Weave Communications, Inc. (WEAV) CEO Roy Banks on Q4 2021 Results - Earnings Call Transcript

Weave Communications, Inc. (NYSE:WEAV) Q4 2021 Earnings Conference Call March 2, 2022 5:00 PM ET

Company Participants

Roy Banks - CEO

Alan Taylor - CFO

Conference Call Participants

Ken Wong - Guggenheim Securities

Matt Stotler - William Blair

Parker Lane - Stiefel

Michael Funk - Bank of America

Mark Schappel - Benchmark

Operator

Good day and welcome to the Weave's Fourth Quarter 2021 Earnings Conference Call. Today's conference is being recorded. At this time I would like to turn the conference over to [indiscernible]. Please go ahead, sir.

Unidentified Company Representative

Good afternoon and thank you for joining us for the Weave Communications fourth quarter and 2021 earnings call. Joining me on the call today are Roy Banks, Chief Executive Officer and Alan Taylor, Chief Financial Officer. Full details of our results and additional management commentary are available in our earnings release, which can be found on the Investor Relations section of the website at investors.gateweaeve.com. Please note that this call will be simultaneously webcast on the Investor Relations section of the company's corporate website.

Before we start, I would like to remind you that the following discussion contains forward-looking statements within the meaning of the federal securities laws, including but not limited to statements regarding beliefs, future financial results and management's expectations and plans for the business. These statements are neither promises nor guarantees and involve risk and uncertainties that may cause the actual results to differ materially from those discussed here.

You should not place undue reliance on any forward-looking statements. Factors that could cause actual results to differ from the forward looking statements can be found on our form 10-Q filed with the SEC on December 9, 2021, which is accessible on the SEC's website at www.sec.gov and also available on our website at investors.gateweave.com as may be supplemented in subsequent periodic reports we filed with the SEC.

Any forward-looking statements made in this conference call including responses to your questions are based on current expectations as of today and Weave assumes no obligation to update or revise them, whether as a result of new developments or otherwise except as required by law. The following discussion contains non-GAAP financial measures. For reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP metric, please see our earnings press release which is available in the IR section of our website at investors.gateweave.com.

Now I will turn the call over to Roy, Chief Executive Officer of Weave.

Roy Banks

Good afternoon, everyone. And thank you for joining us today. At Weave we recognize that small businesses are the backbone of our economy and our communities. Specifically, healthcare is a significant and essential part of our everyday lives. From the very beginning, we developed an innovative and intelligent phone platform specifically designed to support small businesses in the healthcare sector so they could modernize and personalize the way they communicate and engage with their patients. Today that product has evolved into a unified communications platform that enables us to further penetrate our estimated 11.1 billion TAM here in the U.S. Additionally, over the past two years, we further modified our product to help our customers adapt their business practices for a COVID and post-COVID world.

We successfully continue to serve small and medium sized businesses by providing innovative solutions that transform how they communicate, attract, retain and engage with their customers. As a result, our unified platform solution replaces multiple unrelated and expensive point solutions in a cost effective way that simultaneously improves the entire customer experience.

Given the importance of the healthcare sector, our core customer verticals dental, optometry and veterinary have shown resilience in the face of the pandemic and macroeconomic challenges. We demonstrated success in our ability to support each of these verticals by continuing to refine our solutions to meet their individual needs. Following our recent entrants into the home services vertical, we continue to evaluate and learn about how we need to refine our platform to meet the needs of this exciting new market opportunity.

The unique benefits of our platform have enabled us to deliver consistent and strong year-over-year revenue growth despite the challenging market conditions. For the full 2021 year we earn total revenue of $115.9 million up 45% over the prior full year. This growth was driven by adding 5292 net new customer locations to end the year with a total of 23,831.

Specifically in Q4 we earned total revenue of $31.8 million up 34% year-over-year which Alan will further discuss later on the call. As I look back on 2021, I am proud of our strong performance and our ability to operate successfully despite the uncertainty of the macroeconomic environment, an evolving pandemic and the related impacts upon our customers and the Weave business. I am truly grateful for the efforts of our employees, business partners, and customers that contributed to the achievement of a few important milestones that I would like to share now.

