Waystar Holding Corp.

Good day and thank you for standing by. Welcome to the Waystar Third Quarter 2024 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during a session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would like to hand the conference over to your first speaker today, Sandy Draper, Head of Investor Relations. Please go ahead.

Thank you, Operator, and good afternoon, everyone. It is my pleasure to welcome you to Waystar Holding Corporation's third quarter 2024 earnings call. Today's call is being webcast and a replay, along with the transcript, will be available on our website, along with other related materials following the conclusion of this call. Matt Hawkins, Waystar's Chief Executive Officer, and Steve Oreskevich, Waystar's Chief Financial Officer are joining me today. After their remarks, we will open the call to your questions. Earlier today, we issued a press release announcing our financial results 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 include all statements that are not historical facts. Examples of these statements include expectations of future financial results, growth, and margins. These statements do not guarantee future performance and involve a number of risks and uncertainties, and undue reliance should not be placed on these forward-looking statements. Actual results may 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 and our business generally, please refer to this evening's press release and our prospectus filed with the SEC on June 7, 2024, and in other reports we filed with the SEC, all of which are available on the investor relations website page of our website. Any forward-looking statements provided during this call are made only as of the date of this call, and we undertake no obligation to update or revise such statements except as required by law. During today's call, we will also discuss certain non-GAAP financial measures, which we believe may be useful in evaluating our financial performance. We have provided reconciliations of adjusted EBITDA and non-GAAP net income and earnings per share and certain other non-GAAP financial measures included in our remarks to the most directly comparable GAAP measures, together with the explanations of these measures in the appendix of the presentation slide deck and our earnings release. These non-GAAP measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. Lastly, we are pleased to note our participation in the Evercore ISI HealthConnects Conference in Miami and the Barclays Technology Conference in San Francisco, both in December, where we look forward to engaging with many of you. With that, I'll turn it over to Matt.

