Waystar (WAY) Q1 2026 Earnings Call Transcript

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DATE

Wednesday, April 29, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Matthew Hawkins
• Chief Financial Officer — Steven Oreskovich

TAKEAWAYS

• Revenue -- $314 million, up 22% year over year, driven by expansion across the core business and strong platform demand.
• Organic Revenue Growth -- 11% year over year, with momentum across both new and existing clients.
• Net Revenue Retention Rate -- 111%, slightly above the historical range of 108%-110%.
• Adjusted EBITDA -- $135 million, representing 26% year-over-year growth and an adjusted EBITDA margin of 43%.
• Subscription Revenue -- $172 million, growing 38% year over year and 3% sequentially, accounting for 55% of total revenue; on an organic basis, up 14% year over year.
• Volume-Based Revenue -- $139 million, increasing 7% year over year and 4% sequentially; offset by softness in patient payment solutions, which are approximately 25% of total revenue.
• Client Expansion -- 42 new clients with more than $100,000 in trailing 12-month revenue added, bringing the total to 1,433 such clients, up 15% year over year.
• Bookings -- Exceeded internal expectations, with a double-digit count of $1 million-plus annual value contracts, and 40% of new bookings driven by AI-powered capabilities.
• Backlog and Pipeline -- Implementation backlog is elevated, and management stated that they carry “the largest qualified sales pipeline in our history.”
• AI Revenue Mix -- Approximately 50% of solutions leverage AI, and nearly 40% of revenue is generated by AI-embedded workflows.
• Prebill Anomaly Detection Impact -- Early deployments deliver an estimated $3 million in net revenue per 10,000 patient discharges and a 5x return in recovered revenue over three years.
• Recruitment Solution -- Built on Altitude AI, providers reduced reconciliation time by over 80%, and one health system matched $32 million in revenue risk, equivalent to about 13 full-time employees.
• Cash and Leverage -- Ended the quarter with $159 million in cash, equivalents, and short-term investments; gross debt at $1.5 billion; net leverage at 2.7x versus 3x at year-end 2025.
• Unlevered Free Cash Flow -- $90 million, converting 67% of adjusted EBITDA to unlevered free cash flow.
• Guidance Reaffirmed -- Full-year revenue guidance range of $1.274 billion to $1.294 billion (midpoint $1.284 billion, up 17% year over year) and adjusted EBITDA guidance of $530 million to $540 million (midpoint $535 million).
• Patient Payment Solutions Headwinds -- Accelerated conversion from print to digital statements and changes in healthcare coverage contributed to pressure on patient payment volumes.
• Iodine Integration -- Running ahead of plan, with full AI talent integration and early cross-sell traction, expanding combined platform capabilities.
• Provider Solutions -- Comprise approximately 75% of revenue and grew organically at twice the rate of patient payment solutions.
• Seasonality Expectations -- Q2 sequential revenue growth expected to be flat to 1%, while Q3 is anticipated to be 1%-3% sequentially, reflecting altered seasonality due to patient payment dynamics.
• Credit Ratings -- Recent upgrades on the debt facility by both Moody’s and S&P recognized improvements in capital structure.

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RISKS

• Patient payment volume was pressured by “broader macro and weather-related dynamics,” and the accelerated shift to digital statements reduced top-line volume-based revenues.
• Changes in healthcare coverage and utilization contributed to softness in patient payment solutions, which represent 25% of total revenue.
• Seasonality in patient payments is expected to have “much less variability” in 2026, potentially muting sequential growth in the first half of the year.

SUMMARY

Waystar (NASDAQ:WAY) management directly attributed first-quarter outperformance in both core and AI-driven solutions to durable expansion within an expanding client base. The company now generates nearly 40% of revenue from AI-embedded offerings, which contributed 40% of new bookings, indicating accelerated adoption of integrated technology across the platform. Subscription revenue continues to outpace volume-based revenue, and the integration of the Iodine acquisition is providing broader cross-sell opportunities and new clinical intelligence capabilities. The firm’s capital position improved, with declining net leverage and debt facility upgrades, while seasonality from patient payment headwinds is expected to flatten sequential growth through Q2. Guidance for revenue and adjusted EBITDA was reaffirmed, with management citing strong demand signals and the largest qualified pipeline in the company’s history.

• Matthew Hawkins said, “Our first quarter results reinforce our conviction,” specifically noting net revenue retention of 111% and a first pass acceptance rate of approximately 99% across the platform.
• “Bookings exceeded internal expectations and include a double-digit count of $1 million-plus annual value contracts, which is above our historical quarterly performance,” according to Steven Oreskovich.
• The transition from print to digital patient statements is expected to be margin-neutral over time, despite lowering top-line revenue within patient payment solutions.
• Waystar remains focused on investing in AI and innovation while maintaining operational discipline, with management stating priorities as expanded workflow automation, cross-selling, and deepening long-term client relationships.
• Iodine’s integration is “running ahead of plan,” which has enabled access to clinical data on about one-third of U.S. hospital discharges annually for AI model training.
• Credit rating upgrades were received on the company’s debt facility, reflecting improved capital management.

