Waystar Holding Corp. (WAY) Q4 2025 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to the Waystar Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, [Edward Parker], Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining Waystar's Fourth Quarter and Fiscal Year 2025 Earnings Call. Joining me today are Matt Hawkins, Waystar's Chief Executive Officer; and Steve Oreskovich, Waystar's Chief Financial Officer. This morning, 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 only 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, I would like to turn the call over to Matt.

Thank you, Edward, and good morning, everyone. Thank you for joining our Q4 2025 earnings call. Today, we're pleased to share Waystar's strong Q4 and full year 2025 results, reflecting the durability of our business model, the execution of our team and the trust providers place in our platform. 2025 was a defining year for Waystar. We crossed $1 billion in revenue, exceeded both our revenue and EBITDA guidance and achieved strategic milestones that strengthened our competitive position. We completed the acquisition of Iodine Software, adding more than 1,000 hospitals and health systems, deep clinical intelligence and significantly expanding our addressable market. This combination positions Waystar as the only platform with both clinical encounter visibility and financial outcome intelligence at scale. We also extended our AI leadership. In 2025, Waystar AltitudeAI prevented more than $15 billion in denials for our clients, reduced appeal time by 90% and drove double-digit increases in denial overturn rates. We launched new agentic capabilities that cut documentation analysis by 40%, powered by data from 1 in 3 U.S. hospital discharges and more than 7 billion annual transactions. These results demonstrate accelerating demand for mission-critical AI-powered revenue cycle software and validate Waystar's ability to deliver meaningful ROI for providers. I'm proud of what our team accomplished in 2025. We entered 2026 with strong momentum, a clear leadership position and a platform we built to sustain durable profitable growth while delivering exceptional value to our clients. Let me walk through our fourth quarter performance. Q4 revenue reached $304 million, growing 24% year-over-year and 12% organically. Both subscription and volume-based revenue contributed to this strength. These results underscore the mission-critical nature of our platform, elevated patient utilization and the successful onboarding of new clients. Waystar added 85 clients with trailing 12-month spend above $100,000, up from 30 a year ago and more than double last quarter. Win rates improved beyond our historical average of more than 80%, reflecting sustained competitive momentum and clear provider preference for Waystar's cybersecure unified platform. We delivered 112% net revenue retention with 97% gross revenue retention and a Net Promoter Score above 70. Cross-sell and upsell momentum in our large installed base drove this performance and reinforces how deeply Waystar is embedded in our clients' daily operations, serving as essential infrastructure for getting paid. Waystar delivered a record bookings quarter in Q4, and we closed several sizable deals to cap off a strong 2025. We entered 2026 with a robust sales pipeline and the largest implementation backlog in our history. This demand signals strong customer confidence in our platform and reinforces our conviction in the durability of our low double-digit long-term growth outlook. Adjusted EBITDA reached $129 million, up 29% year-over-year with an adjusted EBITDA margin of 42.5%, exceeding our long-term target of 40%. Waystar continues to operate as a Rule of 50 business, pairing strong revenue growth with increasingly efficient operations. Our core business delivers durable organic growth. Iodine extends that strength through disciplined platform expansion, moving Waystar into the mid-cycle, a critical stage where payers deny roughly 60 million claims each year. Together, we deliver full revenue cycle visibility through our unified financial and clinical platform. Iodine has more than 1,000 hospitals and health systems with only 35% customer overlap, expanding our addressable market and cross-sell opportunity. Integration is ahead of plan, and we now expect to realize over 90% of committed cost synergies in fiscal 2026. We fully integrated our commercial teams, and they are already producing results. In Q4, we generated cross-sell traction in both directions and built a robust new business pipeline. Market demand for the Waystar platform is strong. Unified financial and clinical data unlocks unique value and accelerates our innovation road map. Our next-generation pre-bill anomaly detection solution demonstrates this opportunity. We expect a midsized health system to recover $7 million annually in previously missed reimbursement, a 5x return over 3 years. This is the first of many innovations only our integrated platform can deliver, advancing us toward a fully autonomous revenue cycle, including using clinical data to prove medical necessity for prior authorization and overturn denials requiring clinical documentation, all without human intervention. Now let me take a broader view on AI because it is core to who we are and where we're headed. While many new AI entrants add lightweight tools that sit on top of fragmented revenue cycle workflows, Waystar takes a fundamentally different approach. Our end-to-end platform gives us full visibility across the revenue cycle. including authorizations, claims, denials and payments and deep into the layers where complexity resides, payer policy, adjudication logic, diagnosis-related grouping and denial reasoning. This breadth and depth makes Waystar the system of action, identifying issues upstream, resolving them inside the workflow and closing the loop on payment with minimal human intervention. For more than a decade, Waystar has deployed AI, including machine learning and advanced decisioning engines across revenue cycle workflows at scale, grounded in proprietary data and embedded processes few in