First, we expanded our leadership team with several executive hires. In particular, we hired a Chief Revenue Officer and a Chief Marketing Officer, both of which are new roles within our company, and will help to accelerate our revenue growth and go-to-market execution. We continue to enhance our solutions by executing our integrations playbook, with select third party providers to better serve our audiology and veterinary customers. We executed our vertical domino expansion strategy as we entered the home services vertical, including [indiscernible] and plumbing. We celebrated our 10 year corporate anniversary, and to cap off what was already an exciting and strong year in November we completed our IPO and began trading on the New York Stock Exchange.

As we turn now to 2022, our Weave payment solution has already surpassed the incredible milestone of processing $1 billion of payments volume since its launch in early 2020. We continue to expand this full payment solution with added capabilities, such as text to pay, wireless terminals and card on file features. Collectively, this payment solution add yet another way small businesses engage with their customers by collecting payments faster and in more convenient ways.

In early February, we announced that we recently won our largest customer engagement in company history, a Dental Service Organization, or DSO named Dental Care Alliance that operates more than 370 locations across the country. A 19 location test pilot confirmed that our platform could unify office operations, create communication and engagement efficiencies, and help service more patients in a timely manner. Based on the success of the pilot program, they decided to integrate Weave across their organization. We are now working with this new client to align and schedule the onboarding process of the remaining locations over the next few quarters, creating a healthy pipeline of new locations.

As we prepared our 2022 business plan, we recognize and anticipated the ongoing uncertainty of the macroeconomic environment that is beyond our control, including the evolving pandemic, and the labor market that is challenged our efforts to retain, hire and ramp productivity within our sales and customer onboarding organizations. In light of these challenges, we have continued to improve, adapt and optimize our lead generation, go-to-market and sales strategies to increase our effectiveness, reduce customer acquisition costs, and increase ROI.

Under the combined leadership of our recently appointed Chief Revenue Officer and Chief Marketing Officer, we are taking actions to enhance our sales and marketing processes to improve alignment across key functions, productivity and sustainability of our operations. This refocus effort will support ongoing growth despite the changing conditions in the macroeconomic environment.

A few aspects of this new and improved program include, we will remain focused on maximizing the opportunities within our core verticals of dental, optometry and veterinary which are proven to generate significant ROI for us over time and represent markets in which we remain largely underpenetrated. In each of these areas, we will continue to add more functionality to our platform and improve our overall customer experience.

We are excited by the opportunity to increase our market share in each of our core markets as our product market fit remains strong and resonates more acutely during the pandemic. Additionally, we will continue our efforts to improve our Weave's payments offering and make progress in specialty medical and our new verticals in home services, which are still in their early stages.

In 2022, as the impact of the pandemic may become less severe, we expect that our participation level and live marketing events, which pre-COVID provided significant high quality lead flow will surpass our 2020 and 2021 levels. To the extent that these events come back, we will selectively invest our resources and once again exploit this historically valuable customer acquisition channels.

However, the number of live marketing events in 2022 are still expected to be well below the 2019 pre-pandemic levels. So we are continuing to offset our previous reliance on live sales events by implementing and executing new digital marketing and lead generation tactics. We are also evolving our sales model to optimize lead sources, opportunities and value per lead. Set another way our future lead generation efforts will more narrowly target the person local markets where we have had proven success and incredible product market fit. This will increase productivity, lower our customer acquisition costs, and ultimately help grow our subscription revenue and payment processing volume and revenue.

As part of our effort to adapt and optimize our go-to-market strategy, we are transitioning our sales approach into a more efficient motion that better supports our sales cycle, reduces our customer acquisition costs, and allows us to scale for continued in future growth. While we recognize that we have experienced some salesforce turnover during this transition, early results give us confidence that we will end up in a position to better serve our target customers while we execute a sustainable and cost efficient go-to-market strategy.

Our ability to continually improve our technology platform and other aspects of our customer success is paramount. In the fourth quarter and early first quarter we have already completed several meaningful platform enhancements, which include better integration. We launched with better in Q4 as a new integration partner that repeats our integration's playbook in the veterinarian vertical. By providing an automated sync customers will see real time updates their daily calendar and patient contact information.

This eliminates the need for manual data uploads and provides improved communication solutions to veterinarians. New product updates. We've added mobile functionality that is key for many of our verticals to help users capture and save their future customers information via the Weave mobile app. Payments product updates. In Q4 we expanded the Weave payments offering by adding the card on final feature making collecting payments of faster experience for business owners and customers. We also launched wireless payment terminals.