INDUSTRY GLOSSARY

• Agentic AI: Artificial intelligence systems capable of autonomous, multi-step decision-making and workflow execution, embedded directly into operational processes.
• Mission-critical infrastructure: The essential technology and systems providers depend on for core revenue cycle management and successful cash flow operations.
• Recruitment (Healthcare Payments context): The process by which payers claw back or offset funds from previously paid insurance claims, often resulting in provider cash flow volatility.
• Prebill anomaly detection: AI-powered capability to identify payment issues or errors in claims before billing, aimed at reducing denials and improving net revenue recovery.
• SKU: A specific, discrete product offering within Waystar’s portfolio, often referring to modular AI-powered solutions.
• First pass acceptance rate: The percentage of claims accepted without error upon initial submission to payers, indicating claims accuracy and process efficiency.
• Iodine: Acquired company whose integration brings mid-cycle clinical intelligence to Waystar’s platform for enhanced denial prevention and compliant reimbursement.

Full Conference Call Transcript

Unknown Executive: Thank you, operator. Good afternoon, everyone, and thank you for joining Waystar's First Quarter 2026 Earnings Call. Joining me today are Matt Hawkins, Waystar's Chief Executive Officer; and Steve Oreskovich, Waystar's Chief Financial Officer. This afternoon, we issued a press release announcing our financial results and published an accompanying presentation deck. You can find these materials at investors.waystar.com. Before we begin, I would like to remind you that this call contains forward-looking statements, which are predictions or beliefs about future events or performance. Examples of these statements include expectations of future financial results, growth and margins. These statements involve a number of risks and uncertainties that may cause actual results to differ materially from those expressed in these statements.

For a full discussion of the risks and other factors that may impact these forward-looking statements, please refer to this afternoon's press release and the reports we filed with the SEC all of which are available on the Investor Relations page of our website. Any forward-looking statements made on this call are as of today and will not be updated unless required by law. We will also discuss certain non-GAAP financial measures. These measures are intended to provide additional insight into our performance and should not be considered in isolation or as a substitute for financial information prepared in accordance with GAAP.

We have provided reconciliations of the non-GAAP financial measures included in our remarks to the most directly comparable GAAP measures, together with explanations of these measures in the appendix of the presentation slide deck and our earnings release. With that, let me turn the call over to Matt.

Matthew Hawkins: Thank you, Edward, and good afternoon, everyone. Thank you for joining our Q1 2026 Earnings Call. Waystar delivered a solid start to the year reflecting strong execution across the business and our innovation road map as we continue to position ourselves as the market leader in delivering an end-to-end health care revenue cycle platform. We drove strong performance across the core business, built on our innovation momentum, including our recent innovation showcase and introduced a new AI-powered recruitment solution. What differentiates Waystar is the tangible value we deliver.

Our platform is purpose-built and integrates powerful LMs into our core workflows to drive meaningful ROI for health care providers, improving accuracy, reducing friction and lowering the total cost of operating the revenue cycle. As requirements expand across payers, policies and workflows, providers increasingly choose embedded solutions they trust that deliver consistent financial outcomes. Importantly, the AI era is expanding Waystar's total addressable market opportunity meaningfully. Historically, revenue cycle technology addressed a roughly $20 billion software market. As we embed Agentic AI directly into mission-critical workflows, we're building toward what we believe is the future of this industry, the autonomous revenue cycle platform.

That shift unlocks a much larger opportunity, the approximately $100 billion in annual revenue cycle labor services performed across the industry today. We believe we are well positioned to automate a meaningful portion of this labor pool through new AI-powered capability launches like denials, prior authorization and recoupment. In Health Care, where regulation and risk defines success. This shift is critical, and Waystar is built to win. Our AI advantage is anchored in billions of proprietary longitudinal, financial and clinical data points, deeply integrated workflows with significant switching and disruption risk. Hard one domain expertise that positions us as the trusted AI partner and proven ability to operate at scale in an environment with little tolerance for hallucinations.

Our first quarter results reinforce our conviction. Revenue of $314 million, representing 22% year-over-year growth. Strong retention supported that performance with net revenue retention of approximately 111% alongside continued adoption of our AI platform and approximately 99% first pass acceptance rates across the platform. With that context, let me highlight a few key points from the quarter. First, our core growth drivers are durable. Continued expansion across the platform and solid core execution drove our results. We expanded within our installed base and demand signals are strong. Second, AI traction is accelerating. AI-powered capabilities drove roughly 40% of new bookings in Q1 and our clients leaned into the platform for prevention, automation and visibility rather than downstream rework.

That shift reflects the value of embedded intelligence across the revenue cycle. Third, we maintained discipline through near-term headwinds. A few factors pressured patient payment volumes during the quarter, reflecting broader macro and weather-related dynamics, but we held financial discipline while continuing to invest in innovation. Steve will expand on these dynamics shortly. Let me discuss the quarter in more detail. We continue to expand our client base in Q1, adding 42 new clients with more than $100,000 in trailing 12-month revenue. Win rates exceeded our historical averages across segments, and we continue to see RFP activity shift toward platform evaluations over point solutions, favoring Waystar's unified mission-critical platform.

We also delivered strong bookings ahead of internal expectations and building on a record Q4. Demand was broad-based, driven by both new logo wins and expansions within our installed base. We continue to build momentum with larger complex provider organizations as they consolidate vendors and standardize on a single platform. Our implementation backlog is elevated across segments. We carry what we believe is the largest qualified sales pipeline in our history, reflecting deep multiyear platform commitments from providers and supporting visibility into 2027. Waystar delivered adjusted EBITDA of $135 million in Q1, representing an adjusted EBITDA margin of 43%. Revenue mix elevated the margin slightly above expectations, which Steve will discuss.

