Q2 2024 Waystar Holding Corp Earnings Call

August 7, 2024

Good day and thank you for standing by. Welcome to the Waystar 2nd Quarter 2024 Earnings Conference Call.

Operator: Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode.

Operator: After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising you that your hand is raised.

Speaker Change: At this time, all participants are in a listen-only mode.

Speaker Change: After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 11 on your telephone.

Operator: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would like to hand the conference over to your speaker today, Sandy Draper, Chief of Staff and Vice President of Special Projects. Please go ahead, sir.

Speaker Change: You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would like to hand the conference over to your speaker today, Sandy Draper, Chief of Staff and Vice President of Special Projects. Please go ahead, sir.

Sandy Draper: Thank you, operator, and good afternoon, everyone. It's my pleasure to welcome you to Waystar Holding Corporation's second quarter 2024 earnings. 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.

Sandy Draper: Thank you, Operator, and good afternoon, everyone. It's my pleasure to welcome you to Waystar Holding Corporation's second quarter 2024 earnings call.

Speaker Change: 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 Oreskovich, Waystar's Chief Financial Officer, are joining me today.

Speaker Change: After their remarks, we will open the call to your questions.

Speaker Change: 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.

Sandy Draper: Before we get started, I will remind you that this call contains four forward-looking statements, which include all statements that are not historical facts. Examples of these statements include expectations of future growth and margin. 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. However, actual results may differ materially from those expressed in these statements.

Speaker Change: Before we get started, I will remind you that this call contains four looking statements which include all statements that are not historical facts.

Speaker Change: Examples of these statements include expectations of future 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.

Speaker Change: Actual results may differ materially from those expressed in these statements.

Sandy Draper: 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 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, and we undertake no obligation to update and or revise such statements, except as required by law.

Speaker Change: 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 page of our website.

Speaker Change: 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 and will revise such statements except as required by law.

Sandy Draper: 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 explanations of these measures, in the appendix to the presentation slide deck and our earnings report. These non-GAAP measures should not be considered in isolation or as a substitute for financial results prepared in accordance with GAAP.

Speaker Change: During today's call, we will also discuss certain non-GAAP financial measures which we believe may be useful in evaluating our financial performance.

Speaker Change: 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 explanations of these measures, in the appendix to the presentation slide deck and our earnings release.

Speaker Change: These non-GAAP measures should not be considered in isolation or as a substitute for financial results prepared in accordance with GAAP.

Sandy Draper: Lastly, we are pleased to note our participation in the Canada Accord Genuity Annual Growth Conference in Boston on August 13th, 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.

Speaker Change: Lastly, we are pleased to note our participation in the Canada Accord Genuity Annual Growth Conference in Boston on August 13th, where we look forward to engaging with many of you. With that, I'll turn it over to Matt.

Matt Hawkins: Thank you for joining our inaugural earnings call as a publicly traded company. On today's call, we will cover the following four topics. First, I will review Waystar's second-quarter results, reflecting on our strong performance and highlighting a few areas that favorably impacted our results. Second, I will provide insight into our response to, and the impact of, February 21st's cybersecurity attack on a competitor's claims clearance. Third, I'll take the opportunity to share what we are building at Waystar, including innovations and developments that are shaping the future. And last, I'll turn the call over to Steve Oreskevich, our CFO, who will walk through more detailed financial materials and highlight guidance for the full year 2020. We're pleased to report that we have delivered a strong second quarter, continuing our momentum and showcasing the efforts of our entire team. Q2 revenue was $235 million, representing a 20% year-over-year growth.

Matt: Thank you, Sandy, and good afternoon, everyone. Thank you for joining our inaugural earnings call as a publicly traded company.

Matt Hawkins: Our revenue growth in the quarter, which was greater than the low double-digit growth rate that we typically expect, is attributable to a few primary factors. First, our business continued to perform well in Q2. We maintained solid client retention, closed a number of new sales opportunities that we expect to implement at our regular, and continue to grow our bookings pipeline. Second, Q2 revenue had some favorability due to increases in patient payment volumes that we processed on the Waystar software platform.

Matt: On today's call, we will cover the following four topics. First, I will review Waystar's second quarter results reflecting on our strong performance and highlighting a few areas that favorably impacted our results.

Matt: Second, I will provide insight into our response to and the impact of February 21st's cybersecurity attack on a competitor's claims clearinghouse.

Matt: Third, I'll take the opportunity to share what we are building at Waystar, including innovations and developments that are shaping our future.

Steve Oreskevich: And last, I'll turn the call over to Steve Oreskevich, our CFO , who will walk through more detailed financial materials and highlight guidance for the full year 2024.

Matt Hawkins: We believe this outperformance is due to expected increases in patient visits as well as patients choosing to make payments to fulfill their insurance deductible at a modestly faster pace. We note that there is some seasonality in the timing of when patients fulfill their insurance deductibles in any given year.

Steve Oreskevich: We are pleased to report that we have delivered a strong second quarter, continuing our momentum and showcasing the efforts of our entire team.

Steve Oreskevich: Q2 revenue was $235 million, representing a 20% year-over-year growth.

Steve Oreskevich: Our revenue growth in the quarter, which was greater than the low double-digit growth rate that we typically expect, is attributable to a few primary factors.

Matt Hawkins: Third, we completed two small acquisitions in the second half of 2020, which favorably impacted the year-over-year comparison versus last year. And finally, as I will address in more detail in just a moment, our revenue growth benefited from our efforts to onboard thousands of providers to the Waystar software platform after these providers' operations were disrupted by the February 21st cyber attack against the company. Importantly, we expect to retain the majority of this revenue uplift going forward.

Steve Oreskevich: First, our business continued to perform well in Q2. We maintained solid client retention, closed a number of new sales opportunities that we expect to implement at our regular cadence, and continued to grow our bookings pipeline.

Steve Oreskevich: Second, Q2 revenue had some favorability due to increases in patient payment volumes that we processed on the Waystar software platform.

Steve Oreskevich: We believe this outperformance is due to expected increases in patient visits, as well as patients choosing to make payments to fulfill their insurance deductible at a modestly faster pace.

Steve Oreskevich: We note that there is some seasonality in the timing of when patients fulfill their insurance deductibles in any given year.

Steve Oreskevich: Third, we completed two small acquisitions in the second half of 2023.

Steve Oreskevich: which favorably impacted the year-over-year comparison versus last year. And finally, as I will address in more detail in just a moment, our revenue growth benefited from our efforts to onboard thousands of providers to the Waystar software platform.

Steve Oreskevich: After these providers operations were disrupted by the February 21st cyber attack against a competitor.

Steve Oreskevich: Importantly, we expect to retain the majority of this revenue uplift going forward.

Matt Hawkins: So, to summarize, we were pleased with our business performance and a few favorable factors in Q2 supplemented our revenue growth. Normalized for these items, the business grew slightly above our expected low double-digit. We're also pleased to report that Q2 adjusted EBITDA was $94 million, up 12% year-over-year and in line with our adjusted EBITDA margin goal of 40%.

Steve Oreskevich: So, to summarize, we were pleased with our business performance and a few favorable factors in Q2 supplemented our revenue growth. Normalized for these items, the business grew slightly above our expected low double-digit rate.

Steve Oreskevich: We're also pleased to report that Q2 adjusted EBITDA was $94 million, up 12 percent year over year, and in line with our adjusted EBITDA margin goal of 40 percent.

Matt Hawkins: Within Q2 Adjusted EBITDA, we incurred expenses associated with onboarding thousands of providers to the Waystar software platform who were impacted by the February 21st cyberattack. We also focused on integrating recent acquisitions and incrementally investing in growth, cybersecurity, and innovation-related initiatives. From a margin perspective, we're pleased with our adjusted EBITDA margin and are actively pursuing ways to drive operational efficiency to maintain and expand margins over the long term. Our business model promotes strong cash flow conversion, and Q2 was no exception. In the second quarter, we generated an unlevered free cash flow of $50 million.

Steve Oreskevich: Within Q2 adjusted EBITDA, we incurred expenses associated with onboarding thousands of providers to the Waystar software platform who were impacted by the February 21st cyber attack.

Steve Oreskevich: We also focused on integrating recent acquisitions and incrementally investing in growth, cybersecurity, and innovation-related initiatives.

Steve Oreskevich: From a margin perspective, we're pleased with our adjusted EBITDA margin and are actively pursuing ways to drive operational efficiency to maintain and expand margins over the longer term.

Steve Oreskevich: Our business model promotes strong cash flow conversion and Q2 was no exception.

Steve Oreskevich: In the second quarter, we generated unlevered free cash flow of $50 million.

Matt Hawkins: The combination of our strong cash flow profile and our recent IPO puts Waystar in a sound financial position. As we committed, we used the proceeds of our initial public offering in June to pay down debt, bringing our net leverage to 3.7 times at the end of the quarter. Reflecting subsequent debt paydown with the proceeds from the partial exercise of the IPO green shoe option in early July, our net leverage ratio is approximately three times. In addition, I want to highlight two key metrics that we use to track our business's performance and give us confidence in our durable growth model.

Steve Oreskevich: The combination of our strong cash flow profile and our recent IPO puts Waystar in a sound financial position.

Steve Oreskevich: As we committed, we used the proceeds of our initial public offering in June to pay down debt, bringing our net leverage to 3.7 times at the end of the quarter.

Steve Oreskevich: Reflecting subsequent debt paydown with the proceeds from the partial exercise of the IPO green shoe option in early July , our net leverage ratio is approximately 3.4 times today.

Matt Hawkins: First, the number of clients generating more than $100,000 in trailing 12-month revenue increased to 1,117, an increase of 9% year-over-year. We believe this metric demonstrates our ability to land and then expand business with our core business models. We also believe that the number of clients generating more than $100,000 in trailing 12-month revenue increased to 1,117, an increase of 9% year-over-year. We believe this metric demonstrates our ability to land and then expand business with our customers. Second, our net revenue retention in Q2 was 108%, within the range of the 108 to 110% that we have seen over the past 10 quarters.

Speaker Change: In addition, I want to highlight two key metrics that we use to track our business's performance and give us confidence in our durable growth model.

Speaker Change: First, the number of clients generating more than $100,000 in trailing 12-month revenue increased to 1,117, an increase of 9% year over year.

Speaker Change: We believe this metric demonstrates our ability to land and then expand business with our clients.

Speaker Change: Second, our net revenue retention in Q2 was 108 percent, within the range of the 108 to 110 percent that we have seen over the past 10 quarters. Our strong net revenue retention highlights the enduring relationships we establish with our clients.

Matt Hawkins: Our strong net revenue retention highlights the enduring relationships we have established with our clients, beginning with strong gross revenue retention and then delivering value to our clients as we focus on expanding the Waystar software modules they use through our cross and upsell efforts. Steve will discuss Q2 financials in more detail and also provide guidance for Fiscal Year 2021.

Speaker Change: to gain with strong gross revenue retention and then delivering value to our clients as we focus on Expanding the Waystar software modules they use through our cross and upsell efforts

Speaker Change: Steve will discuss Q2 financials in more detail and also provide guidance for fiscal year 2024.

Matt Hawkins: Now, on to the second point, on a topic that I know many of you are keenly focused on: Waystar's response to and the impact of the February 21st competitor cyber attack. Following this unfortunate event in the market, health care providers and patients faced tremendous disruption.

Speaker Change: Now on to the second point.

Speaker Change: on a topic that I know many of you are keenly focused on.

Speaker Change: Waystar's response to, and the impact of the February 21st competitor cyber attack event.

Speaker Change: Following this unfortunate event in the market, healthcare providers and patients faced tremendous disruption. At Waystar, we quickly focused our efforts and marshaled additional resources to help impacted providers simplify their healthcare payments and regain cash flow.

Matt Hawkins: At Waystar, we quickly focused our efforts and marshaled additional resources to help impacted providers simplify their health care payments and regain cash flow. We are pleased to report that Waystar has helped more than 30,000 providers move rapidly to the Waystar software platform, many in as little as three days, to minimize their disruption during this time and to get paid for the health care services they deliver. This urgency to maintain continuity in critical business operations resulted in pulling forward implementation timelines for many of these providers and the corresponding time to revenue for Waystar.

Speaker Change: We are pleased to report that Waystar has helped more than 30,000 providers move rapidly to the Waystar software platform, many in as little as three days.

Speaker Change: to minimize their disruption during this time and to get paid for the health care services they delivered.

Speaker Change: This urgency to maintain continuity in critical business operations resulted in pulling forward implementation timelines for many of these providers and the corresponding time to revenue for Waystar.

Matt Hawkins: We feel grateful to be in a position to help thousands of providers resume normal business operations so quickly. Importantly, we expect to build enduring relationships with these new clients, most of whom signed standard Waystar business agreements with 2-3 year terms and annual auto renewals thereof. This incident created a near-term opportunity for Waystar to help thousands of providers but also a longer-term opportunity for Waystar to cross-sell additional Waystar software modules to these provider organizations.

Speaker Change: We feel grateful to be in a position to help thousands of providers resume normal business operations so quickly.

Speaker Change: Importantly, we expect to build enduring relationships with these new clients, most of whom signed standard Waystar business agreements with two to three year terms and annual auto renewals thereafter.

Speaker Change: This incident not only created a near-term opportunity for Waystar to help thousands of providers, but also a longer-term opportunity to cross-sell additional Waystar software modules to these provider organizations.

Matt Hawkins: For many, this cyber attack reinforced the importance of using a modern cloud-based software platform, such as Waystar, which provider organizations can deploy rapidly with limited to no disruption while successfully managing their finances. Due to Waystar's performance during this trying period, we believe our competitive position in the industry is even stronger, and we continue to work hard to help provider organizations and to capitalize on the positive momentum that we have seen. I want to also comment briefly on Waystar's approach to cybersecurity.

Speaker Change: For many, this cyber attack reinforced the importance of using a modern cloud-based software platform such as Waystar.

Speaker Change: which provider organizations can deploy rapidly with limited to no disruption while successfully managing their finances.

Speaker Change: Due to Waystar's performance during this trying period, we believe our competitive position in the industry is even stronger, and we continue to work hard to help provider organizations and to capitalize on the positive momentum that we have seen.

Speaker Change: I want to also comment briefly on Waystar's approach to cybersecurity. We understand the importance of protecting our clients' data and privacy.

Matt Hawkins: We understand the importance of protecting our clients' data and privacy. We are committed to proactively monitoring and safeguarding our clients' information in today's ever-evolving cyber landscape. Waystar utilizes a robust framework for cybersecurity to proactively monitor, measure, and mitigate risks. We validate our cyber program and readiness with regular HITRUST, PCI, SOC2, and NIST audits.

Speaker Change: We are committed to proactively monitoring and safeguarding our clients' information in today's ever-evolving cyber landscape.

Speaker Change: Waystar utilizes a robust framework for cybersecurity to proactively monitor, measure, and mitigate risk.

Speaker Change: we validate our cyber program and readiness with regular high trust pcii sck two and nist audits

Matt Hawkins: In light of the recent cyber attack on a competitor's system, it's important to note that we have already been using modern cybersecurity protocols, such as requiring multi-factor authentication for system access, credential restrictions, and theft alerts, data exfiltration and endpoint detection capabilities, and system backups that cannot be modified by malware or bad actors to secure our software platform and data. We believe our rigorous approach to cybersecurity can help us minimize the cost of any potential disruption through system resiliency and rapid restoration, and we will remain vigilant in safeguarding against potential threats.

Speaker Change: In light of the recent cyber attack on a competitor's system,

Speaker Change: It's important to note that we have already been using modern cybersecurity protocols such as requiring multi-factor authentication for system access, credential restrictions, and theft alerts,

Speaker Change: data exfiltration and endpoint detection capabilities, and system backups that cannot be modified by malware or bad actors to secure our software platform and data.

Speaker Change: We believe our rigorous approach to cybersecurity can help us minimize the cost of any potential disruption through system resiliency and rapid restoration, and we will remain vigilant in safeguarding against potential threats.

Matt Hawkins: In our inaugural call, I want to highlight Waystar's mission and what makes our company unique. We are focused on simplifying healthcare payments through our modern, end-to-end, cloud-based software, enabling our provider clients to prioritize patient care and optimize their finances. We are transforming health care payments for providers while simultaneously helping patients navigate an often frustrating health care payment experience with greater transparency. I will now highlight six attributes that make us unique and fuel our belief in the positive benefits we can deliver to our clients. First, we are a software company purpose-built for health. We are not a services company trying to become more tech.

Speaker Change: Now on to the third point. In our inaugural call, I want to highlight Waystar's mission and what makes our company unique.

Speaker Change: We are focused on simplifying health care payments through our modern end-to-end cloud-based software, enabling our provider clients to prioritize patient care and optimize their financial performance.

Speaker Change: We are transforming healthcare payments for providers while simultaneously helping patients navigate an often frustrating healthcare payment experience with greater transparency and clarity.

Speaker Change: I will now highlight six attributes that make us unique and fuel our belief in the positive benefits we can deliver to our clients.

Speaker Change: First, we are a software company purpose-built for healthcare.

Speaker Change: We are not a services company trying to become more tech-enabled.

Matt Hawkins: Building great software to disrupt long-standing payment challenges is the focus of Waystar. Second, our software is mission critical to our clients. In 2023, we facilitated over 5 billion healthcare payment transactions, including over $1.2 trillion in gross claims. When clients adopt the Waystar platform, we become essential to their business operations and cash flow generation. We develop long, enduring relationships with clients because our software helps them get paid faster, more accurately, and more efficiently than ever before.

Speaker Change: Building great software to disrupt long-standing payment challenges is the focus of Waystar's work.

Speaker Change: Second, our software is mission-critical to our clients. In 2023, we facilitated over 5 billion health care payment transactions, including over 1.2 trillion dollars in gross claims.

Speaker Change: When clients adopt the Waystar platform, we become essential to their business operations and cash flow generation.

Speaker Change: We develop long, enduring relationships with clients because our software helps them get paid faster, more accurately, and more efficiently than ever before. Our strong client and revenue retention attest to this.

Speaker Change: Third, our differentiated cloud-based software platform with advanced technology is integrated into more than 500 electronic health records and practice management systems.

Speaker Change: This allows us to serve more than 1 million providers of all sizes across every setting of care. Our platform enables us to deliver several benefits to our clients.

Matt Hawkins: Our platform enables us to deliver several benefits to our clients. We rapidly deploy and implement our cloud software to serve clients of all types and sizes, addressing their unique needs. Waystar's end-to-end capabilities enable providers to manage all of their health care payments through a single platform, which serves as a meaningful differentiator for Waystar relative to numerous point solution vendors that exist in the market.

Speaker Change: We rapidly deploy and implement our cloud software to serve clients of all types and sizes, addressing their unique needs.

Speaker Change: Waystar's end-to-end capabilities enable providers to manage all of their health care payments through a single platform, which serves as a meaningful differentiator for Waystar relative to numerous point solution vendors that exist in the market.

Matt Hawkins: We believe that no competitor matches the breadth, depth, and quality of our software platform. And we deliver an average of 300 software feature innovations and improvements each quarter without interrupting the operations of our clients, and our clients achieve the real return on investment they expect as they work with Waystar. Fourth, as we are at the forefront of actively deploying AI and machine learning to automate work, prioritize tasks, and eliminate errors as clients use Waystar software, our software uses AI pervasively today, and we are well-positioned to harness the power of generative AI to drive ROI for our clients.

Speaker Change: We believe that no competitor matches the breadth, depth, and quality of our software platform.

Speaker Change: And we deliver an average of 300 software feature innovations and improvements each quarter without interrupting the operations of our clients.

Speaker Change: and our client achieve the real return on investment they expect as they work with way star

Speaker Change: Fourth, as we are at the forefront of actively deploying AI and machine learning to automate work, prioritize tasks, and eliminate errors as clients use Waystar software,

Speaker Change: our software uses ai pervasively today and we are well positioned to harness the power of generative ai to drive roi for our clients

Matt Hawkins: We recently announced that we have identified more than a dozen promising new generative AI capabilities across the healthcare payments process. Our collaboration with Google Cloud builds on Waystar's proven track record of deploying innovative AI solutions. I'd like to highlight just a few generative AI use cases we are actively developing. First, a co-pilot to further automate prior authorization submission.

