• Revenue: $240 million, a 22% year-over-year increase.
• Net Revenue Retention: 109% in Q3.
• Clients Generating Over $100,000: 1,173 clients, a 14% year-over-year increase.
• Adjusted EBITDA: $97 million, a 19% year-over-year increase.
• Adjusted EBITDA Margin: 40%.
• Unlevered Free Cash Flow: $89 million in Q3.
• Net Leverage Ratio: Reduced to 3 times from 3.7 times at the end of Q2 2024.
• GAAP Net Income: $5 million compared to a net loss of $16 million in the prior year.
• Full Year Revenue Guidance: Raised to a range of $926 to $934 million.
• Full Year Adjusted EBITDA Guidance: Raised to a range of $374 to $378 million.

• Warning! GuruFocus has detected 4 Warning Sign with WAY.

Release Date: November 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Waystar Holding Corp (NASDAQ:WAY) reported a 22% year-over-year revenue increase, reaching $240 million in Q3 2024.
• The company achieved a net revenue retention rate of 109%, consistent with its historical range.
• Waystar's adjusted EBITDA grew by 19% year-over-year, reaching $97 million with a 40% margin.
• The company successfully onboarded over 30,000 new providers following a competitor's cyber event, showcasing its rapid deployment capabilities.
• Waystar is actively leveraging generative AI to enhance its software platform, with plans to launch new AI-driven solutions in 2025.

Negative Points

• Despite strong revenue growth, Waystar's GAAP net income was only $5 million, partly due to $16 million in expenses related to office relocation.
• The company faces challenges with increased complexity and longer decision-making processes in client RFPs.
• Waystar's volume-based revenue is subject to seasonal fluctuations, which could impact future financial performance.
• The company is experiencing competitive pressure from both legacy and modern software providers in the healthcare space.
• Waystar's future revenue growth is expected to normalize to low double digits, indicating a potential slowdown from the current high growth rates.

Q & A Highlights

Q: Could you talk about your updated view on how sustainable the elevated demand picture is, particularly on the new logo side, after the September conference? A: Matthew Hawkins, CEO: 2024 has been a unique year for Waystar. Our business model is working successfully, and our teams are high-performing. We've seen our pipeline grow, especially in the hospital and health system market. The cyber event allowed us to rapidly onboard clients, showcasing our platform's speed and adaptability. We anticipate robust demand as hospitals expect utilization to pick up, and we're invited to many new client discussions due to our brand reputation.

Q: How did Q3 patient payments compare to your expectations, and what are your thoughts on the financials? A: Stephanie Davis, Barclays Analyst: We typically see seasonality with higher patient payments in the first half of the year. However, we've seen increased volume and usage of healthcare services across all solutions in 2024, particularly in Q3, slightly above expectations.

Q: What learnings did you have from the accelerated onboarding earlier this year, and can you leverage this experience to improve future onboarding efficiency? A: Matthew Hawkins, CEO: We learned a lot from the rapid onboarding period. Our solution adoption and product teams focused on automating enrollments and strengthening project management. This momentum has made us smarter and more focused, enhancing client referenceability and sales pipeline growth.

Q: Can you provide more details on the 12 million related to new clients from rapid onboarding? A: Stephanie Davis, Barclays Analyst: The 12 million includes new clients onboarded due to the competitor's cyber event and existing clients who expanded their use of our platform. It's a mix of both, and we expect a continuation and pull-through of this revenue.

Q: Are you seeing any meaningful trends in claim denial rates, and how does Waystar help providers reconcile these denials? A: Matthew Hawkins, CEO: Denied claims are a significant issue. We focus on delivering accurate claims to payers to lower denial rates. Our software offers a denial and appeal management module, helping providers reduce denied claims and automate appeal follow-ups. We're also working on generative AI solutions to further automate these processes.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.