Thank you, Sandy, and good afternoon, everyone. Thank you for joining our Q3 2024 earnings call. Today, I'll cover four key topics that highlight our progress and future direction. First, we'll discuss Waystar's compounding and sustainable revenue growth. Second, I'll share our improvements driving operational profitability and efficiency across the business. Third, I'll highlight the latest innovations in our software platform that deliver value to our clients. And fourth, We'll review recent successes in our client and team member experiences. Then I'll turn the call over to our CFO, Steve, who will provide a detailed view of our financial materials and annual guidance for 2024. First, sustainable revenue growth. In Q3, Waystar delivered another quarter of strong top line growth. Our revenue reached $240 million, representing a 22% year-over-year increase and an acceleration from the 20% growth in Q2 24. We drove this growth through solid client retention, effective cross-selling, new client acquisitions, and modest price increases that demonstrate our software's value. Our sustainable growth strategy prioritizes building enduring client relationships. By delivering a tangible return on investment and lowering the total cost of ownership, we drive client retention and ongoing product expansion. This approach is a fundamental part of our proven strategy as evidenced by two key metrics that track our performance and reinforce our durable growth model. First, net revenue retention came in at 109% in Q3. This result is consistent with our historical range of 108 to 110% over the last 13 quarters. Second, the number of clients generating more than 100,000 in trailing 12-month revenue grew to 1,173, an increase of 14% year over year. Our Q3 growth reflects our success in attracting clients seeking a reliable clearinghouse after the February cyber event that impacted a competitor. As we shared in our previous earnings call, we welcomed more than 30,000 new providers to Waystar, rapidly implementing them to ensure they quickly resumed cash flow. Many of these providers have signed standard Waystar business agreements with two- to three-year terms and are already expanding their use of the Waystar platform beyond Clearinghouse capabilities. Our sustainable growth strategy prioritizes cybersecurity. Waystar demonstrates its commitment to system resiliency by investing in advanced cybersecurity measures that protect our clients' information through proactive monitoring and rapid restoration, ensuring operational continuity. Waystar software is essential to providers' business operations and cash flow generation. Waystar advocates for system resiliency through non-exclusive connections that deploy modern technical protocols to enable providers to exchange information securely and efficiently with payers. We believe that exclusive relationships between some payers and clearinghouses may contribute to a lack of system resiliency. So far in 2024, Waystar has established dozens of new direct connections to payers, enhancing our extensive network of payer connections. Many of these were previously exclusive with a competitor's clearinghouse. These direct connections are non-exclusive and increase the speed of payment and improve network resiliency. Our focus is to create an efficient exchange of information, allowing providers to prioritize patient care. Moving to profitability and efficiency. This quarter continues the trend of strong EBITDA performance. Adjusted EBITDA reached $97 million, reflecting a 19% year-over-year increase and a 40% adjusted EBITDA margin, including a full quarter of public company expenses. This performance highlights the value of our software platform and our commitment to vigilant cost management while we continue to make strategic long-term investments that position Waystar for future growth. Our Q3 performance also highlights our business model's strong cash flow conversion. We experienced a step up year over year and quarter over quarter in unlevered free cash flow, which increased to $89 million in Q3. The improvement underscores our operational efficiency and focus on cash collections. Due to the growth in EBITDA and additional debt pay down, We successfully lowered our net leverage ratio to three times compared to the 3.7 times at the end of Q2 2024. Waystar's cash flow profile continues to provide us the flexibility to evaluate internal investments, explore M&A opportunities, and reduce debt. We remain committed to leveraging our strong position to drive sustainable growth and maximize value for our investors. Next, I'll speak to platform innovation. The inefficiencies in healthcare are unsustainable. 63% of revenue cycle leaders indicate that their teams are understaffed, highlighting a pressing need for mission-critical solutions that promote automation and the reduction of manual work. Recent market research conducted by Modern Healthcare in collaboration with Waystar underscores the industry's strong appetite for artificial intelligence, revealing substantial returns on investments for early adopters and forecasting a significant surge in generative AI solutions over the next 12 to 18 months. Waystar holds a leading position in this transformative landscape with our purpose-built software adeptly addressing complex industry challenges through intelligent automation and delivering demonstrable ROI. We are uniquely positioned to leverage the power of generative AI through our expansive data network, which facilitates over 5 billion transactions, spanning approximately 50% of patients in the United States. With nearly a decade of successful AI deployment and ongoing investments in innovation, We are actively working on more than a dozen generative AI use cases in Waystar's innovation lab. At our client conference in September, we demonstrated generative AI software applications in authorization automation, denial prevention, and appeal management, which are highly anticipated advancements that we expect to begin launching in 2025. Each use case is thematically designed to help providers achieve additional operational efficiencies, promote more intelligent and accurate interactions with payers and patients, and achieve faster time to payment. Our commitment to innovation is not just a promise, but a reality. We launch hundreds of new features and enhancements each quarter throughout our cloud-based software platform. In Q3, we introduced automated workflows to identify missing insurance coverage across the patient financial journey, launched self-service tools that enable providers to manage claims and expedite payer payments, and expanded patient payment options, including the use of Apple Pay. These innovations empower providers to receive payments faster, more accurately, and more efficiently than ever. positively impacting their operations. Our number one ranking in client satisfaction across all care settings is a testament to our commitment to innovative excellence and positions us as a trusted partner for providers. Lastly, I will speak to client and team successes. At Waystar, we prioritize delighting our clients in fostering enduring relationships built on trust, A recent survey revealed that 97% of all respondents believe that Waystar's best days lie ahead, reflecting their confidence in our software, innovations like generative AI, and our commitment to a secure, modern platform. In September, we hosted our annual client conference, Waystar True North, which attracted a 50% increase in attendance compared to the previous year. This event provided an invaluable opportunity for our client community to connect with industry leaders and peers, exchange best practices, and deepen their understanding of our software platform. At the conference, our WayStart Innovation Lab displayed our latest AI and generative AI capabilities alongside advancements in cybersecurity. Clients experienced hands-on demonstrations of our software, further highlighting our dedication to innovation and client engagement. We also convened our Waystar Advisory Board, uniting a nationwide network of healthcare executives from leading healthcare organizations renowned for their achievements and expertise. These members shared valuable insights on market challenges and provided guidance on Waystar's initiatives and generative AI product innovations that advance our mission of simplifying healthcare payments. This quarter, Waystar continued to earn recognition as a leader in innovation and a top workplace. We received several Stevie Awards at the 2024 International Business Awards, achieving honors in four categories within the software and healthcare sectors, including the Gold Stevie Award for Company of the Year in Healthcare and the Gold Stevie Award for best payments solution. Additionally, we celebrated our reputation as an employer of choice, receiving best place to work awards from the Atlanta Business Chronicle and Louisville Business First. For the second consecutive year, Fortune certified Waystar as a great place to work. And this fall, we proudly earned a spot on Fortune's 2024 list of best workplaces in healthcare. Together, these accomplishments reinforce our commitment to delivering exceptional value and position us for continued growth in the future. In conclusion, we are pleased to report our achievements in Q3 and maintain a positive outlook for the future. As we strategically target a substantial addressable market, we recognize the immense opportunities that lie ahead. Our cloud-based software platform which features advanced technology like generative AI combined with our unwavering commitment to exceptional client service uniquely positions us to achieve sustained, durable growth that outpaces the market both now and in the coming years. These advancements not only increase our competitive distinction, but also reinforce our capacity to meet the evolving needs of our clients. Our results affirm our expectation of normalized low double-digit growth as we continue to cultivate a stable, enduring growth compounder. With that, Steve will now provide a detailed overview of our financial performance.