported actors who engage in attacks (including advanced persistent threat intrusions) that add to the risk to our systems (including those hosted on GCP or other cloud services), internal networks, our customers’ systems and the information that they store and process.
In addition to threats from traditional computer hackers, malicious code (such as malware, viruses, worms, and ransomware), employee theft or misuse, password spraying, phishing, credential stuffing, and denial-of-service attacks, we also face threats from sophisticated organized crime, nation-state, and nation-state supported actors who engage in attacks (including advanced persistent threat intrusions) that add to the risk to our systems (including those hosted on GCP or other cloud services), internal networks, our customers’ systems and the information that they store and process.
In addition, increased competition generally could result in reduced revenue, reduced margins, increased losses or the failure of 27 our products to achieve or maintain widespread market acceptance, any of which could harm our business, results of operations and financial condition.
In addition, increased competition generally could result in reduced revenue, reduced margins, increased losses or the failure of our products to achieve or maintain widespread market acceptance, any of which could harm our business, results of operations and financial condition.
We depend upon our information technology (“IT”) systems to conduct virtually all of our business operations, ranging from operation of our platform, our internal operations and research and development activities to our marketing and sales efforts and communications with our customers and integration partners.
We depend upon our information technology (“IT”) systems to conduct virtually all of our business operations, ranging from the operation of our platform, our internal operations and research and development activities to our marketing and sales efforts and communications with our customers and integration partners.
As part of our strategy to expand into new vertical markets, we may look for acquisition opportunities and partnerships that will allow us to enhance our offerings and distribution channels for those verticals and increase our market penetration.
As part of our strategy to expand into new healthcare vertical markets, we may look for acquisition opportunities and partnerships that will allow us to enhance our offerings and distribution channels for those verticals and increase our market penetration.
In addition, we cannot be sure that the time periods that have been required historically to identify, evaluate, develop and launch new product offerings to address specific vertical markets will be representative of the time that will be required to address new vertical markets in the future.
In addition, we cannot be sure that the time periods that have been required historically to identify, evaluate, develop and launch new product offerings to address specific healthcare vertical markets will be representative of the time that will be required to address new healthcare vertical markets in the future.
As we seek to expand our customer base by targeting additional vertical markets in the future, we will need to establish brand awareness in new markets in which we have not historically had a presence.
As we seek to expand our customer base by targeting additional healthcare vertical markets in the future, we will need to establish brand awareness in new markets in which we have not historically had a presence.
Although we have invested in promoting our brand generally, we may not have significant brand awareness in these new markets, and will need to make additional investments to expand awareness of our brand in the new vertical markets we seek to address.
Although we have invested in promoting our brand generally, we may not have significant brand awareness in these new healthcare vertical markets, and will need to make additional investments to expand awareness of our brand in the new healthcare vertical markets we seek to address.
If we are unable to maintain 25 effective marketing programs, then our ability to attract new customers could be adversely affected, our advertising and marketing expenses could increase substantially, and our results of operations may suffer.
If we are unable to maintain effective marketing programs, then our ability to attract new customers could be adversely affected, our advertising and marketing expenses could increase substantially, and our results of operations may suffer.
If our quarterly results of operations or forward-looking quarterly and annual financial 22 guidance fall below the expectations of investors or securities analysts, then the trading price of common stock could decline substantially.
If our quarterly results of operations or forward-looking quarterly and annual financial guidance fall below the expectations of investors or securities analysts, then the trading price of common stock could decline substantially.
We continually monitor the ever-evolving tax landscape in the jurisdictions in which we operate and those jurisdictions where our customers reside. Effective March 2017, we began collecting certain telecommunications-based taxes from our customers in certain jurisdictions.
We continually monitor the ever-evolving tax landscape in the jurisdictions in which we operate and those jurisdictions where our customers reside. Effective in March 2017, we began collecting certain telecommunications-based taxes from our customers in certain 51 jurisdictions.
In addition, we will need to make sales and marketing investments to increase awareness of our platform and products in new vertical markets in which we have not historically had a presence.
In addition, we will need to make sales and marketing investments to increase awareness of our platform and products in new healthcare vertical markets in which we have not historically had a presence.
Our competitors fall into the following primary categories: • customer interactions management solutions; 26 • customer experience management; • marketing solutions; • business intelligence; • integrated payment providers; • unified communications and telecommunications; and • customer relationship management.
Our competitors fall into the following primary categories: • customer interactions management solutions; • customer experience management; • marketing solutions; • business intelligence; • integrated payment providers; • unified communications and telecommunications; and • customer relationship management.
For example, some new vertical markets may require greater mobile functionality than customers in our existing markets. Other new vertical markets may require additional functionality to address regulatory considerations.
For example, some new healthcare vertical markets may require greater mobile functionality than customers in our existing markets. Other new healthcare vertical markets may require additional functionality to address regulatory considerations.
Despite initially denying non-facilities based providers access, the Canadian Secure Token Governance Authority (“CST-GA”) created a new process in November 2021 for such providers to obtain Service Provider Code Tokens and, in turn, Secure Telephone Identity Certificates (“STI Certificates”) to allow higher (Level A or B) call attestation.
Despite initially denying non-facilities based providers access, the Canadian Secure Token Governance Authority (“CST-GA”) created a process in November 2021 for such providers to obtain Service Provider Code Tokens and, in turn, Secure Telephone Identity Certificates (“STI Certificates”) to allow higher (Level A or B) call 42 attestation.
Accordingly, our business model relies to a significant extent on our ability to renew subscriptions and sell 19 additional products to existing customers, and, if we are unable to retain revenue from existing customers or to increase revenue from existing customers, our operating results could be adversely impacted even if such lost revenue were offset by an increase in revenue from new customers.
Accordingly, our business model relies to a significant extent on our ability to renew subscriptions and sell additional products to existing customers, and, if we are unable to retain revenue from existing customers 18 or to increase revenue from existing customers, our operating results could be adversely impacted even if such lost revenue were offset by an increase in revenue from new customers.
In addition, any changes in service levels from GCP may adversely affect our ability to meet our customers’ requirements, result in negative publicity which could harm our reputation and brand and may adversely affect the usage of our platform. Our agreement with GCP is for a 60-month term with no renewal right thereafter.
In addition, any changes in service levels from GCP may adversely affect our ability to meet our customers’ requirements, result in negative publicity which could harm our reputation and brand and may adversely affect the usage of our platform. Our agreement with GCP is for a 60-month term (through 2027) with no renewal right thereafter.
If we fail to expand into new vertical markets and increase our penetration into existing vertical markets, we may not be able to continue to grow our revenue.
If we fail to expand into new healthcare vertical markets and increase our penetration into existing vertical markets, we may not be able to continue to grow our revenue.
During the COVID-19 pandemic, card-not-present transactions, which are transactions for 35 which the credit card is not physically present at the merchant location at the time of the transaction, accounted for a larger proportion of the total payment transactions processed through our platform, which has contributed to higher gross margins on those transactions than in prior periods.
During the COVID-19 pandemic, card-not-present transactions, which are transactions for which the credit card is not physically present at the merchant location at the time of the transaction, accounted for a larger proportion of the total payment transactions processed through our platform, which contributed to higher gross margins on those transactions than in prior periods.
Additionally, even if emails we process are not blocklisted, email service providers from time to time block emails we process from reaching their users. For example, some email service providers categorize as “promotional” emails that originate from email service providers such as us, and, as a result, direct them to an alternate or “tabbed” section of the recipient’s inbox.