We continue to balance profitability with targeted investment in innovation and AI. Turning to iodine. Integration is running ahead of plan and continues to validate the strategic rationale of the acquisition. Iodine extends Waystar into the mid-cycle where clinical intelligence plays a critical role in preventing denials and ensuring compliant reimbursement. The convergence of financial and clinical data represents 1 of the largest unmet needs in the revenue cycle and new third-party research confirms it.

A recent study of 50 mid-cycle leaders found that 86% of organizations have financial and clinical systems that are completely siloed or are reliant on manual data transfers resulting in a lack of visibility into payer payment and denial outcomes, 100% expressed interest in a single AI-powered platform to bridge the gap from mid-cycle to the final claim. We'll publish the full study in the coming weeks, but these findings reinforce why we acquired Iodine and the demand signal we're seeing in the market. Iodine's AI talent is now fully integrated into Waystar, accelerating AI initiatives across the combined platform. We're generating early cross-sell traction in both directions and go-to-market demand is exceeding our expectations.

Last quarter, we outlined the 4 interconnected pillars that position Waystar to lead in the AI-powered revenue cycle. Now I'll focus on how those pillars translate into outcomes for providers. First, Waystar is the mission-critical infrastructure providers depend on to get paid, operating at scale in 1 of the most highly regulated payment environments, directly inside live revenue cycle workflows, eligibility, authorization, claims, denials, appeals and payments. This results in very sticky long-term customer relationships. Second is our proprietary data at scale.

We process over 7.5 billion transactions each year and with Iodine, our models now learn from clinical data on approximately 1/3 of U.S. hospital discharges annually, giving us visibility into the financial and clinical dimensions of reimbursement, not just what happened, but why? Our models learn across hospitals, physician practices and ambulatory settings. Every claim, denial and payment improves performance. Clients benefit from patterns across tens of thousands of similar organizations. Third, Waystar operates a deeply deployed multisided network and proprietary data rails between payers and providers. We connect over 1 million providers to every major payer through 100,000-plus live integrations across electronic health records, practice management systems, clearing houses and clinical platforms.

We touch roughly 60% of the U.S. patient population each year, yet we only penetrate a small portion of the total transactions those patients generate. As volume increases, our platform delivers better outcomes. Fourth, Waystar combines scale distribution with deep domain expertise. We serve providers across all care settings with low client concentration, creating both resilience and broad reach. Our forward deployed teams, product, clinical, revenue integrity and client success work directly inside real workflows. We develop and refine many of our AI capabilities in close partnership with clients, ensuring what we deliver works in production. With that foundation in place, let me turn briefly to how AI is operating and evolving across the platform today.

At Waystar, AI is embedded directly inside workflows and where decisions are made and dollars move. The platform identifies issues upstream, resolves them inside live workflows and learns continuously from outcomes. This quarter, we accelerated the shift from task level automation toward Agentic workflows. Each step moves us closer to the autonomous revenue cycle where the platform absorbs the administrative burden, so teams can focus on exceptions, strategy and patient care. Today, approximately 50% of our solutions leverage AI and nearly 40% of revenue is generated by AI embedded workflows.

At last week's spring innovation showcase, we introduced several net new capabilities that expand AI embedded workflows across the revenue cycle including deeper convergence of financial and clinical intelligence to prevent issues before billing and expanded Agentic intelligence that assesses documentation, prioritizes opportunities and guide next steps directly within live workflows. Early deployments are delivering strong outcomes. Our new prebill anomaly detection solution delivers an estimated $3 million in net revenue per 10,000 patient discharges and a 5x return in recovered revenue over 3 years. New Waystar altitude AI-powered capabilities within our patient financial experience are expected to drive a 50% increase in collections meaningful in a market where patients account for more than $556 billion in out-of-pocket spending.

Some of the most damaging revenue loss in health care happens after providers have already been paid through payer recoupments. Payers regularly take back funds from previously paid claims, often months or years later by offsetting them against future payments with little transparency into which claims are involved, why the funds were recouped or whether the action is even valid. Based on our industry remittance data analysis, we estimate payers take back over $40 billion from providers each year through these offsets, and recruitments are growing at more than 2x the rate of overall claim volume creating significant accelerating cash flow volatility. Waystar's new recruitment solution built on Altitude AI brings transparency to this process.

Providers can now detect previously hidden recruitments, understand the root causes and take action efficiently, all using remittance data at scale. Early results are compelling. Providers are reducing recruitment reconciliation time by over 80% and 1 early adopter health system matched $32 million in revenue risk, work equivalent to approximately 13 full-time employees. This new SKU integrates quickly for existing clients and demonstrates how we convert administrative complexity into financial outcomes through AI. Looking ahead, our priorities are clear: execute against our product road map with AI embedded deeper into every workflow, drive cross-sell and platform adoption across our installed base and maintain operational discipline while investing in the capabilities that widen our competitive advantage.

Q1 reinforces that our role in the health care ecosystem is deepening. We're operating at the intersection of complexity, scale and outcomes, and our platform is engineered for exactly this environment. Before I turn the call over to Steve, I'm pleased to share that will be hosting our first Analyst Day on Tuesday, August 25, alongside our annual Waystar True North Client Conference. You'll hear directly from our customers partners and leadership team, we hope that many of you can join us. With that, let me turn it over to Steve.

Steven Oreskovich: Thanks, Matt. Revenue increased 22% year-over-year in the first quarter to $314 million. Organic revenue grew 11% year-over-year. Performance in the quarter reflects strong execution across the business and expansion within the customer base. Bookings exceeded internal expectations and include a double-digit count of $1 million-plus annual value contracts, which is above our historical quarterly performance. These contracts have both longer lead time to revenue and attractive profitability. Clients generating more than $100,000 of revenue in the last 12 months increased by 42% in the first quarter to 1,433 at quarter end, an increase of 15% year-over-year.

