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Waystar Holding Corp. (WAY)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 delivered double‑digit growth and margin strength: revenue $270.7M (+15% YoY), non‑GAAP diluted EPS $0.36, and adjusted EBITDA $112.6M (42% margin). Results were driven by robust subscription and volume-based growth, rapid onboarding of three large clients, and mix shift to higher‑margin provider solutions .
  • Clear beat vs. Street on revenue and EPS; adjusted EBITDA also above consensus: revenue $270.7M vs. $257.9M*, EPS $0.36 vs. $0.339*, and adj. EBITDA $112.6M vs. $101.6M* (see tables) .
  • Raised FY25 guidance: revenue to $1.030–$1.042B, adjusted EBITDA to $418–$426M, non‑GAAP NI to $251–$257M, and non‑GAAP EPS to $1.36–$1.40; guidance excludes pending Iodine acquisition .
  • Near‑term watch items: management flagged normal seasonality—Q3 revenue down sequentially vs. Q2 and Q3 ≈ Q4—despite strong H1 momentum . Medium‑term catalysts include AI product momentum (AltitudeAI), elevated NRR (115%), and the Iodine Software acquisition (accretive to margins; TAM +15%) .

What Went Well and What Went Wrong

What Went Well

  • Strong top‑ and bottom‑line execution: revenue +15% YoY to $270.7M; non‑GAAP diluted EPS $0.36; adjusted EBITDA $112.6M (42% margin). CEO: “Waystar recorded strong Q2 results… driven by AI‑powered innovations… [and] raise full‑year revenue and adjusted EBITDA guidance.” .
  • Sticky customer economics: NRR 115% and 1,268 clients >$100k LTM revenue (+14% YoY), underscoring durable expansion and cross‑sell .
  • Cash generation and deleveraging: unlevered FCF $110.8M and adjusted net leverage 2.2x TTM, with CFO reiterating the deleveraging glidepath (≈1x annually) .

What Went Wrong

  • 2H seasonality: management expects Q3 revenue down sequentially vs. Q2; Q3 and Q4 similar, reflecting high‑deductible plan dynamics in patient payments (≈30% of revenue) .
  • Street vs. guide gap: despite a guidance raise, FY25 revenue/EPS guidance midpoints are below S&P Global consensus means (see Estimates Context), which may cap near‑term estimate momentum*.
  • Macro/regulatory overhangs: management addressed Medicaid/ACA funding scenarios (One Big Beautiful Bill Act), asserting <1% TTM revenue exposure even with a hypothetical 15% Medicaid reduction; investors will still monitor policy implementation risk .

Financial Results

P&L and Cash Flow (chronological: Q4’24 → Q1’25 → Q2’25)

MetricQ4 2024Q1 2025Q2 2025
Revenue ($M)$244.1 $256.4 $270.7
GAAP Net Income ($M)$19.1 $29.3 $32.2
GAAP Diluted EPS ($)$0.11 $0.16 $0.18
Non‑GAAP Diluted EPS ($)$0.29 $0.32 $0.36
Adjusted EBITDA ($M)$100.2 $107.7 $112.6
Adjusted EBITDA Margin (%)41.0% 42.0% 41.6%
Cash from Operations ($M)$64.8 $64.2 $96.8
Unlevered Free Cash Flow ($M)$80.1 $78.8 $110.8

Q2 2025 Actual vs. S&P Global Consensus

MetricActualConsensus Mean*Surprise*
Revenue ($M)$270.7 $257.9*+$12.7 (+4.9%)*
Non‑GAAP Diluted EPS ($)$0.36 $0.339*+$0.021 (+6.2%)*
Adjusted EBITDA ($M)$112.6 $101.6*+$11.0 (+10.8%)*

Values retrieved from S&P Global.

Revenue Disaggregation

Revenue Type ($M)Q4 2024Q1 2025Q2 2025
Subscription$121.6 $125.0 $131.1
Volume‑based$121.2 $129.9 $138.3

KPIs and Balance Sheet Leverage

KPIQ4 2024Q1 2025Q2 2025
Clients >$100k (count)1,203 1,244 1,268
Net Revenue Retention (%)110% 114% 115%
Adjusted Net Leverage (TTM)2.8x 2.5x 2.2x

Guidance Changes

MetricPeriodPrevious Guidance (4/30/25)Current Guidance (7/30/25)Change
Total RevenueFY 2025$1.006–$1.022B $1.030–$1.042B Raised
Adjusted EBITDAFY 2025$406–$414M $418–$426M Raised
Non‑GAAP Net IncomeFY 2025$241–$247M $251–$257M Raised
Non‑GAAP Diluted EPSFY 2025$1.31–$1.34 $1.36–$1.40 Raised