As it reflect upon where we are today it's clear that our company and our customers have been impacted by certain macroeconomic challenges, and we continue to adjust our business operations to sustain improvements in customer service and revenue growth. Collectively, these evolving factors impacted our sales and new location onboarding productivity as we approach 2022 and are reflected in the guidance we provide today.

However, I am confident in our competitive position in our ability to significantly grow and increase our market share, particularly in our core vertical markets of dental, optometry and veterinary. Within that context, the executive team and I have identified and started to implement a series of go-to-market strategies and operational changes that I outlined moments ago. While we are competent in these changes, it will take some time to see the results. As such, we are optimistic that we will see renewed sales and revenue momentum in the back half of 2022.

With that, I'll turn the call over to Alan to discuss her financials. Alan?

Alan Taylor

Thanks, Roy. I extend my welcome to everyone that is joining us today as well. As Roy discussed, we achieved multiple milestones during 2021 as we expanded our presence in our key vertical markets, dental, optometry and veterinary. We also continue to improve our platform solution and attracted several new and talented executive leaders to our team. For the year we increased our total revenue by 45% to reach $115.9 million. This tremendous growth was driven by two factors; first, by our growth in new customer locations, and second by increasing revenues from existing customer locations. To that end, our ability to expand adoption of platform features by existing customers is reflected in our dollar based net revenue retention rate of 130%, up slightly from 2020 despite the ongoing macro environment challenge.

The year ended with much to be excited about, in particular, our strong gross revenue retention rates, the signing of Dental Care Alliance, our largest multi location customer in company history, and a strong balance sheet coming off our IPO. The latter point gives us much confidence in the financial flexibility as we remain focused on our longer term path to profitability moving forward.

During the quarter, we began seeing renewed uncertainty in the macro environment caused by the rise and impact with the Omicron variant that hit the United States in December inflationary pressures and geopolitical tensions. We believe these macro factors combined with the challenges of the current labor market, both internally and among our customers, slowed our sales and onboarding efforts during the quarter. We are seeing these trends continue into 2022 creating challenges for ourselves and onboarding organizations. As a result of this slowing, we ended our fourth quarter with financial results slightly below the midpoint of our prior guidance ranges. And we are taking a cautious approach to our future outlook.

As Roy mentioned heading into 2022 we are renewing our focus on core vertical markets of dental, optometry and veterinary where we have excellent product market fit and significant growth opportunities to increase our penetration within those markets. This focus combined with our continued customer loyalty and retention, have driven five straight quarters of gross revenue retention improvement. Our net revenue retention rate has also increased slightly year-over-year giving us confidence in our ability to grow revenues in 2022.

In Q4, we earned revenue of $31.8 million, up 34% year-over-year. Consistent with our SaaS business model 95% of our Q4 revenue was recurring revenue. This growth rate reflects a 5292 year-over-year net increase in customer locations to 23,831 locations, along with strong dollar based net revenue retention and gross revenue retention rates of 103% and 94% respectively.

The remaining part of our revenue is generated primarily from payment processing services for which we receive a revenue share from a third party payment processing partner. Before discussing the rest of our financial performance, please note that I will be discussing non-GAAP results going forward. As a reminder, our-GAAP financial results along with the reconciliation between GAAP and non-GAAP results can be found in our earnings press release and its supplemental financial tables. Also note that our customer location information will only be provided with annual and Q4 results. We will not be providing in future interim financial statements or earnings releases.

In the fourth quarter, our gross margin declined modestly to 57.4% from 58.4% in the year ago period, as we ramped our support organization during a tough hiring environment. We decided to pull hiring forward in support organization to enable favorable ongoing customer satisfaction levels that drive our brand recognition as well as our growth retention and net revenue retention rates over time.

Total operating expenses were $28.9 million, up 35% year-over-year. This growth was in line with the higher revenue levels achieved in the quarter. Our marketing expense were $15.3 million the 46% increase over the prior year as we reignited our go-to-market actions following the pandemic reduced levels in 2020. R&D expense was $6.6 million a 24% increase year-over-year driven by the increased headcount to support our R&D efforts to improve our platform solution. Operationally, we made approximately half of the recent R&D hires in geographic regions that enable us to scale our development efforts more rapidly and efficiently. We believe this staffing model enables us to continue our platform enhancement actions while remaining efficient with our expenses.

