Weave Communications, Inc. (WEAV)

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion of our financial condition and results of operations in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Readers are cautioned that these forward-looking statements are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified below, under Part II, Item 1A. “Risk Factors,” and elsewhere herein. Therefore, our actual results could differ materially from those discussed in the forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason.

In this Quarterly Report on Form 10-Q, unless otherwise specified or the context otherwise requires, “Weave,” the “Company,” “we,” “us,” and “our” refer to Weave Communications, Inc. and its wholly-owned subsidiaries.

Overview

Weave is a vertical Software-as-a-Service (“SaaS”) platform that delivers AI-powered patient engagement solutions for small and medium-sized (“SMB”) healthcare practices. Our platform is designed to help the practices manage the complete patient lifecycle by automating administrative patient-facing workflows across pre-care, clinical, and post-care operations. Recognizing that most of these workflows originate from or terminate through a phone call or message, we believe we have significant operational advantage by owning the full telephony and communication stack.

We have embedded AI technology into the platform to function as an "always-on teammate" for practice staff, autonomously fulfilling daily tasks. By leveraging this always-on teammate to handle repetitive duties like answering routine questions, scheduling appointments, and managing payment processing, these solutions reduce front-office interruptions and allow clinical staff to focus on face-to-face patient care.

Our platform ensures seamless patient care by unifying conversational context across voice and text channels into a single inbox, blending AI agents and staff actions. The platform is built on nearly two decades of domain expertise and billions of patient interactions, allowing us to leverage our vertically specialized data to deliver high-accuracy automation within strict privacy and regulatory frameworks.

We continue to focus on reducing administrative burdens for healthcare practices through agentic AI, embedded automation and real-time operational insights.

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 customer onboarding categories to disaggregate revenue and costs of revenue that are one-time in nature from those that are term-based and renewable.

We generate revenue primarily from recurring subscription fees charged to access our platform, which also includes embedded lease revenue on phone hardware. These recurring revenues accounted for 90% and 91% of our revenue the three months ended June 30, 2026 and 2025, respectively and 90% and 91% for the six months ended June 30, 2026 and 2025, respectively. 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 installation fees for onboarding customers. We utilize our onboarding services and phone hardware as customer acquisition tools and price them competitively to lower the barriers to entry for new customers adopting our platform. As a result, the variable cost associated with providing phone hardware and onboarding assistance has historically exceeded the related revenue, resulting in negative gross profit for each. The revenue and related costs associated with

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onboarding new customers are primarily associated with the initial setup of a customer’s software and phone system. Revenue on phone hardware provided to our customers, deemed embedded lease revenue, is recognized over the related subscription period. The associated costs, which primarily represent depreciation expense on phone hardware financed under finance lease arrangements, are incurred over the useful lives of the phone hardware, which is 36 months. We consider the net costs of onboarding and phone hardware, in addition to our sales and marketing activities, to be core elements of our customer acquisition approach.

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:

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.

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, our ability to integrate our platform with practice management systems (“PMS”) and electronic health record (“EHR”) software, which strengthens our product market fit and increases the value our platform provides to customers, and the growth of the market for a customer experience and payments software platform. Sustaining our growth requires continued adoption of our platform by new customers. We aim to add new customers through a combination of unpaid channels, such as recommendations and word of mouth, and paid channels, such as digital marketing, direct mail, trade shows and industry events, brand marketing and our teams of sales representatives. Historically, our go-to-market strategy focused on increasing the number of locations with most of our customers having a single location.

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In addition to pursuing continued customer growth among small businesses, we pursue opportunities to expand our customer base among medium-sized businesses through sales of Weave Enterprise, which is designed for multi-location businesses, with a particular focus on our core specialty healthcare verticals. Our ability to expand among medium-sized businesses will depend upon our ability to successfully sell our enhanced Weave platform to multi-location organizations and effectively retain them.

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. The deployment of the Weave phone system as part of the platform at each of our customers’ locations improves retention and customer loyalty. Historically, our subscriptions have provided our new customers with immediate access to the majority of our products and functionality. However, we have released additional add-on products in recent years, such as Bulk Texting, Forms, Insurance Verification and Call Intelligence, which we are increasingly successful at cross-selling to our customer base. We intend to continue to invest in enhancing awareness of our platform, creating additional use cases, and developing more products, features and functionality.

Customer retention also impacts our future financial performance given its potential to drive improved gross margin. The initial onboarding costs, as well as the cost of phone hardware, which is depreciated over three years, represent substantial cost of revenue elements during the first few years of a customer’s life. 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 78% for each the three months ended June 30, 2026 and 2025, respectively, and 78% and 77% for the six months ended June 30, 2026 and 2025, respectively.

Add New Products

We continue to add new products and functionality to our platform, broadening our use cases and applicability for different customers. In 2026, we introduced our omnichannel AI Receptionist built on Google Cloud's Gemini Enterprise Agent Platform, enabling practices to preserve conversation context across voice and text, configure intelligent routing, and escalate to staff when needed (“AI Receptionist”). In 2025, among other new products, we also delivered Weave Insurance Eligibility, which links directly to multiple dental insurance portals to retrieve detailed patient insurance information to provide patients a more complete view of their insurance coverage.

We expect our future success in winning new clients to be partially driven by our ability to continue to develop and deliver new, innovative products in a timely manner, including those enabled by AI. The depth of our platform’s functionality is dependent upon both our internally-developed or acquired technology and our product partnerships and integrations.