Speaker Change: We recently announced that we have identified more than a dozen promising new generative AI capabilities across the healthcare payments processes.

Speaker Change: Our collaboration with Google Cloud builds on Waystar's proven track record of deploying innovative AI solutions.

Speaker Change: I'd like to highlight just a few generative AI use cases we are actively developing.

Matt Hawkins: We believe this will materially differentiate our existing prior authorization product, positioning it to accelerate the pace of penetration. Second, a co-pilot to automate appeal management when a claim has been denied, substantially accelerating speed. And third, an agent to enable real-time conversion of payer policy changes into claims rules. This technology will allow clients to upload their specific payer contracts and policies to Waystar's cloud rules engine with a high degree of automation and accuracy, driving lower denial rates and improving the ROI of Waystar's products versus the competition.

Speaker Change: First, a co-pilot to further automate prior authorization submission.

Speaker Change: We believe this will materially differentiate our existing prior authorization product, positioning it to accelerate the pace of penetration.

Speaker Change: second a copilot to automate appeal management when a claim has been denied substantially accelerating speed to payment

Speaker Change: And third, an agent to enable real-time conversion of payer policy changes into claims rules.

Speaker Change: This technology will allow clients to upload their specific payer contracts and policies

Speaker Change: to Waystar's cloud rules engine with high degree of automation and accuracy.

Speaker Change: driving lower denial rates and improving the ROI of Waystar's products versus the competition.

Matt Hawkins: In addition, we have several longer-term generative AI products in our pipeline for 2025 and beyond that drive automation and efficiency across the processes that lead to accurate health care. The fifth attribute is that we have a strong track record of delighting our clients, resulting in number one rankings and client satisfaction in several industry surveys and strong net promoter success. We have an active and engaged Client Advisory Board and delighted referenceable customers. And finally, we have a highly visible and durable revenue growth model with sustainable 40% plus adjusted EBITDA margins.

Speaker Change: In addition, we have several longer-term generative AI products in our pipeline for 2025 and beyond that drive automation and efficiency across the processes that lead to accurate healthcare payments.

Speaker Change: The fifth attribute is that we have a strong track record of delighting our clients, resulting in number one rankings in client satisfaction in several industry surveys and strong net promoter scores.

Speaker Change: We have an active and engaged Client Advisory Board and delighted, referenceable clients.

Speaker Change: And finally, we have a highly visible and durable revenue growth model with sustainable 40% plus adjusted EBITDA margins.

Matt Hawkins: We believe there is meaningful embedded growth within our client base and a large addressable market to pursue. We're focused on building and sustaining this momentum that we have created. Now, I will turn the call over to Steve to discuss our results in more detail and highlight our full year guidance for 2024. Thanks, Matt.

Speaker Change: We believe there is meaningful embedded growth within our client base and a large addressable market to pursue. We are focused on building and sustaining this momentum that we have created.

Steve Oreskevich: Now, I will turn the call over to Steve to discuss our results in more detail and highlight our full-year guidance for 2024.

Steve Oreskevich: Before I discuss the results and guide, I'd like to briefly cover the Durable and Visible Financial Model you mentioned, as it is the basis of our highly recurring, predictable, and profitable growth at scale. Over the past several years, we have consistently delivered low double-digit revenue growth and adjusted EBITDA margins of 40% or more. Furthermore, over 99% of our revenue comes from our cloud-based software platform, which means we derive less than 1% of revenue from services.

Steve Oreskevich: Thanks Matt.

Steve Oreskevich: Before I discuss the results and guidance, I would like to briefly cover the durable and visible financial model you mentioned.

Steve Oreskevich: as it is the basis of our highly recurring, predictable, and profitable growth at scale.

Steve Oreskevich: over the past several years we have consistently delivered low double-digit revenue growth and adjusted ebitda margins of forty percent or more

Steve Oreskevich: Over 99% of our revenue comes from our cloud-based software platform, which means we derive less than 1% of revenues from services.

Steve Oreskevich: Software revenue consists of contractually committed subscriptions and predictable recurring volumes processed on the platform. In Q2, revenue was roughly equal between these two streams, and both grew double digits. The subscription fee provides a fixed recurring revenue stream, while the volume-based component allows us to benefit from our client's growth. We generate more revenue as our clients see more patients and deliver more care. Apart from seasonality tied to health plan deductibles and seasonal illnesses, volumes are relatively stable and predictable year to year, given that the demand for healthcare is largely inelastic and growing annually.

Speaker Change: Software revenue consists of contractually committed subscriptions and predictable, recurring volumes processed on the platform.

Speaker Change: In Q2, revenue was roughly equal between these two streams and both grew double digits.

Speaker Change: The subscription fee provides a fixed recurring revenue stream, while the volume-based component allows us to benefit from our clients' growth.

Speaker Change: We generate more revenue as our clients see more patients and deliver more care.

Speaker Change: Apart from seasonality tied to health plan deductibles and seasonal illnesses,

Speaker Change: volumes are relatively stable and predictable year-to-year given that the demand for health care is largely ineelastic and growing annually

Steve Oreskevich: Therefore, in the aggregate, we believe we have meaningful visibility over the entire revenue base. Another important metric that demonstrates the visibility of our model is our net revenue retention. Over the past 10 quarters, we have shown a net revenue retention rate between 108 and 110 percent on a trailing 12-month basis, with Q2 at 108. Turning to financial results, we had a strong second quarter, with all financial metrics showing impressive growth. Revenue increased 20% year-over-year to $235 million.

Speaker Change: Therefore, in the aggregate, we believe we have meaningful visibility over the entire revenue base.

Speaker Change: Another important metric that demonstrates the visibility of our model is our net revenue retention.

Speaker Change: Over the past 10 quarters we have shown a net revenue retention rate between a hundred and eight and a hundred and ten percent on a trailing 12-month basis.

Speaker Change: with q two at one hundred and eight percent

Speaker Change: Turning to financial results, we had a strong second quarter with all financial metrics showing impressive growth.

Speaker Change: Revenue increased 20% year-over-year to $235 million.

Steve Oreskevich: This growth was primarily driven by four out of five. First, our business model continues to be strong. This is evidenced by the successful expansion in the number of clients of scale, to 1,117 as of the end of Q2, adding 37 new clients in the quarter who produced more than $100,000 of LTM revenue. This expansion validates our land and expand strategy, as well as our ability to sell more multiple solution deals to new clients.

Speaker Change: This growth was primarily driven by four outcomes.

Speaker Change: First, our business model continues to be strong.

Speaker Change: This is evidenced by the successful expansion in the number of clients of scale to 1,117 as of the end of Q2.

Speaker Change: adding 37 new clients in the quarter who produced more than a hundred thousand of LTM revenue.

Speaker Change: This expansion validates our Land and Expand strategy.

Speaker Change: as well as our ability to sell more multiple solution deals to new clients.

Steve Oreskevich: We processed more patient payments from existing clients on our software platform than we have typically seen in the second quarter over the past couple of years. We expect the associated beat to be offset in the second half of 2024 and have appropriately factored this into our full year guide. Third, as indicated in our filings, we completed two small acquisitions in the second half of 2023.

Speaker Change: Second, we processed more patient payments from existing clients on our software platform than we have typically seen in the second quarter over the past couple of years.

Speaker Change: We expect the associated beat to offset in the second half of 2024 and have appropriately factored this into our full year guidance.

Speaker Change: Third, as indicated in our filings, we completed two small acquisitions in the second half of 2023.

Steve Oreskevich: Consequently, the timing of the acquisitions modestly benefits the second quarter year-over-year growth. And finally, our team's 24 by 7 work to swiftly onboard new clients impacted by the competitor's cyber attack and to help existing Waystar clients minimize the impact on their operations generated $9 million of incremental revenue in Q2 versus what we would have expected from our historical win rates and associated implementation time. To provide context, we typically see client implementation cycles of a few to several months due to client and insurance payer readiness factors versus the three-day implementations Matt previously mentioned.

Speaker Change: Consequently, the timing of the acquisitions modestly benefit the second quarter year-over-year growth rate.

Speaker Change: And finally, our team's 24x7 work to swiftly onboard new clients impacted by the competitor's cyber attack, and to help existing Waystar clients in minimizing the impact on their operations.

Speaker Change: generated $9 million of incremental revenue in Q2 versus what we would have expected from our historical win rates and associated implementation timing.

Speaker Change: To provide context, we typically see client implementation cycles of a few to several months due to client and insurance payer readiness factors versus the three-day implementations Matt previously mentioned.

Steve Oreskevich: Most importantly, we believe the majority of revenue generated from this work will be enduring and increase our long-term revenue base. While 20% year-over-year growth for Q2 and 19% growth in the first half of 2024 are strong, we also recognize that some of the items that we have highlighted today or referenced in our filings impact year-over-year comparability. Normalizing for those items, revenue growth would be closer to 13%, which is slightly above our expected low double-digit rate. Gap's net loss for the second quarter of 2024 was $28 million compared to a net loss of $11 million in the prior year.

Matt: Most importantly, we believe the majority of revenue generated from this work will be enduring and increase our long-term revenue baseline.

Speaker Change: While 20% year-over-year growth for Q2 and 19% growth in the first half of 2024 are strong, we also recognize some of the items that we have highlighted today or referenced in our filings impact the year-over-year comparability.

Speaker Change: Normalizing for those items, revenue growth would be closer to 13%, which is slightly above our expected low double-digit range.

Speaker Change: Gap net loss for the second quarter of 2024 was $28 million, compared to a net loss of $11 million in the prior year.

Steve Oreskevich: Q2-24 results include $37 million of stock-based compensation costs, with $33 million associated with performance-based options expensed from going public. They also include $4 million of year-over-year channel partner commission increase based on revenue per user. Adjusted EBITDA of $94 million for the second quarter increased 12% year-over-year. The adjusted EBITDA margin of 40% also reflects investment in the business to ensure we are able to meet client expectations and ongoing investments in the areas Matt mentioned, including innovation and cybersecurity.

Speaker Change: Q2-24 results include $37 million of stock-based compensation costs, with $33 million associated with performance-based options expensed from going public.

Speaker Change: They also include $4 million of year-over-year channel partner commission increase based on revenue performance.

Speaker Change: Adjusted EBITDA of $94 million for the second quarter increased 12% year-over-year.

Speaker Change: The adjusted EBITDA margin of 40% also reflects investment in the business to ensure we were able to meet client expectations.

Speaker Change: and ongoing investments in the areas Matt mentioned, including innovation and cybersecurity.

Speaker Change: Switching gears, we have significantly improved our capital structure through several events since the beginning of the year.

Speaker Change: First, we used the net proceeds from the IPO to pay down $909 million in debt.

Speaker Change: This payment and our consistent ability to deleverage through solid financial performance resulted in upgrades of two notches from all three rating agencies.

Steve Oreskevich: We used these two outcomes to reprice our debt in late June, reducing our interest rate to SOFR plus 2.75%, down from silver plus four percent at the beginning of the year. And finally, after the quarter ended, most of the IPO green shoe was exercised for net proceeds of $103 million, and we used those proceeds, along with a bit of cash on hand, to pay down an additional $111 million of debt. We ended the quarter with $1.36 billion of total debt and net debt of $1.29 billion.

Speaker Change: We use these two outcomes to reprice our debt in late June , reducing our interest rate to SOFR plus 2.75 percent.

Speaker Change: down from SOFR plus 4% at the beginning of the year.

Speaker Change: And finally, after the quarter ended, most of the IPO green shoe was exercised for net proceeds of $103 million, and we used those proceeds, along with a bit of cash on hand, to pay down an additional $111 million of debt.

Speaker Change: We ended the quarter with $1.36 billion of total debt.

Steve Oreskevich: On a trailing 12-month basis, our net debt to adjusted EBITDA leverage is 3.7 times, down from 6.6 times at the beginning of the year. And if one were to adjust the leverage ratio to reflect the additional debt paydown in July, it would have decreased to 3.4%. Unleveraged free cash flow was $50 million in the second quarter of 2024 compared to $77 million in the prior year. Our unlevered free cash flow includes a tax burden of $26 million in Q2 versus $6 million last year as we are a full taxpayer. Our capital allocation priorities will remain the same.

Speaker Change: and net debt of $1.29 billion.

Speaker Change: On a trailing 12-month basis, our net debt to adjusted EBITDA leverage is 3.7 times, down from 6.6 times at the beginning of the year.

Speaker Change: And if one were to adjust the leverage ratio to reflect the additional debt paydown in July , it would have decreased to 3.4 times.

Speaker Change: Unleveraged free cash flow was $50 million in the second quarter of 2024, compared to $77 million in the prior year.

Speaker Change: Our unlevered free cash flow includes a tax burden of $26 million in Q2 versus $6 million last year, as we are a full taxpayer.

Speaker Change: Our capital allocation priorities remain the same.

Steve Oreskevich: We expect to continue to de-lever the balance sheet, targeting approximately one turn a year. We continue to invest in the business to drive sustainable top-line growth, and we will also look at opportunities for inorganic growth based on our disciplined acquisition criteria. As evidenced by the financial discussion, we had a solid first half of 2024 and are confident in our outlook for the remainder of the year. For fiscal 2024, we expect revenue to be within the range of $902 to $918 million.

Speaker Change: We expect to continue to de-lever the balance sheet, targeting approximately one turn a year.

Speaker Change: We continue to invest in the business to drive sustainable top-line growth.

Speaker Change: And we will also look at opportunities for inorganic growth based on our disciplined acquisition criteria.

Speaker Change: As evidenced from the financial discussion, we had a solid first half of 2024 and are confident in our outlook for the remainder of the year.

Speaker Change: For fiscal 2024, we expect revenue to be within the range of $902 to $918 million.

Steve Oreskevich: At the midpoint, this represents 15% growth over 2023. For additional context, we expect both subscription and volume-based revenue to grow by over 10% year-over-year. We have also considered the seasonality aspect of patient payments processed on the software platform, which is typically more robust in the first half of the year because patient deductibles reset at the beginning of each. Additionally, we experienced revenue overperformance in Q2 due to the impact of rapid implementations as we helped providers. Our full-year guidance reflects an expectation of normal implementation timelines going forward.

Speaker Change: At the midpoint, this represents 15% growth over 2023.

Speaker Change: for additional context we expect both subscription and volume-based revenue to grow by over ten percent year-over-year

Speaker Change: We have also considered the seasonality aspect of patient payments processed on the software platform.

Speaker Change: which is typically more robust in the first half of the year because patient deductibles reset at the beginning of each year.

Speaker Change: Additionally, while we experienced revenue overperformance in Q2 due to the impact of rapid implementations as we helped providers,

Speaker Change: Our full year guidance reflects an expectation of normal implementation timelines going forward.

Steve Oreskevich: Our expectations for adjusted EBITDA incorporate public company expenses, continued investment in client support, innovation, and cybersecurity, along with higher channel partner commission costs due to strong sales. Factoring in these items, we expect to deliver a just-to-leave revenue between $360 and $368 million, representing nine percent year-over-year growth at the midpoint of guidance along with an adjusted EBITDA margin of 40 percent for 2020. We are now ready to answer your questions. Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Speaker Change: Our expectations for adjusted EBITDA incorporate public company expenses, continued investment in client support, innovation, and cybersecurity, along with higher channel partner commission costs due to strong sales.

Speaker Change: Factoring in these items, we expect to deliver adjusted EBITDA between $360 and $368 million, representing 9% year-over-year growth at the midpoint of guidance, along with an adjusted EBITDA margin of 40% for 2024.

Speaker Change: We are now ready to answer your questions.

Speaker Change: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. We ask that you please limit yourself to one question and one follow-up. One moment as we go to our first question.

Operator: We ask that you please limit yourself to one question and one follow-up. One moment as we go to our first question, and our first question comes from the line of Anne Samuel with J.P. Morgan. Your line is open. Please go ahead.

Speaker Change: And our first question comes from the line of Anne Samuel with J.P. Morgan. Your line is open. Please go ahead. Thank you.

Anne Samuel: Hey guys, congrats on the great print and thanks for taking the question. I was hoping maybe you could talk a little bit about, you know, in your conversations with clients, you know, kind of post-change disruption. How are they thinking about, you know, kind of how they were historically tied to, you know, one vendor and that caused them some disruption or an appetite for diversification so they don't end up, you know, kind of being stuck again? How are they talking about that?

Speaker Change: How are they thinking about, you know, kind of how they were historically tied to, you know, one vendor and that caused them some disruption? Are you talking about an appetite for diversification so they don't end up, you know, kind of being stuck again? How are they talking about that and how are they thinking about, you know, vendor diversification things?

Matt Hawkins: And how are they thinking about, you know, vendor diversification? Thanks, Andy, for the question. This is Matt.

Speaker Change: Thanks, Andy, for the question. This is Matt.

Matt Hawkins: Let me try to provide our perspective. We are, first of all, very grateful to be in a position where we can help the thousands of providers as we've described. I think we were able to not only showcase the speed and ability of Waystar and our team members to rapidly respond to help these providers, but I think we did so, as we also mentioned in the PREPARE remarks, using standard Waystar agreements that, as we've described, are multi-year in nature with auto-renewing aspects thereafter.

Speaker Change: Let me try to provide our perspective. We, first of all, we're

Speaker Change: We're very grateful to be in a position where we could help the thousands of providers as we've described. I think we were able to not only showcase the speed and ability of Waystar and our team members to rapidly respond to help these providers.

Speaker Change: But I think we did so, as we also mentioned in the PREPARE remarks, using standard Waystar agreements that, as we've described, are multi-year in nature with auto-renewing aspects thereafter.

Matt Hawkins: What we believe is the majority of the clients that move to the Waystar platform are looking certainly for a cyber-secure platform, and we, as described, will be vigilant and focused on cybersecurity. We think while there is some chatter or market noise around needing redundancy or having a resilient network, we also believe that that could be rather inefficient. You know, the question would be, will people have multiple EHR solutions because they want redundancy? That just doesn't seem very tenable.

Speaker Change: What we believe is the majority of the clients that move to the Waystar platform

Speaker Change: are looking certainly for a cyber secure platform and we as described will be vigilant and focused on cyber security posture.

Speaker Change: We think while there is some chatter or market noise around needing redundancy or having a resilient network, we also believe that that could be rather inefficient.

Speaker Change: A question would be, will people have multiple EHR solutions because they want redundancy, that just doesn't seem very tenable.

Matt Hawkins: And so what we'll focus on is establishing that we can be a trusted partner. We're proving that now. We're actually beginning to have conversations with many of these clients about expanding the use of the Waystar software platform to include other software modules, and I hope that's a helpful perspective. It is and sounds like a great opportunity for you. You know, maybe just my follow-up would be on the back half volume-based revenue expectations. I was hoping you could just provide a little bit more color there. Maybe that's what's driving that.

Speaker Change: And so what we'll focus on is establishing that we can be a trusted partner. We're proving that now. We're actually beginning to have conversations with many of these clients about expanding the use of the Waystar software platform to include other software modules.

Speaker Change: And I hope that's a helpful perspective.

Speaker Change: It is, and sounds like a great opportunity for you. You know, maybe just my follow-up would be on the back half volume-based revenue expectations. I was hoping you could just provide a little bit more color there, maybe what's driving that. Thank you. Okay, let me turn to Steve for that one.

Steve Oreskevich: Thank you. Okay, let me turn to Steve for that one. Thanks, man.

Steve Oreskevich: Thanks, Annie. Yeah, so at the midpoint of guidance, 15% for the full year would imply roughly about 12.5% year-over-year growth in the second half of the year. You know, we did see and talked about in the walk from, you know, the first half of the year 19% to more of a normalized view of 13%. I did mention in the prepared remarks patient payment volume coming in stronger in the first half of the year, meaning we've seen patients utilizing the healthcare system and the amount of payments being greater than what we've seen in prior years. So we've reflected that in the second half of the year expectations.

Steve Oreskevich: Thanks, man. Thanks, Annie. Yeah, so at midpoint of guidance, 15% for the full year would imply roughly about 12.5% year-over-year growth in the second half of the year.

Speaker Change: You know, we did see and talked about in the walk from, you know, the first half of the year, 19% to more of a normalized view of 13%. I did mention in the prepared remarks.