G&A expense was $7 million to 25% year-over-year increase, as our cost structure changed as public company ramping headcount and operational systems and support in preparation for our IPO as anticipated. Our adjusted EBITDA in Q4 was negative $9.7 million as compared to negative $7 million a year ago, as we rapidly grew our revenues and some near term decline in adjusted EBITDA margin by two percentage points. Given these revenue and expense results, our non-GAAP operating loss was $10.7 million as compared to a loss of $7.6 million a year ago. Non-GAAP net loss was $11 million, or $0.26 per share in the fourth quarter, based on $42.6 million weighted average shares. This is compared to a loss of $0.67 per share a year ago.

Turning out of the balance sheet and cash flows. We ended the fourth quarter with $136 million in cash and cash equivalents up from $55.7 million at 2020 year end. The increase is driven by the $111.6 million in cash and cash equivalents raised through our November IPO, providing dry powder to address our market opportunity. The influx of cash was partially offset by the cash flow from operations usage of $10.4 million in the fourth quarter, reflecting the higher GAAP net loss and increases in accrued liabilities and prepaid expenses. After making investments in property and equipments, our free cash flow was a usage of $12.2 million.

Turning now to our guidance As we conducted our business planning for 2022, we factored in the macroeconomic uncertainties I noted above, and the challenges we saw at the end of the fourth quarter. Specifically, we recognized sales headwinds that picked up through Q4 as Omicron impacted our marketplace and it lingered into Q1 along with macro economic conditions I address previously. These factors are expected to impact our revenue growth rate in the first half of 2022. Whoever as we discussed under the leadership of our new CRO and CMO, we have already taken a number of proactive steps to reinvigorate our go-to-market actions while we are confident that we have initiated the right strategies to successfully navigate these uncertain market conditions. We also anticipate that revenue growth will slightly lag these actions, and we don't expect to see rate acceleration of growth until the second half of the year.

As we work to re-accelerate top line growth, we will maintain a balance between managing our costs and investing for the future. Additionally, we believe our balance sheet puts us in a great position to execute on our roadmap towards profitability.

Considering all these factors, we are providing the following guidance for our Q1 and full year 2022 results. For the first quarter we expect total revenue in the range of $31.0 million to $32.0 million and a non-GAAP operating loss in the range of negative $12.0 million to negative $11.0 million. We expect to have a weighted average share count of approximately 64 .7 million for the first quarter. For the full year and fiscal 2022 we expect total revenue in the range of $136.0 million to $140.0 million, and a non-GAAP operating loss in the range of negative $40.0 million to negative $36.0 million. We expect to have a weighted average share count of approximately 66 million for the full year.

With that, we'll turn it back to the operator. And we'll be happy now to take your questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] And we'll take our first question from Ken Wong with Guggenheim Securities. Please go ahead.

Unidentified Analyst

Hi, this is Nancy on for Ken. Thanks for taking the question. Just on payments. I know you don't break it out specifically. But if you could talk more about the payments and mention you're seeing versus internal expectations, that would be great. And then second question, if on the conservatism in the guide, is there any particular vertical that you are taking in more conservative them into? Thank you.

Roy Banks

Yes. Well, first of all, if I could just wish the people of Ukraine peace, very disturbing to see what's going on over there. So just wanted to get that out and let that Weave is very much concerned about that and have an employee here that's directly affected by that. So thank you for letting me say that. We are very excited about our payments solution. During the quarter, we recently hired a new payment sales leader who comes out of the payment industry. This individual was responsible for selling integrated payments, payment processing, merchant acquiring, payment gateway services, and really brings with him a tremendous work product or body of work that is really going to benefit us here as we look to increase the adoption and increase the processing volume of payments.

As you know, last quarter, we surpassed the $1 billion payment volume processing mark, which really is a significant milestone for the company and for that product. And so we're very excited about how that product is performing. And with the number of initiatives that we've launched over the past quarter we're excited to see that growth continue going into 2022.

Alan Taylo

Regarding your second question, Nancy, we do not see anyone at a verticals impacted more directly than the others. It's been kind of across the board with respect to the cautious outlook.

Unidentified Analyst

Got it. That's helpful. Thank you.

Operator

Thank you. We'll take our next question from Matt Stotler with William Blair.

