Waystar Holding Corp Aktie

All right, everyone, let's go ahead and get started, please. Again, good morning. Welcome back to our session with Waystar. For those of you whom I've not yet met, my name is Ryan Daniels. I'm the health care IT and services analyst here. So very excited to have Matt Hawkins, the CEO of Waystar, with us for the second year, both at our conference and as a public company.

Waystar is a great HCIT holdings, one of our favorite names. It's a company that really sells into the marketplace, we think has very strong demand for services as hospitals continue to face pressure and look towards trusted providers to help them both increase their margins and cash flows and to provide a better experience for their patients and their providers. It's an integrated offering, which we think is in demand, single contract, cybersecure value-added offering that's totally comprehensive.

And really one unique thing we didn't even talk about a year ago is AI. And this is a company, I think, is really well positioned to benefit from that, not threatened by that. So it's offering new products. It's adding value to existing products, which helps with retention and cross-sells. And it's a company that sees an enormous outsourcing market that can move to in-source software as they continue to develop. So it's an expanding TAM, and we see accelerating growth going forward.

So super excited to have Matt here to tell you a little bit more about the story. A couple of quick housekeeping items. I'm required to inform you that disclosures are available at our website at williamblair.com. And second, we'll head up to Richardson. That's on the second floor where we'll do the Q&A. So without further ado, I'll turn it over to Matt to talk a little bit more about the story.

Appreciate it, Ryan. Thank you so much. Ryan basically just gave the story. So thank you for that kind introduction. I'm Matt Hawkins, and I'm the CEO of Waystar. I helped form Waystar with a fabulous team of people in the fall of 2017. And our hypothesis at the time was that provider organizations would absolutely need technology to simplify the way they get paid from both insurance companies and increasingly directly from patients.

And so we formed Waystar then, and we were dreaming about the opportunities that we're seeing in the market today all the way back then. So I look forward to introducing Waystar to you. I'm going to speak to what I assume is a crowd of some experts, health care experts, but also some non-health care experts and a generalist audience, if that's okay. And I look forward to following up in a potential Q&A session afterward and delighted to be more specific.

But as far as overviews are concerned, let's jump in and get going here. Our mission is to use technology in modern ways to help create efficiency and reduce the friction in the payment process in health care, often referred to as the revenue cycle, a series of tasks and steps that historically have been done very manually that increasingly is done with cloud-based software that deploys AI to automate work, to prioritize tasks and organize work and ultimately to eliminate the need for human intervention altogether. And if we can do that, then the exciting future is that provider organizations will have more time to dedicate toward caring for patients and way less time focused on the administrative burden and trying to figure out how they're going to get paid. So it's a very exciting thing that we're endeavoring to do.

We're at a critical inflection point in health care, where we just need to change what happens. As you likely know, health care represents about 20% of the U.S. GDP as far as spend is concerned. And within that $4 trillion plus of annual spend, there's a tremendous amount of administrative burden. By most estimates, it's nearly $0.5 trillion of spend just trying to administer these increasingly complex provider organizations who have consolidated together and you recognize many of their names. I'll speak to a few of them in a second.

Hospitals are now joined with other hospitals. They either own or affiliate with physician networks, post-acute or non-acute sites of care, all in a single system. And they're all trying to get paid accurately in the face of real difficulty. They face staffing shortages. They face friction in the insurance claim submission process that results in annual denials being about 18% of every claim that gets submitted is initially denied by an insurance payer. That's a byproduct of the fact that there's all sorts of manual work that takes place, a lot of error embedded in that manual work.

And consequently, sometimes providers don't get paid at all. So they're writing off services that they've performed that they're rightfully able to collect on as bad debt because they don't get paid and/or they're under coding claims so that they're not even accurately reflective of the health care occurrence or health service that has occurred. All the while, the backdrop is more and more patients in the United States of America are participating in high deductible health plans or they're self-insured and they have to come out of pocket for their own form of payment. And provider organizations historically have not been equipped to deal with patient collections.

So here comes Waystar to the rescue. Our vision and what we're working on building, and I'll tell you how we're getting there, and it's very exciting, is a world where there's an autonomous revenue management platform that does work automatically, where the need for manual intervention is overcome through technology that generates insights, that learns through the processing of transactions that resulted in a successful outcome and that connects providers to payers and to patients across the entire ecosystem where we ultimately create an outstanding experience for providers that enable those providers to care for patients very efficiently and also delight patients along the way.

When you think about Waystar, knowing that this may be an introduction to many of you and a new story to many of you and a familiar story to some, we'd ask that you think about us as a cloud-native platform, a platform where we're deploying hundreds and hundreds of feature improvements and capability gains in a typical quarter to the 1 million-plus providers that we serve.

We offer market-leading AI solutions that are powered by the work that we do with Google Gemini. The more modern generative AI capabilities and foundation model solutions are powerful and we're seeing increasing adoption. In fact, 40% of our bookings in the first quarter of '26 came from modern AI native solutions. We're thrilled with that. And what's exciting is that as providers consume our platform, and I'll show it to you in just a moment, they're consuming AI on the platform in ways that are intuitive to them, as most of you know.

AI capability is quite frankly, ahead of where the human factor is in some cases. And so what prohibits adoption is amongst some is just figuring out where do I put AI in to do this task? And how do I cybersecure it? How do I normalize the use of it in my work environment? We deliver a cloud-native platform that deploys AI to help bring that capability to providers in very intuitive ways that delight them, and we love that.

Our solutions are mission-critical. We want you to know that. This is the true definition of mission criticality. If you use our solutions, you get paid. If you don't use our solutions, your organizations don't get paid. And so in the prioritization of all the things that providers have to grapple with and face, they tend to prioritize revenue cycle as a category and therefore, our platform as a category because it's vital to how they operate, and we're bringing clarity and simplicity to their environments. We have proven and durable solutions and outcomes. And I'll show you an example of a few of those in just a moment.

There's very little tolerance for air in a highly regulated industry like health care. You don't vibe code something overnight and then deploy it because of the tolerance for air is so low. The cost for being wrong is very high due to penalties in how you handle and manage data and how that data ultimately is deployed to effectuate payment. We have a massive proprietary data advantage that I'll describe to you in just a moment.

When you look at our platform and what we're building, we're very excited about our increasing market reach. We serve over 1 million providers, as I mentioned a moment ago, across more than 30,000 client organizations. We have fabulous diversification in our business. In fact, our top 10 clients account for about 11% of our revenue composition. We reach through the providers that we serve, approximately 60% of the U.S. patient population each year. Now we may only have -- if you were to take a typical patient, they may have 10 health care encounters a year. We may only help a provider interact with one of those 10, but nevertheless, we're reaching them. We're helping to facilitate and optimize an interaction between provider and patient that we know statistically delights both.

Within our software, we're processing 1 out of every 3 clinical patient discharges from an acute setting in the United States. So in addition to the more than 7.5 billion insurance transactions we process each year that constitute nearly $2.5 trillion of gross claim charges, we get tremendous clinical information that we're able to use because we're a covered entity and we're a modern network, we naturally aggregate information as it flows and passes through our system. And that proprietary data gives us the right -- we're able to use that data in most cases, to be able to train our software, train the AI models that we deploy to continuously improve.

You can see our software is a workflow platform. It's a cockpit, if you will, organized from the front end of the experience that maps a patient's journey interacting with the provider to the clinical middle part to the back-end reimbursement and collection and payment remittance part. We have software modules that basically reduce the need for manual work. Beginning at the front end through things like insurance eligibility detection, we help providers understand whether or not a patient has any form of insurance. We also can detect insurance coverage for a patient if they show up to see a provider and they may not even know if they have access to insurance. There's something very noble about that.

Understanding the patient's wherewithal and insurance, we run things like propensity to pay algorithms in the background. So we help the provider understand who that patient is. For example, a patient may have the wherewithal to pay, but they may have been conditioned to not pay their health care bill the first time they see it. And so we help educate the provider who the patient is. If the patient is a self-insured case or a self-paid case, we also can help the provider understand if that patient is eligible for charity care. And if they're eligible for charity care, the provider sees the patient and then the cost of that service is often added to a charity care dollar amount that the provider is performing each year. And they typically get a tax credit or some favorable treatment by the government for caring for that patient. So it's all a net good thing.

When you move to the middle part of our business, that historically very difficult part of the accounting or reckoning for the health care interaction between a provider and a patient when the provider sees the patient, then they have to document what they actually did so they can accurately account for and form an insurance claim and then submit that claim to the payer and get reimbursed for it.

What's interesting is we have AI. In fact, we deploy over 150 AI models beginning at the front end of that clinical interaction between provider and patient, oftentimes taking unstructured clinical information from the patient chart as either notated or scribed by the provider. And then through filtration, we're able to, on the other end of that middle part of the revenue cycle, accurately account for the diagnostic codes used that reflect the encounter that the provider had with the patient, use those diagnostic codes in the formation of a highly accurate claim.

You can see where this is going, right? Historically, that was done very manually. So sometimes there was missing charges or codes. Sometimes it wasn't accurate at all. Sometimes there was overcoding. And so what our software using AI does is create an accurate reflection of the encounter that then we use to create the perfect claim that cannot be denied. And when we do that, we reduce the need for manual work, manual rework or errors tremendously, and we help drive to accurate payment quickly.

In the minds of provider decision-makers, our software helps address 4 things. The first is we help reduce the overall cost to collect. Historically, the average in the industry is about anywhere from 6% to 7% or 10% of that is software, let's say, and 90% of that is human labor. What we do invert that, where we can say 80% of that should be addressable with technology, 20% of that could be keeping an expert human in the loop to monitor the progress while we lower the cost to collect.

The second thing is we also drive to more accurate payment. That's what providers want. That's what payers want, too, and that's what patients want. And through the use of technology, smart technology, we're running algorithms to test and detect across the 7.5 billion proprietary data points that we process each year on our platform to help the provider understand, yes, this is an accurate combination of codes that can be used to submit a claim. The third, of course, is to compress the time to payment. And statistically, as I'll show you in a moment, we do just that.

Fourth, of course, is the need for a cybersecure working platform and a solution. The penalty for not being cybersecure is very high. And we take our cyber posture very seriously in a world of bad actors. We're mindful and try to be dutiful. And increasingly, as we interact with provider decision makers as they see our software platform. They ask us to attest for cybersecurity because of the demand and the need for that throughout their organizations.

We often displace point solutions. A point solution might be represented by any one of those small plus signs toward the bottom. But when we deploy our software and we show up in a competitive environment, we often talk about the benefits of using more and more of our platform and expanding the relationships with clients over time as we displace point solutions historically.

We believe that there are at least 4 pillars that enable Waystar's right to win in AI. First, we have a mission-critical system of record and system of action that drives to real outcomes in the reduction of cost to collect in the optimization for yield on each insurance claim we process and the compression of time to collect while being cybersecure. And we're doing it at scale. We also have an unmatched proprietary data advantage given the massive data that we custody and curate and are able to use in HIPAA-compliant ways to drive decisions to create optimized tools that help providers and to reduce the need for manual work.

And imagine in your minds, there's a lot of talk about AI today. Imagine that if everybody is using a foundation model at the same pace, then what foundation model use doesn't become the long-term advantage if we're all using foundation models? There's a asymmetry at the pace at some future point. So the advantage has to become something else. We believe that proprietary data is at the heart of our advantage.

We also have a very deeply deployed network. And by that, I mean, we're deployed across over 1 million providers who reach to every insurance company in the United States, and we connect to all the different -- more than 530 different practice management and electronic health record systems. Deeply deployed, hard to displace or disrupt because of the value that we're creating for the providers that we serve. And we have domain expertise that act as deployed engineer equivalents that are constantly sitting chair side next to provider team members doing work in the revenue cycle to optimize the experience and to ideate around the future of what's possible.

I tell you, I get pretty excited about this but where the industry is headed is from a traditional RCM on the left, which is often siloed set of information, disparate data points to a more organized unified RCM in the middle, where now you have a cohesive platform, you have access to data that you can unify to begin to draw insights from, as I've described, to optimize your insurance coverage detection process at scale, to optimize your prior authorization automation and understand when you need to include medical necessity-based justification to the payer along the way, et cetera, et cetera.

So this is shared intelligence, shared data to create insights and opportunities and orchestrate what AI should be used at what moment in time. Not all AI is created equal or necessary. Foundation model AI is very expensive. The cost of tokens are very expensive. And in some cases, you need to deploy foundation models to be able to derive the benefit for -- that you're trying to achieve. In other cases, depending on how your data is organized and ours is organized in a cohesive platform, a unified data model, you can actually deploy a much more cost-effective instead of large language model, small language model on a look at data and manage the cost and orchestrate to bring the right AI to the right use case.

Ultimately, deploying agent after agent. And Waystar, as I've said earlier in the year, we're committed to deploying multiple agents through the course of '26 and beyond. We're marching our path toward the autonomous revenue cycle management platform. And at some point, we'll do away with the term cycle, and it will just be the autonomous revenue management platform. Work being performed oftentimes without an end user even knowing it behind the scenes while the organization, the patient as the individual and the payer all get the benefit from that type of platform. We believe that this is the way of the future and that Waystar is well positioned to march our way toward that.

We deploy a number of agents already, as you've heard me describe, and algorithmic and AI capability. But imagine even further orchestration as we work our way into the use of more proprietary, well-organized data to look beyond the platform level and the user interface to the orchestration level and then down to utilize proprietary data where agents are benefiting from every transaction we process. They're getting smarter and smarter from front, middle and back of the revenue-generating experience.

Again, data and health care is a long time and persisting challenge. Data tends to be very siloed. You could go back 10 or 20 years and you might say -- and we work with 16 of the top 20 hospitals and health systems in the United States and nearly 2,000 hospitals overall. But the vast majority of our clients operate outside of hospitals, too. They operate in ambulatory settings, 10, 20 doc practices, so to speak, orthopedic surgery groups, primary care physicians, post-acute and non-acute sites of care. You can probably picture in your mind where historically, data has been very siloed in these entities, tough to aggregate. Therefore, it's tough to create insights and tough to know if you're working in a primary care physician group on the West Coast, how do you get insights from the insurance interactions of a primary care group operating in the Midwest or in the Southeast or the Northeast.

And because data has historically been siloed, it's been very tough to drive those insights. The nice thing about Waystar is, again, we have the right, given the fact that we are a covered entity and we're able to traffic in this information to appropriately and carefully custody this information, combine it with the clinical, administrative and financial information we use to then unlock unprecedented automation, unprecedented insights and unprecedented outcomes for the clients that we serve.

We're going after a large and addressable market. Historically, you'd say, well, this is about a $20 billion a year market, becoming a $25 billion a year market. The midpoint of our guide in 2026 from a revenue perspective is just shy of $1.3 billion. So we're a sizable business and growing into this addressable market opportunity. But we see even more addressable market opening up. If you were to look at the amount of dollars being spent for services being performed inside hospitals, health systems and throughout the country in these ambulatory settings, there are market estimates that it's nearly $100 billion plus of annual spend.

If we can deploy AI and modern capability that can eat into and displace the need for those services to occur altogether, we dramatically enhance the addressable market opportunity in front of us. And we're very excited about what we're seeing and what's on our road map to track toward that much larger addressable market.

We're grateful for the clients that we serve. These are market-leading institutions that operate, as you can see, in every care setting across the United States. We don't work with any clients outside the United States today because there's so much opportunity within the United States to drive improvement. In addition to all these clients, we also work with a number of channel partners. As I mentioned, there's over 530 integrations that we support. And of those 530 integrations, of practice management and EHR systems being used across the country. We support over 200 active channel partner relationships who give us the right to call into their practice management or EHR clients and then begin to use Waystar in coordination or as a linchpin to help those providers get the full benefit of our modern solution.

We also work with the outsourcing firms that you may recognize listed on the lower right-hand part of the page. Our platform drives meaningful impact. As I mentioned a moment ago, we're helping to reduce the likelihood that a claim gets denied. In 2025, after launching a brand-new AI-based solution, in 2025 alone, we help prevent nearly $16 billion of denials.

We bring financial visibility to providers who desperately need it to operate their organization successfully. Our first half claim acceptance rate across the billions of insurance transactions we process is nearly 99%, meaning the payer accepts the claim and is able to begin to adjudicate that. And if we know that statistically, we can do a bunch of analytics and create insights that would inform oftentimes preservice what the likely patient financial responsibility is or will be and empower the provider and the patient with that information through software and AI capability that we have.

We can deploy our software very rapidly, so there's a rapid time to value benefit. It's leading to quicker payments and increased revenue to provider organizations. And that's how we compete in the market. We have strong win rates and we've had record bookings quarters. In Q4 of '25, we had an all-time record booking quarter for us, inclusive for those that know our story of the period of time where we had a competitor that was cyber-attacked, and we helped several thousand providers begin to use Waystar in early 2024. So we're seeing demand and the 4 demand indicators for our business are high given the meaningful outcomes that we drive.

We're delighting clients. We're pleased with that. We're market leaders in positive Net Promoter Scores. Our Net Promoter Score of 74 puts us amongst the most trusted brands in the world. We are ranked first in the industry in satisfaction. And in a day and age where people are desirous to use AI, but they want to use it in trusted ways, client trust really matters. And so we're grateful for the recognition and acknowledgments that we're receiving along these lines.

I just would highlight as I close, that we had strong Q1 performance to start the year, 22% top line revenue growth, 26% adjusted EBITDA margin -- excuse me, adjusted EBITDA growth and 43% adjusted EBITDA margins. We generate cash that we use to build our balance sheet and gives us tremendous optionality to invest in the business, to smartly deploy our capital, and we have fabulous retention rates.

And the last thing I'd highlight is, as we look at the growth drivers for our business in the future, we feel like we have a track record of expanding within existing clients, adding new clients every quarter, deploying and launching new AI solutions that show up in meaningful ways to our business model, reaching the market through expanding channel partner relationships and adding incremental payer connections to our business with new novel interaction types and then certainly on occasion through being very disciplined in our approach to strategic M&A. We believe we can be a great home for some novel technologies that we could tuck in and add to our business.

So we're excited about this. And I thank you very much for your time today, and I look forward to those of you that have questions in the follow-up session. Thank you, Ryan, for hosting me.

Thank you.

Yes. I appreciate it.

Good day, and thank you for standing by. Welcome to the Waystar First Quarter 2026 Earnings Conference Call. [Operator Instructions] After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Edward Parker, Head of Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, everyone, and thank you for joining Waystar's First Quarter 2026 Earnings Call. Joining me today are Matt Hawkins, Waystar's Chief Executive Officer; and Steve Oreskovich, Waystar's Chief Financial Officer.

This afternoon, we issued a press release announcing our financial results and published an accompanying presentation deck. You can find these materials at investors.waystar.com. Before we begin, I would like to remind you that this call contains forward-looking statements, which are predictions or beliefs about future events or performance.

Examples of these statements include expectations of future financial results, growth and margins. These statements involve a number of risks and uncertainties that may cause actual results to differ materially from those expressed in these statements. For a full discussion of the risks and other factors that may impact these forward-looking statements, please refer to this afternoon's press release and the reports we filed with the SEC all of which are available on the Investor Relations page of our website.

Any forward-looking statements made on this call are as of today and will not be updated unless required by law. We will also discuss certain non-GAAP financial measures. These measures are intended to provide additional insight into our performance and should not be considered in isolation or as a substitute for financial information prepared in accordance with GAAP.

We have provided reconciliations of the non-GAAP financial measures included in our remarks to the most directly comparable GAAP measures, together with explanations of these measures in the appendix of the presentation slide deck and our earnings release.

With that, let me turn the call over to Matt.

Thank you, Edward, and good afternoon, everyone. Thank you for joining our Q1 2026 Earnings Call. Waystar delivered a solid start to the year reflecting strong execution across the business and our innovation road map as we continue to position ourselves as the market leader in delivering an end-to-end health care revenue cycle platform.

We drove strong performance across the core business, built on our innovation momentum, including our recent innovation showcase and introduced a new AI-powered recruitment solution. What differentiates Waystar is the tangible value we deliver. Our platform is purpose-built and integrates powerful LMs into our core workflows to drive meaningful ROI for health care providers, improving accuracy, reducing friction and lowering the total cost of operating the revenue cycle.

As requirements expand across payers, policies and workflows, providers increasingly choose embedded solutions they trust that deliver consistent financial outcomes. Importantly, the AI era is expanding Waystar's total addressable market opportunity meaningfully. Historically, revenue cycle technology addressed a roughly $20 billion software market. As we embed Agentic AI directly into mission-critical workflows, we're building toward what we believe is the future of this industry, the autonomous revenue cycle platform.

That shift unlocks a much larger opportunity, the approximately $100 billion in annual revenue cycle labor services performed across the industry today. We believe we are well positioned to automate a meaningful portion of this labor pool through new AI-powered capability launches like denials, prior authorization and recoupment.

In Health Care, where regulation and risk defines success. This shift is critical, and Waystar is built to win. Our AI advantage is anchored in billions of proprietary longitudinal, financial and clinical data points, deeply integrated workflows with significant switching and disruption risk. Hard one domain expertise that positions us as the trusted AI partner and proven ability to operate at scale in an environment with little tolerance for hallucinations.

Our first quarter results reinforce our conviction. Revenue of $314 million, representing 22% year-over-year growth. Strong retention supported that performance with net revenue retention of approximately 111% alongside continued adoption of our AI platform and approximately 99% first pass acceptance rates across the platform. With that context, let me highlight a few key points from the quarter.

First, our core growth drivers are durable. Continued expansion across the platform and solid core execution drove our results. We expanded within our installed base and demand signals are strong. Second, AI traction is accelerating. AI-powered capabilities drove roughly 40% of new bookings in Q1 and our clients leaned into the platform for prevention, automation and visibility rather than downstream rework.

That shift reflects the value of embedded intelligence across the revenue cycle. Third, we maintained discipline through near-term headwinds. A few factors pressured patient payment volumes during the quarter, reflecting broader macro and weather-related dynamics, but we held financial discipline while continuing to invest in innovation.

Steve will expand on these dynamics shortly. Let me discuss the quarter in more detail. We continue to expand our client base in Q1, adding 42 new clients with more than $100,000 in trailing 12-month revenue. Win rates exceeded our historical averages across segments, and we continue to see RFP activity shift toward platform evaluations over point solutions, favoring Waystar's unified mission-critical platform. We also delivered strong bookings ahead of internal expectations and building on a record Q4. Demand was broad-based, driven by both new logo wins and expansions within our installed base.

We continue to build momentum with larger complex provider organizations as they consolidate vendors and standardize on a single platform. Our implementation backlog is elevated across segments. We carry what we believe is the largest qualified sales pipeline in our history, reflecting deep multiyear platform commitments from providers and supporting visibility into 2027.

Waystar delivered adjusted EBITDA of $135 million in Q1, representing an adjusted EBITDA margin of 43%. Revenue mix elevated the margin slightly above expectations, which Steve will discuss. We continue to balance profitability with targeted investment in innovation and AI.

Turning to iodine. Integration is running ahead of plan and continues to validate the strategic rationale of the acquisition. Iodine extends Waystar into the mid-cycle where clinical intelligence plays a critical role in preventing denials and ensuring compliant reimbursement. The convergence of financial and clinical data represents 1 of the largest unmet needs in the revenue cycle and new third-party research confirms it. A recent study of 50 mid-cycle leaders found that 86% of organizations have financial and clinical systems that are completely siloed or are reliant on manual data transfers resulting in a lack of visibility into payer payment and denial outcomes, 100% expressed interest in a single AI-powered platform to bridge the gap from mid-cycle to the final claim.

We'll publish the full study in the coming weeks, but these findings reinforce why we acquired Iodine and the demand signal we're seeing in the market. Iodine's AI talent is now fully integrated into Waystar, accelerating AI initiatives across the combined platform.

We're generating early cross-sell traction in both directions and go-to-market demand is exceeding our expectations. Last quarter, we outlined the 4 interconnected pillars that position Waystar to lead in the AI-powered revenue cycle. Now I'll focus on how those pillars translate into outcomes for providers. First, Waystar is the mission-critical infrastructure providers depend on to get paid, operating at scale in 1 of the most highly regulated payment environments, directly inside live revenue cycle workflows, eligibility, authorization, claims, denials, appeals and payments.

This results in very sticky long-term customer relationships. Second is our proprietary data at scale. We process over 7.5 billion transactions each year and with Iodine, our models now learn from clinical data on approximately 1/3 of U.S. hospital discharges annually, giving us visibility into the financial and clinical dimensions of reimbursement, not just what happened, but why?

Our models learn across hospitals, physician practices and ambulatory settings. Every claim, denial and payment improves performance. Clients benefit from patterns across tens of thousands of similar organizations. Third, Waystar operates a deeply deployed multisided network and proprietary data rails between payers and providers. We connect over 1 million providers to every major payer through 100,000-plus live integrations across electronic health records, practice management systems, clearing houses and clinical platforms.

We touch roughly 60% of the U.S. patient population each year, yet we only penetrate a small portion of the total transactions those patients generate. As volume increases, our platform delivers better outcomes. Fourth, Waystar combines scale distribution with deep domain expertise. We serve providers across all care settings with low client concentration, creating both resilience and broad reach. Our forward deployed teams, product, clinical, revenue integrity and client success work directly inside real workflows.

We develop and refine many of our AI capabilities in close partnership with clients, ensuring what we deliver works in production. With that foundation in place, let me turn briefly to how AI is operating and evolving across the platform today. At Waystar, AI is embedded directly inside workflows and where decisions are made and dollars move. The platform identifies issues upstream, resolves them inside live workflows and learns continuously from outcomes.

This quarter, we accelerated the shift from task level automation toward Agentic workflows. Each step moves us closer to the autonomous revenue cycle where the platform absorbs the administrative burden, so teams can focus on exceptions, strategy and patient care.

Today, approximately 50% of our solutions leverage AI and nearly 40% of revenue is generated by AI embedded workflows. At last week's spring innovation showcase, we introduced several net new capabilities that expand AI embedded workflows across the revenue cycle including deeper convergence of financial and clinical intelligence to prevent issues before billing and expanded Agentic intelligence that assesses documentation, prioritizes opportunities and guide next steps directly within live workflows.

Early deployments are delivering strong outcomes. Our new prebill anomaly detection solution delivers an estimated $3 million in net revenue per 10,000 patient discharges and a 5x return in recovered revenue over 3 years. New Waystar altitude AI-powered capabilities within our patient financial experience are expected to drive a 50% increase in collections meaningful in a market where patients account for more than $556 billion in out-of-pocket spending.

Some of the most damaging revenue loss in health care happens after providers have already been paid through payer recoupments. Payers regularly take back funds from previously paid claims, often months or years later by offsetting them against future payments with little transparency into which claims are involved, why the funds were recouped or whether the action is even valid. Based on our industry remittance data analysis, we estimate payers take back over $40 billion from providers each year through these offsets, and recruitments are growing at more than 2x the rate of overall claim volume creating significant accelerating cash flow volatility. Waystar's new recruitment solution built on Altitude AI brings transparency to this process.

Providers can now detect previously hidden recruitments, understand the root causes and take action efficiently, all using remittance data at scale. Early results are compelling. Providers are reducing recruitment reconciliation time by over 80% and 1 early adopter health system matched $32 million in revenue risk, work equivalent to approximately 13 full-time employees.

This new SKU integrates quickly for existing clients and demonstrates how we convert administrative complexity into financial outcomes through AI. Looking ahead, our priorities are clear: execute against our product road map with AI embedded deeper into every workflow, drive cross-sell and platform adoption across our installed base and maintain operational discipline while investing in the capabilities that widen our competitive advantage. Q1 reinforces that our role in the health care ecosystem is deepening. We're operating at the intersection of complexity, scale and outcomes, and our platform is engineered for exactly this environment. Before I turn the call over to Steve, I'm pleased to share that will be hosting our first Analyst Day on Tuesday, August 25, alongside our annual Waystar True North Client Conference. You'll hear directly from our customers partners and leadership team, we hope that many of you can join us.

With that, let me turn it over to Steve.

Thanks, Matt. Revenue increased 22% year-over-year in the first quarter to $314 million. Organic revenue grew 11% year-over-year. Performance in the quarter reflects strong execution across the business and expansion within the customer base. Bookings exceeded internal expectations and include a double-digit count of $1 million-plus annual value contracts, which is above our historical quarterly performance. These contracts have both longer lead time to revenue and attractive profitability.

Clients generating more than $100,000 of revenue in the last 12 months increased by 42% in the first quarter to 1,433 at quarter end, an increase of 15% year-over-year. Our net revenue retention rate also viewed on a last 12-month basis was 111% at the end of Q1, slightly above the historical range of 108% to 110%. Subscription revenue of $172 million for the first quarter increased 38% year-over-year, 3% sequentially and was 55% of total revenue.

On an organic basis, subscription revenue grew 14% year-over-year. The growth and revenue composition are in line with our expectations. Volume-based revenue of $139 million for the first quarter increased 7% year-over-year and 4% sequentially.

As we moved through the quarter, we saw some modest offsets within our volume trends that were most evident in patient interactions with health care providers and taken together, affected volume-based revenues. These headwinds were primarily concentrated in patient payment solutions, which represent approximately 25% of revenue and include a combination of external and client-driven dynamics.

Specifically, we saw accelerated conversion from print to digital patient statements as clients continue to focus on efficient ways to engage with patients. While we've been advocating for the shift to digital for some time, adoption in Q1 was ahead of historical rates, and we have updated expectations for the remainder of the year accordingly.

We also saw 2 factors affecting patient utilization of the health care system during the quarter, changes in health care coverage and weather-related impacts. Importantly, none of these factors were competitive or product-driven as evidenced by our strong bookings performance over the past 3 quarters and a record qualified sales pipeline at the outset of Q2.

Adjusted EBITDA of $135 million for the first quarter increased 26% year-over-year. The adjusted EBITDA margin of 43% was primarily driven by a shift to higher-margin solutions, specifically, provider solutions, which have higher margins and comprised approximately 75% of revenue organically grew year-over-year at double the rate of lower-margin patient payment solutions.

Please see our latest investor presentation for more details on historic growth rates of these 2 solution sets. Our capital position is strong with healthy cash flows as we ended the quarter with $159 million in cash, equivalents and short-term investments and $1.5 billion in gross debt. Unlevered free cash flow was $90 million in the first quarter and we converted 67% of adjusted EBITDA to unlevered free cash flow.

As of March 31, net leverage was 2.7x compared to 3x at the end of 2025, which aligns with our historical ability to delever 1 turn annually. As a reminder, we expect to run the business at or below a 3x leverage ratio. We are also pleased with the recognition of our efforts managing our capital structure as noted by both Moody's and S&P upgrading the ratings of our debt facility in the past couple of months.

Based on the first quarter performance and our current visibility for the rest of the year, we reaffirm our revenue guidance range of $1.274 billion to $1.294 billion, with the midpoint of $1.284 billion, representing 17% year-over-year growth and adjusted EBITDA range of $530 million to $540 million, with the midpoint of $535 million.

Our full year guidance at the midpoint continues to assume normalized organic revenue growth of approximately 10% consistent with our low double-digit long-term growth target. We expect the strong demand in booking activity we saw in the first quarter, along with similar results in the second half of 2025 to provide upside opportunity for growth in late 2026 and beyond. We are balancing that expectation with the near-term impact of the previously discussed offset, which we expect adjust the typical first half, second half of the year seasonality curve associated with patient payments to have much less variability in 2026 relative to the past couple of years.

Thus, while we previously communicated that we expect 1% to 3% sequential quarterly growth throughout 2026, with Q3 at the low end -- we now anticipate Q2 sequential growth to be flat to 1% in Q3 to be 1% to 3%.

This concludes our opening remarks. With that, we are ready for your questions. Operator, please open the call.

[Operator Instructions] Our first question will be coming from the line of Adam Hotchkiss of Goldman Sachs.

I guess, Matt, you spoke about 40% of revenue being associated with work flows related to AI. I think that speaks to the defensibility of the platform as you work AI into the existing solutions. But how should we think about the degree to which AI can be additive to your TAM and show up as rating revenue growth.

I guess I'm just trying to marry the stability of the current organic growth rate with some of the AI strength you're calling out in numbers and how we may see AI SKUs impact revenue growth in the future?

I appreciate your thoughtful question about AI. One of the things that you heard us just speak to, I believe we've provided a slide or 2 this quarter and in the past is a much larger total addressable market that we're able to go after by deploying AI capabilities that replace manual services.

We note that a recent McKinsey report stated that that this ongoing shift in value pools from services to technology and software platforms will expand its incredible addressable market opportunity. And so I think what you see with our recent spring innovation showcase launch where we are consistently pointing people towards the autonomous revenue cycle platform and then delivering new AI-powered capabilities, whether it's the new recruitment SKU that we highlighted or it's things that show up in our innovation showcase like the prebill anomaly detection solution that replaces manual work from needing to take place.

It's going to allow Waystar to pursue a much larger addressable market opportunity. We're very excited about that. We view AI as a tailwind and as the biggest opportunity in our lifetime.

Our next question will be coming from the line of Charles Rhyee of TD Cohen.

I want to ask about the comments you made about volume-based revenue is, obviously, it looks like patient revenue was up about 4% in the quarter. It's been going up more about 8% the last 2 quarters prior. You made some comment about accelerated move from print to digital building.

Just curious, why would that necessarily have an impact in you did call out weather, but are you able to sort of isolate how much maybe weather might have had impact on that? Just trying to understand a little bit what's happening there and how we should think about patient payments to look as we think about the guidance, particularly as the 2Q commentary on flat revenue. Any help there would be helpful.

Thanks, Charles. Let me start and then I'll turn it to Steve. We certainly work to be transparent with what we observed taking place in the business. And we did highlight couple of the offsets in the transaction volume. Most of that was a function of this dynamic of the acceleration of conversion from print statements to digital statements.

We've talked about this for quite some time. We know that there's this tremendous digital transformation opportunity that exists in health care, where we reduce paper and postage and take cost out of the system while we actually increase the patient experience and ensure that we get providers paid accurately and successfully.

So we view this digital transformation as ultimately being good for providers, good for patients, quite frankly, good for the earth and good for Waystar. And Waystar has digital integrated patient payment solutions that improve transparency, improve the patient payment plan adherence and really are also helpful to providers. So I guess I'd say 1 other thing and then we can comment on some of the quarterly commentary, and I'll ask Steve to help us there.

I'd say it's important to note that while we see this trend -- and we're kind of factoring that into how we think about 2026, we view this as an opportunity. We view this transformation as something that's good, as you've heard me describe, and this offset, if you will, has 0 to do with AI competition and more to do with doing what's right for health care. And so with that, Waystar can be an enabler of that. And I'll turn it to Steve for added commentary.

Yes. And hopefully, Charles, when you get a chance, I guide you to look at Slide 8 of our IR deck. We expanded it to include the split of provider and patient payment solutions revenue by quarter and the historical trends since the first quarter of transparently, most people could have picked it up from our filings, but you felt that it just made more sense to illustrate it here so you can actually see the same things that we're seeing going on in the business into.

To Matt's point, right, you continue to see the strength of the business and growing in Provider Solutions, which are 75% of the total revenue. And we talked about in the past, very high margins when we look at it from a very low direct third-party costs associated with it. Over the past 6 quarters, that's continued to grow nicely on an organic basis, which we also called out on the slide, anywhere between, on average, 13% to 14% year-over-year.

The offsets we talk about are in, and as you mentioned, inpatient payments that 25% of the revenue stream where we're helping providers connect with and interact with and get paid by patients. And that's where we're seeing that conversion of -- from print to digital statements.

Transparently, that does impact the top line revenue number on a unit economic basis. But when you look at it from a margin dollars or a cash flow, that conversion is neutral. So we see positivity long term in the business there, because it's going to allow us to see margin accretion in the business overall. A little bit of that, what you see in the first quarter here as well, and we called out based on the revenue composition for the order.

So hopefully, that's helpful commentary, and it's a good spot to go look and really dive into the details on that impact.

And our next question will be coming from Jailendra Singh of Truist Securities.

I wanted to follow up on your comments that about bookings coming in ahead of internal expectations. I think you talked about 40% new bookings driven by AI solutions, and I petite all the color there. Can you elaborate on the remaining 60% bookings? Are there any particular areas that are seeing outperformance -- and considering the rates we are seeing between payers and providers, are you seeing an increased genes from providers, which might result in a faster conversion than what we have seen in the past?

Thank you, Jailendra. Yes, we note that we've just seen nice momentum and I feel like our business is getting better and better every quarter. the bookings momentum is across both new prospects as well as cross-sell and upsell. We are growing across every segment of our business with high-quality opportunities. And as we -- it's interesting, we look at the size of the bookings, just a little color commentary here, we called out in the last 2 quarters of 2025 that the number of million dollar bookings were more than 2x the quarterly average of the past 3 years.

