WEAV - NYSE

Greetings, and welcome to the Weave Communications Q4 and Full Year 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to introduce our host, Mark McReynolds, Head of Investor Relations. Thank you, Mark. You may begin.

Thank you, Matt. Good afternoon, and welcome to Weave's Fourth Quarter and Fiscal Year 2024 Earnings Call. With me on today's call are Brett White, CEO; Alan Taylor, CFO; and Jason Christiansen, VP of Finance. During the course of this conference call, we will make forward-looking statements regarding the anticipated performance of our business. These forward-looking statements are based on management's current views and expectations entail certain assumptions made as of today's date and are subject to various risks and uncertainties described in our SEC filings. We've disclaimed any obligation to update or revise any forward-looking statements. Further, on today's call, we will discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results. Unless otherwise noted, all numbers we talk about today will be on a non-GAAP basis. A reconciliation to comparable GAAP metrics can be found in today's earnings release, which is available on our website and as an exhibit to the Form 8-K furnished with the SEC before this call, as well as the Earnings Presentation on our earnings -- on our Investor Relations website at investors.getweave.com. And with that, I will now turn the call over to Brett.

Thank you, Mark, and thanks to everyone joining us today. 2024 was a year of remarkable progress and transformation for Weave. I'm excited to share key financial and strategic highlights from the past year, as well as our vision for 2025. Weave exists to create better healthcare experiences for patients and the practices that serve. Our goal is to make every interaction with a healthcare provider simple, seamless, and positive. For SMB healthcare practitioners managing a small healthcare business while delivering quality patient care is challenging. Weave streamlined operations, making it easier for providers to focus on what matters most caring for their patients. Our vision is to elevate the patient experience through a unified platform that improves business operations, enabling healthcare professionals to focus on patient care and achieve their dreams. Instead of a fragmented set of tools, Weave offers an AI-powered solution that integrates communication, scheduling, forms, payments and more. Through authorized and supported integrations with leading practice management systems, we unlock deeper functionality without adding complexity. These integrations enable practices to automate and personalize patient communication while embedding fintech solutions such as Text-to-Pay, online bill pay and payment plans directly into the communication workflows. By streamlining payment processes, Weave accelerates collections, reduces write-offs and improves practice profitability. Technology isn't just about efficiency and revenue growth for healthcare practices. It's a key factor in attracting and retaining top talent. 61% of practitioners agree that hiring high-quality employees is easier when their practice leverages the latest office technology, and almost 70% say that retaining great staff is significantly improved with modern tools in place. Investing in the right technology enhances the workplace experience and reduces burnout. Weave's platform gives practices a competitive edge not just in patient engagement and payments, but in building strong, successful teams. By helping healthcare practices attract, engage and retain patients, Weave enabled providers to focus on what they do best, delivering excellent care while growing their business. For many, their practices is a lifelong dream and Weave is here to help them achieve it by simplifying operations, reducing burdens and empowering them to build thriving patient-centered practices. The dental, optometry, veterinary and specialty medical verticals we serve give us access to an addressable market that we believe exceeds $7 billion in the US alone. Before Alan shares more details about our financial performance, I want to share a few key highlights. In Q4 '24, we delivered another outstanding quarter with strong revenue growth of nearly 19% and continued improvements of both profitability and free cash flow. Gross margins improved again for the 12th consecutive quarter, reaching 72.6%. Q4 also marked our second consecutive quarter of positive operating income, resulting in full-year profitability for the first time in Weave's history. We achieved $6.1 million in free cash flow in Q4, more than doubling year-over-year and representing a free cash flow margin of 11%. We produced free cash flow of $10.4 million for the year, representing nearly 60% year-over-year growth. Finally, we're very pleased to have exceeded the high end of the revenue and profitability guidance we gave a year ago. These results underscore the strong market demand for our solutions, driven by the disciplined