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01/11 11:26
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Waystar's earnings call highlights strong financial metrics, including raised revenue and EBITDA guidance, a successful acquisition of Iodine, and positive client feedback. The Q&A session reveals excitement about strategic fits and cross-selling opportunities. While there are some seasonal revenue declines, the overall outlook remains optimistic with robust AI and innovation strategies. The absence of negative management responses further supports a positive sentiment. However, some sequential declines and market uncertainties temper the outlook, resulting in a 'Positive' rating rather than 'Strong positive.'
Revenue Revenue grew to $269 million, representing 12% year-over-year growth. This growth was driven by healthy client retention and expansion, highlighting a durable and predictable model of low double-digit revenue growth annually.
Adjusted EBITDA Adjusted EBITDA of $113 million for the third quarter increased 17% year-over-year. The adjusted EBITDA margin was 42%, above the long-term target of approximately 40%. This outperformance was driven by a revenue shift to higher-margin solutions and ongoing operational cost initiatives.
Subscription Revenue Subscription revenue of $134 million increased 14% year-over-year and 3% sequentially. This growth is expected to be further enriched by the Iodine acquisition.
Volume-based Revenue Volume-based revenue of $132 million increased 10% year-over-year but decreased 4% sequentially, in line with seasonality expectations associated with revenue from patient payment solutions.
Net Revenue Retention Rate (NRR) NRR was 113% for the last 12 months, compared to 15% year-over-year revenue growth over the same period. This was influenced by 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.
Unlevered Free Cash Flow 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 quarter and 86% year-to-date. This is well ahead of the 70% long-term target.
Client Base The 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.
AI-powered platform innovations: Waystar introduced new AI-powered capabilities addressing denial prevention, denial recovery, and patient financial engagement. These innovations aim to reduce administrative burdens, improve reimbursement speed, and enhance financial outcomes for providers.
Iodine Software integration: The acquisition of Iodine Software expands Waystar's total addressable market by over 15%, accelerates innovation, and strengthens the company's ability to drive profitable growth. Iodine's AI-powered mid-cycle capabilities are now integrated into Waystar's platform.
Market expansion through acquisition: Waystar completed the acquisition of Iodine Software, adding nearly 150 health systems and over 1,000 hospitals to its client base. This expands the company's reach and market presence.
Client base growth: The number of clients generating over $100,000 in trailing 12-month revenue grew to 1,306, an 11% year-over-year increase.
Revenue growth: Waystar achieved 12% year-over-year revenue growth in Q3 2025, reaching $269 million, with an adjusted EBITDA margin of 42%.
Cost synergies from acquisition: 70% of the $15 million expected cost synergies from the Iodine acquisition have been acted upon, with full realization expected within 18-24 months.
Focus on AI and innovation: Waystar is advancing its mission to simplify healthcare payments by leveraging AI-powered workflows and automation. The company envisions a future of autonomous AI in healthcare revenue management.
Client engagement and trust: Waystar hosted its annual client conference, True North, to strengthen client relationships and gather insights for innovation. The company reported a 93% confidence level among attendees in Waystar as a trusted partner.
Rising Utilization and Accelerating Denial Rates: Providers are facing increased utilization and denial rates, which continue to pressure margins. This could impact the financial performance of healthcare providers and, by extension, Waystar's revenue.
Ongoing Workforce Shortages: Workforce shortages in the healthcare sector are creating operational challenges for providers, potentially affecting their ability to adopt and fully utilize Waystar's solutions.
Data Fragmentation: Healthcare data is often siloed or locked in unstructured formats, limiting the effectiveness of AI and creating inefficiencies in the system. This poses a challenge to Waystar's AI-powered solutions.
Integration Challenges: Providers require technology that operates seamlessly within their existing systems. Lack of interoperability could hinder the adoption and effectiveness of Waystar's platform.
Cybersecurity Risks: As AI becomes more embedded in clinical and financial processes, secure and compliant data management is critical. Any breach or failure in cybersecurity could damage trust and operational integrity.
Economic Uncertainty: Economic factors, such as patient utilization reverting to historical growth rates, could impact revenue growth, particularly in volume-based revenue streams.
Acquisition Integration Risks: The integration of Iodine Software poses risks, including achieving the expected cost synergies and aligning organizational and product strategies within the planned timeline.
Revenue Guidance for 2025: Waystar is raising revenue guidance for 2025 to a range of $1.085 billion to $1.093 billion, with the midpoint of $1.089 billion, representing a 15% year-over-year growth rate. This includes approximately $30 million of revenue from Iodine in the fourth quarter.
Adjusted EBITDA Guidance for 2025: Adjusted EBITDA guidance is raised 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. The adjusted EBITDA margin is expected to be approximately 42% for 2025.
Iodine Software Contribution: Iodine is expected to contribute approximately $120 million in revenue for the full year 2025, including $30 million in the fourth quarter. Its adjusted EBITDA margin is approximately 40%.
Cost Synergies from Iodine Acquisition: Waystar expects to achieve $15 million in cost synergies from the Iodine acquisition within 18 to 24 months post-close. Approximately 70% of these synergies have already been acted upon.
Leverage Ratio: Waystar aims to reduce its leverage ratio by approximately 1 turn annually. The leverage ratio post-Iodine acquisition is 3.4x, with confidence in deleveraging to 1 turn annually.
Future AI Capabilities: Waystar envisions a future where AI continuously scans data, identifying anomalies, automating tasks, validating documentation accuracy, and predicting financial outcomes, advancing towards autonomous AI in healthcare revenue management.
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Waystar's earnings call highlights strong financial metrics, including raised revenue and EBITDA guidance, a successful acquisition of Iodine, and positive client feedback. The Q&A session reveals excitement about strategic fits and cross-selling opportunities. While there are some seasonal revenue declines, the overall outlook remains optimistic with robust AI and innovation strategies. The absence of negative management responses further supports a positive sentiment. However, some sequential declines and market uncertainties temper the outlook, resulting in a 'Positive' rating rather than 'Strong positive.'
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