Waystar Holding Corp. Common Stock Q2 2026 Earnings Call

Day, thank you for standing by. Welcome to the Waystar second quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Edward Parker, Head of Investor Relations. Please go ahead. Thank you, operator.

Good afternoon, everyone, thank you for joining Waystar's second 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. Example 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 file 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'd like to turn the call over to Matt.

Thank you, Edward, and good afternoon, everyone. Thank you for joining our Q2 2026 earnings call. We delivered another solid quarter as we executed our strategy, supported our clients, and advanced the Waystar platform toward a more autonomous revenue cycle. During the quarter, we delivered revenue of $320 million, representing 18% year-over-year growth and adjusted EBITDA of $137 million, resulting in an adjusted EBITDA margin of 43%, which exceeded consensus expectations for the quarter. We also delivered another strong quarter of bookings, supported by ongoing momentum with larger provider organizations, expansion across our client base, and sustained demand for Waystar's AI-powered solutions. While the operating environment continues to evolve, the breadth of our platform, the diversity of our client base, and the mission-critical nature of our solutions support healthy demand across the business.

At Waystar, our focus is to help providers lower the cost to collect, accelerate reimbursement, and improve payment accuracy across the revenue cycle. In Q2, we saw healthy demand across the business, ongoing client expansion, and broader adoption of Waystar solutions. Large platform deployments drove strong bookings during the quarter, including a double-digit number of $1 million-plus ACV bookings, reinforcing the trend we have discussed over the past several quarters and our view that providers increasingly value a connected platform approach. Larger client relationships also continue to grow. Clients generating more than $100,000 of trailing 12-month revenue grew to 1,453, up 15% year-over-year. Within this cohort, clients have expanded their use of Waystar solutions over the past several years, demonstrating the compounding value clients realize as they adopt additional Waystar capabilities over time.

Net revenue retention was 108%, within our historical range, demonstrating continued expansion within our existing client base. At the same time, new clients are increasingly selecting multiple Waystar solutions as part of their initial purchase decision. Platform consolidation continues to accelerate as providers move away from fragmented point solutions in favor of a single connected software platform. KLAS Research's inaugural Revenue Cycle Management Suites report reflects that shift. Among providers using multiple solutions from a single vendor, the study found that Waystar clients reported some of the strongest improvements in collections performance and cost to collect, providing independent validation of the operational and financial benefits providers can achieve when more of the revenue cycle is managed on a single platform. One of our $1 million-plus ACV bookings is a nonprofit health system serving central New Jersey and southeastern Pennsylvania.

The win reflects the value of Waystar's platform, with the provider selecting Waystar to replace three separate vendors across claims management, patient financial care, clinical documentation integrity, and revenue capture. We also continue to see existing clients expand their relationships with Waystar. This quarter, one of the largest nonprofit health systems in the country began implementing an expanded partnership across eligibility verification and insurance coverage detection. Already a seven-figure Waystar client, the added solutions are expected to generate more than $1 million in incremental annual revenue, reinforcing the advantage of a single connected platform over a patchwork of point solutions. Another established client and multibillion-dollar academic health system with more than 3,000 beds and 9,000 physicians also recently went live with additional Waystar AltitudeAI capabilities designed to prevent denials as part of its strategy to centralize revenue cycle operations.

The go-live increases the client's annual investment in Waystar by an incremental seven figures while helping lower its cost to collect, reduce manual follow-up, and operate more efficiently at enterprise scale. During the quarter, we also saw encouraging adoption of Iodine solutions within the existing Waystar client base. More than $6 million of bookings came from existing Waystar clients purchasing Iodine capabilities, an early proof point of our expanding cross-sell opportunity as clients bring together financial and clinical data to improve outcomes. As coverage dynamics evolve and self-pay populations grow, providers need stronger capabilities to identify available coverage and protect reimbursement. In a newly published success story, ProMedica, a hospital and physician network serving 4.7 million patients annually, leveraged Waystar's patient insurance coverage solution to uncover nearly $10 million in previously unidentified billing opportunities that may have otherwise been missed.

This quarter, we published an in-depth analysis of data from hundreds of hospitals using Waystar's clinical integrity and revenue capture capabilities. The analysis showed clients experienced outsized returns, including 3 times greater financial impact from integrated clinical documentation workflows, generating $2.17 million in incremental reimbursement for 10,000 discharges and a 90% year-over-year increase in rebuild dollars caught by our revenue leakage protection capabilities. Collectively, these examples demonstrate the value of the Waystar platform. As clients adopt more capabilities, they reduce complexity, improve performance, and drive stronger financial outcomes. The momentum we're seeing across the business reflects more than strong execution. It reflects the position Waystar occupies within the healthcare payment ecosystem and the advantages that position creates for our clients.