Our net revenue retention rate also viewed on a last 12-month basis was 111% at the end of Q1, slightly above the historical range of 108% to 110%. Subscription revenue of $172 million for the first quarter increased 38% year-over-year, 3% sequentially and was 55% of total revenue. On an organic basis, subscription revenue grew 14% year-over-year. The growth and revenue composition are in line with our expectations. Volume-based revenue of $139 million for the first quarter increased 7% year-over-year and 4% sequentially. As we moved through the quarter, we saw some modest offsets within our volume trends that were most evident in patient interactions with health care providers and taken together, affected volume-based revenues.

These headwinds were primarily concentrated in patient payment solutions, which represent approximately 25% of revenue and include a combination of external and client-driven dynamics. Specifically, we saw accelerated conversion from print to digital patient statements as clients continue to focus on efficient ways to engage with patients. While we've been advocating for the shift to digital for some time, adoption in Q1 was ahead of historical rates, and we have updated expectations for the remainder of the year accordingly. We also saw 2 factors affecting patient utilization of the health care system during the quarter, changes in health care coverage and weather-related impacts.

Importantly, none of these factors were competitive or product-driven as evidenced by our strong bookings performance over the past 3 quarters and a record qualified sales pipeline at the outset of Q2. Adjusted EBITDA of $135 million for the first quarter increased 26% year-over-year. The adjusted EBITDA margin of 43% was primarily driven by a shift to higher-margin solutions, specifically, provider solutions, which have higher margins and comprised approximately 75% of revenue organically grew year-over-year at double the rate of lower-margin patient payment solutions. Please see our latest investor presentation for more details on historic growth rates of these 2 solution sets.

Our capital position is strong with healthy cash flows as we ended the quarter with $159 million in cash, equivalents and short-term investments and $1.5 billion in gross debt. Unlevered free cash flow was $90 million in the first quarter and we converted 67% of adjusted EBITDA to unlevered free cash flow. As of March 31, net leverage was 2.7x compared to 3x at the end of 2025, which aligns with our historical ability to delever 1 turn annually. As a reminder, we expect to run the business at or below a 3x leverage ratio.

We are also pleased with the recognition of our efforts managing our capital structure as noted by both Moody's and S&P upgrading the ratings of our debt facility in the past couple of months. Based on the first quarter performance and our current visibility for the rest of the year, we reaffirm our revenue guidance range of $1.274 billion to $1.294 billion, with the midpoint of $1.284 billion, representing 17% year-over-year growth and adjusted EBITDA range of $530 million to $540 million, with the midpoint of $535 million. Our full year guidance at the midpoint continues to assume normalized organic revenue growth of approximately 10% consistent with our low double-digit long-term growth target.

We expect the strong demand in booking activity we saw in the first quarter, along with similar results in the second half of 2025 to provide upside opportunity for growth in late 2026 and beyond. We are balancing that expectation with the near-term impact of the previously discussed offset, which we expect adjust the typical first half, second half of the year seasonality curve associated with patient payments to have much less variability in 2026 relative to the past couple of years.

Thus, while we previously communicated that we expect 1% to 3% sequential quarterly growth throughout 2026, with Q3 at the low end -- we now anticipate Q2 sequential growth to be flat to 1% in Q3 to be 1% to 3%. This concludes our opening remarks. With that, we are ready for your questions. Operator, please open the call.

Operator: [Operator Instructions] Our first question will be coming from the line of Adam Hotchkiss of Goldman Sachs.

Adam Hotchkiss: I guess, Matt, you spoke about 40% of revenue being associated with work flows related to AI. I think that speaks to the defensibility of the platform as you work AI into the existing solutions. But how should we think about the degree to which AI can be additive to your TAM and show up as rating revenue growth. I guess I'm just trying to marry the stability of the current organic growth rate with some of the AI strength you're calling out in numbers and how we may see AI SKUs impact revenue growth in the future?

Matthew Hawkins: I appreciate your thoughtful question about AI. One of the things that you heard us just speak to, I believe we've provided a slide or 2 this quarter and in the past is a much larger total addressable market that we're able to go after by deploying AI capabilities that replace manual services. We note that a recent McKinsey report stated that this ongoing shift in value pools from services to technology and software platforms will expand its incredible addressable market opportunity.

And so I think what you see with our recent spring innovation showcase launch where we are consistently pointing people towards the autonomous revenue cycle platform and then delivering new AI-powered capabilities, whether it's the new recruitment SKU that we highlighted or it's things that show up in our innovation showcase like the prebill anomaly detection solution that replaces manual work from needing to take place. It's going to allow Waystar to pursue a much larger addressable market opportunity. We're very excited about that. We view AI as a tailwind and as the biggest opportunity in our lifetime.

Operator: Our next question will be coming from the line of Charles Rhyee of TD Cohen.

Charles Rhyee: I want to ask about the comments you made about volume-based revenue is, obviously, it looks like patient revenue was up about 4% in the quarter. It's been going up more about 8% the last 2 quarters prior. You made some comment about accelerated move from print to digital building. Just curious, why would that necessarily have an impact in you did call out weather, but are you able to sort of isolate how much maybe weather might have had impact on that? Just trying to understand a little bit what's happening there and how we should think about patient payments to look as we think about the guidance, particularly as the 2Q commentary on flat revenue.

