Waystar Holding Corp.

Good day and thank you for standing by. Welcome to the WayStar First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the 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 now like to hand the conference over to your speaker today, Sandy Draper, Vice President of Investor Relations. Please go ahead.

Thank you, operator, and good afternoon, everyone. It is my pleasure to welcome you to WayStar's First Quarter 2025 Earnings Call. Matt Hawkins, WayStar's Chief Executive Officer, and Steve Ruskovitz, WayStar's Chief Financial Officer, are joining me today. After their remarks, we will open the call to answer your questions. This afternoon, we issued a press release announcing our financial results in a presentation slide deck to accompany our prepared remarks. The materials are available on the Investor Relations section of our website at .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 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, including our remarks to the most directly comparable GAAP measures, together with the explanation of these measures in the appendix of the presentation slide deck and our earnings release. Lastly, we are pleased to note our participation in the Bank of America Health Care Conference in Las Vegas on May 13 and the William Blair Growth Stock Conference in Chicago on June 3. We look forward to seeing many of you there. With that, I'll turn it over to Matt. Thank

you, Sandy, and good afternoon, everyone. Thank you for joining our first quarter 2025 earnings call. Wavestar delivered a strong start to the year with Q1 revenue growth of 14% and adjusted EBITDA increase of 16% year over year. This momentum positions us to raise our full year guidance, which Steve will discuss in more detail shortly. I want to begin by emphasizing why Wavestar is uniquely equipped to create long-term shareholder value independent of broader market conditions, given the increasing macro volatility since our last conversation. While no business or sector is entirely insulated from economic cycles, we believe Wavestar's broad presence and business model are recession resistant. We are confident in our ability to deliver strong performance. Our software has enabled providers to succeed despite the challenges of an unpredictable environment. We serve over a million US-based providers who practice across every care setting, from large established integrated delivery networks to small independent physician practices. Wavestar's software platform is embedded in our clients' workflow and plays a mission critical role in helping providers get paid faster and more accurately while reducing administrative costs. In times of volatility and market stress, Wavestar's software can be deployed rapidly and efficiently to help providers optimize cash flow, which is essential in challenging economic conditions. While the new administration is discussing several potential policies that could impact the US healthcare industry, we do not anticipate any major impact in 2025. In fact, if new policy proposals confront healthcare providers, their reliance on software platforms such as Wavestar's will likely strengthen to maximize revenue capture and streamline operational efficiency. Our agility in delivering hundreds of new software capabilities through our cloud platform each quarter gives us confidence that we can help clients address changes as they arise. Turning to our first quarter performance, I'll cover four key areas that highlight our progress and future direction. First, I'll discuss our sustainable and compounding revenue growth. Second, I'll highlight the latest innovations creating value for our clients. Third, I'll share how we are driving operational profitability and efficiency. And fourth, I'll review recent client and team member successes. Then I'll turn the call over to our CFO, Steve, who will review our financial results for the first quarter and discuss our increased 2025 guidance. First, sustainable growth. Wavestar delivered another quarter of strong top line growth generating 256 million in revenue, a 14% year over year increase. Our ability to sustain consistent performance is anchored in our strategy of building enduring client relationships, which is reflected in our 114% net revenue retention rate. We continue to expand those client relationships over time with 1,244 clients now generating more than $100,000 in trailing 12 month revenue, a 15% increase year over year. We continue to experience strong demand fueled by our differentiated cloud-based software platform, exceptional client service, and the measurable return on investment we deliver to our clients. To validate and quantify the key drivers behind today's market demand, we recently conducted a large independent study in partnership with Qualtrics, surveying 600 revenue cycle leaders from provider organizations of all types and sizes. Providers want strong ROI, operational efficiency, and data security. When selecting an RCM technology vendor, 92% of respondents identified AI, advanced automation, and trust as top investment criteria. Wavestar's AI powered platform is purpose-built to meet those priorities, combining proven outcomes with advanced technology designed to deliver results at scale, reinforcing our growing market leadership. This brings us to another key driver of sustainable revenue growth, platform innovation. At Wavestar, our purpose is to simplify healthcare payment. We are pursuing a strategic and ambitious software product roadmap focused on scale, automation, efficiency, and substantial ROI. Last week, we held the Wavestar Innovation Showcase. At this event, we demonstrated new capabilities powered by generative AI and advanced automation to prevent and address denied claims, accelerate reimbursement, and provide an integrated, intuitive, digital-first patient payment experience. The Innovation Showcase builds on the momentum of our January 2025 launch of Altitude AI, Wavestar's comprehensive suite of AI capabilities designed to help providers streamline workflows and improve financial performance. We were pleased with the tremendous client and prospect engagement during the Wavestar Innovation Showcase, where thousands of clients and