Waystar sits at the center of the healthcare payment ecosystem, connecting providers and payers through critical workflows that span the payment life cycle from authorization and claim submission through adjudication, payment, and reimbursement. Providers see their workflows. Payers see their workflows. Waystar connects and acts autonomously across both. Operating at that intersection gives us insight into the interactions, dependencies, and friction points between providers and payers. That perspective enables us to improve performance across the revenue cycle and deliver better payment outcomes. Every transaction provides intelligence about how payments move through the system. As payer requirements change, Waystar helps identify friction, adapt quickly, and continuously improve performance across the network. The result is stronger operational and financial performance for clients, including faster payment decisions, accelerated time to payment, fewer errors, and less rework across the revenue cycle. Waystar processes more than 7.5 billion transactions annually.

The scale of that network creates a unique combination of connectivity, data, workflow intelligence, and payment intelligence that strengthens the value of the platform, supports innovation across the business, and increasingly enables the application of AI across the revenue cycle. These advantages are reinforced by the four structural foundations you've heard me discuss previously: mission-critical infrastructure, proprietary data, an extensively deployed network, and deep domain expertise. We believe these advantages contribute to the strong win rates we achieve and support our ability to compete successfully against point solutions, broader software platforms, end-to-end service providers, and newer market entrants. Taken together, these strengths create a durable advantage that is difficult to replicate and increasingly valuable as providers look to reduce administrative burden, improve efficiency, and drive better financial outcomes. As we've discussed over the last several quarters, we continue advancing our vision of creating the industry's first autonomous revenue cycle.

Our goal is not simply to deploy AI. It is to orchestrate the right AI at the right moment across the revenue cycle to reduce administrative burden, improve performance, and deliver better outcomes for providers. Our AI deployment is not experimental. It is embedded and monetized, and it delivers meaningful outcomes inside the mission-critical workflows our clients rely on every day. External recognition during the quarter provided additional validation of these efforts, with Waystar named to the TIME100 Most Influential Companies list and earning the TIME Impact in AI Award. More than a dozen clients have committed to our next generation anomaly detection solution during the first half of the year. This solution represents an important step forward because it combines Iodine's clinical documentation capabilities with Waystar's revenue capture engine. We are encouraged by the interest it is generating from large hospitals and health systems.

Early adopters are seeing approximately $3 million in incremental revenue recovered per 10,000 admissions through automated revenue leakage detection. We are also seeing promising results from our newest Waystar AltitudeAI-powered solution focused on payer takebacks. U.S. Renal Care, a dialysis provider with more than 500 centers across 32 states, achieved an 88% autonomous match rate between recoupments and original claims, reducing the time spent managing recoupments by approximately 80%. As we look ahead, we are focused on the same priorities that have guided us over the last several quarters: simplifying healthcare payments, driving innovation, and delivering meaningful value for our clients, our team members, and our shareholders. The fundamentals of the business are strong. Client partnerships are healthy, and our long-term opportunity is significant. We look forward to sharing more about our strategy, client adoption trends, and long-term vision at the Investor Day in August.

Before I turn the call over to Steve, I want to take a moment to recognize him and thank him for everything he has done for Waystar. As we announced earlier today, Steve will be transitioning from the Chief Financial Officer role after eight years with the company. Steve has been a tremendous leader, trusted advisor, and great friend. He has played a critical role in helping build Waystar into the company we are today. Helping us scale the business, build a world-class finance organization, navigate our IPO, and establish the strong financial foundation that supports our continued growth today. More importantly, Steve has been an invaluable partner to me and our leadership team. His judgment, integrity, and steady leadership have had a lasting impact on this company, and we are all better because of his contributions.

While Steve will be transitioning from the CFO role, he will remain with Waystar as an advisor over the coming months to help ensure a smooth transition. We are pleased to welcome Alpana Wegner, who joined Waystar this week as our next CFO. Alpana brings extensive public company finance and software industry leadership experience, having served as CFO at several public software companies and held a variety of senior finance and operating leadership roles throughout her career. I look forward to introducing her to you in the coming weeks. Steve, thank you again. You've been a great partner and a great friend. On behalf of all of us at Waystar, thank you for your leadership, your friendship, and everything you've done for this company. We wish you and your family the very best. With that, I'll turn it over to you.