Any help there would be helpful.

Matthew Hawkins: Thanks, Charles. Let me start and then I'll turn it to Steve. We certainly work to be transparent with what we observed taking place in the business. And we did highlight couple of the offsets in the transaction volume. Most of that was a function of this dynamic of the acceleration of conversion from print statements to digital statements. We've talked about this for quite some time. We know that there's this tremendous digital transformation opportunity that exists in health care, where we reduce paper and postage and take cost out of the system while we actually increase the patient experience and ensure that we get providers paid accurately and successfully.

So we view this digital transformation as ultimately being good for providers, good for patients, quite frankly, good for the earth and good for Waystar. And Waystar has digital integrated patient payment solutions that improve transparency, improve the patient payment plan adherence and really are also helpful to providers. So I guess I'd say 1 other thing and then we can comment on some of the quarterly commentary, and I'll ask Steve to help us there. I'd say it's important to note that while we see this trend -- and we're kind of factoring that into how we think about 2026, we view this as an opportunity.

We view this transformation as something that's good, as you've heard me describe, and this offset, if you will, has 0 to do with AI competition and more to do with doing what's right for health care. And so with that, Waystar can be an enabler of that. And I'll turn it to Steve for added commentary.

Steven Oreskovich: Yes. And hopefully, Charles, when you get a chance, I guide you to look at Slide 8 of our IR deck. We expanded it to include the split of provider and patient payment solutions revenue by quarter and the historical trends since the first quarter of transparently, most people could have picked it up from our filings, but you felt that it just made more sense to illustrate it here so you can actually see the same things that we're seeing going on in the business into. To Matt's point, right, you continue to see the strength of the business and growing in Provider Solutions, which are 75% of the total revenue.

And we talked about in the past, very high margins when we look at it from a very low direct third-party costs associated with it. Over the past 6 quarters, that's continued to grow nicely on an organic basis, which we also called out on the slide, anywhere between, on average, 13% to 14% year-over-year. The offsets we talk about are in, and as you mentioned, inpatient payments that 25% of the revenue stream where we're helping providers connect with and interact with and get paid by patients. And that's where we're seeing that conversion of -- from print to digital statements. Transparently, that does impact the top line revenue number on a unit economic basis.

But when you look at it from a margin dollars or a cash flow, that conversion is neutral. So we see positivity long term in the business there, because it's going to allow us to see margin accretion in the business overall. A little bit of that, what you see in the first quarter here as well, and we called out based on the revenue composition for the order. So hopefully, that's helpful commentary, and it's a good spot to go look and really dive into the details on that impact.

Operator: And our next question will be coming from Jailendra Singh of Truist Securities.

Jailendra Singh: I wanted to follow up on your comments that about bookings coming in ahead of internal expectations. I think you talked about 40% new bookings driven by AI solutions, and I petite all the color there. Can you elaborate on the remaining 60% bookings? Are there any particular areas that are seeing outperformance -- and considering the rates we are seeing between payers and providers, are you seeing an increased genes from providers, which might result in a faster conversion than what we have seen in the past?

Matthew Hawkins: Thank you, Jailendra. Yes, we note that we've just seen nice momentum and I feel like our business is getting better and better every quarter. the bookings momentum is across both new prospects as well as cross-sell and upsell. We are growing across every segment of our business with high-quality opportunities. And as we -- it's interesting, we look at the size of the bookings, just a little color commentary here, we called out in the last 2 quarters of 2025 that the number of million dollar bookings were more than 2x the quarterly average of the past 3 years. That trend is continuing. We're seeing more large bookings.

To us, that validates our platform approach as these bookings are often multi-solution or platform sales often involving AI that hopefully can be turned on faster. Generally, cross-sell and upsell bookings, we're able to build in an implementation plan for existing clients. But given the larger nature, whether it's new or existing, if these bookings are larger in size, they're still taking 6 to 18 months to show up in our revenue model. And we've noted in the past how larger deals typically take this type of time for full revenue realization. But certainly, we have internal teams focused on compressing that time. It's just a balancing act. Sometimes it's what the actual provider organization.

Overall, we're pleased with the progress that we're making. We start Q2 with the largest qualified pipeline of new and cross-sell upsell opportunities in our history. So that gives us a sense of momentum and conviction about the work that we're doing. And we also start -- as you might anticipate, at the start of Q2, a large implementation backlog. So hopefully, that commentary is helpful, Jailendra, I appreciate your question.

Operator: And our next question will be coming from the line of Ryan Daniels of William Blair.

Ryan Daniels: Matt, maybe 1 for you. You talked about early adopters of the payment recruitment solutions, seeing some very good ROI -- and I heard in your prepared comments, you stated that was a new SKU. So it sounds like a new AI-enabled revenue generation opportunity. So what I'm hoping you can dive into a bit more is how long does it take for solutions like this to kind of go broadly across your client base? And then also, are you doing any go-to-market changes given the potential increased value of solutions like this that are new and AI enabled that can really add value on a rapid basis. Thank you, Ryan.

We're sure excited about this new EI powered recruitment solution. It does represent a new SKU.

Matthew Hawkins: And as you've heard us speak to in the past, -- these AI-powered solutions have multiple ways to show up into our business model. First, certainly, longevity of clients and sustaining sticky relationships with clients Second, pricing, AI solutions, where we're strengthening in some cases, existing software with more LLM based AI capability. We price those to value for clients as we're delivering incremental capability. In the case of a new SKU like this, like this AI-powered recruitment and what will soon follow in the prebuild anomaly detection solution. If I were to pull back the curtain just a bit we go through an extensive amount of training for our teams.