Additionally, even if the emails we process are not blocklisted, email service providers from time to time block emails we process from reaching their users. For example, some email service providers categorize as “promotional” emails that originate from email service providers such as Weave, and, as a result, direct them to an alternate or “tabbed” section of the recipient’s inbox.
Moreover, our customers’ and other users’ promotion of their products and services through our platform might not comply with federal, state, and 45 foreign laws. These risks may increase as we enter new vertical markets that rely more heavily on email marketing campaigns to obtain new customers.
Moreover, our customers’ and other users’ promotion of their products and services through our platform might not comply with federal, state, and foreign laws. These risks may increase as we enter new healthcare vertical markets that rely more heavily on email marketing campaigns to obtain new customers.
In the event our customers’ ability to use the functionality supplied by our platform were disrupted as a result of issues affecting the hardware, software or services provide by third parties, customers could assert claims against us in connection with such service disruption or cease conducting business with us altogether.
In the event our customers’ ability to use the functionality supplied by our platform is disrupted as a result of issues affecting the hardware, software or services provide by third parties, customers could assert claims against us in connection with such service disruption or cease conducting business with us altogether.
On July 26, 2022, the CST-GA signed a memorandum of understanding with the U.S. Secure Telephone Identity Governance Authority to coordinate interconnection of SHAKEN in both the U.S. and Canada to allow providers to sign calls in one country and accept the signature in the other. However, the SHAKEN interconnection between the U.S. and Canada is not yet operational.
In July 2022, the CST-GA signed a memorandum of understanding with the U.S. Secure Telephone Identity Governance Authority to coordinate interconnection of SHAKEN in both the U.S. and Canada to allow providers to sign calls in one country and accept the signature in the other. However, the SHAKEN interconnection between the U.S. and Canada is not yet operational.
In addition to existing applicable 911/E-911 requirements, the CRTC now requires telecommunications service providers (including VoIP providers) to support next generation 911.
In addition to existing applicable 911/E-911 requirements, the CRTC requires telecommunications service providers (including VoIP providers) to support next generation 911.
If we are unable to develop and maintain successful integrations, such as integrations with providers of practice management systems (“PMS”) or accounting software, the value of our platform and products could decline and our results of operations and financial condition could be adversely affected.
If we are unable to develop and maintain successful integrations, such as integrations with providers of systems of record, including practice management systems (“PMS”), or accounting software, the value of our platform and products could decline and our results of operations and financial condition could be adversely affected.
HIPAA requires covered entities and business associates, such as us, and their covered subcontractors to develop and maintain policies and procedures with respect to PHI that is used or disclosed, including the adoption of administrative, physical and technical safeguards to protect such information.
HIPAA requires covered entities and business associates, such as Weave, and their covered subcontractors to develop and maintain policies and procedures with respect to PHI that is used or disclosed, including the adoption of administrative, physical and technical safeguards to protect such information.
Furthermore, the steps we have taken and may take in the future may not prevent misappropriation of our internally-developed solutions or technologies, particularly with respect to directors, officers and employees who are no longer employed by us.
Furthermore, the steps we have taken and may take in the future may not prevent misappropriation of our internally-developed solutions or technologies, particularly with respect to directors, officers and employees who are no longer employed by Weave.
If one or more equity research analysts cease coverage of our company, or fail to regularly publish reports on us, the demand for our common stock could decrease, which in turn could cause our trading price or trading volume to decline.
If one or more equity research analysts cease coverage of Weave, or fail to regularly publish reports on us, the demand for our common stock could decrease, which in turn could cause our trading price or trading volume to decline.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties As of December 31, 2022, we currently lease approximately 180,000 square feet of office space for our current corporate headquarters in Lehi, Utah under a lease agreement that expires in 2033. We also maintain offices in Noida, India.
Biggest changeItem 2. Properties As of December 31, 2023, we currently lease approximately 180,000 square feet of office space for our current corporate headquarters in Lehi, Utah under a lease agreement that expires in 2033. We also maintain offices in Noida, India.
We may decide to lease suitable office space in India to support our current team and anticipated growth there.
We may decide to lease suitable office space in India to support our current team and anticipated growth there. 61

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe results of any 62 current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors. Item 4. Mine Safety Disclosures None. 63 Part II
Biggest changeThe results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors. Item 4. Mine Safety Disclosures None. 62 Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePrior to that date, there was no public market for our common stock. Holders of Record As of March 10, 2023, there were 33 holders of record of our common stock. This figure does not include a substantially greater number of beneficial holders of our common stock whose shares are held off record by banks, brokers and other financial institutions.
Biggest changePrior to that date, there was no public market for our common stock. Holders of Record As of March 8, 2024, there were 34 holders of record of our common stock. This figure does not include a substantially greater number of beneficial holders of our common stock whose shares are held off record by banks, brokers and other financial institutions.
The following graph depicts the total cumulative stockholder return on our common stock from November 11, 2021, the first day of trading of our common stock on The New York Stock Exchange, through December 31, 2022, relative to the performance of the Standard & Poor's (S&P) 500 Index and the Russell 2000 Index.
The following graph depicts the total cumulative stockholder return on our common stock from November 11, 2021, the first day of trading of our common stock on The New York Stock Exchange, through December 31, 2023, relative to the performance of the Standard & Poor's (S&P) 500 Index and the Russell 2000 Index.
The comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our common stock. 64 *$100 invested on November 11, 2021 in stock or index, including reinvestment of dividends. Fiscal year ending December 31. Copyright© 2022 Standard & Poor's, a division of S&P Global. All rights reserved.
The comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our common stock. 63 *$100 invested on November 11, 2021 in stock or index, including reinvestment of dividends. Fiscal year ending December 31. Copyright© 2023 Standard & Poor's, a division of S&P Global. All rights reserved.
Removed
Copyright© 2022 Russell Investment Group. All rights reserved. Sale of Unregistered Securities and Use of Proceeds Use of Proceeds from Registered Securities On November 15, 2021, we completed our IPO pursuant to which we issued and sold 5,000,000 shares of common stock at a price to the public of $24.00 per share.
Added
Copyright© 2023 Russell Investment Group. All rights reserved. Sale of Unregistered Securities and Use of Proceeds None. Issuer Purchases of Equity Securities None. Item 6. [Reserved]
Removed
All of the shares issued and sold in our IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (No. 333-260321), which was declared effective by the SEC on November 10, 2021. Goldman Sachs & Co.
Removed
LLC, BofA Securities, Inc., Citigroup Global Markets Inc., Piper Sandler & Co., Raymond James & Associates, Inc., Stifel, Nicolaus & Company, Incorporated, William Blair & Company, L.L.C., Guggenheim Securities, LLC, Academy Securities, Inc., Loop Capital Markets LLC, and Tigress Financial Partners LLC acted as underwriters for the IPO.
Removed
Upon completion of the sale of the shares of our common stock referenced in the preceding sentences, the IPO terminated. The net proceeds to us, after deducting underwriting discounts and commissions of $8.4 million and offering expenses of $4.1 million, were $107.5 million.
Removed
No offering expenses were paid directly or indirectly to any of our directors or officers (or their associates) or persons owning ten percent or more of any class of our equity securities or to any other affiliates.