Speaker Change: patient payment volume coming in

Speaker Change: utilizing the health care system and the amount of payments being greater than what we've seen in prior years.

Speaker Change: We've reflected that in the second half of the year expectations. I think you also see in the deck, you may not have had a chance to look at it yet, but the investor deck we put on our website.

Steve Oreskevich: I think you also see in the deck, you may not have had a chance to look at it yet, but the investor deck we put on our website, that obviously we've continued to grow for the past several quarters now and continue to grow sequentially the subscription-based revenue. And I think that's a fair assumption as you think about the second half of the year, that sequential growth, I think. What we reflected in that back half of the year for volume-based business is the overperformance or greater performance that we've seen from the patient payments side of the business for the first half of the year. Yeah, some seasonality that's natural in our business. Correct.

Speaker Change: that obviously we've continued to grow for the past several quarters now and continued to grow.

Speaker Change: sequentially the subscription-based revenue, and I think that's a fair assumption to, as you think about the second half of the year, that sequential growth, I think.

Speaker Change: What we reflected in that back half of the year for the volume-based is the overperformance or greater performance that we've seen from the patient payments side of the business for the first half of the year. Yeah, some seasonality that's natural in our business.

Steve Oreskevich: Very helpful. Thank you. Thank you, and one moment as we move on to our next question. And our next question is going to come from the line of Adam Hotchkiss with Goldman Sachs. Your line is open. Please go ahead.

Speaker Change: Correct.

Speaker Change: very helpful thank you

Speaker Change: Thank you and one moment as we move on to our next question.

Speaker Change: And our next question is going to come from the line of Adam Hotchkiss with Goldman Sachs. Your line is open, please go ahead.

Adam Hotchkiss: Great, good speaking with you all, and thanks so much for taking the questions. I guess to start, I'd be curious about what you're seeing in the software buying environment, agnostic of the cyber attack demand increase. How would you describe the prioritization stack for purchase decision makers at hospitals and health systems for RCM technology? And then I just have a quick follow-up. Thanks, Adam.

Adam Hotchkiss: Great, good speaking with you all and thanks so much for taking the questions. I guess to start, I'd be curious on what you're seeing in the software buying environment, agnostic of the the cyber attack demand increase. How would you describe the prioritization stack for purchase decision makers at the hospital and health systems for RCM technology? And then I just had a quick follow-up.

Matt Hawkins: We see it as very important. RCM is a top priority for decision makers as we reflect on the broader macro market, so to speak. I think it's fair to acknowledge that healthcare is an important industry for all of us. It relates to us personally. In the United States, we spend a substantial amount of money on healthcare each year, but there's also significant waste, more than $750 billion a year of waste.

Speaker Change: Thanks, Adam. We see it as very important. RCM is a top priority to decision makers as we reflect on the broader macro market, so to speak. I think it's fair to acknowledge that healthcare is an important industry for all of us. It relates to us personally. In the United States, we're spending a substantial amount of money on healthcare each year where there's also significant waste, more than $750 billion a year of waste.

Matt Hawkins: And so we see that what's on decision makers' minds is how to gain more operating efficiency within their system. We know that hospital margins have been challenged. We've seen that smoothing out over the last six months. What we've noted is that there is a desire amongst prospects and clients to consume more of the Waystar software platform. There's an emphasis on platform versus point solution. I think part of that might be tied to some cybersecurity impact, because it's harder to cybersecure multiple point solutions than it is to work with a trusted partner that has a platform and a cybersecure approach. But when you think about broader economic macro trends, talk around potential recessions even, what we would say is healthcare as an industry is recession resistant. Not recession proof, but recession resistant.

Speaker Change: And so, we see what's on decision makers' minds is how to gain more operating efficiency within their systems.

Speaker Change: We know that hospital margins have been challenged.

Speaker Change: We've seen that smoothing out over the last six months when you read some different industry reports. What we've noted is that there is a desire amongst prospects and clients to

Speaker Change: consume more of the Waystar software platform. There's an emphasis on platform versus point solution. I think part of that might be tied to some cybersecurity impact, harder to cybersecure multiple point solutions.

Speaker Change: than it is to work with a trusted partner that has a platform and a cyber-secure approach.

Speaker Change: But when you think about broader economic...

Speaker Change: macro trends, you know, talk around potential recession even. What we would say is health care is an industry.

Speaker Change: is recession-resistant. Not recession-proof, but recession-resistant. Even during market downturns, people still need health care services.

Matt Hawkins: Even during market downturns, people still need healthcare services. Well, I think Waystar has a perspective that we are helping decision makers because our software platform delivers operating efficiency. We are automating work, and we're reducing errors associated with all of the billing, insurance, and interactions and collection interactions between providers and insurance companies and providers and patients. We're bringing efficiency and automation to that. And so we have become an important part of the dialogue.

Speaker Change: Well, I think Waystar, as a perspective, is that we are helping decision makers because our software platform delivers operating efficiency.

Speaker Change: We are automating work.

Speaker Change: We're reducing air associated with all of the billing, insurance.

Speaker Change: and

Speaker Change: interactions and collection interactions between providers and insurance companies and providers and patients. We're bringing efficiency and automation to that. And so we become an important part of the dialogue. We've seen an uptick.

Matt Hawkins: We've seen an uptick in our RFPs. We like the position of our bookings pipeline and our high-performing sales organization that is having conversations with decision makers that we feel like gives us a sense of confidence as we look into this economy, as we stay close to decision makers, and as we continue to do work at Waystar to execute on our business. Okay, great. Appreciate all that detail.

Speaker Change: in our RFPs.

Speaker Change: We like the position of our bookings pipeline.

Speaker Change: our high-performing sales organization are having conversations with decision makers that we feel like you know gives us a sense of confidence as we as we look into this economy as we stay close to decision makers and as we continue to do work at Waystar to execute on our business plan.

Matt Hawkins: It was really helpful. And then, Steve, you mentioned the financial impact of the cyber attack at one of your competitors. Could you maybe just talk about what you're baking in there for the back half of the year? Are you continuing to see customers come in the door? As recent as the last couple of months?

Speaker Change: Okay, great. I appreciate all that detail. It was really helpful. And then, Steve, you mentioned the financial impact from the cyber attack of one of your competitors. Could you maybe just talk about what you're baking in there for the back half of the year? Are you continuing to see customers come in the door as recent as the last couple of months? Or is that faded as, you know, February 21st moves further in the background? And then, you know, when you think about the...

Steve Oreskevich: Or is that faded as, you know, February 21 moves further in the background? And then, you know, when you think about the dollar amounts that you're baking in for the back half of the year, you know, how much of what's in guidance now is just what you've already done? And how do you view the upside potential, you know, from the creation of some of these relationships and module cross out? Thanks so much.

Speaker Change: the dollar amounts that you're making in for the back half of the year you know how much of what in got is now is just what you've already done and how do you view the upside potential from the creation of some of these relationships and module crosssell thanks so much

Steve Oreskevich: Yeah, thanks, Adam. I think it's, as you alluded to, in the, you know, we saw $9 million of uplift in the second quarter versus a typical cadence we have expected as a result of the competitor cyber attack, some of that being, you know, generated from greater business wins. We have very high win rates to begin with.

Speaker Change: Yeah, thanks Adam. I think it's as you alluded to in the you know we saw nine million dollars of uplift in the second quarter versus a typical cadence we have expected as a result of the competitor cyber attack some of that being

Speaker Change: generated from greater business wins. We have very high win rates to begin with. A lot of that also being generated from the faster implementation. It was kind of...

Steve Oreskevich: A lot of that is also being generated from the faster implementation. It's, you know, we've, it was kind of, While it was a bad event for the industry and it impacted clients, it also reinforced what we have been saying in the past, that it does not take long to switch to Waystar and implement, and we can implement people quickly. It generally is the timeline in which it falls in the client readiness and in some of the payer connectivity readiness.

Speaker Change: you know, while it was a bad event for the industry and it impacted clients.

Speaker Change: It also reinforced what we have been saying in the past, that it does not take long to switch to Waystar and implement, and we can implement people quickly, it generally is the timeline in which it falls in the client readiness and in some of the payer connectivity readiness.

Steve Oreskevich: I think as far as we looked out into the second half of the year, I think I briefly mentioned we would expect those implementation timelines for clients that we have continued to sign new clients to revert back more towards the norm. That is sort of how we were thinking through it.

Speaker Change: I think as far as we looked out into the second half of the year, I think I briefly mentioned, you know, we would expect those implementation timelines for clients that we've continued signing new clients to revert back more towards the norm.

Steve Oreskevich: I think it is appropriate for us in our initial foray into the public markets to think in that manner. We also, as you alluded to, have a very good track record of cross-selling into our client base. Obviously, there is a bolus of clients that are newer to us and that we brought on board in the second quarter. I think also, as we think through the second half of the year, do we see opportunities for cross-sell and further revenue expansion? I think yes, we definitely do.

Speaker Change: right and that sort of how we were thinking through it and i think it's appropriate for us as a in our initial forraye of the public markets to think in that manner

Speaker Change: We've also, as you alluded to, have a very good track record of

Speaker Change: cross-selling into our client base. And obviously, there's a bolus of clients that are newer to us and that we brought on board in the second quarter.

Speaker Change: We, you know, I think also are, as we think through the second half of the year, do we see opportunities for cross-sell and further revenue expansion? I think, yes, we definitely do. I think we would characterize that more towards a longer term and enduring out in follow-on years versus seeing an immediate impact coming in the second half.

Steve Oreskevich: I think we would characterize that more towards the longer term and enduring out in follow-on years versus seeing an immediate impact coming in. I would also add, Adam, that we are learning through this period of time. We're very active in helping these clients, as I mentioned, to supplement what Steve said. We do see an uptick in RFPs where Waystar is getting invited to participate in more and more of these conversations. Some of those, many of those are clearinghouse related.

Speaker Change: of the year.

Speaker Change: I would also add, Adam, that we are learning through this period of time.

Speaker Change: We're very active in helping these clients, as I mentioned.

Speaker Change: to supplement what steve said we do see an uptick in r fp where waste getatingting invited to participate in more and more of these conversations some of those many of those are are clearing house related and so we see as we describe the near term call two thousand and twenty four impact ment but will' say the longer term opportunity will continue to learn and and hopefully be able to describe more as we

Matt Hawkins: And so we see, as described, the near-term 2024 impact. But we'll say the longer-term opportunity will continue to learn and hopefully be able to describe more as we get a little further out into the future. But one thing for sure, we are focused on having conversations with clients and prospects who we know we can help. And once they become a client of Waystar, then we naturally have cross-selling and upsell. Okay, all really helpful.

Speaker Change: Get a little further out in the future. But one thing for sure, we are focused on having conversations with clients and prospects who we know we can help. And once they become a client of Waystar, then we naturally have cross-sell and up-sell conversations.

Matt Hawkins: Thank you, Matt. Thank you, Steve. Thank you. Thank you, and one moment as we move on to our next question. And our next question is going to come from the line of Socket Collier with Barclays. Your line is open. Please go ahead. Okay, great. Hey, Matt.

Speaker Change: with our

Speaker Change: Okay, all really helpful. Thank you, Matt. Thank you, Steve. Thank you.

Speaker Change: Thank you, and one moment as we move on to our next question.

Speaker Change: And our next question is going to come from the line of Socket Collier with Barclays. Your line is open, please go ahead.

Socket Collier: Hey, Steve. Nice result here, and congratulations on your first quarter as a public company. Thank you, Saka. It's sure nice to have this one done, and we look forward to the conversation. I'm sure Matt, maybe just to start with you, maybe just to change it up a little bit.

Socket Collier: okay great hey matt aaststeve nice result here and congrverats in your first quarterters of public company

Steve Oreskevich: Thank you, Saka. It's sure nice to have this one, you know, done and we look forward to the conversation.

Matt Hawkins: It was great to see the upside, volume-related revenue, and I know that there was some timing benefit there, but can we just talk a little bit about the patient payments business and why you maybe feel like there's an opportunity for share gain in that market?

Socket Collier: I'm sure. Matt, maybe just to start with you, maybe just to change it up a little bit. It was great to see the upside.

Speaker Change: volume related revenue and and I know that there was some timing benefit there but can we just talk a little bit about the patient payments business and and why you maybe feel like there's an opportunity for share gain in that market?

Socket Collier: Yes.

Matt Hawkins: You know, we now understand an important part of a provider's total revenue is increasingly coming from patients themselves who, as you know, are participating in high-deductible health plans at a faster rate than ever. Their out-of-pocket responsibility is increasing each year. And so Waystar, as we've described, as we talk about the Waystar software platform has united insurance, payer interactions for providers, both commercial insurance as well as government insurance, think Medicare and Medicaid, as well as patient payment processing, all on a single cloud-based platform.

Socket Collier: We.

Matt: You know, we now understand an important part of a provider's total revenue.

Speaker Change: increasingly coming from patients themselves who, as you know, are participating in high deductible health plans at a faster rate than ever. Their out-of-pocket responsibility is increasing each year.

Speaker Change: And so Waystar, as we've described, as we talk about the Waystar software platform, has united insurance,

Socket Collier: and payer interactions.

Socket Collier: for providers both commercial insurance as well as government insurance think medicare and medicaid as well as patient payment

Matt Hawkins: We think that's very important because it gives providers a total view of their sources of payment. It's also important because it positively impacts patients. We know from our own work and from hearing and listening to patients and perhaps experiencing that for ourselves, that patients want more transparency in their care. They want more understanding of what their financial responsibility is. And oftentimes, they want that before they receive healthcare versus the 60 or 90 days post-care.

Socket Collier: processing all on a single cloud-based platform. We think that's very important because it gives the provider a total view of their sources of payment. It's also important because it positively impacts patients.

Socket Collier: We know from our own work and from hearing and listening to patients, and perhaps experiencing that for ourselves, that patients want more transparency in their care. They want more understanding of what their financial responsibility is.

Matt Hawkins: Well, that's where Waystar software can really be helpful. Because of the 5 billion insurance transactions we process each year within our platform, we gain a tremendous amount of insight and intelligence that informs what the patient's financial responsibility is likely to be. And we can produce a highly accurate patient payment estimate, often pre-care, that then the provider can use to engage with the patient to put the appropriate payment form on file within Waystar's software. We call it the Waystar patient wallet.

Speaker Change: And oftentimes they want that before they receive health care versus the 60 or 90 days post care. Well that's where Waystar software can really be helpful. Because of the 5 billion insurance transactions we're processing each year within our platform.

Socket Collier: We gain a tremendous amount of insight and intelligence.

Socket Collier: that informs what the patient financial responsibility is likely to be and we can produce a highly accurate patient payment estimate.

Socket Collier: often precare

Socket Collier: that then the provider can use to engage with the patient to put appropriate payment form on file within Waystar's software, we call it the Waystar Patient Wallet.

Matt Hawkins: And then begin to interact with that patient, put them on a financial care plan, or be able to process the payment appropriately over a period of time. We're seeing that capability take hold. And so that is influencing our volumes. We know that when providers use this portion of our software, the patient payment portion of our software. It's increasing patient satisfaction, but it's also increasing collection rates and improving time to collection and overall likelihood of getting paid. And so those things are, at a kind of a high level, absolutely influencing the way providers are thinking about patient payments.

Socket Collier: and then begin to interact with that patient, put them on a financial care plan, or be able to process the payment appropriately over a period of time.

Socket Collier: We're seeing that capability take hold, and so that is influencing our volumes. We know that when providers use this portion of our software, the patient payment portion of our software.

Socket Collier: It's increasing certainly patient satisfaction, but it's also increasing collection rates and improving time to collection and overall likelihood of getting collected.

Socket Collier: Collection.

Socket Collier: And so those things are, at a kind of a high level, are absolutely influencing the use of how providers are thinking about patient payments. And we also know that providers see patients.

Matt Hawkins: And we also know that providers see patients, I think historically you might say, well, provider organizations are just treating patients carefully with care, but also like a transaction. Increasingly, we see many large health systems and hospitals view the patient in kind of a long-term relationship, a patient relationship that they would like to see. So all those factors are influencing patient payment volumes that we're processing on the software platform. We're bringing improvement, transparency, and elegance to what has historically been a very cumbersome process for both providers. That makes a lot of sense.

Socket Collier: I think historically you might say, well, provider organizations are just treating patients carefully with care, but also like a transaction. Increasingly, we see many large health systems and hospitals

Socket Collier: view the patient in kind of a long-term relationship a patient relationship that they like to sustain

Socket Collier: and so all those factors are influencing patient payment volumes that we're processing on the software platform. We're bringing improvement and transparency and elegance to what has historically been a very cumbersome process for both providers and patients.

Socket Collier: That makes a lot of sense. Steve, maybe for my follow-up, for you...

Steve Oreskevich: You know, that 13% normalized growth number was actually a very helpful metric.

Speaker Change: And apologies if I missed it, but can we just go maybe one level deeper into the bridge from the 20% reported growth to 13?

Socket Collier: I think you mentioned something about $9 million in terms of benefit from sort of competitive disruption, but can you just maybe walk us through that bridge from 20 to 13? How much was from that? How much was from outside patient payments or any other granularity that you can provide to help bridge that?

Steve Oreskevich: How much was from, you know, outside patient payments or any other granularity that you can provide to help bridge that? Yeah, definitely. So you are correct. There were probably, if you think about it for the second quarter, there were three items.

Speaker Change: Yeah, definitely. Socket. So you are correct. There were probably if you think about it for the second quarter There's three items if you want to think it more holistically the first half of the year I'd add a fourth item that we talked about in our s1 filing

Steve Oreskevich: If you want to think about it more holistically, the first half of the year, I'd add a fourth item that we talked about in our S1 filing of a contract, a customer contract being terminated by request of that client in the March timeframe as a result of them spinning off a portion of their business. So again, if you think about it from the second quarter, it's really the work surrounding the competitor cyber attack. That's probably the most meaningful item on that bridge.

Speaker Change: of a contract, a customer contract being terminated by request of that.

Socket Collier: Client in in the March time frame as a result of them spinning off a portion of their business. So

Socket Collier: Again, if you think about it from the second quarter, it's really the work.

Speaker Change: Surrounding the competitor cyber attack, that's probably the most meaningful item in that bridge. Second is the fact that the amount of transactions, patient payment transactions that we saw come through.

Steve Oreskevich: Second is the fact that the amount of transactions, patient payment transactions that we saw come through our clients during the second quarter were above what we've seen historically. Then, third, as we had indicated in the prepared remarks, just the timing of two small acquisitions in the second half of 23 and their benefit when you're looking at Q2 year-over-year growth rate. I would expand each of those three as we look to the first half of the year, the year-over-year growth rate, and then add that last item.

Speaker Change: our clients during the second quarter being above what we've seen historically. And then the third, as we had indicated in the prepared remarks, just the timing of two small acquisitions in the second half of.

Speaker Change: 23 in their benefit when you're looking at Q2 year-over-year, you know, growth rate. And I would expand each of those three.

Speaker Change: As we look to the first half of the year, year over year growth rate and then add on that that last item that last item we

Steve Oreskevich: That last item we had mentioned in the S1 filing was about roughly $4 million of benefit to the first quarter. If you think about that, versus ratable timing over the rest of the year, that would be about $2.5 million.

Socket Collier: Mentioned in the S-1 filing was about, you know, roughly $4 million of benefit to the first quarter, if you think about that, versus ratable timing over the rest of the year at the halfway mark. That would be about $2.5 million worth of benefit.

Steve Oreskevich: Very helpful. Thanks, guys. You're welcome.

Ryan Daniels: Thank you. One moment as we move on to our next question, and our next question is going to come from the line of Ryan Daniels with William Blair. Your line is open. Please go ahead.

Speaker Change: Very helpful. Thanks, guys.

Speaker Change: Thank you. One moment as we move on to our next question. And our next question is going to come from the line of Ryan Daniels with William Blair. Your line is open. Please go ahead.

Matt Hawkins: Yeah, good evening, guys. I'll add to the chorus of congratulations and thanks for taking my questions. Matt, maybe I'll start with my first question for you. You mentioned there's a broader adoption of the full solution platform. And I'm curious about two things.