So certainly, the product and technology teams are stoked to build these kind of capabilities and to launch them. We do have a robust early adopter program. We're getting great feedback from some of the leading provider organizations in the United States. This is a robust kind of test and learn environment once we get ready to launch this, we also brought along our go-to-market teams, our product marketing teams. We do a little bit of outbound product marketing to build excitement and webinars and things that will educate provider organizations on the benefits of these types of solutions, while we're training our go-to-market teams. Just last week, we were at a growth summit.

We had several hundred people engaged in hands-on training on making sure that we're able to talk about these solutions, get these solutions into the hands of provider organizations and do ROI calculators, things like that. And then along the way, we're training our operational teams as well to be able to implement these solutions. Depending on the -- and they do a fantastic job I might add. But depending on the SKU we're able to turn some of these things on rapidly.

And to your question, we're always exploring ways for us to turn on new capability in a way that clients can absorb it into their -- into the platform and begin to use it and get the benefit of it. So that often involves training and some educational component. And the nice thing about our platform Ryan, is we're conditioning end users to consume AI in a construct that they understand. And as you know, we deliver hundreds and hundreds of capabilities onto our platform each and every quarter. We want people to understand the power that they have. And sometimes the technology is a little bit ahead of where the human factor is.

And so -- it's not just about turning this capability on and on the platform. It's about making sure that providers can get the benefit that they want as they begin to consume this exciting new AI capability.

Operator: And our next question will be coming from Craig Hettenbach of Morgan Stanley.

Craig Hettenbach: Great. Matt, I just had a question. When I think about how fragmented the revenue cycle management space is your comments around kind of point solutions versus platforms -- what do you think is the tipping point in terms of driving a faster acceleration towards platforms? What are some of the things you're hearing from your customers and seeing in the market?

Matthew Hawkins: Thank you, Craig. It's interesting. There's a lot of excitement right now. This is -- it's not necessarily a new phenomenon. Our health care and the revenue cycle space has had a long history of point solutions. And it was our vision from the very outset that Waystar could create an enterprise caliber end-to-end integrated platform. And that came -- that vision came from actually showing up and talking to provider organization decision-makers who are, quite frankly, fatigued at using point solutions. When you use -- I was -- the example that I've given recently was I was with a CFO -- excuse me, a CIO of a very large system not long ago, and very impressive lady.

She said, Matt, can you help us, can your platform help us? I currently use more than 12-point solutions just to manage our revenue cycle process. And of course, that's where the platform approach really comes to play. What we hear providers want increasingly, they want a regulatory compliant, cyber secure, deeply integrated platform, and they want to be able to call 1 person, 1 organization to help them across the platform to be able to tackle their most persistent challenges. And I think that's where Waystar -- that's where you see the momentum and the size of the deals that we're signing the quality of our pipeline start to show up.

The forward demand indicators to us mean that there's more excitement about our platform than perhaps ever before. This is what we were dreaming of 8 years ago from Waystar. So hopefully, that context is helpful.

Operator: And our next question will be coming from the line of Sean Dodge of BMO Capital Markets.

Sean Dodge: Yes. Maybe just kind of staying on this AI and how that likely changes the market. Matt, you talked a lot about embedding more AI and waste or offerings and that driving more value for clients. You also talked before about pricing to value, so adjusting the revenue model in a way that helps waster participate in some of that value creation. I guess what do you think the time lines are that, that likely happens over this kind of idea of pricing to value. How near term of an opportunity is that? And then like how big of a paradigm shift is that in your pricing approach? I guess you guys have always tried to price the value.

So this is just kind of what you've always done.

Matthew Hawkins: Yes, Sean, that's a great question. Let me speak to that. I'd say we've always priced to value that we deliver. As we deliver these AI capabilities and in a way that clients can absorb them, we're very excited about it. I think this is a long-term opportunity for us to truly price to the value that these are delivering. When we call out in our prepared remarks on the earnings call, the type of impact oftentimes will associate the reduction of manual work and the number of people involved in historically doing that manual work. And so we know that there's impact in the solutions that we have to offer.

Now I would say we're already monetizing AI through our core business model. So part of this really isn't a science project by trying to tie it to modules or outcomes or operating discipline in a new way. We're already doing that. But also this does give us a chance to reflect on the continued effort to price to value. We know that the human labor factor in health care is the most expensive expense line in most health care organizations. And so if we can help then those people become even more productive and focus on higher order, higher value work.

And we're doing our jobs, we're delivering AI in a way that can be very constructive to those organizations. And so while we don't want to disclose too much on our pricing philosophy on a public call, I think what I'd also say is that we're -- we've always been a consumption-based pricing model. We've always deployed amazing software and AI capability that ties to the actual business activity in an organization. We're not a per seat fee-based company were tied to consumption and successful outcomes for the organizations that we work with.

Operator: Our next question will come from Stan Berenshteyn of Wells Fargo Securities.

Stanislav Berenshteyn: I wanted to ask about the sales cycle. You obviously called out you have a lot more SKUs. You're generating much larger sales on a per client basis. And obviously, this requires your sales reps to do a bit more learning perhaps the clients have to do a bit more educating on what you're offering, how is that impacting the sales cycle? Any changes in the conversion rates as we think about this year and next year?