prospects joined to experience our latest innovations firsthand. We observe that budgets for gen AI-enabled solutions are increasingly being centrally pooled and funded at the largest provider organizations. These resources often sit outside traditional healthcare IT budgets. Incremental pools of capital are being allocated to fund key initiatives that deliver real ROI. Providers are looking for trusted, at-scale vendors to help them reimagine and organize traditional processes -to-end. They expect gen AI solutions to improve productivity, increase automation in high-volume, low-complexity tasks, boost accuracy, and accelerate time to payment. Wavestar software advocates for providers and patients by dramatically reducing the likelihood of claim denials and by helping clients respond rapidly and efficiently when denials do occur. We help prevent denied claims through strong patient access solutions, including eligibility and prior authorization automation and AI-powered insurance coverage detection. Securing payer prior authorization manually can take up to 24 minutes per request. With tens of millions of authorizations processed annually, the burden on providers is significant and the patient experience is often frustrating. In Q1, we enhanced Wavestar authorization manager to include our new Auth Accelerate solution and additional use cases for Auth Status. Auth Accelerate unlocks auto approvals and significantly reduces manual staff workload. Early adopter clients are already seeing measurable results, an 85% auto approval rate, and a 70% reduction in time spent on authorizations. With this launch, we are scaling our prior authorization capabilities for key payers across the ambulatory market, including radiology, cardiac imaging, and surgery centers with more specialties and payer expansions underway. Our clients use Wavestar's AI-powered software, Altitude Create, to appeal denied claims. The platform autonomously gathers claim information and generates appeal packages three times faster than traditional services. Wavestar helps providers receive rightful reimbursement as quickly as possible. In the first 90 days post-launch, clients reported a more than 40% increase in overturn rates. These results demonstrate a clear impact on both operational efficiency and reimbursement outcomes. Trust and security are fundamental to Wavestar's software platform. We continually invest in cybersecurity best practices for deterrence, detection, defense, and rapid recovery. We maintain high cybersecurity standards and regularly audit our platform against industry-leading frameworks. Next, profitability and efficiency. We sustained our trend of strong adjusted EVDA performance with Q1 adjusted EVDA of $108 million, representing a 16% -over-year increase. This result underscores the high margin nature of our software platform and our consistent ability to meet our long-range target of approximately 40% adjusted EVDA margins, while strategically investing in innovation, growth, and cybersecurity. Together, our profitability and cashflow profile provide ample flexibility to invest in the business, reduce debt, and thoughtfully pursue M&A. We are focused on deploying this capital in ways that drive durable growth and maximize value for our investors. We are pleased to report that our net leverage ratio at the end of Q1 is 2.5 times. At the same time, we are continuously identifying ways to further improve profitability by operating even more efficiently. That includes scaling automation and agentic AI within our market-leading approach to client experience, all designed to continue leadership and client satisfaction. Today, 100% of clients receive US-based support and over 40% of revenue is tied to clients supported by a dedicated client success manager. Our team resolves 70% of service requests on the same day and answers 90% of inbound calls within 30 seconds, an industry-leading performance that reflects our commitment to responsive, high-impact client experience at scale. Finally, client and team successes. Our unique approach to focusing on our clients continues to garner recognition in the industry. We've achieved multiple number one rankings in the latest best in class report, we're named by Blackbook as the industry's leading AI platform and maintained a net promoter score that consistently exceeds industry benchmarks. Together, these accolades highlight the strength of our client experience and our ability to deliver innovation, speed, and scale that builds long-term trust and measurable results. As part of our market research, we captured strategic insight into Waystar's brand perception and performance. The results highlighted several key takeaways. Waystar earned the top position in both unaided and aided brand awareness, making us the most recognized brand name in healthcare payments. The market also ranked Waystar number one in both brand trust and best days ahead, a reflection of the confidence they have in our vision, pace of innovation, and long-term leadership. Additionally, we were recognized as the top choice for future RCM software investment, underscoring market confidence in our continued momentum and industry role. To ensure we gather and incorporate provider insights, we recently expanded the Waystar Advisory Board by more than 30%. This larger group includes distinguished leaders from top health systems, ambulatory providers, and strategic partners. Our ongoing strategic engagements with this group, including at our most recent meeting in March, are instrumental in raising timely insights that help shape our vision and accelerate our software roadmap. In conclusion, Waystar started 2025 with momentum, purpose, and a clear vision for the future, and our key one results reinforced that trajectory. We are building on our proven strategy to deliver stable, enduring, and compounding growth. With another quarter of strong performance, we are confident in our ability to drive innovation, deliver ROI, and help providers navigate a rapidly changing landscape. As industry dynamics evolve, Waystar is working thoughtfully to help guide the future of the industry with agility, focus, and trust. With that, I'll turn it over to Steve to walk through the financial details.