execution and a clear commitment to efficient growth. At the start of 2024, we identified several key focus areas to open up and expand new vectors of growth, including expanding into specialty medical verticals, strengthening integration partnerships, enhancing solutions for multi-location practices, elevating payments as a core component of our product, and delivering AI-powered innovations. Today alongside our financial performance, I'm excited to share the significant progress we've made in each of these areas. In 2024, we laid the groundwork for success and we're already seeing strong early traction. As a result in 2025, we will be expanding these initiatives and investing to further accelerate momentum. Let me provide some additional color into each of these key growth factors. In 2024, we identified a set of specialties within the SMB medical vertical as strategic expansion opportunities. Revenue from specialty medical practices led by primary care, med spa, plastic surgery, and physical therapy grew at twice the rate of the overall company revenue in 2024. Specialty medical remained our fastest-growing market segment in Q4, with more active medical locations added than in any previous period. Our momentum in this space was fueled by the release of new authorized integrations with practice management software including eClinicalWorks, Athenahealth, DrChrono, and NextGen, expanding our reach and deepening the value of our platform. The SMB medical market in the US spans 29 specialties representing an addressable opportunity that is more than twice the size of the dental, optometry, and veterinary markets combined. With less than 1% market penetration in this vertical, we are only beginning to unlock its vast potential. We began 2025 with the launch of authorized integrations with Prompt and PracticeFusion, further expanding our presence in the medical vertical. At the same time, we are expanding our go-to-market efforts by broadening our target specialty, increasing demand generation investments, and advancing sales enablement programs. These initiatives will accelerate our growth in high-potential medical specialties and solidify Weave's position as a category leader while expanding our market share. Turning to partnerships, in early 2024, we launched a dedicated partnerships team led by an experienced executive to drive new growth opportunities. This investment expanded our serviceable market by over 100,000 locations through new and enhanced integrations across all of our vertical markets. Our strategic partnership with Patterson Dental announced in June significantly broadened our market reach through co-marketing and co-selling efforts resulting in increased bookings and payments revenue in the latter half of 2024. Additionally, our commercial and integration partnership with Prompt, which launched this month, marks a major milestone in our expansion into the physical therapy market. Since launch, we have actively driven adoption through co-marketing efforts, engaging both shared customers and new prospects. To build on this momentum, we are launching a dedicated partner sales team in 2025 that will work closely with our commercial partners. By embedding within their go-to-market strategy, we aim to deepen collaboration, increase engagement, drive referrals and accelerate revenue growth. Given the strong early success of our partnership strategy, we will continue to invest in 2025, strengthening both sales and marketing resources to further expand our market presence and accelerate growth. Another key focus of our strategy this year is expanding our mid-market customer base. In Q2 of '24, we launched an enterprise solution on our platform to meet the unique needs of multi-location practices. We added a proven sales leader in Q3 to accelerate our progress and in Q4, Affordable Care, the nation's largest dental service organization for tooth replacement, chose Weave as its platform of record for patient engagement and payments. In 2025, we are expanding our mid-market sales capacity and increasing our marketing investments. These efforts will deepen engagement and expansion in existing accounts, drive pipeline growth and position Weave for sustained success in this segment. In line with our other focus areas, we are seeing strong traction in our payments business. In 2024, we appointed a General Manager of Payments and doubled the size of our operations in engineering teams. We integrated payments with some of the largest practice management systems in our space including Open Dental and Patterson's Eaglesoft and Fuse to deliver more streamlined communication and collection workflows for our customers. We enhanced our payments product suite with payment plans and payment reminders which help improve case acceptance and reduce outstanding accounts receivables for our customers. Timely payments are crucial for the financial health of any practice and Weave Payments is designed to make that easier. 