Thanks, Matt, and thank you for the kind words. Serving as CFO of Waystar over the past eight years has been one of the greatest privileges of my professional career. I've had the opportunity to work alongside an exceptional team, support incredible clients, and be part of a remarkable journey. I'm incredibly proud of what we've built together and even more confident in where the company is headed. I want to thank our team members, clients, shareholders, and the many friends I've made along the way for their trust, support, and partnership. I'm grateful for the opportunity to have been part of this team and this company. With that, let me turn to the quarter. Revenue increased 18% year-over-year in the second quarter to $320 million, organic revenue grew 7% year-over-year.

Excluding previously discussed items affecting comparability, normalized organic growth was approximately 10% in the quarter. Performance in the quarter reflects expansion across the client base, healthy adoption of high-value solutions, and continued strong execution. Total booking value and expected margin composition again exceeded internal expectations. Bookings also include a double-digit count of 1 million-plus annual contract value engagements, with activity continuing to skew towards larger platform deployments and new solutions, such as the pre-bill demand Matt discussed. Clients generating more than $100,000 of revenue in the last 12 months increased by 20 in the second quarter to 1,453 at quarter end, an increase of 15% year-over-year. Our net revenue retention rate, also viewed on a last 12-month basis, was 108% at the end of Q2, within our historical range of 108%-110%.

Subscription revenue of $176 million for the second quarter increased 34% year-over-year, 2% sequentially, was 55% of total revenue. On an organic basis, subscription revenue grew 12% year-over-year, continuing to grow at a double-digit rate reinforcing the health of the core Waystar business. Volume-based revenue of $142 million for the second quarter increased 3% year-over-year 2% sequentially. Please recall the items impacting second quarter year-over-year comparability are volume-based. We are pleased that both subscription and volume-based revenue performance align with expectations indicated on our prior earnings call. Adjusted EBITDA of $137 million for the second quarter increased 21.5% year-over-year.

The adjusted EBITDA margin of 43% was consistent with the prior quarter is indicative of the scalable nature of our platform model, disciplined cost management, the favorable margin profile of the solutions driving growth across the business. Our capital position remains strong with healthy cash flows as we ended the quarter with $192 million in cash equivalents and short-term investments, $1.5 billion in gross debt. In May, our board of directors authorized a stock repurchase plan for up to $200 million, during the second quarter, we repurchased $13 million worth of Waystar stock at an average price of $19.24 per share. Unlevered free cash flow was $64 million in the second quarter, we converted 47% of adjusted EBITDA to unlevered free cash flow. Cash flow and the conversion ratio reflect the typical timing of estimated federal tax payments in the quarter.

Additionally, capital expenditures, including capitalized software development, increased year-over-year as we continue investing in AI platform capabilities that we believe will support future growth, drive greater automation, and advance our vision for the autonomous revenue cycle over time. As of June 30th, net leverage was 2.5 times compared to 2.7 times at the end of last quarter, which aligns with our historical ability to, and cadence of, delevering and is well below our goal of running the business at or below a 3 times leverage ratio. Based on our performance through the first half of 2026 and current expectations for the rest of the year, we are raising the low end of our revenue guidance range by $2 million, resulting in a revised guidance range of $1.276 billion-$1.294 billion and a midpoint of $1.285 billion, representing 17% year-over-year growth.

We are also raising our adjusted EBITDA guidance to a range of $535 million-$545 million, with a midpoint of $540 million, an increase of $5 million versus prior guidance midpoint. This concludes our opening remarks. With that, we are ready for your questions. Operator, please open the call.

To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. In the interest of time, we ask that you please limit yourself to one question. Please stand by while we compile the Q&A roster. Our first question comes from Ryan Daniels with William Blair. Your line is open. Yeah, Matt, quick question for you and congratulations to Steve on the announcement.

Best wishes to you. I was hoping you could go into a little bit of detail about what you're hearing in the end market with kind of all the noise that's going on in healthcare with the ACA exchange lives rolling off into uninsured with Medicaid lives going down and with OBRA likely to continue to push that down. I guess the question is: what are you seeing in regards to transaction volume or patient pay because of that? And then what are you hearing from your customers about demand for different solutions to help them combat some of those changes in the market? Thanks. Thank you, Ryan. Appreciate your thoughtful question and your well wishes for Steve.