Thanks, Matt. Revenue increased 14% year over year in the first quarter to $256 million. The basis of Q1 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 1,244 at quarter end, an increase of 41 clients in the quarter, and an increase of 15% year over year. It also includes a high net revenue retention rate, which was 114% for the last 12 months. Given the significant number of new clients that went live during February through May of last year, Q1 2025 NRR is above the typical range of 108% to 110% we've experienced over the past three years. As the 114% net revenue retention rate is a 12-month view, the most applicable comparison is to the 18% total revenue growth over the same 12 months. We continue to recognize revenue faster than normal in the first quarter from the clients we've rapidly implemented in early 2024, who were impacted by the competitor Clearinghouse Cyber Attack, generating $10 million more from the faster time to revenue this quarter versus the first quarter of 2024. Please note that Q1 2025 represents the last quarter with a notable impact to the year over year comparison. Subscription revenue increased 18% year over year and 3% sequentially. While this growth rate is generally consistent with the prior four quarters, it benefits from the noted rapid implementations. For the remainder of fiscal year 2025, we would expect modest sequential quarterly growth in subscription revenue. Volume-based revenue grew 11% year over year, adjusting for a previously disclosed $4 million benefit in the first quarter of 2024. From a contract termination, volume-based revenue growth was approximately 15% year over year. Accounting for the Q1 2025 benefit of faster revenue than normal from rapid implementations, offset by the Q1 2024 pull forward of revenue, produces an adjusted year over year growth rate of 12%. Adjusted EBITDA of $108 million for the first quarter increased 16% year over year. The adjusted EBITDA margin of 42% reflects continued investment in the business and timing of operating costs we had expected in the first quarter and now anticipating occurring later in 2025. The adjusted EBITDA margin continues to align with our long-term target of approximately 40%. Unlevered free cash flow was 79 million in the first quarter of 2025. With an unlevered free cash flow to adjusted EBITDA conversion ratio of 73%. The strong start puts us in a good position to achieve our 70% long-term target for the year. Additionally, we moved $24 million of cash in the quarter to slightly higher earning short-term investments. As a result, our cash balance is 224 million at March 31st. The trend of high cash flow conversion coupled with expansion of our trailing 12-month adjusted EBITDA generates a net debt to adjusted EBITDA leverage ratio of two and a half times at March 31st and a decrease of approximately a quarter a turn in the quarter. We continue to maintain flexibility with our overall capital structure and our allocation priorities remain unchanged. Invest in the business to drive top line growth, deliver the balance sheet and evaluate disciplined acquisition opportunities. As Matt indicated earlier, while our business isn't recession proof, it is recession resistant. We also recognize the current environment of economic volatility and have modeled and considered several potential outcomes to the year. Based on the first quarter performance, the modeled potential outcomes and our current visibility for the rest of the year, we are competent in raising our revenue guidance to a range of $1.6 billion to $1.22 billion, representing a $6 million increase at the midpoint of $1.14 billion. On our February earnings call, we provided a couple of data points regarding quarterly growth rate expectations throughout the year, along with how we expected those to differ in the first half versus the last half of the year. I'm pleased to state the first quarter results aligned with those expectations. Further, our increased guidance midpoint of $1.14 billion includes an expectation that the first half revenue is slightly higher than 50% of full year revenue, primarily based on shaping a volume-based revenue, including seasonality in the 30% of total revenue generated by patient payment solutions. We are also raising adjusted EBITDA guidance to a range of $406 to $414 million, with the midpoint of $410 million increasing by $7 million above prior guidance midpoint. We continue to expect an adjusted EBITDA margin of approximately 40% for 2025, which includes cost of revenue as a percentage of revenue to remain unchanged from our original guidance. Operator, please open the call for questions.

As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. In the interest of time, we ask that you please lend yourself to one question. You may rejoin the queue. Please stand by while we compile the Q&A roster. Our first question comes from Adam Hotchkiss with Goldman Sachs, your line is open.