That trend is continuing. We're seeing more large bookings. To us, that validates our platform approach as these these bookings are often multi-solution or platform sales often involving AI that hopefully can be turned on faster. Generally, cross-sell and upsell bookings, we're able to build in an implementation plan for existing clients. But given the larger nature, whether it's new or existing, if these bookings are larger in size, they're still taking 6 to 18 months to show up in our revenue model.

And we've noted in the past how larger deals typically take this type of time for full revenue realization. But certainly, we have internal teams focused on compressing that time. It's just a balancing act. Sometimes it's what the actual provider organization. Overall, we're pleased with the progress that we're making. We start Q2 with the largest qualified pipeline of new and cross-sell upsell opportunities in our history. So that gives us a sense of momentum and conviction about the work that we're doing.

And we also start -- as you might anticipate, at the start of Q2, a large implementation backlog. So hopefully, that commentary is helpful, Jailendra, I appreciate your question.

And our next question will be coming from the line of Ryan Daniels of William Blair.

Matt, maybe 1 for you. You talked about early adopters of the payment recruitment solutions, seeing some very good ROI -- and I heard in your prepared comments, you stated that was a new SKU. So it sounds like a new AI-enabled revenue generation opportunity. So what I'm hoping you can dive into a bit more is how long does it take for solutions like this to kind of go broadly across your client base?

And then also, are you doing any go-to-market changes given the potential increased value of solutions like this that are new and AI enabled that can really add value on a rapid basis. Thank you, Ryan. We're sure excited about this new EI powered recruitment solution. It does represent a new SKU.

And as you've heard us speak to in the past, -- these AI-powered solutions have multiple ways to show up into our business model. First, certainly, longevity of clients and sustaining sticky relationships with clients Second, pricing, AI solutions, where we're strengthening in some cases, existing software with more LLM based AI capability. We price those to value for clients as we're delivering incremental capability.

In the case of a new SKU like this, like this AI-powered recruitment and what will soon follow in the prebuild anomaly detection solution. If I were to pull back the curtain just a bit we go through an extensive amount of training for our teams.

So certainly, the product and technology teams are stoked to build these kind of capabilities and to launch them. We do have a robust early adopter program. We're getting great feedback from some of the leading provider organizations in the United States. This is a robust kind of test and learn environment once we get ready to launch this, we also brought along our go-to-market teams, our product marketing teams.

We do a little bit of outbound product marketing to build excitement and webinars and things that will educate provider organizations on the benefits of these types of solutions, while we're training our go-to-market teams. Just last week, we were at a growth summit. We had several hundred people engaged in hands-on training on making sure that we're able to talk about these solutions, get these solutions into the hands of provider organizations and do ROI calculators, things like that. And then along the way, we're training our operational teams as well to be able to implement these solutions.

Depending on the -- and they do a fantastic job I might add. But depending on the SKU we're able to turn some of these things on rapidly. And to your question, we're always exploring ways for us to turn on new capability in a way that clients can absorb it into their -- into the platform and begin to use it and get the benefit of it.

So that often involves training and some educational component. And the nice thing about our platform Ryan, is we're conditioning end users to consume AI in a construct that they understand. And as you know, we deliver hundreds and hundreds of capabilities onto our platform each and every quarter. We want people to understand the power that they have. And sometimes the technology is a little bit ahead of where the human factor is.

And so -- it's not just about turning this capability on and on the platform. It's about making sure that providers can get the benefit that they want as they begin to consume this exciting new AI capability.

And our next question will be coming from Craig Hettenbach of Morgan Stanley.

Great. Matt, I just had a question. When I think about how fragmented the revenue cycle management space is your comments around kind of point solutions versus platforms -- what do you think is the tipping point in terms of driving a faster acceleration towards platforms?

What are some of the things you're hearing from your customers and seeing in the market?

Thank you, Craig. It's interesting. There's a lot of excitement right now. This is -- it's not necessarily a new phenomenon. Our health care and the revenue cycle space has had a long history of point solutions. And it was our vision from the very outset that Waystar could create an enterprise caliber end-to-end integrated platform. And that came -- that vision came from actually showing up and talking to provider organization decision-makers who are, quite frankly, fatigued at using point solutions.

When you use -- I was -- the example that I've given recently was I was with a CFO -- excuse me, a CIO of a very large system not long ago, and very impressive lady. She said, Matt, can you help us, can your platform help us? I currently use more than 12-point solutions just to manage our revenue cycle process.

And of course, that's where the platform approach really comes to play. What we hear providers want increasingly, they want a regulatory compliant, cyber secure, deeply integrated platform, and they want to be able to call 1 person, 1 organization to help them across the platform to be able to tackle their most persistent challenges. And I think that's where Waystar -- that's where you see the momentum and the size of the deals that we're signing the quality of our pipeline start to show up.

The forward demand indicators to us mean that there's more excitement about our platform than perhaps ever before. This is what we were dreaming of 8 years ago from Waystar. So hopefully, that context is helpful.

And our next question will be coming from the line of Sean Dodge of BMO Capital Markets.

Yes. Maybe just kind of staying on this AI and how that likely changes the market. Matt, you talked a lot about embedding more AI and waste or offerings and that driving more value for clients. You also talked before about pricing to value, so adjusting the revenue model in a way that helps waster participate in some of that value creation. I guess what do you think the time lines are that, that likely happens over this kind of idea of pricing to value.

How near term of an opportunity is that? And then like how big of a paradigm shift is that in your pricing approach? I guess you guys have always tried to price the value. So this is just kind of what you've always done.

Yes, Sean, that's a great question. Let me speak to that. I'd say we've always priced to value that we deliver. As we deliver these AI capabilities and in a way that clients can absorb them, we're very excited about it. I think this is a long-term opportunity for us to truly price to the value that these are delivering. When we call out in our prepared remarks on the earnings call, the type of impact oftentimes will associate the reduction of manual work and the number of people involved in historically doing that manual work.

And so we know that there's impact in the solutions that we have to offer. Now I would say we're already monetizing AI through our core business model. So part of this really isn't a science project by trying to tie it to modules or outcomes or operating discipline in a new way. We're already doing that. But also this does give us a chance to reflect on the continued effort to price to value. We know that the human labor factor in health care is the most expensive expense line in most health care organizations. And so if we can help then those people become even more productive and focus on higher order, higher value work. And we're doing our jobs, we're delivering AI in a way that can be very constructive to those organizations.

And so while we don't want to disclose too much on our pricing philosophy on a public call, I think what I'd also say is that we're -- we've always been a consumption-based pricing model. We've always deployed amazing software and AI capability that ties to the actual business activity in an organization. We're not a per seat fee-based company were tied to consumption and successful outcomes for the organizations that we work with.

Our next question will come from Stan Berenshteyn of Wells Fargo Securities.

I wanted to ask about the sales cycle. You obviously called out you have a lot more SKUs. You're generating much larger sales on a per client basis. And obviously, this requires your sales reps to do a bit more learning perhaps the clients have to do a bit more educating on what you're offering, how is that impacting the sales cycle? Any changes in the conversion rates as we think about this year and next year?

Thanks, Stan. I wish I could have taken you with me to our Growth Summit that we hosted just last week. It felt like an NFL mini can because we take our growth account executives, and we feel like they're the finest best in the industry.

We expect them to be very productive, very focused. These are very well-trained people. And our goal, if we do this right, is we want to consistently be delivering them new capability to introduce to clients and to prospects. First and foremost, we take a platform approach -- and so you can imagine that it becomes really additive to the platform every time we're talking about a new high-value AI-powered solution and our growth team loves that. So we have a methodology that we follow. We have great people in our training and development and strength and conditioning if I can use the NFL analogy and -- we have a really great team of people who want new product.

And as we give it to them, it shows up in the type of demand statistics that we've talked about, elevated really nice bookings higher deal sizes, a great qualified pipeline that we work with great sales leaders to qualify that pipeline, and it allows us to get traction and create some longer-term vision towards what can we build towards. So I hope that commentary is helpful, Stan.

But yes, they're always eager to get more solutions, and we take training very seriously, so we can empower great people to go help us grow.

And just to kind of reiterate, is that impacting the sales cycle at all given the shift towards more SKUs and larger sales?

And let me say that it is not. We've highlighted that each of the segments that we sell to have different sales cycles. And along the lines of your thoughtful question, hospitals and health systems tend to be 12 to 24 months sales cycles. Certainly, depending on the size of a nonhospital or an ambulatory type organization, those sales cycles can be or shorter in length. But we're not noticing a compression of time or any elongation of time.

We are also seeing elevated win rates. So as we're introducing new solutions, if anything, the validating point is that sales cycles are staying the same and we're seeing elevated win rates.

Our next question will be coming from the line of Ryan MacDonald of Needham & Company.

Matt, maybe we'll give you a little bit of a breather on this one. I got 1 for Steve on margins. Steve, I'm curious as how we should think about sort of the pacing and magnitude of incremental investment as we go throughout the year. Was there anything in Q1 in terms of investments where you sort of held back or pushed out to later in the year? The reason I ask is, obviously, has historically been sort of the low watermark from an adjusted EBITDA margin perspective.

And sort of based on the implied guidance, even if you run rate out Q1 adjusted EBITDA throughout the remainder of the year, we're getting to that sort of $540 million sort of high end of the range. So just wondering if the -- what the puts and takes there that with the reaffirmation of the guidance.

Yes. Certainly, Ryan. So our focus and where we're reinvesting back in the business hasn't changed to start with, right? It will continue to be an innovation in the client experience in cybersecurity. So no changes to areas of focus. To your question on the 43% margin -- adjusted EBITDA margin for the quarter versus 42% in overall guidance.

And you are correct, typically, Q1 tends to be a little lower. That really truly is what we're seeing in the growth of the sort of the revenue breakdown that I had mentioned earlier with the provider solutions growing at a faster rate and having a much higher bottom line contribution than patient payments. Now the 1 thing just to be -- as we look out for the full year, with some of the offsets we talked about and some of what you're seeing in patient payments and the interaction in the first quarter of the year, we do expect that first half of the year, second half of the year variability that we tend to see, just seasonality that we tend to see in that business to be tighter to the normal or if I could say, a lighter beta than we've seen in prior years.

So we would expect a little bit of that happening to the shaping it throughout the year, but there's nothing from an innovation or an investment perspective that we were light on from where we expected to be at in the first quarter. So good opportunity to continue to drive exceptional margins throughout the rest of the year.

Now our next question comes from the line of George Hill of Deutsche Bank.

I'll say, Steve, I've got another 1 for you, which is can we unpack the slowdown a little bit more in the Q2 expectations for the volume-based revenue -- and I think a lot of this in services have seen a slowdown in utilization kind of in the first part of Q1 as it relates to flu and weather. Is this like a paper to electronic conversion process -- is this a claims lag issue, which is why you guys are seeing it in Q2? Is it you guys haven't seen the reacceleration or the uptick yet. I'd really like just to understand more of the mechanics of the accounting and what you guys are seeing -- recognizing it's 25% of the revenue.

Yes. Certainly, George. So weather had an impact in the first quarter. We wouldn't expect knock on wood, wouldn't expect an impact going forward for the rest of the year. It is primarily the conversion of print to digital statements and then also a little bit of the utilization of the health care system by patients.

Now typically, to your question specifically on the second quarter and the shaping, typically, the second quarter tends to be 1 of the stronger utilization quarters historically that we've seen -- right now, what we're seeing with the printed digital conversion and how we're seeing that play out from a rest of the year perspective. Do you think that largely offsets what we see in sort of the the patient visitation uptick.

So that's really what we're looking at and how we're sort of giving the guidance for Q2 and then the rest of the year. Now the rest of the year is an impact of why we're seeing strength there. Some of those longer term -- the larger deals that we've seen and we've talked about in the Q3 and the Q4 time frame -- that we've previously said and still believe on the whole, they tend to take longer lead time to revenue more towards that 18-month side of the 6 to 18-month sort of full ramping period.

We're also seeing some good opportunities, as Matt had mentioned, working with clients to move some of those clients and get them up and running and seeing that ROI faster, positively impacting the back half of the year. And I know you're familiar with it, George, on the seasonality aspect in patient payments, especially in the processing of collections tends to be with those -- that segment of patients that are on high deductible plans, which that generally causes that seasonality aspect.

But for others on there, did want to mention that, and that's really why we see in that 25% of the revenue sort of that first half, second half of the year dynamic.

Our next question will be coming from the line of Daniel Grosslight of Citi.

This is Louis on for Daniel. I just had a follow-up. You noted earlier in the call that AI drove 40% of your bookings, and I know that you offer a broad array of AI products and not just products like Dale, can you give more details if providers are more in just the new or more innovative solutions like altitude -- or is the demand just for AI broad across your portfolio?

Thank you for the question. We know that providers are very interested in the use of AI to help them operate and run their businesses. And we know they want to use AI, but they're reticent to use point solutions, the vast majority of provider organizations aren't equipped to necessarily stand up their own technology teams, let alone teams that can support AI on a stand-alone basis in their organizations. And so they're looking for trusted partners like Waystar. I think as we engage, we know that there's certainly excitement around the new LLM or AI-powered solutions that Waystar offers.

There's also broader-based interest in some of our AI-powered solutions. AI is a broad category. So it would include machine learning and some data science that produces intelligence or insight -- and as you've heard us talk about in our prepared remarks, our deeply deployed multisided network, there's just so much learning that takes place on that network. As a result of all these different forms of AI.

That tends to be very interesting to provider decision makers. They're focused on outcomes. They want cybersecurity, they want efficiency they want industry compliance and to stay abreast with what's going on in the industry, and they want deep integration to the EHR systems that they may be using or the practice management systems. They may be using -- and they want the benefit of being able to do that at scale and get the learnings from thousands of other organizations like them and Waystar helps to deliver that to these providers.

And our next question will be coming from the line of Elizabeth Anderson of Evercore ISI.

Can you -- maybe to sort of macro-type questions. One, are you seeing any sort of change in anything as we're seeing hospitals have more difficulties on the financing side? And then two, are you hearing anything from your customers about like managed care companies and payers like back against some of these new solutions to do that? Any color on that would be super helpful.

Thanks, Elizabeth. We're seeing our solution which tend to get prioritized, as you've heard me talk about, because we're mission critical in nature and because we help organizations get paid for the services that they're rendering. We tend to get prioritized in the decision-making of things. And I think our pipeline and our bookings results and our financial results are a testament to that.

We continue to believe that, that will be the case. As we think about the -- you mentioned the payer provider tension, so to speak, and perhaps sometimes push back. I'm not sure exactly what you're referring to. But what I would say is we know that there are payers that are working to deploy AI capability to do the things that they're organized to do to make sure that payments are accurate to avoid broad waste and abuse.

And -- and sometimes that means they've denied claims, but they're increasingly using AI to do that. I don't know how an individual provider who isn't as deeply resourced as the deep-pocketed payers are could stand up against these payers by themselves. So we're really grateful to have to put waste are in a position where we can represent over 1 million providers and we can develop AI capability that leads to more accuracy in coding, leads to a higher first pass claim acceptance rate where the payer is accepting the accurate claim -- and that's leading to accurate payment, faster payment, a more efficient payment. And so we'd like to think that Waystar's role can be that constructive referee that intermediary that brings fairness and transparency to the marketplace that really needs it.

And honestly, we're also seeing outreach from a number of payer organizations directly who would like to talk about things like real-time claim adjudication for a portion of the claims that they're processing through Waystar. They're doing that -- and I think they're doing that as evidenced because they're seeing that we're bringing accurate plans. And so we'd like to think that we can help bring fairness and balance to this exchange between providers and payers.

Our next question will come from the line of Constantine Davides of Citizens.

Matt. I appreciate all the bookings color you provided. But I did want to just drill in a bit on momentum in the acute space, more specifically. And just wondering if you can describe how your execution and competitiveness are tracking there on the inpatient side of the market where you, I guess, historically had lower market share relative to what you've carried in ambulatory.

Thank you, Constantine. We're seeing nice momentum on the acute side. It's right. It's fair to say that when we formed Waystar 8 years ago, we had a small handful of hospitals and health systems that we're working with us. But today, we've built a really nice presence where approximately now we work with 16 of the top 20 hospitals and health systems in the United States.

We work with nearly hospitals in some form or another. And we're delivering them the message that we have a unified end-to-end revenue cycle platform that's marching towards an autonomous revenue cycle platform. And it tends -- that message is really taking hold. I'd also note that about 40% of our revenue today is hospital and health system or acute related. And we're excited about the progress that we're making in every segment of care, but certainly, the growth and continued momentum we see in the hospital health systems.

And I would now like to turn the call back to Matt Hawkins for closing remarks.

Well, thank you for joining our call today. We're very grateful for your interest and appreciate your thoughtful questions. As we wrap up today, I'd like to just reaffirm that our business is getting better and better every quarter. We're doing what we said we would do from the outset, and that is we're focused on disciplined execution.

This is now 8 consecutive quarters of strong revenue growth, EBITDA performance and cash flow above the consensus has allowed us to continue to delever. We've seen recent upgrades in -- by standard and S&P, excuse me, and Moody's and we're really grateful for the momentum that we see in our business.

And it's all possible because we have great people who buy into our mission of simplifying health care payments for providers so that they can spend more time caring for patients and less time trying to work through the administrative hassles that they do. So I'd like to just thank our team, thank our clients and thank our partners and we look forward to continuing to execute against our plan in 2026. Thank you.

This concludes today's program. Thank you for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Waystar Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, [Edward Parker], Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining Waystar's Fourth Quarter and Fiscal Year 2025 Earnings Call. Joining me today are Matt Hawkins, Waystar's Chief Executive Officer; and Steve Oreskovich, Waystar's Chief Financial Officer. This morning, we issued a press release announcing our financial results and published an accompanying presentation deck. You can find these materials at investors.waystar.com. Before we begin, I would like to remind you that this call contains forward-looking statements, which are predictions or beliefs about future events or performance. Examples of these statements include expectations of future financial results, growth and margins. These statements involve a number of risks and uncertainties that may cause actual results to differ materially from those expressed in these statements.

For a full discussion of the risks and other factors that may impact these forward-looking statements, please refer to this afternoon's press release and the reports we filed with the SEC, all of which are available on the Investor Relations page of our website. Any forward-looking statements made on this call are only as of today and will not be updated unless required by law. We will also discuss certain non-GAAP financial measures. These measures are intended to provide additional insight into our performance and should not be considered in isolation or as a substitute for financial information prepared in accordance with GAAP. We have provided reconciliations of the non-GAAP financial measures included in our remarks to the most directly comparable GAAP measures, together with explanations of these measures in the appendix of the presentation slide deck and our earnings release. With that, I would like to turn the call over to Matt.

Thank you, Edward, and good morning, everyone. Thank you for joining our Q4 2025 earnings call. Today, we're pleased to share Waystar's strong Q4 and full year 2025 results, reflecting the durability of our business model, the execution of our team and the trust providers place in our platform. 2025 was a defining year for Waystar. We crossed $1 billion in revenue, exceeded both our revenue and EBITDA guidance and achieved strategic milestones that strengthened our competitive position. We completed the acquisition of Iodine Software, adding more than 1,000 hospitals and health systems, deep clinical intelligence and significantly expanding our addressable market. This combination positions Waystar as the only platform with both clinical encounter visibility and financial outcome intelligence at scale. We also extended our AI leadership.

In 2025, Waystar AltitudeAI prevented more than $15 billion in denials for our clients, reduced appeal time by 90% and drove double-digit increases in denial overturn rates. We launched new agentic capabilities that cut documentation analysis by 40%, powered by data from 1 in 3 U.S. hospital discharges and more than 7 billion annual transactions. These results demonstrate accelerating demand for mission-critical AI-powered revenue cycle software and validate Waystar's ability to deliver meaningful ROI for providers. I'm proud of what our team accomplished in 2025. We entered 2026 with strong momentum, a clear leadership position and a platform we built to sustain durable profitable growth while delivering exceptional value to our clients. Let me walk through our fourth quarter performance.

Q4 revenue reached $304 million, growing 24% year-over-year and 12% organically. Both subscription and volume-based revenue contributed to this strength. These results underscore the mission-critical nature of our platform, elevated patient utilization and the successful onboarding of new clients. Waystar added 85 clients with trailing 12-month spend above $100,000, up from 30 a year ago and more than double last quarter. Win rates improved beyond our historical average of more than 80%, reflecting sustained competitive momentum and clear provider preference for Waystar's cybersecure unified platform. We delivered 112% net revenue retention with 97% gross revenue retention and a Net Promoter Score above 70. Cross-sell and upsell momentum in our large installed base drove this performance and reinforces how deeply Waystar is embedded in our clients' daily operations, serving as essential infrastructure for getting paid.

Waystar delivered a record bookings quarter in Q4, and we closed several sizable deals to cap off a strong 2025. We entered 2026 with a robust sales pipeline and the largest implementation backlog in our history. This demand signals strong customer confidence in our platform and reinforces our conviction in the durability of our low double-digit long-term growth outlook. Adjusted EBITDA reached $129 million, up 29% year-over-year with an adjusted EBITDA margin of 42.5%, exceeding our long-term target of 40%. Waystar continues to operate as a Rule of 50 business, pairing strong revenue growth with increasingly efficient operations. Our core business delivers durable organic growth. Iodine extends that strength through disciplined platform expansion, moving Waystar into the mid-cycle, a critical stage where payers deny roughly 60 million claims each year.

Together, we deliver full revenue cycle visibility through our unified financial and clinical platform. Iodine has more than 1,000 hospitals and health systems with only 35% customer overlap, expanding our addressable market and cross-sell opportunity. Integration is ahead of plan, and we now expect to realize over 90% of committed cost synergies in fiscal 2026. We fully integrated our commercial teams, and they are already producing results. In Q4, we generated cross-sell traction in both directions and built a robust new business pipeline. Market demand for the Waystar platform is strong. Unified financial and clinical data unlocks unique value and accelerates our innovation road map. Our next-generation pre-bill anomaly detection solution demonstrates this opportunity. We expect a midsized health system to recover $7 million annually in previously missed reimbursement, a 5x return over 3 years.

This is the first of many innovations only our integrated platform can deliver, advancing us toward a fully autonomous revenue cycle, including using clinical data to prove medical necessity for prior authorization and overturn denials requiring clinical documentation, all without human intervention. Now let me take a broader view on AI because it is core to who we are and where we're headed. While many new AI entrants add lightweight tools that sit on top of fragmented revenue cycle workflows, Waystar takes a fundamentally different approach. Our end-to-end platform gives us full visibility across the revenue cycle. including authorizations, claims, denials and payments and deep into the layers where complexity resides, payer policy, adjudication logic, diagnosis-related grouping and denial reasoning.

This breadth and depth makes Waystar the system of action, identifying issues upstream, resolving them inside the workflow and closing the loop on payment with minimal human intervention. For more than a decade, Waystar has deployed AI, including machine learning and advanced decisioning engines across revenue cycle workflows at scale, grounded in proprietary data and embedded processes few in the industry can match. We're extending those capabilities with LLMs, generative and agentic AI while maintaining control of the data, decisioning logic and outcomes that matter most to providers. Today, approximately 50% of our solutions leverage AI and nearly 40% of our revenue is driven by AI embedded in mission-critical reimbursement workflows.

In 2025, roughly 30% of new bookings came from AI-powered capabilities. This signal is clear. Clients trust Waystar to deliver AI that goes beyond assistance to enable agentic outcome-driven revenue cycle automation. We believe Waystar is well positioned to lead the next era of health care revenue cycle automation. The foundations of software moats are shifting in the age of AI from workflow stickiness and switching costs to a new set of structural advantages. Our strength comes from 4 interconnected pillars: mission-critical infrastructure, unmatched proprietary data, and extensively deployed network and scaled distribution paired with deep domain expertise. First, our platform is the mission-critical infrastructure providers need to get paid. Waystar is embedded directly in the flow of dollars, decisions and denials and our 97% gross revenue retention proves it.

Once clients implement Waystar, they stay. We reduce administrative burden, prevent billions in avoidable denials, accelerate cash flow and ensure reimbursement accuracy at scale. Our commercial model is aligned with consumption, which is a function of providers seeing patients. As Agentic AI streamlines workflows and reduces manual work, the durability of our model strengthens. Pricing is tied to claims, payments or prescribing providers, directly matching how value is created in the revenue cycle. Our multiyear partnership with Google Cloud's Gemini LLM accelerates innovation, and we retain control of the data, decisioning and outcomes providers care most about. As RCM moves toward agentic AI and autonomous workflows, our role deepens. Our agents act on behalf of providers, resolving issues, correcting errors and closing the loop on payment.

Second, Waystar has an unmatched proprietary data advantage. AI strength ultimately comes down to data, its scale, richness, structure and proximity to action. We operate one of the largest health care payment data sets in the United States, processing more than 7 billion transactions annually. With Iodine, we pair that financial depth with unmatched clinical data and our models now learn from approximately 1/3 of U.S. hospital discharges each year. We deploy AI across the full revenue cycle continuum from authorization and eligibility to denials and appeals. Our data advantage is self-reinforcing. Every claim denial and payment improves our models. When a provider uses Waystar, they benefit from the learnings of tens of thousands of organizations like theirs, similar size, similar payer mix, similar challenges. And because our data spans the full care continuum, hospitals, physician practices, outpatient surgery centers, our models see patterns no single organization or new entrant can match.

General purpose model vendors lack this real-time closed-loop proprietary data. Third, Waystar's platform is a deeply deployed multisided network, creating scale and connectivity that others cannot replicate. We sit at the center of the payer provider patient ecosystem, connecting over 1 million providers to every major payer powered by more than 100,000 live integrations across EHRs, practice management systems, clearinghouses and clinical platforms. We touch approximately 60% of the U.S. patient population each year and process billions of dollars in patient payments across our network annually. We built this network over more than a decade. It represents scale, trust and connectivity that cannot be bought or quickly engineered.

Every transaction flowing through Waystar increases network intelligence, sharpens model accuracy and expands our distribution advantage. The result, a platform that strengthens continuously with every client we serve and every workflow we power. Fourth, Waystar combines scaled distribution with deep domain expertise. We serve providers across all care settings with low concentration. Our top 10 clients represent approximately 11% of revenue, driving resilience, reach and durable bookings growth. Our go-to-market organization consistently delivers strong win rates, rapid time to value and compelling client ROI. Forward deployed teams, product management, revenue integrity, clinical documentation and client success experts work directly alongside real workflows. Dozens of clients codevelop and pilot new AI capabilities with us, validating outcomes before broad release.

We have already seen our AI-enabled engineering tools reduce manual work, in some cases, by more than 75%, and we expect further improvement as we scale these capabilities in 2026. These pillars enable our AI to deliver outcomes at scale. In less than a year, Waystar AltitudeAI has prevented $15 billion in denials and accelerated appeal package generation by 90%, turning work that once took days into minutes. Our network consistently achieves approximately 99% clean claim and first pass acceptance rates, driving faster, more accurate reimbursement. These outcomes expand our footprint, build trust and help providers improve margins while freeing staff for higher value work.

Last month, we shared our vision for Waystar's autonomous revenue cycle, a dynamic end-to-end agentic network that acts continuously within workflows, learns from outcomes and delivers meaningful financial results with minimal intervention. Providers don't want point solutions. They need trusted cybersecure platforms that unify financial, clinical and operational outcomes. Our product road map is robust, and we expect to launch several new AI agents this year on Waystar's platform. We have the data, the deployment, the distribution and the discipline to lead this next era of health care revenue cycle automation. We're moving with the urgency and the mindset of a disruptor because this moment demands nothing less. With that, I'll turn the call over to Steve.

Thanks, Matt. Please note that my comments regarding fourth quarter and full year 2025 results include a full quarter of contribution from Iodine. Revenue increased 24% year-over-year in the fourth quarter to $304 million. Organic revenue grew 12% and Iodine contributed $31 million in the quarter, slightly ahead of our previously communicated expectation. The growth reflects strong client retention and expansion, healthy patient utilization of the health care system and new client implementations. The quarterly results highlight our durable, predictable model of low double-digit revenue growth annually on a normalized basis. And the highly recurring volume aspect of health care provides us predictability, creating a notable differentiation compared to most consumption models.

For the full year, revenue increased 17% year-over-year to $1.1 billion. On an organic basis, revenue increased 13%, consistent with our long-term target of low double-digit growth. Clients generating more than $100,000 of LTM revenue increased by 85 in the fourth quarter to 1,391 at quarter end, an increase of 16% year-over-year. Roughly 1/2 of the increase in the fourth quarter was from the inclusion of Iodine clients. On an organic basis, the year-over-year growth rate is consistent with the quarterly average over the past 3 years. Our net revenue retention rate, or NRR, was 112% for the last 12 months compared to 13% organic growth rate over the same period. As we've discussed over the past several quarters, NRR benefited from the rapid time to revenue from clients impacted by a competitor's cyber event in early 2024.

Subscription revenue of $168 million for the fourth quarter increased 38% year-over-year and 25% sequentially. On an organic basis, subscription revenue grew sequentially at a similar pace as the past few quarters. From a mix perspective, subscription revenue was 55% of total revenue, which aligns with previously communicated expectations. For the full year, subscription revenue of $558 million increased 22% year-over-year. Volume-based revenue of $134 million for the fourth quarter increased 11% year-over-year and 1% sequentially. Consistent with our seasonality expectations, revenue from patient payment solutions was lower than the prior quarter. This was more than offset by sequential growth from provider solution volumes.

For the full year, volume-based revenue of $535 million increased 11% year-over-year with steady double-digit growth from both provider solution transactions and patient payment dollars. Adjusted EBITDA was $129 million for the fourth quarter at a 43% margin and increased 29% year-over-year. On a full year basis, adjusted EBITDA was $462 million at a 42% margin and increased 21% year-over-year. Our adjusted EBITDA margin of 43% for the fourth quarter benefits from approximately $2 million of realized acquisition cost synergies, reflecting 1% of margin improvement for the quarter.

Turning to the balance sheet and cash flow. We ended the quarter with $86 million in cash, equivalents and short-term investments and $1.5 billion in gross debt. Unlevered free cash flow was $80 million in the fourth quarter and $365 million for the full year. We converted 79% of adjusted EBITDA to unlevered free cash flow, enabling us to continue sustained deleveraging. As of December 31, net leverage was 3x, which is down almost 0.5 turn since the beginning of the quarter when we closed the Iodine acquisition. We expect to run the business at or below a 3x leverage ratio and delever in line with our historical rate of approximately 1 turn annually.

We continue to maintain flexibility within our overall capital structure and our allocation priorities remain unchanged: invest in the business to drive top line growth, evaluate disciplined acquisition opportunities and explore ways to enhance shareholder value. Looking ahead to 2026 full year guidance, we expect revenue of $1.274 billion to $1.294 billion with a midpoint of $1.284 billion, representing 17% year-over-year growth. Our full year guidance at the midpoint assumes normalized organic growth of approximately 10% with a similar implied growth rate for Iodine. We also expect revenue to grow 1% to 3% sequentially throughout the year, with the third quarter at the low end due to seasonality of patient payments.

Further, we assume utilization of the health care system by patients remains healthy throughout 2026 as the diversity of our client base and ROI from our solutions insulate us from the reimbursement rate pressures that may impact our clients. Lastly, as Matt mentioned, the record level of bookings and several sizable deals we generated this quarter contribute to our forward visibility. As a reminder, these larger agreements typically take 6 to 18 months to fully ramp, and we would expect many to land towards the longer end of that range, supporting our confidence in a normalized low double-digit revenue growth profile for 2026 and beyond. Please note that we have included a bridge from the 17% growth rate at the midpoint of guidance to the 10% normalized organic growth rate in the IR deck on our website.

We expect adjusted EBITDA of $530 million to $540 million with a midpoint of $535 million, representing 16% year-over-year growth and a margin of approximately 42% for 2026. This includes gross margins of approximately 68%, which is consistent with 2025. The 42% margin also includes an uplift of approximately 1% from realizing acquisition cost savings. Said differently, we expect to realize approximately $14 million of savings in 2026, which is over 90% of the committed $15 million we previously communicated and well ahead of the prior time line.

This reflects our commitment to quickly and successfully integrate Iodine. We are focused on reinvesting in the business in key areas we expect to drive long-term top line growth and remain confident in our ability to do so while being mindful of our long-term adjusted EBITDA margin target of 40%. This concludes our opening remarks. With that, we are ready for your questions. Operator, please open up the call.

[Operator Instructions] Our first question will be coming from Brian Peterson of Raymond James.

Congrats on the quarter. Matt, maybe I want to start off on AI, and I appreciate all the color you gave on the advantages you have in an AI world. But I wanted to understand when you talk to your customers and looking at RCM specifically, what is their appetite to kind of use LLMs and kind of build on their own versus buy from somebody like Waystar. Just wanted to understand how those conversations are going? And how can you kind of unlock some of that AI opportunity over the long term?

Our next question will be coming from Elizabeth Anderson of Evercore ISI.

I'll just let you respond to Brian's question, and then I can go.

Please standby.

Can you hear us okay?

Yes we can hear you.

Excellent. Let me go back to Brian's question about AI. I appreciate his comments regarding our quarter and also our position and our strength and the opportunity that we see in front of us to win in the delivery of AI. I would note that the vast majority of clients we talk to would rather integrate AI capability into their systems of record or action that run the backbone of their business, so to speak. And while there's some experimentation willingness and some exploration around how could we deploy AI or do some type of kind of science experiment within our organization, what we see is the vast majority of providers want to work with a trusted partner where they have a history of deploying AI in a cybersecure environment that's integrated and interoperable with other systems that they're utilizing.

And quite frankly, most provider organizations don't have the abundance of engineering talent that they need to kind of test and deploy AI. And it really isn't true to their core competency of taking care of patients. So we feel like Waystar is very well positioned to deliver AI as we've done so far and to continue that track record. Thank you, Brian, for the question. And sorry for the...

It's Elizabeth from Evercore. You've mentioned several new AI agents launching this year. How do you kind of think about that launching? Are those like individually incremental revenue opportunities for Waystar as it combined with Iodine too? Or is that something that you sort of see as like helping to increase the moat of your current AI offering or maybe some of both?

I believe it's a bit of both, Elizabeth. We're very excited about the product road map that we have in place, what we have ahead of us as far as delivering agentic capability to our clients and on our platform. Some of that will be brand new, and it will be a new SKU with new price to value, reflective of the value that, that agent is delivering to our clients. Other AI capability will add on to existing software modules that will bring incremental automation, and we're sure excited about that as well. As we think about monetization in general, the way to think about monetization of AI is this. First, if we deliver AI, it tends to drive retention and an elongation of a relationship with the client. So that tends to show up in strong retention results like the ones that we produce.

We also can impose an annual price increase that is reflective of the value that we deliver. And in this case, we're watching closely and seeing that when AI delivers incremental automation, we're able to reduce headcount associated with a manual task that is now automated given the agentic capability that we launched, we have the opportunity to price to value in that setting. And then the third, as I mentioned a moment ago, is the introduction of a new SKU, a new pricing, putting it in the hands of our go-to-market teams and selling it that way. So we look forward to further monetizing AI, but a lot of that is already showing up in monetizing through our core business model.

And our next question will be coming from Kevin Caliendo of UBS.

Just looking at the fourth quarter, you had G&A, R&D, D&A all stepped up. I'm assuming that's largely Iodine coming into the numbers. And I appreciate you gave us the $14 million in expected synergies to get to the margin guidance for the full year. I'm guessing, should we look at the 4Q sort of margin as the run rate for those individual cost centers and take out the synergies. I'm just trying to think about modeling the margins and where you might have additional leverage above and beyond that $14 million in synergy thinking through the fourth quarter.

Yes, Kevin, thanks for the question. This is Steve. I think to answer your first part of that question, you're correct. The step-up there does include the additional cost of one full quarter of Iodine in the fourth quarter. I think as we think about the guide for 2026, a couple of things to think about and mentioned in the prepared comments, we would expect similar gross margin in the high 60s for 2026 as we saw in 2025. In addition, well, to your point, there are opportunities that we're continually focused on to improve the overall margin profile.

We've set guidance at the midpoint of about 42% gross margin for 2026, which -- EBITDA, sorry, of 42% for 2026, which includes about 1% benefit from those cost synergies. And again, we're continuing to look and we'll find additional opportunities for cost savings. So that does exist. But right now, our focus from a capital allocation approach, and I mentioned it in the prepared comments, is to continue to reinvest in the business for long-term revenue and growth expansion. We've set the target, and we've probably beat the drum for quite a while now of low double-digit revenue growth long-term target. But obviously, the opportunities we see in front of us is how do we reinvest now to expand that ultimately in the years going forward.

And our next question will be coming from Ryan MacDonald of Needham & Company.