Ryan Daniels: yeah good evening guys i'll add to the course of congratulations and thanks for taking my questions

Ryan Daniels: Matt, maybe I'll start with my first for you. You mentioned there's a broader adoption of the full solution platform.

Matt Hawkins: Number one, is that really among new clients moving over to Waystar? Are you seeing that same desire among your current client base? And then, number two, depending on your answer there, does that change at all your sales team or go-to-market strategy? Thanks, Ryan. I appreciate your thoughtful question.

Ryan Daniels: And I'm curious, two things. Number one, is that really among new clients moving over to Waystar? Are you seeing that same desire among your current client base? And then number two, depending on your answer there, does that change at all your sales team or go-to-market strategy?

Matt: Thanks, Ryan.

Matt Hawkins: We're noticing a couple of things that we're particularly pleased with and encouraged by. We are noticing that there are increasingly more clients that are utilizing the end-to-end platform from the start. One of the metrics, as you'll recall, that we report on is the number of clients that are producing over $100,000 of LPM revenue.

Speaker Change: We appreciate your thoughtful question. We.

Speaker Change: We're noticing a couple of things that we're particularly pleased with and encouraged by. We are noticing that there are increasingly more clients that are utilizing the end-to-end platform from the start. One of the metrics, as you'll recall, that we report on is the number of clients.

Speaker Change: that are producing over one hundred thousand dollars of lpm revenue so we we' start there and we believe that's an important metric because it measures both to your question the new clients to join us in consuming our

Matt Hawkins: So we start there, and we believe that's an important metric because it measures both, to your question, the new clients that join us and are consuming several modules or perhaps even the whole platform at the outset. It also measures, as we grow, how we may land in one area. For example, in Q2, we had, as you know, the urgent work of helping clients begin to use the Waystar Clearinghouse. Well, that's a software module within the Waystar software platform.

Speaker Change: several modules or perhaps even the whole platform at the outset.

Speaker Change: It also measures as clients, we may land in one area, for example in Q2 we had, as you know, the urgent work of helping clients begin to use the Waystar Clearinghouse. Well that's a software module within the Waystar software platform.

Matt Hawkins: And, you know, we typically land there, and then we'll expand our relationship with them over time. And so we're pleased with both the new client pursuit, which where we were organized with high-performing sales team members, as well as our efforts to once land to expand the relationship, and so that metric that we report on is a reflection of both new and existing clients who are consuming more and more of the Waystar software.

Speaker Change: And, you know, we land there typically and then we'll expand the relationship with them over time. And so we're pleased with both the new client pursuit, which where we were organized.

Speaker Change: with high performing sales team members, as well as our efforts to, once landed, to expand the relationship. And so that metric that we report on is a reflection of both new and existing clients who are consuming more and more of the Waystar software platform.

Matt Hawkins: Yeah, I think, Brian, maybe to add a little bit of financial context surrounding your question, and I think Saket may have asked about it or maybe alluded to it in his question to Matt as well, we documented or disclosed, sorry, in the S-1 that provider solutions generate about 70 percent of revenue in patient payment, solutions generate about 30 percent of the revenue, and for the first half of 2024, we've seen both, we've seen that sort of mix continue at substantially the same rate, and both, you know, which implies then both are growing well over 10 percent as well, so I think we like the totality of the solution offering, and I don't think we've seen any big shift in mix there, and think both markets, you know, the opportunity within the client base and the broader healthcare base for both sets of high-level family solutions are, still remains. I think that's right.

Speaker Change: Yeah, I think, Ryan, maybe the...

Speaker Change: add a little bit of financial context surrounding your question and i think socket may have asked about it or maybe alluded to it and is the question to mat as well if we documented or disclosed storyorry in the s one that provider

Speaker Change: solutions generate about 70% of revenue in patient payment.

Speaker Change: Solutions generate about 30%.

Speaker Change: of the revenue. And for the first half of 2024, we've seen both, we've seen that sort of mix.

Speaker Change: continue at substantially the same rate and both you know which which implies then both are growing well over 10% as well so I think we like the totality of the the solution offering and I don't think we've seen any big shift in mix.

Speaker Change: and think both markets. You know, the opportunity within the client base and the broader healthcare base for both sets of high-level family solutions still remains significant. I think that's right. And Ryan, if it's okay, let me address the second part of your question, which was...

Steve Oreskevich: And Ryan, if it's okay, let me address the second part, focused on, given what we've seen, are there any kind of go-to-market team improvements? And what I'd say there is, as you'll know very well, we're going after a very large addressable market opportunity, about $15 billion a year, where we have a substantial opportunity to grow within the market. We feel like our new client pursuit is well organized, both in hospitals and health systems, as well as on the ambulatory side of our business.

Ryan Daniels: was focused on, given what we've seen, are there any kind of go-to-market team implications?

Speaker Change: And what I'd say there is, as you'll know very well, we're going after a very large addressable market opportunity.

Speaker Change: about $15 billion a year, where we have substantial opportunity to grow within the market. We feel like our new client pursuit is well-organized.

Speaker Change: both in hospitals and health systems as well as on the ambulatory side of our business.

Steve Oreskevich: And then we also, part of that market, that addressable market is, again, once we land a client, then we get right to work and expand those relationships and create a unique client experience so that they want to use more of our software. And I feel like we're well organized from a go-to-market perspective there as well. Perfect. Thank you so much.

Speaker Change: And then we also, part of that market, that addressable market is, again, once we land a client, then we get right to work and expand those relationships and create a unique client experience so that they want to use more of our software. And I feel like we're well organized from a go-to-market perspective there as well.

Ryan Daniels: And given the two-part question, I'll go ahead and hop back in the queue for you. Thanks, guys. Thanks, Ryan. Thank you. One moment as we move on to our next question. And our next question is going to come from the line of Elizabeth Anderson with Evercore ISI. Your line is open. Please go ahead.

Speaker Change: Perfect. Thank you so much. And given the two-part question, I'll go ahead and hop back in the queue for you. Thanks, guys. Thanks, Ryan.

Speaker Change: Thank you. One moment as we move on to our next question.

Speaker Change: And our next question is going to come from the line of Elizabeth Anderson with Evercore ISI. Your line is open. Please go ahead.

Elizabeth Anderson: Hi Guys, congratulations on your first quarter as a public company, and thanks so much for the question. I was wondering if you could comment on the visibility that you guys are getting sort of from the change situation, like if we think about the, you know, 1,117 customers that you announced over 100K in the quarter, that doesn't count some of these new ones that have come through. So, as we think about kind of that increased visibility that that brings you internally, I was wondering what you could potentially share with that, and then maybe as a follow-up, Thanks.

Elizabeth Anderson: Hi guys, congratulations on your first quarter as a public company and thanks so much for the question. I was wondering if you could comment on the visibility that you guys are getting sort of from the change situation.

Elizabeth Anderson: Like if we think about the, you know, 1,117 customers that over 100K you announced in the quarter, like that doesn't count some of these new ones that have come through. So as we think about kind of that increased visibility that that brings you internally, I was wondering what you could potentially share with that. And then maybe as a follow-up, I have a question about the bookings and pipeline. Thanks.

Matt Hawkins: So, we at Waystar, and thank you, Elizabeth, pride ourselves on staying very close to our clients and to opportunities within our pipeline, where we track things, we measure a lot of things. As you can appreciate, we know a lot; we're learning. There's been a surge of work, as we've described, to help many new providers begin to use the Waystar software platform. What I'd say is, we're continuing to help those clients begin to use Waystar and learn and identify opportunities that are beginning to show up in our booking pipeline of opportunities. So, we'll continue to track that and report our progress as we get the opportunity to visit with you.

Waystar: So, we at Waystar, and thank you Elizabeth, we pride ourselves on staying very close to our clients and to opportunities within our pipeline.

Speaker Change: where we track things, we measure a lot of things as you can appreciate.

Speaker Change: So we know a lot. We're learning. There's been a surge of work, as we've described, to help many new providers begin to use the Waystar software platform.

Speaker Change: What I'd say is...

Elizabeth Anderson: We're continuing to help those.

Elizabeth Anderson: Those clients begin to use Waystar and learn and identify opportunities that are beginning to show up in our bookings pipeline of opportunity. So we'll continue to track that and report our progress as we get the opportunity to visit with you in the future.

Speaker Change: Great, thank you.

Matt Hawkins: Thank you. Thank you, and one moment as we move on to our next question. And our next question is going to come from the line of Sean Dodge with RBC Capital Markets. Your line is open, please go ahead. Hey, good afternoon. This is Thomas Keller on for Sean.

Speaker Change: Thank you, and one moment as we move on to our next question.

Speaker Change: And our next question is going to come from the line of Sean Dodge with RBC Capital Markets. Your line is open. Please go ahead.

Speaker Change: Hey, good afternoon. This is Thomas Keller on for Sean. Congrats on the results and thanks for taking the questions.

Speaker Change: I wanted to follow up on the previous questions on patient payments, and I want to make sure I heard this right. Are you expecting this part of the business to sort of grow in tandem with the other solutions? Or are you expecting this to grow a little bit faster? Thanks.

Steve Oreskevich: I think if you think about the base, you know, the 70-30 split with provider solutions being 70% of the business, patient payments being 30% of the business, naturally, just due to the sort of the law of numbers, that growth rate for patient payment solutions is going to be a little bit larger than for provider solutions inherent in the expectation for the full year guidance. I would say though that obviously maintaining that 70-30 split that we've seen historically and seeing that in the first half is also part of it would be part of our expectations as well.

Speaker Change: Yeah, Tom, this is Steve. I think if you think about the base, you know, the 70-30 split with provider solutions being 70% of the business.

Speaker Change: patient payments, 30% of the business. Naturally just due to the sort of the law of numbers that that growth rate for patient payment solutions is going to be a little bit

Speaker Change: larger than provider solutions inherent in the in the expectation for the full year guidance.

Speaker Change: I would say, though, that, obviously,

Speaker Change: Maintaining that 70-30 split that we've seen historically and seeing that in the first half is also part of, would be part of our expectations as well. So we see both sides, or both, I shouldn't say sides, both.

Steve Oreskevich: So we see both sides, or both, I shouldn't say sides, both high-level product families growing very nicely, not only in the historical results but what we would expect for the rest of 2020. I appreciate that color.

Speaker Change: High-level product families growing very nicely, not only in the historical results, but what we would expect for the rest of 2024.

Steve Oreskevich: And then just a quick follow up on that. Are there any near term opportunities to drive first margin expansion in that business as well? Yeah, so we've talked about, I think, in our long-term target of low double-digit revenue growth annually and a 40% adjusted EBITDA margin, that we would look to, you know, look for opportunities as they made sense to reinvest in the business to maintain somewhere around that low double-digit, or sorry, that 40% plus adjusted EBITDA margin, investing in areas like bolstering an already strong cybersecurity posture or in generative AI solutions. Definitely, right?

Keller: I appreciate that, Keller. And then just a quick follow-up on that. Are there any near-term opportunities to drive first margin expansion in that business as well?

Speaker Change: Yeah, so we've talked about, I think, in our long-term target of low double-digit revenue growth annually and a 40% adjusted EBITDA margin that we would look to, you know, look for opportunities as they made sense to

Speaker Change: reinvest in the business to maintain somewhere around that low double digit or sorry that 40% plus adjusted EBITDA margin. Investing in areas like bolstering and already strong cyber security.

Speaker Change: cybersecurity posture or in generative ai solutions are there opportunities then that we would look at from a scalability perspective that would allow us to do that definitely right i think there's

Steve Oreskevich: I think there are opportunities as we look at those two acquisitions, the smaller acquisitions that we finalized in 2023, to sort of, you know, finish the pot surrounding synergy expectations that we have associated with them. I think there are also opportunities and projects that we're looking at internally that look at, you know, that 60% direct cost associated with patient payments and our ability to look at whether it's the interchange rails on which those payments are processed to better them from a cost structure perspective or for those interactions with the patient population that still occur through a printed statement that gets mailed.

Speaker Change: There's opportunities as we look at those two acquisitions, the smaller acquisitions.

Speaker Change: that we finalized in two thousand and twenty three to sort of

Speaker Change: You know, finish the pot surrounding synergy expectations that we have associated with them. I think there's also opportunities and projects that we're looking at internally that looks at, you know, that 60%.

Speaker Change: or 60% direct cost associated.

Speaker Change: With patient payments and our ability to look at whether it's the interchange rails in which those payments are processed on to better those from a cost structure perspective, or

Speaker Change: for those interactions with the patient population that still occurs through a printed statement.

Steve Oreskevich: There's an opportunity to change that into a more digital interaction that, long-term, we think benefits the overall margin profile of the business and allows us to continue to invest back in the business, you know, running it at 40% plus adjusted EBITDA. It's very helpful. Thanks again for the color.

Speaker Change: that gets mailed, there's an opportunity to change that into a more digital interaction that long-term we think benefits the overall margin profile of the business and allows us to continue to invest back in the business, running it at 40% plus adjustment.

Speaker Change: to leave it that.

Steve Oreskevich: You're welcome, Tom. Thank you, and one moment as we move on to our next question. And our next question is going to come from the line of George Hill with DB. Your line is open. Please go ahead.

Speaker Change: That's very helpful. Thanks again for the color.

Speaker Change: You're welcome, Tom. Thank you. And one moment as we move on to our next question.

Speaker Change: And our next question is going to come from the line of George Hill with DB. Your line is open. Please go ahead.

George Hill: Yeah, good afternoon, guys. Welcome to the public markets. And thanks for taking my questions. Matt and Steve, I guess as it relates to the patient payments portion of the business, we talked about the split, and I know it's a smaller part.

George Hill: Yeah, good afternoon guys. Welcome to the Public Markets and thanks for taking my questions. Matt and Steve, I guess on, as it relates to the patient payments portion of the business, we talked about the split and I know it's a smaller part, but I guess the question I would ask is, have you guys seen any sign of consumer weakness?

Speaker Change: as it relates to the patient financial responsibility part of the business.

Speaker Change: And I guess my follow-up question there would kind of be, like, I'm trying to understand, like, is the core...

Speaker Change: Like, is the collections portion growing in line with what unit sales look like or whatever is the right way to think of that metric? But this is really like a patient financial responsibility slash consumer credit question. Like, are you guys seeing any erosion in that part of the business? And then I have a quick follow-up if you don't mind.

Steve Oreskevich: But I guess the question I would ask is, have you guys seen any sign of consumer weakness as it relates to the patient financial responsibility part of the business? And I guess my follow-up question there would be, I'm trying to understand, like, is the core, like is the collections portion growing in line with what unit sales look like or whatever is the right way to think of that metric, but this is really like a patient financial responsibility slash consumer credit question like are you guys seeing any erosion in that part of the business? And then I have a quick follow-up, if you don't mind This is Steve.

Steve Oreskevich: I think, you know, what we've seen is actually stronger interaction and payments coming from patients in the first half of the year. And it's reflected in a stronger meaning above and beyond the normal seasonality we would expect to see, right? And we reflected that in the prepared or prepared comments, sorry. If we think about your question, I think the second part of your question is, how do we think about the potential, you know, weakness, if you want to call it that, in the consumer aspects of it that may surface in the second half of the year as we're hearing in, you know, commentary from other companies more broadly. I don't think that we've seen anything specific to date that would state that.

Steve Oreskevich: Yeah, certainly, George. This is Steve. I think, you know, what we've seen is actually stronger, you know, interaction and payments coming from patients in the first half of the year, and it's reflected stronger meaning above and beyond the normal seasonality we would expect to see.

Speaker Change: and we've reflected that in the prepared comments. If we think about your question, I think the second part of your question is, how do we think about the potential?

Speaker Change: weakness, if you want to call it that, in in the consumer aspects of it that may may surface in the second half of the years. We're hearing in, you know, commentary from other companies more broadly. I don't think that we've seen anything specific to date.

Steve Oreskevich: But I think the other thing is, in being prudent and in our expectations and guidance range, I think we've accounted for that as we think through the overall revenue guidance that we've provided of, you know, top line growth of 918 to 990. That's great, Collar. And my quick follow-up would be, some other competitors in the spaces have commented that the sales environment into the provider setting seems to be getting a little bit more challenging, and they are kind of trying to migrate the sales model from, I'll call it, more modular to more bundled.

Speaker Change: That would state that, but I think the other thing is in being prudent and in our expectations and guidance range, I think we've accounted for that as we think through the overall revenue guidance that we've provided of

Speaker Change: a top-line growth of $918 million to $902 million.

Collar: Okay, that's great, Collar.

Speaker Change: My quick follow-up would be, some other competitors in this space have commented that the sales environment into the provider setting seems to be getting a little bit more challenging, and are kind of trying to migrate the sales model from, I'll call it, more modular to more bundled, and would just...

Steve Oreskevich: And we just, I'd kind of ask if you feel like you're seeing any incremental challenges kind of in the sales process, and kind of just if that would drive any changes in how you guys think about that market strategy. On Georgia's map, the short answer is we have a strong and compelling ROI-based sales approach. We have many referenceable clients and case studies that support this ROI and our approach. I can't comment on what other companies you're referencing.

Speaker Change: I'd kind of ask if you feel like you're seeing any incremental challenges kind of in the sales process and kind of just if that would drive any changes in how you guys think about the market strategy.

Matt: Hi George, it's Matt.

George Hill: a short answer is we have a strong and compelling rroi based sales approach

Speaker Change: We have many referenceable clients and case studies that support this ROI and our approach, I can't comment on what other companies you're referencing.

Matt Hawkins: What I can say is that we have a robust pipeline of opportunities. We take an approach where it's very thoughtful. We discover, we go, we have thoughtful dialogue, and we understand the needs and the pain points of these prospects and clients that we work with as we create and identify opportunities. And then we're bringing appropriate resources and expertise to bear, reflecting our understanding of how to improve. And that leads to really good conversations and engagement with clients. And so I would say our ROI-based approach is one that we feel confident in and we'll continue to emphasize as we go. I thought that was the case,

Speaker Change: What I can say is

Speaker Change: We have a robust pipeline of opportunity.

Speaker Change: We take an approach where it's very thoughtful, we discover, we go, we have thoughtful dialogue, we understand the needs.

Speaker Change: and the pain points of

Speaker Change: of these prospects and clients that we work with as we create and identify opportunities. And then we're bringing appropriate resources and expertise to bear.

Speaker Change: reflecting our understanding of how to improve. And that leads to really good conversations and engagement with clients. And so I would say our ROI based approach is one that we feel confident in and will continue to emphasize as we go to market.

Speaker Change: I thought that was the case. Thank you. Thank you. Thank you. One moment as we move on to our next question.

Matt Hawkins: Thank you. Thank you. Thank you. One moment as we move on to our next question, and our next question is going to come from the line of Richard Close with Canaccord Genuity. Your line is open, please go ahead.

Speaker Change: and our next question i'm going to come from the line of richard close with canaaccord anuity your line is open please go ahead

Richard Close: Yeah, congratulations, and thanks for the question. Just to maybe hit on the digitization of payments a little bit more, you know, as you go away from paper, I'm just curious about the percentage of your client base that's still doing paper statements and collections through mail. And then, you know, as you think about as it moves to digitizing, like the success difference between traditional paper and digitized. Thanks, Richard.

Richard Close: Yeah, congratulations and thanks for the question. Just to maybe hit on the digitization of payments a little bit more. You know, as you go away from paper, I'm just curious.

Speaker Change: You know, the percentage of your client base that's still doing paper statements and collections through mail. And then.

Speaker Change: You know, as you think about as it moves to digitizing, like the success difference between the traditional paper and digitized.

Matt Hawkins: So what we would say is, as you'll recall, Waystar has taken a holistic approach to connecting providers to patients in the ways that patients want to be connected to. And the fact is, there is still a portion of the population that prefers a paper-based invoice or statement. And so we facilitate that today. We also have solutions that enable digital engagement and digital conversation that are taking hold, and providers and patients are increasingly using our solutions.

Speaker Change: Thanks Richard. So what we would say is, as you'll recall, Waystar has taken a holistic approach.

Speaker Change: to connecting providers to patients

Speaker Change: in the ways that patients want to be connected to. And the fact is there is still a portion of the population that prefers a paper-based invoice or statement.