Great, thanks so much for taking the question. I guess, just to start, I would love to get a breakdown on the outperformance in the quarter. I know historically we've talked about outperformance from change, we've talked about patient payments being elevated relative to historical norms, and I know you've guided to that normalizing this year. I'm just curious what happened in Q1 and sort of what's embedded in the guidance from a components perspective as we think about growth. Thanks so much.

Yeah, thanks for the question, Adam. Thanks to Steve, so I can answer both those. So I think the key for the first quarter and the performance versus our expectation and built into guidance is primarily driven by the continuance we saw starting in 2024 of strong patient payment utilization of the services that are provided by our clients. If you think then to how that relates to the guidance raised in the range specific to revenue for the full year, I guess a couple of things just as a reminder. The first is recall that 98% of our revenue in any given year generally comes from contracted solutions that we have in-house at the beginning of the year. And then secondly, as you think in terms of the macro environment, please recall that our clients are 100% US based. They have a big diversity in terms of size, specialty and geography within the US, which means that we are fairly isolated or insulated, sorry, from anything that may happen to a specific specialty or type of reimbursement rate. We also have very limited direct exposure to tariffs. So when we think about the guidance range and what might lead from an upside or to the top side of guidance, it would be that continuation of strong patient utilization above and beyond our expectations for the year. That being said, if we look at the lower end of guidance, a notable difference in utilization throughout the rest of the year versus our expectation in the strong start to Q1 would be the primary factor on the low end of guidance. I'd also say the other piece to that could be the impact of ability of patients to pay for the services that are provided in terms of just general economic environment. That said, we haven't seen any degradation in the patient's ability to pay in the first quarter.

Thank you. Our next question comes from Socket Kahlia with Barclays. Your line is open.

Okay, great. Hey, guys. Thanks for taking my question here and nice start to the year. Thanks, Vakka.

Thank you, Socket.

Matt, maybe for you. The number that jumped out to me the most in the press release was the net revenue retention at about 114%. Could you just maybe dig into what products are maybe driving that cross-sell success and what do you think is driving that?

Thank you, Socket. Yeah, I'd have to say we're so pleased to deliver four consecutive quarters of double-digit revenue growth and EBITDA margins above 40% as a public company. And we look at the strong retention rates of the business. You'll recall that the retention rates are a look back, so a last 12-month look back. That being said, some of the things that are influencing that net revenue retention rate of 114% include the fact that we've had robust bookings from revenue cycle solutions, think claims management, patient access solutions that are coming from, in some cases, clients that have been impacted by a cyber attack, and really just the overall fact that our solutions are driving return on investment for clients. And as we build more advocacy, as we build more case-referensibility and demonstrable return on investment, it's just the case that clients are talking to each other. And so that portion of our platform is performing nicely and we're seeing nice growth there. And that shows up in a lot of cases in the subscription portion of our revenue performance. Steve, why don't you take the second part of that?

Yeah, Socket, I'd add, if you think about our typical bridge to NRR, starting with gross revenue retention of approximately 97%. The factors that we typically talk about leading to the 108 to 110% are very similar to what we saw last quarter, meaning we would have expected that calculation or seen the calculation on a normalized basis to be at about 110%, maybe slightly a little ahead of that, driven by the strong continuation of the volume side or patient utilization. As you get to the factor from a slightly above 110 to 114, that's also seeing the benefit of those clients we rapidly onboarded early in 2024 in the associated revenue from that, just purely by the way that the NRR calculation is performed. And I won't go into the specifics of it, you can read about it in our filings, but we get a bump in the above normal range from that as well.

Thank you. Our next question comes from Elizabeth Anderson with Evercore ISI. Your line is open.

Thanks for the question. This is Joanna for Elizabeth. We have one question. So given some of the utilization trends, the payers have been saying, can you remind us about your updated thoughts on the trends in 2025 and how do you think about the 25 seasonality in both the -a-pay and provider businesses? Thank you.