We are seeing the demand environment return to, from a transaction utilization perspective, return to the long-term average of kind of that 1%-2%. We know that the long-term secular trend is that 1%-2%. In recent years, it's been higher based on probably a little bit of COVID catch up, maybe higher as 3% or 4%. There are some trends that you rightly highlighted, whether it's a little bit of regulatory uncertainty around certain uninsured populations or things like that, the decrease in Medicaid lives covered that does create uninsurance. That really does create demand for Waystar solutions. When you think about what providers are most focused on, it is lowering the cost to collect, optimizing payment yield, whether from an insurance reimbursement or from a patient, and reducing time to collect.

We know that they want to use a platform approach versus a point solution because there's this point solution fatigue where many of them are using well over a dozen point solutions in a patchwork way to try to figure out how they can optimize their collections and address their patient population. We think that setup is squarely within the line of what the value proposition is for Waystar solutions. We know that. Our solutions are mission critical, that they can be very helpful to providers in addressing the utilization environment, helping them do more with less, helping them have optionality to address the self-pay population or the uninsured population with many of the software modules and capabilities that we have on Waystar's platform.

Certainly to continue to optimize and detect coverage where a patient may be eligible for coverage. Our solutions use AI to detect that coverage. We think those factors all contribute to a strong demand environment that we see at Waystar and have contributed to strong bookings momentum and a robust pipeline as we address the second half of the year.

Perfect. Thank you so much. Appreciate all the color. Thank you.

Our next question comes from Michael Cherny with Leerink Partners. Your line is open. Good afternoon.

Thanks for taking the question. Maybe if I can build a little bit on Ryan's question, thinking about the end market. As you go into RFPs, and really nice to see some of these business wins, but especially now as you go in with Iodine, what is the pitch that you're making, and are you seeing any different responses, either against module components or potentially embedded EHR players as you drive towards your NR levels and other new wins that you saw in the quarter? Thank you. Thank you, Michael.

We are seeing client interest in combining clinical and financial intelligence, and that's exactly the opportunity that we saw when we acquired Iodine. We know that in doing so, what we're doing is effectively reaching further upstream into the clinical workflows and beginning there, working to prevent denials from occurring in the first place, which really helps providers. Working to detect anomalies, where as they begin to form a claim, we want that claim to be highly accurate, so we're deploying AI to help them. We've seen some really nice wins, as we called out in our prepared remarks in the quarter. More than $6 million of some of the pre-bill anomaly detection capabilities that really come about because now Iodine and Waystar are one company. We see strong pipeline and momentum in that regard.

Again, all of it is oriented toward what our vision was at the outset of acquiring Iodine, which was to use Iodine as the AI engine to help form new solutions that are AI-based that can thematically prevent denials from occurring and create that perfect, undeniable claim that will lead to accurate and timely payment. We do like the setup, and we feel good about the strategy. Believe it's intact. Thank you.

Our next question comes from Stephen Valiquette with Mizuho Securities. Your line is open. Yeah, thanks.

Good afternoon. Just a high-level question. Just curious about just overall RCM platform approach. Obviously, now you have Iodine with CDI software. A lot of vendors sell medical coding software and CDI together. Does medical coding software make sense tied into CDI? Thanks. Thanks, Stephen. Yeah, we're absolutely focused on building toward the robust autonomous revenue cycle solution.

Again, the acquisition and the strategic logic of why Iodine is very much a part of that vision, because we're uniting the front end of our platform with the middle part, that perfect puzzle piece that you've heard me describe in quarters past, with the back end clearinghouse capabilities. Which as you all know, the clearinghouse is the heart and soul of the revenue cycle because that's where all the things that you do building up to payment, that's where the action, the rubber hits the road, so to speak, and where the action occurs. Really our platform is a system of action, and it's driving real benefit.

Within the mid-cycle, you highlight some important things that we believe that we have the right to do or the right to partner with others in the space. On the one end of the clinical documentation improvement capability, where again, Iodine is deploying over 150 AI models and delivering more and more all the time. There is the ambient listening category. We know those players and there's opportunity for us to partner there. On the other end, you highlighted coding. In particular, there's the autonomous coding category or the auto coding category. With all the work that we're doing, we believe that we have the right to explore that area and expand our addressable market opportunity. We certainly are studying that space carefully, and I won't say more than that at this point in time.

When you look long term at what we're building toward, envision this autonomously acting revenue cycle platform where a lot of work is shifting from automated work to orchestrated work by agents acting on behalf of revenue cycle experts to create that perfect round-the-clock behaving solution that benefits providers and creates a highly informed patient who can engage in their financial responsibility where we seek payments as well. That's where we're headed, and I hope my answer helps address some of the ways we're thinking about added opportunity in the middle part of the revenue cycle.