the industry can match. We're extending those capabilities with LLMs, generative and agentic AI while maintaining control of the data, decisioning logic and outcomes that matter most to providers. Today, approximately 50% of our solutions leverage AI and nearly 40% of our revenue is driven by AI embedded in mission-critical reimbursement workflows. In 2025, roughly 30% of new bookings came from AI-powered capabilities. This signal is clear. Clients trust Waystar to deliver AI that goes beyond assistance to enable agentic outcome-driven revenue cycle automation. We believe Waystar is well positioned to lead the next era of health care revenue cycle automation. The foundations of software moats are shifting in the age of AI from workflow stickiness and switching costs to a new set of structural advantages. Our strength comes from 4 interconnected pillars: mission-critical infrastructure, unmatched proprietary data, and extensively deployed network and scaled distribution paired with deep domain expertise. First, our platform is the mission-critical infrastructure providers need to get paid. Waystar is embedded directly in the flow of dollars, decisions and denials and our 97% gross revenue retention proves it. Once clients implement Waystar, they stay. We reduce administrative burden, prevent billions in avoidable denials, accelerate cash flow and ensure reimbursement accuracy at scale. Our commercial model is aligned with consumption, which is a function of providers seeing patients. As Agentic AI streamlines workflows and reduces manual work, the durability of our model strengthens. Pricing is tied to claims, payments or prescribing providers, directly matching how value is created in the revenue cycle. Our multiyear partnership with Google Cloud's Gemini LLM accelerates innovation, and we retain control of the data, decisioning and outcomes providers care most about. As RCM moves toward agentic AI and autonomous workflows, our role deepens. Our agents act on behalf of providers, resolving issues, correcting errors and closing the loop on payment. Second, Waystar has an unmatched proprietary data advantage. AI strength ultimately comes down to data, its scale, richness, structure and proximity to action. We operate one of the largest health care payment data sets in the United States, processing more than 7 billion transactions annually. With Iodine, we pair that financial depth with unmatched clinical data and our models now learn from approximately 1/3 of U.S. hospital discharges each year. We deploy AI across the full revenue cycle continuum from authorization and eligibility to denials and appeals. Our data advantage is self-reinforcing. Every claim denial and payment improves our models. When a provider uses Waystar, they benefit from the learnings of tens of thousands of organizations like theirs, similar size, similar payer mix, similar challenges. And because our data spans the full care continuum, hospitals, physician practices, outpatient surgery centers, our models see patterns no single organization or new entrant can match. General purpose model vendors lack this real-time closed-loop proprietary data. Third, Waystar's platform is a deeply deployed multisided network, creating scale and connectivity that others cannot replicate. We sit at the center of the payer provider patient ecosystem, connecting over 1 million providers to every major payer powered by more than 100,000 live integrations across EHRs, practice management systems, clearinghouses and clinical platforms. We touch approximately 60% of the U.S. patient population each year and process billions of dollars in patient payments across our network annually. We built this network over more than a decade. It represents scale, trust and connectivity that cannot be bought or quickly engineered. Every transaction flowing through Waystar increases network intelligence, sharpens model accuracy and expands our distribution advantage. The result, a platform that strengthens continuously with every client we serve and every workflow we power. Fourth, Waystar combines scaled distribution with deep domain expertise. We serve providers across all care settings with low concentration. Our top 10 clients represent approximately 11% of revenue, driving resilience, reach and durable bookings growth. Our go-to-market organization consistently delivers strong win rates, rapid time to value and compelling client ROI. Forward deployed teams, product management, revenue integrity, clinical documentation and client success experts work directly alongside real workflows. Dozens of clients codevelop and pilot new AI capabilities with us, validating outcomes before broad release. We have already seen our AI-enabled engineering tools reduce manual work, in some cases, by more than 75%, and we expect further improvement as we scale these capabilities in 2026. These pillars enable our AI to deliver outcomes at scale. In less than a year, Waystar AltitudeAI has prevented $15 billion in denials and accelerated appeal package generation by 90%, turning work that once took days into minutes. Our network consistently achieves approximately 99% clean claim and first pass acceptance rates, driving faster, more accurate reimbursement. These outcomes expand our footprint, build trust and help providers improve margins while freeing staff for higher value work. Last month, we shared our vision for Waystar's autonomous revenue cycle, a dynamic end-to-end agentic network that acts continuously within workflows, learns from outcomes and delivers meaningful financial results with minimal intervention. Providers don't want point solutions. They need trusted cybersecure platforms that unify financial, clinical and operational outcomes. Our product road map is robust, and we expect to launch several new AI agents this year on Waystar's platform. We have the data, the deployment, the distribution and the discipline to lead this next era of health care revenue cycle automation. We're moving with the urgency and the mindset of a disruptor because this moment demands nothing less. With that, I'll turn the call over to Steve.