Congrats on a great quarter. I'd be curious, Matt, as you're having customer conversations, you talked about, obviously, there's a lot of new vendors in the space that are trying to sort of, let's call it, overlay generative AI functionality on top of their existing systems versus your approach, which obviously is deeply integrated and built sort of in an end-to-end platform. As you look at sort of how budgets are being developed and being allocated, are you seeing more sort of demand or sort of more of the conversations heading towards sort of one-off sort of more point solution functionality or SKUs from a generative AI perspective? Or is this creating, I guess, a broader, let's call it, refresh cycle where we might look at a sort of full end-to-end modernization within RCM? And how do we think those conversations develop over the next 12 to 18 months?

Thank you, Ryan. We're not necessarily seeing a clear delineation between a normal technology budget and an AI-specific budget. We are seeing willingness to -- from clients to embrace AI. And again, speaking to kind of our prepared remarks, they want to consume AI, but they want to do it in a very thoughtful way. I'd point to our recent Q4 results, the best quarter in our history, a really nice mix of new clients, cross-sell opportunities, AI embedded in those conversations. And we have -- as we start '26, we have a very robust pipeline of opportunities. And what we're seeing isn't necessarily just a point solution willingness. We're seeing clients wanting to embrace to your thoughtful question, Ryan, more and more of the platform approach, where there's an assumption that AI will be included in part of that platform.

If you looked at the -- our last 2 quarters of bookings in 2025, the number of million dollar bookings -- million dollar plus bookings in the last 2 quarters of 2025 were more than 2x the quarterly average of the past 3 years. And so what this signals to us is that our platform approach is working. It is displacing oftentimes point solutions in multiple vendors, and there is willingness by clients to embrace and explore AI in that context. We don't necessarily see that being fairly partitioned as a separate budget.

And our next question will be coming from George Hill of Deutsche Bank.

I guess, Steve, I'd ask you to break apart Iodine a little bit. The business did $31 million in the fourth quarter. The back of the napkin math looks like you're guiding to $125 million to $130 million for full year '26. So I guess it implies a little bit of the flattening there. I know that you guys are historically conservative as it relates to guidance. So I might like you to talk about that a little bit. And then maybe, Matt, like the question that goes with that is, what do you guys feel like you're seeing for AI market growth in the health care space? And kind of like I know that health care has historically been slow to adopt new technology solutions, but it would seem like the macro AI market may be growing faster than the AI market in health care. I would just love you to kind of talk about those dynamics.

Yes. George, I'll go first. We did in the prepared comments, mentioned we expect an Iodine year-over-year growth rate to be similar to the 10% normalized organic growth rate that we set aside or I commented on for Waystar for 2026. So I think our expectation would be a little higher than what you had mentioned, but somewhat in the ballpark there. And I think we see really good opportunities as it pertains to both the -- or the totality of the solution set from the bookings that we saw in the fourth quarter that Matt had mentioned and especially as we think through the $1 million plus bookings the metric that Matt had provided.

Maybe I'll just give a little bit more color on that before turning it to Matt to answer the second part of the question because I figure you guys are going to ask at some point. Maybe to put a range for you guys on the account for the Q4 and Q3 million-plus bookings number. That was in the 15 to 20 count range for each of the individual quarters. And as Matt had indicated earlier, that's 2x the amount we had typically seen on a quarterly basis for the past 3 years. So a healthy mix of both Iodine -- legacy Iodine solutions in that fourth quarter number as well. Matt?

Yes. Great, George. And let me speak to the general question about AI. And we feel like it's the biggest opportunity in our lifetime, and we're seizing it and making the most of it. What I'd say is LLMs are great tools and they're needed. And with specific to health care, it's time for the industry to embrace technology, perhaps instead of services and manual work that has taken place for far too long. We see curiosity and interest there. This underscores -- when you think about the LLMs in general, it underscores how important it is for us to have this now multiyear relationship with Google. But I think we talked about our relationship with Google's LLM even a couple of years ago in 2024 on one of our earnings calls.

And we're delivering AI, and I think there's some real interest. A few thoughts come to mind. While some software may be displaced by AI, other software platforms like Waystar are actually being strengthened. And AI is accelerating our ability to deliver capability. It's delivering strong results for our clients, and that's very important. I think trust, reliability and scalability matter more than ever, especially in regulated environments like health care, production-grade software has to be secure, scalable and accurate. And so we're really grateful for the relationship that we have with Google. As I think about the things that are required in -- a few things to keep in mind with respect to the mission-critical problems within the revenue cycle.

I won't opine broadly on health care, but just within the mission-critical problems in revenue cycle management, there are a number of things that are required. First, it's required to have rich and real-time proprietary data, not publicly available data. And you need a payment source of truth, and we have that at Waystar. What else is required? Well, cybersecurity is required when you're thinking about deploying AI. Regulatory compliance is required. Deep subject matter expertise is required. Deep integration and connectivity, strong distribution and client trust are required. And so when you think about this opportunity that we're seeing in health care, LLMs by themselves can't deliver those things, but companies can, companies like Waystar can. So we're excited about the AI opportunity before us.

Our next question will come from Stephen Valiquette of Mizuho Securities.

Just I was curious if you could provide a little more color on your assumption around the utilization of health care by patients remain, you said, I think, healthy throughout 2026. So how should we think about that, I guess, in the context of your historical baseline assumption of that 1% to 2% that you've talked about previously?

Yes, Stephen, this is Steve. We would expect it to be on the higher side of that 1% to 2% historically. It aligns with what we've seen coming through the fourth quarter and kind of the prepared comments as well that I made surrounding that. And we would expect continued nice healthy growth in both that volume-based aspect as it pertains to both patient payments revenue, which has historically been about 30% of our total revenue, mixing Iodine and going forward, it probably gets closer to 25%, but also then from those provider solutions, the -- as Matt had mentioned in the prepared comments, the transaction volumes that come from processing claims, eligibility checks, et cetera, et cetera, et cetera. So hopefully, that's helpful commentary.

And our next question will come from Alexei Gogolev of JPMorgan.

I was wondering if you can double-click on some of the comments you made last quarter about the time line for patients meeting their deductibles, which impacted the patient volumes that you just talked about. What trends did you see at the end of 4Q? And maybe how are you thinking about 2026?

Yes, certainly, Alexei. We did see sequential decrease from Q3 to Q4 as patients continue to hit those under high deductible health plans, as you mentioned, continue to hit their deductibles. That was more than nicely offset by the volumes coming through the provider solutions aspect or solutions of the business that led to a very -- less of an impact Q3 versus Q4 than we would have expected in our -- in the commentary that we had made last quarter.

As we think about that aspect into 2026, I provided some commentary surrounding quarterly sequential growth expectation. As you hit on, Alexei, we typically with that 30% of revenue from patient payment solutions now getting closer to 25% going forward. We typically see a first half, second half of the year dynamic, obviously, with the switch or the change in revenue mix, we would expect that to be not as notable as prior years. And we would expect nice sequential growth throughout the quarters in 2026.

I mentioned the range of sequential growth of 1% to 3% with calling out specifically the third quarter of the year being closer to that 1% of a range, and that's typically due to the dynamic expectations of -- over the past number of years, we typically see those patients that are on high deductible health plans start to hit those deductibles in the second half of the year, tend to see it most notably between the second and third quarter. So that's sort of the contextually a little bit more detail surrounding the sequential growth expectations in 2026.

And our next will be coming from Allen Lutz of Bank of America.

Matt, you mentioned 35% of bookings are now coming from AI-related products. When you're speaking to these health system customers and prospects and they're exploring AI, does this -- in your conversations, does this make them more hesitant to spend in the near term because they're trying to figure out where they want to put dollars to work? Or is this actually accelerating total spend? And I guess I'm asking that question in the context of what you saw in the fourth quarter and how you think about 2026.

Yes. What we see is some constants. First, decision-makers want efficiency. They want cost takeout. They want cybersecurity. They want to work with partners that can help them get paid faster and accurately and efficiently. And so within that, what we're seeing is we continue to get prioritize in their decision-making process because the revenue cycle is mission critical. It's truly mission-critical. And you take a system of record, system of action like Waystar, it's easier for clients to think through how do we work with Waystar to deploy more AI, obviously, very interested in using AI because it can drive efficiency, because it can reduce cost and because it can drive automation and some of those things we talked about.

And so where we tend to focus is on the ROI nature of the conversations. And that is what is driving these types of record bookings and strong pipeline of opportunity. We highlight the fact that our prior authorization, for example, is 90% touchless and can actually do the work that previously it took 12 employees to do in a midsized hospital. we highlight the fact that our coverage detection solution, which also uses AI capability is helping to discover more than $20 million of incremental insurance coverage to help aid these hospitals reimbursements.

And that's in a typical sized hospital. We also highlight things like -- I'll give you one more example for our digital patient payment and patient financial care suite. We use AI to help automate and create self-service for 80% of the patients that are interacting with our digital payment suite. And that is lifting patient payments by 20% because we're driving better patient payment plan adherence. And that typically is finding more than $8 million of annual impact or a typical hospital. So these are the types of things that we highlight as we go and engage with clients where they know they're going to be able to use AI in a setting and a platform that they trust. And that's why you're starting to see it show up in the bookings the way that we are.

And our next question will be coming from Ryan Halsted of RBC.

Maybe just sticking with the questions about AI and just competitive landscape. A lot of the color you provided today so far has been incredibly helpful. But maybe just to dig in a little further on the competitive landscape. I mean, when you're presenting your ROI? Are you hearing any feedback from your customers about the competitive nature of, say, some of the ROI that these other platforms are potentially offering or these other solutions, maybe not necessarily platforms that they are offering? How does -- how should we think about your ROI versus what maybe others are putting out there?

Well, we won't disclose exactly what our ROI is. What I will say, Ryan, and thank you for the question. We have a very robust ROI calculator. We go through a rich discovery process with clients, and we present to them a platform, and oftentimes, as you've heard us talk in the past, there's a compounding benefit when a client uses more and more of our solutions together on the platform. Again, those solutions are AI-infused, AI-enabled and are driving tremendous results.

And I'm sure that those clients are going through a process of comparing what Waystar offers versus what an upstart or a newcomer for a point solution may offer. But I think what stands the test of the time and what we're seeing is really robust win rates. We noted improvement in the quarter above our strong 80% win rates, we noted that it's even higher in the last little bit. And so we feel like our ROI is very compelling. And more and more clients are buying into this idea of the importance of a platform approach as they begin and they want to consume AI on the platform.

And our next question will be coming from Ryan Daniels of Blair.

Matt, maybe a strategic one for you on AI and the improvements you're seeing in the platform, especially with Iodine and their solutions and data assets. You've talked about the perfect claim. And I'm curious if this can provide you with a contracting advantage longer term strategically where not only can you go in with a fully integrated platform, but maybe increase the total value add, maybe share in some of those savings. So are there any potential thoughts on risk-based contracts or tying to other KPIs that you know you can improve on an accelerated basis and maybe see not only a win rate delta from doing that versus some of your peers, but also maybe greater revenue enhancement or an accelerated time frame with novel contracting?

Thanks, Ryan. I appreciate that thoughtful question as well. We talk a lot at Waystar about building the autonomous revenue cycle platform, this dynamic end-to-end agentic network that acts continuously within workflows, learns from outcomes with real sources of payment truth and then delivers the perfect undeniable claim, real financial results with minimal intervention. It's on our road map. And that's -- we have teams of people focused on how do we create with minimal intervention this -- where we keep a human in the loop appropriately as AI continues to learn from our massive proprietary data. How do we march toward that perfect undeniable claim? We're absolutely willing to explore some performance-based pricing opportunity in this space. It's something that we won't talk a lot about in the public domain here, but it's something that we contemplate internally as we think about how to price to the value that we're delivering to our clients.

And our next question will be coming from Brian Tanquilut of Jefferies.

Congrats on the quarter. I really appreciate all the comments today, Matt. But as I think about -- you talked about how important the platform is and kind of like the one-stop shop approach from your clients. One question we're getting a lot is when we think of the traditional EHR players or vendors trying to build AI capabilities that kind of touch into RCM, how do you think about that? And maybe how does the clearinghouse factor into that decision, which platform your clients, these hospitals or provider groups would build on when they choose the one-stop shop solution going forward?

Yes. Thanks for the question, Brian. We are very focused on revenue cycle, clearinghouse, successful payment. And so as you know, we connect to over 500 different instances of practice management and electronic health systems, including some of the largest in the United States. We have not seen a successful test or result of anybody -- EHR system creating a clearinghouse. And it tends to be just a different development motion, a very different set of capabilities required to build and sustain a network.

We've been building Waystar's cloud-native modern clearinghouse for over a decade, and we monitor it and pressure test it and update it continuously intradaily. That's very different from developing an electronic health record solution or a practice management system, quite frankly. And so as we stay focused on our platform and then being highly interoperable and deeply deployed with all the electronic health record systems in the market, we think that's the winning approach. We can specialize in what we're doing. We can be a lynchpin solution to those EHR systems and a great partner to our clients and helping them get paid.

And our next question will be coming from Richard Close of Canaccord Genuity.

Congratulations on the year. Just maybe a little bit more on the AI and OpenAI, Claude for Healthcare, both had some notable organizations listed in their press releases on the launches like HCA, Boston Children's, Stanford and some, I assume, are Waystar clients. And I'm just curious what your thoughts are -- and do you see situations where clients will have multiple vendors for certain AI functionality, meaning it's not necessarily a zero-sum game, which the market seems to be pricing in. And then also just your thoughts on health care system landscape overall. There's a lot of the haves and the have-nots. And maybe some of these larger AI companies are not necessarily good fits for certain customers.

Thank you, Richard. I would say, again, it's an exciting time in health care. This is a moment of a lifetime where generative AI capability is available to hospitals and health systems and any organization. LLMs are great tools to develop and deliver features and functions. We see that internal to Waystar again as we utilize Google's LLM. And what I'd say is having a heterogeneous deployment of technology is not a new phenomenon in health care. It tends to actually not be a zero-sum game in health care. And there may be some misunderstanding or a lack of appreciation for how heterogeneously help -- in health care technology is being deployed. But again, to solve the mission-critical problems that are demanded in the revenue cycle that, quite frankly, Waystar solves, you have to have a deeply deployed multisided network to connect organizations to payers and to patients.

It's required to have rich and real-time data that you can use to real-time train your network so that you don't really have the luxury of having a science experiment in your revenue cycle. There's a limited tolerance for any type of fault. And so RCM has to be 100% right. Otherwise, there are penalties, there are fines. There's all sorts of other things that can just go bad. And so having rich and real-time data is important, having subject matter expertise, it's tough to get all of that within one hospital or health system. And so most hospitals and health systems, to your second part of your question, don't necessarily have the abundance of engineering talent that they need to build and then sustain and support AI capability.

So we think the longer-term benefit is really what Waystar can do and vendors like Waystar can do to actually help deliver AI that can be consumed thoughtfully in workflows that employees understand, et cetera. The last thing I'd say is speaking of the haves and have-nots that you highlighted, Richard, I think there's very few hospitals and health systems that have the resources to deploy AI and sustain it and manage it themselves and meet regulatory requirements to do all the things that you're obligated to do if you're working and using technology inside a hospital and health system. The vast majority of our clients, for example, especially on the ambulatory side, the nonhospital side, we're bringing equity and fairness and modern AI capability to them that they'd never be able to develop by themselves. And so there's something really cool about that, that inspires our work.

And our next question will be coming from Michael Cherny of Leerink Partners.

Another AI one for me. But along all those same lines, as you think about your role, your integration with various different partners, how do you make sure that your organic, inorganic R&D investments stay on top of the curve so that you are continuing to deliver value, you are continuing to make sure that you box out other providers, be it purpose-built or some of these larger companies relative to their ability to try and deploy AI either to disrupt you, disintermediate you or whatever term you might want to use?

Yes. I mean I would say we talked a lot about LLM tools right now. They're good for coding efficiency. We're deploying LLM tools, as I've mentioned. And we feel like there's basically -- everybody is using LLM tools, is the LLM the advantage? Is the LLM -- is the use of the LLM the advantage? We would argue that you need other capability to be competitive and to deliver value to clients. So from an organic perspective, how do we stay ahead? Well, we're investing in innovation. We're using LLM capability ourselves. We're seeing productivity gains amongst our development teams as we highlighted in our prepared remarks.

And we're delivering hundreds and hundreds of feature improvements in any typical quarter that help our clients achieve fantastic results. We also have a dedicated corporate development team, and we scan the market all the time to look at some of the start-ups that are creating novel and unique AI capabilities that may not have the distribution or the deeply deployed network that we have. And we think we can be a great home for the right types of companies. But it's a very exciting time, and Waystar is very motivated to continue to deliver value to our clients and to our shareholders.

I would now like to turn the conference back to Matt Hawkins, CEO, for closing remarks.

Great. Okay. Thanks so much for the time and the thoughtful questions today. To summarize, Waystar is executing from a position of strength. We're delivering durable growth, strong margins and meaningful cash generation while extending our leadership in AI-powered revenue cycle automation. Our AI is not experimental. It's embedded, monetized and delivering measurable outcomes inside mission-critical workflows our clients rely on every day.

With unmatched data, deep deployment and domain expertise, strong distribution and a disciplined operating model, we believe Waystar is exceptionally well positioned to compound value over the long term. I'd especially like to thank our outstanding team for their dedicated and impactful work. They're the reason that Waystar continues to perform at this level. We appreciate your interest and support, and we look forward to updating you on our continued progress. Thank you, everybody.

And this concludes today's program. Thank you for participating. You may now disconnect.

Hello, everyone. This is Alexei Gogolev, Head of Vertical SaaS and HealthTech team here at JPMorgan Equity Research. Today, I'm delighted to have CEO, Matt Hawkins at Waystar, present at our conference. Matt, welcome and look forward to your presentation.

Thank you, and good morning to everybody. I look forward to sharing an overview of Waystar with you today. And I'm very grateful and honored to represent the Waystar team here as well as our Board. And I'm excited about what we'll talk about. I plan to anticipate presenting for about 20 to 25 minutes and then leave some time for some Q&A toward the last 15 minutes or so. Okay. Sounds good.

So let's jump in. First, I'd like to just highlight for those of you that may be new to the Waystar story or those of you would have great familiarity with our story, there's a few things that I would love to have you walk away and remember as you think about Waystar. The first is that we are establishing industry leadership in health care revenue cycle. We are a cloud-native platform. We deliver hundreds of capabilities and feature improvements, some of which we'll talk about here today on our platform to our clients in any given quarter. We have a very ambitious product road map. We're deploying AI solutions across the platform. And we are seeing the move from hype to reality as we deliver real meaningful value to the clients that we serve. And we'll talk about why we believe we have a long-term advantage in delivering AI to our clients. The work that we do is mission-critical. For those familiar with health care, you know that the revenue cycle and having clarity around how provider organizations can get paid really matters in health care.

And our solutions are deeply integrated into the workflows that provider organizations follow in order to not only see a patient and help that patient clinically, but on our side, how to administratively handle how they will get paid for the treatments and the encounters that they're having with patients. We're going after a large and growing addressable market.

We'll talk a little bit about the size of that market and what we're doing to inflect even future growth and more addressable market opportunity through some of the solutions that we're introducing. And then I'd also talk about our proven and durable growth model. We've now been public for 6 quarters through the end of Q3 of 2025. Every quarter, we've met and exceeded and improved our guidance for the year on both revenue and EBITDA. This is a business that has the ability to compound very consistent and growth -- durable growth. We also produce an impressive amount of cash, and we're very thoughtful with how we deploy our resources as we invest for innovation, invest for growth and continually improve our balance sheet and our capital structure.

The last is that as we look to the future, we believe, and this may be underappreciated in the market, that we have a fabulous proprietary data set. We're pleased to report that in 2025, we processed 7.5 billion insurance transactions that account for over $2.5 trillion of gross claim charges on our platform. We also bought a business in '25 called iodine. Iodine processes 1 out of every 3 hospital-based patient discharges in the United States.

So the combination of 7.5 billion insurance transactions and one out of every 3 clinical discharges enables us to take a tremendous amount of proprietary information and use that as we develop new AI solutions, as we train those solutions and refine those solutions, reinforcing what works and then learning rapidly across our platform, what can be improved. So we feel like that long term -- we feel like the proprietary data that we have access to. And as you all know, data is very valuable in the development and curation of AI tools. And so having access to this tremendous amount of information, we believe that will enable us to continue to launch new solutions and drive opportunity on our platform. Our mission is simple. It's to simplify the revenue cycle, simplify the payment process using modern, powerful technology that will enable the providers whom we work with to spend more time caring for patients and quite frankly, less time trying to figure out how they're going to get their organizations paid.

They're operating on razor thin margins. And as we have proven now over many years, our ability to deliver technology that makes a difference that drives down total cost of ownership and drives up return on investment for these providers as we simplify the health care payment process makes a meaningful difference, and we're motivated by this mission. Health care is prime for transformation right now.

And we are at an inflection point where technology can be used to make a real difference. Waystar is using technology to make a difference. As you know, there's nearly $0.5 trillion of administrative waste that occurs in health care. This feels like we're living in the upside down, if you're familiar with stranger things. It's fraught with manual work, and I see some of you smiling. It's fraught with manual work and errors and fax documents back and forth, siloed data and information and certainly labor shortages that lead to denial complexity that lead to lower reimbursements that never get followed up on, manual errors that persist , and a lot of this gets accounted for bad debt and bad debt write-offs and patients and providers are unduly burdened by this current situation.

This makes for a very large and addressable -- growing market opportunity. And so if you were to take the strictest definition of what we would call the addressable market, we would say it is $20 billion, part ambulatory, part hospital and health system as defined by current software, incumbent software. Some of that has been -- those software solutions have been in place for 20 or 30-plus years.

Some of them are homegrown home developed solutions. Some of them are Microsoft Excel-based access-based spreadsheets that we're replacing in the market. We approach this market, and we know it's growing. We approach it with what I'll show you in just a moment, but modern next-generation platform capability. But that's not all we're going after. We're not just anticipating that this market is going to grow from 20 to 25. We actually believe there's much more opportunity here to create a much larger addressable market. If you were to look at the BPOs and the staffing agencies that they would define the revenue cycle services market, in many cases, as being north of $100 billion a year in value. As we develop AI-based solutions that automate work, that prioritize tasks on our platform that eliminate the need for rework, and I'll show you exactly what we're talking about here in just a moment, we create incremental opportunity and expand the addressable market for us to go get.

So we're very excited about that. And we focus on that with our approach. Our approach is an end-to-end AI-powered software platform from one end, from what we would call the front end of the revenue cycle, where there's work taking place to identify who the patient is and whether or not they have access to any form of insurance or any form of insurance coverage to the mid-cycle where a patient begins to have a clinical encounter with a provider.

We know the source of 60 million denied claims in any given year begins in the mid-cycle because of the manual entry or the inefficient notations or unstructured notes that are housed in clinical records. We bring clarity. We bring over 150 AI trained models that will go and filter through, in many cases, unstructured clinical notes. And on the other end, as we venture toward the back end of the revenue cycle, we're able to produce a highly accurate, efficient claim using technology that minimizes rereviews by 70% that allows us to produce a first pass claim acceptance rate that's nearly 99% across our entire platform. That statistically reduces the likelihood that a claim ever gets denied. So what we're doing, we know brings real value.

It's a unified platform, all commercial payers, all government forms of payer, whether it's Medicare or Medicaid, are united on this platform. We have an integrated patient payment offering, and we're using insights from what we -- the insurance network side of things to then inform what the patient financial responsibility is. And the thing that's game changing is that we're doing that in many health care service moments in ways that now the patient can know before they ever see a doctor, what their financial responsibility is likely to be.

And we believe that unification of all forms of payment on a single cloud-native platform is game-changing and differentiated. We drive real and meaningful client ROI on our platform. We're not just talking about hype. We're talking about reality. And it's that reality that allows us to compete in the market and have very impressive win rates in this market. We're also cybersecure. So we come in as we talk to health care decision-makers who, in many cases, I was talking to a CIO not long ago from a very impressive health system. And she said, "Matt, can you help us? We're currently using more than 12 different point solutions just for the administrative side of our hospital system. We said, yes, because we have a platform approach that unites several of these capabilities that are AI-infused and drive automation and prioritize work.

And so we're able to win in moments like that because of our platform approach. And we're doing this at scale. We serve over 1 million providers across every care setting today. providers of different sizes, types, different geographies are all using and getting benefit from our platform. We just went through the updating of our data and information. These 1 million-plus providers are reaching now more than 60% of the U.S. patient population on an annual basis.

And as I mentioned a moment ago, one out of every 3 hospital-based patient discharges is flowing through our software, our technology. So again, we're getting tremendous access to information as we pursue this large and growing addressable market. We create enduring clients and partner relationships. We're trusted, again, by more than 30,000 clients that represent over 1 million providers that practice, as you can see from acute and emergency settings to ambulatory, post-acute, long-term settings, home-based settings, behavioral health, retail, virtual and even specialized settings of care. And when you look at the list of impressive organizations that we feel so grateful to work with, they trust us. They're advocating for us as they talk to their peers.

And it's a nice phenomenon to see that now as we approach the market, in many cases, we're getting referred -- we're very active in the market. We're very direct in how we go to market, but it's nice to also see we're getting referred to market opportunities, and we're very grateful for that. One of the things that I think may be underappreciated about our business model is that we support over 500 different integrations to other practice management and EHR vendors.

As you all know, data is siloed in many of these different systems. Waystar's technology acts as a linchpin. We sit side-by-side with these systems, and we're able to bring data to and from those in a HIPAA-compliant SOC 2, other forms of security attested ways to be able to help these provider organizations make the most of the data that they have access to. These more than 500 different integrations and channel partner relationships allow us to reach the breadth of the broad spectrum of different types of providers and the patients that they serve in the industry. And we're also, of course, grateful to work alongside outsourced RCM vendors many of whom are partners of ours because they're using our software behind the scenes to do their services work for the hospitals that they're engaged with.

And so in a way, we're growing with them as they grow, and we're grateful for that opportunity. Well, a few slides on -- that I'll move at pace through, but just to call out, our software is delivering real meaningful results from greater productivity. And in 2025, we prevented nearly $16 billion of denied claims from occurring. We're thrilled with that result. As I mentioned, our first pass claim acceptance rate across our platform is nearing 99%.

We're competing against incumbents that are in the low 90%. So when we come along and use our solution, there's a meaningful difference. In fact, we have clients that tell us, "You're helping us reimagine what's possible. in the use of Waystar's software and AI-infused technology. We're delivering rapid time to value. We're able to implement and deploy our software because it is cloud native very rapidly. That's leading to quicker payments, quicker time to value and real reimbursements that are lowering the overall total cost of ownership while improving the financial performance of these organizations. A few more. We're not trying to take a victory lap here you guys. But like these are large and impressive organizations that are telling us really positive things that we're grateful for. Same-day cash posting increased by 88%, $10 million of generated payment uplift. And 70% -- 77% reduction in manual work.

These are things that we know that we do that our platform delivers value to our clients. And of course, you can see a rapid -- a dramatic reduction in the decrease to days it takes to adjudicate a claim and an increase in automation. These are large and impressive organizations, and we find that there's so much opportunity as we address each situation with Waystar software platform.

We're also gaining trust in the market and trust is currency as we scale and as we begin to reach more and more clients with our capability, we're grateful for the trust that we're earning along the way. We use that trust -- we use client satisfaction. We use strong Net Promoter Scores to advocate for why Waystar software can make a difference for the next new client along the way, and that's fueling our go-to-market engine. Now this data I'll highlight is through the third quarter of 2025. As I mentioned earlier, we've had 6 consecutive quarters of revenue and EBITDA beat compared to the consensus. And that was the case through Q3 of 2025. We updated our guidance for full year 2025 by more than the Q3 revenue and EBITDA beat.

And this is really when you look at some of these metrics, it's a testament to our business model. We're a rule of 50-plus business that's got nice organic double-digit revenue growth, meaningful EBITDA production and strong net revenue retention. What I said in October, we look forward to providing an update to the market in several weeks from now, but in our normal earnings call. But what I said that we feel very good about is the momentum that we have in our business.

I noted in our earnings call in a few subsequent conversations during our open window that we have a robust pipeline of opportunity that our win rates of 80% against our competitors remain strong, that we -- as we measure activities and demonstrations and RFP participation, we feel very good about the work that we're doing, and I look forward to providing an update here in a few weeks. There's a sense of momentum that we have about our business as we look to the future. And we also have several levers of future growth opportunity that we're familiar with, that we've used, that we're using today to compound and create growth in our business. It starts for us with fantastic gross revenue retention of 97% as we walk to all the way up to the net revenue retention, which, as you'll know, speaks -- does -- that net revenue retention number excludes any impact of new clients that we're able to add to our business.

But our net revenue retention averaged anywhere between 108% and 110% over the last many quarters. In the last 1.5 years, it's even been higher than that, and we're grateful for that. But that algorithm, as you walk from gross revenue retention and net revenue retention is a function of utilization increases. We typically model 1% to 2% in any given year.

We have a modest annual price increase that we implement given the value of our solutions that we're delivering and we price our solutions increasingly to value. And then it's a function of cross-sell and upsell. So we begin our growth levers and we talk about how do we expand within existing clients. We've got about 5% market share in the hospital space and about 9% market share in the ambulatory space. And what we tell people is that if you didn't -- if we didn't develop another software solution and we didn't add another client, we could more than double the size of our business today. So there's plenty of opportunity to expand within existing clients. Certainly, we're focused on adding new clients as well. And in my previous comments about our pipeline and the bookings that we've closed year-to-date, I talked about it being approximately 50-50 as far as new versus cross-sell, upsell related.

We reach the market through channel partnerships, as you saw me highlight a few minutes ago, and alliances that allow us to partner along with other entities, practice management and EHR vendors that are advocating for us, giving us access to their user conferences and where in many ways, we're the lead, we sell, but we get favorable or preferential treatment in these channel partners.

We've also had a strong track record of extending our platform leadership through disciplined M&A. We have a dedicated corporate development team that looks at the market. We're very disciplined in how we deploy our capital and the build versus buy analysis of things. But in the iodine acquisition that we announced late last summer, we noted that there was tremendous cross-sell and upsell opportunity that there would be tremendous access to information that would fuel our future product road map. And we also noted in the October 29 call that we're tracking very nicely on the integration plans associated with that, both from a growth side, seizing the opportunity as well as from the cost structure synergy identification side. So we feel very good about that.

And then as I mentioned at the outset, we'll use this combination of information on this learning and dynamic platform. We'll take data to deliver new models. And again, as you know, the LLM is one thing, but it's the access to proprietary organized information that will help us design, develop, train and refine AI models that will deliver real value to our clients in the future, where our platform, we've conditioned -- we serve over 1 million providers.

So we've conditioned end users that work in those provider organizations to thoughtfully consume the AI that we're delivering, and we look forward to delivering more of those innovations in the days ahead. Our platform, and this will move from kind of history to a little bit of vision. Our vision is that the Waystar's platform can power an autonomous revenue cycle in health care. You look at the fact that we have conditioned and are conditioning end users to consume AI thoughtfully, responsibly, ethically to be able to do real work for them that automates tasks, again, that prioritizes work that drives insights. We ask ourselves often the question, what moral good can Waystar do to help drive dramatic transformation in health care? What can we do to leverage AI to drive more transparency? What can we do to leverage AI to drive more efficiency?

And for us, it starts with connecting the data, leads to activating the right AI at the right time, eliminating friction points, manual interventions that are unnecessary. Errors that occur, if we can prevent those upfront, we can compress the time to value. And then ultimately, while we'll keep a human in the loop on a couple of things that I'll show you in just a moment, ultimately, as we train and refine our AI, ultimately, how do we minimize human intervention.

And overall, that will lead to a smarter, more efficient, more effective revenue cycle. That's our vision. And we have the AI to scan the data and to drive toward outcomes in a number of these ways. Again, I think this is game changing. And I believe that this will prove very advantageous to Waystar over a longer period of time, the access to data, again, not siloed in lots of different locations, but centralized and curated. Not in paper somewhere or on a publicly available resource site, but proprietary within our data set that will allow us to develop innovations and turn unified data into trusted intelligence to power the right AI at the right time and deploy it effectively. We're doing that now as we prevent denied claims.

As I mentioned a minute ago, we help prevent in 2025 since the launch of Altitude AI, nearly $16 billion of denied claims, but expediting that even further and fueling that with clinical information so that when prior authorizations occur that require medical necessity or clinical information-based information to get that authorization fully authorized by the payer.

Now we've got access to that clinical data. to eradicate denials with an integrated documentation and coding revenue capture solution. That's industry compliant that leverages regulatory standards. We've got the right to do that with the data set that we have and to then accelerate reimbursements with intelligent-powered clinical appeals is very value creating. I want to show you just one thing is one of the early evidence points of us uniting Waystar with iodine will allow us to take clinical information that again comes from Iodine, unite it with Waystar's financial data to unlock revenue protection for the clients. What we're seeing in the process of creating a united platform that unites the front, mid and back end of the revenue cycle is, again, in that cumbersome middle part of the revenue cycle where so many denials originate we can leverage over 150 AI trained models and now infuse those models with administrative data to identify appropriate documentation, scan for any anomalies that may occur in the forming of the diagnostic codes that can ultimately be used to create an accurate claim and to ultimately unlock missed opportunity for providers.

So we're very excited about the early evidence points of Waystar plus Iodine working together to strengthen and bolster an existing solution and begin to launch new solutions. Let me show you one other thing. We announced this morning that we're -- and highlighted what we had previously said last year at this time where we launched Altitude AI. This morning, we're following up on that Altitude AI announcement from last year to indicate that we're beginning to expand into agentic AI capability.

We're creating agents that will begin to do real value-creating work for provider organizations. These aren't just normal agents. When a person -- an agent isn't just replicating one smart person. The agent is replicating 50,000 or 100,000 are the smartest people that do that job. And I want to show you a couple of things really quickly here. Available now is the ability to take a way star agent on the Waystar platform and put it to work.

Your smartest agent that's way smarter than a human or a group of humans that comes back and return information that's more accurate than a human can produce and uniting clinical information, to review documents, scan for coding errors and to improve the revenue capture. Waystar Altitude AI identifies documentation and coding gaps. The agent creates a compliant documentation or coding correction request and draft.

And then they return that to a human in the loop, a nurse in this case to review and approve that the documentation is accurate with 1 click. And then that documentation will be used to create a very efficient claim. Now this is step 1 as we keep a human in the loop, but where are we going from here? Can we create even more autonomy as we move from clinical documentation that's improved and filtered through these AI models to ultimately create that perfect undeniable claim that you may have heard me speak about. Coming soon is the ability to use an agent, a waste our agent to resolve open issues with a claim to detect and diagnose problems or problematic claims and then recommend resolution for those claims.

Experts will then review, they'll take the age and output and review the documentation from the agent and then be able to submit that claim successfully to a payer. And we're very excited about the work that we'll launch here soon. We're venturing into this world. I think we would characterize it as moving from -- we've been deploying AI on our platform for many years, moving from AI and machine learning to increasingly agentic where we do keep a responsible human in the loop to approve or validate.

We'll learn on every one of those validations and refine our model and refine our thinking and make us even better for the next time. Ultimately, as we move and progress toward a more autonomous revenue cycle platform that's always learning. We believe that it will be Waystar's right to compete and that we can be a long-term winner in the AI space. as we work to embrace this technology that delivers real value to our clients. So I thank you very much for letting me present and be delighted to take a few questions.

Thank you, Matt. And on the -- sticking on the AI theme, can you maybe talk a bit more about the moat that makes the space so much more difficult to disrupt? I think you talked in the past about the data points that you have and maybe update us on the latest.

Sure. Yes. So first, I think it does start with a platform approach. If I could liken it to a car, a platform versus a feature, right? A feature may be a mono for power windows or power steering, like we're delivering the whole car. We're delivering the platform now. And while some people are talking about a feature or an intent, our platform approach it learns from one side of the other. So if we're in the pre-revcycle, and we're doing something that's using AI and leveraging data, we're actually creating benefit because the other side of our revenue cycle platform is learning, too. So it starts with the platform approach. It all works together to create a successful outcome. Secondly, decision-makers really want cybersecurity.

They want to work with less vendors more and they want it cyber-secured. The third is we have the rails, the rails that are deeply embedded in the workflows today and have the right to deliver more and more AI capability to our clients because of how we're integrated to so many different systems and we reach across the broad ecosystem of health care providers. And the fourth is we're investing in AI. We'll deliver it and continue to thoughtfully deploy it as we work toward that more autonomous revenue cycle platform.

And I think you talked about 6 Billion data points in the past. Has this number expanded?

Yes. Yes. Thank you for calling that out. As you just highlighted, last year, we were processing about $6 billion insurance transactions per year. We've updated that to now be $7.5 billion insurance transactions. And so again, every incremental insurance transaction or payment transaction we process, we're learning from that. What were the codes and rules embedded in that transaction that will make us a smarter, more efficient network. And so we're pleased with the continued progress and growth that we have made there.