Matthew Hawkins: Thanks, Stan. I wish I could have taken you with me to our Growth Summit that we hosted just last week. It felt like an NFL mini can because we take our growth account executives, and we feel like they're the finest best in the industry. We expect them to be very productive, very focused. These are very well-trained people. And our goal, if we do this right, is we want to consistently be delivering them new capability to introduce to clients and to prospects.

First and foremost, we take a platform approach -- and so you can imagine that it becomes really additive to the platform every time we're talking about a new high-value AI-powered solution and our growth team loves that. So we have a methodology that we follow. We have great people in our training and development and strength and conditioning if I can use the NFL analogy and -- we have a really great team of people who want new product.

And as we give it to them, it shows up in the type of demand statistics that we've talked about, elevated really nice bookings higher deal sizes, a great qualified pipeline that we work with great sales leaders to qualify that pipeline, and it allows us to get traction and create some longer-term vision towards what can we build towards. So I hope that commentary is helpful, Stan. But yes, they're always eager to get more solutions, and we take training very seriously, so we can empower great people to go help us grow.

Stanislav Berenshteyn: And just to kind of reiterate, is that impacting the sales cycle at all given the shift towards more SKUs and larger sales?

Matthew Hawkins: And let me say that it is not. We've highlighted that each of the segments that we sell to have different sales cycles. And along the lines of your thoughtful question, hospitals and health systems tend to be 12 to 24 months sales cycles. Certainly, depending on the size of a nonhospital or an ambulatory type organization, those sales cycles can be or shorter in length. But we're not noticing a compression of time or any elongation of time. We are also seeing elevated win rates. So as we're introducing new solutions, if anything, the validating point is that sales cycles are staying the same and we're seeing elevated win rates.

Operator: Our next question will be coming from the line of Ryan MacDonald of Needham & Company.

Ryan MacDonald: Matt, maybe we'll give you a little bit of a breather on this one. I got 1 for Steve on margins. Steve, I'm curious as how we should think about sort of the pacing and magnitude of incremental investment as we go throughout the year. Was there anything in Q1 in terms of investments where you sort of held back or pushed out to later in the year? The reason I ask is, obviously, has historically been sort of the low watermark from an adjusted EBITDA margin perspective.

And sort of based on the implied guidance, even if you run rate out Q1 adjusted EBITDA throughout the remainder of the year, we're getting to that sort of $540 million sort of high end of the range. So just wondering if the -- what the puts and takes there that with the reaffirmation of the guidance.

Steven Oreskovich: Yes. Certainly, Ryan. So our focus and where we're reinvesting back in the business hasn't changed to start with, right? It will continue to be an innovation in the client experience in cybersecurity. So no changes to areas of focus. To your question on the 43% margin -- adjusted EBITDA margin for the quarter versus 42% in overall guidance. And you are correct, typically, Q1 tends to be a little lower. That really truly is what we're seeing in the growth of the sort of the revenue breakdown that I had mentioned earlier with the provider solutions growing at a faster rate and having a much higher bottom line contribution than patient payments.

Now the 1 thing just to be -- as we look out for the full year, with some of the offsets we talked about and some of what you're seeing in patient payments and the interaction in the first quarter of the year, we do expect that first half of the year, second half of the year variability that we tend to see, just seasonality that we tend to see in that business to be tighter to the normal or if I could say, a lighter beta than we've seen in prior years.

So we would expect a little bit of that happening to the shaping it throughout the year, but there's nothing from an innovation or an investment perspective that we were light on from where we expected to be at in the first quarter. So good opportunity to continue to drive exceptional margins throughout the rest of the year.

Operator: Now our next question comes from the line of George Hill of Deutsche Bank.

George Hill: I'll say, Steve, I've got another 1 for you, which is can we unpack the slowdown a little bit more in the Q2 expectations for the volume-based revenue -- and I think a lot of this in services have seen a slowdown in utilization kind of in the first part of Q1 as it relates to flu and weather. Is this like a paper to electronic conversion process -- is this a claims lag issue, which is why you guys are seeing it in Q2? Is it you guys haven't seen the reacceleration or the uptick yet.

I'd really like just to understand more of the mechanics of the accounting and what you guys are seeing -- recognizing it's 25% of the revenue.

Matthew Hawkins: Yes. Certainly, George. So weather had an impact in the first quarter. We wouldn't expect knock on wood, wouldn't expect an impact going forward for the rest of the year. It is primarily the conversion of print to digital statements and then also a little bit of the utilization of the health care system by patients. Now typically, to your question specifically on the second quarter and the shaping, typically, the second quarter tends to be 1 of the stronger utilization quarters historically that we've seen -- right now, what we're seeing with the printed digital conversion and how we're seeing that play out from a rest of the year perspective.

Do you think that largely offsets what we see in sort of the patient visitation uptick. So that's really what we're looking at and how we're sort of giving the guidance for Q2 and then the rest of the year. Now the rest of the year is an impact of why we're seeing strength there. Some of those longer term -- the larger deals that we've seen and we've talked about in the Q3 and the Q4 time frame -- that we've previously said and still believe on the whole, they tend to take longer lead time to revenue more towards that 18-month side of the 6 to 18-month sort of full ramping period.

We're also seeing some good opportunities, as Matt had mentioned, working with clients to move some of those clients and get them up and running and seeing that ROI faster, positively impacting the back half of the year. And I know you're familiar with it, George, on the seasonality aspect in patient payments, especially in the processing of collections tends to be with those -- that segment of patients that are on high deductible plans, which that generally causes that seasonality aspect. But for others on there, did want to mention that, and that's really why we see in that 25% of the revenue sort of that first half, second half of the year dynamic.