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 started in dental and have since successfully expanded to optometry and veterinary. Most recently, we entered the specialty medical industry vertical, which has quickly grown to be our second largest industry vertical by location count and remains our fastest growing. Entering a new industry vertical includes evaluating product-market fit and establishing key integration partnerships with the primary systems of record in that vertical. While we are focused on continued growth within

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion of our financial condition and results of operations in conjunction with the consolidated financial statements and the notes thereto included elsewhere in this Annual Report on Form 10-K. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Readers are cautioned that these forward-looking statements are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified above, under “Part I, Item 1A. Risk Factors,” and elsewhere herein. Therefore, our actual results could differ materially from those discussed in the forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason.

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.

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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. Refer to “Part II, Item 7. 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, 2024, which was filed with the U.S. Securities and Exchange Commission (“SEC”) on March 13, 2025, for year-over-year comparisons of the results of operation between the year ended December 31, 2024 and December 31, 2023 as well as a discussion of 2023 performance metrics and cash flow activity, all of which are incorporated herein by reference.

Overview

Weave is a leading AI-powered patient communications, engagement, and payments platform purpose-built for small and medium-sized (“SMB”) healthcare practices. We strive to elevate patient experiences through a unified platform that improves business operations, allowing healthcare professionals to focus on what matters most: patient care.

Weave serves as the orchestration layer for modern healthcare practices, bringing together voice, text, and AI-powered workflows into a single system of work. Our platform is built on nearly two decades of domain expertise and billions of patient interactions, allowing us to leverage our vertically specialized data to deliver high-accuracy automation within strict privacy and regulatory frameworks.

We deliver powerful communication and engagement capabilities previously only available to enterprises, made them intuitive and easy to use and put them in one solution. Our verticalized software platform helps streamline the day-to-day operations of running an SMB healthcare practice.

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 onboarding categories to disaggregate revenue and costs of revenue that are one-time in nature from those that are term-based and renewable.

We generate revenue primarily from recurring subscription fees charged to access our platform, which also includes embedded lease revenue on phone hardware. These recurring revenues accounted for 91% and 92% of our revenue for each of the years ended December 31, 2025 and 2024, respectively. 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 installation fees for onboarding customers. We utilize our onboarding services and phone hardware as customer acquisition tools and price them competitively to lower the barriers to entry for new customers adopting our platform. As a result, the variable cost associated with providing phone hardware and onboarding assistance has historically exceeded the related revenue, resulting in negative gross profit for each. The revenue and related costs associated with onboarding new customers are primarily associated with the initial setup of a customer’s software and phone system. Revenue on phone hardware provided to our customers, deemed embedded lease revenue, is recognized over the related subscription period. The associated costs, which primarily represent depreciation expense on phone hardware financed under finance lease arrangements, are incurred over the useful lives of the phone hardware, which is 36 months. We consider the net costs of onboarding and phone hardware, in addition to our sales and marketing activities, to be core elements of our customer acquisition approach.

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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:

______________

(1)    Cost of revenue related to hardware represents depreciation of phone hardware over a 3-year useful life.

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.

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, our ability to integrate our platform with PMS and EHR software, which strengthens our product market fit and increases the value our platform provides to customers, and the growth of the market for a customer experience and payments software platform. Sustaining our growth requires continued adoption of our platform by new customers. We aim to add new customers through a combination of unpaid channels, such as recommendations and word of mouth, and paid channels, such as digital marketing, direct mail, trade shows and industry events, brand marketing and our teams of sales representatives. Historically, our go-to-market strategy focused on increasing the number of locations with most of our customers having a single location.

In addition to pursuing continued customer growth among small businesses, we intend to pursue opportunities to expand our customer base among medium-sized businesses through sales of Weave Enterprise, which is designed for multi-location businesses, with a particular focus on our core specialty healthcare verticals. Our ability to expand among medium-sized businesses will depend upon our ability to successfully sell our enhanced Weave platform to multi-location organizations, and effectively retain them.

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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. The deployment of the Weave phone system as part of the platform at each of our customers’ locations improves retention and customer loyalty. Historically, our subscriptions have provided our new customers with immediate access to the majority of our products and functionality. However, we have released additional add-on products in recent years, such as Bulk Texting, Forms, Insurance Verification and Call Intelligence, which we are increasingly successful at cross-selling to our customer base. We intend to continue to invest in enhancing awareness of our platform, creating additional use cases, and developing more products, features and functionality.

Customer retention also impacts our future financial performance given its potential to drive improved gross margin. The initial onboarding costs as well as the cost of phone hardware, which is depreciated over three years, represent substantial cost of revenue elements during the first few years of a customer’s life. 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 78% for each of the years ended December 31, 2025 and 2024.

Add New Products

We continue to add new products and functionality to our platform, broadening our use cases and applicability for different customers. In 2025, among other new products, we introduced our AI-receptionist, powered by TrueLark, which automatically follows up on missed calls with a fully interactive AI-powered texting conversation and lets patients book appointments over text or from the practice's website, any time of day. We also delivered Weave Insurance Eligibility, which links directly to multiple dental insurance portals to retrieve detailed patient insurance information which provides a more complete view of a patient’s insurance coverage.

We expect our future success in winning new clients to be partially driven by our ability to continue to develop and deliver new, innovative products in a timely manner, including those enabled by AI. The depth of our platform’s functionality is dependent upon both our internally-developed technology and our product partnerships and integrations.

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 started in dental and have since successfully expanded to optometry, and veterinary. Most recently, we entered the specialty medical vertical, which has quickly grown to be our second largest vertical by location count and remains our fastest growing. Entering a new industry vertical includes evaluating product-market fit and establishing key integration partnerships with the primary systems of record in that vertical. While we are focused on continued growth within our core specialty healthcare verticals and adjacent healthcare markets, we continue to evaluate additional expansion opportunities.

Key Business Metrics

In addition to our financial information that is presented in accordance with the generally accepted accounting principles in the U.S. (“U.S. GAAP”), we review several operating and financial metrics, including the following key metrics to evaluate our business, measure ou

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