Removed
There has been no material change in the planned use of proceeds from the IPO as described in the final prospectus dated as of November 10, 2021 and filed with the SEC pursuant to Rule 424(b)(4) on November 12, 2021 Issuer Purchases of Equity Securities None. 65 Item 6. [Reserved]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeBecause of the uncertainty of the realization of the deferred tax assets, we have a full valuation allowance for domestic net deferred tax assets, including net operating loss carryforwards. 73 Results of Operations The following table sets forth our consolidated statements of operations data for the periods indicated: Year Ended December 31, 2022 2021 (in thousands) Revenue $ 142,117 $ 115,871 Cost of revenue (1) 53,276 49,372 Gross profit 88,841 66,499 Operating expenses: Sales and marketing (1) 65,378 58,244 Research and development (1) 30,714 27,009 General and administrative (1) 42,453 31,637 Total operating expenses 138,545 116,890 Loss from operations (49,704) (50,391) Other income (expense): Interest expense (1,441) (1,184) Other income (expense), net 1,511 (55) Loss before income taxes (49,634) (51,630) Provision for income taxes (104) (60) Net loss $ (49,738) $ (51,690) ______________ (1) Includes stock-based compensation expense as follows: Year Ended December 31, 2022 2021 (in thousands) Cost of revenue $ 723 $ 526 Sales and marketing 3,436 1,962 Research and development 4,576 3,545 General and administrative 10,017 8,058 Total stock-based compensation $ 18,752 $ 14,091 Stock-based compensation expense for the years ended December 31, 2022 and 2021 included zero and $3.4 million, respectively, of compensation expense related to amounts paid in excess of the estimated fair value of the common stock in secondary sales of common stock.
Biggest changeBecause of the uncertainty of the realization of the deferred tax assets, we have a full valuation allowance for domestic net deferred tax assets, including net operating loss carryforwards. 70 Results of Operations The following table sets forth our consolidated statements of operations data for the periods indicated: Year Ended December 31, 2023 2022 (in thousands) Revenue $ 170,468 $ 142,117 Cost of revenue (1) 54,377 53,276 Gross profit 116,091 88,841 Operating expenses: Sales and marketing (1) 70,765 65,378 Research and development (1) 34,040 30,714 General and administrative (1) 45,652 42,453 Total operating expenses 150,457 138,545 Loss from operations (34,366) (49,704) Other income (expense): Interest income 2,196 1,155 Interest expense (1,923) (1,441) Other income (expense), net 3,322 356 Loss before income taxes (30,771) (49,634) Provision for income taxes (260) (104) Net loss $ (31,031) $ (49,738) ______________ (1) Includes stock-based compensation expense as follows: Year Ended December 31, 2023 2022 (in thousands) Cost of revenue $ 971 $ 723 Sales and marketing 4,233 3,436 Research and development 5,590 4,576 General and administrative 12,029 10,017 Total stock-based compensation $ 22,823 $ 18,752 See Note 12 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details. 71 The following table sets forth our consolidated statements of operations data expressed as a percentage of revenue for the periods indicated: Year Ended December 31, 2023 2022 (percentage of total revenue) Revenue 100 % 100 % Cost of revenue 32 37 Gross profit 68 63 Operating expenses: Sales and marketing 42 46 Research and development 20 22 General and administrative 27 30 Total operating expenses 88 97 Loss from operations (20) (35) Other income (expense): Interest income 1 1 Interest expense (1) (1) Other income (expense), net 2 — Loss before income taxes (18) (35) Provision for income taxes — — Net loss (18) % (35) % Comparison of the Years Ended December 31, 2023 and December 31, 2022 Revenue Year Ended December 31, Change 2023 2022 Amount Percentage (dollars in thousands) Revenue $ 170,468 $ 142,117 $ 28,351 20 % Revenue increased by $28.4 million, or 20%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
In addition, we provide recurring payment processing services through Weave Payments and derive revenue on transactions between our customers that utilize Weave Payments and their end consumers. We also derive revenue associated with non-recurring installation fees for onboarding customers and from embedded leases on phone hardware.
In addition, we provide recurring payment processing services through Weave Payments and derive revenue from transactions between our customers that utilize Weave Payments and their end consumers. We also derive revenue associated with non-recurring installation fees for onboarding customers and from embedded leases on phone hardware.
Sales and Marketing Sales and marketing expenses consist primarily of personnel-related expenses associated with our sales and marketing staff, including salaries, benefits, bonuses and stock-based compensation. Sales commissions paid on new subscriptions to our software, phone, and payments services are deferred and amortized over the expected period of benefit which is determined to be three years.
Sales and Marketing Sales and marketing expenses consist primarily of personnel-related expenses associated with our sales and marketing staff, including salaries, benefits, sales commissions, bonuses and stock-based compensation. Sales commissions paid on new subscriptions to our software, phone, and payments services are deferred and amortized over the expected period of benefit, which is determined to be three years.
Emerging Growth Company and Smaller Reporting Company Status We are an “emerging growth company”, as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” We may take advantage of these exemptions until we are no longer an “emerging growth company.” Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards.
Emerging Growth Company Status We are an “emerging growth company”, as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” We may take advantage of these exemptions until we are no longer an “emerging growth company.” Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards.
Retain and Expand Within Our Customer Base Our ability to retain and increase revenue within our existing customer base is dependent upon a number of factors, including customer satisfaction with our platform and support, the sum total of the features and pricing of the alternative point solution patchwork, our ability to effectively enhance our platform by developing new applications and features and addressing additional use cases, and our ability to leverage and scale our core sales efforts and marketing capabilities to increase our penetration into our core specialty healthcare verticals.
Retain and Expand Within Our Customer Base 66 Our ability to retain and increase revenue within our existing customer base is dependent upon a number of factors, including customer satisfaction with our platform and support, the sum total of the features and pricing of the alternative point solution patchwork, our ability to effectively enhance our platform by developing new applications and features and addressing additional use cases, and our ability to leverage and scale our core sales efforts and marketing capabilities to increase our penetration into our core specialty healthcare verticals.
However, our cost of revenue has been and will continue to be affected by a number of factors including increased regulatory fees on texting and phone calls, the number and aging of phones provided to customers, our stock-based compensation expense, and the timing of the amortization of internal-use software development costs, which could cause it to fluctuate as a percentage of revenue in future periods.
However, our cost of revenue has been and will continue to be affected by a number of factors including increased regulatory fees on texting and phone calls, the quantity and aging of phones provided to customers, our stock-based compensation expense, and the timing of the amortization of internal-use software development costs, which could cause it to fluctuate as a percentage of revenue in future periods.
Investing Activities Cash used in investing activities for the year ended December 31, 2022 was $54.0 million, primarily due to $50.9 million in purchases of short-term investments. Additionally, we purchased $1.9 million in furniture, equipment and leasehold improvements, and capitalized $1.2 million of personnel-related costs as internal-use software development.
Additionally, we purchased $1.7 million in furniture, equipment and leasehold improvements, and capitalized $2.0 million of personnel-related costs as internal-use software development. Cash used in investing activities for the year ended December 31, 2022 was $54.0 million, primarily due to $50.9 million in purchases of short-term investments.
In short, our ability to add new SMB customers is dependent on the features and functionality we add to our platform for small businesses, particularly in our core specialty healthcare verticals. The depth of our platform’s functionality is dependent upon both our internally-developed technology and our platform partnerships and 68 integrations.
In short, our ability to add new SMB customers is dependent on the features and functionality we add to our platform for small businesses, particularly in our core specialty healthcare verticals. The depth of our platform’s functionality is dependent upon both our internally-developed technology and our platform partnerships and integrations.
Supplemental Financial Information — Disaggregated Revenue and Cost of Revenue 66 To supplement our discussion of our consolidated results of operations, we have separated our revenue and cost of revenue into recurring and non-recurring categories to disaggregate revenue and costs of revenue that are one-time in nature from those that are term-based and renewable.