Thanks, Matt. Please note that my comments regarding fourth quarter and full year 2025 results include a full quarter of contribution from Iodine. Revenue increased 24% year-over-year in the fourth quarter to $304 million. Organic revenue grew 12% and Iodine contributed $31 million in the quarter, slightly ahead of our previously communicated expectation. The growth reflects strong client retention and expansion, healthy patient utilization of the health care system and new client implementations. The quarterly results highlight our durable, predictable model of low double-digit revenue growth annually on a normalized basis. And the highly recurring volume aspect of health care provides us predictability, creating a notable differentiation compared to most consumption models. For the full year, revenue increased 17% year-over-year to $1.1 billion. On an organic basis, revenue increased 13%, consistent with our long-term target of low double-digit growth. Clients generating more than $100,000 of LTM revenue increased by 85 in the fourth quarter to 1,391 at quarter end, an increase of 16% year-over-year. Roughly 1/2 of the increase in the fourth quarter was from the inclusion of Iodine clients. On an organic basis, the year-over-year growth rate is consistent with the quarterly average over the past 3 years. Our net revenue retention rate, or NRR, was 112% for the last 12 months compared to 13% organic growth rate over the same period. As we've discussed over the past several quarters, NRR benefited from the rapid time to revenue from clients impacted by a competitor's cyber event in early 2024. Subscription revenue of $168 million for the fourth quarter increased 38% year-over-year and 25% sequentially. On an organic basis, subscription revenue grew sequentially at a similar pace as the past few quarters. From a mix perspective, subscription revenue was 55% of total revenue, which aligns with previously communicated expectations. For the full year, subscription revenue of $558 million increased 22% year-over-year. Volume-based revenue of $134 million for the fourth quarter increased 11% year-over-year and 1% sequentially. Consistent with our seasonality expectations, revenue from patient payment solutions was lower than the prior quarter. This was more than offset by sequential growth from provider solution volumes. For the full year, volume-based revenue of $535 million increased 11% year-over-year with steady double-digit growth from both provider solution transactions and patient payment dollars. Adjusted EBITDA was $129 million for the fourth quarter at a 43% margin and increased 29% year-over-year. On a full year basis, adjusted EBITDA was $462 million at a 42% margin and increased 21% year-over-year. Our adjusted EBITDA margin of 43% for the fourth quarter benefits from approximately $2 million of realized acquisition cost synergies, reflecting 1% of margin improvement for the quarter. Turning to the balance sheet and cash flow. We ended the quarter with $86 million in cash, equivalents and short-term investments and $1.5 billion in gross debt. Unlevered free cash flow was $80 million in the fourth quarter and $365 million for the full year. We converted 79% of adjusted EBITDA to unlevered free cash flow, enabling us to continue sustained deleveraging. As of December 31, net leverage was 3x, which is down almost 0.5 turn since the beginning of the quarter when we closed the Iodine acquisition. We expect to run the business at or below a 3x leverage ratio and delever in line with our historical rate of approximately 1 turn annually. We continue to maintain flexibility within our overall capital structure and our allocation priorities remain unchanged: invest in the business to drive top line growth, evaluate disciplined acquisition opportunities and explore ways to enhance shareholder value. Looking ahead to 2026 full year guidance, we expect revenue of $1.274 billion to $1.294 billion with a midpoint of $1.284 billion, representing 17% year-over-year growth. Our full year guidance at the midpoint assumes normalized organic growth of approximately 10% with a similar implied growth rate for Iodine. We also expect revenue to grow 1% to 3% sequentially throughout the year, with the third quarter at the low end due to seasonality of patient payments. Further, we assume utilization of the health care system by patients remains healthy throughout 2026 as the diversity of our client base and ROI from our solutions insulate us from the reimbursement rate pressures that may impact our clients. Lastly, as Matt mentioned, the record level of bookings and several sizable deals we generated this quarter contribute to our forward visibility. As a reminder, these larger agreements typically take 6 to 18 months to fully ramp, and we would expect many to land towards the longer end of that range, supporting our confidence in a normalized low double-digit revenue growth profile for 2026 and beyond. Please note that we have included a bridge from the 17% growth rate at the midpoint of guidance to the 10% normalized organic growth rate in the IR deck on our website. We expect adjusted EBITDA of $530 million to $540 million with a midpoint of $535 million, representing 16% year-over-year growth and a margin of approximately 42% for 2026. This includes gross margins of approximately 68%, which is consistent with 2025. The 42% margin also includes an uplift of approximately 1% from realizing acquisition cost savings. Said differently, we expect to realize approximately $14 million of savings in 2026, which is over 90% of the committed $15 million we previously communicated and well ahead of the prior time line. This reflects our commitment to quickly and successfully integrate Iodine. We are focused on reinvesting in the business in key areas we expect to drive long-term top line growth and remain confident in our ability to do so while being mindful of our long-term adjusted EBITDA margin target of 40%. This concludes our opening remarks. With that, we are ready for your questions. Operator, please open up the call.