Operator: Our next question will be coming from the line of Daniel Grosslight of Citi.

Unknown Analyst: This is Louis on for Daniel. I just had a follow-up. You noted earlier in the call that AI drove 40% of your bookings, and I know that you offer a broad array of AI products and not just products like Dale, can you give more details if providers are more in just the new or more innovative solutions like altitude -- or is the demand just for AI broad across your portfolio?

Matthew Hawkins: Thank you for the question. We know that providers are very interested in the use of AI to help them operate and run their businesses. And we know they want to use AI, but they're reticent to use point solutions, the vast majority of provider organizations aren't equipped to necessarily stand up their own technology teams, let alone teams that can support AI on a stand-alone basis in their organizations. And so they're looking for trusted partners like Waystar. I think as we engage, we know that there's certainly excitement around the new LLM or AI-powered solutions that Waystar offers. There's also broader-based interest in some of our AI-powered solutions. AI is a broad category.

So it would include machine learning and some data science that produces intelligence or insight -- and as you've heard us talk about in our prepared remarks, our deeply deployed multisided network, there's just so much learning that takes place on that network. As a result of all these different forms of AI. That tends to be very interesting to provider decision makers. They're focused on outcomes. They want cybersecurity, they want efficiency they want industry compliance and to stay abreast with what's going on in the industry, and they want deep integration to the EHR systems that they may be using or the practice management systems.

They may be using -- and they want the benefit of being able to do that at scale and get the learnings from thousands of other organizations like them and Waystar helps to deliver that to these providers.

Operator: And our next question will be coming from the line of Elizabeth Anderson of Evercore ISI.

Elizabeth Anderson: Can you -- maybe to sort of macro-type questions. One, are you seeing any sort of change in anything as we're seeing hospitals have more difficulties on the financing side? And then two, are you hearing anything from your customers about like managed care companies and payers like back against some of these new solutions to do that? Any color on that would be super helpful.

Matthew Hawkins: Thanks, Elizabeth. We're seeing our solution which tend to get prioritized, as you've heard me talk about, because we're mission critical in nature and because we help organizations get paid for the services that they're rendering. We tend to get prioritized in the decision-making of things. And I think our pipeline and our bookings results and our financial results are a testament to that. We continue to believe that, that will be the case. As we think about the -- you mentioned the payer provider tension, so to speak, and perhaps sometimes push back. I'm not sure exactly what you're referring to.

But what I would say is we know that there are payers that are working to deploy AI capability to do the things that they're organized to do to make sure that payments are accurate to avoid broad waste and abuse. And -- and sometimes that means they've denied claims, but they're increasingly using AI to do that. I don't know how an individual provider who isn't as deeply resourced as the deep-pocketed payers are could stand up against these payers by themselves.

So we're really grateful to have to put waste are in a position where we can represent over 1 million providers and we can develop AI capability that leads to more accuracy in coding, leads to a higher first pass claim acceptance rate where the payer is accepting the accurate claim -- and that's leading to accurate payment, faster payment, a more efficient payment. And so we'd like to think that Waystar's role can be that constructive referee that intermediary that brings fairness and transparency to the marketplace that really needs it.

And honestly, we're also seeing outreach from a number of payer organizations directly who would like to talk about things like real-time claim adjudication for a portion of the claims that they're processing through Waystar. They're doing that -- and I think they're doing that as evidenced because they're seeing that we're bringing accurate plans. And so we'd like to think that we can help bring fairness and balance to this exchange between providers and payers.

Operator: Our next question will come from the line of Constantine Davides of Citizens.

Constantine Davides: Matt. I appreciate all the bookings color you provided. But I did want to just drill in a bit on momentum in the acute space, more specifically. And just wondering if you can describe how your execution and competitiveness are tracking there on the inpatient side of the market where you, I guess, historically had lower market share relative to what you've carried in ambulatory.

Matthew Hawkins: Thank you, Constantine. We're seeing nice momentum on the acute side. It's right. It's fair to say that when we formed Waystar 8 years ago, we had a small handful of hospitals and health systems that we're working with us. But today, we've built a really nice presence where approximately now we work with 16 of the top 20 hospitals and health systems in the United States. We work with nearly hospitals in some form or another. And we're delivering them the message that we have a unified end-to-end revenue cycle platform that's marching towards an autonomous revenue cycle platform. And it tends -- that message is really taking hold.

I'd also note that about 40% of our revenue today is hospital and health system or acute related. And we're excited about the progress that we're making in every segment of care, but certainly, the growth and continued momentum we see in the hospital health systems.

Operator: And I would now like to turn the call back to Matt Hawkins for closing remarks.

Matthew Hawkins: Well, thank you for joining our call today. We're very grateful for your interest and appreciate your thoughtful questions. As we wrap up today, I'd like to just reaffirm that our business is getting better and better every quarter. We're doing what we said we would do from the outset, and that is we're focused on disciplined execution. This is now 8 consecutive quarters of strong revenue growth, EBITDA performance and cash flow above the consensus has allowed us to continue to delever. We've seen recent upgrades in -- by standard and S&P, excuse me, and Moody's and we're really grateful for the momentum that we see in our business.

And it's all possible because we have great people who buy into our mission of simplifying health care payments for providers so that they can spend more time caring for patients and less time trying to work through the administrative hassles that they do. So I'd like to just thank our team, thank our clients and thank our partners and we look forward to continuing to execute against our plan in 2026. Thank you.

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

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