Supplemental Financial Information — Disaggregated Revenue and Cost of Revenue To supplement our discussion of our consolidated results of operations, we have separated our revenue and cost of revenue into recurring and non-recurring categories to disaggregate revenue and costs of revenue that are one-time in nature from those that are term-based and renewable.
This amended agreement includes financial covenants requiring that, at any time, if our total unrestricted cash and cash equivalents at SVB, plus our short-term investments managed by SVB, is less than $100.0 million, we must at all times thereafter maintain a consolidated minimum $20.0 million in liquidity, meaning unencumbered cash plus available borrowing on the line of credit, and that we meet specified minimum levels of EBITDA, as adjusted for stock-based compensation and changes in our deferred revenue.
This agreement includes financial covenants requiring that, at any time, if our total unrestricted cash and cash equivalents held at SVB, plus our short-term investments managed by SVB, is less than $100.0 million, we must at all times thereafter maintain a consolidated minimum $20.0 million in liquidity, meaning unencumbered cash and short-term investments plus available borrowing on the line of credit, and that we meet specified minimum levels of EBITDA, as adjusted for stock-based compensation and changes in our deferred revenue.
Our first RSU grants were made effective November 12, 2021 in connection with the IPO and, as such, prior to the IPO we had not recognized stock-based compensation on RSUs.
Our first RSU grants were made 78 effective November 12, 2021 in connection with our IPO and, as such, prior to the IPO we had not recognized stock-based compensation on RSUs.
In this Annual Report on Form 10-K, unless otherwise specified or the context otherwise requires, “Weave,” “we,” “us,” and “our” refer to Weave Communications, Inc. and its consolidated subsidiaries. We have elected to omit discussion on the earliest of the three years presented in the Consolidated Financial Statements of this Annual Report on Form 10-K.
In this Annual Report on Form 10-K, unless otherwise specified or the context otherwise requires, “Weave,” the “Company,” “we,” “us,” and “our” refer to Weave Communications, Inc. and its consolidated subsidiaries. 64 We have elected to omit discussion of the earliest of the three years presented in the Consolidated Financial Statements of this Annual Report on Form 10-K.
We evaluate the likelihood of any future benefit of deferred tax assets and, based on that evaluation, record a valuation allowance if we determine that a portion of that benefit will not be realized. Our valuation allowance is based on management’s judgement and estimates of future business performance and taxes to be paid.
We evaluate the likelihood of any future benefit of deferred tax assets and, based on that evaluation, record a valuation allowance if we determine that a portion of that benefit will not be realized. Our valuation allowance is based on management’s judgment and estimates of future business performance and taxes to be paid.
The associated costs, which primarily represent depreciation expense on phones financed under capital lease arrangements, are incurred over the useful lives of the phones. We consider the net costs of onboarding and hardware, in addition to our sales and marketing activities, to be core elements of our customer acquisition approach.
The associated costs, which primarily represent depreciation expense on phones financed under finance lease arrangements, are incurred over the useful lives of the phone hardware. We consider the net costs of onboarding and hardware, in addition to our sales and marketing activities, to be core elements of our customer acquisition approach.
We have not incurred any costs as a result of such indemnification obligations historically and have not accrued any liabilities related to such obligations in our consolidated financial statements as of December 31, 2022.
We have not incurred any costs as a result of such indemnification obligations historically and have not accrued any liabilities related to such obligations in our consolidated financial statements as of December 31, 2023.
For retention rate calculations, we use adjusted monthly revenue, or AMR, which is calculated for each location as the sum of (i) the subscription component of revenue for each month and (ii) the average of the trailing-three-month recurring payments revenue.
For retention rate calculations, we use adjusted monthly revenue (“AMR”), which is calculated for each location as the sum of (i) the subscription component of revenue for each month and (ii) the average of the trailing-three-month recurring payments revenue.
Dollar-Based Net Retention Rate We believe our dollar-based net retention rate, or NRR, provides insight into our ability to retain and grow revenue from our customer locations, as well as their potential long-term value to us.
Dollar-Based Net Retention Rate We believe our dollar-based net retention rate (“NRR”) provides insight into our ability to retain and grow revenue from our customer locations, as well as their potential long-term value to us.
Actual results could differ and may materially impact our financial statements in future periods. Contractual Obligations and Commitments Refer to the notes to our consolidated financial statements within Part II, Item 8 of this Annual Report on Form 10-K for more details on contractual obligations.
Actual results could differ and may materially impact our financial statements in future periods. Contractual Obligations and Commitments Refer to the notes to our consolidated financial statements within “Part II, Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for more details on contractual obligations.
The deployment of the Weave phone system at each of our customers increases stickiness and customer loyalty. Historically, our subscriptions have provided our new customers with immediate access to the majority of our products and functionality.
The deployment of the Weave phone system as part of the platform at each of our customers increases stickiness and customer loyalty. Historically, our subscriptions have provided our new customers with immediate access to the majority of our products and functionality.
Expand to New Industry Verticals We believe we have built a flexible platform that encompasses the majority of the functionality needed for communications and engagement across industry verticals, and we have developed a repeatable playbook for assessing new industry verticals.
Expand to New Industry Verticals We believe we have built a flexible platform that encompasses the majority of the functionality needed for customer experience and engagement across industry verticals, and we have developed a repeatable playbook for assessing new industry verticals.
We believe our disaggregated revenue and cost of revenue financial data, particularly our subscription and payment processing gross margin, provide insight into the impact of customer retention on overall gross margin improvement. Our subscription and payment processing gross margin was 74% and 73% for the years ended December 31, 2022 and 2021.
We believe our disaggregated revenue and cost of revenue financial data, particularly our subscription and payment processing gross margin, provide insight into the impact of customer retention on overall gross margin improvement. Our subscription and payment processing gross margin was 77% and 74% for the years ended December 31, 2023 and 2022.
Historically, our go-to-market strategy focused on increasing the number of locations with most of our customers having a single location; however, we have introduced multi-office functionality to our platform to allow us to better service organizations with multiple locations.
Historically, our go-to-market strategy focused on increasing the number of locations with most of our customers having a single location; however, we now provide multi-office functionality on our platform to allow us to better service organizations with multiple locations.
We may take advantage of these exemptions up until the last day of the fiscal year following the fifth anniversary of our initial public offering or such earlier time that we are no longer an emerging growth company.
We may take advantage of these exemptions up until the last day of the fiscal year following the fifth anniversary of our IPO or such earlier time that we are no longer an emerging growth company.
These amounts were partially offset by a $6.6 million increase in deferred revenue due to our prepay arrangements with our customers, an increase in accounts payable and accrued liabilities of $2.1 million, and an increase in deferred rent of $4.3 million.
These amounts were partially offset by a $4.9 million increase in accrued liabilities, $4.8 million increase in deferred revenue due to our prepay arrangements with our customers, and an increase of $1.3 million to accounts payable.
For example, as free cash flow has been negative, we have needed to access cash reserves or other sources of capital for these investments. Adjusted EBITDA EBITDA is defined as earnings before interest expense, provision for income taxes, depreciation, and amortization.
For example, as free cash flow has in the past been negative, we have needed to access cash reserves or other sources of capital for these investments. Adjusted EBITDA We define EBITDA as earnings before interest expense, interest income, other income/expense, provision for income taxes, depreciation, and amortization.
As of December 31, 2022, we had more than 27,000 customers in the United States and Canada, spanning organizations across our end markets, and 25,000 customer locations under subscription.