Speaker Change: and so we facilitate that today we are we also have solutions that enable a digital engagement in a digital conversation that that's

Speaker Change: It's taking hold and providers and patients are using our solutions increasingly. And so we see over time the increasing opportunity to drive that digital engagement. We don't disclose the portion of our business that is...

Matt Hawkins: And so we see over time the increasing opportunity to drive that digital engagement. We don't disclose the portion of our business that is that has this paper-based patient statement, but we do see over time the opportunity to continue to help providers connect to patients and do so increasingly with modern digital tools that both providers and patients will benefit from as we go. And then the success between the two, I mean, I assume digital is much more successful in getting patients to pay.

Speaker Change: that has this paper based patient statement but but we do to see over time there're being opportunity

Speaker Change: to continue to help providers connect to patients and do so increasingly with modern digital tools that both providers and patients will benefit from as we go forward.

Speaker Change: And then the success between the two? I mean, I assume digital is much more successful getting the patients to pay.

Speaker Change: We are seeing and tracking...

Speaker Change: Most of our case studies, I would say, that track faster collection rates and higher collection rates emphasize the digital engagement tool.

Speaker Change: That's what we would expect as we lean into that opportunity over the longer term.

Matt Hawkins: Thank you. And one moment for our next question. And our next question is going to come from the line of Brian Peterson with Raymond James. Your line is open. Please go ahead.

Speaker Change: Great, thank you. Thanks Richard. Thank you and one moment for our next question.

Speaker Change: And our next question is going to come from the line of Brian Peterson with Raymond James. Your line is open. Please go ahead. Thank you. Thank you. Thank you.

Brian Peterson: Thanks, gentlemen, and congratulations on the strong print right out of the gate. I appreciate all the detail here, Steve, on the $9 million and the impact, but I'd love to understand, when we think about that revenue, how much of that was kind of net new customers to Waystar versus customers that may have needed help in facing those challenges. And is there any commonality between where you saw a bigger increase in terms of areas or customers or location? And we'd just love to understand that.

Brian Peterson: Thanks, gentlemen, and congrats on the strong print right out of the gate. I appreciate all the detail here, Steve, on the $9 million and the impact, but I'd love to understand, if we think about that revenue, how much of that was kind of net new customers to Waystar versus customers that may have needed help facing those challenges? And is there any commonality between where you saw a bigger increase in terms of areas or customers and location? And we'd just love to understand that a little better.

Matt Hawkins: Yeah, what we would say, and thanks Brian, and I appreciate your kind comments, what we would say is that the $9 million of Q2 revenue that we've outlined or highlighted as a benefit to us in the second quarter that comes from these over 30,000 providers that we've been able to help really comes in two general categories. The first category that we've seen are existing clients that might be using one portion of the Waystar software platform that reached out to us quickly and then rapidly began using more of our software. That came in from all types of providers and all sizes of organizations. So think large hospitals and health systems, as well as those that are practicing in smaller facilities.

Brian Peterson: Yeah, what we would say, and thanks Brian , and we appreciate your kind comments. What we would say is that the

Speaker Change: The $9 million of Q2 revenue that we've outlined or highlighted as a benefit to us in the city

Speaker Change: second quarter that comes from these over 30,000.

Speaker Change: providers that we've been able to help

Speaker Change: really comes two general category is the first category that we've seen our existing clients that might be using one portion of the waste our software platform that reached not too as quickly and then rapidly began using more of our software

Speaker Change: That came in all types of providers and all sizes of organizations, so large hospitals and health systems as well as those that are practicing in smaller care settings.

Matt Hawkins: We also have noticed the phenomenon of simply adding net new clients to the Waystar platform where there was urgency to move from the cyber-attacked competitor system to Waystar. And again, we would characterize that as being across the United States, all types, and all sizes of care settings. And again, we would just underscore that we're grateful to be in a position to respond so quickly to the healthiest providers. And we'll continue to learn more and report on our progress and any insight that we continue to gain as we go forward. It's great to hear.

Speaker Change: We also have noticed the phenomenon of simply adding net new clients to the Waystar platform.

Speaker Change: where there was urgency to move from the cyber attack competitor system to Waystar. And again, we would characterize that as being across the United States.

Speaker Change: All types.

Speaker Change: all sizes of care settings and again we would just underscore that we're grateful to be in a position to respond so quickly to help these providers.

Speaker Change: And we'll continue to learn more and report on our progress and any insight that we continue to gain as we go forward.

Matt Hawkins: Thank you. Thanks, Brian. Thank you, and I would now like to hand the conference back over to Matt Hawkins for any further remarks. OK. Well, thank you so much, Michelle, for organizing and running the call today. Before signing off, I want to thank our dedicated Waystar team members. And if there's a public forum to do that, I just want to say thanks. They're fantastic.

Speaker Change: Great to hear. Thank you. Thanks, Brian .

Speaker Change: Thank you, and I would now like to hand the conference back over to Matt Hawkins for any further remarks.

Matt Hawkins: Okay, well, thank you so much, Michelle, for organizing and running the call today. Before signing off, I want to thank our dedicated Waystar team members. And if there's a public forum to do that, I just want to say thanks.

Matt Hawkins: We also have incredible clients and new and existing investors who have supported us on our journey as a newly public company. We're passionate about what we're building at Waystar, and we're focused on executing our business plan to achieve results in the next quarter as well as the year ahead. So thank you for joining us today, and we wish everybody a great evening.

Speaker Change: They're fantastic. We also have incredible clients and new and existing investors who have supported us on our journey.

Speaker Change: as a newly public company. We're passionate about what we're building at Waystar and we're focused on executing our business plan to achieve results in the next quarter, as well as the year ahead. Thank you for joining today and we wish everybody a great evening.

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

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

Operator: [music] Good day, and thank you for standing by. Welcome to the Waystar 2nd Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode.

Speaker Change: Thanks for watching!

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 11 on your telephone. You will then hear an automated message advising you that your hand is raised. To withdraw your question, please press star 11 again.

Speaker Change: Good day and thank you for standing by. Welcome to the Waystar 2nd Quarter 2024 Earnings Conference Call.

Speaker Change: At this time, all participants are in a listen-only mode.

Speaker Change: After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 11 on your telephone.

Sandy Draper: Please be advised that today's conference is being recorded. I would like to hand the conference over to your speaker today, Sandy Draper, Chief of Staff and Vice President of Special Projects. Please go ahead, sir.

Sandy Draper: Chief of Staff and Vice President of Special Projects. Please go ahead, sir.

Sandy Draper: Thank you, operator, and good afternoon everyone. It's my pleasure to welcome you to Waystar Holding Corporation's second quarter 2024 earnings. 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.

Sandy Draper: Thank you, Operator, and good afternoon, everyone. It's my pleasure to welcome you to Waystar Holding Corporation's second quarter 2024 earnings call.

Speaker Change: 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.

Speaker Change: After their remarks, we will open the call to your questions.

Sandy Draper: Before we get started, I will remind you that this call contains four forward-looking statements, which include all statements that are not historical facts. Examples of these statements include expectations of future growth and margins. These statements do not guarantee future performance and involve a number of risks and uncertainties, and reliance should not be placed on these forward-looking statements. However, actual results may differ materially from those expressed in these statements.

Speaker Change: Before we get started, I will remind you that this call contains four looking statements which include all statements that are not historical facts.

Speaker Change: Examples of these statements include expectations of future growth and margins. These statements do not guarantee future performance and involve a number of risks and uncertainties, and unnew reliance should not be placed on these forward-looking statements.

Speaker Change: Actual results may differ materially from those expressed in these statements.

Speaker Change: for full discussion of the risks and other factors then may impact these forward-looking statements

Speaker Change: 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 page of our website.

Speaker Change: 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 and or revise such statements, except as required by law.

Sandy Draper: 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 explanations of these measures, in the appendix to the presentation slide deck and our earnings report. These non-GAAP measures should not be considered in isolation or as a substitute for financial results prepared in accordance with GAAP.

Speaker Change: During today's call, we will also discuss certain non-GAAP financial measures which we believe may be useful in evaluating our financial performance.

Speaker Change: These non-GAAP measures should not be considered in isolation or as a substitute for financial results prepared in accordance with GAAP.

Speaker Change: Lastly, we are pleased to note our participation in the Canaccord Genuity Annual Growth Conference in Boston on August 13th, where we look forward to engaging with many of you. With that, I'll turn it over to Matt.

Matt Hawkins: Thank you for joining our inaugural earnings call as a publicly traded company. On today's call, we will cover the following four topics. First, I will review Waystar's second-quarter results, reflecting on our strong performance and highlighting a few areas that favorably impacted our results. Second, I will provide insight into our response to, and the impact of, February 21st's cybersecurity attack on a competitor's claims clearinghouse. Third, I'll take the opportunity to share what we are building at Waystar, including innovations and developments that are shaping the future. And last, I'll turn the call over to Steve Oreskevich, our CFO, who will walk through more detailed financial materials and highlight guidance for the full year 2022. We're pleased to report that we have delivered a strong second quarter, continuing our momentum and showcasing the efforts of our entire team. Q2 revenue was $235 million, representing a 20% year-over-year growth.

Matt Hawkins: Thank you, Sandy, and good afternoon, everyone. Thank you for joining our inaugural earnings call as a publicly traded company.

Matt Hawkins: Our revenue growth in the quarter, which was greater than the low double-digit growth rate that we typically expect, is attributable to a few primary factors. First, our business continued to perform well in Q2. We maintained solid client retention, closed a number of new sales opportunities that we expect to implement at our regular meetings, and continue to grow our bookings pipeline. Second, Q2 revenue had some favorability due to increases in patient payment volumes that we processed on the Waystar software platform.

Matt Hawkins: On today's call, we will cover the following four topics.

Matt Hawkins: First, I will review Waystar's second quarter results reflecting on our strong performance and highlighting a few areas that favorably impacted our results.

Matt Hawkins: Second, I will provide insight into our response to and the impact of February 21st's cybersecurity attack on a competitor's claims clearinghouse.

Matt Hawkins: Third, I'll take the opportunity to share what we are building at Waystar, including innovations and developments that are shaping our future.

Steve Oreskevich: And last, I'll turn the call over to Steve Oreskevich, our CFO , who will walk through more detailed financial materials and highlight guidance for the full year 2024.

Matt Hawkins: We believe this outperformance is due to expected increases in patient visits as well as patients choosing to make payments to fulfill their insurance deductibles at a modestly faster pace. We note that there is some seasonality in the timing of when patients fulfill their insurance deductibles in any given year.

Speaker Change: We're pleased to report that we have delivered a strong second quarter, continuing our momentum and showcasing the efforts of our entire team.

Steve Oreskevich: Q2 revenue was $235 million, representing a 20% year-over-year growth.

Steve Oreskevich: Our revenue growth in the quarter, which was greater than the low double-digit growth rate that we typically expect, is attributable to a few primary factors. First, our business continued to perform well in Q2. We maintained solid client retention.

Matt Hawkins: Third, we completed two small acquisitions in the second half of 2020, which favorably impacted the year-over-year comparison versus last year. And finally, as I will address in more detail in just a moment, our revenue growth benefited from our efforts to onboard thousands of providers to the Waystar software platform after these providers' operations were disrupted by the February 21st cyber attack against one of our competitors. Importantly, we expect to retain the majority of this revenue uplift going forward.

Speaker Change: Closed a number of new sales opportunities that we expect to implement at our regular cadence.

Steve Oreskevich: and continue to grow our bookings pipeline.

Steve Oreskevich: Second, Q2 revenue had some favorability due to increases in patient payment volumes that we processed on the Waystar software platform.

Steve Oreskevich: We note that there is some seasonality in the timing of when patients will fill their insurance deductibles in any given year.

Steve Oreskevich: Third, we completed two small acquisitions in the second half of 2023.

Steve Oreskevich: After these providers operations were disrupted by the February 21st cyber attack against a competitor.

Steve Oreskevich: Importantly, we expect to retain the majority of this revenue uplift going forward.

Steve Oreskevich: We're also pleased to report that Q2 adjusted EBITDA was $94 million, up 12% year-over-year, and in line with our adjusted EBITDA margin goal of 40%.

Matt Hawkins: Within Q2 adjusted EBITDA, we incurred expenses associated with onboarding thousands of providers to the Waystar software platform who were impacted by the February 21st cyberattack. We also focused on integrating recent acquisitions and incrementally investing in growth, cybersecurity, and innovation-related initiatives. From a margin perspective, we're pleased with our adjusted EBITDA margin and are actively pursuing ways to drive operational efficiency to maintain and expand margins over the long term. Our business model promotes strong cash flow conversion, and Q2 was no exception. In the second quarter, we generated an unlevered free cash flow of $50 million.

Matt Hawkins: We also focused on integrating recent acquisitions and incrementally investing in growth, cybersecurity, and innovation-related initiatives.

Matt Hawkins: From a margin perspective, we're pleased with our adjusted EBITDA margin and are actively pursuing ways to drive operational efficiency to maintain and expand margins over the longer term.

Matt Hawkins: Our business model promotes strong cash flow conversion and Q2 was no exception. In the second quarter, we generated unlevered free cash flow of $50 million.

Matt Hawkins: The combination of our strong cash flow profile and our recent IPO puts Waystar in a sound financial position.

Matt Hawkins: As we committed, we used the proceeds of our initial public offering in June to pay down debt, bringing our net leverage to 3.7 times at the end of the quarter.

Matt Hawkins: Reflecting subsequent debt paydown with the proceeds from the partial exercise of the IPO green shoe option in early July , our net leverage ratio is approximately 3.4 times today.

Matt Hawkins: In addition, I want to highlight two key metrics that we use to track our business's performance and give us confidence in our durable growth model. First, the number of clients generating more than $100,000 in trailing 12-month revenue increased to 1,117, an increase of 9% year-over-year. We believe this metric demonstrates our ability to land and then expand business with our customers. Additionally, our net revenue retention in Q2 was 108%, within the range of the 108 to 110% that we have seen over the past 10 quarters.

Matt Hawkins: In addition, I want to highlight two key metrics that we use to track our business's performance and give us confidence.

Matt Hawkins: in our durable growth model.

Matt Hawkins: First, the number of clients generating more than $100,000 in trailing 12-month revenue increased.

Speaker Change: through one thousand one hundred and seventeen

Speaker Change: an increase of 9% year-over-year. We believe this metric demonstrates our ability to land and then expand business with our clients.

Speaker Change: Second, our net revenue retention in Q2 was 108%, within the range of the 108% to 110% that we have seen over the past 10 quarters. Our strong net revenue retention highlights the enduring relationships we establish with our clients.

Matt Hawkins: Our strong net revenue retention highlights the enduring relationships we established with our customers, beginning with strong gross revenue retention and then delivering value to our clients as we focus on expanding the Waystar software modules they use through our cross and upsell efforts. Steve will discuss Q2 financials in more detail and also provide guidance for FY 2021. Now, on to the second point, on a topic that I know many of you are keenly focused on.

Matt Hawkins: beginning with strong gross revenue retention and then delivering value to our clients as we focus on expanding the Waystar software modules they use through our cross and upsell efforts.

Speaker Change: Steve will discuss Q2 financials in more detail and also provide guidance for fiscal year 2024.

Steve Oreskevich: Now on to the second point.

Steve Oreskevich: on a topic that I know many of you are keenly focused on.

Matt Hawkins: Waystar's response to and the impact of the February 21st competitor cyber attack. Following this unfortunate event in the market, health care providers and patients faced tremendous disruption. At Waystar, we quickly focused our efforts and marshaled additional resources to help impacted providers simplify their health care payments and regain cash flow. We are pleased to represent you on behalf of the U.S. Department of State.

Steve Oreskevich: Waystar's response to, and the impact of the February 21st competitor cyber attack event.

Matt Hawkins: That Waystar has helped more than 30,000 providers move rapidly to the Waystar software platform, many in as little as three days, to minimize their disruption during this time and to get paid for the health care services they deliver. This urgency to maintain continuity in critical business operations resulted in pulling forward implementation timelines for many of these providers and the corresponding time to revenue for Waystar. We feel grateful to be in a position to help thousands of providers resume normal business operations so quickly.

Steve Oreskevich: We are pleased to report

Matt Hawkins: that Waystar has helped more than 30,000 providers move rapidly to the Waystar software platform, many in as little as three days, to minimize their disruption during this time and to get paid for the health care services they delivered.

Matt Hawkins: This urgency to maintain continuity in critical business operations resulted in pulling forward implementation timelines for many of these providers and the corresponding time to revenue for Waystar.

Matt Hawkins: We feel grateful to be in a position to help thousands of providers resume normal business operations so quickly.

Matt Hawkins: Importantly, we expect to build enduring relationships with these new clients, most of whom signed standard Waystar business agreements with 2-3 year terms and annual auto renewals thereof. This incident created a near-term opportunity for Waystar to help thousands of providers, but also a longer-term opportunity to cross-sell additional Waystar software modules to these provider organizations. For many, this cyber attack reinforced the importance of using a modern cloud-based software platform such as Waystar, which provider organizations can deploy rapidly with limited to no disruption while successfully managing their finances.

Matt Hawkins: Importantly, we expect to build enduring relationships with these new clients, most of whom signed standard Waystar business agreements with two to three year terms and annual auto renewals thereafter.

Matt Hawkins: This incident not only created a near-term opportunity for Waystar to help thousands of providers, but also a longer-term opportunity to cross-sell additional Waystar software modules to these provider organizations.

Matt Hawkins: For many, this cyber attack reinforced the importance of using a modern cloud-based software platform such as Waystar.

Matt Hawkins: which provider organizations can deploy rapidly with limited to no disruption while successfully managing their finances.

Matt Hawkins: Due to Waystar's performance during this trying period, we believe our competitive position in the industry is even stronger, and we continue to work hard to help provider organizations and to capitalize on the positive momentum that we have seen. I want to also comment briefly on Waystar's approach to cybersecurity. We understand the importance of protecting our clients' data and privacy. We are committed to proactively monitoring and safeguarding our clients' information in today's ever-evolving cyber landscape. Waystar utilizes a robust framework for cybersecurity to proactively monitor, measure, and mitigate risks. We validate our cyber program and readiness with regular HITRUST, PCI, SOC2, and NIST audits.

Matt Hawkins: I want to also comment briefly on Waystar's approach to cybersecurity. We understand the importance of protecting our clients' data and privacy.

Matt Hawkins: we are committed to proactively monitoring and safeguarding our client' information in today's ever evolving cyber landscape

Matt Hawkins: Waystar utilizes a robust framework for cybersecurity to proactively monitor, measure, and mitigate risk.

Matt Hawkins: We validate our cyber program and readiness with regular HITRUST, PCI, SOC2, and NIST audits.

Speaker Change: In light of the recent cyber attack on a competitor's system,

Matt Hawkins: data exfiltration and endpoint detection capabilities, and system backups that cannot be modified by malware or bad actors to secure our software platform and data.

Matt Hawkins: We believe our rigorous approach to cybersecurity can help us minimize the cost of any potential disruption through system resiliency and rapid restoration and we will remain vigilant in safeguarding against potential threats.

Matt Hawkins: Now on to the third point. In our inaugural call, I want to highlight Waystar's mission and what makes our company unique. We are focused on simplifying healthcare payments through our modern, end-to-end, cloud-based software, enabling our provider clients to prioritize patient care and optimize their finances. We are transforming healthcare payments for providers while simultaneously helping patients navigate an often frustrating healthcare payment experience with greater transparency. I will now highlight six attributes that make us unique and fuel our belief in the positive benefits we can deliver to our clients. First, we are a software company purpose-built for health. We are not a services company trying to become more tech-oriented.

Speaker Change: Now on to the third point. In our inaugural call, I want to highlight Waystar's mission and what makes our company unique.

Matt Hawkins: I will now highlight six attributes that make us unique and fuel our belief in the positive benefits we can deliver to our clients.

Matt Hawkins: First, we are a software company purpose-built for healthcare.

Matt Hawkins: We are not a services company trying to become more tech-enabled.

Matt Hawkins: Building great software to disrupt long-standing payment challenges is the focus of Waystar. Second, our software is mission critical to our clients. In 2023, we facilitated over $5 billion in health care payment transactions, including over $1.2 trillion in gross claims. When clients adopt the Waystar platform, we become essential to their business operations and cash flow generation. We develop long, enduring relationships with clients because our software helps them get paid faster, more accurately, and more efficiently than ever before.