Matt Stotler

Hi, Roy. Hi Alan. Thanks for taking the questions. Maybe just I want to start from the macro perspective. Obviously a lot of disruption in kind of December, January timeframe from Omicron especially with that sort of stuff pursued with inflation is particularly negative for small businesses, but just wanted to dive into what you're seeing in terms of customer behavior, and what the feedback is from customers is this more companies go out of business, is this customers less willing to buy, and specifically looking at this, and how it compares to your experience early on, the pandemic was still able to grow pretty substantially even looking at a sequential basis, what's different over the past several months that didn't happen in 2020?

Roy Banks

Yes. So great question. So part of it is the, the extent of the impact of Omicron on our customers. Part of the challenge that we had in Q4 was to the onboarding, and throughput as we sell new customers, being able to get them on boarded. Well, it's very difficult to do that, when you have customers that have employees that are sick, that we cannot coordinate and schedule installations with. So that was something that took us a little bit by surprise. And just as you look at some of the consumer hesitancy around making significant capital expenditure purchases that obviously affected us, and then as we look at our own resources internally we also experienced some challenges from the Omicron. And just generally speaking, the pandemic affecting our ability to staff and keep up with the opportunities that we've had.

Alan Taylo

Matt, I would just add, or early on in the pandemic, I do think that overall, we were successful as a country in kind of flattening the curve as they referred to it. So it didn't have that kind of acute impact. Omicron kind of hit in late December, and we had it all, it wasn't as severe thankfully, we did have onboarding people out, we had sales people out and officers aren't available to be on boarded. And all of those things. In fact it impacted our ability to get customers active on our platform.

Matt Stotler

Got it, Okay, that's helpful. And then a follow up on the go-to-market actions that you're taking. So it would be really helpful to kind of dive into what some of these specific inefficiencies have been that you've identified? What's changing and then as you look to I guess what the impact is on the guidance, versus maybe what you would have expected previous previously for 2022, lots of understand that as well? And how your confidence and the new guidance?

Roy Banks

Yes. Happy to address that. So as you know, and I'll let Alan speak to the impact on guidance. But as you know, we hired, recently hired a CMO and we hired a CRO, and those are new positions to the company that we've never had. So we've never really had that type of executive leadership with that type of experience to really help us better understand and develop and mature our sales organization. So based upon their experience and their expertise, they were able to identify some go-to-market changes that we needed to make to make us quite frankly to help us scale much more quickly and to really help increase our growth. And so we took the opportunity to really pull the trigger on that. And we've made some significant changes that I think that we believe will be very positive for the company specifically.

We've identified ways to simplify our sales motion so that we can better align it with our customer sales cycle. Here, we have a very short customer sales cycle and the previous model that we had really supports a longer tail sales cycle. We've created a more dynamic and scalable go-to-market program that allows us to make pivots and adjustments as we see opportunities become available. We've reduced probably one of the more significant changes that we've made as we reduce our dependence on a position called the sales development rep. We had what we call the SDR account executive model. And we found that because of many of the challenges that we had around retaining SDR, we were not able to really advance and really grow the way that we felt like we could nor was it really supporting our sales motion in the right way.

So we've made some changes there to really transition to what we call a full cycle AE where we now have the hunter and the farmer in one position that better fits our sales model. And so we are seeing some very early on positive results in success with that. We're very optimistic about this change and the impact it will have on our business and then we've made some changes around the way that we compensate. We've developed a long tail residual commission program that really ties the sales rep to their appointment with here within the company while paying them a very healthy compensation stream. And so very excited to see some of those changes and we look to see and report on that in the future.

Alan Taylo

And so Matt, with respect to the guy who -- items that Roy just mentioned there, challenges along in the current labor market are really accentuated here along this in the silicon slopes area. We're fighting for talent, that's always been an issue. The change in the CRO and CMO as new people come in, there's some of the old guard and sales that will we'll move on. So we're in the process of bringing those people up to speed making sure that they're ramped and capable. And so we've just adjusted our models to reflect the ramp period. And how we see them coming up to speed as we get back. We think that the upside is worth this change. And as Roy mentioned, SDR turnover made this change made us want to make this change even more rapidly than planned.

Roy Banks

And I'll add one more thing to that. We're also excited about the ability to reduce our customer acquisition costs through the elimination of that position and look to make sure that that's something that we continue to monitor closely.

Matt Stotler

Got it. Thanks again. It's helpful.

Operator

Thank you. We'll take our next question from Parker Lane with Stiefel.