74% of practices believe they get paid faster by offering Text-to-Pay and 62% say it helps prevent overdue invoices. Affordable Care selected the Weave Enterprise Solution to improve collections and reduce write-offs with integrated digital payment solutions like Text-to-Pay. By leveraging mobile terminals, flexible payment options and embedding payments into patient communication workflows, Affordable Care practices using Weave have seen significant revenue cycle management improvements. In 2025, payments will be a core element of our product and go-to-market strategy. Payments are now seamlessly integrated into our initial sale, reducing time to value for our customers. We are also investing in dedicated payments team focused on adoption and increasing usage within our customer base. We believe that these resources will result in a scalable, resilient payments business that is well-positioned to drive continued growth in the coming years. Another important aspect of our strategy is AI. Last year, we made meaningful strides in this area. We launched our AI-powered platform for both single and multi-location practices. Weave AI is embedded throughout our platform to help streamline communications between a practice and its patients through review responses, email marketing creation, message tagging and prioritization, and voicemail transcriptions. In Q4, we announced our AI-powered Call Intelligence product. This revolutionary technology transforms how healthcare practices analyze and leverage call data, enabling them to elevate patient experiences, boost operational efficiencies, and unlock new revenue streams. 88% of practices say technology is crucial to delivering a great patient experience. In 2025, we will continue advancing AI-powered solutions to transform patient engagement and optimize complex practice operations. By automating workflows and enhancing communication, Weave is leading the way in intelligent automated healthcare solutions, making our platform an essential tool for the modern healthcare practice. In summary, in 2024 we laid the foundation for expansion achieving early success across multiple growth areas. In 2025, we will continue making disciplined strategic investments where we see the greatest opportunity and a clear path to winning new business; medical vertical markets, mid-market, partnerships, payments, and AI. The traction we gained in 2024 reinforces our confidence that these investments will strengthen our market leadership and unlock new revenue streams. With a strong team, a clear vision, and proven ability to execute, Weave is well-positioned to accelerate growth and drive long-term success. Finally, Weave continues to earn recognition for our dedication to delivering exceptional customer experiences and the outstanding performance of our team and our platform. In G2's Winter 2025 Report, Weave ranked first of 23 categories and was once again named the leader in the grid for patient relationship management. Weave also selected as an Inc. Power Partner Award winner. We are committed to fostering an exceptional workplace and Weave was named a Top Workplaces Culture Excellence winner in 2024 for innovation, employee appreciation, employee well-being, leadership, and compensation and benefits. In closing, I'm deeply proud of the Weave team's accomplishments over the past year. We achieved robust top-line growth, advanced profitability, and introduced groundbreaking products that address the evolving needs of our customers. These results highlight our unwavering focus on delivering value and driving innovation. As I sit here today, I am more confident in our opportunities and outcomes than I was just 12 months ago. A heartfelt thank you to our customers, partners, team members and shareholders for their continued trust and support. Before I turn the call over, I'd like to take a moment to address the announcement we made earlier today. Our Chief Financial Officer, Alan Taylor, will be retiring at the end of this quarter. As part of a planned succession, Jason Christiansen, Weave's Vice President of Finance, will be replacing Alan as Weave's new Chief Financial Officer and will join the executive team upon Alan's retirement. I would like to thank Alan for his significant contributions to the company. During his nine years at Weave, he built our finance function and guided Weave along the journey from startup to successful public company. I want to express my gratitude for his partnership and for his commitment to ensuring smooth transition before he embarks on his well-deserved retirement. I've had the privilege of working closely with Jason throughout his four-year tenure at Weave. His extensive experience in our business, understanding of our strategy and deep insights into our customers make him the ideal successor. Having, personally, been served as the CFO for over 20 years, I'm confident in Jason's ability to continue to scale Weave and drive continued growth and performance for many years to come. With that, I'll turn the call over to Alan.