As of December 31, 2023, we had more than 28,000 customers in the United States and Canada, spanning organizations across our end markets, and more than 31,000 customer locations under subscription.
Attract New Customers Our ability to attract new customers is dependent upon a number of factors, including the effectiveness of our pricing and products, the sum total of the features and pricing of the alternative point solution patchwork, the effectiveness of our marketing efforts, the effectiveness of our channel partners in selling and marketing our platform and the growth of the market for SMB communications and engagement.
Attract New Customers Our ability to attract new customers is dependent upon a number of factors, including the effectiveness of our pricing and products, the sum total of the features and pricing of the alternative point solution patchwork, the effectiveness of our marketing efforts, the effectiveness of our channel partners in selling and marketing our platform and the growth of the market for a customer experience and payments software platform.
To calculate our GRR, we first identify the Base Locations that were under subscription in the Base Month. We then calculate the effect of reductions in revenue from customer location terminations by measuring the amount of AMR in the Base Month for Base Locations still under subscription twelve months subsequent to the Base Month, or Remaining AMR.
We then calculate the effect of reductions in revenue from customer location terminations by measuring the amount of AMR in the Base Month for Base Locations still under subscription twelve months subsequent to the Base Month, or Remaining AMR.
GAAP financial measures and the reconciliations of these non-GAAP financial measures to their most directly comparable U.S. GAAP financial measures and to not rely on any single financial measure to evaluate our business.
GAAP financial measures and the reconciliations of these non-GAAP financial measures to their most directly comparable U.S. GAAP financial measures and to not rely on any single financial measure to evaluate our business. 75 Free Cash Flow and Free Cash Flow Margin U.S.
December 31, 2022 2021 Number of locations (at period end) 27,193 23,831 Dollar-based net retention rate 99 % 103 % Dollar-based gross retention rate 94 % 94 % Number of Customer Locations We believe the number of customer locations for each year provides us an indicator of our market penetration, the growth of our business and our potential future business opportunities.
December 31, 2023 2022 Number of locations (at period end) 31,002 27,193 Dollar-based net retention rate 95 % 99 % Dollar-based gross retention rate 92 % 94 % 67 Number of Customer Locations We believe the number of customer locations for each year provides us an indicator of our market penetration, the growth of our business and our potential future business opportunities.
On January 1, 2022, we adopted the new accounting guidance required by ASC 842 and the interest on all finance leases initiated going forward is based on the rate implicit within the lease agreement. Other Income (Expense), Net Other income consists primarily of interest income earned on our cash and cash equivalents and short term investments.
On January 1, 2022, we adopted the new accounting guidance required by ASC 842 and the interest on all finance leases initiated going forward is based on the rate implicit within the lease agreement. Other Income (Expense), Net Other income (expense), net primarily consists of gains and losses on short-term investments, foreign currency transactions, and sublease income.
Interest on borrowings is based on a floating per annum rate at specified percentages above the prime rate. Interest on finance leases initiated prior to January 1, 2022 is based on our incremental borrowing rate at the time the agreements were initiated.
Interest Expense Interest expense results primarily from interest payments on our borrowings and interest on finance lease obligations. Interest on borrowings is based on a floating per annum rate at specified percentages above the prime rate. Interest on finance leases initiated prior to January 1, 2022 is based on our incremental borrowing rate at the time the agreements were initiated.
Provision for Income Taxes Year Ended December 31, Change 2022 2021 Amount Percentage (dollars in thousands) Provision for income taxes $ (104) $ (60) $ (44) 73 % Provision for income taxes increased by an immaterial amount due to increases in operations and other expenses in our foreign jurisdictions.
Provision for Income Taxes Year Ended December 31, Change 2023 2022 Amount Percentage (dollars in thousands) Provision for income taxes $ (260) $ (104) $ (156) 150 % Provision for income taxes increased by an immaterial amount due to increases in operations and other expenses in our foreign jurisdictions.
Indirect costs included in costs of revenue include fees paid to third-party independent contractors as part of the Installation Program and personnel-related expenses, such as salaries, benefits, bonuses and stock-based compensation expense, of our onboarding and customer support staff. Cost of revenue also includes an allocation of overhead costs for facilities and shared IT-related expenses, including depreciation expense.
Indirect costs included in costs of revenue include personnel-related expenses, such as salaries, benefits, bonuses and stock-based compensation expense, of our onboarding and customer support staff. Cost of revenue also includes an allocation of overhead costs for facilities and shared IT-related expenses, including depreciation expense.
Our depreciation adjustment includes depreciation on operating fixed assets and does not include amortization of finance lease right-of-use assets on phone hardware provided to our customers. We further adjust EBITDA to exclude stock-based compensation expense, a non-cash item.
Our depreciation adjustment has included depreciation on operating fixed assets and has not included amortization of finance lease right-of-use assets on phone hardware provided to our customers. Our amortization adjustment has included the amortization of capitalized internal-use software costs. We further adjust EBITDA to exclude stock-based compensation expense, a non-cash item.
GAAP financial measures, evaluate growth trends, establish budgets and assess operating performance. These non-GAAP financial measures should not be considered by the reader as substitutes for, or superior to, the financial statements and financial 77 information prepared in accordance with U.S. GAAP. See below for a description of these non-GAAP financial measures and their limitations as an analytical tool.
GAAP financial measures, evaluate growth trends, establish budgets and assess operating performance. These non-GAAP financial measures should not be considered by the reader as substitutes for, or superior to, the financial statements and financial information prepared in accordance with U.S. GAAP.
Liquidity and Capital Resources Since inception, we have financed operations primarily through cash generated from the sale of subscriptions to our platform, and the net proceeds of issuances of equity securities.
(2) Represents amortization of capitalized internal-use software costs. Liquidity and Capital Resources Since inception, we have financed our operations primarily through cash generated from the sale of subscriptions to our platform, and the net proceeds received from issuances of our equity securities.
Cost of Revenue and Gross Margin Year Ended December 31, Change 2022 2021 Amount Percentage (dollars in thousands) Cost of revenue $ 53,276 $ 49,372 $ 3,904 8 % Gross margin 63 % 57 % The increase in cost of revenue was due primarily to an increase of $3.6 million in personnel-related costs, particularly related to merit increases and new hires, and a $1.7 million increase in direct costs to support customer usage and growth of our customer base, including cloud infrastructure costs and fees 75 paid to application providers.
Cost of Revenue and Gross Margin Year Ended December 31, Change 2023 2022 Amount Percentage (dollars in thousands) Cost of revenue $ 54,377 $ 53,276 $ 1,101 2 % Gross margin 68 % 63 % The increase in cost of revenue was due primarily to an increase of $0.6 million in personnel-related costs, particularly related to merit increases and new hires, and a $0.5 million increase in direct costs to 72 support customer usage and growth of our customer base, including cloud infrastructure costs and fees paid to application providers.
The following table shows a summary of our cash flows for the periods presented: Year Ended December 31, 2022 2021 (in thousands) Net cash used in operating activities $ (12,766) $ (20,373) Net cash used in investing activities (54,026) (9,809) Net cash provided by (used in) financing activities (7,207) 110,480 Operating Activities For the year ended December 31, 2022, cash used in operating activities was $12.8 million, primarily consisting of our net loss of $49.7 million adjusted for non-cash charges of $46.8 million, and net cash outflows of $9.9 million provided by changes in our operating assets and liabilities.