[Operator Instructions] Our first question will be coming from Brian Peterson of Raymond James.

Congrats on the quarter. Matt, maybe I want to start off on AI, and I appreciate all the color you gave on the advantages you have in an AI world. But I wanted to understand when you talk to your customers and looking at RCM specifically, what is their appetite to kind of use LLMs and kind of build on their own versus buy from somebody like Waystar. Just wanted to understand how those conversations are going? And how can you kind of unlock some of that AI opportunity over the long term?

Our next question will be coming from Elizabeth Anderson of Evercore ISI.

I'll just let you respond to Brian's question, and then I can go.

Please standby.

Can you hear us okay?

Yes we can hear you.

Excellent. Let me go back to Brian's question about AI. I appreciate his comments regarding our quarter and also our position and our strength and the opportunity that we see in front of us to win in the delivery of AI. I would note that the vast majority of clients we talk to would rather integrate AI capability into their systems of record or action that run the backbone of their business, so to speak. And while there's some experimentation willingness and some exploration around how could we deploy AI or do some type of kind of science experiment within our organization, what we see is the vast majority of providers want to work with a trusted partner where they have a history of deploying AI in a cybersecure environment that's integrated and interoperable with other systems that they're utilizing. And quite frankly, most provider organizations don't have the abundance of engineering talent that they need to kind of test and deploy AI. And it really isn't true to their core competency of taking care of patients. So we feel like Waystar is very well positioned to deliver AI as we've done so far and to continue that track record. Thank you, Brian, for the question. And sorry for the...

It's Elizabeth from Evercore. You've mentioned several new AI agents launching this year. How do you kind of think about that launching? Are those like individually incremental revenue opportunities for Waystar as it combined with Iodine too? Or is that something that you sort of see as like helping to increase the moat of your current AI offering or maybe some of both?

I believe it's a bit of both, Elizabeth. We're very excited about the product road map that we have in place, what we have ahead of us as far as delivering agentic capability to our clients and on our platform. Some of that will be brand new, and it will be a new SKU with new price to value, reflective of the value that, that agent is delivering to our clients. Other AI capability will add on to existing software modules that will bring incremental automation, and we're sure excited about that as well. As we think about monetization in general, the way to think about monetization of AI is this. First, if we deliver AI, it tends to drive retention and an elongation of a relationship with the client. So that tends to show up in strong retention results like the ones that we produce. We also can impose an annual price increase that is reflective of the value that we deliver. And in this case, we're watching closely and seeing that when AI delivers incremental automation, we're able to reduce headcount associated with a manual task that is now automated given the agentic capability that we launched, we have the opportunity to price to value in that setting. And then the third, as I mentioned a moment ago, is the introduction of a new SKU, a new pricing, putting it in the hands of our go-to-market teams and selling it that way. So we look forward to further monetizing AI, but a lot of that is already showing up in monetizing through our core business model.

And our next question will be coming from Kevin Caliendo of UBS.

Just looking at the fourth quarter, you had G&A, R&D, D&A all stepped up. I'm assuming that's largely Iodine coming into the numbers. And I appreciate you gave us the $14 million in expected synergies to get to the margin guidance for the full year. I'm guessing, should we look at the 4Q sort of margin as the run rate for those individual cost centers and take out the synergies. I'm just trying to think about modeling the margins and where you might have additional leverage above and beyond that $14 million in synergy thinking through the fourth quarter.

Yes, Kevin, thanks for the question. This is Steve. I think to answer your first part of that question, you're correct. The step-up there does include the additional cost of one full quarter of Iodine in the fourth quarter. I think as we think about the guide for 2026, a couple of things to think about and mentioned in the prepared comments, we would expect similar gross margin in the high 60s for 2026 as we saw in 2025. In addition, well, to your point, there are opportunities that we're continually focused on to improve the overall margin profile. We've set guidance at the midpoint of about 42% gross margin for 2026, which -- EBITDA, sorry, of 42% for 2026, which includes about 1% benefit from those cost synergies. And again, we're continuing to look and we'll find additional opportunities for cost savings. So that does exist. But right now, our focus from a capital allocation approach, and I mentioned it in the prepared comments, is to continue to reinvest in the business for long-term revenue and growth expansion. We've set the target, and we've probably beat the drum for quite a while now of low double-digit revenue growth long-term target. But obviously, the opportunities we see in front of us is how do we reinvest now to expand that ultimately in the years going forward.