Thanks, Brett, and good afternoon, everyone. It's been a great privilege to serve as the CFO at Weave for the last nine years and to work with such an incredible team. I'm looking forward to the next stage in my life and I have enormous confidence in Jason as he takes the reins as CFO. Jason's extensive finance experience and leadership were integral to our IPO and last few years business transformational growth. In addition to leading financial planning and analysis, Jason has played a central role in driving strategic corporate initiatives including business technology and business intelligence, and developing our payment business strategy in advance of hiring a dedicated General Manager. Jason's deep understanding of Weave, his alignment with our mission and his embodiment of our core values make him well-suited for this role. Jason will join us for Q&A after my prepared remarks. Starting with Q4, we had an excellent quarter and continued to execute well across the board. In Q4, we delivered revenue of $54.2 million reflecting nearly 19% growth year-over-year, exceeding the midpoint of our guidance by $1.1 million or 2% [indiscernible]. Revenue growth was driven by new customer acquisitions, payments, upsells and ongoing momentum in our specialty medical verticals which continues to grow rapidly. Notable successes were achieved among the primary care, med spa, plastic surgery and physical therapy verticals. Our net revenue retention rate was 98% in Q4, up from 95% last year. This reflects the positive contributions from [indiscernible] customers and price adjustments for additional functionality made to select customer cohorts and products throughout 2024. Gross revenue retention, or GRR, remained strong and rounded to 91% in Q4, which is a minor decrease of 20 basis points from Q3, 2024, and 30 basis points from a year ago. Our GRR has consistently ranged between 91% and 94% over the past four years, positioning us among the top performers in SMB retention. Turning to operating results, I'll be referring to non-GAAP figures unless otherwise stated. In Q4, gross margin improved to 72.6%, representing a 290 basis point increase year-over-year and our 12th quarter of sequential improvement. Our total operating expenses as a percent of revenue improved to 69% this quarter, down from 73% in Q4 of 2023, reflecting disciplined cost management and operational efficiencies. We saw the biggest improvement in general and administrative expenses, which were $9.3 million or 17% of revenue, down from 19% of revenue last year. Sales and marketing expenses came in at $20 million or 37% of revenue, a slight decrease from 38% in the same period last year. Research and development expenses for the quarter totaled $8.3 million, representing 15% of revenue, down from 16% of revenue a year ago. These improvements highlight focus on efficiency and productivity. In Q4, we achieved our second consecutive quarter of non-GAAP operating income with $1.8 million of profit, a $3.5 million improvement compared to last year, and $800,000 higher than the top end of our guidance. The corresponding operating income margin of 3.3% is a significant improvement to the operating loss margin of 3.8% last year. Our net income was $2.4 million or $0.03 per share in the fourth quarter based on 72.9 million weighted average shares outstanding, reflecting a $3.2 million improvement year-over-year. Adjusted EBITDA for Q4 was $2.6 million, improving from $3.4 million year-over-year due to revenue growth and operating efficiencies. Turning to the balance sheet and cash flow, we ended the year with $99.1 million in cash and short-term investments, up from $98.2 million last quarter. Cash flow generated from operations in Q4 was $6.7 million, a $2.9 million improvement year-over-year. Free cash flow was $6.1 million in the fourth quarter, representing year-over-year growth of 109%. We're particularly pleased with profitability and free cash flow progress that we made in 2024. We anticipate operating income and free cash flow will remain positive for the full year 2025, though Q1 will likely show negative free cash flow due to the timing of the payout of annual employee bonuses and certain one-time remittances. Before reviewing our guidance, I'll provide a brief recap of the full-year results. In 2024, total revenue grew 20% to $204.3 million. The Subscription and payment revenue grew 21% up from 19% last year. Our gross margin improved to 71.9% up from 68.7% last year. Our operating margin improved to a positive 0.4% as we delivered the first year of operating income in company history, a significant improvement over the negative 6.8% margin in 2023. We made substantial progress on free cash flow ending the year having generated $10.4 