The following table shows a summary of our cash flows for the periods presented: Year Ended December 31, 2023 2022 (in thousands) Net cash provided by (used in) operating activities $ 10,221 $ (12,766) Net cash used in investing activities (7,739) (54,026) Net cash used in financing activities (13,723) (7,207) Operating Activities For the year ended December 31, 2023, cash provided by operating activities was $10.2 million, primarily consisting of our net loss of $31.0 million adjusted for non-cash charges of $49.3 million, and net cash outflows of $8.1 million provided by changes in our operating assets and liabilities.
For stock options and ESPP, the fair value is estimated using the Black-Scholes option-pricing model, and stock-based compensation is recognized in the consolidated statements of operations using the straight-line attribution method. The fair value of RSUs is based on the closing market price of our common stock on the date of the grant.
For stock options and ESPP, the fair value is estimated using the Black-Scholes option-pricing model. The fair value of RSUs is based on the closing market price of our common stock on the date of the grant.
We generate revenue primarily from recurring subscription fees charged to access our software platform and phone services, including recurring hardware fees. These recurring revenues accounted for 95% and 94% of our revenue for the years ended December 31, 2022 and 2021, respectively.
We generate revenue primarily from recurring subscription fees charged to access our platform, which also include recurring hardware fees. These recurring revenues accounted for 92% and 95% of our revenue for the years ended December 31, 2023 and 2022, respectively.
These cash outflows were partially offset by $1.3 million in proceeds received from employee stock option exercises, and proceeds of $0.9 million received from our employee stock purchase plan.
We also paid $0.7 million in offering costs related to our IPO in November 2021. These cash outflows were partially offset by $1.3 million in proceeds received from employee stock option exercises, and proceeds of $0.9 million received from our employee stock purchase plan.
As and to the extent in-person events and conferences continue to return to pre-pandemic levels of activity, we expect that our marketing expenses will increase compared to 2022.
We expect that our sales and marketing expenses will increase and continue to be our largest operating expense for the foreseeable future as we grow our business. As and to the extent in-person events and conferences continue to return to pre-pandemic levels of activity, we expect that our sales and marketing expenses will continue to increase compared to 2023.
Recently Adopted Accounting Pronouncements See the sections titled “Basis of Presentation and Summary of Significant Accounting Policies—Accounting Pronouncements Adopted” and “—Accounting Pronouncements Pending Adoption” in Note 2 to our consolidated financial statements for more information.
Recently Adopted Accounting Pronouncements For more information, see the sections titled “Basis of Presentation and Summary of Significant Accounting Policies—Accounting Pronouncements Adopted” and “—Accounting Pronouncements Pending Adoption” in Note 2 of our consolidated financial statements in Part II, Item 8, "Financial Statements and Supplementary Data" in this Annual Report on Form 10-K.
Following this change, our customers now directly engage with third-party independent contractors to configure hardware, install the software and assist with upgrades, for which we do not derive any revenue.
Our customers may directly engage with third-party independent contractors to configure hardware, install the software and assist with upgrades, for which we do not derive any revenue. Cost of Revenue Cost of revenue consists of costs related to providing our platform to customers and costs to support our customers.
Of the total increase, approximately $15.0 million, or 57%, was attributable to new customer locations acquired during the year ended December 31, 2022, and $11.2 million, or 43%, was attributable to existing customer locations under subscription as of December 31, 2021. Customer locations totaled 27,193 and 23,831 as of December 31, 2022 and 2021, respectively.
Of the total increase, approximately $19.1 million, or 67%, was attributable to new customer locations acquired during the year ended December 31, 2023, and $9.2 million, or 33%, was attributable to existing customer locations under subscription as of December 31, 2022. Customer locations totaled 31,002 and 27,193 as of December 31, 2023 and 2022, respectively.
In August 2021, we amended our agreement with SVB to increase the revolving line of credit from $10.0 million to $50.0 million. The total borrowing capacity is subject to reduction should we fail to meet certain metrics for recurring revenue and customer retention.
Silicon Valley Bank Credit Facility In August 2021, we established a revolving line of credit with Silicon Valley Bank (“SVB”) allowing for total borrowing capacity up to $50.0 million. The borrowing capacity is subject to reduction should we fail to meet certain metrics for recurring revenue and customer retention.
Year Ended December 31, 2022 2021 (dollars in thousands) Net cash used in operating activities $ (12,766) $ (20,373) Net cash used in investing activities $ (54,026) $ (9,809) Net cash provided by (used in) financing activities $ (7,207) $ 110,480 Free cash flow $ (15,893) $ (30,182) Net cash used in operating activities as a percentage of revenue (9) % (18) % Free cash flow margin (11) % (26) % Net loss $ (49,738) $ (51,690) Adjusted EBITDA $ (25,692) $ (33,271) Free Cash Flow and Free Cash Flow Margin We define free cash flow as net cash used in operating activities, less purchases of property and equipment and capitalized internal-use software costs, and free cash flow margin as free cash flow as a percentage of revenue.
Year Ended December 31, 2023 2022 (dollars in thousands) Net cash provided by (used in) operating activities $ 10,221 $ (12,766) Net cash used in investing activities $ (7,739) $ (54,026) Net cash used in financing activities $ (13,723) $ (7,207) Free cash flow $ 6,531 $ (15,893) Net cash provided by (used in) operating activities as a percentage of revenue 6 % (9) % Free cash flow margin 4 % (11) % Net loss $ (31,031) $ (49,738) Adjusted EBITDA $ (7,846) $ (27,203) Free Cash Flow and Free Cash Flow Margin We define free cash flow as net cash provided by (used in) operating activities, less purchases of property and equipment and capitalized internal-use software costs, and free cash flow margin as free cash flow as a percentage of revenue.
The main drivers of the changes in operating assets and liabilities were a $12.8 million increase in deferred contract costs, comprised primarily of sales commissions earned on new sales; and an increase in prepaid expenses of $4.1 million.
The drivers of the changes in operating assets and liabilities were a $13.3 million increase in deferred contract costs, comprised primarily of sales commissions earned on new sales, a $3.7 million decrease in operating lease liabilities from payments made, an increase to accounts receivable of $1.4 million, and an increase in prepaid expenses and other assets of $0.7 million.
General and Administrative Year Ended December 31, Change 2022 2021 Amount Percentage (dollars in thousands) General and administrative $ 42,453 $ 31,637 $ 10,816 34 % The increase in general and administrative expenses was primarily due to a $4.3 million increase in personnel related expenses, including a $2.4 million increase in payroll costs from salary adjustments and bonuses, and a $2.0 million increase in stock-based compensation.
General and Administrative Year Ended December 31, Change 2023 2022 Amount Percentage (dollars in thousands) General and administrative $ 45,652 $ 42,453 $ 3,199 8 % The increase in general and administrative expenses was primarily due to a $4.7 million increase in personnel-related expenses, particularly from additional bonus incentives, salary adjustments, and stock-based compensation.
To incentivize annual payments, we may offer pricing concessions that apply ratably over the twelve-month subscription plan. As of December 31, 2022 and 2021, approximately 41% of customer locations elected annual prepayments . Subscription revenue is recognized ratably over the term of the subscription agreement. Amounts billed in excess of revenue recognized are deferred.
As of December 31, 2023 and 2022, approximately 39% and 41% of customer locations elected annual prepayments, respectively. Subscription revenue is recognized ratably over the term of the subscription agreement. Amounts billed in excess of revenue recognized are deferred.
Key Business Metrics In addition to our financial information that is presented in accordance with the generally accepted accounting principles in the United States (“U.S. GAAP”), we review several operating and financial metrics, including the following key metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions.