Yep, that's great. Thank you.

Thank you. Thank you. Our next question comes from Scott Schoenhaus with KeyBank.

Your line is open. Thanks, guys, for taking my question.

You noted the strength in the large provider clients, and you talked about bookings. I'm just wondering on the RFP process, specifically on the pipeline there, are you seeing more large provider clients this year versus last year in your RFP process, and what are they coming specifically for? Is Iodine the lead catalyst for that? I'm just trying to get a better sense of the RFP process, given all the concern around large hospital systems contemplating whether in-house or other third-party AI platforms here. Thank you. Thank you, Scott.

We are seeing an uptick in RFPs, and we're participating in more RFPs, and that is leading to the types of strong bookings results that we see. Because these are larger recent wins, and as we look ahead at our robust pipeline, there are RFP activities going on within our bookings pipeline. Some of these are taking slightly longer to implement, and it's not just one solution, it's multiple solutions, front, middle, or back, and often all. That's thrilling for us to be able to participate in those things. We're creating delighted clients as we take them live.

When I step back, Scott, this is what we were alluding to all the way back in 2024 when we were working to rapidly address not only the phase one, as you may have heard me talk about it, clients that needed rescuing when a competitor of ours was cyber attacked and their network was taken down. We alluded to a phase two, what we saw was going to be a longer tail of phase two. We didn't know how to time box it at the time. We didn't know how big it was going to be, but we had a sense that this was going to be a longer phase two. We're living in that now, and we have seen an uptick.

Some of that uptick has already resulted in bookings, but we don't see that diminishing, and we believe that Waystar is well-positioned to continue to participate and to win, given the strength of our win rates. I highlight in our prepared remarks that KLAS report that named us a top platform solution. It's an inaugural report in this topic. We were thrilled with that, and I think that's an evidence point for how we're positioning Waystar to be successful in this exciting phase two that you've heard us talk about.

Thank you. Thank you. Our next question comes from Brian Peterson with Raymond James.

Your line is open. Hey, guys.

Thanks for taking the question and congrats on the strong bookings. I wanted to unpack the transaction component a bit. How did that trend versus your internal expectations in the quarter? It looks like the patient volume was up a bit, but the provider was down. Is there anything that you can share that gives us more context on that? Thank you. Yeah. Thanks, Brian.

This is Steve. I'll take that. I'd say for the quarter, the patient utilization aligns with both our expectations and with overall guidance for the year. As Matt alluded to earlier, it's in line with what we've seen from a long-term historical annual uplift year-over-year, recognizing that we're looking at a tough comp when we're looking at 2026 versus 2025, because that utilization was elevated in 2025. To your question, I'll probably specify a little more on the volume-based revenue. We talked about that in the past being about 45% of revenue, $142 million in the quarter. That is up 3% year-over-year. If you were to normalize the items that we talked about on prior calls, whether they were specific to 2025 or earlier in 2026, that volume-based revenue on a normalized basis is more like 8% year-over-year.

Feel really good about, again, where it is for the quarter, and then where we've seen it so far year-to-date versus our expectations from a guidance perspective, recognizing that it is in line with the long-term historical trends versus what we've experienced or seen in the last couple of years.

I'd say, Brian, really quickly adding on to what Steve just highlighted. Speaking specifically, we called out those three large client implementations a year ago in 2025 that we were able to take live on a very compressed timeline. As we noted then, they were larger and the nature of the agreements we had with them were transactional volume-based. That's part of what leads to the year-over-year comp that optically looks the way it does. We feel good about the volume-based aspect of our business and the growth opportunity there.

Thank you. Our next question comes from Brian Pincus with Jefferies. Your line is open. Good afternoon.

Steve, thank you and good luck with the move. Maybe just my question, as I think about guidance and the move on the EBITDA range, you beat by $7 million Q1, $6 million Q2 roughly. Just curious, is there anything we should be thinking about in the back half of the year that's kind of preventing you from guiding, at least by the beats that you've seen this year?

Brian, thank you. First, we're pleased with the performance of the business. This is the ninth consecutive quarter of beating analysts' expectations, and consensus on both revenue and EBITDA. We have confidence in our full-year outlook. What I'd say is that a couple thoughts on EBITDA production in particular. We have a number of internal initiatives that you've heard us talk about in the past. Some of those are AI operating leverage type initiatives that create improvement in gross margin, which I think you see show up in our P&L. Also, continued expansion of our adjusted EBITDA margin, as noted in the quarter. We're balancing that with the tremendous opportunity we see to continue to invest for the long-term growth of the business. That is additional growth investments in AI, in continuing to position Waystar to be the category leader of this AI-first autonomous revenue cycle platform.