million, up from $6.5 million last year. We ended the year with nearly 35,000 customer locations on our platform, landing at 34,997, up 13% year-over-year. We are pleased with our progress this year and would like to thank all of our team members and Weave, our customers and partners for their contributions throughout the year. I'd like to provide some color regarding our outlook for 2025. As we outlined in 2024, we continuously refine our pricing strategies to align with market dynamics and business objectives. While we will continue to make adjustments as necessary, we do not anticipate the same magnitude of price changes in 2025 as we implemented in 2024. The most significant pricing updates occurred in Q2 of 2024, making Q2 our toughest year-over-year comparison of 2025 as we lapped the effects of that cohort. However, excluding the impact of these adjustments, we anticipate growth in our core business in 2025 to exceed 2020. As Brett mentioned, we are investing in payments and AI to deliver innovative workflow-based solutions which we believe will unlock greater lifetime value and expand wallet share in the next few years. Additionally, in 2024 we launched a new platform, secured some transformative partnerships and made great strides in our mid-market business. We are still in the early stages of these opportunities and we're encouraged by the green shoots we see, but we're not assuming significant contributions in the first half of 2025 from these new vectors of growth. On the expense side, 2025 will be the first year that we will be required to comply with Section 404(b) of the Sarbanes-Oxley Act and as a result, we are expecting an increase in compliance and audit fees compared to 2024. To add more color on expenses, there are seasonal factors that result in a sequential increase in expenses in Q1, including the reset of payroll tax, benefits renewals taking effect, and the timing of the annual audit fees, which are weighted more heavily in Q1. For the first quarter of 2025, we expect total revenue in the range of $54 million to $55 million and non-GAAP operating income in the range of negative $0.7 million, positive $0.3 million. For the full year 2025, we expect total revenue to be in the range of $232 million to $237 million. We expect the range for our full-year 2025 non-GAAP operating income to be from $2 million to $6 million. We expect to have a weighted average share count of approximately 75.9 million shares for the full year. As I wrap things up in this final earnings call for me, may I express how incredibly fortunate I am to have been a part of the Weave team for nearly nine years. This last chapter of my business career started with an opportunity to work with the Founders of Weave; Brandon Rodman, Jared Rodman and Clint Berry. They are remarkable people and capable leaders and the success that we presently enjoy finds its root in their vision and determination to build something extraordinary. Brandon is one of the most fearless and optimistic people I've ever met and I'm tremendously grateful for the opportunity he gave me to work with him. Finance team is best-in-class, committed and a delight to work with the, The investors and Board members are sharp and excited, as well as being great friends and mentors. What we do at Weave is a vital part of how healthcare practitioners and their staff take care of people. Our people and our platform help them deliver a better experience for their patients. That's an important goal and it's been hugely rewarding to watch what this great Weave team has [indiscernible]. Weave been able to tap into a market with great potential, the greatest portion of which is still ahead. As for me, retirement means, I can look forward to spending more time with my sweetheart Paula, who, like every family member or loved one of those who work [indiscernible] make their own special contributions to our success through their love, sacrifice, patience and support. I'm grateful to Paula and to the extended Weave family who are such an important part of making it all happen. Paula and I look forward to spending more time together with our 16 grandchildren, so I'm fairly confident I'll have plenty to keep me busy. Brett and this great management team that is in place will not miss a beat if they're joined by Jason, who has already won their respect because they have witnessed his capacity and performance for four years. Looking ahead, I'm very confident that we will continue to capitalize on new opportunities because the entire organization is passionate about the mission and will be disciplined in executing that mission. Weave is exceptionally well-positioned to grow and succeed in the years to come. With that, I'll turn the call over to the operator for Q&A.