And I'm sure you've heard about the recent close for health care announcement over the weekend. So what do you think about the access to data that these newcomers may have Will they be able to get access to that proprietary data you're talking about the one that is protected by IPA?

Yes. I recently heard about the cloud announcement. I would say that the large language model, really large object model, we're using a different large language, large object model. We're partnered with Google and Gemini, and we really like the progress that we continue to make there. And -- but we think the long-term value isn't necessarily in the large language model itself. It's actually in the access to data and the ability to kind of utilize that data, scan that data and then deliver value to providers, again, across an organized platform.

One thing that I note today is it feels like -- and you may agree with this, it feels like the technology is advancing at a rapid pace, and it's ahead of where the human factor is or where the human organization is able to actually consume it. So I think one of the advantages that Waystar brings to the table to anybody whatever large language model would be one of the -- our competitive advantages is we have an organized approach where we're able to deploy AI in a way that the human factor can understand it and consume it and get the benefit of it. And do it in an organized fashion that can really help these provider organizations today.

And slightly switching gears. You obviously benefited from elevated patient utilization last year. do you consider it to be a potential tailwind this year?

We have benefited -- our model, just oriented toward how we think about utilization. We help providers in strong utilization periods because we help make them more efficient and enable them to see more patients. We help providers in periods of time where utilization may taper often be normalized as we help those providers use more of our software to help understand who the patient is and identify forms of payment and forms of coverage for them.

So in any model, I think we're adept at helping providers be efficient and utilize our software effectively. We typically approach -- in our business model for prudent's sake, we're -- as we walk from our gross revenue retention of 97% to the long average of about 108% to 110%. Again, it's been running a than not recently.

But we build into our thinking 1% to 2% utilization increases every year. That's about a 60-year average. And so when utilization runs better, it tends to benefit our business model. When utilization normalizes, it still may while utilization may normalize, our business model still may benefit because we have other solutions to sell the providers to help them, find coverage, find payments, process payments. So that's how we think about utilization.

But we currently feel good about the momentum that we have in our business from a growth perspective.

Great. And you also talked about very strong momentum that you're seeing in your pipeline, win rates, RFP participation. Can you double-click a bit more on that and maybe talk about the updates on the sales cycle dynamics.

Sure. Yes. I look forward to in a few weeks from now being able to give you a Q4 and 2025 full year update. Everything that I've said in recent conferences and our earnings call stands true. Feel very good about the robust pipeline of opportunity. The RFP participation rate, the activity, the win rates, for sure, I think it goes back to -- for those of you that have been following our narrative for a little while, as you'll recall, in 2024, one of our competitors was cyber attacked. And in that cyber attacked, there was there's massive urgent push to kind of -- for providers to come and adopt the waste or platform as a way to kind of rescue them from the cyber attack platform or the solution they were using. And -- and we characterize that as a Phase 1, urgent Phase I, where there's a lot of business activity, a lot of volume. And then we also -- for those of you that were following us, over the last year, we've talked about a longer-term Phase II, where we felt like, over time, given how we've been able to help providers how rapidly and successfully we were able to deploy Waystar's platform that, that Phase 2 would create incremental opportunities for us that would kind of bear to fruit, so to speak, as we move forward.

And in Phase II, we didn't characterize how long that Phase II would last. But as I noted in late October, we are seeing activity in that Phase II, and we're really pleased with the progress that we continue to make, and we look forward to giving you an update here in a few short weeks. But many positive signs.

Perfect. And final question, Matt. There's been a lot of discussion about vendor fatigue and the desire for fewer, more integrated solutions. Can you maybe update us on your deep integrations with EMR and PM?

Yes. We know that because of some of that vendor fatigue. And many of it's with legacy type vendors, Waystar is being prioritized in discussions. And that tends to aid us. Again, as I noted, and you'll recall on this slide, we're replacing point solutions with our platform approach with a modern cloud-native AI-infused learning platform. And I think that's aiding us in the conversations. We have many integrations with the large and impressive EMR, EHR vendors that you would know of.

We cited a few of them on our platform. And many of those -- the decision makers that use those systems many of them are in our user conferences on our advisory boards give us feedback about how we can continue to advance our solutions and be a trusted partner with these EMR solutions as well. So we feel great. We're always gaining new channel partnerships and new relationships, and that drives our growth model.

Perfect. Thank you very much, Matt. We appreciate you being here with us.

Yes. Thank you. Thanks, everybody.

Okay. Well, good afternoon, everyone. Welcome to Day 1 of the Barclays TMT Conference. My name is Saket Kalia. I cover software here at Barclays. Honored to have the team with us here from Waystar. We've got Matt Hawkins, CEO; and also have Sue Dooley, Head of Investor Relations, there in the audience as well.

So we've got about 30 minutes together. I'd love to leave some fireside chat here for 20 or 25 minutes because I know that's going to be fun here with Matt. And then would love to make this interactive so anyone that's got a question, just pop up your hand. We'll make sure we circulate the mic for the benefit of the webcast.

So with that, Matt, thanks so much for having -- for being here.

I'm grateful to be here. It's been a fast year since we were here together last.

Yes. Yes. I know a lot of good stuff that's happened, too. So I definitely want to jump into that. But maybe for those of us that are less familiar with the company, could you just maybe start with an overview of Waystar? And as part of that, maybe recap some of the points from last quarter that you were most proud of to just make sure we're all on the same page?

Absolutely. Waystar is a cloud-native software platform that's purpose built to help health care providers as they interact with insurance companies and as also as they interact with patients, to help those providers get paid faster, more efficiently and more accurately than they ever have before. We serve 1 million providers -- more than 1 million providers across our platform, including 17 of the top 20 hospitals and health systems in the United States today.

And we help them connect to every insurance company, including the government forms of insurance, Medicare and Medicaid, across the United States. And those providers are reaching approximately 50% of the U.S. patient population. And we're deploying AI on our platform as we serve these more than 1 million providers to help them bring efficiency and help them automate tasks that historically have been manual for a long time. We're helping to bring automation and insight and productivity to these provider organizations.

And our mission is taking hold. We've been public now since June of 2024. We now have had our sixth consecutive quarter of revenue and EBITDA beat above the consensus, the analyst consensus. Our business is performing well, and we have a sense of conviction in our business. In fact, we updated our full year 2025 guidance for '25, more than the revenue and EBITDA beat in Q3. So we're thrilled to have that.

A real beat and raise.

A real beat and raise. The midpoint of our guidance reflects $1.090 billion of revenue and is about 12% revenue growth year-over-year. So we're really a Rule of 50 business because we're producing greater than 40% adjusted EBITDA margins and converting a majority of that to free cash flow, and that allows us to do a number of good things.

Boy, I talk to our companies that are aspiring to a Rule of 40 and here we go on a Rule of 50, so that's a great highlight. I want to dig into some of the points that you mentioned just around the contours of the business like your acquisition of Iodine. But before we do that, right, I'd love to maybe do a little bit of a mini teach-in or a mini 101 here for tech investors just on the revenue cycle management space because I think it's another space that necessarily a lot of tech investors are following.

And so as I've spent time with the company, folks in the industry really talk about front end, right, front end, mid-cycle back-end revenue cycle management. Maybe it will be really helpful as all of us have gone to a physician, a doctor or some sort of medical professional, maybe you can just walk us through an example. Let's say, I go see my primary care physician for an annual checkup. Maybe you could just walk us through what are some of the key tools that Waystar provides in that process in terms of what's front end, what's mid-cycle, what's back end, taking us from sort of the appointment all the way to reimbursement?

Perfect. Yes, great setup. So we can relate to this, right? So Waystar's workflow platform is organized to help the provider understand who the patient is on the front end. They understand who that patient is and their financial ability to pay. For many patients, that means they have some form of insurance. It might be commercial insurance through their employer, it might be Medicare or Medicaid. Waystar has software that uses AI to automate the insurance eligibility verification process.

We also detect insurance coverage. Think about the nobility of this and humanity of this. We detect insurance coverage for a patient when they show up and they may not even know if they have access to health care insurance or not. So we've got AI working across our more than 6 billion insurance transactions that we're processing annually, to scan for whether or not a patient might be eligible for insurance coverage.

We are then helping to the provider interact with the payer before they see the patient especially if the health service is known, that the provider may need to get authorization from the payer to perform a certain health service. If it's an MRI or a complex laboratory test or something like that, they'll need to get insurance authorization, something that's referred to as prior authorization on that front end to know whether or not the patient is going to be insured for that service or to get approval from the payer. So we do all of that in a highly automated way. Historically, all of that's been done very manually in a very cumbersome way. So we're bringing efficiency and automation to that.

In the middle part of the revenue cycle, that really kicks in when a provider has an encounter with a patient. You can probably picture this in your minds but historically, the provider might see the patient and go their whole day and then at the end of the day, try to remember exactly what did they do with that patient and try to account for it in the patients. clinical record. Oftentimes in the clinical chart, there are unstructured clinical notes where they either remember or perhaps there's a physician assistant scribing in the clinical chart real time if they happen to be attending the patient's and that provider visit.

But therein is the middle part begins. And typically, historically, the middle part is where the source of a lot of manual work, agitation and inefficiency begin to occur, the source of where a claim could get denied. In fact, 60 million claims get denied beginning somewhere in that middle part of the revenue cycle. Waystar has a solution that we just acquired through Iodine that takes unstructured clinical information and using AI, begins to filter and improve that information. So that on the other side of that, a patient discharge information is cleared and understood using accurate diagnostic codes but then can also be used to create an accurate claim. And automating that process with software and AI, which we do, is unlocking tremendous value for providers and for patients.

On the back end of the revenue cycle then, we're processing insurance claims, and we're doing it at scale. Again, we're processing 6 billion insurance claims annually that constitute nearly $2 trillion of gross claim charges, and we're doing it with market-leading first pass claim acceptance rates that are nearly 99% across our entire platform. So while we're talking about this one patient example, imagine us seeing approximately 50% of the U.S. patient population that's flowing through Waystar's software at some point in their year and we're helping to bring tremendous efficiency to that provider transparency to the patient.

On the back end, not only are we processing the claim accurately. In the case where a claim might get denied, we're helping the provider to, again, use AI tools to automatically appeal that denied claim and have those denied claims get overturned. And our results are remarkable. We're having tremendous success in -- it's a prime use case for GenAI, by the way -- to create automated appeal letters that are leveraging clinical information and administrative health plan level information to help the provider return that denied claim. And that helps the patient and it helps the provider. It brings fairness to this historically imbalance system.

The last thing I'd say is we offer an integrated patient payment suite. So using all of the insurance knowledge that we have, we're informing what the patient financial responsibility is with AI-driven insights about what their copayment is, what their they're deductible, the remaining portion of their payment is reflecting the deductible balance that might be due. So we're doing a bunch of these things on our platform from front, middle to back and we're bringing unprecedented efficiency to this process in health care that historically has been very cumbersome and has resulted in nearly $400 billion a year of administrative waste.

So I mean what I take away from that is that we've got a really complete platform. I think Iodine is going to add to that, right, which we'll touch on in a second. But also there's a lot of opportunity for automation, right, which is where I'm sure we're going to talk a little bit about AI in discussion as well. But maybe another foundational question I want to ask again, just for the benefit of our tech investor audience. I mean Waystar's business is about 50-50 subscription and volume-based revenue. We'll call that pre-Iodine, right? We'll layer on Iodine in a second. But sometimes when software investors hear volume based, they immediately think not recurring. So maybe you could sort of share with us maybe the visibility that you have into that volume-based line, if you will?

You bet. So we have exceptional visibility to our revenue growth. In fact, our long-term organic revenue growth target is low double digits. And we've exceeded that every quarter that we've been public and have great confidence and conviction in our business model as we look ahead to the future. As you noted, 50% of our revenue today is subscription on a per provider per month kind of model. And the types of clients of ours that use that per provider per month subscription tend to be the types of doctors that practice in 10 to 20 to 50 doctor groups. Think orthopedic surgeons that are practicing together, cardiologists, primary care physicians.

Those that take advantage of our volume metric volumetric contractual relationship with us, they tend to be larger hospitals where a better measure of activity in those hospitals tends to be the number of patient visits that they have that tie to an insurance transaction or something that Waystar could help process for them. So typically, in those relationships, rather than a per provider per month subscription, we create a volumetric type relationship where there are volume minimums. And then on top of that, there are volume overages.

We get great visibility to all of those volumes because we're processing that insurance transaction or those transactional volumes through our software every single day. And they're very predictable. We start each year with about 98% visibility on future years' revenue opportunity. So the go get tends to be small and with coming from new clients that we have, And that gives us confidence in the business that we're building.

A portion of the volume metric side of our business, again, approximately 50-50, but about 30% of the volumetric side of our business is patient payment dollar volume related. So again, as I highlighted a moment ago, we offer an integrated patient payment solution on our platform. That's really helpful for providers, and it's helpful for patients to help them understand what their financial responsibility is going to be. And of that 30%, that is a take rate relationship. So for every dollar we process, we have a modest take rate on that dollar volume that we process.

And again, great visibility to that. We like the secular trend there because as you likely know, more and more patients are participating in high deductible health plans that require them to pay out of pocket and meet their deductible, which typically resets every January, and they fulfill that deductible as they visit doctors or hospitals throughout the year. And so we like the nature of our business model, fairly predictable.

Yes, absolutely. Maybe to put a bow on sort of that volumetric part of the business, I think one of the things that Steve mentioned on the Q3 call was that health care utilization has been elevated, it seems like, for the better part of the past year. Again, maybe for us tech investors that aren't following your end customers as closely, what do you look at to sort of get reads on how utilization is trending? And how should we -- maybe relatedly, because you talked about sort of the move to high deductible plans, which is very topical. But how should we be thinking about the seasonality in that volumetric part of the business?

Yes. So a lot to unpack there. Let me say this, utilization, Waystar starts in our growth algorithm, we start with an assumption that ties to a 60-year historical trend, which is that utilization increases about 1% to 2% every year. Utilization is a measure of how much patients are visiting the providers. And our business model is fine-tuned to help providers address utilization and to see patients. But that's where we start, 1% to 2% is what we conservatively model.

We've seen that in higher utilization years, that tends to mean patients are seeing the provider more or sooner in the year. And if they're participating in a high deductible health plan, then they're coming out of pocket to pay for their health care sooner. And that's what we've noted this year. Given higher utilization, as a patient meets their deductible, there tends to be some seasonality in the second half -- that starts in the second half of the year. And of course, we prudently or conservatively model that. And the Q4 guidance that we gave suggested that our Q4 growth reflecting the patient payment seasonality would be about 8% before it resets on January 1, and we go back to our kind of normal growth. We did that, but we also updated our guidance for 2025, too. So we feel good about our business. So hopefully, that's helpful.

Yes, that's really helpful, actually. I want to shift gears to AI a little bit, right, because it's clearly been topical for all of our application software companies. But I also think it's particularly topical in your end market because revenue cycle management is so process oriented. As you is that was the reason why I wanted to go through kind of the there different parts of the revenue cycle management process. So maybe, Matt, you could just talk to us about what generative or agentic AI looks like for Waystar in the next couple of years, perhaps leveraging some of what you walked us through in terms of your different parts of the workflow? Maybe we'll start there.

Thank you. Yes, foundationally, we believe that Waystar will be a long-term winner in the AI race in revenue cycle, and we've got a number of things that we're doing that are competitively differentiating. And let me start. So Waystar is primarily focused on leveraging AI to automate some of these tasks that have been manually performed. We've conditioned over 1 million providers and end users that we serve to consume AI that we've been delivering for over a decade. To do some of the work that I described it as bringing insight or automation or prioritization of work on this workflow platform that we have.

We have a tremendous amount of billions of administrative data elements. And now with Iodine, Iodine's processing through its software as we unite that and put that onto the Waystar software platform. Iodine is processing about 34% of all patient discharges that occur in the United States today, so a tremendous amount of clinical data. So just foundationally, we believe that data is in Waystar's data foundry, if you will. That's proprietary data that Waystar has access to, to train and fine-tune our LLMs and AI models to further automate, to further bring insight to and further delight our clients.

And as we've conditioned them to consume AI and as we deliver more of it that fits intuitively into how they think about the work that they do, we believe Waystar will be a long-term winner. We think the winning solution, as LLMs are important today, the winning solution will really be those that have access to the most relevant and proprietary data. And that's where Waystar -- you'll see as we unite Iodine with Waystar, this tremendous data foundry with billions of data elements that will train our AI models on will deliver real value. And we're already doing that today.

We've announced at the start of 24 several GenAI-based capabilities that we've launched to our clients, they're seeing tremendous efficiency gain in the world of preventing denied claims much more rapidly, doing far less work, deploying autonomous generative AI to gather content and information that will help us automate the prior authorization, for example. And on the other side of that, when a claim does get denied, we're using GenAI capability to automatically draft appeal letters that can then be submitted and we're doing that with better accuracy than a human can produce in moments, not hours and days to gather and write those appeal letters.

So we're doing some remarkable things there. And I'm pleased to report, we mentioned this a few weeks ago that we have a very robust pipeline of opportunity as we look ahead in our business with a record number of RFPs that we're participating in with strong win rates with tremendous sales activity. I alluded to the fact then, but I'd like to share with you today that a portion of the sales pipeline of opportunity that we closed year-to-date, these are bookings that we've won, have come from these new AI modules that we've sold. And I'm pleased to report that 31%, more than 30% of all of our bookings that we've closed year-to-date, have come from a new AI solution.

So Waystar is delivering AI capability that increasingly will impact our business model. And we believe we're very well positioned to win because of the proprietary data that we'll use to train the LLM, and we think that's the long-term winning strategy in this game.

Well, 31% of year-to-date bookings is a heck of a ramp.

And if you were to look at our qualified pipeline of opportunity that, again, is very robust, you see a nice mix of new clients that we're going after, cross-sell opportunities we're going after where AI is playing an increasing role in the opportunities that were -- and the dialogue that we're having with prospects and with clients. We're very encouraged by the work that we're doing.

Yes, absolutely. I mean it's funny, we've got a lot of coverage companies that are kind of talking about AI very conceptually. But in an industry like health care, where you can actually drive real dollars, real value, that's great to see. Maybe the follow-on question there is, how do we monetize it, right? Because you provide so much value to the health care industry. I mean, is this something where we can command maybe higher pricing for? Is it a separately billable SKU? How do we -- and there are multiple ways that you can monetize, but I'm just kind of curious, what's been the main driver of that 31%?

Well, so certainly, we sell everything on an ROI-based concept. We're turning AI hype into this ROI reality discussion with clients. As we think about monetization, I think there are 4 ways that we think about monetizing the AI benefit that we're delivering to clients. The first is certainly elongating relationships with clients. As we infuse more GenAI capability into existing software SKUs and they're consuming that, we're creating enduring retention with clients. We have fabulous gross revenue retention already at 97%, but elongating that it's a great starting point.

Again, as we infuse AI capability into our current software modules, there's a chance to reflect pricing, pricing to value there. We typically have an annual price increase program that averages about 3% today. And without disclosing more from a pricing perspective, we expect to be able to price AI solutions to the value that they're delivering, and we know they're delivering real value. Third, you mentioned new SKUs. We're excited about the new SKUs that we're launching and the value that they will bring and will have the chance to price those to value as well.

And then the fourth thing I'd say is it's not necessarily a commercialization effort, but more of an internal one. Internally, we've identified more than 100 AI use cases where we can use AI internally to delight clients and create market-leading client experiences. We're already really good at that. We have market-leading Net Promoter Scores that exceed 70 and we're thrilled with how we delight our clients but we're also able to create operating leverage. And we have a long-term EBITDA margin target of 40% today, adjusted EBITDA margin target of 40%. You've seen us the last couple of quarters exceed that. We've recently been at 41%, 42%. I think you're starting to see some of the impact of some of the operating leverage that we're creating.

My goal for our team is given the market moment and the opportunity to continue to drive growth and innovation, let's run the business at 40%, even though we know we could run it and higher than that. Let's create operating leverage through some of these AI use cases that we know are creating value. And then let's use that incremental identified resources to invest back in the business to drive further innovation and further growth and delight our clients.

It's funny to cover a company that would have a saying of, well, we would spend our way to our margin target right? And it sounds like a very...

You say invest.

Invest our way to our margin target, absolutely. Absolutely.

But we will be disciplined in how we think about the whole thing.

Absolutely, and that's definitely shown. I want to wrap up with some financial questions here in a second. But I think that AI point was really interesting. Any questions here before we move on?

Maybe just to move to a couple of financial questions here for you, Matt. I mean, clearly, this has been a strong year for growth. I think we've seen growth year-to-date in the mid-teens versus what we've seen historically kind of in the low double-digit growth, which you've just been so consistent with since the IPO. It's obviously early to guide to '26 and I'm not looking for a guide, but what are maybe some of the puts and takes that you want us thinking about from a growth perspective as we go into next year high level?

Yes, we have seen year-to-date growth of about 14%. We're thrilled with that. That's above our low double-digit kind of revenue growth target, for good reason. The business is creating value for our clients. And again, our full year '25 target that we've shared is 12%. I think what we would highlight to investors is that our long-term growth target is organic low double-digit revenue growth. And things that influence that our ability to launch and deliver new capabilities. As I just mentioned, we're doing that and our provider clients are beginning to buy those solutions and we'll implement those solutions and create value and be able to price to value appropriately.

Driving cross-sell on our platform, where it's an incredible cross-sell opportunity. We can more than double the size of our company if we didn't add another client and we just sold the existing software solutions that we have to those clients. We could more than double the size of our business. So that's another thing that can inflect growth.

The third is, as we think about this exciting acquisition and as we unite with Waystar, what we identified in Iodine that stands out to us is not only a philosophically be very aligned with us as we think about AI market leadership, but they have 151 clients that represent over 1,000 hospitals. Waystar serves well over 1,000 hospitals. And on a combined basis, we serve 17 of the top 20. But as we look at the Venn diagram of their group of clients and ours, there's about a 35% overlap. So one of the things that could really inflect growth as we think about it is how quickly can we begin to cross-sell Waystar solutions to Iodine clients and Iodine solutions to Waystar clients.

And of course, there's other factors that we look ahead to with confidence: the robustness of our pipeline, our continued strong win rates, the fact that we see great sales activity, and we're creating tremendous client referenceability. I'd highlight the fact that every spring and every fall, we do an Innovation Showcase. That's available on our website, you can see previous ones on our website where we're highlighting areas where Waystar is using AI to solve a real market problem in health care we're showing how our AI works. And then we're showing a client testimonial, a live person talking about how they're getting value from using our solution.

And so I'm generally excited about the momentum that we're creating in the business. And we've seen some of the stuff going on recently in our stock price. It feels like there's misunderstandings that I'm working to correct, and I hope you have a sense of confidence that I feel in our business. And the silver lining is I think there's a good buying opportunity right now for Waystar.

Yes. Now, I wanted to ask you about that point about where you think the disconnect might be, but we hit on that. Maybe the last question I want to ask on then is on capital structure. I think we financed the Iodine deal with a combination of debt, equity and some cash on the balance sheet. And ever since the IPO, we've just done a really good job of steadily delevering the balance sheet. Should we expect to continue to see sort of -- as you and the Board kind of think about capital allocation, should we sort of expect to see a similar pace of delevering or anything else that you want to snow in capital allocation?

Our business produces tremendous free cash flow. This year, I think we've averaged greater than 80% of adjusted EBITDA to free cash flow conversion. So we delever full turn a year and we did more than that the first kind of -- our more than that in the first 5 quarters we were public. So we're grateful for that. I think that puts us in a strong position. Our strong cash flow production gives us optionality. And we'll continue to be very disciplined as we approach all options on the table. So to continue to delever, to use our cash for other things as we evaluate the strength of our business and some of the opportunities we see in the market.

Got it. Excellent. Well, there's so much to talk about there, but I think that's about all the time that we have left. Matt, Sue, thanks so much for being with us here today. Really enjoyed it.

Thank you. Thanks for hosting us. Great to see you today.

Yes, absolutely. Same here, Matt.

Thank you.

All right. I think we're just about at time here. So thank you. Good afternoon, everyone, and thanks for joining us at the Waystar fireside chat. My name is Daniel Grosslight, I'm the health care technology and distribution analyst here at Citi.

And I'm very pleased to welcome Steve Oreskovich, the CFO of Waystar. Thank you for making the trip down to Miami.

Yes. Thank you for the time.

Maybe if we can get started with just a little bit of level-setting, for people who are newer to the Waystar story. You're still relatively new to the public markets. Can you just start by framing the core problem you're solving for health care providers?

And in particular, the question that I get the most, mostly from people who are newer to the story, is about where you fit within the competitive dynamic, the competitive field, I should say, because it is quite crowded. Can you discuss the importance of being kind of an end-to-end platform and the more modular way you approach that end-to-end platform versus some of the more full-stack outsourcers?

Yes, definitely, and appreciate the question. So if you think at its core, our clients, the health care providers for decades now have continued to see various types of pressure on their top line revenue reimbursement-wise. More recently, maybe the One Big Beautiful Bill and some of the auths to that, right? Where Waystar comes in is we're helping them with our software platform and the solutions on that hosted platform more efficiently and effectively, ensure they're getting paid in full for the services that they do.

And where we really go to market from a differentiation standpoint is talking about illustrating and showing them the ROI we believe we can deliver, our software can deliver, and lower their total cost of ownership. So as they're feeling top line pressures, we're able to help them. And especially if you think about health systems and hospitals that are working on relatively thin bottom line margins, we're helping them to maintain or expand those bottom line margins.

If we think about it from a competitive standpoint, I think there's a couple of things that are really resonating versus other legacy incumbents we see in the field out there. The first is the platform approach, right? We're hearing more and more from our clients that they want to work with a single trusted provider, highly cyber-secure, and reduce the number of vendors that they have in their ecosystem.

I think the second thing is I'd mentioned earlier the approach of illustrating the ROI and benefit that we can perform and we can deliver for our clients. And I think a tangible way to illustrate that is, as you think about nationally, typically, there's still about a 16% to 17% denial rate occurring when a claim is being submitted to a payer, right? We typically see a point differentiation in the starting point of that, meaning as a claim is initially delivered, we call it a first-pass clean claim rate, almost 99% across all our clients.

So if you think about that in terms of the amount of work that's spent in that follow-up and you have a provider that you're -- or a vendor, sorry, that you're utilizing today that's delivering a low-90s first-pass clean claim rate, versus Waystar, you're talking a marked difference in the amount of work that has to occur thereafter to rightfully get paid for the services that our clients are providing.

Got it. So as you go to market, and we'll dig a bit deeper into the competitive dynamic later, but as you go to market, are you mostly replacing kind of these vendors that just haven't performed well? Or is it completely you replacing very traditional school ways of doing things on paper? What are you...

Yes. A bit of both, right? So we still see homegrown systems and manual effort and work that's being done. I think what we're starting to see more and more is the opportunity -- especially as we talked to and I've mentioned earlier, the approach of having all of our software solutions on a single platform. We're starting to see in the RFPs that we're in, and in the pipeline, more opportunities to eliminate or to replace several different vendors they may be using today with Waystar.

Because they're seeing the benefits to clients, and potential clients -- are seeing the benefits of working with a single vendor, again, highly secure, highly cyber-secure, sorry, with a good set of existing clients that are referable or can actually be leading and helping us out with that conversations with potential clients on illustrating what Waystar was able to do for them. So it's more -- it's a combination of what we commit to, but then also having others speak on our behalf.

Yes. Yes, makes sense. I want to touch on one of your recent acquisitions, a large acquisition you made, the $1.25 billion acquisition of Iodine. This is really interesting because it kind of got you more into the clinical documentation setting. Could you just maybe talk a little bit about the value that Iodine is bringing to your end-to-end platform? Because I think as I look at your platform, it's pretty robust, but this is kind of a new step for you. And what opportunities does this specifically unlock for you?

Yes. We've talked about previously the opportunity for us to help our clients be able to submit what we've called the perfect, undeniable claim, right? That's our out-year vision. I think Iodine goes a long way to helping that occur.

If you think of the Waystar solutions today, we do really well at the outset of when a provider interacts with a patient, meaning helping to look for eligibility, prior authorization, coverage detection. And then obviously, you mentioned how we have a point-step differential between the competition on when it comes to processing the claim for them to be paid, interacting with the payers and/or interacting with patients.

What Iodine does for us is it helps in that process of as the patient and the physician are having his or her interaction and taking, to your point, the clinical diagnostics, and taking those unstructured notes, turning them into the structured information that forms the basis, the codes that form the basis of the claim. So we think by informing and putting together ultimately the Iodine clients and the solutions on the Waystar platform, we can even improve the enhancements and the outcomes that we see today.

The other part of it that we see from a more near-term perspective is often certain aspects of that interaction between the payer and the clinician will require some clinical data in order to ensure that we can eliminate back-and-forth processes that occur one area is in prior authorizations, right? And that is a pain point that has a lot of national coverage and we've heard about lately.

So we think there's an opportunity to take with the Iodine, not only the algorithms, but the clinical information, and allow us to really shorten the time line of enhancements that we were looking to bring already in certain of the Waystar end solutions that we have today.

And can you talk a little bit about the AI models that Iodine also brings to your tech stack?

Yes. I mean it's -- they have over 160 different AI modules that are actually helping to take, again, unstructured information, unstructured data, look at it and help to form the basis of basically reading and helping to form the basis of the clinical codes that go into -- ultimately go into the claims. We think there's opportunities to take that base structure and apply them in other areas into the ecosystem as well, and continue to enhance and shorten the time to market for other solutions that we already had in our product road map.

Yes. Let's talk about a little bit of a nearer-term dynamic. I think 4Q is typically one of the busier quarters from a sales cycle perspective. Now that we're kind of nearing the end of 4Q, how has the sales cycle shaped up this year versus prior years? Are there any solutions that you're seeing kind of outsized demand for? I think you mentioned kind of the pre-auth and, I'm assuming, denials too are big for you. But any solutions that this year had seen a marked change in demand?

Yes. We mentioned on the last earnings call, we see really good activity on, not only from a pipeline perspective and a demand perspective, but also in the RFP side. And those tend to be the larger opportunities out there. I think probably specific solution, are we seeing a marked differential from what we've historically seen? It's along those same lines. There's, obviously, in the areas that you mentioned, Daniel.

I think where we're really seeing excitement and significant uptick is in what we would consider multiple sales solutions platform type solutions and opportunities with new clients, that earlier comment I made about the opportunity and the desire for potential clients to eliminate or reduce the number of vendors in the ecosystem. So we're starting to see -- and we started to see that in the past 12 months or so. Starting to really see a nice uptick in that specific types of opportunities.

Got it. Okay. And from the RFPs, is that mostly health systems, or is it really throughout -- you typically are bigger on the ambulatory space. But has the nature of the RFP and who's running an RFP changed as well?

It remains largely health systems and hospitals, but then those larger enterprise, ambulatory companies also do a similar type structured arrangement when they're looking at bringing on a new vendor in their ecosystem as well.

Okay. Great. Utilization has been very strong for you guys for the past couple of years. I'm wondering, is this a temporary bump that you're seeing? Or is this more of a structural shift in the market that is durable for the next few years? And importantly, how does this impact the demand for your platform? And do you think it will intensify provider focus on revenue capture from that utilization?

Yes. A couple of things. So in general, our revenue mix is about 50% subscription, 50% volume-based. So we like that mix because it allows us to capture the upside from utilization, whether that's coming from, for the past decades now, continued patient greater utilization of the health care system, as I'll put myself in these category, as we continue to age, right? I think also our solutions allow our clients to become more efficient, more effective and further increase their capacity as well. So we get to see upside when that occurs.

To your point, we've seen continued utilization. We've commented strong utilization, that we've commented on in our prior calls for about the past 5, 6 quarters now, above what we've historically seen. Is that a step-mark change into what our expectations would be going forward? I don't think we've seen anything that would say what we've seen over the past 5 to 6 quarters would change at any immediate point in time in the future. Am I ready to sit here as a CFO and try to call the future, at least the next couple of years at this point? Probably not.

But feel really good about the totality of our revenue sort of algorithm, whether it's subscription and software, whether it's coming from newer or existing clients, and the durability of that to allow us to continue to meet our long-term low double-digit revenue growth rate, and continue to reinvest back in the business to help us ultimately exceed that.

Yes. We'll switch over to AI. We already mentioned it with Iodine and what that brings to your platform. But you also have a partnership with Google, and you've rolled out several generative AI products, the Altitude product suite, which is really interesting and I think one of the only ways to play the AI trade right now in health care in a real way. A lot of people talk about AI, but you're actually introducing products that have real AI in it. How are you pricing these products? And what has the early reception been to these products?

Yes. Maybe I'll hit that in reverse, if it's okay. So the early reception has been fantastic, right? And to your point, we're -- and we've used this phrase before, we're taking AI hype and turning it into ROI reality.

You mentioned 2 pain point areas earlier, being prior authorizations, right? The generative AI solution that we brought so far, and the clients that are using it, are reporting about a 70% decrease in the time to go ahead and receive and interact with the payers and receive that prior authorization. That's fantastic results if you think of it, as you and I as patients, of having faster time to understand what our next care path step is, right?

In the area -- the other area you mentioned, in denials, right? Our denials and appeals management solution, we've seen, with the generative AI capabilities enhanced into that, a decrease of 90% of the time it takes to go ahead and not only gather the information and understand why it was denied, but turn around, appeals -- put the appeal package together and submit that appeals package to the payer, right? That's significant savings that our clients are seeing, right?

How are we then in turn looking to monetize those rightfully for the ROI that we are delivering with those solutions? It's in a couple of different ways, right? For those early adopters, we'll look at -- that helped us formulate these, we're looking, think through how do we -- in our annual price increase or price uplift program that we've had throughout our entire client base for several years now, how do we look to, in the next turn of interacting with that client, price to value there?

We've also created new SKUs, you alluded to them. They're the peak product solutions; you can see on our website. That also allows for those existing clients have not yet adopted that are looking to adopt. Or for new clients, for us to charge a differentiated price point for those new solutions because of the vast differential in savings that we think they're allowing those clients to achieve.

Yes. And is there any way to dimensionalize what percent of revenue or percent of clients have adopted some of these newer AI-driven technologies?

Yes, we haven't stated specifics around it yet from an adoption perspective. What we did comment on is we're starting to see a healthier and healthier portion of the pipeline, and started to see the last couple of quarters a growing portion of the bookings being comprised of these solutions.

So we're excited about where we stand today. We still think we're in the early innings of the opportunity in front of us. And we're going to continue to -- you alluded to it earlier, we're going to continue to look at it on a solution-by-solution basis and continue to bring to market. So from a CFO perspective, the beauty of that is that it's not going to be a one big bang and done for us from a revenue growth opportunity. It's going to be continued -- a long-term continued layering effect.

And remind me, there are -- typically, I know every contract is a little bit different, but there are typically, even for non-AI products, annual escalators. Can you frame what a typical annual escalator is? And then how perhaps the GenAI escalator compares to that?

Yes. So if you look at our bridge from gross revenue retention to net, it typically starts out with very strong 97% gross revenue retention. We talked about the patient utilization. Annually, we continue to see increases there. It generally drives about a 1% to 2% uplift. Price increases, the program we've had in place now for 7 years generates generally between 3% and 4%. And then as we get to the 108% to 110% net revenue retention rate, 6% to 8% comes through cross-sell.

We haven't yet indicated how much we think we can change that 3% to 4% dynamic. Obviously, it will be a change over time, but we think there's opportunity on client-by-client basis as appropriate to continue to increase that. And then obviously, the other place that it will benefit the NRR rate altogether will be in that cross-sell, upsell as those new SKUs go in.

Yes. Makes sense. Okay. And then looking ahead, what do you think is next for GenAI? Do you think you'll move to kind of an agentic AI product at some point? How should we think about the future of that product set?

Yes. So look, we've got a lot of excitement. I don't want to get ahead of our tech folks, I should say. They might not be happy if I start committing us to certain things on this call here today. But I think it's safe to say that we -- we mentioned a while back that, at the beginning of the year, we were looking at 16 use cases. We've obviously brought several of those to market. We continue to add to that.

We typically have every 6 months or so, what we call our innovation showcase. It's on our websites as well. You could see the one that we recently did and the solutions that we highlighted that we're bringing to bear that have generative AI as part of that. Going forward in the future, would I expect agentic AI to be part of the solutions that we bring forward as well and even things that we haven't thought of yet today? 100%.

Got it. Okay. Let's switch over to the competitive dynamic. As I alluded to, it's a very crowded field. And this is, as I mentioned, probably one of the questions that I get asked most often, because you do seem to hear about a new company every week or so that is AI-native revenue cycle management. You hear about what Epic and Cerner are doing on the revenue cycle management side, which has not typically been an area of strength for them, but they do tend to own, at least on the health system side, the tech stack. And then you've got your traditional competitors, which have always been around.