And our next question will be coming from Ryan MacDonald of Needham & Company.

Congrats on a great quarter. I'd be curious, Matt, as you're having customer conversations, you talked about, obviously, there's a lot of new vendors in the space that are trying to sort of, let's call it, overlay generative AI functionality on top of their existing systems versus your approach, which obviously is deeply integrated and built sort of in an end-to-end platform. As you look at sort of how budgets are being developed and being allocated, are you seeing more sort of demand or sort of more of the conversations heading towards sort of one-off sort of more point solution functionality or SKUs from a generative AI perspective? Or is this creating, I guess, a broader, let's call it, refresh cycle where we might look at a sort of full end-to-end modernization within RCM? And how do we think those conversations develop over the next 12 to 18 months?

Thank you, Ryan. We're not necessarily seeing a clear delineation between a normal technology budget and an AI-specific budget. We are seeing willingness to -- from clients to embrace AI. And again, speaking to kind of our prepared remarks, they want to consume AI, but they want to do it in a very thoughtful way. I'd point to our recent Q4 results, the best quarter in our history, a really nice mix of new clients, cross-sell opportunities, AI embedded in those conversations. And we have -- as we start '26, we have a very robust pipeline of opportunities. And what we're seeing isn't necessarily just a point solution willingness. We're seeing clients wanting to embrace to your thoughtful question, Ryan, more and more of the platform approach, where there's an assumption that AI will be included in part of that platform. If you looked at the -- our last 2 quarters of bookings in 2025, the number of million dollar bookings -- million dollar plus bookings in the last 2 quarters of 2025 were more than 2x the quarterly average of the past 3 years. And so what this signals to us is that our platform approach is working. It is displacing oftentimes point solutions in multiple vendors, and there is willingness by clients to embrace and explore AI in that context. We don't necessarily see that being fairly partitioned as a separate budget.

And our next question will be coming from George Hill of Deutsche Bank.

I guess, Steve, I'd ask you to break apart Iodine a little bit. The business did $31 million in the fourth quarter. The back of the napkin math looks like you're guiding to $125 million to $130 million for full year '26. So I guess it implies a little bit of the flattening there. I know that you guys are historically conservative as it relates to guidance. So I might like you to talk about that a little bit. And then maybe, Matt, like the question that goes with that is, what do you guys feel like you're seeing for AI market growth in the health care space? And kind of like I know that health care has historically been slow to adopt new technology solutions, but it would seem like the macro AI market may be growing faster than the AI market in health care. I would just love you to kind of talk about those dynamics.

Yes. George, I'll go first. We did in the prepared comments, mentioned we expect an Iodine year-over-year growth rate to be similar to the 10% normalized organic growth rate that we set aside or I commented on for Waystar for 2026. So I think our expectation would be a little higher than what you had mentioned, but somewhat in the ballpark there. And I think we see really good opportunities as it pertains to both the -- or the totality of the solution set from the bookings that we saw in the fourth quarter that Matt had mentioned and especially as we think through the $1 million plus bookings the metric that Matt had provided. Maybe I'll just give a little bit more color on that before turning it to Matt to answer the second part of the question because I figure you guys are going to ask at some point. Maybe to put a range for you guys on the account for the Q4 and Q3 million-plus bookings number. That was in the 15 to 20 count range for each of the individual quarters. And as Matt had indicated earlier, that's 2x the amount we had typically seen on a quarterly basis for the past 3 years. So a healthy mix of both Iodine -- legacy Iodine solutions in that fourth quarter number as well. Matt?