Great, thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] First question here is from Alex Sklar from Raymond James. Please go ahead.

Great, thank you. Alan, congratulations on the retirement and Jason on the new role. First question for me is just on the 2025 guide. It implies kind of a step back in the rule of framework. I know we saw something similar with how you approach the 2024 outlook, but could you just provide some more color on what you're factoring from an incremental investment perspective and when we could expect those to contribute to growth?

Alex, thanks. Hey, I'll start. So we made it clear last year, this year, and going forward that our bias is going to be towards growth. And so the investment profile, with all of the things that we have in terms of the partnerships, the new markets we're going into, especially medical markets, our investments in AI, that -- those are the areas where we will continue to invest so that we can lay the groundwork for just continuing growth. And so that's, I think, fairly consistent with what we've been saying all along in terms of the way that we'll plan on going forward with growth.

Yeah, Alex, maybe I'll add to that. So I know the word investment can be a scary word sometimes when giving guidance. So let me just give a little color. In each of these vectors of growth where we're really starting to see the green shoots growing in order to really capture the opportunity to accelerate them, each of them needs a team. And so instead of having the existing team turn out, work on partnerships or work on payments, we're actually setting up dedicated teams. They're small teams to get us started and to grow. So we're not going crazy. We're just making very targeted small team investments in each one of these growth vectors to really get the kind of traction that we think we can. But these are really important multi-year growth opportunities. And so we're seeding those now with some teams to really get them going. And we mentioned, we're going to be more -- deliver more profit next year than we did this year. We're going to see growth accelerate in the second half. So don't be scared by the investment words. It's just a few teams, but we're levering those up this quarter to really to hit the end of the year, to hit the second half of the year at stride.

Okay, thank you both for that color. Just one, maybe follow up then on one of those growth vectors payments. So you've had a new Head of Payments in place now it's top priority. You're talking about seeding more of the team there. Can you just kind of update us on where that solution stands in terms of how accretive it's been to growth? And just given some of the learnings from Patterson, how do you view the payments opportunity for 2025 versus '24?

Yeah, so we're -- the key for us for payments is getting the workflow payments integrated into the office workflow. And so much of this year was hiring ahead of payments. Actually, Jason was our Acting Head of Payments for the first half of the year and then we hired a new Head of Payment. So, they've really been assembling the team, put together the [BRICS] (ph) team. We've doubled the size of the engineering, we've built in some new integration flows. We're working with ACI to bring their payments over to our platform. So I think we've got all the pieces in place and now the rest of the work really is building out the workflows. And then the other major change we've made this year is we've changed the sales compensation model. So starting January, all of our sales account executives now have a payments number. They all get paid on closing payments and they also get paid on payment residuals. So we've changed the go-to-market model, we've changed the sales model. We've got many of the integrations done. There's still work to be done. I think we'll be working on the workflow for quite a while, but we make incremental improvements there. We're getting traction with new ads, we're getting traction with partners. So I would say, everything is proceeding nicely and it will definitely continue to have an accretive effect in '25 for both our growth and our margins.

All right. Great. Thank you both.

Our next question is from Brent Bracelin from Piper Sandler. Please go ahead.

Good afternoon, Alan. It's been a pleasure working with you. Best of luck in retirement. 16 grandchildren, sounds like you're going to remain pretty active. Jason, congrats on the new role. Much deserved. Maybe, Alan, we'll double-click into the guide. If I go back your initial guide for '23 was 11%, actual was 19.9%. 2024 initial guide was 15%, actual growth 19.9%. Are you trying to flag the 15% growth as some near-term challenges you see to growing in 2025 or should we think about the guide as kind of a typical conservative amount of conservatism in the guide this year? Just trying to parse that out if there's something specific you're trying to flag to us or if this is kind of the normal cadence of guidance you give. Thanks.

So, Brent, first of all, thank you very much. It's been a pleasure to work with you as well. The only thing that I would point out is what we mentioned in the prepared remarks, which is that we do have a difficult comp in Q2, but other than that, this is the same philosophy that we've been using. And so I appreciate that setup that is very germane to this conversation in terms of the way that we look at the growth. The only other thing that would add is the green shoots that we've been talking about, these are pretty exciting things. I may not be around to see them, but I'm very convinced that we've got some opportunity for things that we will have a conviction about as this year progresses. But I would read it as status quo with respect to the philosophy behind the guide with one-quarter [difference] (ph) compared to Q2.