We are certainly confident in our full-year guide on revenue and EBITDA, but we want to reserve a little bit of room for us to invest as appropriate. By the way, we think that the 40+% adjusted EBITDA margins that we're delivering are great because it is putting us in a strong capital position as you see us driving free cash flow. Steve, would you highlight anything incrementally?

Yeah. Just to tie out what Matt has said, as you look through the entirety of the financials, Brian, you saw it in my prepared remarks call out, the capitalized software spend, where it ties directly into what Matt said about how we're focused on driving new solutions and implementing and inserting AI into our existing platform to round out the capabilities, and drive an already impressive ROI for our clients even higher. If you looked at the capitalized software spend in the first half of the year, you'd see it's roughly double what it was in 2025. That is a reflection of how we're investing, as Matt said, into the products today to drive revenue growth for the future. I'd say we're doing it in a very thoughtful manner as well.

As you could see that from the unlevered free cash flow conversion of adjusted EBITDA, being 47% in the quarter. I mentioned a couple other items out there, we're looking to invest in and spend it in prudent manners. To Matt's point, just to circle back to it, we would expect some of that to be flowing through to the P&L in the second half of the year. Really, as we look at the full year guide of 42% adjusted EBITDA margin, think that's phenomenal based upon how we're looking to invest for the future while being stewards of the business today.

I appreciate that. Thank you.

Thank you. Our next question comes from Elizabeth Anderson with Evercore ISI. Your line is open. Hi, guys.

This is Yashan for Elizabeth. Thanks for taking my question. You've talked about the 6-18-month lead time for larger bookings a couple of quarters ago. As you scale this number of $1 million contracts, as you mentioned in the prepared remarks, are you seeing that range tighten closer to 0-12 months now, or is 6-18 months sort of the right way to still think about it?

Thank you, Yashan, and give Elizabeth our best. I'd say that 6-18 months is still generally how we're thinking about it. We're certainly working to pull that in, as tight as we can. We see once in a while people moving much faster, and we're always grateful for that as we position ourselves to win. Most often it's a very deliberate, thoughtful process that provider decision makers go through, and it tends to be that 6-18 months, especially for the larger deals where we've highlighted some examples. The good news is we have a robust growth team. We have a proven track record in how we go and discover opportunities and accounts. We're able to sell the full platform, but we're also able to go to where the clients need help the most.

Sometimes the variability there is if the client wants help or the prospect wants help in one particular area, that might be more 6 to 9 to 12 months. If they want the full platform or multiple solutions on the platform, like what we're seeing, the traditional average for us of 6 to 18 tends to hold true. It's a proven method, and we're always working to compress it because we know the benefits of doing so on our P&L, but we've got a great team pursuing it.

Thank you. Thank you. Our next question comes from Ryan Halsted with RBC Capital Markets.

Your line is open. Good afternoon.

Thanks for taking the question. I thought maybe you could comment just on the NRR, which has been steadily stepping down. Appreciating all the color you've offered so far on the business. It'd be helpful just to hear it in the context of NRR in terms of the moving parts. Should we be reading into it some impact of the volume-based business, or is it sort of a lack of upsell, or is there even some attrition? Any sort of color on the inputs that go into the NRR would be helpful. Thanks. Certainly, Ryan. This is Steve.

First off, I'd say we view the NRR, the LTM view of 108 for this quarter is very healthy and in alignment with our long-term historical sort of NRR rate. We've talked about before. Obviously, there's a slide that we include in our investor deck that shows the bridge from gross revenue retention to NRR. If you look at those components, gross revenue retention continues to remain very strong at 97%. The trend that you're noticing is a factor primarily of two things. One is the clients and their time to rapid revenue that Matt had mentioned earlier, how they benefited NRR for the quarterly period, I think around Q2 of 2025 through Q1 of 2026. That added to what historically we had seen.

The fact that we had higher utilization rates through the middle to about the, I'll call it midway through the second half of 2025, also had a positive benefit and impact on that. If you look at that slide, again, in our IR deck, you'd see that historically it's been about 108-110, the components that lead from gross to net are all in about those same ranges that are indicated on that slide. Very comfortable with the 108, I wouldn't read more into it than we've just had some tailwind items the past few quarters that have allowed it to be beneficial and above that historical 108-110 range.

Got it. Okay. Helpful. Thanks.

Thank you. Our next question comes from Richard Close with Canaccord Genuity. Your line is open. Yes.