Parker Lane

Yes. Hi, guys, thanks for taking the question. I'm hoping to reconcile some of the commentary made on the macro and the impact on the end markets with the improvement grocery tensions, very strong net retention again. So we anticipate that takes a step back here in the front half of the year, given all the commentary provided on what your end markets are seeing, or is this primarily a new sales and onboarding issue, the changes you're putting in place will help improve that and maybe we see a little bit less net new sales here to start the year?

Alan Taylo

Yes, thanks, Parker. It's the latter. We shouldn't see any decline, our retention rates were really five consecutive quarters of improvement on the gross revenue retention. We see that staying the same. It really has been around the sales and the onboarding, were on [indiscernible] some of the staffing [indiscernible]. We're addressing both of those problems, we anticipate getting our strike back.

Roy Banks

Yes. And I will also say that as part of our the changes that we've made, we've also made some changes operationally that will help and assist in pre-preparing those customers that we've signed for onboarding through a customer launch group. So I think that will also help if nothing else, increase our ability to throughput more customers as we add them.

Parker Lane

Understood, and then looking at those verticals outside of the core three mentioned, call it physical therapy, chiropractic, cosmetic any of those areas. It's not necessarily a wholesale de-emphasis of these markets going forward, right? It's more, it's difficult to hire people right now we're going to double down in the places we're having success, the places we have critical mass and a brand and you could potentially start to increase investment outside of those areas when the environment improves?

Roy Banks

Yes, that's exactly right. Yes. We have several emerging markets. And obviously, we announced home services last year. And we continue to be very bullish about that market, but quite frankly, entering and when we announce a new market, that does not mean that we ignore the existing markets that we're in and based on the demand, and based on what we're seeing from our product market fit, we continue to be very excited about the existing core markets that have really responded well to our offerings.

So we're just making sure that we're taking care. We're under 10% penetrated in each one of those markets and we want to continue to expand our footprint in those markets and deliver the value that Weave does for that for that customer segment. So yes we're going to continue to do that while we cultivate new and emerging markets. And those new emerging markets can take several years and if you look at the years that it has taken for us to really nurture and cultivate dental, opto, vet and even orthodontia there's a little bit of a long tail there, there's a lot to learn but we we've been able to really vet those particular markets very well and we built on specific product market fit that meets the needs of those markets in a way and in a manner that's very unique.

Parker Lane

Appreciate the feedback Roy.

Roy Banks

You're welcome. Thank you.

Operator

Thank you. We'll take our next question from Brent Bracelin with Piper Sandler.

Unidentified Analyst

Hi, this is [indiscernible] on for Brent. First question. I think it might be helpful if you could give us a sense on what the plan sales and marketing capacity growth is for 2022 maybe relative to revenue growth and if possible, maybe some context that how that was growing in 2021 and maybe where you ended the year considering the turnover in the sales and marketing force.

Alan Taylo

Good question. As we brought on our new CMO, and particularly our CRO, and CMO have kind of established their plans, we invested still in marketing, I would describe our 2022 investment in marketing as much more targeted, and with CMO that really gets the digital side of things. And so there's going to be spent on the digital side. We will be returning to events, as we discussed, we still see some events are about 50% participation now, as opposed to pre- pandemic. Hopefully, those will come back. But we know the ones that we can target successfully, and get a good ROI out of our investment in those events. So we'll continue to increase that investment both on the sales and marketing side. But I do think that given the targeted approach that we got which is a little more laser focused than it was in 2021 that we'll see a better yield from those efforts.

Unidentified Analyst

Great, and there's a follow up of question, just to clarify, how recent was the CRO appointment? Was that during Q4 or just during 2021? I wanted to clarify that. And then when you are considering the ramp time for AEs in 2022, what's the timeframe that you're considering at this point?

Roy Banks

Yes. We hired Matt Hyde, our Chief Revenue Officer back I believe it was in Q2 of last year. And then our CMO we hired just in January, yes, in January. So that's the timing there. And then it takes about six to nine months to ramp up an AE and we have a very substantial platform, and just making sure that we train them not only on the platform, but on the various industries that they will be selling into very important that we provide them with the proper training and experience that they need to garner to be effective.

And one of the thing I wanted to mention was one of the things that we're really focused on when it comes to how we're becoming more laser focused in the way that we market and target customers. It's really speaking in the language of our customers and really putting ourselves in the identity of our customers. We're doing more to make sure that we really understand and empathize with our customers in ways that none of our competitors understand, and also in ways that they can better appreciate the value of our platform and the technology that we provide them.