Got it. Very clear. So the Q2 compare is the only kind of thing kind of factoring into the guide. That's super helpful color. Brett, for you. You're clearly excited by these four or five new initiatives, specialty medical, partner of payments. When do you think those can start to actually drive an acceleration in growth? I ask because we've had good stabilization in growth the last two years. When do you think the green shoots could be material enough to drive actually an acceleration in top line?

Yeah. Thank you, Brent. So in some areas, it's already happening, but you kind of can't see it yet. I think one of the points I wanted to make sure that came through is, as Alan mentioned, we're lapping our price adjustments from last year, which will happen the final quarter in Q2. And we're not planning the same level of price adjustments in our '25 guide. So absent the price increases, we believe our core business will grow faster in '25 than in '24. So I think they're already the number -- it's already showing up in the numbers in the business that we really look at. And then I think the second half is when we'll see market acceleration relative to these initiatives. Definitely on the partnership front, definitely on the multi-location front, definitely on the specialty medical front. So I think if we were able to screen through the pricing adjustments, I think you'd be seeing more of it now. But, net of all that, I think you'll see it mostly in the second half. Does that make sense?

Helpful color. Thank you. Absolutely. Thank you.

Yeah, thank you.

Next question is from Parker Lane from Stifel. Please go ahead.

Hi, guys. Thanks for taking the question. And Alan, I'll echo my congrats on the successful career environment here. Maybe the question is for Brett here. When you look at the multi-location and enterprise motion, how much of that is aimed at largely the dental vertical, where you have the biggest exposure and the history there versus the broader swath of the go-to-market motion?

I would say, currently, if you look at our pipeline and our focus areas, it's primarily dental and it's just because we've got the brand, we've got the product, we've got the partnerships with the big practice management software vendors and frankly, that's where we get the most inbound. So we've totally changed the go-to-market motion, we've totally changed the team, we're going to be changing the events we go to. So it's a major rebuild of that function and it's off to a great start. So kind of like the rest of our SMB business, we'll start in dental, get our traction there, and then move into probably other areas of DOV; Dental, Optometry and Vet, and then Specialty Medical.

Understood. And then Alan, I know you referenced the pricing increase last year impacting 2Q. When you look at some of the AI functionality you're bringing, things like call recording, et cetera, why isn't there an opportunity to take more price on those feature sets that you're bringing to the market here in 2025? Or is that something you think about in longer terms or simply just customer success and differentiating the platform?

Yeah, Parker, I think there will be the AI functionality that we're doing, we're already seeing the capability Call Intelligence, for instance, is doing well. We're seeing that uplifted. But when we're talking about price specifically just increasing the price on existing products or to existing customers, I think we're kind of separating that out a little bit. And so, we will take advantage of just some price increase this year, [indiscernible] but that does not limit what we can do on the AI products and the other upsell products that are presently being sold and will be introduced.

Can I add something to that? We also don't want to do price increases that inhibit our ability to move customers onto the new platform. But we are seeing greater adoption and higher NPS and better customer response from that platform. And we know that's something that we want to move customers towards. And so, we're trying to be very careful and cautious in how we balance those two in 2025.

Understood. Thanks for the feedback, guys.

Thanks, Parker.

Next question is from Tyler Radke from Citi. Please go ahead.

Hi, this is Kylie on for Tyler. Congratulations. Echoing the congrats for Alan on your retirement and thanks again for the question. NRR up-ticked nicely through the year. I'd just love to hear any directional comments for expectations on NRR trends for FY '25.

So NRR will continue to be fed by improvements in payments. We obviously have some NRR improvement through pricing last year. Payments is probably our strongest lever right now, but the upsells are doing well and so we've got a few vectors that can help us to improve the NRR. I think it's important for all, everybody on the call to make sure they understand, we price our offering on a location basis. And so some of the NRR and we land very heavy in the processes that we go into. And so some of the NRR we take up front as just the full features that these offices want. And yet we still have the opportunity to continue to improve as we have payment penetration within our customer base and we continue to improve the opportunities for them to take advantage of these upsell products like Call Intelligence and Insurance Verification and Bulk Texting and so on.