Yes. Great, George. And let me speak to the general question about AI. And we feel like it's the biggest opportunity in our lifetime, and we're seizing it and making the most of it. What I'd say is LLMs are great tools and they're needed. And with specific to health care, it's time for the industry to embrace technology, perhaps instead of services and manual work that has taken place for far too long. We see curiosity and interest there. This underscores -- when you think about the LLMs in general, it underscores how important it is for us to have this now multiyear relationship with Google. But I think we talked about our relationship with Google's LLM even a couple of years ago in 2024 on one of our earnings calls. And we're delivering AI, and I think there's some real interest. A few thoughts come to mind. While some software may be displaced by AI, other software platforms like Waystar are actually being strengthened. And AI is accelerating our ability to deliver capability. It's delivering strong results for our clients, and that's very important. I think trust, reliability and scalability matter more than ever, especially in regulated environments like health care, production-grade software has to be secure, scalable and accurate. And so we're really grateful for the relationship that we have with Google. As I think about the things that are required in -- a few things to keep in mind with respect to the mission-critical problems within the revenue cycle. I won't opine broadly on health care, but just within the mission-critical problems in revenue cycle management, there are a number of things that are required. First, it's required to have rich and real-time proprietary data, not publicly available data. And you need a payment source of truth, and we have that at Waystar. What else is required? Well, cybersecurity is required when you're thinking about deploying AI. Regulatory compliance is required. Deep subject matter expertise is required. Deep integration and connectivity, strong distribution and client trust are required. And so when you think about this opportunity that we're seeing in health care, LLMs by themselves can't deliver those things, but companies can, companies like Waystar can. So we're excited about the AI opportunity before us.

Our next question will come from Stephen Valiquette of Mizuho Securities.

Just I was curious if you could provide a little more color on your assumption around the utilization of health care by patients remain, you said, I think, healthy throughout 2026. So how should we think about that, I guess, in the context of your historical baseline assumption of that 1% to 2% that you've talked about previously?

Yes, Stephen, this is Steve. We would expect it to be on the higher side of that 1% to 2% historically. It aligns with what we've seen coming through the fourth quarter and kind of the prepared comments as well that I made surrounding that. And we would expect continued nice healthy growth in both that volume-based aspect as it pertains to both patient payments revenue, which has historically been about 30% of our total revenue, mixing Iodine and going forward, it probably gets closer to 25%, but also then from those provider solutions, the -- as Matt had mentioned in the prepared comments, the transaction volumes that come from processing claims, eligibility checks, et cetera, et cetera, et cetera. So hopefully, that's helpful commentary.

And our next question will come from Alexei Gogolev of JPMorgan.

I was wondering if you can double-click on some of the comments you made last quarter about the time line for patients meeting their deductibles, which impacted the patient volumes that you just talked about. What trends did you see at the end of 4Q? And maybe how are you thinking about 2026?

Yes, certainly, Alexei. We did see sequential decrease from Q3 to Q4 as patients continue to hit those under high deductible health plans, as you mentioned, continue to hit their deductibles. That was more than nicely offset by the volumes coming through the provider solutions aspect or solutions of the business that led to a very -- less of an impact Q3 versus Q4 than we would have expected in our -- in the commentary that we had made last quarter. As we think about that aspect into 2026, I provided some commentary surrounding quarterly sequential growth expectation. As you hit on, Alexei, we typically with that 30% of revenue from patient payment solutions now getting closer to 25% going forward. We typically see a first half, second half of the year dynamic, obviously, with the switch or the change in revenue mix, we would expect that to be not as notable as prior years. And we would expect nice sequential growth throughout the quarters in 2026. I mentioned the range of sequential growth of 1% to 3% with calling out specifically the third quarter of the year being closer to that 1% of a range, and that's typically due to the dynamic expectations of -- over the past number of years, we typically see those patients that are on high deductible health plans start to hit those deductibles in the second half of the year, tend to see it most notably between the second and third quarter. So that's sort of the contextually a little bit more detail surrounding the sequential growth expectations in 2026.

And our next will be coming from Allen Lutz of Bank of America.

Matt, you mentioned 35% of bookings are now coming from AI-related products. When you're speaking to these health system customers and prospects and they're exploring AI, does this -- in your conversations, does this make them more hesitant to spend in the near term because they're trying to figure out where they want to put dollars to work? Or is this actually accelerating total spend? And I guess I'm asking that question in the context of what you saw in the fourth quarter and how you think about 2026.

Yes. What we see is some constants. First, decision-makers want efficiency. They want cost takeout. They want cybersecurity. They want to work with partners that can help them get paid faster and accurately and efficiently. And so within that, what we're seeing is we continue to get prioritize in their decision-making process because the revenue cycle is mission critical. It's truly mission-critical. And you take a system of record, system of action like Waystar, it's easier for clients to think through how do we work with Waystar to deploy more AI, obviously, very interested in using AI because it can drive efficiency, because it can reduce cost and because it can drive automation and some of those things we talked about. And so where we tend to focus is on the ROI nature of the conversations. And that is what is driving these types of record bookings and strong pipeline of opportunity. We highlight the fact that our prior authorization, for example, is 90% touchless and can actually do the work that previously it took 12 employees to do in a midsized hospital. we highlight the fact that our coverage detection solution, which also uses AI capability is helping to discover more than $20 million of incremental insurance coverage to help aid these hospitals reimbursements. And that's in a typical sized hospital. We also highlight things like -- I'll give you one more example for our digital patient payment and patient financial care suite. We use AI to help automate and create self-service for 80% of the patients that are interacting with our digital payment suite. And that is lifting patient payments by 20% because we're driving better patient payment plan adherence. And that typically is finding more than $8 million of annual impact or a typical hospital. So these are the types of things that we highlight as we go and engage with clients where they know they're going to be able to use AI in a setting and a platform that they trust. And that's why you're starting to see it show up in the bookings the way that we are.