How do you differentiate yourself among those different constituencies? And also, there is this dynamic too where you're partners with EHR companies, so it's this coopetition dynamic too that is playing out in the market. How do you maintain those strong relationships while also being a competitor?

Yes. Several parts of the question, so I'll try to go through them in sort of pieces. So if we look at the existing or what you might call legacy competitive field, I think the differentiation point comes in the marked differential of ROI versus the solutions that they're providing.

It also comes in our client experience, right? So we tend to believe and live by that we have a high-touch client experience, right? And by that, I mean, I'll give you an example. For clients of a certain size, we have what we call a client success management team. That team is there to say, are you receiving the benefits and are you gaining the benefit that you would get when you first bought the solution? How can I help solve your challenges?

They're also there to identify and look for new opportunities for us to be able to work with that client in other areas where they're having challenges with other -- whether homegrown systems or other vendors that are not meeting their needs, right? So we think we have a highly differentiated technological and client experience approach.

If you look at the new potential upstarts that you mentioned, and we see the same splashy announcements as well. I think it comes down to the differential between hype and ROI reality, right? So for instance, I'll take in the area of prior authorizations clients, as we -- or a vendor, a new vendor says, "We've solved for and automated prior authorizations." Well, when you dig under the covers, what you find is for the couple of clients that they have, maybe they're doing it for a few specialties and a few end-user payers. Where when we're bringing something to bear, that's a highly -- a more highly automated approach to prior authorizations, it's for the entirety, that 70% opportunity. The time reduction I had mentioned earlier, it's for the entirety across the continuum of our client base.

I'd say the other thing is we believe that we've got a bit of a moat differential both versus those new upstarts and probably the EHR, theirs as well. And the fact that we have this big database over 6 billion transactions processed annually for our LLMs to learn from, which means that they can learn faster and they can be more accurate in their output, right?

The other thing is the connectivity within the ecosystem that we have today is a marked differential as well, whether that's with over 500, not only EHR practice management systems, but thousands of end-use payers where we have direct connection to as well. So as we're solving problems for our customers in the ecosystem, we're doing it in a way that has mass connectivity and we're solving it on a broader scale, right?

We've also, to your point in mentioning we have good partnerships with Epic, a contractual partnership with Oracle, Cerner, MEDITECH as well on the health system and hospital side. So they are good partners and whom we work with. I think what we've seen in the past is when they've made certain announcements, they've been more of an effect of looking to put the market on hold while they develop something, right?

And what has tended to come out in the past is we've seen that there is still an opportunity for Waystar to partner with those clients, that they would say they have a solution to provide, because of the marked differential in the ROI that we're still able to deliver versus what they may bring to bear is more of a minimally viable solution.

So not discouraging or disparaging any of the competition out there. We like to compete, but we think we still have ways that we are ahead of the competition in certain areas and obviously looking to continue to maintain that lead, whether it's technologically or in the client experience.

Yes, makes sense. And I'm wondering though, do you think as AI becomes more prevalent, that this dynamic changes at all? And what I mean by that is I get a lot of questions also on how does -- and this isn't just for revenue cycle management, but you can ask this question for any vertical SaaS company. How does vertical SaaS operate in an AI dominated industry?

And I'm thinking maybe we'll have this barbell effect where it does make it easier for health systems and larger ambulatory groups to in-source with AI tools, and maybe it does make the EHRs a little bit better in terms of product quality or a little bit faster to market. Do you see that -- it's probably not here right now, but looking out a year or 2 years from now, do you see AI changing the competitive dynamic and that barbelling effect?

Yes. I think what we're seeing today, I won't try to predict the future, but what we're seeing today is, to your point, a lot of interest, right, from our clients, the providers, the health care providers. And what I think they're looking at when you talk about do I want to as a health care provider start to use generative AI internally to solve problems versus work with a vendor like Waystar, you start to think about the ways in which they're going to have to connect into the health care ecosystem, right? They would have to solve that problem to all of their payers. They would have to solve that problem as it connects to a multiple of their other systems that they're utilizing internally.

What we see and hear more and more is, hey, look, even if they're evaluating a point solution from a new generative AI company out there, is we'd rather look and work with a trusted adviser like Waystar that we know and we can see what you're -- how you're innovating, not only today but how you're looking to innovate into the future, rather than to have to not only design that ourselves, but then have to continue to maintain that ourselves in an ever-changing environment.

I think that's part of the beauty of where we sit in the health care ecosystem, and maybe some from a vertical SaaS provider or a vendor as well, is that the workflow involved in it, the interconnectivity involved in it with other vendors is significant.

So could there be some on the peripheries -- I don't know that I'd necessarily see it as a dumbbell approach, right, or barbell approach. But could there be some improvement opportunities on the peripheries one way or the other that also enhance and help bring forward and help reduce waste in the health care ecosystem? Yes. Do I see it being sort of a pressure point on Waystar and our opportunity in front of us? No. Not today.

Got it. Okay. And let's talk about some of that connectivity that you do have within the health care system. When I think about you guys, you also have a big clearinghouse business, which has benefited from some competitor disruption. Can you -- I don't think you've ever really sized the clearinghouse business, but is there any qualitative commentary around the size of that business that you can provide?

And then really my question is with that disruption that came from your competitor, there's obviously a big upsell opportunity. And I think that was one of -- that has been one of the drivers of your very strong dollar-based retention. Can you just comment on the progress that you've made and if there's more juice to squeeze out of those clients?

Yes. I'll hit it in reverse, if that's okay. So yes, there's definitely more juice to squeeze, more cross-sell opportunity, so to speak. We've talked about in the past in a couple of phases. Phase one being those clients -- potential clients that were hard-stop business down that we helped bring on board, sign them intentionally to standard Waystar agreements, 2 to 3 years in contract length, whatever, and evergreen annual renewals thereafter, right? And mentioned a couple of quarters ago that we've seen about 30% of those clients looking at follow-on sales opportunities in the pipeline, which is right in line with what we see in any new cohort of clients that we bring on.

So feel really good about the trust we've built with that client base, the opportunities to continue to cross-sell into those client base. And we've got a go-to-market team that's wholly focused on cross-sell, upsell within our existing client base, that's highly focused on those and all our -- all other clients that we have, right?

We also noted that there's this -- that there was a phase two. So those clients that could weather the storm or contractual obligations that were significant enough -- potential clients, sorry, that were significant enough, that we thought were going to come up for opportunities here around this time and through the next couple of years. And we're seeing that strength in our commentary in the surrounding RFPs in the pipeline. So we feel really good about that opportunity to continue to win market share.

Now that being said, as we disclosed in our S-1, we have really high win rates against the entirety of the competition, 80% plus, right? So feel really, really good about where that sits and where the opportunity could go.

The second part of your -- the first part of your question was around?

Sizing how big the clearinghouse is...

Yes, sizing, how big. Sorry. Thank you for the reminder. So if you think about it from a go-to-market perspective, our teams are focused not only on new client and cross-sell opportunities, but also health systems and hospitals and ambulatory, right?

Typically, the sale process into an ambulatory client tends to be that, we call it the claims management solution suite or solutions in their clearinghouse, right? So if you think about ambulatory from a revenue perspective being about 2/3 of the business, health system and hospital revenue being about 1/3 of the business, you can kind of get a sense of how many ambulatory clients and revenue is -- has -- includes those clearinghouse solutions, right?

The health system and hospital opportunity and go-to-market approach tends to be one that is very diagnostic and pretty agnostic, meaning we say, what is the solution that we can help you -- what is a problem area we can help you solve today? Land that, prove ourselves. And then expand and gain other solution sales in there. So it's not focused on it has to start with those clearinghouse solutions. Rather, it has many paths and ways that we can continue to expand -- enter into and expand with clients in that area.

So hopefully, that's helpful sizing to say it is a meaningful portion of the revenue that we derive. And obviously, it's a different -- it's the entry point into most of our ambulatory sales opportunities.

Yes, makes sense. One other industry dynamic that has come up this year is kind of an arms race between provider tech and payer tech. And it does seem like provider tech, and maybe this is just a false narrative and me searching for a narrative, but it does seem like provider tech has kind of gotten the upper hand this year at least. And perhaps next year we'll see payers invest more in their technology stacks to combat some of the headwinds they're facing on the MLR side. Are you seeing a similar dynamic or am I just searching for a narrative here? What's the tension been like between providers and payers as they invest in their technologies?

Yes. As we speak to our clients, I think what they would say is, for years, the playing field was heavily tilted towards the payers, right? And vendors like Waystar are now starting to bring an equality or fairness to it. And as we continue to drive generative AI solutions, it's even helping them further and faster identify and get paid rightfully for the work that they're providing.

We've kind of heard the similar characterization of: is it leading up to an arms race? I mean I'd look at it and say, our hope -- my hope, I'll speak for Steve, my hope is that it helps us -- bring us -- continues to bring us closer and partner more with the payers in opportunities that we can both derive efficiencies into the ecosystem, whether that's through direct API connectivity or otherwise, that we can help illustrate that the work that the payers and the costs that payers are incurring today with manual or inefficient processes in the background, hopefully, vendors like Waystar can help make them more efficient as well and see goodness in the entirety of the ecosystem, as opposed to it kind of building up and trying to be this arms race.

Would you ever consider getting more into payer tech, maybe through payment integrity or something like that?

I'd say never say never, right? But today, we're clearly focused on who our customer set is. Those are the providers. We look at our $17 billion plus total addressable annual market opportunity and the low penetration we have in that. If you blend between ambulatory and health system and hospitals, it's in the high single digits. So we've got a lot of runway within the area that we're fully focused on today. But I wouldn't close out any opportunity in the future.

Okay. Let's stick to the giant opportunity you have in front of you then. You bought Iodine, which got you into kind of clinical document management. You acquired a patient payment asset that got you more into patient payments. Looking forward, where do you see the most opportunity? And this could be organic or inorganic. But where do you see the most opportunity for either expansion into new products, new markets? What's next there?

Yes. Yes. So we're continually looking to listen and understand from our clients' areas of pain points we think we can bring new solutions to help mitigate, right? A couple of areas that we've talked about from past earnings calls are still relevant.

One, potentially, if you look at the front end of where we engage with patients today, the digital front door, you know the market well, obviously, highly fragmented. But it's an area that we're looking at build-buy-partner, that we're studying and understand the opportunity there. Because our end users are business people as well and they know that, if they can engage with and maintain a patient for their life cycle, that's millions of dollars of revenue opportunity for them, right?

The other area is real adjacent to what Iodine does, and it's actually between the clinical diagnostic and the claim. And you might have heard it characterized as autonomous coding, right? And that's an area where we think, and fits really nicely and dovetails nicely into that perfect, undeniable claim, right, is an area where we think there's opportunity to drive efficiencies and drive accuracy and continue to lower the labor burden of our clients and what occurs even today in the technologies that we brought to bear and Waystar and Iodine combined can bring to bear.

Yes. What about ambient scribing? We hear a lot about the hype in that market. Any interest in those solutions?

Yes. I mean an area that we're looking at transparently. We've heard a lot in -- recently there where it seems to -- I don't want to use the word commoditized, but it seems to be getting pretty quick for generative AI to solve there. But the outcome of that is still unstructured clinical notes. So it could be a place to partner, it could be a place internally to look at. I think -- we think that the real benefit is in the ecosystem as it sits today and the future is more on the autonomous coding side.

Got it. Okay. And let's turn to your guide, your '25 guide, which was strong. But to us, it does seem a bit conservative, maybe prudently conservative. If we assume an increase -- a sequential increase in your subscription revenue, it implies kind of a mid-single-digit sequential drop in volume. Can you just remind us of the seasonality in the business and some of the building blocks of your '25 guide?

Yes. So to your point, the '25 guide, hopefully full year and inherent in the fourth quarter, you saw a pickup above the beat on the midpoint of our revenue guidance versus the Q3 beat, which we're really pleased with. It continues to signal, as you noted, strength in the business, at an implied Waystar standalone growth rate in the fourth quarter alone of 8% year-over-year.

It's a consideration of a couple of things. One, sort of the rapid time to revenue last year for those clients that we onboarded and the potential impact that Q4-over-Q4 might be a tougher quarter just from a percentage of revenue growth opportunity.

The other piece is in the 30% of our revenue that comes from patient payments, how those providers interact with and collect from patients, we've seen stronger utilization and payment activity in the earlier half of the year. And we typically see growth year-over-year there. Stronger in the first half of the year versus second half of the year seasonality.

And we're just to you all, to use your word, whether it's a gauge of prudency, we're just trying, to our best estimate, think about where the outcomes could be. At the midpoint of our guide, we think that stronger utilization we see means less payments to occur in the back half of Q4. Obviously, at the upside, on the high side of guidance, it could be a little stronger payment and less patients hitting their deductibles that are on high deductible plans, over a broader swath versus what our internal expectation is.

Got it. And we're just about out of time here, but I'd be remiss not to ask about 2026. I know you're not going to give formal guidance, unless that is something you want to do. But I would like you to kind of help frame how we should be thinking about growth in '26. I think margins are pretty safe, but growth, I think, has been a bigger area of debate, particularly because you have had such -- and I'm talking about on an organic basis, such a nice organic growth over the last couple of years, above your targets. Maybe help decompose kind of the growth, bridge the growth from '25 to '26. Are there any temporary or nonrecurring items in '25 we should be thinking about as we model out '26?

Yes. I appreciate the question, right? And to your point, look forward to in our next earnings call digging deep into 2026. I don't think there's anything we see that significantly changes from what our long-term targets that we have talked about have been, right? Low double-digit revenue growth on an annualized basis, 40% plus adjusted EBITDA margins. Continue to expect strong free cash flow conversion of 70% plus. And then obviously, we have a history of, and I mentioned in the last earnings call, that we continue to expect to delever 1 turn annually.

So I think those are still, as you're looking at long-term projections and how to think about the business, the right way in which to characterize the business.

Great. Well, we are out of time now. Steve, thank you so much for all your time this afternoon. Super interesting.

Thank you, Daniel. Appreciate it.

Good day, and thank you for standing by. Welcome to the Waystar's Third Quarter 2025 Earnings Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Sue Dupuly, Vice President of Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, everyone, and thank you for joining Waystar Third Quarter 2025 earnings call. Joining me today are Matt Hawkins, Waystar's Chief Executive Officer; and Steve Oreskovich, Waystar's Chief Financial Officer. This afternoon, we issued a press release announcing our financial results and published an accompanying presentation deck.

You can find these materials at investors.waystar.com. Before we begin, I'd like to remind you that this call contains forward-looking statements, which are predictions or beliefs about future events or performance. Examples of these statements include expectations of future financial results, growth and margins.

These statements involve a number of risks and uncertainties that may cause actual results to differ materially from those expressed in these statements. For a full discussion of the risks and other factors that may impact these forward-looking statements, please refer to this afternoon's press release and the reports we file with the SEC, all of which are available on the IR page of our website.

Any forward-looking statements made on this call are only as of today and will not be updated unless required by law. We will also discuss certain non-GAAP financial measures. These measures are intended to provide additional insight into our performance and should not be considered in isolation or as a substitute for financial information prepared in accordance with GAAP.

We have provided reconciliations of the non-GAAP financial measures included in our remarks to the most directly comparable GAAP measures, together with explanations of these measures in the appendix of the presentation slide deck and our earnings release.

With that, I would like to turn the call over to Matt.

Thank you, Sue, and good afternoon, everyone. In Q3, Waystar continued its strong momentum, achieving solid revenue growth and profitability. This performance was anchored by healthy client retention and expansion, reflecting our leading position in modernizing the health care payment process. Our cloud-based AI-powered software creates compelling value that drives meaningful ROI, strengthens client financial outcomes and improves transparency in the cost of patient care.

Let's review a few key highlights. Reflecting strong execution, Waystar delivered another quarter of double-digit revenue growth and strong margins, outpacing our guidance on both measures. Revenue grew to $269 million, representing 12% year-over-year growth with an adjusted EBITDA margin of 42%.

On October 1, Waystar completed the acquisition of Iodine Software, expanding our reach to more providers uniting clinical, administrative and financial data, increasing the total addressable market and unlocking new opportunities to drive profitable growth.

We announced innovations across our AI-powered platform and engaged hundreds of health care's top technology and industry leaders at Waystar True North. Our annual client conference to foster connection, success and ensure our product road map continues to meet providers' needs today and in the future. At Waystar, the mission is clear, to simplify health care payments, the health care financial system is complex, fragmented and administratively heavy and Waystar is modernizing it through a cloud-based platform that streamlines the entire process.

Our technology helps providers get paid faster, more accurately and with less administrative burden so they can focus on what matters most, delivering quality patient care, purpose-built for health care, our platform integrates with more than 500 electronic health records and practice management systems.

This extensive integration enables us to serve over 1 million providers nationwide of all types and sizes. And we believe Waystar's impact is unmatched. Waystar leads the market in advanced automation and intelligence, leveraging AI-powered workflows, unrivaled data assets and meaningful innovation.

Our powerful software fuels industry-leading client satisfaction and is transforming the financial and administrative engine of health care. As the industry seeks greater efficiency, transparency and value, we believe Waystar is positioned to capture a vast and durable growth opportunity for years to come. Turning to the completion of the iodine software acquisition, Waystar has taken a major step forward in our mission. The addition of iodine expands our total addressable market by more than 15% and accelerates innovation and strengthens our ability to drive durable, profitable growth.

We've also welcomed nearly 150 health systems, representing more than 1,000 hospitals to our client base. Iodine brings proven AI-powered mid-cycle capabilities, including clinical documentation integrity, utilization management and prebill anomaly detection. With Iodine now part of Waystar, we're uniting clinical, financial, administrative and payer data in a single intelligent platform -- by infusing these capabilities and data into our software, we're extending and compounding the value Waystar provides before, during and after care.

Our platform and access to this tremendous data spans every stage of the revenue cycle powering AI insights, automation and accuracy that enable complete compliant and defensible claims, accelerating reimbursement and strengthening provider financial performance.

We estimate that Iodine accelerates portions of our product road map by nearly 2 years as we deliver the next generation of clinically informed AI-powered capabilities. We are pleased to have Ionis Founder, William Chan, now serving as Waystar's Chief AI and Product Officer. In this role, William is shaping the future of the Waystar platform and advancing our innovation agenda.

He is joined by several senior leaders and domain experts from Iodine who bring deep clinical and technical expertise to accelerate our progress. To give you a sense of what's ahead, we envision a future where AI continuously scans data, identifying anomalies across patients, providers and payers, automating tasks, validating documentation accuracy and predicting and delivering financial outcomes.

This is the path toward true autonomous AI in health care revenue management. And ultimately, we believe these innovations will power the future of the health care system. Waystar recently hosted its sold-out client conference, Waystar True North, convening more than revenue cycle leaders, 1 of the largest gatherings of decision-makers in the industry.

At the conference, we highlighted client results that generated meaningful ROI and strong performance. A few examples of client impact include reduced prior authorization submission time by 70% within weeks of implementation at a large regional health system. Achieved a 4x ROI for a major nonprofit health system through lower denials and higher revenue capture and increased point-of-service cash collections while redeploying the equivalent of 10 full-time employees to higher-valued work and a large Midwestern health system.

These outcomes reinforce the scalability and financial impact of the Waystar platform and our ability to deliver sustainable, profitable growth. Also at Waystar True North, we convened the Waystar Advisory Board, senior executive decision makers and early adopters of Waystar software from leading provider organizations who provide invaluable insights that fuel our innovation and help shape our strategy.

Our discussions reflected the realities provider space today, rising utilization accelerating denial rates and ongoing workforce shortages that continue to pressure margins. Many are turning to AI, seeking technology to drive greater efficiency, reduce administrative waste and deliver the financial transparency that builds trust across all stakeholders. Despite this progress, key barriers remain, most notably data fragmentation. Much of the health care data is siloed or locked in unstructured formats, such as clinical charts and notes, PDFs, lab reports and images, limiting the effectiveness of AI.

An MIT study found that nearly 95% of AI initiatives rely on incomplete or inconsistent data. The results without high-quality data, AI doesn't create efficiency, it creates more work. The second challenge is integration. Providers need technology that operates seamlessly within their current systems and workflows without interoperability, the value of AI remains unrealized.

And finally, cybersecurity remains critical as AI becomes more deeply embedded in clinical and financial processes, secure, compliant data management at every point of contact is essential. These challenges underscore the need for a unified intelligent and trusted platform and this is where Waystar is uniquely positioned to lead. An independent market study ranked Waystar, the #1 trusted vendor among top competitors, recognizing a sustained commitment to data protection client experience and innovation.

Insights from the Waystar Advisory Board and independent studies reinforce our differentiated position and confirm the growing demand for a unified intelligent and trusted platform. We continue to build client confidence and deepen relationships that drive expansion, accelerate adoption and power the next generation of innovation across the platform.

At the heart of Waystar's differentiation is innovation. Our platform advances continuously with hundreds of new capabilities launched each quarter to improve automation, accuracy and ease of use. Twice each year, new product capabilities are unveiled through the innovation showcase highlighting how the platform is advancing to meet providers' needs. Launched at Waystar True North, our fall innovation showcase, introduced new AI-powered capabilities that address some of the most pressing challenges in health care including denial prevention and recovery and patient financial care, driving better outcomes for providers and the patients they serve.

The important advancements we announced include denial prevention. Waystar altitude AI targets the 60% of denials that are preventable, reducing time related to critical prevention work by 95% for a midsized health system and building on our industry-leading 98.5% plus first pass clean claim rate across our client base, accelerating reimbursement and improving cash flow.

In denial recovery, Waystar is addressing the $20 billion annual denial problem. Waystar Altitude AI enables providers to create hundreds of appeal packages simultaneously more than 90% faster than before, driving double-digit increases in overturn rates for early adopters and improving reimbursement speed and accuracy and patient financial engagement to address the $17 billion uncompensated care gap related to patient collections.

Waystar's cost estimation capability is seamlessly integrated within our patient digital experience to increase pre-service patient payments accelerate cash flow and reduce uncompensated care. Client feedback on these innovations has been very positive, validating our road map and reinforcing the growing demand for AI-powered automation.

This innovation continues to build client confidence and deepen long-term relationships that drive adoption, expansion and sustained growth across the Waystar platform. Trust remains central to our success. Following Waystar True North, attendees reported a 93% confidence level in Waystar as a trusted partner. That confidence is reflected in our performance with strong Net Promoter Scores and a net revenue retention rate of 113%.

The A number of clients generating more than $100,000 in trailing 12-month revenue grew to 1,306 in Q3, an increase of 11% year-over-year. And the market is taking note of our progress. We were proud to receive 2 prestigious awards during the third quarter, powerful validation for Waystar. Fast Company named Waystar 1 of the Best Workplaces for Innovators in North America and the 2025 Stevie Awards named Waystar Healthcare Company of the Year, and honored us as the top-ranked payments solution.

In closing, sustainable transformation in health care requires a strong foundation. We believe Waystar's industry-leading AI-powered platform is that foundation, the essential differentiated choice for providers seeking to simplify health care payments and achieve better outcomes.

Waystar's momentum is strong and accelerating as we advance our mission and capture a large expanding market opportunity. We are operating with discipline and delivering results, building a rule of 50-plus software business with the ability to compound revenue and profitable growth.

With that, I'll turn it over to Steve to walk through the financial details from the quarter.

Thanks, Matt. Please note that my comments regarding Third Quarter and year-to-date results reflect Waystar's performance only, while full year guidance and implied Q4 guidance include a full quarter of contribution from Iodine. Revenue increased 12% year-over-year in the third quarter to $269 million, driven by healthy client retention and expansion, highlighting our durable, predictable model of low double-digit revenue growth annually on a normalized basis.

We also expanded our client base generating more than $100,000 of LTM revenue by 38 clients in the third quarter to 1,306 at quarter end, an increase of 11% year-over-year. Our net retention rate, or NRR, was 113% for the last 12 months compared to 15% year-over-year revenue growth over the same period.

As we've discussed over the past several quarters, NRR benefited from the rapid time to revenue from clients impacted by a competitor's cyber event in early 2024, and elevated patient utilization of the health care system since early 2024.

Subscription revenue of $134 million increased 14% year-over-year and 3% sequentially. Going forward, we expect Iodine to further enrich our subscription revenue mix. Volume-based revenue of $132 million increased 10% year-over-year and decreased 4% sequentially, in line with our seasonality expectations associated with revenue from patient payment solutions.

Also, we saw overall patient utilization in the third quarter, begin to revert back to historical growth rates. Adjusted EBITDA of $113 million for the third quarter increased 17% year-over-year. Our adjusted EBITDA margin was 42%, and above our long-term target of approximately 40%.

The adjusted EBITDA outperformance was driven by a revenue shift to higher-margin solutions, along with ongoing operational cost initiatives, outpacing reinvestments in areas such as innovation, cybersecurity and client experience.

Please note that none of the $15 million of expected cost synergies from the Iodine acquisition are reflected in our third quarter results. We have already notified and acted on approximately 70% of annualized cost synergies. We expect these action synergies to be realized and beginning to positively impact results over the next few quarters.

We are confident in our ability to achieve the full cost synergies within the previously communicated period of 18 to 24 months post close. We further believe our track record and M&A will demonstrate with time and integration that Iodine's clinical expertise, robust data and AI capabilities add to our long-term profitable growth profile.

Turning to cash flow and the balance sheet. We ended the quarter with $421 million in cash and equivalents and $1.2 billion in gross debt. As a reminder, in conjunction with the Iodine acquisition, we issued $250 million of debt and drew on $30 million of our revolving credit facility.

We also lowered the interest rate on both facilities by 25 basis points to SOFR plus 200 for the entire debt and SOFR plus 1.75 for the revolver. Unlevered free cash flow was $96 million in the third quarter of 2025 with an unlevered free cash flow to adjusted EBITDA conversion ratio of 85% for the third quarter and 86% year-to-date, which are both well ahead of our 70% long-term target.

The trend of high cash flow conversion, coupled with the expansion of our trailing 12-month adjusted EBITDA, generated a 1.9x leverage ratio at September 30, which is down almost a full turn since the beginning of the year, ahead of our previously stated goal of reducing our leverage ratio by approximately 1 turn annually.

If we carry this calculation forward to October 1, 2025, to account for the Iodine acquisition, the leverage ratio would be 3.4x. We are confident in our ability to delever approximately 1 turn annually. Regarding 2025 full year guidance, please note that the following includes a full quarter of contribution from Iodine. We are raising revenue guidance for 2025 to a range of $1.85 billion to $1.93 billion, with the midpoint of $1.89 billion representing a 15% year-over-year growth rate.

This is an increase of $53 million or 5% versus the prior guidance midpoint. The increase represents a 12% year-over-year growth rate for standalone Waystar and an expectation of approximately $30 million of revenue from Iodine in the fourth quarter. Our expectation for Iodine revenue for the full year 2025 is approximately $120 million, which includes alignment with Waystar accounting policy and in line with prior expectations.

Further, given our approach to rapidly uniting all aspects of iodine and the significant progress we have made towards organizational alignment, including product development, go-to-market and cross-selling. We don't expect to separately break out Iodine going forward.

We are also raising adjusted EBITDA guidance to a range of $451 million to $455 million with a midpoint of $453 million, increasing by $31 million or 7% versus the prior guidance midpoint. We now expect an adjusted EBITDA margin of approximately 42% for 2025, driven in part by the outperformance through the first 3 quarters of the year.

This guidance assumes $12 million of contribution from iodine in the fourth quarter at its historic adjusted EBITDA margin of approximately 40%. We look forward to providing 2026 guidance on our next earnings call. This concludes our opening remarks. With that, we are ready for your questions. Operator, please open the call.

[Operator Instructions]. Our first question comes from the line of Ryan Daniels from William Blair.

Congrats on the strong performance. Matt, maybe 1 for you. Interesting that True North took place right around the Iodine transaction closed. And I'm curious if you had the opportunity to introduce clients to that. and see new iodine clients? And just overall, kind of what areas were key focus and what the overall feedback on Iodine and Waystar from the Iodine clients were.

Thanks, Ryan. It was a perfectly timed in conference for us. Waystar True North was fabulous. As we indicated, it was sold out -- and we were able to highlight -- we hosted an innovation lab where we allowed clients to get hands on with our technology advancements and see AI at work. We also had the opportunity to showcase how Iodine, which, again, is this middle revenue cycle, tremendous software set of solutions, how Iodine can really connect Waystar front-end and back-end solutions effectively together.

And the client sentiment was 100% positive. We heard feedback from our advisory board meeting that we hosted just on the front end of the Waystar True North Client Conference. And I noted a couple of particular quotes. One said, we're so thrilled about this announcement. This will be awesome for us and for health care. And another 1 said, I'm actually an Iodine user too. So I'm very excited about this acquisition, and it feels like a perfect fit -- for you.

And so as we think about the opportunity now to combine these 2 special companies, we feel like it's a perfect strategic fit and it's helping us toward our ultimate goal of creating that perfect undeniable insurance claim. Thank you for the question.

Our next question comes from the line of Brian Peterson from Raymond James.

And I'll echo my congrats on a strong quarter. Matt, maybe a high-level 1 for you, especially as you think about the platform with Iodine the fold, how do you think about the cadence of the legacy or replacement of legacy processes in RCM. I know some of these sales cycles for Waystar health systems can be long.

But I'm curious kind of an AI-enabled and a genetic world, we start to see customers maybe move faster to tackle this opportunity.

Thanks, Brian. Let me start with maybe just a bit of 1 more background to comment on Iodine and then how we're leaning into being able to sell the full Waystar platform. So just as a quick reminder, Iodine sits in the mid-revenue cycle -- it is really a powerful software that does clinical documentation, integrity, utilization management and prebuilt anomaly detection.

And these capabilities bring bring structure to unstructured clinical information. They detect missing codes or incorrect codes before a bill is complete. And they keep a human in the loop, so to speak, as they deploy over 160 different leading AI models within Iodine software that that allow the human to validate what the AI has identified as an accurate code.

So what that's doing is that's leading to a 70% reduction in the likelihood of a set of codes need to be rereviewed before a claim is submitted. So that fits perfectly into Waystar next-generation, cloud platform, and we really feel like this will allow us to continue to demonstrate market leadership and establish us as the next-generation revenue cycle solution of choice.

We've cross-trained our sales teams. We noted at the announcement that there was this tremendous cross-sell and upsell opportunity with -- when you do the overlap or the Venn diagram of the portion of clients that are both Iodine and Waystar, gosh, there's only somewhere between 35% and 40% of clients that are using bold.

So not only have we cross-trained our sales teams, we've introduced Iodine now to Waystar our clients we're beginning to tell that story and promote some of the incredible capabilities that we'll be able to do together. And conversely, we've been able to introduce Waystar to Iodine clients.

So there's certainly cross-sell opportunities where we'll replace legacy and incumbent software that may have been in place for years. There's also the opportunity for us to increasingly promote the whole platform. And when you think about the clinical data access that Iodine brings to Waystar's software solutions. Iodine process is more than 160 million patient encounters annually and about 34% of all patient discharges in the United States annually.

So there's a tremendous amount of clinical information that we're already figuring out how to integrate and unite and place into the large language models that we're using to automate prior authorizations, for example, or to strengthen our claims processing capability, or to further automate the appeal management process where some clinical information is super helpful.

Overall, we're headed toward more platform sales opportunities, and we're very excited by it. So thank you for asking the question, Brian.

Our next question comes from the line of Adam Hotchkiss from Goldman Sachs.

I think, Steve, you mentioned that patient utilization has started to move back to historical levels. Could you maybe just expand a little bit on that. And I know that the volume-based business declined 4% sequentially. I think it's a little bit more than we've seen in the last couple of years. So -- could you maybe just expand on what the right way for us to think about seasonality in a more normalized environment going forward looks like?

Yes. Certainly, Adam. So I can a sure few thoughts here. So maybe a couple of level-setting thoughts and then I can specifically address your questions. Recall that our solutions help providers become more efficient and effective, so they have the ability to capture utilization upside of the health care system as we've seen in the past several quarters.

Also, our mix of revenue is generally 50% from subscription based and 50% volume-based -- with the volume base coming from both provider solutions, those solutions that help providers interact with and obtain payments from commercial payments and governmental entities as well as you mentioned, Adam, patient payments, those that help them interact with and collect from patients. So my prepared comment is based on what we're seeing, particularly within patient payments, which, as you noted, has a natural first half, second half seasonality aspect to it based on the timing of patients with high deductible plans.

And notably, what I was looking at qualifying is we started to see the timing of patients reaching deductibles occur earlier in the third quarter than we had last year. It's an early indication though versus a long-term or a trended expectation. So we've kind of taken that into context in how our approach is to guidance, which we believe is prudent.

So as we set guidance, particularly for the remainder of 2025 and implied fourth quarter -- we've taken that into account. What I mean there, Adam, is if our volume-based outcomes and the patient utilization continue on sort of that same trended rate we've seen for -- the first 3 quarters of the year, we would expect to come in at the high side of guidance.

If we see that those patients that are reaching those deductibles within those high deductible plans continue as we started to see them here in the third quarter and that sequential change versus the third quarter and second quarter, we could be at closer to the midpoint of guidance versus potentially even on the lower end of guidance. So hopefully, that's helpful context.

Our next question comes from the line of Allen Lutz, Allen from Bank of America.

At 1 of your innovation showcases several weeks ago. You talked about shipping patients from mail payments to mobile. Can you talk a little bit about discussions with your customers around making that change and how long that would take? And then how should we think about the relative gross margin delta between those 2 products?

So thank you, Allen. And thank you for tuning into our innovation showcase, by the way. It's available to anybody on our website -- we do it once in the spring and once in the fall. And in the fall, we did it in conjunction with the Waystar Tudor Client Conference. It felt like we were at a rock rock concert.

It was really well received. And with respect to the digitization of the patient statement and the integration of the patient payment with a well-informed digital statement. It certainly has a different margin profile. We think it has a different impact

One of our -- 1 of the things that we foresee overall across the health care marketplace and what we're pursuing is a tremendous opportunity to move from analog to digital in several areas. And we believe that Waystar could be a market leader in that.

One of the pain points that has persisted on the analog side of things, is a tremendous amount of paper that continues to be used in health care. So in faxes, in back offices, some inpatient statements where it's a fact that there's a portion of the population that still wants their patient statement and paper form so that they can review it. Waystar is working to make that as intuitive and as easy as possible and to integrate the patient payment capabilities to create transparency, ease of understanding and facilitate accurate and timely payments to providers.

We're doing all that now and making it available in a digital format. And providers are beginning to opt in to that strategy. They're beginning to embrace it. They're asking patients that they would like to opt in. And we're thinking through the time line. We don't see it dramatically shifting in 1 quarter or 2 quarters.

This is a long tail of transformation and opportunity as we help providers connect with patients, but we know that Waystar to be a market leader there and that the experience for the patient can be meaningful because it will -- we're introducing patient statements that oftentimes do -- is like educating for the patient is anything, which is really great way to think about that.

But it's also meaningful for the provider. When you look at Waystar's patient financial care suite of solutions, 1 of the things that we measure is patient NPS scores, not just provider NPS for us, but patient NPS scores. And what we find is that when a patient understands their financial responsibility at the point of care that the Net Promoter Score goes up because they appreciate the transparency, they can make appropriate plans for how they'll make payment -- in fact, Waystar software helps the provider a range for payment plans within this integrated software solution within our patient financial care suite.

So we know that digitization is on the way and we're a facilitator and a driver of that to help both providers and patients.

The next question comes from Vikram Kesavabhotla from Baird.

I wanted to ask about the Iodine acquisition as well. And I think in your prepared remarks, you said that this could accelerate parts of your product road map by nearly 2 years. And I'm just wondering if you can elaborate on that comment a little more. What are some of the best examples of how this is adding to your innovation process? And how should we think about the time line to seeing some of those combined capabilities start to emerge in the product portfolio?

Terrific. Thank you, Vikram. Let me give you some tangible examples of why we're so excited and why we think it will accelerate the road map by nearly 2 years as we've indicated Let's take a couple of product examples. So 1 is a Waystar product called prior authorizations. As you know, and as we've stated and showcased in our innovation lab and in our innovation showcase, we're automating 90% of the prior authorization experience for provider organizations.

But sometimes, that prior authorization when a provider is committing an authorization to perform a service or patient they submit that authorization request to a payer. Sometimes the payer come back comes back and asks for clinical information. We'll ask for, is this medically necessary, and that is a medical necessity based for our authorization.