And just one point I would add just clarification. We measure NRR on a location basis. So we don't measure it on a logo basis. So for example, as ACI adds locations over time, that does not positively affect the ACI logo NRR per se. So I think that's a really important one to understand. So an ACI location is the same as any other and they're measured year-over-year on the individual location basis, not as a number of locations added by a logo.

Makes total sense. Thanks. And then if I could slip in one more, I'd love to hear any comments on demand trends in the quarter. And then keeping in mind that comment that you're more confident than 12 months ago, but just noticing that software revenue did have a slight decel off of 3Q. What drove the revenue upside and the incremental confidence? Thank you.

Yeah. So, at the beginning of the year, at the beginning of '24, we laid out our plan and all of our focus areas. And throughout the year, we just kept adding really good leadership, and they were tapping into these veins of opportunity and producing results. And so, lots of green shoots, lots of green lights are coming out of our kind of strategic plan for '24. So, you know, as I was preparing for our kickoff, our employee kickoff, I kind of looked at on the same stage 12 months later, how's the view from the stage? And it was just a lot better because we have a lot more vectors to pursue. And so, really the question is, how aggressively do we want to pursue them on an investment basis? So we're being measured in our investment, but we're putting full teams behind each one of these opportunities. And demand was terrific in Q4. And so, from my seat, things look pretty darn good.

And our next question is from Mark Schappel from Loop Capital Markets. Please go ahead.

Hi. Thank you for taking my question, Brett. And first of all, Alan, congrats on your retirement here. Question for you, Brett. I was wondering if -- I appreciate your comments regarding your investment priorities in the coming year with respect to the sales enablement initiatives to expand your presence in specialty companies, especially medical. Is that strategy to go deeper in the current, say, handful of sub-segments that you currently play in, or is the plan to maybe expand into other sub-segments?

So, kind of the way the model works is we look at demand, we look at product market fit, and then we design our integration timing or integration rollout based on those factors. And so really, where we really start getting traction in new verticals is when we build the integration. So we build our integration roadmap, we start rolling out integrations, and then the go-to-market falls right behind that. And the concept of sales enablement is, let's not try to make our old scripts in the old verticals work in the new verticals. Let's actually make them very, very tailored, very pointed, so our sales teams get more efficient more quickly. The previous question was, why the optimism? A year ago, we had -- we were looking for integrations to write. We were trying to get partners to sign up with us, so we'd write the integration. Now we're exactly flipped. Now we have more partners who want to partner with us, more integration agreements signed than we have actually have the capacity to deliver. So we're actively hiring more on the engineering side, so we can meet the demand. So it's identify the verticals that are the closest product market fit, build integrations, tailor the go-to-market motion to that integration -- or to that vertical, and then, unleash the teams.

Great, thank you. And then with respect to your AI products, specifically Assistant and Call Intelligence, just wondering if you could just provide some additional color on how you plan to actually monetize those products.

So they're currently -- so currently they are included in the top bundle and then also we can sell them on upsell. So Call Intelligence is an upsell or it's an additional cost in the higher bundle. And I think the results we've seen recently is where our new sales are more biased towards the higher-end bundle. We kind of have the standard good, better, best bundling and ASPs are coming up because our sales are more biased towards the higher bundle. So Call Intelligence is not a freebie. Some of the other embedded AI technologies come with the new Weave experience platform. But that's one of the ways that we're able to deliver value and therefore get price on both the SMB segment, but really importantly on the multi-market segment or multi-location segment.

Great, thank you.

This concludes the question-and-answer session. I'd like to turn the floor back to Brett White for any closing comments.

Well, another big thank you to Alan for all his years of commitment and just being a great partner. And thanks to all of you for joining the Call. And thanks again to the entire Weave team.