Matt Hawkins: Building great software to disrupt long-standing payment challenges is the focus of Waystar's work.

Matt Hawkins: Second, our software is mission-critical to our clients. In 2023, we facilitated over 5 billion health care payment transactions, including over 1.2 trillion dollars in gross claims.

Matt Hawkins: When clients adopt the Waystar platform, we become essential to their business operations and cash flow generation.

Matt Hawkins: We develop long, enduring relationships with clients because our software helps them get paid faster, more accurately, and more efficiently than ever before. Our strong client and revenue retention attest to this.

Matt Hawkins: Third, our differentiated cloud-based software platform with advanced technology is integrated into more than 500 electronic health records and practice management. This allows us to serve more than 1 million providers of all sizes across every setting of care. Our platform enables us to deliver several benefits to our clients. We rapidly deploy and implement our cloud software to serve clients of all types and sizes, addressing their unique needs. Waystar's end-to-end capabilities enable providers to manage all of their health care payments through a single platform, which serves as a meaningful differentiator for Waystar relative to numerous point solution vendors that exist in the market.

Matt Hawkins: Third, our differentiated cloud-based software platform with advanced technology is integrated into more than 500 electronic health records and practice management systems.

Matt Hawkins: This allows us to serve more than 1 million providers of all sizes across every setting of care. Our platform enables us to deliver several benefits to our clients.

Matt Hawkins: We rapidly deploy and implement our cloud software to serve clients of all types and sizes, addressing their unique needs.

Matt Hawkins: Waystar's end-to-end capabilities enable providers to manage all of their healthcare payments through a single platform, which serves as a meaningful differentiator for Waystar relative to numerous point solution vendors that exist in the market.

Matt Hawkins: We believe that no competitor matches the breadth, depth, and quality of our software platform. And we deliver an average of 300 software feature innovations and improvements each quarter without interrupting the operations of our clients, and our clients achieve the real return on investment they expect as they work with Waystar. Fourth, as we are at the forefront of actively deploying AI and machine learning to automate work, prioritize tasks, and eliminate errors as clients use Waystar software, our software uses AI pervasively today, and we are well positioned to harness the power of generative AI to drive ROI for our clients.

Matt Hawkins: We believe that no competitor matches the breadth, depth, and quality of our software platform.

Matt Hawkins: And we deliver an average of 300 software feature innovations and improvements each quarter without interrupting the operations of our clients.

Matt Hawkins: And our clients achieve the real return on investment they expect as they work with Waystar.

Matt Hawkins: Fourth, as we are at the forefront of actively deploying AI and machine learning to automate work, prioritize tasks, and eliminate errors as clients use Waystar software,

Matt Hawkins: Our software uses AI pervasively today, and we are well positioned to harness the power of generative AI to drive ROI for our clients.

Matt Hawkins: We recently announced that we have identified more than a dozen promising new generative AI capabilities across the healthcare payments processes.

Matt Hawkins: Our collaboration with Google Cloud builds on Waystar's proven track record of deploying innovative AI solutions.

Matt Hawkins: I'd like to highlight just a few generative AI use cases we are actively developing.

Matt Hawkins: First, a co-pilot to further automate prior authorization submission.

Matt Hawkins: And third, an agent to enable real-time conversion of payer policy changes into claims rules. This technology will allow clients to upload their specific payer contracts and policies

Matt Hawkins: to Waystar's cloud rules engine with high degree of automation and accuracy driving lower denial rates and improving the ROI of Waystar's products versus competition.

Matt Hawkins: In addition, we have several longer-term generative AI products in our pipeline for 2025 and beyond that drive automation and efficiency across the processes that lead to accurate health care. The fifth attribute is that we have a strong track record of delighting our clients, resulting in number one rankings and client satisfaction in several industry surveys and strong net promoter success. We have an active and engaged client advisory board and delighted referenceable customers. And finally, we have a highly visible and durable revenue growth model with sustainable 40% plus adjusted EBITDA margins.

Matt Hawkins: In addition, we have several longer term generative AI products in our pipeline for 2025 and beyond that drive automation and efficiency across the processes that lead to accurate healthcare payments.

Matt Hawkins: The fifth attribute is that we have a strong track record of delighting our clients resulting in number one rankings in client satisfaction in several industry surveys and strong net promoter scores.

Matt Hawkins: We have an active and engaged Client Advisory Board and delighted, referenceable clients.

Matt Hawkins: And finally, we have a highly visible and durable revenue growth model with sustainable 40% plus adjusted EBITDA margins.

Matt Hawkins: We believe there is meaningful embedded growth within our client base and a large addressable market to pursue. We are focused on building and sustaining this momentum that we have created. Now, I will turn the call over to Steve to discuss our results in more detail and highlight our full year guidance for 2024. Thanks, Matt.

Matt Hawkins: We believe there is meaningful embedded growth within our client base and a large addressable market to pursue.

Matt Hawkins: We are focused on building and sustaining this momentum that we have created.

Matt Hawkins: Now, I will turn the call over to Steve to discuss our results in more detail and highlight our full-year guidance for 2024.

Steve Oreskevich: Before I discuss the results and guidance, I'd like to briefly cover the durable and visible financial model you mentioned, as it is the basis of our highly recurring, predictable, and profitable growth at scale. Over the past several years, we have consistently delivered low double-digit revenue growth and adjusted EBITDA margins of 40% or more. Furthermore, over 99% of our revenue comes from our cloud-based software platform, which means we derive less than 1% of revenue from services.

Steve Oreskevich: Thanks Matt.

Steve Oreskevich: Before I discuss the results and guidance, I'd like to briefly cover the durable and visible financial model you mentioned.

Steve Oreskevich: as it is the basis of our highly recurring, predictable, and profitable growth at scale.

Steve Oreskevich: Over the past several years, we have consistently delivered low double-digit revenue growth and adjusted EBITDA margins of 40% or more.

Steve Oreskevich: Over 99% of our revenue comes from our cloud-based software platform, which means we derive less than 1% of revenues from services.

Steve Oreskevich: Software revenue consists of contractually committed subscriptions and predictable recurring volumes processed on the platform. In Q2, revenue was roughly equal between these two streams, and both grew double-digits. The subscription fee provides a fixed recurring revenue stream, while the volume-based component allows us to benefit from our clients' growth. We generate more revenue as our clients see more patients and deliver more care. Apart from seasonality tied to health plan deductibles and seasonal illnesses, volumes are relatively stable and predictable year-to-year, given that the demand for healthcare is largely inelastic and growing annually.

Matt Hawkins: Software revenue consists of contractually committed subscriptions and predictable recurring volumes processed on the platform.

Matt Hawkins: In Q2, revenue was roughly equal between these two streams, and both grew double digits.

Steve Oreskevich: The subscription fee provides a fixed recurring revenue stream, while the volume-based component allows us to benefit from our clients' growth.

Matt Hawkins: We generate more revenue as our clients see more patients and deliver more care.

Matt Hawkins: Apart from seasonality tied to health plan deductibles and seasonal illnesses,

Steve Oreskevich: Volumes are relatively stable and predictable year-to-year given that the demand for health care is largely inelastic and growing annually.

Matt Hawkins: Therefore, in the aggregate, we believe we have meaningful visibility over the entire revenue base.

Steve Oreskevich: Another important metric that demonstrates the visibility of our model is our net revenue retention.

Steve Oreskevich: Over the past 10 quarters, we have shown a net revenue retention rate between 108 and 110 percent on a trailing 12-month basis.

Steve Oreskevich: with Q2 at 108 percent.

Steve Oreskevich: Turning to financial results, we had a strong second quarter with all financial metrics showing impressive growth.

Steve Oreskevich: Revenue increased 20% year-over-year to $235 million.

Steve Oreskevich: This growth was primarily driven by four out of five First, our business model continues to be strong. This is evidenced by the successful expansion in the number of clients of scale, to 1,117 as of the end of Q2, adding 37 new clients in the quarter who produced more than $100,000 of LTM revenue. This expansion validates our land and expand strategy, as well as our ability to sell more multi-solution deals to new clients. Additionally, we processed more patient payments from existing clients on our software platform than we have typically seen in the second quarter over the past couple of years.

Steve Oreskevich: This growth was primarily driven by four outcomes.

Steve Oreskevich: First, our business model continues to be strong.

Steve Oreskevich: This is evidenced by the successful expansion in the number of clients of scale to 1,117 as of the end of Q2.

Steve Oreskevich: adding 37 new clients in the quarter who produced more than $100,000 of LTM revenue.

Steve Oreskevich: This expansion validates our land and expand strategy.

Steve Oreskevich: as well as our ability to sell more multiple solution deals to new clients.

Steve Oreskevich: Second, we processed more patient payments from existing clients on our software platform than we have typically seen in the second quarter over the past couple of years.

Steve Oreskevich: We expect the associated beat to be offset in the second half of 2024 and have appropriately factored this into our full year guide. Third, as indicated in our filings, we completed two small acquisitions in the second half of 2023.

Steve Oreskevich: We expect the associated beat to offset in the second half of 2024 and have appropriately factored this into our full year guidance.

Steve Oreskevich: Third, as indicated in our filings, we completed two small acquisitions in the second half of 2023.

Steve Oreskevich: Consequently, the timing of the acquisitions modestly benefit the second quarter year-over-year growth rate.

Steve Oreskevich: And finally, our team's 24x7 work to swiftly onboard new clients impacted by the competitor's cyber attack.

Steve Oreskevich: and to help existing Waystar clients in minimizing the impact on their operations.

Steve Oreskevich: generated $9 million of incremental revenue in Q2 versus what we would have expected from our historical win rates and associated implementation timing.

Steve Oreskevich: To provide context, we typically see client implementation cycles of a few to several months due to client and insurance payer readiness factors versus the three-day implementations Matt previously mentioned.

Steve Oreskevich: Most importantly, we believe the majority of revenue generated from this work will be enduring and increase our long-term revenue base. While 20% year-over-year growth for Q2 and 19% growth in the first half of 2024 are strong, we also recognize that some of the items that we have highlighted today or referenced in our filings impact year-over-year comparability. Normalizing for those items, revenue growth would be closer to 13%, which is slightly above our expected low double-digit rate. Gap's net loss for the second quarter of 2024 was $28 million, compared to a net loss of $11 million in the prior year.

Matt Hawkins: Most importantly, we believe the majority of revenue generated from this work will be enduring and increase our long-term revenue baseline.

Matt Hawkins: Normalizing for those items, revenue growth would be closer to 13%, which is slightly above our expected low double-digit range.

Matt Hawkins: Gap net loss for the second quarter of 2024 was $28 million compared to a net loss of $11 million in the prior year.

Matt Hawkins: Q2-24 results include $37 million of stock-based compensation costs, with $33 million associated with performance-based options expensed from going public.

Matt Hawkins: They also include $4 million of year-over-year channel partner commission increase based on revenue performance.

Matt Hawkins: Adjusted EBITDA of $94 million for the second quarter increased 12% year-over-year.

Matt Hawkins: The adjusted EBITDA margin of 40% also reflects investment in the business to ensure we were able to meet client expectations.

Speaker Change: and ongoing investments in the areas Matt mentioned, including innovation and cybersecurity.

Steve Oreskevich: Switching gears, we have significantly improved our capital structure through several events since the beginning of the year. First, we used the net proceeds from the IPO to pay down $909 million a day. This video Resulted in upgrades of two notches from all three rating engines. We used these two outcomes to reprice our debt in late June, reducing our interest rate to SOFR plus 2.75%, down from SOFR plus 4% at the beginning of the year.

Speaker Change: Switching gears, we have significantly improved our capital structure through several events since the beginning of the year.

Matt Hawkins: First, we used the net proceeds from the IPO to pay down $909 million in debt.

Matt Hawkins: This payment, and our consistent ability to deleverage through solid financial performance, resulted in upgrades of two notches from all three rating agencies.

Matt Hawkins: We use these two outcomes to reprice our debt in late June , reducing our interest rate to SOFR plus 2.75 percent.

Matt Hawkins: down from SOFR plus 4% at the beginning of the year.

Steve Oreskevich: And finally, after the quarter ended, most of the IPO green shoe was exercised for net proceeds of $103 million, and we used those proceeds, along with a bit of cash on hand, to pay down an additional $111 million of debt. We ended the quarter with $1.36 billion of total debt and net debt of $1.29 billion.

Matt Hawkins: And finally, after the quarter ended, most of the IPO green shoe was exercised for net proceeds of $103 million. And we used those proceeds, along with a bit of cash on hand, to pay down an additional $111 million of debt.

Matt Hawkins: We ended the quarter with $1.36 billion of total debt and net debt of $1.29 billion.

Matt Hawkins: On a trailing 12-month basis, our net debt to adjusted EBITDA leverage is 3.7 times, down from 6.6 times at the beginning of the year.

Matt Hawkins: And if one were to adjust the leverage ratio to reflect the additional debt paydown in July , it would have decreased to 3.4 times.

Matt Hawkins: Unleveraged free cash flow was $50 million in the second quarter of 2024, compared to $77 million in the prior year.

Matt Hawkins: Our unlevered free cash flow includes a tax burden of $26 million in Q2, versus $6 million last year, as we are a full taxpayer.

Matt Hawkins: Our capital allocation priorities remain the same.

Steve Oreskevich: We expect to continue to de-lever the balance sheet targeting approximately one turn a year. We continue to invest in the business to drive sustainable top-line growth, and we will also look at opportunities for inorganic growth based on our disciplined acquisition criteria. As evidenced by the financial discussion, we had a solid first half of 2024 and are confident in our outlook for the remainder of the year. For fiscal 2024, we expect revenue to be within the range of $902 to $918 million.

Matt Hawkins: We expect to continue to de-lever the balance sheet, targeting approximately one turn a year.

Matt Hawkins: We continue to invest in the business to drive sustainable top-line growth.

Matt Hawkins: And we will also look at opportunities for inorganic growth based on our disciplined acquisition criteria.

Matt Hawkins: As evidenced from the financial discussion, we had a solid first half of 2024 and are confident in our outlook for the remainder of the year.

Matt Hawkins: For fiscal 2024, we expect revenue to be within the range of $902 to $918 million.

Steve Oreskevich: At the midpoint, this represents 15% growth over 2023. For additional context, we expect both subscription and volume-based revenue to grow by over 10% year-over-year. We have also considered the seasonality aspect of patient payments processed on the software platform, which is typically more robust in the first half of the year because patient deductibles reset at the beginning of each Additionally, while we experienced revenue over-performance in Q2 due to the impact of rapid implementations as we helped providers, our full year guidance reflects an expectation of normal implementation timelines going forward.

Matt Hawkins: At the midpoint, this represents 15% growth over 2023.

Matt Hawkins: For additional context, we expect both subscription and volume-based revenue to grow by over 10% year-over-year.

Matt Hawkins: We have also considered the seasonality aspect of patient payments processed on the software platform.

Matt Hawkins: which is typically more robust in the first half of the year because patient deductibles reset at the beginning of each year.

Matt Hawkins: Additionally, while we experienced revenue overperformance in Q2 due to the impact of rapid implementations as we helped providers,

Matt Hawkins: Our full year guidance reflects an expectation of normal implementation timelines going forward.

Steve Oreskevich: Our expectations for adjusted EBITDA incorporate public company expenses, continued investment in client support, innovation, and cybersecurity, along with higher channel partner commission costs due to strong sales. Factoring in these items, we expect to deliver a just-to-leave-adopt between $360 and $368 million, representing 9% year-over-year growth at the midpoint of guidance, along with an adjusted EBITDA margin of 40% for 2020. We are now ready to answer your questions. Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Matt Hawkins: Our expectations for adjusted EBITDA incorporate public company expenses, continued investment in client support, innovation, and cybersecurity, along with higher channel partner commission costs due to strong sales.

Matt Hawkins: Factoring in these items, we expect to deliver adjusted EBITDA between $360 and $368 million, representing 9% year-over-year growth at the midpoint of guidance, along with an adjusted EBITDA margin of 40% for 2024.

Speaker Change: We are now ready to answer your questions.

Speaker Change: And our first question comes from the line of Anne Samuel with J.P. Morgan. Your line is open. Please go ahead.

Anne Samuel: Hey guys, congrats on the great print and thanks for taking the question. I was hoping maybe you could talk a little bit about, you know, in your conversations with clients, you know, kind of post-change disruption. How are they thinking about, you know, kind of how they were historically tied to, you know, one vendor and that caused them some disruption or an appetite for diversification, so they don't end up, you know, kind of being stuck again? How are they talking about that?

Speaker Change: How are they thinking about, you know, kind of how they were historically tied to, you know, one vendor and that caused them some disruption? Are you seeing an appetite for diversification so they don't end up, you know, kind of being stuck again? How are they talking about that? And how are they thinking about, you know, vendor diversification things?

Matt Hawkins: And how are they thinking about, you know, vendor diversification? Thanks, Andy, for the question. This is Matt.

Anne Samuel: Thanks, Andy, for the question. This is Matt.

Matt Hawkins: Let me try to provide our perspective. We, first of all, we're

Matt Hawkins: But I think we did so, as we also mentioned in the PREPARE remarks, using standard Waystar agreements that, as we've described, are multi-year in nature with auto-renewing aspects thereafter.

Matt Hawkins: What we believe is the majority of the clients that move to the Waystar platform are looking certainly for a cyber-secure platform, and we, as described, will be vigilant and focused on cyber security. We think while there is some chatter or market noise around needing redundancy or having a resilient network, we also believe that that could be rather inefficient. The question would be, will people have multiple EHR solutions because they want redundancy? That just doesn't seem very tenable.

Matt Hawkins: What we believe is the majority of the clients that move to the Waystar platform

Matt Hawkins: are looking certainly for a cyber secure platform and we as described will be vigilant and focused on cyber security posture.

Matt Hawkins: We think while there is some chatter or market noise around needing redundancy or having a resilient network, we also believe that that could be rather inefficient.

Matt Hawkins: A question would be, will people have multiple EHR solutions because they want redundancy? That just doesn't seem very tenable.

Matt Hawkins: So what we'll focus on is establishing that we can be a trusted partner. We're already doing that. We're actually beginning to have conversations with many of these clients about expanding the use of the Waystar software platform to include other software modules, and I hope that's a helpful perspective. It is and sounds like a great opportunity for you. You know, maybe just my follow-up would be on the back half volume-based revenue expectations. I was hoping you could just provide a little bit more color there. Maybe what's driving that?

Matt Hawkins: And I hope that's a helpful perspective.

Steve Oreskevich: Thank you. Okay, let me turn to Steve for that one. Thanks, man.

Steve Oreskevich: Thanks, man. Thanks, Annie. Yeah, so at midpoint of guidance, 15% for the full year would imply roughly about 12.5% year-over-year growth in the second half of the year.

Speaker Change: You know, we did see and talked about in the walk from, you know, the first half of the year, 19% to more of a normalized view of 13%. I did mention in the prepared remarks.

Steve Oreskevich: patient payment volume coming in

Steve Oreskevich: utilizing the health care system and the amount of payments being greater than what we've seen in prior years.

Steve Oreskevich: We've reflected that in the second half of the year expectations. I think you also see in the deck, you may not have had a chance to look at it yet, but the investor deck we put on our website.

Steve Oreskevich: I think you also see in the deck, you may not have had a chance to look at it yet, but the investor deck we put on our website shows that obviously we've continued to grow for the past several quarters now and continue to grow sequentially the subscription-based revenue. And I think that's a fair assumption as you think about the second half of the year, that sequential growth. What we reflected in that back half of the year for volume-based business is the overperformance or greater performance that we've seen from the patient payments side of the business for the first half of the year. Yeah, some seasonality that's natural in our business. Correct.

Steve Oreskevich: that, obviously, we've continued to grow for the past several quarters now and continued to grow sequentially the subscription-based revenue. And I think that's a fair assumption as you think about...

Steve Oreskevich: the second half of the year, that sequential growth, I think.

Steve Oreskevich: What we reflected in that back half of the year for the volume-based is the overperformance or greater performance that we've seen from the patient payments side of the business for the first half of the year. Yeah, some seasonality that's natural in our business.

