Monday, Nov.
2, 2026 CALL PARTICIPANTS Head of Investor Relations - Edward ParkerChief Executive Officer - Matthew HawkinsChief Financial Officer - Alpana Wegner Revenue -- $325.6 million, representing 21% growth due to strong subscription performance and the contribution of acquired businesses.Organic Revenue Growth -- 10%, reflecting approximately 1 percentage point of pressure from large client implementations that occurred in the prior year.Adjusted EBITDA -- $139.3 million, increasing 24% driven by operating leverage and disciplined expense management.Adjusted EBITDA Margin -- 42.8%, compared to 42.0% last year, as a result of gross margin expansion and favorable revenue mix.Subscription Revenue -- $180.7 million, up 34% year over year because of continued strength in the core platform and new client additions.Large Client Count -- 1,488 clients generating over $100,000 in trailing 12-month revenue, a 14% increase following successful market expansion efforts.Unlevered Free Cash Flow -- $114.8 million, reflecting high-quality cash generation and disciplined capital allocation.FY 2026 Revenue Guidance -- $1.277 billion to $1.287 billion, updated to reflect longer implementation cycles for large clients and a shift in patient payment delivery.FY 2026 Adjusted EBITDA Guidance -- $543 million to $549 million, representing an increase in expectations due to strong operational execution.FY 2026 Capital Expenditures -- $55 million to $60 million, primarily focused on ongoing investments in platform infrastructure and AI capabilities.Year-to-Date Bookings -- 25% growth, driven by healthy demand and solid execution across the business.Implementation Backlog -- 50% increase for large opportunities, providing visibility into commercial activity that will contribute to future revenue.Net Revenue Retention Rate -- 108%, consistent with historical ranges and supported by a 97% gross retention rate.AltitudeAI Bookings -- 43% of total third quarter bookings, demonstrating rapid adoption of new AI-powered capabilities.Iodine Bookings -- $30 million year to date, exceeding management's plan by 74% as clinical documentation and anomaly detection solutions gain traction.Patient Revenue -- $82.2 million, an increase of 5% year over year despite pressure from the transition from printed to digital statements.Provider Revenue -- $243.4 million, representing 28% growth due to increased platform adoption and a 30% increase in large opportunity bookings.Net Leverage Ratio -- 2.2x, a reduction of more than one full turn over the past 12 months following debt reduction efforts.Share Repurchases -- $21 million during the third quarter, part of a $200 million authorization to return capital to shareholders.Transaction Volume -- 8.5 billion annually, representing more than $3 trillion in gross claims processed through the network.Digital Integration -- 100 new direct connections to health plans in 2026, supporting nearly 50 million transactions annually.
Need a quote from a Motley Fool analyst? Email [email protected] Hawkins stated, "As we sign more of these larger deals, we are seeing implementation and revenue ramp periods that are longer than we originally anticipated," leading to slower revenue recognition despite strong bookings.Wegner stated, "The impact of the transition from printed patient statements to digital delivery within our patient payment business has increased from our expectations earlier in the year," creating near-term revenue pressure in that segment.Wegner warned that management is seeing lower levels of revenue from Iodine than previously anticipated in full year 2026, due to a shift toward performance-based revenue models.
Waystar Holding Corp.
(WAY +0.50%) reported financial results for the third quarter of 2026, highlighted by a 21% increase in revenue and 24% growth in adjusted EBITDA.
Management noted that commercial momentum remains steady, with year-to-date bookings increasing 25% and implementation backlog for large clients rising 50%.
The company updated its full-year guidance to reflect shifting dynamics in patient payment delivery and longer implementation timelines for large-scale contracts.
Strategic focus continues on advancing artificial intelligence capabilities, including the launch of autonomous claim resubmission and expanding mid-cycle offerings through the Iodine integration.
Hawkins stated, "AltitudeAI-powered offerings represented approximately 43% of third quarter bookings."Management estimated that its new autonomous claim resubmission feature could autonomously resubmit up to $5 billion in previously rejected claims annually.Wegner noted that the shift from printed patient statements to digital delivery is expected to be margin accretive over the long term despite near-term revenue pressure.The company secured its largest win to date, a major East Coast health system representing $7 billion in annual net patient revenue.Iodine's cross-sell momentum included existing Waystar clients contributing $9 million in bookings during the third quarter, representing a 50% sequential increase.The company expanded its distribution in the ambulatory market through a partnership expansion reaching nearly 4,000 providers across more than 2,500 sites.