So if Waystar were to go and gather that clinical information itself, we would go out to all of our hospitals that we work with, build appropriate APIs ourselves and then gather that clinical information. Getting access to Iodines incredibly powerful clinical data set, uniting it with Waystar not only creates 1 of the most comprehensive administrative and clinical data sets to our knowledge in the United States of America, but we'll be able to use that clinical data set to do things like medical necessity-based prior authorizations where clinical information is required by the payer before they're fully authorized in treatment or a service provider to perform for a patient.

One other example, when a claim gets denied, and we know that denials are on the minds of all provider decision makers. When a claim does get denied, and providers are working to contest or appeal that denied claim. 450 million claims we get denied annually. So this is a real problem.

When they go through the process of appealing the denied claim, oftentimes, it's helpful to supplement the appeal letter with clinical information that can be used to help a test for the reasons for why that denied claim should be overturned and successfully adjudicated and payment remitted to the provider. So those are solutions that Waystar has in place. Those are generative AI solutions. -- prior authorization and appeal management letters where we're generating learners very rapidly.

We're keeping a human in the loop, and now as we infuse clinical information into that appeal letter where we believe that, that will drive successful overturn rates and supplement and accelerate an already great product with clinical information. Those are 2 examples.

But we're very excited about the acceleration of an Bowstreet of Waystar software with this clinical information. And conversely, I would say, as we learn more about the in suite of software capabilities -- there are -- as you know, Waystar process is 6 billion insurance transactions annually. And we have a tremendous amount of administrative data that we can use to then also support and strengthen in software solutions in clinical documentation improvement.

We're processing billions of claims. We understand pro combinations and we understand what gets successfully adjudicated and reimbursed. We can use that to train Iodine's AI models. Likewise, with prebuilt anomaly detection, we'll use administrative data there to further supplement Iodine's already strong and a tremendously capable solution. So hopefully, those examples are helpful Vikram.

Our next question comes from Elizabeth Anderson from Evercore ISI.

Congrats on the quarter, obviously, you've given us a tremendous amount of detail about how Iodine the portfolio and sort of your view for the fourth quarter. I was wondering as we have used hospitals who are seeing some margin pressure on the horizon or currently -- have you guys noticed a -- and you have a broad suite of solutions to address all sorts of things, but have you noticed any shift in terms of the types of modules people are -- hospitals are interested in.

Are they going for sort of more things versus other things? Just any additional color you can provide on that front would be helpful in just kind of understanding the broader landscape.

Thank you, Elizabeth. Speaking of the hospital demand environment, let me start with a high-level idea or 2 and then speak to solutions that we see being very attractive to decision makers. We know that decision-makers want efficiency. They want entity. They want to work with entities or partners that can help them get paid faster accurately and efficiently in our side of the world, so to speak. They want cybersecure solutions. There's also, as I mentioned just a moment ago, a greater focus on the mile rates and what is actually driving them -- and these are all areas that completely align with Waystar's value proposition.

Our solutions are mission-critical. They help drive efficient cash flows, and we get prioritized amongst decision-makers. So in this demand environment, -- we've been saying this now for a few quarters, but we tend to get prioritized because we are mission-critical. And we see strong demand for our -- increasing demand for our platform -- but it's interesting provider decision makers are now starting to understand the relationship, the compounding benefit of using more than 1 or 2 of Waystar software markets.

For example, if they're using Water's claims management suite, which already has a tremendously high first pass claim acceptance rate that is greater than 98.5% across our entire network. But denial prevention and denial reduction is on their mind, then we're able to have a conversation with them about eligibility and eligibility automation and insurance coverage detection, which we know statistically reduces the likelihood that a claim gets denied.

We are then often talking to provider decision-makers about prior authorization automation, another sticky point. When a provider doesn't get authorized to perform a health service, that's a reason why claims get denied. So we have seen demand across our platform. But we see a note that there is interest in reducing denials. And we see -- we're able to articulate as we go through the discovery process with these clients and prospects and decision makers, we were able to understand their current activity rates or metrics and then compare that with what we could do prospectively when they begin to use more of our solutions.

And so eligibility, automation, coverage detection, prior authorization are seemingly hot areas of product. On the other side of that, denial and appeal management software Waystar solutions shine because of the autonomous generative AI work that we're doing there is also something of interest to providers.

Our next question comes from Daniel Grosslight from Citi.

Congrats on the quarter end closing line. I was at a conference recently and the most striking thing to me was just the number of vendors that have popped up with AI-powered RCM capabilities. Given what seems to be increasing competitive intensity, can you talk a little bit about how your go-to-market strategy has changed or will change and how bringing William on as your Chief AI and Product Officer may impact this?

Sure. Yes. Thank you, Daniel, for that question. So let me speak to our approach and then the competition and growth opportunities as we see them. We have a strong pipeline of opportunities with a very healthy mix of new and cross-sell opportunities.

It's interesting to note that we've seen new products that we've launched, so think about some of the altitude AI solutions that we've launched, now beginning to make a meaningful contribution to our pipeline and our year-to-date results. This is very important.

And our go-to-market came, I think it's a fabulous team. This is a fabulous group of leaders. They care a tremendous amount about not just proving results, but actually transforming health care, and it's a privilege for me to work alongside such a fantastic group of go-to-market people and team members. With respect to our approach, it's -- we feel like we have a market-leading approach. We're not going to tell the world our secret sauce on this call.

But we do some things to train and make our team members productive. And enrich a discovery process that enables us to understand what's going on at our client sites that then enable us to have an ROI-based discussion and really promote and drive our solutions.

What I'd say with respect to competition, we are at the street level. We see what's going on. And we think that imitation may be the nicest form of admiration or flattery, and we appreciate that. There does seem to be plenty of noise in the market with splashy announcements, being made. But we're focused on executing our business plan. And what we see is continued momentum and success in our platform approach.

Again, we're driving real ROI conversations. We're moving from AI hype to drive to the kind of ROI reality. We believe that we're the best platform in the market or a platform. We're not a point solution, we are a platform from end to end. We have the lowest total cost of ownership and the highest ROI. And our win rates are consistently high, and they've increased modestly since we last published or so. So we feel very good about the strong pipeline of opportunity, the continued elevated participation rates in RFPs and sales activities.

And we know that there's a lot of curiosity and interest in the RCM revenue cycle management category. And we believe that our competitive advantage or edge is the fact that we're cloud native. We have a data rich and robust rules engine that governs our network. We are AI-enabled and driving automation, and we delight clients with high client satisfaction.

Our next question comes from the line of Saket Kalia.

Matt, maybe for you, actually, I want to pick up on that thread a little bit. It sounds like there's been a ton of innovation through Altitude AI, and you just talked about how it's starting to contribute to Waystar. I was just curious how you kind of think about monetization some software companies create separately billable SKUs, right, that sort of add an AI layer on top.

Some are able to sort of deliver or charge additional value. How do you kind of think about that monetization strategy for Waystar.

Thank you, Saket. So for us, monetization comes in multiple forms. We're beginning to monetize it now. But it starts with retention and a long enduring relationship with clients as they use our software and they get the benefit of that, and it shows up in real returns to that.

The second is we have an annual price uplift program that has been in place for several years. And we priced the value, and we're beginning to price the value where we see incremental benefits as we've begun to introduce autonomous or generative AI capabilities within the various software modules.

So we're starting to price those to value without disclosing things further. The third is the opportunity to introduce actual new SKUs, so to speak, or new software modules, and we've begun to do that in a couple of areas, and we're excited about that without necessarily publicly commenting on what those are.

We are absolutely focused on introducing those to our clients. And those are the 3 that come to mind. I might just add that Waystar, as you know, Saket, and this is more of a general comment, but Waystar has been a long-time deployer of AI on our platform. And I think it's very important in this world where AI may be the biggest opportunity in our lifetime, especially in health care, where the technology might be a little bit ahead of where the human factor is.

And we see that in health care provider organizations who are very interested in beginning to consume and get the benefit of AI. For us at Waystar, we're working to set the standard in how we use AI -- we want AI to be deployed responsibly and ethically. And we want to be able -- people to be able to trust us. We believe that there's an opportunity for us to use AI for more good and to advocate for providers and patients to improve access to care and transparency and fairness and empathy and reduce waste and burden.

So those are things that excite us. One of the last comments I'll make is as we monetize AI. One of the things that we hear from providers is they want to use it, but they don't know quite how it fits into their workflow. And so what Waystar has now been doing for a long time on our platform, please recall that our platform is a workflow platform. So we're deploying AI across the platform today. It's intuitive.

It's easy for end users. It likes them. What we're doing is we're conditioning end users to consume AI as they use our platform. We're bringing the right AI to the right use case, often with a human in the loop, where appropriate to validate that the results are accurate. But we're making -- the AI that we're deploying is making the end users that use Waystar software, making their life easier.

And they may not even know or fully realize that they're consuming AI because AI is automating tasks in the background or AI is prioritizing work for them. we're driving insights to them to make their day easier. And so that AI high ROI realities are mantra, and we'll continue to monetize it, but we're very encouraged by the products that we have launched, pricing that we are achieving and their long-term enduring relationships that we're creating with our clients.

Our next question comes from the line of Charles Rhyee from TD Cowen.

Matt, just wanted to -- obviously, in the last 12 months, you've also seen some big annuates from the big EHR vendors. I think you have to get there annual event as well as Oracle talking about Cerner. They're starting to build more AI into the EHR itself as well as talking about solutions for recycle management, using agents -- can you talk about sort of how you see that developing, maybe talk about how the Waystar platform can work with the HR systems as well and maybe points of difference in maybe doing different things? Or maybe if you could just talk a little bit more about how these will all go this together.

Thank you. So it's interesting because in health care we have well over 1,000 hospitals today, and the majority of those are on EPIC, that are clients of ours. So they're using Waystar today. We have many Cerner clients today. We have many Meditech and other practice management and EHR clients today that are the lighting to be using Waystar software, use at a phrase that I'd like to just highlight.

And that is these organizations are "talking" about RCM. Waystar is doing RCM. That's all we do. And we have a team of people completely focused on simplifying health care payments. using modern AI capabilities. We are using every modern LLM that you can envision in the market to do work. But we think that the value is actually in the access to data to train these large language models. They should really call large object models because they can do a lot more than just consume language.

They're consuming lab charts. They're consuming objects that are in PDF forms and images. And Waystar doing that today. So we think we can be a fabulous partner. We could be a linchpin technology for these EHR systems, where they become the large monolift and they're focused on so many different things.

We've proven that our interoperability and integration to their systems actually delight their clients and we welcome the chance to partner with these systems. And while I'm on this point, this theme of interoperability and connectivity, I would just say from a regulatory perspective, the Waystar is an advocate for modern connectivity via APIs to all the payers we promote that we're connected to the vast majority of payers in the United States.

We also connect to more than 500 different instances of electronic health record, practice management and hospital information system vendors. So we think there we can be a great partner and we're demonstrating that as we help them and their clients grow and achieve great results as they use our software.

Our final question comes from Jailendra Singh from Truist Securities.

Congrats on a very strong quarter. I want to ask about EBITDA margin trends. I know you guys have talked about 40% as being a reasonable long-term target. But what are your views on the sustainability of some of these margin efficiencies and gains that you've seen recently? You shared examples around the way you're using AI to create value for your clients. But given your expertise, is it fair to assume you're using AI to drive some internal operational efficiencies? And what kind of opportunities do you see in that area?

Well, thank you, Jailendra. I appreciate your question. It's a very important 1 for us as well. We appreciate all these questions actually. What I would say is, just to start by grounding us in fact, we talk about our business model being an enduring long-term normalized low double-digit revenue growth business -- you've also heard us talk about our long-term target of adjusted EBITDA margins of 40%.

And those are targets for us. And we're very mindful of we know we could run the business at greater than 40% EBITDA margins, for example. But we feel like the right range to run it in today is while we invest in innovation, invest in cybersecurity, invest in go-to-market go-to-market capabilities in this unique period of time in health care, it's the right kind of way to run the business at that 40% or so level.

We're certainly pleased with the recent quarter's results and being slightly higher than that. But I suspect we'll continue to find areas to invest, and we'll be very conscious about that long-term target. With respect to some of the internal initiatives around AI, let me just highlight a couple of things. One, we do have William acting as a Chief AI and Product Officer. We're very excited about that because he complements an incredibly talented team of other leaders who are very passionate about driving to our long-term targets.

We also have established an internal AI team, it's we call it our Kaizen AI team, and this is a team that works within Waystar cross-functionally across all the businesses, all the functional teams to identify use cases where AI could be used to create market-leading experiences, but at a higher -- or maybe create more operating leverage by deploying AI instead of people for certain tasks.

One of the things that we emphasize internally is that we believe that AI is more of a productivity augmentation tool that will allow us to scale future from here as we make our team members even more and more productive in their jobs. This is an awesome group of people.

And what we've done is we've given every single team member at Waystar, a copilot license. We've taken them through certification and training on how to responsibly and ethically -- and from a business perspective, the Waystar way of how we like them to deploy CoPilot. We have contest internally where we celebrate individuals and teams who have created novel use cases using CoPilot through some prompting or some engineering capabilities to improve or automate certain tasks that have been done manually previously to make our team members even more productive and to help them delight clients as they do to help them write source code and have it be reviewed.

Our development teams, for example, are using GitHub and Copilot and we're starting to see some increased efficiency and as they deploy AI and they're using it to review code and do integrity testing and other types of testing in our software. We're really excited about the opportunity there.

And I suspect that we'll find future opportunities to advance and drive operating leverage in the business as we find those operating leverage basis points or percentage point, so to speak. We may not convert that all to adjusted EBITDA, because we may choose at this point in our journey as a company to reinvest operating leverage that we find back into the business to drive innovation and drive go-to-market success, drive cybersecurity and drive a market-leading client experience.

And so that's how we're thinking about the internal use of AI. We've got well over 100 use cases that are actively being explored and pilot tested within Waystart today on the internal side. So we're very excited about that.

Thank you. This concludes the question-and-answer session. Now I will turn the call over to Matt Hawkins, CEO, for closing remarks.

Yes. So let me just close here. We thank everybody for participating today and for your thoughtful questions. I hope the sense that we're pleased with the performance of the business we -- it's -- there's a sense of momentum. We are raising our full year guidance on that basis.

We're thrilled to have closed the Iodine acquisition, and we're well underway and excited to work together as 1 team to really do some transformational work in health care. What I'd say is it's all due to our team. I'm so grateful to work alongside such a talented and dedicated group of people. This is a team that really cares about our mission to simplify health care payments, and it's an honor for me to work alongside them.

What we're building is a market-leading platform, we're beginning to get data and network effects as we process more transactions and we get richer data drive the smarter automation. That creates higher client value and deeper stickiness and retention with our clients.

So we're excited about the work that we're doing, and we look forward to continuing to execute on our business plan. Thank you very much for the time today.

Thank you, everyone, for your participation in today's conference. This does conclude the program. You may now disconnect.

Well, great. Thanks so much, everyone, for being here. My name is Adam Hotchkiss. I cover the emerging software space here at Goldman. Really thrilled to have Matt Hawkins, CEO of Waystar, here with us today. Matt, thanks so much for being here. for your first time.

Yes, my first Goldman Tech Conference. I'm grateful to be here. Thank you.

Fantastic. I guess for those in the room, I know you obviously have a health care angle to you. So for those in the room who are a little bit less familiar with what Waystar does and what you're trying to build at the company, maybe just give a brief overview of the history, your role at the company and then maybe help us understand the software angle a little bit here.

So I'm Matt Hawkins. I'm the CEO of Waystar. I spent most of my career in and around software. And a lot of that has been private equity backed. I've worked with private equity firms in leading portfolio companies for them with Vista Equity Partners and Bain Capital. And I came to this opportunity in 2017 with Bain Capital, and I helped form Waystar with a really great team of people in the summer fall of 2017. And I'll tell you a little more about that. But essentially, what we did is we brought 2 really impressive revenue cycle technology businesses together. One of them had been backed by Sequoia Capital, a business called ZirMed. It had architected and built this great cloud-native software platform. And we thought to ourselves, let's combine ZirMed with a business called Navicure, which we did in the fall of 2017.

We formed Waystar then. And our first test was to unite all the Navicure clients onto what we call the Waystar software platform. It was the ZirMed great cloud-native tech stack. And we did that. And as we did it, we discovered, gosh, this cloud software is very extensible. We can add capability to it. It delighted clients. It was a really great user interface, and we could also do it without disrupting their workflow of operations.

What Waystar does to get to the second part of your question, Adam, is we help health care providers get paid from all different types of insurance companies and also from patients. We help them get paid faster, more accurately and more efficiently than ever before. We're going after a tremendously large addressable market that is fraught with inefficiency and errors and manual services. And as we work to create cloud software that deploys AI on our platform, we have now created a really strong track record of delighting our clients with modern software and disrupting the status quo that has persisted in health care for a long time.

Yes. One of the things, Matt, I think I underappreciated when I first started looking at your business was what the legacy operations look like, how fragmented the technology solutions are almost to the point where we were seeing a reversal of all of the other sort of on-prem to cloud or services to cloud transitions that we had seen in software where you had a bunch of fragmented technology and there were decision-makers at hospitals saying, "I now want to go and do services." And it was a backward-looking situation. It's really surprising for me. So maybe distill that a little bit for people who are less familiar with your industry. And then with that backdrop in mind, where do you think Waystar is positioned? And how do you convince folks who didn't enjoy the fragmented situation to look back at technology?

Sure. A couple of facts for the group here. In health care, in the United States, on the administrative side of care, there's approximately $450 billion of administrative waste that occurs every year. The industry is fraught with denied claims. It's fraught with manual work and services that take too long. There are staffing shortages, hospitals and other health care providers are constantly trying to train new staff. And as we formed Waystar, what we observed on top of all this was that provider organizations in the U.S. were consolidating to form integrated delivery networks or health systems. And you guys have observed this where hospitals were buying other hospitals, they're buying physician sites, post-acute, non-acute sites of care to form these integrated delivery networks. That was exacerbating this administrative complexity of helping these providers understand how they were going to get paid from insurance companies and trying to collect from patients.

And so we came along and we observed that there wasn't really any enterprise caliber or scaled modern platform to serve the needs of these increasingly complex organizations. And we said, let's get to work. What we did see, to your point, Adam, was a bunch of legacy incumbent software, some of which have been in place for 20 years. We saw a bunch -- and we still do see a bunch of homegrown solutions. And sometimes decision-makers, they tend to be a little more risk adverse in health care because on the clinical side, patients' lives are on the line. And on the administrative side, they're operating at such low operating margins that cash flow becomes super important.

So we come along now, we deploy our software. We've created over 1 million providers that are now using Waystar software every day. Hundreds of thousands of those people in those organizations are using Waystar software for the majority of their workdays to streamline and reduce the friction in the payment process. And our proposition, quite frankly, to these decision-makers is a very strong ROI use case. a minimal disruption, if no disruption to their business. And we can deploy our software because it is cloud-based very rapidly. And so we're creating a lot of interest and momentum in the business.

Okay. And maybe in addition to the administrative waste, talk a little bit about the gap in what hospitals are receiving from insurance companies versus what they should be? And how you bridge that gap versus maybe others in the market?

Okay. It's another statistical fact that there are still 450 million denied claims a year. Approximately 17% of every claim that a hospital or other providers submit initially get denied and sent back to the provider for rework. So Waystar, when these providers use Waystar software, the denial rate that they experience drops substantially. Part of that's because we use a cloud-based rules engine that governs our network, and we help providers accurately and successfully submit claims with a first pass claim acceptance rate that's nearly 99% across our entire network.

So we're coming along with something completely new and novel and allowing them to reimagine the way they use software that leverages AI on our platform. And you get large impressive provider organizations like the Cleveland Clinic telling us when they began to use our software, they were experiencing denial rates, they were experiencing a low first pass claim acceptance rate as they self-reported in the low 90s. So when they went to work with us where it was nearly 99% right out of the box, they said, you're helping us reimagine what's possible. We're minimizing the gaps. We're helping them find more revenue. We're helping them find it much faster. We're helping them collect from patients as well because given our insurance knowledge, we process over 6 billion insurance transactions every year that constitute over $1 trillion of gross claim charges. So because we do that, we algorithmically can understand what the patient's financial responsibility is oftentimes before the patient even sees the provider.

And we're helping to shape behavior where providers can present to the patient before they receive care, here's what your estimated financial responsibility will be. We have an integrated patient payment capability on our platform. And we're helping kind of reduce the gap in the patient payment rate as well. Sometimes and we might all experience this in one form or another as patients ourselves or if we know someone who is, we oftentimes don't even get bills in the mail until 60 or 90 days post care, right? That makes it very hard for a provider to collect once it's that old. And they're not equipped to collect. So our software helps kind of reduce that gap and reduce that burden, too.

Yes. In a lot of ways, you sit in a really unique position in a classic vertical software sense where you utilize AI to effectively help you with things like patient payments and improving things at point of sale and also with providers, right? And so when you think about -- and this is what other vertical software companies are doing from a moat perspective. When you think about your moat, right, versus other Gen AI opportunities out there, how do you think about what that looks like? And in particular, how do you think about what that looks like given the risk aversion of buyers in your space?

Sure. We -- it's a fact that even since inception when we formed Waystar, one of the things we admired all the way back when we saw those 2 companies that we brought together was the cloud software from the ZirMed side was using some form of basic AI even then. So it had smart fields and doing some simple machine learning to prioritize work or to automate certain tasks. And so now as we've expanded the use of that platform to over 1 million providers, we've basically conditioned end users to be able to consume AI sometimes it's invisible to them. It's worked at tasks that have been automated and prioritized for them. So they're consuming it today. And as we have a relationship with Google, we launched at the start of 2025, something that we call AltitudeAI.

It's Gen AI capability that we begin to embed in certain software modules across the Waystar platform. And we think our competitive moat is a couple of things. One, we have a very engaged end user group that's using our software and conditioned to consume AI and they trust us. The platform is very cybersecure. We're doing all the things we can to attest to those things, cybersecurity protocols. We have a massive data set. and that we're constantly training our foundation models on as we introduce more and more Gen AI capability. And what we're excited about is our platform is a learning platform. It's not the static platform that only gets updated a couple of times a year. We're delivering hundreds and hundreds of feature improvements to our clients every quarter. And so they're used to that. In a way, we're future-proofing their use of our software as we deliver them more and more AI capability versus some static monolithic software application. That probably will die over some certain period of time. We like what we're doing.

And with the acquisition of Iodine, something we haven't necessarily talked about yet, we're uniting one of the largest financial or administrative data sets with from Iodine, one of the largest clinical data sets that we'll use to continuously train and teach our platform. So we create this learning model that we expect to be able to deliver the AI platform of the future for revenue cycle or even revenue management within health care.

Yes. The word that was escaping me in my last question was rules-based engines. I think whenever we see rules-based engines being used in so many different use cases, it feels like there is a particularly large percentage of workflows that can be augmented by AI. Is that something you think is true across your platform and in your space as well?

It's a great prompt, Adam, because we do have a cloud-based rules engine. And one of the things that we do, it's a classic use case for the use of AI is we're going out and gathering using Gen AI, health plan claim rule updates Also, we're scouring CMS for CPT code changes and updates. There's thousands of changes that are occurring in a very dynamic way in health care. And so because we have this rules engine that is a learning engine, we like to say every transaction we process makes us incrementally smarter, and we're delivering that value to our clients. And so we're excited about the deployment of autonomous AI, some agentic AI capability, where we do, in some cases, keep humans in the loop where they oversee certain things to make sure that it meets their standards or what they expect. And we think we're very early in a very exciting run as an AI platform of the future for health care.

Okay. Very helpful. I want to pivot into the business and growth drivers. And I'll just start this open-ended, right? You've talked about this business being a 10%-plus growth business, and you far exceeded that since you came public. Talk about what you're seeing from that perspective. I know you had a cyberattack at a competitor that drove some business to you. But even after -- and now that we've lapped that a year later, you still managed to reaccelerate the business last quarter, lapping that. And so talk a little bit about, I guess, the drivers for the first couple of quarters as a public company and then maybe more recently, what you're seeing as well.

Thank you for acknowledging that. Yes, we've had 5 consecutive quarters of double-digit revenue growth above our long-term growth rates. I think it starts for us, we're going after a very large addressable market. The conservative strictest definition of that market is a $15 billion a year of replacing legacy software market. But what we're really going after is all of the manual services work. The BPOs that serve health care today would say that's a $100 billion-plus market. So we start there and we say, for every AI application or capability that we can offer that eats into that service work, then we're expanding this massive addressable market opportunity.

So we love the momentum that we're building. We delight clients with the use of our software. We have very strong ROI and Net Promoter Scores and client satisfaction. That tends to show up for us in referenceability and new sales. It shows up in cross-sell and upsell referenceability as well. And it ultimately shows up in us creating enduring very sticky relationships with our clients. When you look at our growth algorithm, you start with gross revenue retention that has lasted for -- been consistent for the last several years of 97%. And our net revenue retention pre-public has averaged somewhere between 108% and 110%. So as a prudent young public company, we think, well, we talked about low double-digit revenue growth. But since we've been out, we're -- we've exceeded that by several percentage points. Early on, it was the Change Healthcare clients that were impacted by that cyberattack that we've been able to rescue and help put on the Waystar software platform. And more recently, it's just consistent delivery of our solutions and driving growth to new clients and cross-selling others.

Yes. I wanted to touch on in the most recent quarter in particular. And I think this is one of the most remarkable things is you -- again, you lapped this event and yet accelerated growth. And I think you talked about, in particular, a couple of client -- large clients that you were pulling forward implementations for in the quarter. And so maybe what is driving that incremental level of interest in your business? And then how should we think about the sustainability of that as we go forward? Because your guidance does imply some deceleration in the back half and you have sort of talked us to normalization in revenue growth to more normalized levels in future years. So maybe just talk about those dynamics.

Yes. I think part of the guidance is us not necessarily being able to foresee the future and also kind of balancing a little bit of prudence there. But what I would say is we did update our guidance for the full year to be above what our beat was in Q2. With respect to the call out in Q2, we did highlight that there were 3 clients that were large competitive takeaways from others besides Change Healthcare. And as they joined us, these larger clients, they tend to have 12-month plus implementation plans, not because it's difficult to implement our software, but because they have other things that they have going on in their often multisite, multi-hospital organizations.

In this case, one of the things we were able to showcase is with these 3 clients, in particular, was they got into the implementation process in configuring and deploying our software, realizing how straightforward and easy it is to begin to use our software successfully that they said, let's do it all right now." And so we saw the benefit of that in Q2. And we would love for every client to do that. I mean what we've been able to educate clients with and in some ways, overcome a long-standing perception of how hard it is to install software is when we present Waystar they'll ask us sometimes, how many man years of IT staff should we procure for this implementation. And we look at each other and scratch our heads and say, well, you could take, I guess, maybe man hours.

But we can configure and deploy our software with large health systems like we did during the Change cyberattack outage, we took hospitals live in a weekend. And we're able to deploy that successfully. And I think there is opportunity for us to continue to educate the market that you can deploy Waystar and not have your business operations get disrupted. And there's opportunity in front of us that way. And as we compete in a record number of RFPs that we're involved in and have a strong pipeline, you can be assured that we're highlighting that ability to deploy our software very rapidly and successfully.

And is it as simple as referenceability and being able to tell someone, look at, we implemented a very large customer that's a similar size of yours in a very short time period, and that's maybe the first time or first handful of times we've done that, and so we can prove to you that we can do that. Is it as simple as that referenceability? Or is there something else going on?

I think it really does help. Referenceability surely helps. And I'll say this, health care decision-makers, they are brilliant people in all over the world, but certainly in health care. On the clinical side, they tend to be a little more risk adverse because if they implement their own technology, it impacts people's lives. So they want to see other examples of how it works in other settings. So before they tend to be a little more risk on in that regard. On the administrative side, they tend to be a little more risk adverse because if it disrupts their cash flow or their business operations, these hospitals are operating on razor-thin margins.

And so they tend to have that orientation. We've grown enough, and we have enough referenceability where we can go to clients. Let's say, it's a large health system in New York that has 20 hospitals and has a $5 billion a year net patient revenue Epic customer. We can go to them and say, guess what, we've got someone that looks like you, and they're in the Southeast, and they do $4.5 billion of net patient revenue, and they use Epic. And here's how they're deploying Waystar software to help them. And so we're finding that now we have enough of those matches and enough case studies where it really is becoming hopefully a long-term momentum shift and a market share gain element to how we approach the opportunity.

Yes. And does that actually help you catalyze RFPs in excess of what the normal replacement cycle market looks like? Because you did talk about that $15 billion software replacement market. Does you having more referenceability actually make you catalyze RFPs in excess of what a historical procurement cycle might look like for a hospital? Or is that not something you're seeing yet?

We believe that's a contributor to our seeing more elevated RFP participation for sure. We're now hearing people talk to each other and then calling us, which is a really nice phenomenon to experience as you're growing a software business. And we're grateful for that. And that plus the -- they wouldn't be referenceable if we weren't delivering a real return on investment for these organizations. And so we stand by that, and we do think that's a contributor to our growth.

Okay. And who do you compete with specifically? Is it really just a bunch of homegrown solutions or small fragmented solutions? Are there any large players we should think about in the software space? And then on the BPO side, are you actually competing with the BPOs today in that $100 billion market? Or are you helping augment them with technology as well?

Yes. It's a great question. We like to say that we don't have a competitor that's like us in the market, a cloud-based, cloud-native platform that's using AI across the platform to organize work for both the ambulatory client base, that long field of non-hospitals providers that are caring for patients as well as for the hospital base. Think about the power of that. We have one platform that can be deployed in small care settings where they may not even have a dedicated IT person and also in large sophisticated settings where they have several hospitals. So I don't know if there's anybody like us in the space. And I think that's going to give us the chance to grow. That being said, when you look at the incumbent legacy kind of providers of solutions, you would say Change Healthcare is one of those. That's the amalgamation of Emdeon and Relay Health and multiple businesses that weren't ever necessarily tightly integrated.

You would also run into other competitors that have presence in only one side or the other. So you think TriZetto, primarily on the ambulatory side, Availity, which incidentally is owned by a group of payers on the ambulatory side. You have FinThrive that is mostly on the hospital side. And that's who we run into most often, and we have strong 80% or so win rates against those when we go head-to-head. We -- when you think about the BPOs and the work that they do, they have been partners of ours in the sense that they're consuming our software behind the scenes when they go to a hospital and the hospital elects to say, "Hey, I don't want to do this work myself. I would rather have the billing and collection work be done by a third party." Those third parties oftentimes are using elements of Waystar software.

It's never the case that they're using all of Waystar software to be clear. We're constantly talking to them about how they can use more. In some cases, we're competing against them for certain aspects of revenue cycle work within a hospital or health system. In other cases, we're cooperating with them. They're a partner of ours. But people like Conifer and Optum and Ensemble and R1 are names that you may recognize, where we've had some form of coopetition with those type of entities.

We -- more often than not as we go forward, with the way that we're deploying AI agentically or even autonomously to gather information and compress work and automate work, sometimes making it invisible to the end user. So they don't even know what's going on. They're just seeing the end result of it or reviewing appropriate data elements. We think the long-term opportunity, again, is to eat into this much larger service market with great software. And we've seen that take place in other industries and other vertical markets as well. But we believe that Waystar can be that AI-powered platform that helps providers succeed.

Okay. So you operate in the revenue cycle from sort of that initial patient touch point to patient eligibility all the way to that claims management process. You made an acquisition recently or announced an acquisition of Iodine Software, which fits the middle piece, as you said, of that revenue cycle. For those in the audience, maybe not as familiar, what does that mean? And why did you announce the acquisition?

Perfect. Yes. So just a quick grounding on what we -- when we talk about the revenue cycle, it's a series of processes or tasks that is organized in the front when a provider is trying to understand who the patient is and understand whether or not they have insurance or a form of payment. Waystar software is market-leading, market leader in helping to financially clear that patient, gather insurance eligibility information, detect insurance coverage using AI where the patient may not even know if they have access to coverage and automate prior authorizations. That's the front part.

The back part is in the claims processing. Again, market leadership, first pass claim acceptance rates that are 99% across our entire network and recognized to be fast and help to dramatically reduce denials, the likelihood that a claim gets denied. We got familiar with a business called Iodine. Iodine is in the middle part, where Waystar doesn't have any competing software. And what the middle part typically reflects is the point in time where a provider is actually seeing a patient clinically. And you can probably picture this in your minds, where that provider may be seeing 40 or 50 patients a day. They're trying to keep track of all the clinical encounter information for each and every patient. Sometimes they're transcribing, sometimes they've got a physician assistant, keeping track of the notes. What Iodine does is Iodine is also cloud native. Iodine also deploys AI, hundreds of AI models that take unstructured clinical information and begin to make it more intelligent and structure it.

And through their AI models, I'm kind of drawing a funnel. They begin to filter what actually shows up and create structured clinical notes that are used to create accurate codes, commonly combined codes, CPT codes, if I can use that designation, clinical codes that can be used ultimately to form and create a highly accurate claim. So with the combination of all of these capabilities, Iodine by itself, a couple of other interesting data points. They're processing over 160 million clinical encounters on -- in their software every year and work with over 1,000 hospitals. So they have this massive clinical data set. They're discharging -- like 34% of every patient in the United States right now.

So one thing that I think since the announcement that we made, people are underappreciating is this really amazing clinical data set that they trust with HIPAA compliant usage, everything else that we can use to combine with Waystar's massive administrative data set and begin to train AI models to, again, constantly learn, constantly do work, identify, I can use that expression, work that has never been automated or done by another entity before. And all of a sudden, we get this opportunity to combine these businesses look to create that perfect undeniable claim where we reduce the likelihood that a denial ever occurs. And then we start talking about things that are happening in other industries for decades.

But like auto adjudication, auto payment, real-time understanding of what the payment to the provider is going to be. What does that mean for a patient? What type of transparency? What type of satisfaction does that bring to a patient? How does that streamline a bunch of work and reduce a bunch of inefficiencies that exist on the administrative side of care. So we're super pumped about the Iodine acquisition opportunity. And just as we've done in 9 previous acquisitions that we've made as we've built out the Waystar software platform, we do the hard work to unite and completely integrate that capability onto the Waystar software platform so that ultimately, the end users have a very consistent, I'll say, delightful user experience. It's intuitive. It's easy. There's in-app prompts and training to guide the end users, and we'll expect to deliver the same thing as we unite iodine with Waystar.

To what degree are there limitations or guardrails around what you're able to actually do with the underlying data, whether that's anonymized or otherwise in the context of AI models to help inform the other pieces of the revenue cycle. Can you use this data at large? Are there limitations? How do you go about?

I mean we certainly have some limitations, some that are self-imposed just given our approach to being responsible and ethical in the use of information. We always appropriately anonymize information. As you would expect, we are absolutely HIPAA compliant, HITRUST Certified. And we'll always make that as a standard. So we're -- and in some cases, we have some contracts with provider organizations that limit how information can be used, and we absolutely abide by those.

Helpful. I want to switch gears a little bit in the last 5 minutes to your exposure to patient payments volumes and just visits volumes and things that are maybe separate from the minimums that are paid for your software product. How should we think about Waystar's exposure as a subscription business to these volumes, how that impacts revenue on a year-to-year basis?

Sure. I think we should basically start with an understanding of our revenue model. Approximately 50% of Waystar's revenue model today is subscription. And the primary driver of that is a per provider per month subscription. Interestingly, Iodine is also a subscription-based model. where the provider count is the best driver of value in that type of situation. We tend to offer subscription agreements to the smaller end of the market, where provider count is knowable, it tends to be the best driver of activity. So you think about the 25-person doc practice of primary care physicians orthopedic surgeons that are practicing together, they often have a subscription.

Where health care is being delivered where a volumetric relationship becomes more meaningful or places like laboratories where they might be processing 5 million lab tests a year, and they have 3 providers on staff. So like we would enter a volumetric relationship with them where there's often a volume minimum that acts like a subscription. And then the way our software works is we know we have great visibility to these volumes. We know and we can update as we need to on a regular basis, like what the volume overages are, and that tends to show up in our model.

Also, larger hospitals, you think about these large multisite, multi-hospital systems that -- where provider count would not be the right kind of driver of activity. It's more patient visits to your point. And as patient volumes increase, patient visits increase, we have a volumetric relationship with them. The third thing I'd call out in that other -- that 50% of our business that has a volumetric component is there's a smaller portion of that, that is patient payment related. And what we have is we have an integrated patient payment solution where Waystar is taking a take rate on the patient dollars where we put a card on file or they swipe a card or we establish a financial care plan for the patient, and we secure that, we tokenize it, of course. But where we have a -- if we're processing that payment, we have a modest take rate associated with that, and that shows up in the volumetric side of our business as well.

Got it. And we don't need to break down between the sort of payments volumes versus the visits volume. But how should we think about what sort of outlook is embedded in your numbers or your guidance or how you think about the growth of these things? I know there's been an elevated utilization environment. How much have you benefited from that? And how should we think about how that's embedded into numbers?