And our next question will be coming from Ryan Halsted of RBC.

Maybe just sticking with the questions about AI and just competitive landscape. A lot of the color you provided today so far has been incredibly helpful. But maybe just to dig in a little further on the competitive landscape. I mean, when you're presenting your ROI? Are you hearing any feedback from your customers about the competitive nature of, say, some of the ROI that these other platforms are potentially offering or these other solutions, maybe not necessarily platforms that they are offering? How does -- how should we think about your ROI versus what maybe others are putting out there?

Well, we won't disclose exactly what our ROI is. What I will say, Ryan, and thank you for the question. We have a very robust ROI calculator. We go through a rich discovery process with clients, and we present to them a platform, and oftentimes, as you've heard us talk in the past, there's a compounding benefit when a client uses more and more of our solutions together on the platform. Again, those solutions are AI-infused, AI-enabled and are driving tremendous results. And I'm sure that those clients are going through a process of comparing what Waystar offers versus what an upstart or a newcomer for a point solution may offer. But I think what stands the test of the time and what we're seeing is really robust win rates. We noted improvement in the quarter above our strong 80% win rates, we noted that it's even higher in the last little bit. And so we feel like our ROI is very compelling. And more and more clients are buying into this idea of the importance of a platform approach as they begin and they want to consume AI on the platform.

And our next question will be coming from Ryan Daniels of Blair.

Matt, maybe a strategic one for you on AI and the improvements you're seeing in the platform, especially with Iodine and their solutions and data assets. You've talked about the perfect claim. And I'm curious if this can provide you with a contracting advantage longer term strategically where not only can you go in with a fully integrated platform, but maybe increase the total value add, maybe share in some of those savings. So are there any potential thoughts on risk-based contracts or tying to other KPIs that you know you can improve on an accelerated basis and maybe see not only a win rate delta from doing that versus some of your peers, but also maybe greater revenue enhancement or an accelerated time frame with novel contracting?

Thanks, Ryan. I appreciate that thoughtful question as well. We talk a lot at Waystar about building the autonomous revenue cycle platform, this dynamic end-to-end agentic network that acts continuously within workflows, learns from outcomes with real sources of payment truth and then delivers the perfect undeniable claim, real financial results with minimal intervention. It's on our road map. And that's -- we have teams of people focused on how do we create with minimal intervention this -- where we keep a human in the loop appropriately as AI continues to learn from our massive proprietary data. How do we march toward that perfect undeniable claim? We're absolutely willing to explore some performance-based pricing opportunity in this space. It's something that we won't talk a lot about in the public domain here, but it's something that we contemplate internally as we think about how to price to the value that we're delivering to our clients.

And our next question will be coming from Brian Tanquilut of Jefferies.

Congrats on the quarter. I really appreciate all the comments today, Matt. But as I think about -- you talked about how important the platform is and kind of like the one-stop shop approach from your clients. One question we're getting a lot is when we think of the traditional EHR players or vendors trying to build AI capabilities that kind of touch into RCM, how do you think about that? And maybe how does the clearinghouse factor into that decision, which platform your clients, these hospitals or provider groups would build on when they choose the one-stop shop solution going forward?

Yes. Thanks for the question, Brian. We are very focused on revenue cycle, clearinghouse, successful payment. And so as you know, we connect to over 500 different instances of practice management and electronic health systems, including some of the largest in the United States. We have not seen a successful test or result of anybody -- EHR system creating a clearinghouse. And it tends to be just a different development motion, a very different set of capabilities required to build and sustain a network. We've been building Waystar's cloud-native modern clearinghouse for over a decade, and we monitor it and pressure test it and update it continuously intradaily. That's very different from developing an electronic health record solution or a practice management system, quite frankly. And so as we stay focused on our platform and then being highly interoperable and deeply deployed with all the electronic health record systems in the market, we think that's the winning approach. We can specialize in what we're doing. We can be a lynchpin solution to those EHR systems and a great partner to our clients and helping them get paid.

And our next question will be coming from Richard Close of Canaccord Genuity.