Notes: Guidance excludes the impact of the pending Iodine acquisition . FY25 assumptions include ~41% adj. EBITDA margin, ~$72M net interest, ~21% non‑GAAP tax rate, and ~184M fully diluted average shares .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24, Q1’25)Current Period (Q2’25)Trend
AI and automation (AltitudeAI)FY24: ongoing AI use; Q1: AltitudeAI launch and ROI focus AI pervasive; 70% boost in appeal productivity; prevention of nearly $6B in denials 1H’25; “perfect undeniable claim” vision Accelerating
Revenue mix/NRRFY24 NRR 110%; strong subscription/volume growth NRR 115%; mix shift to higher‑margin provider solutions Improving
Patient payments & seasonalityNoted as part of model ~30% of rev; Q3 down sequentially vs. Q2; Q3≈Q4 Seasonally softer 2H
Regulatory (Medicaid/ACA)Macro watchHypothetical 15% Medicaid cut → <1% TTM revenue exposure; resilient across payer types Monitored; insulated per mgmt
Prior authorization reforms—AHIP pledge to reduce PA burden; Waystar 90% touchless authorizations; positioned to benefit Positive opportunity
Competitive dynamicsIPO momentum; platform breadthThree large competitive takeaways; rapid onboarding; continued switching from impacted competitor; independence resonates Share gains likely
M&A—Iodine acquisition: TAM +15%, accretive margins; Advent to accept stock (18‑month lockup) Strategic positive

Management Commentary

  • Strategy: “Our ultimate goal is to create the perfect undeniable claim using AI.”
  • Demand & positioning: “Decision makers prioritize our mission‑critical platform because we help their organizations get paid fully and accurately while reducing complexity and administrative burden.”
  • Seasonality guide: “We expect total revenue to be down sequentially in Q3 as compared to Q2… We currently expect Q3 and Q4 revenue to be similar.”
  • Large client wins: The three rapid onboardings added ~2% to Q2 YoY growth and are expected to be “highly recurring,” shifting from volume‑based to subscription over time .
  • Regulatory insulation: A 15% Medicaid funding impact would translate to <1% of Waystar TTM revenue under a full‑downside scenario; offsets not included in that stress test .

Q&A Highlights

  • Change Healthcare cohort: The 2024 cyber event benefit is now fully lapped; retention in the migrated cohort remains “excellent,” with ongoing cross‑sell opportunities .
  • H2 outlook: Seasonality in patient payments (≈30% of revenue) drives Q3 sequential decline; Q3≈Q4 revenues expected .
  • Mix and margins: Strength in provider solutions (~70% of revenue) supported higher margins this quarter .
  • Volume drivers: Elevated utilization; digitization of patient payments supporting collection rates; volume growth roughly 60% patient‑payment and 40% provider‑solutions mix YoY in Q2 .
  • Competitive dynamics: Three large competitive takeaways drove rapid onboarding and volume benefits; independence from payers increasingly resonates with providers .

Estimates Context

  • Q2 2025: Waystar beat on revenue ($270.7M vs. $257.9M*) and non‑GAAP diluted EPS ($0.36 vs. $0.339*); adjusted EBITDA also above consensus ($112.6M vs. $101.6M*). These constitute broad‑based beats across key lines (see table) .
  • FY 2025: Despite the guidance raise, company guidance midpoints remain below Street means—revenue midpoint $1.036B vs. $1.090B*, and non‑GAAP EPS midpoint $1.38 vs. $1.463*—setting up potential estimate‑spread debate until visibility improves or the Iodine close/updates shift modeling*.
    Values retrieved from S&P Global.

Key Takeaways for Investors

  • Beat and raise quarter: Broad upside on revenue/EPS/EBITDA with a mix shift to higher‑margin provider solutions; cash conversion remained strong, enabling faster deleveraging .
  • Near‑term cadence: Expect seasonal softness—Q3 down sequentially; Q3≈Q4—despite robust demand signals and elevated NRR .
  • Guidance vs. Street: FY25 guide midpoints trail consensus despite the raise; watch for further raises if utilization stays elevated or large implementations convert to subscription faster*.
  • Structural tailwinds: AI is increasingly embedded (AltitudeAI), delivering tangible ROI (denial prevention, appeals productivity, payment acceleration) that underpins durable growth and margin resilience .
  • Strategic M&A: Iodine acquisition broadens clinical intelligence, expands TAM (+15%), and is accretive to margins; Advent’s stock‑only consideration and lockup align incentives .
  • Risk management: Policy shifts (Medicaid/ACA/PA reforms) are being actively navigated; management quantifies limited downside exposure and sees product‑led offsets .
  • Positioning: Strong balance sheet (2.2x TTM net leverage), high NRR (115%), and growing $100k+ client cohort support a multi‑year compounding story .