Thanks for the question. Steve, enjoyed working with you over the last several years. With respect to, you have a strong partnership with Google on the AI front. I'm just, Steve, curious, maybe what you're seeing in terms of cost to compute as AI is integrated into your platform, and how that gets baked into your guidance, how you think about cost to compute.

Yeah. Thanks, Richard, for the kind words. I'd say, as Matt talked earlier on the call about the internal initiatives that we have that are always ongoing, that are looking to add scalability to our overall operating profile. One of the things that we know that in the reinvestments areas that we've talked about previously, one of those areas that we know we will utilize from the benefits of those operational activities is to cover things like cost to compute without impacting our overall margin profile. You could probably see that in the first couple of quarters here with not only a calculable gross margin remaining at about 70%, which is in line with where we were in the back half of 2025, but the overall adjusted EBITDA margin as well as we look all the way through the P&L.

I think we feel really good about how we've set the contracts with Google and sort of the cost structure that we have in with that, without going into too much detail, and feel like the other areas where we would expect cost to compute just to normally and appropriately increase as we continue to sell more and more AI solutions or AI-enabled solutions into our client base. We feel very good about the other areas that we have ongoing that will allow us to absorb those, for lack of a better phrasing. Matt, anything else you'd add to that?

Yeah. I got a couple of things. Thanks, Steve. First, token expense is all the rage in the broader market discussion, isn't it?

It is. People are worried about the use or consumption of tokens and trying to manage and govern those broadly.

It's interesting to follow the broader industry conversation, which I'm sure you're all following. What we do at Waystar, we have an internal governance model, an AI governance approach that really could be exportable, and we could help our clients manage the way they think about AI. As we create this operating system approach for the autonomous Revenue Cycle, we expect to deliver foundation model capability, agentic capability, while carefully and thoughtfully managing token expense and use of foundation model expense on behalf of the clients that we serve. We've got a unique approach. I appreciate you highlighting the relationship that we have with Google. It's a very constructive relationship. Again, we like the fact that they're a hyperscaler and doing some very progressive things.

We're getting the benefit of that as our teams are spending time co-developing on-site together, and there's some really breakthrough things that we're focused on. Amongst those is the importance of getting a grasp on governing the use of those models. While we've trained 100% of our internal team and given 100% of our internal team access to various foundation models to do real work, we're also taking approach thoughtfully to how to govern expense internally and also on behalf of the clients. I think we'll see a steady long-term view that we can do so effectively.

Thank you. Thank you. Our next question comes from George Hill with DB.

Your line is open. Hey, good evening, guys.

Thanks for taking the questions. I've got two quick ones. I guess, Steve, can you talk about, given the slowdown in the volume-based growth, what's embedded in the guidance for the back half of the year? If that's a number that continues to grow in the 3% range, or if we should expect to see a continued deceleration there. Then my other follow-up is, can you talk a little bit where the leverage in the model's coming in? Because the revenue guide for the year is up modestly while the EBITDA guide is up significantly more than the revenue guide. I'd say, from a margin perspective, that math doesn't perfectly math. Clearly, there's costs coming out faster than revenues rolling along, or we'd just love to understand the dynamics between the revenue guide and the increase in the EBITDA guide.

Thank you. Yeah, certainly, George.

I'd say a couple of things. As you think about volume-based revenue for the rest of the year, the baseline for that is patient utilization of the healthcare system. We've talked, our original guidance was for the impact for us, which is generally about a 1%-2% uplift annually year-over-year. That was our expectation going into the year. That expectation hasn't changed. If you think about the 3% year-over-year increase on the volume-based side for the second quarter, I'd ask you to think about it in terms of the guidance for the full year, that normalized organic rate of 8% that I had mentioned earlier in the call. If you're looking at how to impact that from a year-over-year perspective.

I'd say, as you think about, your question about the revenue range and the uplift in the midpoint of guidance of $1 million versus the adjusted EBITDA uplift at the midpoint of range in guidance of $5 million, it's a factor of a couple of things. It's a reflection of where we've run the business for the first half of the year, and specifically from an adjusted EBITDA perspective there at 43%, while we still expect 42% for the full year. Partially want to be able to recognize that we've run the business a little above our full-year expectation at the beginning of the year. Matt and I talked about a little earlier in the call, just as a reminder, the areas of where we're looking to invest in AI and how we expect that to impact the back half of the year.