Unidentified Analyst

Appreciate the color. Thank you.

Roy Banks

Thank you.

Operator

Thank you. We will hear next from Michael Funk with Bank of America.

Michael Funk

Yes. Thank you for the questions tonight. A couple of if I could. I think I understand the guide for 2022 primarily revolves around at the lower gross additions than previously expected. You mentioned the sales force turnover. But in your earlier comments, you threw out a few things Omicron, inflation, geopolitical. On the inflation comment specifically, is that impacting customers either migrating down to lower price plans or your expectations for a slower ramp in pricing in 2022 adoption, incremental functionality? Is that part of the guide here as well? Or is it purely just based on the lower growth conditions in 2022?

Alan Taylo

It's primarily the latter there. I think the customer, everyone's been hit by the inflation. There is no question about that. We're responding and we'll work those into kind of the normal annual price increases that we cycled through our customer base. But I do think that that and those aren't resulting in churn or we haven't seen a lot of churn based on customers leaving based on price or anything like that. So I think it's the latter just in terms of the growth. That obviously the inflation is a challenge for everybody. So we're keeping a close eye on that and we'll respond as we need to through the balance of the year.

Michael Funk

Okay, and the back of the envelope there. I assume that net additions are roughly flattish each quarter in 2022 with flattish pricing in the same hardware and onboarding revenue that kind of gets me to the midpoint of your guidance range. Is at the right math around that?

Alan Taylo

Yes, it is.

Michael Funk

Okay, and then so one more if I could, please. I didn't hear earlier but did you quantify the sales and marketing turnover for the productivity metrics help us think about how that potentially ramps as you bring new employees on and they get to that 6 to 9 month period when they get to full productivity?

Alan Taylo

We didn't quantify it and we won't be quantifying it even today. It's definitely been a challenge. We're I think, right in line with others along the silicon slopes area and across the country.

Roy Banks

And given the fact that we've made some changes in that area we don't have enough history there to really kind of even suggest what that might look like. But that's obviously something that we'll continue to watch and monitor.

Michael Funk

Understood. Thank you very much.

Roy Banks

Thank you.

Alan Taylo

Thank you.

Operator

Thank you. We'll hear next from Tyler Radke with Citi.

Unidentified Analyst

Hi, this is [indiscernible] on for Tyler Radke. Thank you so much for taking my question. So I know you pointed to slower sales and onboarding efforts related to challenging the labor market. But are you at all and if so, like to what extent are you seeing any impact from like, pull forward in demand and most in the communication sphere that we have seen from a lot of the other UcaaS and CPaaS vendors? And then I had a follow up. Thanks.

Roy Banks

I don't think that we're necessarily seeing any of that, to be honest with you. I mean, I think I don't know that we can cite a particular statistic or a metric that would indicate that we're seeing anything related to that being an impact having an impact on our business.

Unidentified Analyst

Got it. And then I also wanted to ask about that large customer one that you had through the dental service organization. I understand that the initial conversation was tied to like the core communications module. But have you at all discussed the potential to add the payments module in the near term? Where's the appetite for that from that network of customers?

Alan Taylo

It's always a possibility. There is nothing contractual at this point with those customers. But I think that the payments offering is compelling enough that it may be of interest in the future. We definitely want to make sure that people are understanding that option for us and we see other multi office opportunities in our mid market team that where we will factor that in and make sure that we're giving it the billing and the exposure that will land some of those customers on payments as well.

Roy Banks

And as it relates to our payment offering, we can offer that both at the point of sale and on an upsell basis into our existing customer base. So oftentimes, it just depends on what's the right sales motion to introduce payments. And so we always have the option of going back into our customer base and selling or upselling payments.

Unidentified Analyst

Great, thank you very much. And congratulations on that customer [indiscernible].

Alan Taylo

Thank you. Very exciting.

Operator

Thank you. We'll take our next question from Brian Peterson with Raymond James.

Unidentified Analyst

Hi, thanks for taking the question. This is John on for Brian. First question on lead generation sources. Can you quantify the historic pipeline contribution from live events and conferences? And while I know you said that there's a lower amount of conferences this year. We have seen some in person conferences return. How is the pipeline contributions stand present?