INDUSTRY GLOSSARY NRR (Net Revenue Retention Rate): A metric comparing the total amount invoiced to a cohort of clients over a 12-month period against the amount invoiced to that same cohort in the subsequent 12 months.LTM (Last Twelve Months): A financial period representing the 12 months immediately preceding the report date.CDI (Clinical Documentation Integrity): The process of improving healthcare records to ensure accurate clinical representation and reimbursement.AltitudeAI: Waystar's proprietary suite of artificial intelligence solutions designed to automate healthcare revenue cycle tasks.Agentic AI: Artificial intelligence systems capable of executing complex tasks and workflows autonomously on behalf of users.Mid-cycle: The phase of the healthcare revenue cycle between patient encounter and claim submission, typically including coding and clinical documentation.Prebill Anomaly Detection: A solution that identifies discrepancies or errors in healthcare claims before they are submitted to payers for reimbursement.
Full Conference Call Transcript Operator: Good day, and thank you for standing by.
Welcome to the Waystar Third Quarter 2026 Earnings Conference Call.
[Operator Instructions] Please be advised that today's conference is being recorded.
I'd now like to hand the conference over to Edward Parker, Head of Investor Relations.
Please go ahead.
Edward Parker: Thank you, operator.
Good afternoon, everyone, and thank you for joining Waystar's Third Quarter 2026 Earnings Call.
Joining me today are Matt Hawkins, Waystar's Chief Executive Officer; and Alpana Wegner, 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 file 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 and 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'd like to turn the call over to Matt.
Matthew Hawkins: Thanks, Edward, and good afternoon, everyone.
Thank you for joining our third quarter earnings call.
Waystar delivered another strong quarter.
Revenue grew 21% year-over-year and 10% organically.
Adjusted EBITDA grew 24% with an adjusted EBITDA margin of 43%, and we generated $115 million in unlevered free cash flow.
We ended the quarter with 1,488 clients generating more than $100,000 of trailing 12-month revenue, up 14% year-over-year.
Commercial activity reflected healthy demand and robust bookings across the business.
We are establishing larger, broader client relationships as large health care organizations increasingly look to Waystar to support more of the revenue cycle through a single connected platform.
We made meaningful progress across our product road map, including new AI-powered and Agentic capabilities that advance our vision of creating the industry's first autonomous revenue cycle.
This quarter reflects strong progress against our 3 execution priorities: driving broader adoption of the Waystar platform, extending our reach through partners and integrations and advancing AI and innovation.
First, driving broader adoption of the Waystar platform.
We're expanding our relationships with existing clients and moving further upmarket with new clients.
Our connected end-to-end platform gives us the opportunity to support the entire revenue cycle.
Within our large client cohort, which we define as clients generating more than $100,000 in LTM revenue, the average client now uses approximately 5 Waystar product modules.
With more than 30 modules across 6 product families, we see significant opportunity to continue driving broader platform adoption within these relationships.
Second, extending our reach.
We're expanding our distribution through strategic partners and deeper integrations that bring Waystar into more provider workflows.
Across our ecosystem of more than 200 channel partners, we have added more than 20 new integrations this year that expand our reach and create new opportunities for growth.
Third, advancing AI and innovation.
We're advancing our product road map across the Waystar platform, including expanding our position in the mid-cycle and bringing new AltitudeAI-powered and Agentic innovations to market.
Our near-term road map includes more than 20 planned AI capabilities, accelerating the autonomous revenue cycle vision to reduce manual work, automate increasingly complex tasks and improve financial and operational outcomes for our clients.
We delivered another quarter of strong commercial momentum.
Year-to-date bookings grew 25% year-over-year, demonstrating continued demand and solid execution across the business.
Let me bring that momentum to life with a few examples of what we're seeing in the market.
This quarter, we secured the largest new client win in Waystar's history.
In a competitive process, a major East Coast health system representing approximately $7 billion in annual net patient revenue selected Waystar's full platform across patient access, mid-cycle and back-end revenue cycle operations.
The organization plans to replace more than 20 separate vendors with Waystar as it simplifies its technology infrastructure and streamlines operations.
We're also seeing strong momentum within our existing client base, which accounted for approximately 60% of our year-to-date bookings.
One example is a large Texas-based health system that selected our Prebill Anomaly Detection solution, expanding its relationship with Waystar and displacing 2 incumbent vendors.
This organization already uses Waystar across claims management, patient access and clinical documentation integrity, demonstrating our ability to broaden strategic relationships across the revenue cycle.