GAAP”), we review several operating and financial metrics, including the following key metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions.
These amounts were partially offset by a $4.6 million increase in deferred revenue due to our prepay arrangements with our customers, and a $1.8 million increase in accrued liabilities For the year ended December 31, 2021, cash used in operating activities was $20.4 million, primarily consisting of our net loss of $51.7 million adjusted for non-cash charges of $36.0 million, and net cash outflows of $4.7 million provided by changes in our operating assets and liabilities.
These amounts were partially offset by a $4.6 million increase in deferred revenue due to our prepay arrangements with our customers, and a $1.8 million increase in accrued liabilities. Investing Activities Cash used in investing activities for the year ended December 31, 2023 was $7.7 million, primarily due to $66.2 million in purchases of short-term investments.
We have generated losses from our operations as reflected in our accumulated deficit of $231.6 million as of December 31, 2022 and negative cash flows from operating activities for the 2022, 2021, and 2020 fiscal years.
We have generated losses from our operations as reflected in our accumulated deficit of $262.7 million as of December 31, 2023 and, prior to 2023, have generated negative cash flows from operating activities.
Sales and Marketing Year Ended December 31, Change 2022 2021 Amount Percentage (dollars in thousands) Sales and marketing $ 65,378 $ 58,244 $ 7,134 12 % The increase in sales and marketing expenses was primarily attributable to an increase of $7.0 million in personnel-related expenses driven largely by compensation adjustments, including increases to salaries, sales commissions, and stock-based compensation.
Sales and Marketing Year Ended December 31, Change 2023 2022 Amount Percentage (dollars in thousands) Sales and marketing $ 70,765 $ 65,378 $ 5,387 8 % The increase in sales and marketing expenses was attributable in part to an increase of $2.1 million in personnel-related expenses, driven largely by salary and commission plan adjustments, and stock-based compensation.
Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition, results of operations, and cash flows.
Financial Statements and Supplementary Data” of this Annual Report on Form 10-K, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition, results of operations, and cash flows.
Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on March 23, 2022, for year-over-year comparisons of the results of operation between the year ended December 31, 2021 and December 31, 2020 as well as discussion of 2020 performance metrics and cash flow activity, all of which are incorporated herein by reference..
Securities and Exchange Commission (“SEC”) on March 16, 2023, for year-over-year comparisons of the results of operation between the year ended December 31, 2022 and December 31, 2021 as well as a discussion of 2021 performance metrics and cash flow activity, all of which are incorporated herein by reference.
We are required to pay 81 an annual fee of $0.13 million beginning on the effective date of the agreement, and continuing on the anniversary of the effective date.
We have made no additional draws on the line of credit since the finalization of our agreement with SVB. We are required to pay an annual fee of $0.1 million beginning on the effective date of the agreement, and continuing on the anniversary of the effective date.
Accordingly, the majority of our research and development expenses result from employee-related costs, including salaries, benefits, bonuses, stock-based compensation and costs associated with technology tools used by our engineers. We expect that our research and development expenses will increase as our business grows, particularly as we incur additional costs related to continued investments in our platform and products.
Our platform is software-driven, and its research and development teams employ software engineers in the continuous testing, certification and support of our platform and products. Accordingly, the majority of our research and development expenses result from employee-related costs, including salaries, benefits, bonuses, stock-based compensation and costs associated with technology tools used by our engineers.
We had $34.1 million of deferred revenue recorded as a current liability as of December 31, 2022. This deferred revenue will be recognized as revenue when all of the revenue recognition criteria are met.
Deferred revenue consists of the unearned portion of billed fees for our subscriptions, which is recorded as revenue over the subscription term. We had $38.9 million of deferred revenue recorded as a current liability as of December 31, 2023. This deferred revenue will be recognized as revenue when all of the revenue recognition criteria are met.
As of December 31, 2022, our principal sources of liquidity were cash held as deposits in financial institutions and cash equivalents consisting of highly liquid investments in money market securities of $62.0 million, as well as $51.3 million in other short-term investments comprised primarily of treasury and commercial paper instruments.
As of December 31, 2023, our principal sources of liquidity were cash held as deposits in financial institutions and cash equivalents consisting of highly liquid investments in money market securities of $50.8 million, as well as $58.1 million in other short-term investments comprised primarily of treasury and commercial paper instruments. 76 A substantial source of cash inflow from operating activities is our deferred revenue, which is included on our consolidated balance sheets as a liability.
We assess our liquidity primarily through our cash on hand as well as the projected timing of billings under contract with our paying customers and related collection cycles. We believe our current cash, cash equivalents and marketable securities will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months.
We assess our liquidity primarily through our cash on hand as well as the projected timing of billings under contract with our paying customers and related collection cycles.
In connection with this transaction, we drew down an additional $6.0 million from the line of credit resulting in a total outstanding balance of $10.0 million. We have made no additional draws or repayments on the line of credit since the finalization of our agreement with SVB.
In connection with our 2021 agreement with SVB, a previously outstanding $4.0 million note payable was converted to a deemed advance on the line of credit, and we drew down an additional $6.0 million from the line of credit resulting in a total outstanding balance of $10.0 million.
The increase in other income is due to additional earnings generated on capital raised in our initial public offering, which was invested in market securities and other short-term investments, and to a lesser extent a rise in average interested rates over the period.
The increase in interest income is due to interest generated on our money market securities. The increase in other income (expense), net is largely due to realized gains on our short-term investments and, to a lesser extent, a rise in average interest rates over the period contributed to increases both interest and other income.
Our actual results could differ from these estimates. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected.
To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected. We believe that of our significant accounting policies, which are described in Note 2 to our consolidated financial statements included in “Part II, Item 8.
We derive our annual NRR as of any date by taking a weighted average of the monthly net retention rates over the trailing twelve months prior to such date. 69 Dollar-Based Gross Retention Rate We believe our dollar-based gross retention rate, or GRR, provides insight into our ability to retain our customers, allowing us to evaluate whether the platform is addressing customer needs.
We derive our annual NRR as of any date by taking a weighted average of the monthly net retention rates over the trailing twelve months prior to such date.
(2) Represents amortization of capitalized internal-use software costs. Components of Results of Operations Revenue We generate revenue primarily from recurring subscription fees charged to access our software and phone services platform, and recurring embedded lease revenue on hardware provided to customers.
Components of Results of Operations Revenue We generate revenue primarily from recurring subscription fees charged to access our software and phone services platform, and recurring embedded lease revenue on hardware provided to customers. The majority of these subscription arrangements have contractual terms of month-to-month, with a small minority portion having contractual terms of 1-3 years.
We expect that our general and administrative expenses will increase in absolute dollars as our business grows but will decrease as a percentage of our revenue over time. Interest Expense Interest expense results primarily from interest payments on our borrowings and interest on finance lease obligations.
We expect that our general and administrative expenses, including expenses for insurance, investor relations and fees for professional services, will increase in absolute dollars as our business grows but will decrease as a percentage of our revenue over time. Interest Income Interest income consists primarily of interest earned on our cash, cash equivalents, and short-term investments.
General and Administrative General and administrative expenses consist primarily of personnel-related expenses for our finance, legal, human resources, facilities and administrative personnel, including salaries, benefits, bonuses and stock-based compensation.
In addition, research and development expenses that qualify as internal-use software development costs are capitalized and the amount capitalized may fluctuate significantly from period to period. General and Administrative General and administrative expenses consist primarily of personnel-related expenses for our finance, legal, human resources, facilities and administrative personnel, including salaries, benefits, bonuses and stock-based compensation.