So if I heard all of that, the question was really about utilization trends and what providers are reporting, what we're experiencing, and how does that impact our business model? Is it fair to frame it that way? I'm not sure I completely heard the question. Okay. Well, you know, I just would start with the fact that we feel like we have a very predictable and proven business model. Part of that business model is subscription-based, revenue model subscription-based as you know. Part of it is volume-based and both benefit, but primarily the volume side benefits from utilization. And we build that into the way that we grow. And so we typically model, what is it? One to two percent. One to two percent utilization increases each year. That's largely consistent with a much longer term historical average. What we've seen in this recent start to the year is that utilization has trended above that. And so that tends to benefit our business model. And it's consistent with what providers are reporting. They are reporting that we're, you know, they're certainly seeing more patients, experiencing more patient visits, but they're doing that with the same resources or less. And we think that's where Waystar Software Platform can really help them. It's our ability to help them address utilization increase, but from a payment perspective, we're helping them do that very efficiently. We're helping them take out costs as you've heard us describe and we're helping them find more dollars. And that ability to collect dollars and drive cash flow is making Waystar Software relevant and important right now.

Yeah, specific to the question around seasonality, the provider solutions, the 70% of revenue tends to have very little seasonality, whereas the 30% of revenue coming from patient payments is deductibles reset at the beginning of the year. That tends to have more from a dollars perspective happening in the first half of the year and then tapering off in the back half of the years as patients hit the deductibles under their high deductible plans. We haven't seen anything so far in the first quarter nor have changed our expectation for the full year as it pertains to seasonality in that 30% of the business.

Thank you. Our next question comes from Brian Peterson with Raymond James. Your line is now open.

Thanks for taking the question and congrats with a really strong quarter. So I know you mentioned the 10 million in revenue impacts from change this quarter. But I'm curious, how big of a factor is the security and really the time to implementation that you guys are referencing in terms of moving deals through sales cycles? And I'd love to understand maybe the nature of these customer conversations and how those have changed over the last 30 days. Thanks, guys.

Sure, let me start there. Thanks, Brian, for the nice words. What I'd say is what we've described over the last year is a phased approach where speaking specifically to those providers that were disrupted by this cyber attack, as you'll recall, there was this rush to move to another system and Waystar was in a position to help providers do that. We call that phase one. And then you've also heard us talk about a second phase, a phase two where it's more of a return to normal but intentional business decision-making. And factors that come into play include cyber security and ability to trust the vendor partner, ability to address utilization and scale, reference ability of clients that are also using the Waystar software platform, and the ability, perhaps as important as the cybersecurity piece, the ability to get tangible ROI and to be able to deploy the software rapidly and get that type of ROI. And so as we engage with clients in the market, you highlighted last 30 days. And what we've seen is we've seen continued strong demand. We've seen RFPs that are robust, where Waystar's getting invited to participate in RFPs and working our way through those RFPs. We did notice an uptick as we described last, second half of last year. And we see that being robust. And really an emphasis on providers prioritizing what's most important for them during this economic environment. And really that's where the virtue of a true mission-critical solutions comes to play. And we feel like we are positively able to address all of those things. You know, cash flow is mission-critical. So as providers address more utilization, they wanna be able to convert those patient visits to cash rapidly and efficiently. And so we see that demand environment. We're grateful to be in a position to help providers. And we have a robust pipeline with strong win rates.

Thank you. Our next question comes from Alan Watts with Bank of America. Your line is now open.

Good afternoon and thanks for taking the questions. One for Matt, really a follow-up on the last question around RFP activity. I guess, Matt, you mentioned you talked about really strong RFP activity in the second half of last year with prospects like hospitals and health systems. I guess, has anything changed more recently due to tariffs? Can you talk about your recent conversations that you're having as part of these project meetings? Has anything changed at all? And then you mentioned conversations around new AI buckets or new areas of spend there that are outside of the traditional health IT buckets. How big in terms of dollars relative to the traditional health IT buckets is that span? And then has that unlocked at all? Or is that something that's sort of on the come?

Thank you. Hey, Alan, this is Sandy. I apologize. We had a bit of a technical difficulty on our side. I'm gonna have to ask you to repeat the question. I apologize about that.

No problem at all. So a two-part question. So really a follow-up to the last question. Can you talk about the recent RFP activity with prospective hospitals and health systems? And have those conversations changed at all as it relates to the prospect of tariffs? Have those conversations been pushed out or is it really the same conversation that you're having with those prospective customers? And then second, Matt, you mentioned new AI buckets of potential spend there is outside of the traditional health IT allocation. My question is how big is the allocation to that? And has any of that spend been deployed or is that all prospective and forward-looking? Thanks.