This is also a great example of the opportunity we saw in bringing Waystar and Iodine together.
By combining Waystar's financial data, workflows and connectivity with Iodine's clinical intelligence, we're creating differentiated capabilities that allow us to solve more complex problems for our clients and expand our relationships over time.
We're seeing that strategy translate into strong commercial results.
Iodine bookings exceeded our year-to-date plan by 74%.
A key driver has been our go-to-market strategy of bringing together clinical documentation integrity known as CDI and Prebill Anomaly Detection to address a broader set of mid-cycle needs.
Across these 2 solutions, we generated nearly $30 million of year-to-date bookings, including approximately $15 million in the third quarter alone with a combined pipeline of more than $100 million.
We're also seeing encouraging cross-sell momentum.
Existing Waystar clients adopting Iodine capabilities contributed approximately $9 million of bookings in Q3, up 50% sequentially.
Taken together, these results demonstrate the opportunity we have to bring more of Waystar's capabilities to our installed base, expand our strategic client relationships and drive durable growth across the platform.
We're also extending our reach through strategic channel relationships, particularly across the ambulatory market.
During the quarter, we expanded our partnership with a leading physical therapy practice management system, giving Waystar distribution into an additional segment of its client base.
This expansion displaces 3 incumbent revenue cycle vendors and extends Waystar's reach to nearly 4,000 providers across more than 2,500 sites, representing approximately 17 million claims annually.
Decisions like these reflect the trust we've built with channel partners, the breadth of our platform and our ability to deliver real ROI.
These wins demonstrate how our platform strategy is translating into competitive success.
We are winning large new clients, replacing fragmented incumbent solutions and expanding relationships with clients and channel partners select Waystar to tackle more of their revenue cycle challenges.
Our trusted, connected and independent platform is built on 4 structural foundations we've discussed before: Mission-critical infrastructure, proprietary data, an extensively deployed network, and deep domain expertise.
Together, these strengths enable us to connect providers, payers and patients across the revenue cycle.
Our network continues to grow in both scale and depth.
Waystar now processes more than 8.5 billion transactions annually, representing more than $3 trillion in gross claims.
We connect approximately 1.5 million providers, and our clinical intelligence spans approximately 1/3 of U.S.
hospital discharges.
We continue to deepen our payer connectivity.
In 2026, we've added more than 100 direct connections to health plans, supporting nearly 50 million transactions annually.
These deeper integrations increase the value of our network for clients and further strengthen Waystar's role as the connected financial operating layer for health care.
And we believe these advantages become even more valuable as AI accelerates across health care.
We're moving beyond AI that identifies opportunities and recommends actions toward AI agents that can execute increasingly complex work on behalf of our clients.
We continue to make meaningful progress advancing AI and innovation across the Waystar platform.
As AI accelerates across health care, we believe the value of a trusted, connected and independent platform becomes even greater.
The revenue cycle doesn't operate within a single application.
It spans providers, payers, patients and thousands of financial workflows.
Waystar is the system of action that sits at the intersection of those workflows.
One example is the industry's first autonomous claim resubmission capability, which we launched this quarter and is now in production as part of our premium claims management offering.
Powered by AltitudeAI, the capability interprets payer responses, applies payer-specific intelligence to determine the next action and autonomously resubmits eligible rejected claims with minimal human intervention.
Based on early adopter results and the initial claim types supported, we estimate this capability could autonomously resubmit up to $5 billion in previously rejected claims annually with the potential to eliminate more than 400,000 hours of manual work each year.
For clients, that means lower administrative costs, faster reimbursement and improved financial performance.
For Waystar, we believe it creates opportunities to expand adoption of our premium offerings and drive additional transaction volume across the platform.
We're putting AI to work in new ways across the Waystar platform.
More than 100 clients are participating in early access for conversational AI within our premium analytics offering.
Clients can quickly analyze complex revenue cycle data by simply asking questions in natural language.
Early adopters have reported up to a 75% reduction in time spent on data analysis.
Mid-cycle is a strategic part of how we're expanding the Waystar platform.
We're combining Waystar's financial data, payer intelligence, workflows and connectivity with Iodine's clinical intelligence to bring greater automation earlier in the revenue cycle.
As quality becomes an increasingly important component of reimbursement, we'll extend our Prebill Anomaly Detection capabilities into quality-related workflows, further connecting clinical and financial performance.
We're seeing this innovation translate into commercial momentum.
AltitudeAI-powered offerings represented approximately 43% of third quarter bookings.