Steve Oreskevich: Correct.

Speaker Change: Very helpful. Thank you.

Speaker Change: Thank you and one moment as we move on to our next question.

Speaker Change: And our next question is going to come from the line of Adam Hotchkiss with Goldman Sachs. Your line is open. Please go ahead.

Adam Hotchkiss: Great. It was good speaking with you all and thanks so much for taking the questions. I guess to start, I'd be curious about what you're seeing in the software buying environment agnostic of the cyber attack demand increase. How would you describe the prioritization stack for purchase decision makers at hospitals and health systems for RCM technology? And then I just have a quick follow up. Thanks, Adam. We see it as very important. RCM is a top priority for decision makers as we reflect on the broader macro market, so to speak. I think it's fair to acknowledge that health care is an important industry for all of us because it relates to us personally in the United States.

Adam Hotchkiss: Great. Good speaking with you all, and thanks so much for taking the questions. I guess to start, I'd be curious on what you're seeing in the software buying environment, agnostic of the cyber attack demand increase. How would you describe the prioritization stack for purchase decision makers at the hospital and health systems for RCM technology? And then I just had a quick follow-up.

Speaker Change: Thanks, Adam. We see it as very important. RCM is a top priority to decision makers as we reflect on the broader macro market, so to speak. I think it's fair to acknowledge that health care is an important industry for all of us. It relates to us personally. In the United States, we're spending

Matt Hawkins: We're spending a substantial amount of money on health care each year where there is also significant waste, more than seven hundred and fifty billion dollars a year of waste. And so we see what's on decision makers' minds is how to gain more operating efficiency within their system. We know that hospital margins have been challenged.

Steve Oreskevich: A substantial amount of money on health care each year where there's also significant waste. More than $750 billion a year of waste. And so we see what's on decision makers minds is how to gain more operating efficiency within their systems.

Matt Hawkins: We've seen that smoothing out over the last six months. What we've noted is that there is a desire amongst prospects and clients to consume more of the Waystar software platform. There's an emphasis on platform versus point solution. I think part of that might be tied to some cybersecurity impact, because it's harder to cybersecure multiple point solutions than it is to work with a trusted partner that has a platform and a cybersecure approach. But when you think about broader economic macro trends, talk around potential recessions even, what we would say is healthcare as an industry is recession resistant. Not recession proof, but recession resistant.

Steve Oreskevich: We know that hospital margins have been challenged.

Steve Oreskevich: We've seen that smoothing out over the last six months when you read some different industry reports. What we've noted is that there is a desire amongst prospects and clients to

Steve Oreskevich: and then it is to work with a trusted partner that has a platform and a cyber secure approach. But when you think about broader economic...

Speaker Change: Macro Trends, you know, talk around potential recession even. What we would say is health care is an industry.

Steve Oreskevich: is recession-resistant.

Speaker Change: Not recession-proof, but recession-resistant. Even during market downturns, people still need healthcare services.

Speaker Change: Well, I think Waystar has a perspective is that we are helping decision makers because our software platform delivers operating efficiency.

Speaker Change: We are automating work.

Matt Hawkins: We're reducing air associated with all of the billing, insurance.

Matt Hawkins: and

Matt Hawkins: interactions and collection interactions between providers and insurance companies and providers and patients. We're bringing efficiency and automation to that and so we become an important part of the dialogue. We've seen an uptick

Matt Hawkins: We're reducing errors associated with all of the billing, insurance, and interactions and collection interactions between providers and insurance companies and providers and patients. We're bringing efficiency and automation to that. And so we have become an important part of the dialogue. We've seen an uptick in our RFPs. We like the position of our bookings pipeline and our high-performing sales organization that is having conversations with decision makers that we feel like gives us a sense of confidence as we look into this economy, as we stay close to decision makers, and as we continue to do work at Waystar to execute on our business. Okay, great. I appreciate all that detail.

Matt Hawkins: in our RFPs.

Matt Hawkins: We like the position of our bookings pipeline and our high-performing sales organization are having conversations with decision makers that

Matt Hawkins: We feel like, you know, it gives us a sense of confidence as we as we look into this economy, as we stay close to decision makers, and as we continue to do work at Waystar to execute on our business plan.

Matt Hawkins: It was really helpful. And then Steve, you mentioned the financial impact of the cyber attack at one of your of one of your competitors. Could you maybe just talk about what you're baking in there for the back half of the year? Are you continuing to see customers come in the door? As recent as the last couple of months?

Matt Hawkins: Okay, great. I appreciate all that detail. It was really helpful. And then, Steve, you mentioned the financial impact from the cyber attack of one of your competitors. Could you maybe just talk about what you're baking in there for the back half of the year? Are you continuing to see customers come in the door as recent as the last couple of months? Or is that faded as, you know, February 21st moves further in the background? And then, you know, when you think about the...

Steve Oreskevich: There's that faded background, as you know, February 21 moves further in the background. And then, you know, when you think about the dollar amounts that you're making in for the back half of the year, you know, how much of what's in guidance now is just what you've already done? And how do you view the upside potential, you know, from the creation of some of these relationships and module cross out? Thanks so much.

Speaker Change: The dollar amounts that you're making in for the back half of the year, you know, how much of what's in guidance now is just what you've already done and how do you view the upside potential, you know, from from the creation of some of these relationships and module cross out. Thanks so much.

Speaker Change: Yeah, thanks, Adam. I think it's, as you alluded to, in the, you know, we saw $9 million of uplift in the second quarter versus a typical cadence we'd have expected as a result of the competitor cyber attack, some of that being

Speaker Change: you know, generated from greater business wins. We have a very high win rates to begin with. A lot of that also being generated from the faster implementation. It's, you know, we've, it was kind of...

Matt Hawkins: you know, while it was a bad event for the industry and it impacted clients.

Matt Hawkins: It also reinforced what we have...

Matt Hawkins: I've been saying in the past that it does not take long to switch to Waystar and implement, and we can implement people quickly. It generally is the timeline in which it falls in the client readiness and in some of the payer connectivity readiness.

Speaker Change: right, and that's sort of how we were thinking through it, and I think it's appropriate for us as a And in our initial foray into the public markets to think in that manner

Speaker Change: We've also, as you alluded to, have a very good track record of

Speaker Change: cross-selling into our client base. And obviously, there's a bolus of clients that are newer to us and that we brought on board in the second quarter.

Speaker Change: I think also, as we think through the second half of the year, do we see opportunities for cross-sell and further revenue expansion? I think, yes, we definitely do. I think we would characterize that more towards a longer term and enduring out in follow-on years versus seeing an immediate impact coming in the spring.

Speaker Change: second half of

Speaker Change: of the year.

Speaker Change: I would also add, Adam, that we are learning through this period of time.

Speaker Change: We're very active in helping these clients, as I mentioned.

Speaker Change: to supplement what steve said we do see an uptick in r fp where wastest getating invited to participate in more and more of these conversations some of those many of those are are clearing house related and so we see as we' described the near term call two thousand and twenty four impact that but we' say the longer term opportunity will continue to learn and hopefully be able to describe more as we

Steve Oreskevich: And so we see, as described, the near-term, call it 2024, impact. But we'll say the longer-term opportunity, and we'll continue to learn and hopefully be able to describe more as we get a little further out into the future. But one thing for sure, we are focused on having conversations with clients and prospects who we know we can help. And once they become a client of Waystar, then we naturally have cross-sell and upsell opportunities. Okay, all really helpful.

Speaker Change: get a little further out in the future. But one thing for sure, we are focused on having conversations with clients and prospects who we know we can help and once they become a client of Waystar, then we naturally have cross-sell and up-sell conversations.

Steve Oreskevich: Thank you, Matt. Thank you, Steve. Thank you. Thank you, and one moment as we move on to our next question. And our next question is going to come from the line of Socket Calia with Barclays. Your line is open. Please go ahead. Okay, great. Hey Matt.

Speaker Change: Webinar.

Speaker Change: Okay, all really helpful. Thank you, Matt. Thank you, Steve. Thank you.

Speaker Change: Thank you, and one moment as we move on to our next question.

Speaker Change: And our next question is going to come from the line of Saket Kalia with Barclays. Your line is open, please go ahead.

Socket Calia: Hey, Steve. Nice result here, and congratulations on your first quarter as a public company. Thank you, Saka. It's sure nice to have this one done, and we look forward to the conversation. I'm sure Matt, maybe just to start with you, maybe just to change it up a little bit.

Saket Kalia: Okay, great. Hey, Matt. Hey, Steve. Nice result here and congrats on your first quarter as a public company.

Steve Oreskevich: Thank you, Saka. It's sure nice to have this one, you know, done and we look forward to the conversation.

Matt Hawkins: It was great to see the upside, volume-related revenue, and I know that there was some timing benefit there. But can we just talk a little bit about the patient payments business? And why you maybe feel like there's an opportunity for share gain in that market?

Saket: I'm sure. Matt, maybe just to start with you, maybe just to change it up a little bit. It was great to see the upside.

Speaker Change: Yes.

Matt Hawkins: You know, we now understand an important part of a provider's total revenue is increasingly coming from patients themselves who, as you know, are participating in high-deductible health plans at a faster rate than ever. Their out-of-pocket responsibility is increasing each year. And so Waystar, as we've described, as we talk about the Waystar software platform has united insurance, payer interactions for providers, both commercial insurance as well as government insurance, I think Medicare and Medicaid, as well as patient payment processing, all on a single cloud-based platform.

Speaker Change: We...

Speaker Change: You know, we now understand an important part of a provider's total revenue.

Speaker Change: And so Waystar, as we've described, as we talk about the Waystar software platform, has united insurance,

Speaker Change: and payer interactions.

Speaker Change: For providers, both commercial insurance as well as government insurance, I think Medicare and Medicaid, as well as patient payment.

Matt Hawkins: We think that's very important because it gives providers a total view of their sources of payment. It's also important because it positively impacts patients. We know from our own work and from hearing and listening to patients and perhaps experiencing that for ourselves that patients want more transparency in their care. They want more understanding of what their financial responsibility is. And oftentimes, they want that before they receive health care versus the 60 or 90 days post-care.

Speaker Change: processing all on a single cloud-based platform. We think that's very important because it gives the provider a total view of their sources of payment. It's also important because it positively impacts patients.

Speaker Change: We know from our own work and from hearing and listening to patients, and perhaps experiencing that for ourselves, that patients want more transparency in their care. They want more understanding of what their financial responsibility is.

Speaker Change: And oftentimes they want that before they receive health care versus the 60 or 90 days post care. Well, that's where Waystar software can really be helpful. Because of the 5 billion insurance transactions we're processing each year within our platform.

Matt Hawkins: Well, that's where Waystar software can be really helpful. Because of the 5 billion insurance transactions we process each year within our platform, we gain a tremendous amount of insight and intelligence that informs what the patient's financial responsibility is likely to be, and we can produce a highly accurate patient payment estimate, often pre-care, that then the provider can use to engage with the patient to put the appropriate payment form on file within Waystar's software.

Speaker Change: We gain a tremendous amount of insight and intelligence.

Speaker Change: that informs what the patient financial responsibility is likely to be and we can produce a highly accurate patient payment estimate.

Speaker Change: often pre-care.

Speaker Change: that then the provider can use to engage with the patient to put appropriate payment form on file within Waystar's software. We call it the Waystar Patient Wallet.

Matt Hawkins: We call it the Waystar patient wallet. And then they begin to interact with that patient, put them on a financial care plan, or be able to process the payment appropriately over a period of time. We're seeing that capability take hold, and so that is affecting our volumes. We know that when providers use this portion of our software, the patient payment portion of our software, it's increasing patient satisfaction, but it's also increasing collection rates and improving time to collection and overall likelihood of getting. And so those things, at a kind of a high level, are absolutely influencing the way providers are thinking about patient payments.

Speaker Change: and then begin to interact with that patient, put them on a financial care plan, or be able to process the payment appropriately over a period of time.

Matt Hawkins: We're seeing that capability take hold, and so that is influencing our volumes. We know that when providers use this portion of our software, the patient payment portion of our software.

Matt Hawkins: It's increasing certainly patient satisfaction, but it's also increasing collection rates and improving time to collection and overall likelihood of getting collection.

Matt Hawkins: to collect.

Matt Hawkins: And so, those things are, at a kind of a high level, are absolutely influencing the use of how providers are thinking about patient payments. And we also know that providers see patients...

Steve Oreskevich: And we also know that providers see patients. I think historically, you might say, well, provider organizations are just treating patients carefully with care, but also like a transaction. Increasingly, we see many large health systems and hospitals view the patient in kind of a long-term relationship, a patient relationship that they would like to have. So all those factors are influencing patient payment volumes that we're processing on the software platform. We're bringing improvement, transparency, and elegance to what has historically been a very cumbersome process for both providers. That makes a lot of sense.

Matt Hawkins: I think historically you might say, well, provider organizations are just treating patients carefully with care, but also like a transaction. Increasingly, we see many large health systems and hospitals

Matt Hawkins: view the patient in kind of a long-term relationship, a patient relationship that they would like to sustain.

Matt Hawkins: and so all those factors are influencing patient payment volumes that we're processing on the software platform. We're bringing improvement and transparency and elegance to what has historically been a very cumbersome process for both providers and patients.

Steve Oreskevich: Steve, maybe for my follow-up for you, you know, that 13% normalized growth number was actually a very helpful metric. And apologies if I missed it, but can we just go maybe one level deeper into the bridge from the 20% reported growth to 13? You know, I think you mentioned something about $9 million in terms of benefit from sort of competitive disruption, but can you just maybe walk us through that bridge from 20 to 13, how much was from that, how much was from, you know, outside patient payments, or any other granularity that you can provide to help bridge that? Steve, thank you so much for that. Yeah, definitely, Socket. You are correct. There were probably, if you think about it for the second quarter, three items.

Matt Hawkins: That makes a lot of sense. Steve, maybe for my follow-up for you, you know, that 13% normalized...

Speaker Change: growth number was actually a very helpful metric. And apologies if I missed it, but can we just go maybe one level deeper into the bridge from the 20% reported growth to 13?

Matt Hawkins: I think you mentioned something about $9 million in terms of benefit from sort of competitive disruption, but can you just maybe walk us through that bridge from 20 to 13? How much was from that? How much was from outside patient payments or any other granularity that you can provide to help bridge that?

Speaker Change: Yeah, definitely, Socket. So, you are correct. There were probably, if you think about it for the second quarter, there's three items. If you want to think it more holistically, the first half of the year, I'd add a fourth item that we talked about in our S-1 filing of a contract, a customer contract.

Steve Oreskevich: If you want to think about it more holistically, the first half of the year, I'd add a fourth item that we talked about in our S1 filing of a contract, a customer contract being terminated by request of that client in the March timeframe as a result of them spinning off a portion of their business. So, again, if you think about it from the second quarter, it's really the work surrounding the competitor cyber attack. That's probably the most meaningful item on that bridge.

Matt Hawkins: being terminated by request of that client in the March time frame as a result of them spinning off a portion of their business.

Matt Hawkins: Again, if you think about it from the second quarter, it's really the work.

Steve Oreskevich: Second, the fact and the amount of transactions, patient payment transactions that we saw come through our clients during the second quarter were above what we've seen historically. And then, third, as we had indicated in the prepared remarks, just the timing of two small acquisitions in the second half of 2023 and their benefit when you're looking at Q2's year-over-year growth rate. And I would expand each of those three as we look to the first half of the year, the year-over-year growth rate, and then add that last item.

Matt Hawkins: surrounding the competitor cyber attack. That's probably the most meaningful item in that bridge. Second is the fact that in the amount of transactions, patient payment transactions that we saw come through our clients during the second quarter being above what we've seen historically. And then the third is we had indicated in

Matt Hawkins: in the prepared remarks, just the timing of two small acquisitions in the second half of.

Speaker Change: 23 in their benefit when you're looking at Q2 year-over-year, you know, growth rate. And I would expand each of those three.

Steve Oreskevich: That last item we had mentioned in the S1 filing was about roughly $4 million of benefit for the first quarter. If you think about that versus ratable timing over the rest of the year at the halfway mark, that would be about $2.5 million.

Speaker Change: As we look to the first half of the year, year over year growth rate, and then add on that that last item, that last item, we had.

Speaker Change: Mentioned in the S-1 filing was about, you know, roughly $4 million of benefit to the first quarter, if you think about that, versus ratable timing over the rest of the year at the halfway mark. That would be about $2.5 million worth of benefit.

Steve Oreskevich: Very helpful. Thanks, guys. You're welcome.

Matt Hawkins: food.

Speaker Change: Very helpful. Thanks, guys.

Matt Hawkins: Thanks.

Matt Hawkins: Yeah, good evening, guys. I'll add to the chorus of congratulations. And thanks for taking my questions. Matt, maybe I'll start with my first question for you. You mentioned there's a broader adoption of the full solution platform. And I'm curious about two things.

Ryan Daniels: Yeah, good evening guys. I'll add to the chorus of congratulations and thanks for taking my questions.

Ryan Daniels: Matt, maybe I'll start with my first for you. You mentioned there's a broader adoption of the full solution platform.

Matt Hawkins: Thanks, Ryan. I appreciate your thoughtful question. We're noticing a couple of things that we're particularly pleased with and encouraged by. We are noticing that there are increasingly more clients that are utilizing the end-to-end platform from the start. One of the metrics, as you'll recall, that we report on is the number of clients that are producing over $100,000 of LPM revenue. We start there, and we believe that's an important metric because it measures both, to your question, the new clients that join us and are consuming our several modules or perhaps even the whole platform at the outset.

Matt Hawkins: Thanks, Ryan.

Speaker Change: We appreciate your thoughtful question. We.

Speaker Change: that are producing over $100,000 of LTM revenue. So we'd start there, and we believe that's an important metric because it measures both, to your question, the new clients that join us and are consuming our...

Speaker Change: several modules or perhaps even the whole platform at the outset.

Matt Hawkins: It also measures how as clients, we may land in one area. For example, in Q2, we had, as you know, the urgent work of helping clients begin to use the Waystar Clearinghouse. Well, that's a software module within the Waystar software platform.

Speaker Change: It also measures as clients, we may land in one area, for example in Q2 we had, as you know, the urgent work of helping clients begin to use the Waystar clearinghouse. Well that's a software module within the Waystar software platform.

Matt Hawkins: And, you know, we land there typically, and then we'll expand the relationship with them over time. And so we're pleased with both the new client pursuit, which we were organized with high-performing sales team members, as well as our efforts once we land to expand the relationship. And so that metric that we report on is a reflection of both new and existing clients who are consuming more and more of Waystar software.

Matt Hawkins: with high performing sales team members, as well as our efforts to, once landed, to expand the relationship. And so that metric that we report on is a reflection of both new and existing clients who are consuming more and more of the Waystar software platform.

Matt Hawkins: Yeah, I think, Ryan, maybe to add a little bit of financial context surrounding your question, and I think Saket may have asked about it or maybe alluded to it in his question to Matt as well, we documented or disclosed, sorry, in the S1 that provider solutions generate about 70 percent of revenue in patient payment, while patient solutions generate about 30 percent of revenue.

Matt Hawkins: Yeah, I think, Ryan, maybe the...

Ryan Daniels: Add a little bit of financial context surrounding your question and I think

Ryan Daniels: Socket may have asked about it or maybe alluded to it in his question to Matt as well. We documented or disclosed, sorry, in the S-1 that provider

Ryan Daniels: solutions generate about 70% of revenue in patient payment.

Ryan Daniels: Solutions generate about 30%.

Steve Oreskevich: And for the first half of 2024, we've seen both, we've seen that sort of mix continue at substantially the same rate, and both, you know, which implies then that both are growing well over 10 percent as well. So I think we like the totality of the solution offering, and I don't think we've seen any big shift in mix there, and I think both markets have the opportunity within the client base and the broader health care base for both sets of high-level family solutions still remain. I think that's right.

Ryan Daniels: of the revenue. And for the first half of 2024, we've seen both, we've seen that sort of mix.

Speaker Change: there and think both markets, you know, the opportunity within the client base and the broader healthcare base for both sets of high-level family solutions still remain significant. I think that's right. And Ryan, if it's okay, let me address the second part of your question.