Yep, thank you, Alan. We read the same headlines and are having the same conversations about potential tariff impact to any company or any provider organization in this case. Let me just make a few comments and then speak to the second question about AI and economic pools associated with AI investing. What I'd say, just to reaffirm what Steve said earlier, our clients are US-based and Waystar itself has no direct exposure to tariffs. And so we're very empathetic as we read these headlines about potential headwinds or supply chain impact that could result from some of these tariffs. And we're mindful of that. What we see taking place is that in these types of difficult times, clients are looking for ways and prospects are looking for ways to help them operate efficiently and to get paid. And so again, I just would reaffirm that without commenting specifically on RFP volume or a pipeline. Occasionally we will comment on our pipeline. We'll do that probably once a year type of a thing, not every quarter. But what we are seeing is strong demand. And that demand is based on our ability to deploy cloud software that leverages AI that is helping providers get tangible return on investment. We believe that Waystar can be a net winner, share gain winner during this cycle. And what we know is that 90% of healthcare decision makers that we're talking to, they're prioritizing AI and advanced automation to help them address this economic cycle. But the vast majority of them were still very early in the actual adoption and use of AI in this timeframe. So the vast majority have either been using it for less than a couple months, AI in any form, or not at all. And so we view this as opportunity. Commenting on our observation, we do see dollars set aside from traditional HCIT OPEC spend. Where there are dollars set aside for Gen.AI focused spend. Where there's real ROI associated with that spend. And the good news for us with Waystar is what you've seen us talk about recently. And some of you may have participated in the Waystar Innovation Showcase that we launched just last week to show these AI tools. We are actually moving from AI hype to ROI reality. And we're delivering real return on investment with the areas that we've launched. You'll recall that we launched Altitude AI in January of 2025. This comprehensive suite of generative AI capabilities that is pervasive across the Waystar software platform. And we're seeing early adopters achieve remarkable results. And so we're able to go and have real conversations with these set aside pools that are AI focused to talk about the ROI that we can help clients achieve. And I won't qualify or quantify the size of those pools, but I will say that there's tremendous interest on behalf of healthcare decision makers to prioritize AI and automation capabilities in their organizations.

Thank you. Our next question comes from Jaylinder Singh with Truest Securities. Your line is now open.

Thank you and thanks for taking my questions and congrats on a strong quarter. I was wondering if you could provide any update on 30% of your change related customers pursuing cross-cell opportunities you flagged on the last call. Is there any change to that figure? And do you see any of that benefit flowing through this year? And related to that, we have been hearing that several providers who temporarily switched to other vendors last year went back to change because of the existing contracts with change. And now as these contracts are coming up for renewal, these providers have been more actively evaluating other alternatives. Have you seen any of that playing out yet? And would you consider something like that as incremental to your low double digit long-term growth rate?

Thank you, Jaylinder. It's nice to hear your voice as well. What I'd say is that we're in a competitive active environment. And as you'll recall, I'll speak to our growth model just for a moment. We have this proven growth model and it starts with us creating enduring relationships with our clients, which we do. Our retention rates are exceptional. And then once they begin using our software as many thousands of impacted clients started to do last year, then we are having conversations with them where they're naturally expanding the use of our software, which is well architected and beautiful by the way, we're able to deploy it rapidly and clients can add an existing client can add additional software and deploy that very rapidly as well. That's normal business for us. And so we made the comment about approximately 30% of the providers that joined us in that cohort that was impacted a quarter ago or actively in dialogue with us. What I'd say is we've seen strong demand in clients as they now are our clients and talking to them about additional solutions. And when you look at, and I won't speak in detail about this, but our results in Q1 from a bookings perspective, we saw nice adoption of additional software modules amongst that cohort of existing clients. I think I'll leave it at that. I just would characterize our work as very active and we are encouraged and excited about the opportunity just to have conversations with clients to use more software and prospects who are evaluating what to do next. And you can imagine we have a -to-market team that's very focused and thoughtful in our approach, going through discovery processes and helping these prospects as they evaluate opportunities, talk to or get references from our existing clients. And certainly we have ROI calculators that help them make thoughtful decisions. And so we'll be very active and from time to time comment specifically on what we're doing, but I'll leave it at that for right now.

Thank you. Our next question comes from George Hill with Deutsche Bank. Your line is open.

Yeah, good morning guys and thanks for taking the question. I've got a quick two-parter here. I get that everything's going right and well with the business, but you guys have kind of called out recession risk a couple of times in prepared commentary. I wanted to ask, are you seeing anything that kind of makes you bring up the risk? Like, are you seeing any type of lengthening sales cycles and kind of has anything in the macro changed what clients are demanding of you guys from a product or functionality perspective? I know that you guys brought up AI, but is there like has the macro like made clients pivot from like maybe the stronger solutions around patient self-pay or ability to pay tolls? I'd just be interested if the macro is changed, like which widgets clients are looking at and kind of what you guys are seeing on sales cycles.