More than 130 clients have joined our early adopter program, helping us test and refine new capabilities as we bring them to market.
We also saw strong client engagement at our recent Waystar True North conference, where a majority of surveyed attendees said they were more likely to expand the number of Waystar products their organizations use following the event.
Taken together, these proof points reinforce our long-term opportunity ahead as we bring AI more deeply into the revenue cycle.
To help lead this next phase, we recently welcomed Amit Khanna as our Chief Product and Technology Officer.
Amit brings more than 25 years of enterprise technology experience, most recently leading health care at Salesforce, where he helped bring Agentforce for Health to market.
His experience strengthens our ability to accelerate AI innovation and execute against our long-term vision.
We're pleased with the progress we're making across our platform, product road map and commercial execution.
A key part of our strategy is signing larger, broader platform relationships, and we're seeing strong success here.
As we sign more of these larger deals, we are seeing implementation and revenue ramp periods that are longer than we originally anticipated.
These relationships represent significant long-term revenue opportunities with revenue building as clients implement and adopt more of the Waystar platform.
Other factors are also affecting our near-term revenue outlook, which Alpana will discuss.
We are confident in the underlying business and focused on translating our commercial momentum into low double-digit revenue growth while continuing to invest in the Waystar platform, operate with discipline and deliver adjusted EBITDA margins of 40% or greater.
Alpana will walk through our updated outlook, the near-term revenue dynamics and how we're thinking about the business from here.
Alpana, over to you.
Alpana Wegner: Thank you, Matt, and good afternoon, everyone.
It's great to be here for my first earnings call as Waystar's CFO.
Since joining Waystar, I've been impressed by the depth of the team, the strength of the Waystar platform and the opportunity ahead.
I'll start with our third quarter results and then cover our updated outlook.
Revenue was $326 million, an increase of 21% year-over-year.
Organic revenue grew 10% and as anticipated, reflects the approximately 1 point of pressure from 3 large client implementations that ramped unusually quickly in the prior year period.
Subscription revenue was $181 million, an increase of 34% year-over-year.
On an organic basis, subscription revenue grew 12%, reflecting continued strength in the core Waystar business.
Volume-based revenue was $143 million, an increase of 8% year-over-year.
Volume-based revenue improved from the second quarter and was in line with our expectations.
Provider revenue was $243 million, an increase of 28% year-over-year.
On an organic basis, provider revenue grew 11%.
Patient payments revenue was $82 million, an increase of 5% year-over-year, reflecting the shift from print to digital statements we have discussed throughout the year.
Net revenue retention was 108%, consistent with our historical range, demonstrating continued expansion with our existing client base.
As we execute our strategy to drive broader Waystar platform adoption, our large client relationships are becoming an increasingly important driver of our business.
These relationships now represent approximately 75% of revenue compared with roughly 2/3 just 2 years ago.
We are seeing momentum across 3 indicators: growth in the number of clients, strong bookings and expansion in our implementation backlog.
Specifically, clients generating more than $100,000 of trailing 12-month revenue increased to 1,488 during the third quarter, up 2% sequentially and 14% year-over-year.
Year-to-date bookings from opportunities greater than $100,000 grew more than 30% year-over-year and implementation backlog associated with these larger opportunities increased more than 50% year-over-year and have grown at a mid-30% 2-year CAGR.
These trends are important because they provide visibility into the commercial activity that will contribute to future revenue growth.
Larger, broader platform implementations naturally have longer revenue conversion times, which can extend to 12 to 18 months.
As we move through our planning process, we are focused on providing investors with greater insight into how the commercial momentum translates to recognized revenue.
We expect to provide additional context with our formal outlook next quarter.
Adjusted EBITDA was $139 million, an increase of 24% year-over-year and adjusted EBITDA margin was 43%.
Adjusted EBITDA performance reflects continued operating leverage in our business, disciplined expense management and gross margin expansion from efficiencies across the Waystar platform and favorable revenue mix, inclusive of the shift away from lower-margin revenue.
GAAP net income was $31 million or $0.16 per diluted share.
Non-GAAP net income was $87.1 million and diluted non-GAAP net income per share was $0.44.
Turning to the cash flow statement and balance sheet.
Our business continues to generate strong, high-quality cash flow.
Cash flow from operations was $104 million and unlevered free cash flow was $115 million.
Capital expenditures, including capitalized internally developed software, were $10 million in the quarter.