Yes. We take a conservative view on volume estimates or expectations. I think the long-term historical average has been about a 2% increase a year. What we're seeing today is a little higher than that. We're seeing about a 4% utilization impact the year. And part of the secular trends in health care, you see the baby boomer population going to the doctor more, et cetera. There's some tailwinds there. Waystar, -- that being said, we tend to take a conservative approach. There also is a little bit of seasonality in -- for patient payment processing, if there's a high deductible health plan, and we know more patients are participating in high deductible health plans than ever before, they tend to reset in January.

And at the start of each year, they'll have a higher out-of-pocket payment responsibility, then they'll work through it over the course of the year. So we see a little bit of seasonality that starts to taper off in the back half of the year. We factor all of that in. And overall, we try to take a prudent approach to our guidance as a young public company and -- but we have a model that benefits from utilization and from usage. And we help providers successfully navigate utilization increases with less resources.

That's great. In the last 30 seconds, what are you most focused on over the next 6 to 12 months as CEO? And what are you most excited about over a 3- to 5-year time frame?

Thank you, Adam. It's great to visit with you. Successful integration of the Iodine acquisition, really starting to leverage the power of the clinical and administrative data set to continue to train these AI models to grow into that massive addressable market opportunity. That's what we're focused on and of course, delighting our clients along the way so we continue to build momentum in the business.

Okay. Matt Hawkins, thanks so much.

Thank you very much. Good to see you.

Good to see you. Thanks so much.

All right.

Good day, and thank you for standing by. Welcome to the Waystar Second Quarter 2025 Earnings Conference Call.

[Operator Instructions]

Please be advised today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Greg McDowell, Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, everyone, and thank you for joining Waystar Second Quarter 2025 Earnings Call. Joining me today are Matt Hawkins, Waystar's Chief Executive Officer; and Steve Oreskovich, Waystar's Chief Financial Officer. After their remarks, we will open the call up for questions.

This afternoon, we issued a press release announcing our financial results and published a presentation slide deck to accompany our prepared remarks. You can find these materials in the Investor Relations section of our website at investors.waystar.com. Before we begin, I would like to remind you that this call contains forward-looking statements, which are predictions about future events. Examples of these statements include expectations of future financial results, growth and margins. These statements involve a number of risks and uncertainties that may cause actual results to differ materially from those expressed in these statements.

For a full discussion of the risks and other factors that may impact these forward-looking statements, please refer to this afternoon's press release and the reports we file with the SEC, all of which are available on the Investor Relations page of our website. Any forward-looking statements provided during this call are made only as of the date of this call. During today's call, we will also discuss certain non-GAAP financial measures. We have provided reconciliations of the non-GAAP financial measures included in our remarks to the most directly comparable GAAP measures, together with explanations of these measures in the appendix of the presentation slide deck and our earnings release. With that, I will turn it over to Matt.

Thank you, Greg, and good afternoon, everyone. Thank you for joining our second quarter 2025 earnings call. I will begin today by highlighting Waystar's recently announced agreement to acquire Iodine Software, a proven leader in AI-powered clinical intelligence. Iodine is a highly complementary strategic fit, and this transaction is a major step forward in accelerating Waystar's mission to simplify health care payments.

We look forward to extending Waystar's leadership in the critical stage of the revenue cycle between care delivery and claim submission, where providers lose billions each year to administrative inefficiencies and expanding Waystar's total addressable market by more than 15%. The purchase price of $1.25 billion represents a high teens enterprise value to adjusted EBITDA multiple based on Iodine's estimated 2025 EBITDA adjusted for synergies. As a clear vote of confidence in Waystar, Advent International, Iodine's largest shareholder, is expected to receive 100% of its consideration in the form of Waystar common stock, subject to an 18-month lockup agreement. iodine brings a highly recurring subscription-based business model with a financial profile that is aligned with Waystar's. We expect the transaction to be immediately accretive to gross margin and adjusted EBITDA margin following closing and accretive to revenue growth and non-GAAP net income per diluted share in 2027.

The acquisition of Iodine also accelerates Waystar's product road map by nearly 2 years, unlocking a new level of automation, accuracy and performance for providers. It advances Waystar's strategic position to eradicate unnecessary denials, maximize reimbursement and deliver meaningful ROI across the revenue cycle. Following the anticipated close by year-end, we will activate Waystar's proven M&A playbook.

Our combined go-to-market team will capitalize on bidirectional cross-sell opportunities, expanding Waystar's reach into Iodine's client base, introducing Iodine's platform to Waystar clients and unlocking greater value where we already intersect. Across the 9 acquisitions Waystar has completed, we have demonstrated our ability to ensure seamless integration and capture identified synergies to drive growth, operational excellence and financial performance. For more on this important milestone, we encourage you to review the materials published last week available on our Investor Relations website.

We will dedicate the remainder of today's call to reviewing Waystar's Q2 results. War delivered its fifth consecutive quarter as a public company of double-digit revenue growth and strong margins in Q2. Revenue reached $271 million, representing 15% year-over-year growth with an adjusted EBITDA margin of 42%.

Our momentum in the first half of 2025 has enabled War to raise full year guidance for both revenue and adjusted EBITDA, which Steve will cover in more detail shortly. As providers navigate margin pressure, workforce shortages and legislative changes, Waystar's AI-powered software platform is in strong demand. Decision-makers prioritize our mission-critical platform because we help their organizations get paid fully and accurately while reducing complexity and administrative burden. War is uniquely positioned to address evolving industry needs, deliver meaningful ROI and create long-term value for shareholders. In a dynamic market and evolving policy landscape, 2 recent developments are worth noting. First, the One Big Beautiful Bill Act; and second, the prior authorization pledge led by America's Health Insurance Plans. The One Big Beautiful Bill Act introduces changes to Medicaid funding over the next decade and imposes stricter eligibility criteria for both Medicaid and Affordable Care Act exchange coverage. Importantly, we believe Waystar is well insulated from downside risk across a range of scenarios.

In a hypothetical analysis in which 15% of Medicaid funding were to be affected, War's trailing 12-month revenue would be impacted by less than 1%. More importantly, these conditions highlight the advantage of Waystar's purpose-built platform, which is already equipped to support providers across all payer types. Whether volumes shift across Medicaid, Medicare, commercial or self-pay, Waystar enables providers to maximize reimbursement, reduce denials and operate efficiently.

As I will describe in a moment, capabilities such as insurance coverage detection, charity screening, patient payments and unified payment processing are essential for helping providers navigate this evolving funding landscape. Now let's turn to the prior authorization pledge led by America's Health Insurance Plans. More than 60 health insurers recently signed a nonbinding commitment with the U.S. Department of Health and Human Services outlining a multiyear path to reduce unnecessary prior authorization requirements by 2026 and implement standardized electronic workflows by 2027. We note that Waystar has long been a market leader in prior authorization automation, well ahead of this anticipated industry pledge.

Our software, authorization Manager connects health care providers to a broad range of payers, while Auth Accelerate launched earlier this year, automates every step of the prior authorization process and enables auto approval. With more than 2 billion prior authorization submissions occurring annually, this remains one of health care's most burdensome and resource-intensive manual processes.

Today, Waystar delivers more than 90% touchless authorizations. For a midsized health system, this level of advanced automation can unlock capacity equivalent to over a dozen full-time employees, freeing staff to focus on higher-value work. Waystar is encouraged to see the broader industry coalescing around initiatives that benefit providers and patients. And Waystar will continue to lead from the front, anticipating change and tackling health care's most complex challenges with AI-powered software.

As a result, Waystar clients are well equipped to navigate regulatory demands, unlock meaningful ROI and drive strong financial performance. Waystar has established deep trust with over 1 million providers, reinforcing our conviction that our growth strategy is making a tangible impact. This trust is reflected in our 115% net revenue retention rate and the growing number of clients generating more than $100,000 in trailing 12-month revenue, now at 1,268, which is a 14% increase year-over-year.

Our compounding growth algorithm begins with the enduring relationships we create with our clients. Waystar is a proven innovator, delivering software that empowers providers to get paid fully and faster with unprecedented automation and greater accuracy. Each innovation is purpose-built to address health care's most complex challenges. Let me highlight a few now. First, insurance coverage and eligibility. As shifting coverage policies introduce more complexity and increase gaps in insurance eligibility, providers face a rising risk of denied or delayed payments. Waystar's AI-powered software platform delivers unmatched performance in resolving inaccurate or unknown coverage, automatically identifying the correct insurance in as many as 55% of cases that would otherwise result in write-offs. The result, revenue is recovered in seconds with no manual effort required from the provider. For a midsized health system, this can drive upwards of $20 million in incremental annual reimbursement. Second, patient payment optimization.

As more financial responsibility shifts to patients, Providers face growing pressure to improve affordability, streamline collections and deliver a positive patient experience. Waystar's AI-powered software platform automatically identifies financial assistance eligibility and pairs it with intuitive digital-first billing and integrated patient payment options.

This approach drives up to 80% patient self-service adoption and more than a 20% lift in patient collections, translating to nearly $8 million in annual impact for a midsized health system while significantly reducing the effort required to collect. Importantly, a strong patient payment experience builds trust between the provider and patient at a critical point in the patient journey, reflecting in patient Net Promoter Scores above 60 for health care providers using Waystar's software platform. Third, reimbursement and cash flow. In the first half of 2025, Waystar's AI-powered software platform prevented nearly $6 billion in denied claims. When denials do occur, our appeal capabilities accelerate recovery and increase overturn rates, unlocking millions in reimbursement.

Clients also reduced days to pay by up to 15%, strengthening cash flow and operational resilience. AI is at the center of Waystar's innovation strategy. Today, the vast majority of revenue is generated from software where AI is actively driving results.

We are also generating new incremental revenue with the launch of Waystar AltitudeAI, which deploys generative AI in key use cases on Waystar's platform. Waystar AltitudeAI delivers tangible outcomes such as a 70% boost in appeal productivity and double-digit increases in overturn rates, freeing up capacity equivalent to nearly 10 full-time employees for a midsized health system. Innovations like these are delivering meaningful ROI and strengthening Waystar's leadership in improving provider financial performance. A recent Forrester study of more than 300 provider leaders confirmed that trusted vendors like Waystar are preferred for AI adoption in contrast to new market entrants. Revenue cycle leaders cited scale, integration and outcomes as top priorities, areas where Waystar has demonstrated clear leadership in all 3 categories. Waystar's growth strategy is grounded in proven results, impactful innovation and enduring client trust.

As the industry evolves, Waystar is uniquely positioned to lead with a unified AI-powered software platform that delivers automation, accuracy and meaningful results at scale. We look forward to advancing our software product road map and helping providers strengthen financial performance and stay ahead in an increasingly complex environment.

Waystar is proud of the continued recognition of its software platform, culture and the results we deliver to providers and patients. In Q2, Waystar was recognized as the best overall health care payments solution provider by MedTech Breakthrough and named one of the U.S. News Best Companies to Work for. These accolades reflect the unwavering commitment of the Waystar team and our clients to simplify health care payments. Waystar is well governed by a strong, experienced Board of Directors. In Q2, 2 new independent Board members, Aashima Gupta and Mike Roman joined, bringing valuable expertise and perspective that are already contributing meaningfully to Waystar's long-term strategy. With that, I'll turn it over to Steve to walk through the financial details from the quarter.

Thanks, Matt. Revenue increased 15% year-over-year in the second quarter to $271 million. The basis of Q2 growth continues to be our durable, predictable model that produces low double-digit revenue growth annually on a normalized basis. This includes expanding the client base, producing more than $100,000 of revenue in the last 12 months to 1,268 at quarter end, an increase of 24 clients in the quarter and an increase of 14% year-over-year. It also includes a high net revenue retention rate, which was 115% for the last 12 months and compares to 17% year-over-year growth over the last 12 months. As discussed on our last call, the net revenue retention rate benefits from the rapid time to revenue from clients impacted by competitor cyber event in early 2024 and elevated patient utilization of the health care system over the past year. The other components of the bridge from gross to net revenue retention are consistent with prior quarters. Subscription revenue of $131 million increased 17% year-over-year and 5% sequentially, reflecting strong performance in the business. Volume-based revenue of $138 million increased 14% year-over-year and 6% sequentially. Volume-based revenue benefited from rapid time to revenue from a few large clients that we took live in the quarter. These 3 implementations highlight our ability to rapidly onboard large clients.

Adjusted EBITDA of $113 million for the second quarter increased 20% year-over-year. Our adjusted EBITDA margin was 42%, above our long-term target of approximately 40%. The adjusted EBITDA outperformance was driven by both the revenue upside as well as a slight revenue mix shift to higher-margin provider solutions, which comprise approximately 70% of the total revenue. Additionally, we realized benefits from operational efficiency initiatives, while at the same time, investing in areas such as innovation, cybersecurity and client experience. Unlevered free cash flow was $111 million in the second quarter of 2025 with an unlevered free cash flow to adjusted EBITDA conversion ratio of 98%. The ratio this quarter benefits from the appropriate delay of federal tax payments to the fourth quarter. The strong first half puts us in a good position to achieve our 70% long-term target for the year.

The trend of high cash flow conversion, coupled with expansion of our trailing 12-month adjusted EBITDA generated a 2.2x net debt to adjusted EBITDA leverage ratio at June 30, which is down 0.6x since the beginning of the year. Our continued ability to delever this quarter aligns with our previously stated goal of approximately 1 turn annually. Regarding 2025 full year guidance, please note the following excludes any potential impact from the pending acquisition of Iodine.

We are raising revenue guidance for 2025 to a range of $1.30 billion to $1.42 billion with a midpoint of $1.36 billion, which represents an increase of $22 million or 2% versus prior guidance midpoint and represents 10% year-over-year growth. We've included a slide in the IR presentation reconciling the expected 2025 revenue growth rate of 10% at the midpoint of guidance and a normalized revenue growth rate of 12%, which is adjusted for revenue realized in 2024 that would have occurred in 2025 under typical time lines. On previous calls, we've talked about the first half, second half dynamic of our business. As expected, our first half revenue was over 50% of projected full year guidance, primarily based on the shaping of volume-based revenue, including seasonality in the approximate 30% of total revenue generated by patient payment solutions.

As a reminder, revenue dollars tend to be higher in the first half of the year compared to the second half as patients with high deductible plans see those deductibles reset annually and typically meet those deductibles in the latter portion of the year. Altogether, we expect total revenue to be down sequentially in Q3 as compared to Q2. And on an absolute dollar basis, we currently expect Q3 and Q4 revenue to be similar.

We are also raising adjusted EBITDA guidance to a range of $418 million to $426 million, with a midpoint of $422 million, increasing by $12 million or 3% versus the prior guidance midpoint. We now expect an adjusted EBITDA margin of approximately 41% for 2025, driven in part by the outperformance in the first half of the year. Again, our updated guidance excludes the impact of the pending acquisition of iodine. As we mentioned on the call last week, on a stand-alone basis, Iodine expects approximately $120 million to $125 million of subscription-based revenue for 2025 at a gross margin of approximately 75% and an adjusted EBITDA margin of approximately 40%. Additionally, we expect to realize over $15 million of cost synergies within 2 years of closing the acquisition.

We prioritize maintaining a strong balance sheet and project net leverage to be approximately 3.5x following the transaction. For clarity, this would only include the expected trailing 12 months of adjusted EBITDA from Waystar stand-alone. As noted earlier, we have demonstrated the ability to delever quickly through strong free cash flow and adjusted EBITDA growth, and we expect to do so post close. Operator, please open the call for questions.

[Operator Instructions]

Our first question comes from Alexei Gogolev with JPMorgan.

This is Destiny on for Alexei. In 1Q '25, you mentioned $10 million revenue boost coming from client migration, post change IRA tax. Has there been any benefit in 2Q or it's now clearly over? And are we back to additional business decision making?

Yes. Thanks for the question, Destiny. This is Steve. As we had mentioned on our prior earnings call, we had expected by the time we hit Q2 of 2025, that year-over-year benefit would essentially have lapped such that it doesn't have a significant difference between the as reported growth rate and the normalized growth rate, and we did see that come to fruition here in the second quarter. So there isn't anything notable to call out, and that's why you didn't see me mention anything in the prepared remarks.

Yes. And Destiny, what I would add, this is Matt. in the original cohort of those that did adopt the Waystar software platform, we've seen excellent retention and continued progress in the cross-sell opportunities there. And not calling it out doesn't mean that we're not seeing a tremendous progress. We just are choosing to be selling given the competitive nature of what we're doing. I will say that it represents a tremendous opportunity for Waystar to continue to execute our play.

And we do see, just given the level of unrest in that client base, we see continued switching on the horizon. We know one recent survey suggested that more than 36% of respondents are likely to switch clearinghouse vendors and that some of those change clients that have not switched represented nearly 1/3 of the respondents. And so we feel like Waystar is a great home, a trusted vendor with strong Net Promoter Scores amongst that cohort that we've already helped and certainly more broadly across our whole client base. But we look forward to being a share gainer during this period of time as we continue to execute our play.

Our next question comes from Adam Hotchkiss with Goldman Sachs.

I just wanted to touch on the rapid onboarding of large clients you mentioned. Is there any reason that some of the volume-based revenue that was brought on from those clients wouldn't be recurring in the second half of the year? I just note that because I think the guidance implies a greater step down in second half revenue than I think we're used to. And so I'm just trying to understand the outperformance in the second quarter and why we wouldn't expect that to flow through to the second half? And I guess, how you think about the upside risk to the second half around those dynamics plus the volume-based side?

Thanks, Adam. Let me speak to our ability to rapidly onboard clients, first of all. As you'll recall, we're a cloud-based software platform, and we can deploy our software very rapidly, especially in moments where -- like we saw with the change cohort of impacted clients where they needed it, but also in opportunities where clients make a decision and they just want to move fast. We have a lot of experience and our software is architected and certainly configurable in ways that make it easy to deploy rapidly. We were thrilled to be able to work with these 3 clients to rapidly onboard them. And that, as you noted, did impact our second quarter revenue results. Steve, let me turn it to you for thinking through the second part of his question.

Yes. First, just for some context specific to the second quarter, Adam, from a benefit perspective, as it pertains to year-over-year growth rate, if I round up, it's about 2% of that year-over-year growth rate, to your question regarding the recurring nature of that, we would expect it to be highly recurring.

As you're well aware, we have a construct with our contracts such that roughly half of the revenue that we generate comes through subscription software revenue with the other piece -- the other -- approximately 50% volume based and the timing, especially with larger clients of when the subscription base aspect kicks in, tends to be a little -- a few months or several months post signing of the contract based upon the expected rollout.

So that revenue is illustrating itself and showing up this quarter in volume-based as a result of the fact that it's outperforming the contractual monthly minimums. And we would fully expect as we get further along in the contract life cycle with those 3 clients that, that will then show up as subscription revenue at that point in time based upon the fact of where they are contractually versus the expectations.

So we expect that to be in the recurring and in the future revenue stream for quite the foreseeable future. Specific to your question surrounding 2H versus 1H and sort of the expectation of the back half being sub 50% of the total year revenue, that is more a factor of 2 items. First, the 30% of revenue that comes from patient payments. Please recall, I mentioned in the prepared remarks, the impact of patient deductibles and how they tend to impact the first half and second half of the year. And then as it pertains to our approach to expectations from the volume-based revenue stream and patient utilization, we think we're appropriate in our view.

But if the patient utilization of the health care system continues to remain high as it has for the -- or higher as it has for the first couple of quarters of this year, that could lead to the upside of the guidance range that we provided. And if we were to see something happen negatively, that would lead to the downside of our full year guidance expectation in the range. So hopefully, that's helpful context, Adam.

Our next question comes from Allen Lutz with Bank of America.

One for either Matt or Steve, looking at subscription revenue, this was the biggest sequential increase in subscription revenue in the past year. And I guess that would be a little counterintuitive given the benefit that you observed from the cybersecurity piece in 2024. So as we think about the benefit you saw in 2Q, more than $6 million of sequential revenue growth in subscription. What's driving that exactly? And was there any type of impact from tariffs, just concern from customers? And then how do you think about the demand environment in the second half of the year. Is there any contemplation of a pullback? Just what drove the growth in the quarter? And then how to think about 2H from here?

Well, let me speak first about the demand environment, Alan, and then I'll ask Steve to comment on subscription revenue, if that's okay with you. First of all, the demand environment we see as being robust and strong. And I'll tell you why. We see provider decision-makers looking for efficiency. They are adopting technology or wanting to, to help them drive efficiency and collect faster and more accurately. And they want cybersecure solutions, and they want to work with vendors that they can trust. So while our business has no direct exposure to tariffs, as we've talked about in the past, we're serving U.S. clients only. We are noticing that provider decision-makers are they're very thoughtful. They're very diligent and probably stressed as they prioritize areas of spend. We're really grateful that Waystar is on the favorable side of that prioritization.

And because we are a trusted platform, we are mission-critical, and we help providers drive efficient cash flows and we stand by our results. They're just demonstrable return on investment results. When you look at the ways that we think about demand and how it shows up in our business, we have a strong qualified pipeline of opportunities that we look to the second half of '25 and into the future with excitement and a sense of momentum.

And we also feel good and optimistic about the year-to-date bookings results that we've achieved. So feeling good overall about demand, recognizing that it's stressful, but where provider decision-makers tend to prioritize mission-critical solutions like Waystar. Steve, second part of that question?

Yes. So specific to the question, Alan, surrounding the subscription revenue and the sequential growth, you are correct. On the last call, I had made a statement that we had expected to see prior quarters in which the benefit of those clients we rapidly onboarded through -- that were impacted by the Change cyber event that we had expected to see the subscription sequential growth rate start to taper off in the second quarter and through the rest of the year.

What we saw actually was the mix of revenue this quarter. And I think in the prepared comments, apologies, I had stated that reflecting the strong performance in the business. Well, that's specific to those provider solutions that comprise 70% of the total revenue. If you recall, the majority of our subscription revenue or about 70% of that 70%, which if you follow calculus through is about 50% of total revenue comes from those -- or is generated through those provider solutions.

The strength in those and continued adoption and implementation of those in the second quarter has continued to drive the subscription revenue basis and is also just sort of to tie out sort of all the way through the P&L is also the piece where I mentioned generate that mix shift between Provider Solutions revenue and that 70% also led to the higher margins and ultimately at a higher gross margin -- or sorry, the higher adjusted EBITDA margin for the second quarter as well. So we're very pleased to see that strength in the business continue. And obviously, it has positive impacts for us throughout the entire P&L.

Our next question comes from Richard Close with Canaccord Genuity.

Congratulations. Just maybe on the volume growth, again, even with, I guess, the rapid onboarding, adding a couple of percentage points in the second quarter, the quarter was still above the 11% in the first quarter. So I'm just curious, is it your sense it's the higher utilization environment? Or is there any read through maybe moving more clients to digital payments and getting better collection rates and I guess I'm just curious where you stand on penetration of patient payments on the digital versus traditional methods and how that's progressing?

Thanks, Richard. Yes, we're thrilled with, obviously, to deliver Q2, and this represents 5 consecutive quarters of double-digit revenue growth, strong EBITDA margin performance, cash flow conversion and doing exactly basically what we say we're going to do. So we're thrilled with that. On the volume growth side, we are seeing a strong utilization environment. Obviously, we're prudent in how we think about the business and how we create operating plans and forecasts for the business.

But it's been encouraging to see higher utilization, and that tends to benefit the volumetric side of our business, as you know. With respect to the digital payment solutions, the digital-first payment solutions that we offer with the integrated patient financial care solutions that we have. We're not calling that out in particular. We do know that those solutions are driving better collection rates and certainly better patient satisfaction because patients want transparency in what their financial obligation is going to be. And we like the activity that we're seeing in the business, but not necessarily calling it out. And I'll pause there. Steve, what would you add to kind of this volume-related question?

Yes. And as we think of the patient utilization of the health care system. Recall that roughly half of that volume-based revenue is associated with Provider Solutions, the other half associated with the patient payment solution. So to your point about the digitization. And we're seeing a good mix in volume from both of those. So if we looked at the second quarter, the year-over-year growth rate, I would say it probably breaks down roughly about 60-40 year-over-year. 60% of that growth is coming through those patient payment solutions, 40% roughly is coming the provider solution. So a good mix of volume increase across all of the solutions in our business.

Yes. And I'd say from a penetration perspective, Richard, we have a long field right in front of us, right down the middle, where we can just go address and become a market share gainer here with the compelling solutions that we have to offer. So a long way to run.

Our next question comes from George Hill with Deutsche Bank.

I've got 2 quick ones. One is a layup for Matt and one is a little bit tougher one for Steve. So Matt, if you're listening to MCO earnings calls, they're basically all creating a commercial for Waystar talk complaining about how the impacts of AI and revenue cycle management tools are killing their cost targets. So I guess what I would ask is, have you seen any downstream impact of that from a client demand perspective? And I guess, is there a way to quantify like on a year-over-year basis, if we think about your revenue, like what is the benefit of kind of increased charge capture or the increased ability to code in the volume-based revenue? And I apologize for this long question. And then for Steve, maybe I missed this in the detailed commentary. But if I look at the subscription revenue and the volume-based revenue, like is the expectation that like either the volume-based revenue -- I'm sorry, the subscription-based revenue tracks back meaningfully or the volume-based revenue because if the subscription revenue doesn't, the volume-based revenue would really have to backtrack in order to see Q3 and Q4 down meaningfully to kind of get to the guidance targets.

So I would just love kind of more interplay on like which revenue lines are moving in which direction and why as it relates to the guidance, which is looking pretty conservative. Sorry for the long question, guys.

Thanks, George. I'm going to take your first one. I'm going to lean into it a little bit, if you don't mind, just given the AI opportunity that we see. We were recently ranked #1 in AI platform solutions by Black Book Research. Our clients, as you know, AI is pervasive across the War platform today. The vast majority of our revenue includes software where AI is in use today. So when we're selling and you're seeing revenue growth in our business, you can assume that there's AI embedded in the software solutions that we're delivering. We bring the right AI to the right use case. And in the case of us launching AltitudeAI at the start of the year, where it has several Gen AI use cases, one of the things that we're seeing, and we did listen closely to the MCO calls, and we're aware of what's going on in the market.

We brought first-to-market capability around denial prevention solutions. So I think things that prevent the likelihood that a claim gets denied. We're hearing that in the market a lot, and people want those type of capabilities. Our Gen AI solutions are preventing $6 billion of denied claims so far this year.

On the other side of that, on the appeal side, solutions to see a 40% increase in appeal overturn rates at 3x a faster ability because the Gen AI is autonomously gathering financial and clinical information. And so I'm going to lean in just for a moment further, and then I'll turn it to Steve. But when you think about what is Waystar's ultimate goal and you start to think and reflect on why Iodine. We think it's a perfect strategic fit. And part of that is really about the use of AI. So you think Waystar has solutions that highly accurately and rapidly and automatically identify patients and do prior authorizations and prevent denials. On the other side, we also have solutions that use AI to process claims at market-leading first pass claim acceptance rates and rapidly appeal denied claims.

And why it makes perfect sense for us to go and announce the acquisition of Iodine, it's because in that middle area between the clinical encounter and the formation of a claim and the submission of that claim, there's more than 60 million denied claims that occur in that area. And so our ultimate goal is to create the perfect undeniable claim. You can write that down.

Our goal is to create the perfect undeniable claim using AI. And we're on a mission to do just that to help providers because we're listening to their commentary, and we know the pain that they're experiencing. And we're excited about this. So I'll pause to ask Steve to help us just clarify for you, George, the subscription revenue versus the transactional or volumetric revenue and what we expect on the back half.

Yes. And I might revert a little bit, George, back to the prepared comments that I stated reminding you about the first half of the year, second half of the year dynamic that happens within and seasonality that happens within the patient payment solutions, primarily associated with patients that are under high deductible health care plans that have those deductibles reset at the beginning of the year and are generally start to meet those deductibles in the second half of the year. So that 30% of the revenue tends to be primarily volume-based revenue. And what we're looking at from a full year guide is the expectation that patients start to hit those or meet those deductibles, sorry, in that second half of the year.

So if you're looking at sort of the expectation from a subscription revenue growth rate and volume-based growth rate, it's probably more heavily weighted towards the volume-based growth rate in the second half of the year as it pertains to the full year guide.

[Operator Instructions]

Our next question comes from Elizabeth Anderson with Evercore ISI.

Thanks so much for the question. I don't know if I can get such a sound bite out of you as George can, but I was hoping you could help me understand the math that you were talking about, about the One Big Beautiful Bill math where you're talking about sort of the 15% of Medicaid funding and the HICS funding as well with a 1% impact. Obviously, that's the key question in terms of how people are thinking about a bunch of health care services companies for 2026. So I was wondering if you could just sort of help us flush out like to think about those assumptions. And obviously, there isn't a one-to-one impact with the volume. So maybe you could just walk us through that again as well and make sure we all understand your thinking there.

Sure. Let me highlight it. Elizabeth, thank you. And then I'll turn it to Steve as well. Basically, the way to think about our business is -- we -- with respect to the one big beautiful bill, Waystar serves every payer type on a single platform. And we have solutions that address efficiency and finding funding.

And so you think about the -- how we might be insulated from any one source of funding, and it really starts with the fact that we serve a very large and diverse group of clients who have -- who serve a very large population of patients and not all of those patients necessarily have the same exposure to any one source of funding. Speaking to the one big beautiful bill, it's Medicaid in particular.

And so really, it just goes to the fact that we have such a diverse business model, a resilient business model that we're insulated from any one particular type of things. And if there were to be a 15% reduction of Medicaid funding, what would happen is some of our other solutions would be -- come in even more demand as providers work to find alternative ways to help their organizations get paid.

We highlighted a few on our prepared remarks, but that would include solutions that Waystar offers such as insurance coverage detection and automatic eligibility verification as providers seek sources of how a patient might be covered, charity care screening and propensity to pay AI that Waystar offers today and an integrated patient financial care suite with patient payments.

So all those things, we feel combined to say we feel very well positioned and insulated from this type of particular exposure. And we did run the math on the hypothetical scenario of a 15% reduction of Medicaid funding, followed it all the way through our business model, and that resulted in a retrospective look, a trailing 12-month look of less than 1% of revenue of Way stars that would be impacted. And Steve, if you clarify anything further there, that would be great.

Yes. I think you said it spot on, Matt. I think the only thing to just add to that, Elizabeth, is the scenario that Matt just articulated is a full downside scenario. So it doesn't include the offsets where we think our clients have moved to in the solutions that we have that could help them that could generate additional revenue for us if that basis. if that particular client base -- pardon me, were impacted as we had articulated.

And if states weren't -- and there's a bunch of other things. it's a multi-varied environment. But we're comfortable with our analysis and the resilience of our business.

Our next question comes from Brian Tanquilut with Jefferies.

Maybe just a follow-up on Elizabeth's question. As I think about APTCs, the health insurers exchange subsidies expiring, have you looked into how that would look or what that quantification would be? I know the One Big Beautiful is less than 1%, but PDC will be more relevant in '26. I'm just curious how you're thinking about that.

Yes, we have. We've looked at the analysis in our business, and again, I feel like we're appropriately insulated just given the diversity of clients that we serve and the diversity of patients that they serve. So -- but it's similar thought process there. We've done some sensitivity analysis on our business model. And again, what I -- I think what it speaks to in the affirmative is Waystar's strong business model, how in-demand our solutions are the ways that provider organizations are prioritizing Waystar to be able to procure solutions that help them manage this type of difficult environment, and we can help them do that and our results attest to that.

Our next question comes from Brian Peterson with Raymond James.

My congrats on the quarter. Matt, I wanted to double click on mid-cycle. You're clearly leaning into that opportunity with Iodine. Could you help me understand how penetrated that segment is relative to the other areas of RCM? And as we think about the AI impact on the value to customers, like do you think mid-cycle is maybe the first act relative to other areas? Would love to unpack that a bit?

Yes. Thanks, Brian. So several thoughts here. We do know that mid-cycle is the source where a lot of pain is experienced by providers. You think historically, you can probably picture this in your mind when you as the patient walk into the provider and they see you as the patient and they're trying to keep track of that interaction from a clinical perspective. that's historically been very manual labor, manual work. If a provider is seeing 40, 50 patients a day, trying to keep track of that, we often hear providers talking about going back at the end of their day trying to retrospectively recall what their encounter was. Sometimes they'll dictate.

Sometimes there's other ways to get that information recorded. We do think that the mid-cycle that -- again, that space between the patient provider clinical encounter and on the other side, where a claim is formed and successfully submitted, that space is ripe with opportunity for AI, for AI impact. When we think about how much opportunity is left, we said last week on the call that this represents about a 15% total addressable market expansion for us.

That's by the strictest definitions. But we believe that there's opportunity for us to make it much larger as software and AI consume manual work and manual service. And we think step one for us in this regard is the acquisition that we announced. And we'll just work to make this really successful, again, because it's a source of where a lot of pain has been experienced by providers. We like the fact that iodine has some really compelling solutions that they are market leaders. They have over 160 leading custom AI models that reduce the need for manual work and claim rereview by more than 70%. And they're processing 160 million clinical encounters and improving the notes in those encounters every year. And they cover approximately 34% of all inpatient discharges.

So as we think about the opportunity and what we've spoken to is the fact that this clinical data that iodine generates, it certainly feeds their AI models today, and that's this learning kind of self-improving thing. But as Waystar gets appropriate access to that clinical data set in the future, we believe that it will bolster Waystar's current software with clinical information and make our current software even better and more compelling.

Think about the clinical data benefits that we could add to prior authorizations and denial and appeal management automation and the patient financial experience solution. So we're really excited about the AI opportunity here. And not just us. We announced this last week. We had the chance to get insight from our clients. So you can bet that as soon as our announcement was over, we scheduled a call with our advisory board. I know iodine did the same. The client sentiment was 100% positive. I heard direct quotes from our Advisory Board client members who said, "We're thrilled about this announcement. This will be awesome for us and for health care. Another one said, "Very exciting acquisition for Waystar feels like the perfect fit for you. As you may be aware, we recently implemented Iodine across our system.

We're looking forward to realizing the full benefit of the opportunities we discovered in our assessment. The iodine team, much like Waystar's team, has been very invested and engaged throughout the implementation. And then this other one that's a favorite, "Now I can say that I'm an early adopter at both Waystar and iodine. You know I've been a long-time advocate of Waystar, but now I'm not sure that you knew that I was also an early adopter at iodine. This is all very exciting.

And so we think about the AI opportunity here to bring modern software, AI that improves the clinical documentation that optimizes the claim and our quest, our ultimate goal to create the perfect undeniable claim that this is a great fit. And one other thing I just would add, iodine serves 150-plus clients that constitute or represent more than 1,000 hospitals. In our research, approximately 1/3 of those clients are also Waystar clients. And so there's this tremendous bidirectional cross-sell opportunity that will emerge from this. So not only is this a perfect AI fit and strategic fit, but it also will lead to, we believe, long-term great financial sense as well.

Our next question comes from Ryan Daniels with William Blair.

Matt, one for you. You hit on this a little bit in your prepared comments, but earlier this week, we effectively heard from one of your competitors that their technology is falling behind the curve and really impacting market performance. So Curious if you could dive a little bit deeper about what you're seeing on the competitive front and perhaps any color on recent win rates or how your modern platform is impacting the sales pipeline versus what you've seen in past years against your peers?

Thanks, Ryan. We -- I did add some comments earlier. We are seeing continued switching on the horizon. Our win rates have stayed consistent with what we published as part of the S-1. So strong win rates against all of our direct competitors. And we believe that this is an opportunity for Waystar to continue to execute on our play. We have noted a level of unrest in the change client base, in particular, as I mentioned. And we believe that looking -- reflecting on our qualified pipeline of opportunities, seeing the number of RFPs and jump balls staying consistently strong and looking at the bookings results that we've achieved so far this year, we're excited about the opportunity that we see and the momentum that we feel is kind of building in the market. We believe that Waystar could be a share gainer here.

Our next question comes from Jailendra Singh with Truist Securities.

Congratulations on strong quarter. I want to follow up on your comments around health plans pledged around reducing the need for prior authorization. Given your deep partnership with health systems and providers, what is the early feedback on this development? Are providers making any changes in the workflow in response? Is it too early to say and related to that, we have heard about that a concern among providers that this might drive more denials post patient interaction, which could be actually good for your platform, denial management. But just curious, like any feedback from providers on that?

Yes. Thank you, Jailendra. I don't know that necessarily there's -- we see that there's more than 2 billion prior authorizations that occur today. As you know, -- the authorization process can be very necessary and important at times. It's a way for payers to kind of play a stage gate on what care gets delivered for complex medical procedures or encounters. And I think what the prior authorization pledge highlighted from our perspective is that, that can increasingly be -- they can increasingly deploy modern technical protocols to drive those interactions.