Sure, yeah, thanks George.

What I'd say is,

you know, we're a young public company working to deliver on our commitments. We feel very good about the fact that we've now delivered four consecutive quarters of good results, but we're working to be prudent. So we know that it's on people's minds that potential for tariff impact on the economy and specifically on healthcare providers. And we're very empathetic to those that may be impacted. Again, I would just reaffirm that we've said a number of things that kind of measure or give you a sense of our enthusiasm and desire to be helpful during this economic cycle. We have a mission critical software platform. We are working to help clients see the software, get access to it. It obviously highlights and showcases our AI capabilities to dramatically change manual work into automated tasks and to autonomously generate work that creates tremendous efficiency. And we're gonna navigate with clients through this cycle. We're noting that things haven't necessarily changed in their decision-making timeframe. They're working to be very thoughtful. We're also seeing them prioritize to the most important and essential solutions that will help them succeed and navigate this critical time. And we're in a position to be that type of software platform that can help them do that. So again, we believe we'll be a net winner during this cycle as we help clients and as we stay very focused on serving them.

Thank you. Our next question comes from Ryan Daniels with William Blair. Your line is now open.

Yeah, guys, thanks for taking the question. I wanted to ask another follow-up on artificial intelligence. Matt, you mentioned BlackBook earlier, and I also saw a recent survey they had out talking about providers moving a lot more of the outsourced RCM back in-house. And it seems like AI is the driver for that. Because some of the BPO operations where maybe you needed big OUS staffs of billers and coders are really becoming obsolete with artificial intelligence. So I'm curious if you think, either in the near-term pipeline or the long-term, that's a trend that could benefit you by kind of bringing some of that business back to the client base and then you selling a software solution to address that. Thanks.

Thanks, Ryan. We do think it's a trend that will benefit our business model and we're beginning to see that now. You think about something I often say, we've never had more technological capability to do hard things than we do right now. And we're seeing that with generative AI. A couple of thoughts for you. We know there's interest and curiosity, and we know that there's willingness to begin to reflect expenses that you might otherwise have to spend if you were paying someone to do a job or a task. In the kind of in air quotes, the Clayton Christensen jobs to be done category, what we're seeing is that we have the opportunity to automate high volume, low complexity tasks using generative AI. And we're showcasing that with the launch of altitude AI. When you think about our ability to prevent denials from occurring and taking tasks that used to take three days and compressing those through generative AI to take three minutes. Now you don't have to have the outsource conversation. You can insource it and reimagine what's possible through the use of generative AI. You can do the same thing with denial and appeal management. Waystar offers an autonomous and automatic letter writing capability that's compressing the time it takes, staff time 70% and actually creating a more accurate appeal letter that then we're seeing just really positive overturn rates from. That's something that somebody may have had to outsource a year or three or five years ago. Well, they don't have to today. So we do think that that will lead us to be able to expand the addressable market opportunity before us and serve that market with software, with software and with AI. And we are pleased with the competitive position that Waystar is in, our ability to deliver automation and efficiency to clients. The last comment, Ryan, you really got me going on this now. But look, what we're also doing and we're mindful of is we're serving over a million providers across all the different care settings. Couple thoughts there. One, we're creating a tremendous amount of data and working to very carefully and thoughtfully custody that data and use it to then fuel the generative AI capabilities that we launch. That's unique. We think long-term it's the data access and the data ability that you feed to the large language model, so to speak, that really becomes the powerful enabler of automation and capability gain here. And then two, we're also, given that we are serving a million providers across all the care settings, we're taking a very disciplined, careful, prudent approach to launching these capabilities amongst early adopters, making sure that we can attest to cybersecurity, making sure that we can help them adopt this in ways that will enable them to accomplish their goal. And that's often associated with their ROI. So thank you for highlighting that question. It is something that we're excited about as we shift the market and bring more decision-making opportunity back in-house where previously it just had to be outsourced in expensive ways.

Thank you. Our next question comes from Richard Close with Canaccord Genuity. Your line is now open.

Thank you. Congratulations on the strong start to the year. Just staying on the AI, I'm curious how you're thinking about it. Is this really maybe a market share gain, new client win opportunity or a same store growth, more same store growth opportunity? And I'm curious, as people use these products, you just let in the clients use them, get a feel of the capabilities and the improvement ROI as you're talking about, and then you come back behind and reprice their contracts or these add-ons to existing contracts, just trying to get a better feel of it.

