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Waystar Holding Corp. (WAY)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered 14% year-over-year revenue growth to $256.4M, 42% adjusted EBITDA margin, and 11% GAAP net income margin; management raised full-year revenue, adjusted EBITDA, non-GAAP net income, and diluted non-GAAP EPS guidance .
  • Versus Street: revenue beat by ~$7.9M and diluted non-GAAP EPS was essentially in line (Q1 2025 EPS $0.32 vs $0.3195 consensus; revenue $256.4M vs $248.5M consensus)* ; estimates from S&P Global*.
  • Positive catalysts: strength in patient payment utilization, elevated net revenue retention (NRR 114%), and AI-driven product momentum (AltitudeAI) with measurable ROI, alongside a cleaner balance sheet at 2.5x net leverage .
  • Watch-outs: Q1 benefited from ~$10M faster-than-normal revenue recognition tied to rapid client implementations (last quarter of notable impact), and management expects modest sequential subscription growth through FY25; patient payment seasonality skews H1 higher .

What Went Well and What Went Wrong

What Went Well

  • Elevated retention and cross-sell: NRR of 114% (above the typical 108–110%), supported by strong bookings across claims management and patient access solutions; “we’re so pleased to deliver 4 consecutive quarters of double-digit revenue growth and EBITDA margins above 40%” .
  • Patient payment utilization strength: Q1 outperformance driven by continued strong utilization of patient payment solutions (30% of revenue) and volume trends above historical 1–2% assumptions .
  • AI innovation momentum: Launch and expansion of AltitudeAI; examples include automated denial prevention and accelerated appeals with early adopters seeing >40% overturn rate increases and 85% auto approvals, reducing authorization time by ~70% .

What Went Wrong

  • One-time comparability dynamics: ~$10M faster time-to-revenue from rapid implementations benefited Q1; Q1 2024 contained a $4M contract termination benefit, complicating YoY comparability; adjusted YoY growth ~12% after normalizations .
  • Subscription growth moderation: Management guided to modest sequential subscription growth for the remainder of FY25, tempering near-term top-line acceleration .
  • Macro sensitivity: While “recession resistant,” management repeatedly flagged macro and tariff risks and patient ability-to-pay as potential pressures, though no deterioration seen in Q1 .

Financial Results

P&L and Margins (sequential trend)

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$240.1 $244.1 $256.4
Adjusted EBITDA ($USD Millions)$96.7 $100.2 $107.7
Adjusted EBITDA Margin (%)40.3% 41.0% 42.0%
Net Income ($USD Millions)$5.4 $19.1 $29.3
Net Income Margin (%)2.3% 7.8% 11.4%
GAAP Diluted EPS ($USD)$0.03 $0.11 $0.16
Non-GAAP Diluted EPS ($USD)$0.14 $0.29 $0.32

Performance vs Wall Street Consensus (S&P Global)

MetricQ3 2024Q4 2024Q1 2025
Revenue Consensus Mean ($USD Millions)*223.8*232.2*248.5*
Revenue Actual ($USD Millions)240.1 244.1 256.4
Primary EPS Consensus Mean ($USD)*0.1067*0.1389*0.3195*
Diluted Non-GAAP EPS Actual ($USD)0.14 0.29 0.32

Values retrieved from S&P Global.*

Segment Revenue Breakdown

SegmentQ3 2024Q4 2024Q1 2025
Subscription Revenue ($USD Millions)$118.0 $121.6 $125.0
Volume-based Revenue ($USD Millions)$120.7 $121.2 $129.9

KPIs and Cash Flow

KPIQ3 2024Q4 2024Q1 2025
Net Revenue Retention (NRR) (%)109% 110% 114%
Clients >$100k LTM (Count)1,173 1,203 1,244
Cash from Operations ($USD Millions)$78.8 $64.8 $64.2
Unlevered Free Cash Flow ($USD Millions)$89.1 $80.1 $78.8
Net Leverage (Adjusted) (x)3.0x 2.8x 2.5x

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenue ($USD Billions)FY 2025$1.000–$1.016 $1.006–$1.022 Raised (midpoint +$0.006B)
Adjusted EBITDA ($USD Millions)FY 2025$399–$407 $406–$414 Raised (midpoint +$7M)
Non-GAAP Net Income ($USD Millions)FY 2025$237–$243 $241–$247 Raised
Diluted Non-GAAP EPS ($USD)FY 2025$1.29–$1.32 $1.31–$1.34 Raised
Adjusted EBITDA Margin (%)FY 2025~40% (implied) ~40% (maintained) Maintained
Cost of Revenue (% of Revenue)FY 2025Prior plan Remains unchanged vs original guidance Maintained
Revenue SeasonalityFY 2025Not specifiedH1 slightly >50% of FY due to patient payments (30% of revenue) New color