We think that's a very good thing. modern APIs that are secure that allow for providers to rapidly get authorization from payers. And I'll tell you right now, the early feedback is providers and patients suffer from authorizations that are manual that take, in some cases, days where care is delayed, a patient comes to the office, hoping to get a procedure or something done or advancing their health care and they can't -- they're pause, they have to end up leaving and coming back at another time.

We -- our prior authorization solutions automate, as we highlighted, 90% of those authorizations. And we think we're just getting started, and we can have a voice and be a market leader here to represent providers and patients and to help streamline and bring more benefit. I don't know that it will be reducing the need for prior authorizations to your earlier question, as much as it will be streamlining the need and creating more real-time opportunities. And Waystar is in a position to help and continue its market leadership in this area.

Our next question comes from Charles Rhyee with TD Cowen.

This is Lucas on for Charles. Congrats on the quarter. Recently, we've heard that the competitor impacted by the cyber attack has recently been reaching out to customers that have left as a result of the outage, pushing hard for them to return now that their systems are back online, possibly using contractual obligations to do so. I guess, one, are you experiencing this? And then two, you noted earlier, seeing excellent retention amongst these customers from that competitor. But curious if it's possible that you see this as a risk going forward.

We have not noticed that. Again, we've seen excellent retention amongst the cohort that joined us. And I won't make a lot of additional comments on kind of what they might be doing in the market. But we believe that as we move further and further away from the actual cyber attack and outage itself, this will be an opportunity for Waystar to help this next kind of cohort of clients that are potentially in a state of unrest find a great home at Waystar. So I think that's all I'll comment further given what I've already said, but we would note that there was a survey that suggested that there's more than 36% of the survey respondents that are looking or likely to switch vendors. And that 1/3 of those respondents are coming from the incumbent competitor that you highlighted. So I'll just leave it at that if that's okay.

Our next question comes from Daniel Grosslight with Citi.

I'd like to go back to the 3 large client wins that helped boost volume revenue this quarter. Were those wins contemplated in guidance last quarter and so the upside is really coming from onboarding them faster than anticipated. And then I'm curious if you can provide a bit more detail on those clients, namely are these competitive takeaways? Are they health system or ambulatory clients? And is there opportunity for further cross-sells this year?

Yes. Thanks, Daniel. This is Steve. I'll hit the first question regarding the contemplation and with respect to guidance. We -- for our larger clients, we typically -- and we've talked about this in the past, we typically expect the time to revenue associated with implementation from those larger clients to occur over several months, generally between 6 to 12 months and maybe sometimes even longer depending upon how they're rolling out amongst their various facilities. In this case, the 3 noted wanted to move rapidly and the solutions that they had contracted for allowed us to roll those out across their entire footprint very rapidly. So they did lead to upside versus our expectations as it pertains to the second quarter of 2025. We've considered that now in the rest of the full year guide, and it's part of the reason while beating revenue by $15 million from our expectation in the second quarter, for the full year, we increased revenue guidance by $22 million. So that's part of the -- contextually our thought process on the raise substantially above our second quarter beat. Sorry, one other part to your question as far as the mix, it wasn't all health system or large ambulatory clients, rather a mix of both.

Yes. SP1 And are these competitive takeaways?

Yes, yes. They were. In all 3 cases.

Our next question comes from Steven Valiquette with Mizuho Securities.

It's Steven Valiquette from Mizuho So obviously, at this point, a lot of key topics have already been talked about. But one thing I was kind of curious about, really in the clearinghouse solutions market and really most of the back end of revenue cycle continuum. Some of your biggest competitors are obviously still owned by managed care payers. One has been talked about a lot on this call, but there's other ones, too.

So I guess, really with the results you're seeing in some of the wins you've had. Curious if you're getting more feedback that in this environment, the Waystar independence is really resonating just as strong, if not even stronger in 2025 versus 2024. I know it's hard to quantify something like that, but any qualitative color. Somebody mentioned that competitor talked about kind of falling behind from a technology innovation standpoint, but really just on the independence part in particular, just curious to hear more about that and whether that's resonating really against a lot of your other competitors that are owned by payers.

Thanks, Steven. We do hear that feedback from time to time. I think what providers are wanting and looking for is a sense of fairness and the concern that the claims management system or the clearinghouse might be owned by a potential payer may create a concern of conflict. We do hear that. Providers need -- and patients need a referee. They need a sense of fairness. And Waystar brings that through transparency and accuracy and efficiency, that's what we're advocating for. And we have great technology that deploys AI to help bring fairness and a referee to this process. And I do see that message resonating even stronger in 2025.

And I think part of -- again, going back to Waystar as a public company, it's been really important for us to be able to share this fairness message in the market and to build our awareness that Waystar is here to help, and we can help providers and thereby also help patients. And so yes, to answer your question succinctly, Steven, we do see that. And the good news is we're delivering technology all the time, as you know, we're delivering hundreds and hundreds of feature improvements and new capabilities in any quarter. And so providers are looking to us to help future-proof the way they get paid to do it very efficiently and with a sense of fairness. And that message is resonating.

And I'm not showing any further questions at this time. I'd like to turn the call back over to Matt Hawkins, CEO for any closing remarks.

Okay. Great. Thank you so much for joining today, everybody. We definitely appreciate the thoughtful questions and the engagement. Waystar enters the second half of 2025 with a sense of momentum and a sharp focus on execution, and we've updated our 2025 full year guidance kind of as a signal of that. We continue to deliver durable growth, impactful innovations and meaningful ROI that drives tangible value. And with an AI-powered software platform accelerating automation and a growing base of engaged clients, we believe we're well positioned to shape the future of health care payments and to define what's possible, which as you've heard me say, the creation and delivery of the perfect undeniable claim. Our vision reflects our commitment to eliminating friction, maximizing reimbursement and delivering compounding long-term growth and innovation that leads to value. I'd like to especially thank our heroic clients, our amazing team members and our shareholders for your continued trust and partnership. Thank you.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.

Good day, and thank you for standing by. Welcome to the Waystar Investor update and conference call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, [ Greg McDowell ], Investor Relations. Please go ahead.

Thank you, John, and good afternoon, everyone. It is my pleasure to welcome you to Waystar's Investor Conference Call. Matt Hawkins, Waystar's Chief Executive Officer; and Steve Oreskovich, Waystar's Chief Financial Officer, are joining me today.

After their remarks, we'll open the call to your questions. This afternoon, we issued a press release announcing a definitive agreement to acquire 100% of Iodine Software and a presentation slide deck to accompany our prepared remarks. The materials are available on the Investor Relations section of our website at investors.waystar.com.

Before we get started, I will remind you that this call contains forward-looking statements, which are predictions about future events. Examples of these statements include the expectations of future financial results, growth and margins. These statements involve a number of risks and uncertainties that may cause actual results to differ materially from those expressed in these statements.

For a full discussion of the risks and other factors that may impact these forward-looking statements, please refer to this afternoon's press release and the reports we file with the SEC, all of which are available on the Investor Relations page of our website.

Any forward-looking statements provided during this call are made only as of the date of this call. During today's call, we will also discuss certain non-GAAP financial measures. With that, I'll turn it over to Matt.

Thank you, Greg, and good afternoon to everyone, and thank you for joining us on short notice this afternoon. Today marks an important milestone in Waystar's journey.

Earlier, we announced a definitive agreement to acquire Iodine Software, a proven leader in AI-powered clinical intelligence software. This transaction is a strong strategic fit and a major step forward in our mission to simplify health care payments through modern AI-powered software.

The addition of Iodine to Waystar strengthens our platform, expands our reach, enhances the meaningful outcomes we deliver to clients and drives financial benefits. Throughout our time together today, I will reference the presentation available on Waystar's Investor Relations website.

As shown on Slide 3, Waystar's strategic rationale for acquiring Iodine is straightforward and compelling. The acquisition of Iodine accelerates Waystar's AI-powered transformation by expanding the impact of Waystar AltitudeAI, with new capabilities that target long-standing friction points in the revenue cycle.

The acquisition helps eradicate unnecessary denied claims at the source by integrating clinical intelligence into the Waystar platform so providers can avoid lost revenue and secure optimal reimbursement before claims are submitted. The acquisition of Iodine increases our total addressable market by more than 15% and strengthens Waystar's position with over 1,000 hospitals and health systems served by Iodine today.

It deepens shared relationships and unlock new bidirectional cross-sell opportunities across the combined client base. The acquisition also enhances revenue growth and profitability by strengthening our high-margin subscription-based model and reinforcing our long-term growth profile. We're confident the Iodine acquisition will advance Waystar's market leadership, accelerate innovation and deliver durable value to clients and shareholders.

On Slide 4, I'd like to highlight or share several notable aspects of the transaction. Waystar's acquisition of Iodine is expected to be immediately accretive to gross margin and adjusted EBITDA following closing and accretive to revenue growth and non-GAAP net income per diluted share by 2027.

The purchase price of $1.25 billion which represents a high-teens enterprise value to adjusted EBITDA multiple on a pro forma synergy-adjusted basis will be funded through approximately 50% in cash and 50% in Waystar common stock. Following the transaction, we expect Iodine shareholders will own approximately 8% of Waystar stock.

Importantly, and as a clear vote of confidence in Waystar, Advent, Iodine's largest shareholder is expected to receive 100% of its transaction consideration in the form of Waystar common stock, and we look forward to adding one new director that Advent will nominate to the Waystar Board.

We expect the transaction to close by year-end 2025. Until this transaction closes, we will continue to report Waystar's financial results and provide guidance on a stand-alone basis, excluding Iodine. We look forward to updating investors on Waystar's Q2 performance as well as our outlook for full year 2025 during our regularly scheduled earnings call on Wednesday, July 30.

Now on Slide 5, we illustrate how the addition of Iodine strengthens our ability to deliver ROI to our clients. The acquisition of Iodine will rapidly accelerate Waystar's impact by expanding the intelligence and reach of our AI-powered platform to deliver even greater ROI for our clients. Iodine brings an award-winning, industry-leading AI platform recognized similarly to Waystar for its deep expertise, expansive capabilities and proven results in transforming health care.

Iodine's proprietary clinical AI engine continuously trains on millions of patient encounters and billions of clinical data points. Iodine's software is powered by one of the most comprehensive data sets in the industry, including data from approximately 1/3 of the hospital stays each year in the United States.

These powerful capabilities enable providers to improve clinical documentation, increase coding accuracy and accelerate reimbursement. By integrating Iodine's clinical intelligence with Waystar's enterprise-scale software platform trusted by more than 1 million providers across every setting of care Waystar will accelerate its product road map by nearly two years and unlock new levels of automation, accuracy and performance for providers. Waystar will eradicate unnecessary denials, ensure full, timely and efficient payments and deliver meaningful ROI.

Slide 6 highlights the differentiated value Iodine brings to Waystar through its AI-powered clinical intelligence platform. These solutions help systems capture more revenue, reduce administrative burden and improve both clinical and financial outcomes. Iodine has three software solutions that are all powered by AI.

First, medical necessity. This verifies that care is delivered properly -- excuse me, this verifies that care is properly documented and justified, leading to fewer delays, fewer denials and faster reimbursement. Second, documentation accuracy. This guides clinicians in capturing complete and accurate documentation in real time, ensuring providers are paid appropriately for the care they deliver to patients.

And third, post-discharge revenue protection. After a patient is discharged from a hospital, this solution identifies billing risks and revenue leakage helping hospitals recover dollars that would otherwise be lost. Iodine enables hospitals to get paid faster and more accurately while reducing the manual work required. That's why many of the nation's leading health systems rely on Iodine and why it's such a strong strategic fit for Waystar.

As shown on Slide 7, the acquisition of Iodine is a force multiplier, amplifying Waystar's strategic advantages and accelerating Waystar's innovation engine. Waystar will unlock faster go-to-market execution, a larger addressable market and deeper value across all provider segments in care settings with the acquisition of Iodine. Both organizations bring a shared reputation for client success, a deep market presence and award-winning software, positioning us to lead with an even greater impact. This alignment and strategy and culture strengthens Waystar's competitive edge and advances our mission to simplify health care payments.

On Slide 8, I'd like to emphasize Waystar's proven track record of successful integration and synergy realization. As we've shared publicly, M&A is one of Waystar's five strategic growth pillars, and Waystar has a strong record -- track record of execution. Waystar has successfully completed and integrated nine acquisitions and we have exceeded more than 100% of our identified synergies as we have successfully united these acquisitions to Waystar.

This repeatable intentional approach gives Waystar high conviction in the ability to unite Iodine with precision and speed while creating long-term value for clients, team members and shareholders. Our proven playbook prioritizes key team member engagement, client continuity and delight, platform unification and ambitious product innovation. And we approach all of this while working to reduce risk and maximize impact. We are confident this integration will deliver exceptional outcomes.

Now on to Slide 9. Waystar expects meaningful benefits to our financial profile from the acquisition of Iodine. As you know, Waystar has built a durable and predictable growth model anchored by strong recurring revenue with double-digit revenue growth every quarter since going public. We've also delivered strong adjusted EBITDA margin performance while consistently delevering our balance sheet.

Iodine brings a similarly strong financial profile. With all revenue from a subscription-based model, high gross margins and similar adjusted EBITDA margins as Waystar's. Iodine also adds a highly respected client base, including many of the nation's leading hospitals and health systems. Our combined go-to-market team is well positioned to capitalize on bidirectional cross-sell opportunities expanding Waystar's reach into Iodine's client base, introducing Iodine's platform to Waystar's clients and unlocking greater value where we already intersect.

In addition to these top line growth opportunities, we expect cost synergies of more than $15 million over the first 18 to 24 months following transactions flows. We will update you on our progress toward integration and synergy attainment on future earnings calls post transaction close. Please note that Waystar expects the acquisition of Iodine to be immediately accretive to gross margin and adjusted EBITDA margin and accretive to revenue growth and non-GAAP net income per diluted share in 2027.

Waystar will continue to prioritize maintaining a strong balance sheet. We project our adjusted net leverage ratio to be approximately 3.5x following the transaction. And as you know, Waystar has demonstrated our ability to delever quickly through strong free cash flow and adjusted EBITDA growth, and we expect to do so post close.

On Slide 10, I'm pleased to preannounce Waystar's Q2 revenue to highlight our continued progress and momentum and to be clear, this is on a stand-alone basis. Waystar's Q2 revenue is approximately $271 million in the quarter, representing a 15% year-over-year increase. We look forward to sharing full Q2 results and commentary as well as our outlook on full year 2025 during our Q2 earnings call on Wednesday, July 30.

In closing, Waystar is thrilled to welcome Iodine. This acquisition strengthens Waystar's position as an AI-powered healthcare software platform, driven by growth, innovation and meaningful impact. What excites us most is how this acquisition will help us accelerate our ability to achieve our mission to simplify healthcare payments by eradicating denied claims automating manual work and increasing transparency for providers and patients. This is a powerful step forward in advancing even better outcomes for our provider clients, patients and shareholders. And now operator, with that, we would be pleased to open the line for questions.

Thank you. Ladies and gentleman we will now begin the question and answer session [Operator Instructions]. Your first question comes from the line of Adam Hotchkiss with Goldman Sachs.

I'll keep it to one. Just would love any color on the overlap between the Iodine customer base and the Waystar customer base and how much of a consideration analysis of Iodine's customer base was when making the acquisition?

Thank you for the question about overlapping client bases. We're very impressed with the Iodine business. We've known the business and the leadership team for many years and have admiration for their impressive client list. We won't comment too specifically prior to closing. But what we will say is, as we highlighted on the call, we believe that there is strong cross-sell opportunities for -- in the scenario where -- it's a Waystar client. We have the chance to introduce Iodine's compelling software to that client.

We know that the mid part of the revenue cycle, so to speak, that area between the patient encounter and ultimately, on the other side where a claim gets formed and submitted is appealing to many of the Waystar clients. So we know there's cross-sell opportunities there.

We know on the other side, a fair amount that we'll talk about more after we close that there will be opportunities for us where Waystar is historically strong on the front -- the front end of the revenue cycle and on the back end of the revenue cycle, for us to be able to take and cross-sell those solutions to Iodine's impressive clients.

And then we also recognize that there is a meaningful overlap in that Venn diagram where we're just going to have the chance to dialogue and further strengthen our penetration, so to speak, in the instances where clients are using both. But we do see that as being meaningful and look forward to talking more about that in the future.

Your next question comes from the line of Allen Lutz with Bank of America.

Matt, how much is AI driving buying decisions for hospitals today when they're selecting a prospective vendor? And then what would you say the biggest area of differentiation is for Iodine?

We did a study a few months back with HFMA where in that study. We know that there's eagerness to adopt AI as we talked about on previous earnings calls. I think it's something like 90% of clients want to use AI. We also know that in their survey, it's clear that they want to work with a trusted partner they worry about how do they deploy AI in a case where it might be one small narrow solution, how does it connect everything else going on in their IT environment, so to speak.

And so we think that as far as what we're working on here is Waystar is a trusted partner to clients that we serve. They trust our approach to cybersecurity. They trust our ability to deliver technology rapidly and seamlessly without disrupting their working environments or their cash flow and we know that Iodine is positioned much the same way. And so we work to be very thoughtful.

Again, we've known this business, admired it for many years. And -- we like the fact that Iodine, like Waystar has had a decade-long history of leveraging advanced AI capabilities. And we believe that we're meeting the moment. We know there's providers, decision-makers that are thinking about this they would like to deploy it with the caveat that they work with a trusted partner that it's cybersecure, that it can integrate successfully. And Waystar and Iodine have both been doing that independently. Now on a combined basis, we'll do it even more effectively.

Your next question comes from the line of Richard Close with Canaccord Genuity.

Congratulations, Matt, on the transaction. I just want to dive a little bit deeper into -- I guess, something you said in response to the first question on customer overlap. With respect to the product overlap, you mentioned there is some between Waystar and Iodine. Can you go into a little bit more detail in terms of where you might have overlap and maybe like the holes that Waystar had that Iodine is filling specifically?

Sure. Yes. And I'd like to clarify that to make sure that we're crystal clear on the fact that we don't view there being much of any overlap today. The analogy that I give is kind of when you're sitting around the holiday table, working on 1,000-piece puzzle, and you can't find that one piece and then all of a sudden, you find it and everybody around the table goes, yes, this is a perfect fit.

We kind of feel that way about this. And we think Iodine has market leading solutions in areas such as clinical documentation improvement, utilization management and post-discharge revenue capture. Those are all new spaces and new opportunities for Waystar and very complementary that fit nicely into our platform, so to speak.

Waystar, where we are in the mid-revenue cycle, that place where Iodine competes so well, we have revenue capture, our Charge Integrity solution, for example, leverages machine learning algorithms and predictive analytics to, I guess, really automatically identify incorrect or undercoated claims as well as identify missing potential charges.

So we're not in an area where Iodine is today and said differently, Iodine is not delivering great software with AI in areas where Waystar is today. So we view this as that perfect puzzle piece and a really good strategic set.

Your next question comes from the line of George Hill with Deutsche Bank.

Just one of the things I wanted to ask about was we talked a little bit about customer overlap. And I'd be interested more about like how do you think about the cross-sell of Waystar's products into the Iodine footprint. I think of Iodine is having a bit more of an inpatient footprint versus Waystar is more outpatient footprint. We just kind of interested to hear you talk about, but like do you see the greater opportunity to add the Iodine functionality to the Waystar base or to bring the Waystar products to the Iodine base?

Yes. Thank you, George. It's a really thoughtful point. What I'd say is Iodine's business is exclusively hospitals and health systems. They serve over 1,000 hospitals and health systems and they are very impressive group of providers and clients. As you know, part of Waystar's business is ambulatory or nonhospital. And yes, part of it is also hospital-focused. And it's about 30% of Waystar's revenue today, as we've highlighted in previous calls.

Today, as you know, Waystar serves 16 of the top 20 hospitals and health systems in the United States. So that's a very important part of our business and a growing part of our business. So as we think about cross-sell opportunities, again, there's things we won't speak about until we close, but we do look forward to highlighting them further when we can.

But what we know now is that in the hospital segment that both Iodine and Waystar served, there's meaningful and substantial opportunity. As you'll recall, this is a large addressable market for Waystar. We serve about 4% to 5% of this large addressable markets. We've got a long room to run right in front of us and Iodine solutions there's a large addressable market there.

So I think -- we think about Iodine's clients, again, being able to utilize Waystar software, plenty of cross-sell opportunities there. On the inverse of that, Waystar clients today, us being able to introduce Iodine solutions to them, meaningful opportunity. And we'll talk at some future point about how would we potentially take some of Iodine's compelling solutions to the broader ambulatory market as well.

It's clear that they're solving real pain and struggle for providers as they work to accurately document a clinical encounter and convert that into a successful claim. And so there's opportunity for us to unite now and drive cross-sell but do it through product integration that just makes sense for the hospital and health system market and perhaps longer term to the nonhospital and health system market.

Your next question comes from the line of Elizabeth Anderson with Evercore ISI.

I have two questions. One, could you talk a little bit about -- more about the Iodine revenue model? Is it subscription based? Is it claims based? Is there a combination based? That would be helpful. And two, can you talk about any interaction with your current like Altitude offerings? And if we should think about any product overlap there? And then also, how do we sort of think about the integration and the time line from a tech perspective? Sorry, that was actually three question.

I'm going to ask Steve to speak to the revenue-related question, and we appreciate your question there. We'll speak to both. Steve?

So Elizabeth, if you think about the revenue composition for Iodine, it is almost 100% subscription-based. We like that because it makes it extremely sticky. And then as you think of that in comparison to Waystar our revenue composition has historically been about 50% subscription and 50% volume base.

So we believe the acquisition and post acquisition allows us to shift now our composition to becoming a majority of it from subscription based, which should add to the forward visibility that we have at any point in time and period.

And then to the second question, thank you, Steve, for clarifying that. To the second part of your question, Elizabeth. As we think about Waystar's AltitudeAI and the progress that we're seeing there. We won't speak to that on this call. We'll highlight some thoughts next week. What I'd say is focusing mostly our commentary on Iodine's impressive AI. What we -- and then your second part of that was what's the time line for integrating and uniting these capabilities.

First, we do see Iodine software harnessing the power of AI. They're really applying the right AI at the right moment and use case. And everything from -- similar to what Waystar is doing and now kind of focusing on with AltitudeAI. We're deploying everything as is Iodine, from machine learning, data science, leveraging their impressive clinical data set. It's a fact that these large language models really benefit from large data sets.

So as we contemplate what Iodine is doing with its impressive data set what we could possibly do together as we combine or unite the clinical data and information with Waystar's financial and administrative data set information, there's some wonderful things that we are contemplating around. Harnessing the power of large language models and doing some things with autonomous work with generative AI and also Agentic AI.

Those are the things that Iodine is doing today. We view them as complementary to what Waystar will do. And is doing and not a lot of overlap at all, more complementary as we bring these companies together. So we'll talk more about that in our future.

What I would say is from a technical integration perspective. As you know, we take the high road, and we're going to work to integrate and unite the technology so that we create a very consistent user experience for our clients. We kind of take the data assembly and management and duration of that data seriously. And that takes real work.

So typically, for us, when we've done acquisitions where we're really working to unite the technology that's typically an 18-month exercise for us. And the work that we've done to get familiar with this, we're pleased with it. We have a sense of confidence in our ability to integrate the companies technically culturally and process-wise in a way that will be minimally disruptive to clients but really maximize the longer-term opportunity here to create a special company.

Your next question comes from the line of Brian Peterson with Raymond James.

Congrats on the deal. Is there anything that you can share on the growth trajectory of the business, even if it's kind of a rough sense. And I'd also love to understand what their go-to-market looks like primarily direct or if there's any incremental partnership opportunities for you guys, either from a technology perspective or a consulting perspective.

Yes, certainly, Brian. This is Steve. So as Matt had mentioned, Iodine's financial profile is pretty similar to Waystar's, right? I mean we just covered off that the revenue is almost entirely subscription-based and probably is a helpful data point that you can probably back into it from the information that's provided. But just to give a little bit more helpful data point. We probably expect Iodine's revenue for 2025 to be approximately $120 million to $125 million.

So if you think about it going forward and why we talk about the expansion of the growth rate in 2027. It comes back to what we talked about earlier about the client base is primarily consists of health systems and hospitals. So they have similar sales cycles and lead times as Waystar does when it comes to not only the sales cycle, but then the time to revenue.

So we believe the cross-sell efforts that we spent a lot of time talking about earlier here on the call into the respective client bases allow for expansion of our long-term low double-digit revenue growth target starting in 2027. And why we [ peg ] that period of time is really based upon the sales cycle of those cross-sell opportunities and then the associated time to revenue on that. So hopefully, that gives you a little bit of context what you're looking for there, Brian.

And Brian, let me take the second part of that question about go-to-market and our thoughts there. What -- you'll recall that Waystar has a go-to-market kind of engine that's very focused on each provider segment that we serve, from ambulatory and nonacute to the hospitals and health systems. And we think one of the compelling things about this acquisition is the ability to give more solutions to our go-to-market engine on the hospital and health system front in the near term.

And then longer term, potentially the ambulatory front, as I've highlighted, and it's kind of like making sure that we're able to deliver more and more to this group and supplement that with solutions that we already offer and have to offer as we address this tremendous market opportunity. What we'd also say our work is direct in the hospital and health system front.

To your question, is it direct or indirect or through partners. What we've learned in getting to know Iodine and admiring their work is that they have an impressive go-to-market engine as well. That's direct in nature. And they have great connectivity to all the large EHRs that serve the hospital market as just Waystar. So we think there's complementary strength there and scale that we can bring to these EHRs as good partners. I think that will be very important here.

And the other thing I'd highlight, and it has became perhaps more future out-year facing, is Waystar serves over 200 active channel partners across all the different care settings and we have integration to over 500 different EHR and administrative systems in healthcare. So we have a number of channel partner relationships and work to sustain those.

And we think for us to meet the broader market opportunity, we want to be connected to as many EHRs and partners as we can to ensure that our solutions are used in the most successful ways. And so I think that there's opportunity to now, as we unite Iodine with Waystar to leverage the partner approach as well as to harness the power that these direct go-to-market teams are already showcasing.

Your next question comes from the line of Ryan Daniels with William Blair.

Congrats to both the teams on completing the RCM Christmas puzzle here. I guess one area I want to dive into a little bit deeper, and you hit on this already, but I think this is an important data point. There's so much data on your platform and how you're acquiring an asset that does more than 1 in 3 inpatient discharges.

So I'm curious, as you think about the product road map post deal over the next 2, 3 years. How much opportunity do you see to kind of shift your internal R&D budget towards AI? And how much of the Iodine platform and learnings and large language models can be moved over to Waystar and vice versa. So just trying to get a feel for how transformative this really could be longer term to kind of amplify as you said, the broader product portfolio.

Thanks, Ryan, and thank you for recognizing how joyful it is to find that puzzle piece. It's special. And we feel that way about this. What I'd say is we won't cover off in detail on aspects of how we're viewing this opportunity from a product vision perspective beyond what we've said in our prepared comments. But I would say, again, that you're thinking about it the right way, harnessing the power of the AI capabilities that Iodine has today, given their impressive data set and then combining that with Waystar's impressive data set.

We believe that there is unlocked opportunity and impact ahead of us here. And that was one of the big drivers in us kind of thinking about the special puzzle piece and thinking about it on a combined basis. And so we look forward to sharing more with you when we can when the transaction closes. And -- but it's something that we're excited about, and I appreciate you highlighting it.

[Operator Instructions] Your next question comes from the line of Jailendra Singh with Truist Securities.

This is Jailendra Singh from Truist Securities. Congratulations on the deal. I want to dive deeper into the thought process of buy versus build on this projection, clearly, some of the capabilities you guys talked about for Iodine around denials management, revenue capture, maximizing revenue reimbursement.

I mean you talked about similar stuff as well, you might not have exact project on those [ slides ]. Just how did you go about decide thing between going deeper into back-end solutions versus M&A versus expanding into new areas such as front-end patient-facing solutions where Waystar doesn't have any presence. Just give us thought process on buy versus build and front end versus back end.

Sure. Thank you. So I'd say just at a kind of basic understanding level, we have a team of product managers that own various software products that exist on the Waystar software platform. And they are responsible for identifying the entirety of all the things that could be developed on this software platform and then putting it all together. Without going into a lot of detail, you could appreciate the fact that we meet regularly to talk about areas of innovation and investment and opportunity, supplementing that organic product management, product development road map work.

We also have a dedicated corporate development team that takes a very disciplined approach. So looking at areas within the product road map, they're staying in the room with us, and they're talking about our platform, and they're looking at areas with us of potential future build or potential future acquisition opportunity. And so I won't share all of our secret sauce with you, so to speak.

But we do look at what is compelling, what's going to make the biggest impact for clients for the providers that we serve. And we've been talking about the middle part of the revenue cycle, that area from where the patient sees the doctor in a clinical counter incurs to the successful submission of a claim that can get adjudicated and rapidly reimbursed. We're doing that.

You'll recall in the back end, we're submitting claims with the first pass claim acceptance rate that's approximately 99% across the 1 million providers that we serve and the 6 billion insurance transactions that we're processing. And on the front end, we do an exceptional job at identifying the patient, clearing that patient financially, helping ensure that the patient has insurance eligibility, often detecting coverage when you don't even know if they have access to it or not. That helps the provider a lot.

So we've got really good software on the front and the back and what we've seen in our discussion with our advisory Board members, as we -- as our product managers go to work and market and meet with clients and prospects, this middle part of the revenue cycle, so to speak, there's opportunity there.

And again, we've engaged with Iodine over several years. We've been admirers of this business. And we're in the build versus buy of things. Their technology is advanced their clinical data set, the connectivity they've developed to many hospitals as we've highlighted. It's just -- there wasn't a chance for us in the near term to build that ourselves and to deliver the impact that we expect in the time period that we expect. So we said, let's go to work and let's acquire and we're just thrilled to be in this situation.

The other thing that I'd highlight, and it really carries over from the question before, and that is as we were looking at build versus buy versus acquire, one of the things we also observed was that this clinical data that Iodine has today.

We'll refine and strengthen the AltitudeAI platform to drive even greater end-to-end efficiencies across the revenue cycle and will further strengthen Waystar's current products. And we think about the front-end patient access, such as prior authorizations that has a clinical element to it that will be strengthened by Iodine. We could not have built that ourselves in the near term and got the same type of impact that we believe we'll get successfully in this acquisition.

And I'd also highlight the denial and appeal management suite. Sometimes there's clinical information that is used in the appeal process. This accelerates our effort to bolster that product even further and to strengthen the results for the provider clients that we serve and the patients that they meet with. So we're pleased with this opportunity and thrilled about the acquisition and the announcement today.

Your next question comes from the line of Charles Rhyee, with TD Cowen.

Yes. If I heard correctly earlier, I think you guys mentioned that with the acquisition and the cross-selling opportunity, we could see sort of an acceleration of revenue growth in '27 in particular. Does this -- does Iodine fundamentally change then the growth algorithm, if we think about how you've kind of talked about in the past of -- from sort of net retention plus cross-sell, plus new logos, et cetera. Does that cross-sell piece of the algorithm -- is that now sort of primarily increased? And is there something that you haven't talked about perhaps is what percent of the Iodine customer base are perhaps clearinghouse customers of Waystar? And is that also an opportunity?

Yes. Thanks, Charles. Again, what I'd say is there's more work for us to do before we provide any thoughts on any future period. It's probably prudent for us to wait until we get this transaction closed before we start to highlight what we believe is opportunity in '26 and '27.

Beyond what we've commented, we do believe this will be accretive to revenue in '27, but we'll work to further clarify that and to talk about the metrics that we would expect to contribute to that once we close this transaction. And again, to your second question about are there Iodine clients who are Waystar clients, for example, in the clearinghouse area? The answer is yes. we are not disclosing how much at this point. And if you let us kind of continue to do our work between now announcement and close, we'll work to be thoughtful in how we describe the cross-sell benefit and the opportunities we see in front of us at some future point.

Your next question comes from the line of Daniel Grosslight of Citi.

Congrats on the acquisition. I was wondering if you could provide a bit more detail on where the $15 million of cost synergies will come from and what the cadence could potentially look like over the next couple of years? And secondly, Iodine's CEO is going to be a significant shareholder here. I'm curious if he's also going to assume an operational role at the company.

Thank you. We appreciate the curiosity on the synergy number, the $15 million synergy number and the time horizon and over what period we expect to realize that. And then the second question about the Iodine CEO. I'll reserve any comments on hand. We're sure impressed with them in the business that he has built and team, but you can appreciate we're talking about different things. And we'll hold any commentary on that for now.

What I'd say is, in addressing the $15 million of synergy opportunity. I think the most helpful thing we can reinforce is that over -- as we have purpose-built Waystar into a market-leading healthcare software business, over nine acquisitions. So each one of those has had a synergy target.

We are more than 100% on an attainment basis in [indiscernible] synergies -- synergies realized. And so it's certainly embedded into our playbook, as I highlighted on the prepared remarks portion of things. This is something that we have dedicated team members at Waystar are focused on, and they have a lot of experience and we look forward to kind of updating our progress as we go forward. You can anticipate that on future earnings calls once this closes, that we'll talk about synergy attainment and progress on the integration and unification of these Iodine to Waystar but we'll reserve any further comment on that right now, but I appreciate the curiosity.

Your next question comes from the line of Steven Valiquette with Mizuho Securities.

Let me offer my congrats on the transaction as well. I guess my question is really just understanding that the class rankings are really not the be all and all within healthcare IT. Iodine has consistently ranked pretty high on the class rankings for CDI. They used to be #1 a few years ago, but now -- but they don't seem to show up in any other categories outside of CDI at least for mass.

I guess can you just confirm whether in that CDI is really the core offering within Iodine. And then you sort of touched on this, but as far as for Waystar trying to round out your RCM platform approach, how critical is CDI within some of the places where you're trying to build out that platform versus other areas that you still may be looking to fill out as well.

Yes. Thanks, Steven. We try to measure client satisfaction and delight in a number of areas. I know Iodine does the same, that we both use Net Promoter Scores and there's all sorts of impressive metrics within Iodine that at some future point, once closed, we may choose to highlight.

On the Waystar side, Net Promoter Scores, successful on-time, on-budget implementations, for example, the ways that we delight our clients being a great place to work for our team members, the most trusted company type score that we were just so thrilled to earn those honors. Iodine is earning similar honors. And it's certainly well ranked in class and have been best-in-class and we're grateful for that.

They culturally, you can tell in meeting with this team, they care a lot about working to delight their clients and delivering modern software that harnesses the power of AI to deliver real impact. And we feel that in our dialogue and in this process of getting to know them and reaching this point. So I'd say on the first point of things, we feel really good about the alignment there and the conviction that we have, but we can continue to delight clients and serve them effectively.

When you look at their solutions, I'll reserve a lot of commentary around clinical documentation improvement. We know that's a very important part of the middle part of the revenue cycle, and we admire Iodine's position there. And we believe that there will be some things for us to work on together that will strengthen ability to get to an accurate code set that will inform a plan strengthen the ability to leverage as we highlighted in our prepared remarks, utilization management capabilities.

And then I also highlighted one other area that I think is a newer capability for Iodine. So we talked about medical necessity that really speaks to care being properly documented and justified that leads to fewer delays, fewer denials and faster reimbursement. And then we talked -- I highlighted a newer capability around post-discharge revenue protection.

After a patient is discharged from a hospital, Iodine is introducing a new solution that identifies billing risk and revenue leakage. We think there's a lot of opportunity there to help hospitals recover dollars that would have otherwise been lost. And so all in, we're excited about the capability set the way that Iodine is thinking about their product road map and how nicely it complements what we're doing at Waystar and the opportunity to unite them together.

As there are no further questions at this time, that concludes the question-and-answer session. I would like to turn the call back over to Mr. Matthew Hawkins for closing remarks.

Well, thank you so much for joining on short notice, everybody. As you can sense, we're thrilled about this opportunity, and we're confident in what lies ahead. We've taken a very disciplined approach here to get to know this business and this area within the revenue cycle for a long time and the acquisition of Iodine marks a significant step forward for Waystar.

It's our first public company, acquisition as a public company, and we believe it will strengthen our ability to deliver exceptional results. We are focused, as you can tell, on driving meaningful impact for clients creating new opportunities for team members across Waystar and Iodine and ultimately generating long-term value for our shareholders.

So thank you for being with us today. We look forward to our earnings call on July 30. We're grateful to preannounce revenue today, and you can sense the momentum that we're building in the business. We look forward to giving you an update on -- a more fulsome update on Q2 as we normally do. And also to provide our thoughts on outlook for full year 2025 next week. So thanks so much. Hope you guys all have a great night.

Ladies and gentlemen, this concludes today's conference call. We thank you for your participation. You may now disconnect. Have a pleasant day, everyone.