Congratulations on the year. Just maybe a little bit more on the AI and OpenAI, Claude for Healthcare, both had some notable organizations listed in their press releases on the launches like HCA, Boston Children's, Stanford and some, I assume, are Waystar clients. And I'm just curious what your thoughts are -- and do you see situations where clients will have multiple vendors for certain AI functionality, meaning it's not necessarily a zero-sum game, which the market seems to be pricing in. And then also just your thoughts on health care system landscape overall. There's a lot of the haves and the have-nots. And maybe some of these larger AI companies are not necessarily good fits for certain customers.

Thank you, Richard. I would say, again, it's an exciting time in health care. This is a moment of a lifetime where generative AI capability is available to hospitals and health systems and any organization. LLMs are great tools to develop and deliver features and functions. We see that internal to Waystar again as we utilize Google's LLM. And what I'd say is having a heterogeneous deployment of technology is not a new phenomenon in health care. It tends to actually not be a zero-sum game in health care. And there may be some misunderstanding or a lack of appreciation for how heterogeneously help -- in health care technology is being deployed. But again, to solve the mission-critical problems that are demanded in the revenue cycle that, quite frankly, Waystar solves, you have to have a deeply deployed multisided network to connect organizations to payers and to patients. It's required to have rich and real-time data that you can use to real-time train your network so that you don't really have the luxury of having a science experiment in your revenue cycle. There's a limited tolerance for any type of fault. And so RCM has to be 100% right. Otherwise, there are penalties, there are fines. There's all sorts of other things that can just go bad. And so having rich and real-time data is important, having subject matter expertise, it's tough to get all of that within one hospital or health system. And so most hospitals and health systems, to your second part of your question, don't necessarily have the abundance of engineering talent that they need to build and then sustain and support AI capability. So we think the longer-term benefit is really what Waystar can do and vendors like Waystar can do to actually help deliver AI that can be consumed thoughtfully in workflows that employees understand, et cetera. The last thing I'd say is speaking of the haves and have-nots that you highlighted, Richard, I think there's very few hospitals and health systems that have the resources to deploy AI and sustain it and manage it themselves and meet regulatory requirements to do all the things that you're obligated to do if you're working and using technology inside a hospital and health system. The vast majority of our clients, for example, especially on the ambulatory side, the nonhospital side, we're bringing equity and fairness and modern AI capability to them that they'd never be able to develop by themselves. And so there's something really cool about that, that inspires our work.

And our next question will be coming from Michael Cherny of Leerink Partners.

Another AI one for me. But along all those same lines, as you think about your role, your integration with various different partners, how do you make sure that your organic, inorganic R&D investments stay on top of the curve so that you are continuing to deliver value, you are continuing to make sure that you box out other providers, be it purpose-built or some of these larger companies relative to their ability to try and deploy AI either to disrupt you, disintermediate you or whatever term you might want to use?

Yes. I mean I would say we talked a lot about LLM tools right now. They're good for coding efficiency. We're deploying LLM tools, as I've mentioned. And we feel like there's basically -- everybody is using LLM tools, is the LLM the advantage? Is the LLM -- is the use of the LLM the advantage? We would argue that you need other capability to be competitive and to deliver value to clients. So from an organic perspective, how do we stay ahead? Well, we're investing in innovation. We're using LLM capability ourselves. We're seeing productivity gains amongst our development teams as we highlighted in our prepared remarks. And we're delivering hundreds and hundreds of feature improvements in any typical quarter that help our clients achieve fantastic results. We also have a dedicated corporate development team, and we scan the market all the time to look at some of the start-ups that are creating novel and unique AI capabilities that may not have the distribution or the deeply deployed network that we have. And we think we can be a great home for the right types of companies. But it's a very exciting time, and Waystar is very motivated to continue to deliver value to our clients and to our shareholders.

I would now like to turn the conference back to Matt Hawkins, CEO, for closing remarks.

Great. Okay. Thanks so much for the time and the thoughtful questions today. To summarize, Waystar is executing from a position of strength. We're delivering durable growth, strong margins and meaningful cash generation while extending our leadership in AI-powered revenue cycle automation. Our AI is not experimental. It's embedded, monetized and delivering measurable outcomes inside mission-critical workflows our clients rely on every day. With unmatched data, deep deployment and domain expertise, strong distribution and a disciplined operating model, we believe Waystar is exceptionally well positioned to compound value over the long term. I'd especially like to thank our outstanding team for their dedicated and impactful work. They're the reason that Waystar continues to perform at this level. We appreciate your interest and support, and we look forward to updating you on our continued progress. Thank you, everybody.

And this concludes today's program. Thank you for participating. You may now disconnect.