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
AI/Technology Initiatives“Investing in AI-driven automation” ; Cloud platform ROI AltitudeAI expansion; denial prevention, automated appeals; tangible ROI (85% auto approvals, 70% time reduction; >40% overturns) Strengthening; broader deployment and measurable outcomes
Patient Utilization & PaymentsRevenue growth with volume-based leverage ; strong Q4 run-rate Patient payment utilization above expectations; H1 skew; drivers of outperformance Elevated; supportive tailwind
Tariffs/MacroGeneral macro caution No direct tariff exposure; recession resistant; cautious but confident Neutral to cautious commentary
RFP Activity/PipelineNot detailed in PRRobust RFPs, strong win rates; cybersecurity, ROI, rapid deployment cited Healthy demand backdrop
Cross-sell (Change cohort)Not detailed in PRActive expansion dialogs (~30% of cohort); bookings momentum with additional modules Positive cross-sell traction
SeasonalityNot detailedPatient payment seasonality: H1 heavier due to deductibles Clearer guidance framing
Capital Structure/LeverageDeleveraging trajectory (2.8x by Q4) Net leverage 2.5x at Q1; continued flexibility Improving balance sheet

Management Commentary

  • Strategic positioning: “Waystar delivered a strong start to the year with Q1 revenue growth of 14% and adjusted EBITDA increase of 16%… This momentum positions us to raise our full year guidance” .
  • AI ROI: “In the first 90 days post launch, clients reported a more than 40% increase in overturn rates… Auth Accelerate unlocks auto approvals… 85% auto approval rate and a 70% reduction in time spent on authorizations” .
  • Profitability discipline: “Q1 adjusted EBITDA of $108 million… aligns with our long-range target of approximately 40% adjusted EBITDA margins” .
  • Resilience and macro: “While our business isn’t recession-proof, it is recession resistant… we are confident in raising our revenue guidance” .
  • Balance sheet: “Net debt to adjusted EBITDA leverage ratio of 2.5x at March 31… flexibility to invest, delever, and evaluate disciplined M&A” .

Q&A Highlights

  • Components of outperformance and guidance: Continued strong patient payment utilization drove Q1 beat; upside to guidance would stem from sustained utilization strength; downside tied to weaker utilization or patient ability to pay, which hasn’t deteriorated .
  • NRR drivers: Gross retention ~97%; volume-side utilization strength and rapid onboarding effects lifted NRR above the typical 108–110% to 114% .
  • RFP and sales cycles: Robust RFP activity with emphasis on cybersecurity, trust, ROI, and rapid deployment; strong pipeline and win rates noted .
  • Tariffs/macro exposure: No direct tariff exposure; clients are U.S.-based and diversified; AI budgets forming outside traditional HCIT with increasing interest tied to ROI .
  • Cross-sell opportunity: ~30% of the change-related cohort engaged on additional modules; Q1 bookings showed adoption from that base .
  • M&A: Active corporate development pipeline; disciplined approach to integrate tech, people, and clients onto Waystar’s platform .

Estimates Context

  • Q1 2025: Revenue $256.4M vs $248.5M consensus* (beat); diluted non-GAAP EPS $0.32 vs $0.3195 consensus* (inline) .
  • Prior quarters: Q4 2024 revenue $244.1M vs $232.2M consensus*; diluted non-GAAP EPS $0.29 vs $0.1389 consensus* (beat). Q3 2024 revenue $240.1M vs $223.8M consensus*; diluted non-GAAP EPS $0.14 vs $0.1067 consensus* (beat) .
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Momentum and guidance: Strong beat-to-inline Q1, coupled with guidance raises across revenue, adjusted EBITDA, non-GAAP net income, and EPS, should support near-term sentiment .
  • Utilization tailwinds: Elevated patient payment utilization and volume-side exposure are driving topline; monitor utilization trends and H1 seasonality (patient payments ~30% of revenue) .
  • AI execution: AltitudeAI is delivering tangible ROI (denial prevention, faster appeals, prior auth automation); expect expanding adoption and pricing-to-value opportunities .
  • Profitability durability: Adjusted EBITDA margin ~40% sustained while investing; cash conversion strong (73% UFCF/Adj. EBITDA in Q1) .
  • Balance sheet optionality: Net leverage at 2.5x enhances strategic flexibility for disciplined M&A and continued deleveraging .
  • Normalize the one-time boost: Q1 included ~$10M faster revenue recognition; management flagged this as the last quarter with notable impact—investors should normalize forward comparisons .
  • Near-term catalysts: Continued AI feature launches, bookings momentum in patient access/claims, and H1 revenue skew could drive estimate revisions and stock reaction; investor conference presence adds visibility .