Alan Taylo

So John, the historical rate was about we got almost a third of our leads and deals through conferences pre-pandemic. Obviously, those went largely way until recently, and then the pandemic impact on those conferences been such that last fall where it was somewhere between 25% and 30% attendance versus pre-pandemic levels, and now we're at about 50%, in the most recent ones. And so we're going to see the lead flow. The lead flow definitely makes it it's still worth attending some of those larger conferences. You get whether those conferences really return to pre-pandemic levels, is going to be a factor of a number of things. One of the things that we do, we are aware of, from our sales team [indiscernible] one of our sales reps who's saying a lot of these conferences pre-pandemic were often attended by the professionals who wanted to earn continuing education credits, and they would use these conferences as an avenue to do that.

And now with pandemic those same CD credits are coming through largely remote and online and Zoom instructions and so whether these conferences will ever get back to completely full strength is yet to be determined, but we do know the ones that will be attended at level that will make it viable for us to be there and we still see an opportunity to have a good customer acquisition costs associated with our efforts on shows.

Unidentified Analyst

Perfect thanks for color. It was helpful there. And then factoring in your 2022 outlook here. How should we think about the cadence of gross margin progression as we move through 2022, given some of the puts and takes with hardware and implementation? Thank you very much.

Roy Banks

You're welcome.

Alan Taylo

Yes. The hardware and implementations are the key elements of our what will ultimately result in positive margin expansion as we go forward, onboarding customers in expensive proposition and providing them summonses as well. So we'll use margin expansion going, kind of from the 58 range to the 60 range in the back half of the year.

Unidentified Analyst

Thank you very much.

Roy Banks

You are welcome.

Operator

Thank you. We'll take our next question from Mark Schappel with Benchmark.

Mark Schappel

Thank you for taking my question. My question for you, given the change in leadership and the sales strategy in your payments business, is it fair to assume that you're not seeing the adoption trends in your payment business that you initially hoped to?

Alan Taylo

We were still very much in the early stages last year, when we were still trying to build the product market fit for payments. And so it was now that we have all the features and functionality that we believe really gives us a robust payment offering, it was quite rightly time to bring on a payment sales leader that could really put that product on steroids and really increase the adoption for it. So think about this, we processed a billion dollars in payments volume, without having a real payments leader over that product. So now with the opportunity that we have with a new payments leader and a robust product, we just felt it was it's a great opportunity for us to really have payments be a breakout product for us. So we're excited about what we're going to see.

Unidentified Analyst

That's helpful. Thank you. And then one additional question. In your prepared remarks I believe you noted turnover in the sales force was higher than anticipated. I am wondering if you could just comment a little bit further on this? Are you seeing sales reps go to competitors? Are they going outside the industry? Maybe just provide a little bit more color on that.

Alan Taylo

Yes. So part of it is we're here in Utah, Silicon Slopes as it's affectionately known, we're seeing a real fervent environment for talent, for the competition of talent. And so I don't know what it's like in other areas of the country, but that's what it is here. And because of that, we have seen some churn there. We are also, as a result of the new sales model that we put into place quite frankly there's some folks that are not as excited or as enthusiastic about those changes and are more familiar with a different system. And so some of those are self selecting as well.

And so that's really kind of what has been driving some of that churn that we've seen. Unfortunately, this is a talent rich environment that we are in. While the competition for talent is fierce, we continue to recruit because selling Weave is a great experience and we have great product market fit. So we're navigating those challenges. We've created some incentives for retention that I think are keeping some of our real top tier sales people and are really starting to ramp up for more scale and more effective selling as we extract more value per lead. And we continue to drive results in that particular part of our organization.

Mark Schappel

Great, thank you.

Roy Banks

You are welcome.

Operator

Thank you. [Operator Instructions] We have no additional questions in the queue. I'd like to turn the covers back over to Roy for any additional or closing remarks.

Roy Banks

Awesome. Well, I would like to thank everyone for being on the call today. Really appreciate your interest in Weave. We hope this call gives you confidence that we have a clear plan and path to re-accelerating growth in the company as we make a much needed and exciting changes within the business as we navigate and overcome some of the challenges that we've highlighted on this call. We remain very optimistic about the prospects for the company and especially as we look forward to the second half of the year as we look for the impact of many of the changes that we've implemented and we would like to thank all of you for your time today and appreciate your ongoing support and enthusiasm for our company. We really appreciate it. Thank you very much and have a wonderful rest of the day.

Operator

Thank you. And that does conclude today's conference. We do thank you all for your participation. You may now disconnect.