Matt Hawkins: And Ryan, if it's okay, let me address the second part, which is, given what we've seen, are there any kind of go-to-market key members? And what I'd say there is, as you'll know very well, we're going after a very large addressable market opportunity of $15 billion a year, where we have a substantial opportunity to grow within the market. We feel like our new client pursuit is well-organized, both in hospitals and health systems, as well as on the ambulatory side of our business.

Ryan Daniels: which was...

Speaker Change: is focused on, given what we've seen, are there any kind of go-to-market team implications?

Speaker Change: And what I'd say there is, as you'll know very well, we're going after a very large addressable market opportunity.

Speaker Change: about $15 billion a year, where we have substantial opportunity to grow within the market. We feel like our new client pursuit is well-organized.

Speaker Change: both in hospitals and health systems as well as on the ambulatory side of our business.

Matt Hawkins: And then we also, part of that market, that addressable market is, again, once we land a client, then we get right to work and expand those relationships and create a unique client experience so that they want to use more of our software. And I feel like we're well-organized from a go-to-market perspective there. Perfect. Thank you so much.

Ryan Daniels: And then we also, part of that market, that addressable market is, again, once we land a client, then we get right to work and expand those relationships and create a unique client experience so that they want to use more of our software. And I feel like we're well organized from a go to market perspective there as well.

Ryan Daniels: Okay, perfect. Thank you so much. And given the two-part question, I'll go ahead and hop back in the queue for you. Thanks, guys. Thanks, Ryan.

Speaker Change: Thank you. One moment as we move on to our next question.

Speaker Change: And our next question is going to come from the line of Elizabeth Anderson with Evercore ISI. Your line is open. Please go ahead.

Elizabeth Anderson: Hi guys, congratulations on your first quarter as a public company, and thanks so much for the question. I was wondering if you could comment on the visibility that you guys are getting sort of from the change situation, like if we think about the, you know, 1,117 customers that you announced over 100K in the quarter, that doesn't count some of these new ones that have come through. So as we think about kind of that increased visibility that that brings you internally, I was wondering what you could potentially share with that, and then maybe as a follow-up, I Thanks.

Matt Hawkins: So, we at Waystar, and thank you, Elizabeth, we pride ourselves on staying very close to our clients and to opportunities within our pipeline, where we track things, we measure a lot of things, as you can appreciate. So, we know a lot; we're learning. There's been a surge of work, as we've described, to help many new providers begin to use the Waystar software platform.

Waystar: So we at Waystar, and thank you Elizabeth, we pride ourselves on staying very close to our clients and to opportunities within our pipeline.

Matt Hawkins: where

Matt Hawkins: What I'd say is that we're continuing to help those clients begin to use Waystar and learn and identify opportunities that are beginning to show up in our booking pipeline of opportunities. So, we'll continue to track that and report our progress as we get the opportunity to visit with you.

Speaker Change: We track things. We measure a lot of things, as you can appreciate.

Speaker Change: So we know a lot, we're learning, there's been a surge of work as we've described to help many new providers.

Speaker Change: begin to use the Waystar software platform. What I'd say is

Speaker Change: We're continuing to help those.

Speaker Change: Those clients begin to use Waystar and learn and identify opportunities that are beginning to show up in our bookings pipeline of opportunity.

Speaker Change: So we'll continue to track that and report our progress as we get the opportunity to visit with you in the future.

Sean Dodge: Thank you. Thank you, and one moment as we move on to our next question. And our next question is going to come from the line of Sean Dodge with RBC Capital Markets. Your line is open. Please go ahead. Hey, good afternoon. This is Thomas Keller on for Sean.

Speaker Change: Got it. Thank you.

Speaker Change: Thank you, and one moment as we move on to our next question.

Speaker Change: And our next question is going to come from the line of Sean Dodge with RBC Capital Markets. Your line is open. Please go ahead.

Thomas Keller: Congratulations on the results and thanks for taking the question. I wanted to follow up on the previous questions on patient payments, and I want to make sure I heard this right. Are you expecting this part of the business to sort of grow in tandem with the other solutions, or are you expecting this to grow a little bit faster? Yeah, Tom. This is Steve. I think if you think about the base, you know, the 70-30 split with provider solutions being 70% of the business, patient payments being 30% of the business, naturally, just due to the sort of the law of numbers, that growth rate for patient payment solutions is going to be a little bit larger than for provider solutions inherent in the expectation for the full year guidance.

Speaker Change: Hey, good afternoon. This is Thomas Keller on for Sean. Congrats on the results and thanks for taking the questions.

Speaker Change: I wanted to follow up on the previous questions on patient payments, and I want to make sure I heard this right. Are you expecting this part of the business to sort of grow in tandem with the other solutions, or are you expecting this to grow a little bit faster? Thanks.

Speaker Change: Yeah, Tom, this is Steve. I think if you think about the base, you know, the 70-30 split with provider solutions being 70% of the business.

Speaker Change: patient payments, thirty percent of the business. Naturally just due to the sort of the law of numbers that that growth rate for patient payment solutions is going to be a little bit

Speaker Change: larger than provider solutions inherent in the in the expectation for the full year guidance.

Thomas Keller: I would say, though, that obviously maintaining that 70-30 split that we've seen historically and seeing that in the first half is also part of it would be part of our expectations as well. So we see both sides or both, I shouldn't say sides, both high-level product families growing very nicely, not only in the historical results but what we would expect for the rest of 2020. I appreciate that color.

Speaker Change: I would say, though, that, obviously,

Speaker Change: maintaining that 70-30 split that we've seen historically and seeing that in the first half is also part of, would be part of our expectations as well. So we see both sides, or both, I shouldn't say sides, both.

Speaker Change: High-level product families growing very nicely, not only in the historical results, but what we would expect for the rest of 2024.

Steve Oreskevich: And then just a quick follow up on that. Are there any near-term opportunities to drive first margin expansion in that business as well? Yeah, so we've talked about, I think, in our long-term target of low double-digit revenue growth annually and a 40% adjusted EBITDA margin, that we would look to, you know, look for opportunities as they made sense to reinvest in the business to maintain somewhere around that low double-digit, or sorry, that 40% plus adjusted EBITDA margin, investing in areas like bolstering an already strong cybersecurity posture or in generative AI solutions. Definitely, right?

Culler: I appreciate that, Culler. And then just a quick follow-up on that. Are there any near-term opportunities to drive first margin expansion in that business as well?

Speaker Change: reinvest in the business to maintain somewhere around that low double digit or sorry that 40% plus adjusted EBITDA margin investing in areas like bolstering and already strong cyber security.

Speaker Change: cybersecurity posture or in generative AI solutions. Are there opportunities then that we would look at from a scalability perspective that would allow us to do that? Definitely, right? I think there's...

Speaker Change: There's opportunities as we look at those two acquisitions that the smaller acquisitions that we finalized in 2023 to sort of.

Speaker Change: You know, finish the finish the pot surrounding synergy expectations that we have associated with them. I think there's, there's also opportunities and projects that we're looking at internally that that looks at, you know, that 60%.

Speaker Change: or 60% direct cost associated.

Matt Hawkins: with patient payments and our ability to look at whether it's the interchange rails in which those payments are processed on to better those from a cost structure perspective, or for those interactions with the patient population that still occurs through a printed statement.

Steve Oreskevich: There's an opportunity to change that into a more digital interaction that, long-term, we think benefits the overall margin profile of the business and allows us to continue to invest back in the business. You know, running it at 40% plus adjusted. It's very helpful. Thanks again for the color.

Matt Hawkins: that gets mailed, there's an opportunity to change that into a more digital interaction that long-term we think benefits the overall margin profile of the business and allows us to continue to invest back in the business, you know, running it at 40% plus adjusted EBITDA.

Speaker Change: That's very helpful. Thanks again for the color.

Matt Hawkins: You're welcome, Tom. Thank you. And one moment as we move on to our next question.

Speaker Change: And our next question is going to come from the line of George Hill with DB. Your line is open. Please go ahead.

George Hill: Yeah. Good afternoon, guys. Welcome to the public markets. And thanks for taking my questions. Matt and Steve, I guess as it relates to the patient payments portion of the business, we talked about the split, and I know it's a smaller part.

George Hill: Yeah, good afternoon guys. Welcome to the Public Markets and thanks for taking my questions. Matt and Steve, I guess on, as it relates to the patient payments portion of the business, we talked about the split and I know it's a smaller part but I guess the question I would ask is have you guys seen any sign of consumer weakness?

Steve Oreskevich: But I guess the question I would ask is, have you guys seen any sign of consumer weakness as it relates to the patient financial responsibility part of the business? And I guess my follow-up question there is, I'm trying to understand, like, what the core is, like, is the collections portion growing in line with what unit sales look like or whatever is the right way to think of that metric. But this is really like a patient financial responsibility slash consumer credit question.

Speaker Change: as it relates to the patient financial responsibility part of the business.

Speaker Change: And I guess my follow-up question there would kind of be, like, I'm trying to understand, like, is the core...

Steve Oreskevich: Like, are you guys seeing any erosion in that part of the business? And then I have a quick follow-up, if you don't mind. Yeah, certainly, George, this is Steve. I think, you know, what we've seen is actually stronger interaction and payments coming from patients in the first half of the year. And it's reflected in a stronger meaning above and beyond the normal seasonality we would expect to see, right?

Steve Oreskevich: And we've reflected, you know, we've reflected that in the prepared, or our prepared comments, sorry. If we think about your question, I think the second part of your question is, how do we think about the potential, you know, weakness, if you want to call it that, in the consumer aspects of it that may surface in the second half of the year as we're hearing in, you know, commentary from other companies more broadly. I don't think that we've seen anything specific to date that would state that.

Steve Oreskevich: Yeah, certainly, George. This is Steve. I think, you know, what we've seen is actually stronger, you know, interaction and payments coming from patients in the first half of the year. And it's reflected, stronger meaning, above and beyond the normal seasonality we would expect to see, right? And we reflected, you know, we reflected that in the prepared

Speaker Change: or there are prepared comments, sorry. If we think about your question, I think the second part of your question is how do we think about the potential, you know,

Speaker Change: Weakness if you want to call it that in in the consumer aspects of it that may May surface in the second half of the years. We're hearing and you know commentary from other companies more broadly I don't think that we've seen anything specific to date

Steve Oreskevich: But I think the other thing is, in being prudent and in our expectations and guidance range, I think we've accounted for that as we think through the overall revenue guidance that we've provided of, you know, top-line growth of 918 to 990. That's great, Collar. And my quick follow-up would be, some other competitors in this space have commented that the sales environment into the provider setting seems to be getting a little bit more challenging, and they are kind of trying to migrate the sales model from, I'll call it, more modular to more bundled.

George Hill: That would state that, but I think the other thing is in being prudent and in our expectations and guidance range, I think we've accounted for that as we think through the overall revenue guidance that we've provided of top-line growth of $918 million to $902 million.

Collar: Okay, that's great, Collar.

Steve Oreskevich: I'd kind of ask if you feel like you're seeing any incremental challenges kind of in the sales process, and kind of just if that would drive any changes in how you guys think about go-to-market strategies. On Georgia's map, the short answer is we have a strong and compelling ROI-based sales approach. We have many referenceable clients and case studies that support this ROI and our approach. I can't comment on what other companies you're referencing.

Speaker Change: I'd kind of ask if you feel like you're seeing any incremental challenges kind of in the sales process, and kind of just if that would drive any changes in how you guys think about the market strategy.

Matt Hawkins: Hi George, it's Matt.

George Hill: A short answer is we have a strong and compelling ROI-based sales approach.

Speaker Change: We have

Speaker Change: many referenceable clients and case studies that support this ROI and our approach, I can't comment on what other companies you're referencing.

Matt Hawkins: What I can say is we have a robust pipeline of opportunity. We take an approach that's very thoughtful. We discover, we go, we have thoughtful dialogue, we understand the needs and the pain points of these prospects and clients that we work with as we create and identify opportunities. And then we bring appropriate resources and expertise to bear, reflecting our understanding of how to improve. And that leads to really good conversations and engagement with clients. And so I would say our ROI-based approach is one that we feel confident in and we'll continue to emphasize as we go. I thought that was the case,

Matt Hawkins: What I can say is

Matt Hawkins: We have a robust pipeline of opportunity.

Matt Hawkins: We take an approach where it's very thoughtful, we discover, we go, we have thoughtful dialogue, we understand the needs.

Matt Hawkins: and the pain points of

Matt Hawkins: of these prospects and clients that we work with as we create and identify opportunities. And then we're bringing appropriate resources and expertise to bear.

Speaker Change: All right.

Matt Hawkins: reflecting our understanding of how to improve.

Matt Hawkins: and that leads to really good conversations and engagement with clients. And so, I would say our ROI-based approach is one that we feel confident in and will continue to emphasize as we go to market.

Speaker Change: I thought that was the case. Thank you. Thank you. Thank you. One moment as we move on to our next question.

Speaker Change: And our next question is going to come from the line of Richard Close with Canaccord Genuity. Your line is open. Please go ahead.

Richard Close: Yeah, congratulations, and thanks for the question. Just to maybe hit on the digitization of payments a little bit more, you know, as you go away from paper, I'm just curious about the percentage of your client base that's still doing paper statements and collections through mail. And then, you know, as it moves to digitizing, like the success difference between traditional paper and digitized.

Richard Close: Yeah, congratulations and thanks for the question. Just to maybe hit on the digitization of payments a little bit more. You know, as you go away from paper, I'm just curious.

Speaker Change: the percentage of your client base that's still doing paper statements and collections through mail. And then.

Speaker Change: You know, as you think about as it moves to digitizing, like the success difference between the traditional paper and digitized.

Matt Hawkins: Thanks, Richard. So what we would say is, as you'll recall, Waystar has taken a holistic approach to connecting providers to patients in the ways that patients want to be connected to. And the fact is, there is still a portion of the population that prefers a paper-based invoice or statement.

Richard Close: Thanks Richard. So what we would say is

Speaker Change: As you'll recall, Waystar has taken a holistic approach.

Matt Hawkins: to connecting providers to patients.

Speaker Change: in the ways that patients want to be connected to. And the fact is there is still a portion of the population that prefers a paper-based invoice or statement.

Matt Hawkins: And so we facilitate that today. We also have solutions that enable a digital engagement and a digital conversation that is taking hold, and providers and patients are using our solutions increasingly, so we see over time an increasing opportunity to drive that digital engagement. We don't disclose the portion of our business that has this paper-based patient statement, but we do see over time an opportunity to continue to help providers connect to patients and do so increasingly with modern digital tools that both providers and patients will benefit from as we go. And then the success between the two, I mean, I assume digital is much more successful in getting patients to pay.

Speaker Change: And so we facilitate that today. We also have solutions that enable a digital engagement and a digital conversation that

Matt Hawkins: it's taking hold and providers and patients are using our solutions increasingly. And so we see over time the increasing opportunity to drive that digital engagement. We don't disclose the portion of our business that is...

Matt Hawkins: that has this paper-based patient statement, but we do see over time there being opportunity to continue to help providers connect to patients and do so increasingly with modern digital tools that both providers and patients will benefit from as we go forward.

Matt Hawkins: forward.

Speaker Change: And then the success between the two? I mean, I assume digital is much more successful getting the patients to pay.

Matt Hawkins: We are seeing and tracking. Most of our case studies, I would say, that track faster collection rates and higher collection rates emphasize digital engagement. That's what we would expect as we link into that opportunity. Great. Thank you. Thanks, Richard. Thank you. And one moment for our next question. And our next question is going to come from the line of Brian Peterson with Raymond James. Your line is open. Please go ahead.

Matt Hawkins: We are seeing and tracking...

Speaker Change: Most of our case studies, I would say, that track faster collection rates and higher collection rates emphasize the digital engagement tool.

Matt Hawkins: That's what we would expect as we lean into that opportunity over the longer term.

Speaker Change: Great, thank you. Thanks Richard. Thank you and one moment for our next question.

Speaker Change: And our next question is going to come from the line of Brian Peterson with Raymond James. Your line is open. Please go ahead.

Brian Peterson: Thanks, gentlemen, and congratulations on the strong print right out of the gate. I appreciate all the detail here, Steve, on the $9 million and the impact, but I'd love to understand, when we think about that revenue, how much of that was kind of net new customers to Waystar versus customers that may have needed help facing those challenges. And is there any commonality between where you saw a bigger increase in terms of areas or customers or location?

Brian Peterson: Thanks, gentlemen, and congrats on the strong print right out of the gate. I appreciate all the detail here, Steve, on the $9 million and the impact, but I'd love to understand, if we think about that revenue, how much of that was kind of net new customers to Waystar versus customers that may have needed help facing those challenges? And is there any commonality between where you saw a bigger increase in terms of areas or customers or location? And we'd just love to understand that a little better.

Matt Hawkins: And we'd just love to understand that. Yeah, what we would say, and thanks, Brian, and I appreciate your kind comments. What we would say is that the $9 million of Q2 revenue that we've outlined or highlighted as a benefit to us in the second quarter that comes from these over 30,000 providers that we've been able to help really comes in two general categories. The first category that we've seen are existing clients that might be using one portion of the Waystar software platform that reached out to us quickly and then rapidly began using more of our software.

Steve Oreskevich: Yeah, what we would say, and thanks Brian , and I appreciate your kind comments, what we would say is that the the nine million dollars of Q2 revenue that we've outlined as a, or highlighted as a benefit to us in the

Speaker Change: second quarter that comes from these over 30,000.

Matt Hawkins: providers that we've been able to help really comes in two general categories. The first category that we've seen are existing clients that might be using one portion of the Waystar software platform that reached out to us quickly and then rapidly began using more of our software.

Matt Hawkins: That came from all types of providers and all sizes of organizations, so think large hospitals and health systems as well as those that are practicing in smaller. We also have noticed the phenomenon of simply adding net new clients to the Waystar platform where there was urgency to move from the cyber attack competitor system to Waystar. And again, we would characterize that as being across the United States, all types and all sizes of care settings.

Matt Hawkins: That came in all types of providers and all sizes of organizations. So think large hospitals and health systems as well as those that are practicing in smaller care sets.

Matt Hawkins: We also have noticed the phenomenon of simply adding net new clients to the Waystar platform.

Matt Hawkins: where there was urgency to move from the cyber attack competitor system to Waystar. And again we would characterize that as being across the United States

Matt Hawkins: And again, we would just underscore that we're grateful to be in a position to respond so quickly to help these providers. And we'll continue to learn more and report on our progress and any insight that we continue to gain as we go forward. Great to hear. Thank you. Thanks, Brian. Thank you, and I would now like to hand the conference back over to Matt Hawkins for any further remarks. Thank you so much, Michelle, for organizing and running the call today.

Matt Hawkins: All types.

Matt Hawkins: all sizes of care settings and again we would just underscore that we're grateful to be in a position to respond so quickly to help these providers.

Matt Hawkins: And we'll continue to learn more and report on our progress and any insight that we continue to gain as we go forward.

Matt Hawkins: Before signing off, I want to thank our dedicated Waystar team members. If there's a public forum to do that, I just want to say thanks. They're fantastic. We also have incredible clients and new and existing investors who have supported us on our journey as a newly public company. We're passionate about what we're building at Waystar, and we're focused on executing our business plan to achieve results in the next quarter as well as the year ahead. So, thank you for joining us today, and we wish everybody a great evening. This concludes today's conference call. Thank you for participating. You may now disconnect.

Matt Hawkins: Great to hear. Thank you. Thanks, Brian .

Matt Hawkins: Thank you, and I would now like to hand the conference back over to Matt Hawkins for any further remarks. Okay, well, thank you so much, Michelle, for organizing and running the call today. Before signing off, I want to thank our dedicated Waystar team members. And if there's a public forum to do that, I just want to say thanks.

Matt Hawkins: They're fantastic. We also have incredible clients and new and existing investors who have supported us on our journey.

Matt Hawkins: as a newly public company. We're passionate about what we're building at Waystar and we're focused on executing our business plan to achieve results in the next quarter, as well as the year ahead. Thank you for joining today and we wish everybody a great evening.

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

Q2 2024 Waystar Holding Corp Earnings Call

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