We continue to invest meaningfully in our platform, AI and automation capabilities as we advance our vision for the autonomous revenue cycle while maintaining strong profitability and disciplined investment across the business.
For modeling purposes, we currently expect capital expenditures for fiscal year 2026 to be $55 million to $60 million.
As a reminder, we can have variability in capital expenditures from one quarter to the next, primarily due to timing of investments in our platform infrastructure.
We ended the quarter with approximately $277 million of cash and short-term investments.
Our net leverage ratio was 2.2x at quarter end, representing more than 1 full turn of leverage reduction over the past 12 months and ahead of the commitment we made.
Our capital allocation priorities remain unchanged.
During the quarter, we repurchased approximately $21 million of Waystar stock, bringing aggregate repurchases under our $200 million authorization to approximately $33 million through September 30.
We continue to be focused on investing organically in the business, complemented by selective M&A, maintaining a disciplined balance sheet through debt reduction and returning capital to shareholders through our share repurchase program.
Turning to our outlook.
We now expect full year revenue of $1.277 billion to $1.287 billion, with a midpoint of $1.282 billion.
This implies fourth quarter revenue of approximately $323 million and revenue growth of approximately 6%.
I want to walk you through the 3 dynamics that are informing and shaping our expectations for Q4.
First, the impact of the transition from printed patient statements to digital delivery within our patient payment business has increased from our expectations earlier in the year.
We continue to view the shift towards digital as the right long-term direction for providers, patients and Waystar.
Digital delivery offers a better patient experience and more attractive unit economics.
Second, the mix of commercial activity for Iodine has shifted towards Prebill Anomaly Detection, where implementation and the performance-based revenue model create a longer period between booking and recognized revenue.
As a result, we are seeing lower levels of revenue from Iodine than previously anticipated in full year 2026.
Importantly, our view of the strategic opportunity and our expectations for the accretion in fiscal year 2027 are unchanged, given the strong commercial momentum we're seeing in Iodine bookings and increasing demand for Prebill Anomaly Detection.
Third, our fourth quarter growth comparison reflects 3 large client implementations that ramped unusually quickly in the prior year period.
Taken together, these 3 factors will impact our expected revenue growth rate for the fourth quarter by approximately 4 points.
Without these 3 factors, our normalized fourth quarter growth rate would be approximately 10%.
On a full year basis, our guidance at the midpoint implies normalized organic revenue growth of approximately 11%, consistent with our low double-digit long-term growth target.
Importantly, many of the comparison dynamics we've discussed throughout 2026 will roll off as we exit the year, providing a cleaner underlying comparison going forward.
As a reminder, consistent with prior years, we typically see seasonally lower patient payment volumes in the fourth quarter compared with the third quarter as patients meet their high deductible health plans.
Turning to profitability.
We are raising our full year adjusted EBITDA outlook to $543 million to $549 million, with a midpoint of $546 million, an increase of $6 million from our prior midpoint.
This implies fourth quarter adjusted EBITDA of approximately $135 million, representing a margin of approximately 42% and full year EBITDA margin of approximately 42.5% at the midpoint.
Our margin reflects the scalable nature of our platform and disciplined cost management balanced against planned ongoing investments in advancing AI and innovation.
In closing, we delivered strong third quarter results and executed across our strategic priorities.
The commercial traction we're seeing reinforces the strength of our competitive position, our underlying business and the opportunity ahead.
The revenue dynamics we discussed are largely driven by timing and year-over-year comparisons rather than changes in underlying demand.
We believe this distinction is important in understanding our near-term performance.
Looking ahead, our focus remains on converting strong bookings and expanding backlog into durable revenue growth while maintaining our financial discipline and profitability.
We are confident in our long-term opportunity and strength of our financial model.
With that, operator, we're ready to take your questions.
Operator: [Operator Instructions] Our first question comes from Brian Peterson with Raymond James.
Brian Peterson: So I maybe just wanted to start on some of these really strong bookings numbers that you gave.
Matt, those are well above your normalized growth rates that you called out that are in the low double digits.
Like can you kind of just walk us through the disconnect between the bookings and the revenue growth? I know there's going to be some variability on implementations, but bookings is the best leading indicator.
So just kind of want to understand how that's going to translate into the revenue growth going forward.
Matthew Hawkins: You bet.
Thanks, Brian.
We're really pleased with the year-to-date bookings growth.
As we highlighted in the prepared remarks, 25% year-over-year growth, including the largest new client win in our company history.
We're seeing really nice installed base growth.
So we're growing with existing clients.
We're pleased with that.
And that....