The table below sets forth the revenue and associated cost of revenue for our recurring subscription and payment processing services, as well as for our onboarding services and phone hardware: Year Ended December 31, 2022 2021 (dollars in thousands) Subscription and payment processing: Revenue $ 136,592 $ 108,841 Cost of revenue (35,008) (29,452) Gross profit $ 101,584 $ 79,389 Gross margin 74 % 73 % Onboarding: Revenue $ 1,288 $ 3,687 Cost of revenue (9,612) (10,942) Gross profit $ (8,324) $ (7,255) Gross margin (646) % (197) % Hardware: Revenue $ 4,237 $ 3,343 Cost of revenue (1) (8,656) (8,978) Gross profit (1) $ (4,419) $ (5,635) Gross margin (104) % (169) % ______________ (1) Cost of revenue related to hardware represents depreciation of phone hardware over a 3-year useful life. 67 Factors Affecting Our Performance Our historical financial performance has been, and we expect our financial performance in the future to be, driven by our ability to attract new customers, retain and expand within our customer base, add new products and expand into new industry verticals.
The table below sets forth the revenue and associated cost of revenue for our recurring subscription and payment processing services, as well as for our onboarding services and phone hardware: 65 Year Ended December 31, 2023 2022 (dollars in thousands) Subscription and payment processing: Revenue $ 162,715 $ 136,592 Cost of revenue (38,194) (35,008) Gross profit $ 124,521 $ 101,584 Gross margin 77 % 74 % Onboarding: Revenue $ 3,232 $ 1,288 Cost of revenue (8,710) (9,612) Gross profit $ (5,478) $ (8,324) Gross margin (169) % (646) % Hardware: Revenue $ 4,521 $ 4,237 Cost of revenue (1) (7,473) (8,656) Gross profit (1) $ (2,952) $ (4,419) Gross margin (65) % (104) % ______________ (1) Cost of revenue related to hardware represents depreciation of phone hardware over a 3-year useful life.
Research and Development Year Ended December 31, Change 2022 2021 Amount Percentage (dollars in thousands) Research and development $ 30,714 $ 27,009 $ 3,705 14 % The increase in research and development expenses was due primarily to an increase of $2.5 million in personnel-related costs largely from stock-based compensation and other salary adjustments, and a $0.4 million increase in allocated overhead as a result of increased overall costs to support the growth of our business and related infrastructure.
Research and Development Year Ended December 31, Change 2023 2022 Amount Percentage (dollars in thousands) Research and development $ 34,040 $ 30,714 $ 3,326 11 % The increase in research and development expenses was due to an increase of $3.3 million in personnel-related expenses, largely from salary adjustments and stock-based compensation, for employees enhancing our platform infrastructure and developing new product offerings.
The majority of these subscription arrangements have contractual terms of month-to-month, with a small minority portion having contractual terms of 1-3 years. Subscription and hardware fees are prepaid and customers may elect to be billed monthly or annually, with the majority of our revenue coming from those that elect to be billed monthly.
Subscription and hardware fees are prepaid and customers may elect to be billed monthly or annually, with the majority of our revenue coming from those that elect to be billed monthly. To incentivize annual payments, we may offer pricing concessions that apply ratably over the twelve-month subscription plan.
These payment transactions are generally for services rendered at customers’ business location via credit card terminals or through several card-not-present modalities, including “Text-to-Pay” functionality. As we act as an agent in these arrangements, revenue from payments services is recorded net of transaction processing fees and is recognized when the payment transactions occur.
In addition, we provide payment processing services and receive a revenue share from a third-party payment facilitator on transactions between our customers that utilize our payments platform and their 68 end consumers. These payment transactions are generally for services rendered at customers’ business location via credit card terminals or through several card-not-present modalities, including “Text-to-Pay” functionality.
However, we expect that our research and development expenses will remain fairly consistent or slightly decrease as a percentage of our revenue over time. In addition, research and development expenses that 72 qualify as internal-use software development costs are capitalized and the amount capitalized may fluctuate significantly from period to period.
We expect that our research and development expenses will increase as our business grows, particularly as we incur additional costs related to continued investments in our platform and products. However, we expect that our research and development expenses will remain fairly consistent or slightly decrease as a percentage of our revenue over time.
The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances.
We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.
We recognize 80 stock-based compensation expense over the requisite service period, which is the vesting period of the respective awards. Forfeitures are accounted for when they occur. Prior to our initial public offering, the fair value of our common stock on the date of the grant was determined based on independent third-party valuations as there was no public market.
Prior to our IPO, the fair value of our common stock on the date of the grant was determined based on independent third-party valuations as there was no public market.
Amounts outstanding on the line will accrue interest at the greater of prime rate plus 0.25% and 3.5%. As part of our agreement with SVB, the $4.0 million note payable was converted to a deemed advance on the line of credit and was deemed a debt modification.
Amounts outstanding on the line will accrue interest at the greater of prime rate plus 0.25% and 3.5%.
We also collect non-recurring installation fees for onboarding customers, the revenue for which is recognized upon completion of the installation.
As we act as an agent in these arrangements, revenue from payments services is recorded net of transaction processing fees and is recognized when the payment transactions occur. We also collect non-recurring installation fees for onboarding customers, the revenue for which is recognized upon completion of the installation.
Financing Activities Cash used in financing activities for the year ended December 31, 2022 was $7.2 million, primarily due to $8.7 million from principal payments made on finance lease obligations. We also paid $0.7 million in offering costs related to our initial public offering in November 2021.
These cash outflows were partially offset by $12.9 million in proceeds received from employee stock option exercises, and proceeds of $1.3 million received from our employee stock purchase plan. Cash used in financing activities for the year ended December 31, 2022 was $7.2 million, primarily due to $8.7 million from principal payments made on finance lease obligations.
Additionally, dues and subscription expenses increased 76 by $1.0 million, bad debt expense increased by $0.5 million, and $0.3 million increase in miscellaneous licenses, taxes and fees.
We also experienced increases of $0.5 million in miscellaneous taxes and fees, $0.4 million in bad debt expense, and $0.3 million in dues and subscription costs.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeIn future periods, we will continue to evaluate our investment policy in order to ensure that we continue to meet our overall objectives. As of December 31, 2022, we had a $10.0 million outstanding balance on our credit facility with an interest rate of the greater of Prime Rate plus 0.25% or 3.50%.
Biggest changeIn future periods, we will continue to evaluate our investment policy in order to ensure that we continue to meet our overall objectives. Our credit facility bears an interest rate of the greater of Prime Rate plus 0.25% or 3.50%. Increases in Prime Rate would increase the interest rate on any borrowings.
As the impact of foreign currency exchange rates has not been material to our historical operating results, we have not entered into derivative or hedging transactions, but we may do so in the future if our exposure to foreign currency becomes more significant. 83
As the impact of foreign currency exchange rates has not been material to our historical operating results, we have not entered into derivative or hedging transactions, but we may do so in the future if our exposure to foreign currency becomes more significant. 81
Increases in Prime Rate would increase the interest rate on these borrowings. Foreign Currency Exchange Risk The vast majority of our customer subscription agreements are denominated in U.S. dollars, with a small number of subscription agreements denominated in Canadian dollars.
As of December 31, 2023, we had no outstanding borrowing balance on our credit facility. 80 Foreign Currency Exchange Risk The vast majority of our customer subscription agreements are denominated in U.S. dollars, with a small number of subscription agreements denominated in Canadian dollars.

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