Waystar Holding Corp. (WAY) Earnings Call Transcript & Summary

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.