Sure, thank you, Richard. Last week we showed several generative AI capabilities in our innovation showcase, and we presented the problem that the AI capability is working to address, and we showed our software addressing that problem, and then we showed clients who are benefiting from the use of that software, and we'd highlighted several metrics that they're benefiting from the use of our software to inflect their business positively. And so as we think about Gen.AI's impact on our business, I really like that analogy that you used, the same store growth analogy, we're certainly not a retailer, but we do think in terms of retention of our clients, and part of how we'll have business impact is to infuse generative AI capability into our existing software that will make it even better and elongate that relationship with the client to drive fantastic retention. The second way is, you mentioned pricing. We don't disclose specific terms on pricing, but our thoughts are we price to value, and we know that there's value being generated, and so as we've highlighted, we do have a very modest annual price increase program across our business. As we study this without disclosing more on this call, we believe that there's an opportunity to price to value appropriately for those that are using generative AI in our existing software. And then the third way, as we're thinking about it, is depending on the generative AI module, it may be a new SKU, a new software module that we sell to both prospects and to existing clients, and we're preparing our teams and operational team members and -to-market team members and our whole business to be able to take new solutions and successfully launch those into existing clients and new prospects as well. The last way I think gen.ai impacts our business is the internal consumption of gen.ai, which we're using today to drive efficiency, to drive impact without compromising our ability to create the highest in the industry market-leading client experiences as we work to serve our clients. We also have a real effort underway to train all of our teams, but especially our software engineering teams on how to use AI, so not just dedicated amongst a cohort of .ai-specific application engineers, but our whole engineering team. We want the ability to use gen.ai to become pervasive, and we see that taking place, and even to be able to help produce software code. So there's multiple ways that gen.ai will impact our business, and we look forward to articulating that more specifically as we roll forward, but there are some things that are already taking place now that we're encouraged by.

Thank you. As a reminder to ask a question, please press star one one. Our next question comes from Anne Samuel with JP Morgan, your line is open.

Hi, thanks for the question, and congrats on the great results. You guys hit your leverage target a lot sooner than we were anticipating, and now that you're there, I was wondering if maybe you could just talk about how you're thinking about adding to your existing portfolio through M&A.

Well, thank you, Anne, for highlighting that. We're pleased to make and keep our commitments. I commented to Steve earlier today that we're proud to have kept the commitments we made when we went public, and that was to de-lever the business successfully, and we think it's a testament to our business model, our business model that Steve highlighted earlier. It has a strong adjusted EBITDA margins and a really nice conversion ratio to unlevered free cash flow, so we're pleased with the profile of our business and the strength of our balance sheet. What I'd say is with regards to M&A, we do have a history of successful M&A, and our approach may be a bit unique in the sense that we look for companies that have technology, people, and clients that really fit what we're working to accomplish and do, and then every time we've been able to acquire a business, as you know, Annie, we work to integrate and unite that company, that technology, the people, and the clients onto the Waystar platform so that all of our clients could benefit from it, and we've seen really positive things occur doing that, and so we believe that Waystar can be a great home for the right types of companies, and we have a very disciplined approach, a dedicated corporate development team with a robust pipeline of opportunities. We're actively in the market. We have really good conversations with people that we admire, with businesses that they lead, and we're grateful for that, and I think our commitment is to just continue that approach, to be disciplined, and at the right time, we'll look forward to highlighting things that we expect to do, but we're active right now.

Thank you. I'm showing no further questions at this time. I would now like to turn it back to Matt Hawkins for closing remarks.

Well, thank you, Daniel, for operating the call today. As we conclude today's call, I just wanna take a moment to thank our incredible, dedicated Waystar team members who I feel so grateful to work alongside, and I also just wanna say how much we are privileged and thrilled to serve our remarkable clients who really are healthcare's heroes here. We're grateful to deliver them software that benefits them as they work to care for patients. We're passionate about what we're building. I hope you sense that, and we're pleased with our performance to start 2025. Looking ahead, I just would reaffirm our focus and our excitement about the opportunities that are right in front of us. We're focused on executing our proven plan while recognizing the macroeconomic uncertainties facing providers and expressing empathy there, but belief that we can really be helpful. So thank you all for joining. We wish you a great evening, and we're excited about getting to work. Thanks.

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