The other piece to that is we've made the comment not only on this call, but in the last call in our prepared comments about the revenue mix and how we continue to see the revenue in the Sorry, the bookings, and then how it's translating into revenue from higher margin deals, and it's a reflection of that factor as well, that we continue to see the margin profile from the booking side of things, and how some of those are of the shorter timeline being reflected in the P&L, and feel really good about that factor as well. Obviously, that's good for the business. That gives us additional ability to look at how we want to utilize those funds investing in or otherwise throughout the business.

Thank you. You're welcome. Thank you.

Our next question comes from Allen Lutz with Bank of America. Your line is open. Good afternoon.

Thanks for taking the questions. First, Steve, it was great working with you. Best wishes moving forward. I have two questions in one here. Last quarter, AI was 40% of bookings. I do not know if you provided what it was this quarter, but if you are going to provide it, can you let us know what that was? Steve, as we think about the level of capitalized software, as you talked about earlier in the call, it has gone up over the past year and over the past couple quarters. Can you talk about this level of capitalized software? Is this the right run rate? As we think about the duration of the higher capitalized software spend, is there any timeframe that you can give for us there? Thanks. Yeah. Certainly, Allen. I will start with the first one.

We saw, again, a very good composition and mix this quarter from a bookings perspective of AI-enabled solutions. To answer your question specifically, that was approximately 40% again in this quarter, so feel really good about where we sit not only for the quarter but for the year to date. On the capitalized software development cost front, I think that if we are looking at a very near-term run rate and our expectation through the rest of 2026, I would think that what we have seen the first couple of quarters here in 2025 are a good indication of what we would see for the rest of the year.

We will reserve the right, if I can use that phrase too, as we continue to understand where our opportunities are to rapidly bring new solutions to market and continue to differentiate ourselves versus the competition, we may go a little higher than what we have seen for the first couple of quarters from a run rate perspective. I think we feel really good about our capabilities today and reserve the right to increase a little bit more. Obviously, keeping in tune with and conscious of our unlocked free cash flow conversion rate. I do not think you would see us do something like some of the hyperscalers have done, which would mean looking at going negative from a cash flow perspective. Not at all. Matt, I do not know what else you would add to that.

I would say it's a great question. I'd say we're working to meet this unique moment in time. We feel like we've got a great position to be a category leader, to build the market's first and most robust autonomous revenue cycle platform. You have seen us step up our cap software spend. We're doing a number of things internally that are allowing us to accelerate the ability to deliver AI-powered solutions, models deployed to do specific work that we know based on some testing that we're doing with clients, that these are things that are going to produce good outcomes. You'll see us be disciplined, but we at the same time want to meet this unique moment in time, which is why we've doubled the cap software spend thus far. We'll continue to track and report to the group.

The nice setup for us is that we have a strong P&L that produces growth, compounding growth, and good free cash flow conversion from strong EBITDA performance. It gives us optionality to do the right thing for the business that will create long-term shareholder benefit and client benefit, just given our position in the market.

Great. Thank you both. Thank you.

Thank you. Our next question comes from Craig Hettenbach with Morgan Stanley. Your line is open. Yes, thank you.

Question on just 2026 guidance. Kind of implied for the back half is roughly in change. Anything you would call out between Q3 and Q4? As you think through the larger deal sizes, some that are extending out to 18 months for ramp up, how do you think about the visibility as you head into next year?

Yes, Craig, this is Steve. We would expect from a second half of the year dynamic to your question specifically on Q3 and Q4 in that portion of the volume-based businesses that we have that are surrounding the collections from the patients. That's about 15% of overall revenue. It typically has a dynamic whereas those patients that are on high deductible plans meet those deductible plans. They would have slightly lower revenue in the fourth quarter versus the third quarter. We would still expect that seasonality component to exist similar to prior years. As we think about these large deals that we've talked about, the $1 million-plus signings, I think it gives us really good visibility and confidence as we look out into the future. Specifically, we've talked in the past about, and we mentioned early on the call about the Iodine solutions that we're seeing cross-sell from.

It gives us real good encouragement and confidence in the comments we've made historically about the time to revenue from those cross-sell items and impact in 2027 and feel highly confident that that opportunity still exists out here today, as well as obviously, the overall visibility from those $1 million-plus agreements.

Yeah, I think that's right. I think 2026 feels like it's about sales execution and setting up implementations. We expect revenue contribution and platform benefits to become increasingly visible through 2027. As Steve said, it does give us added confidence and conviction that the long term is forming well.

Helpful. Thank you. Thank you.

Our final question comes from Charles Rhyee with TD Cowen. Your line is open. Oh, yeah.

Thanks for squeezing me in. Steve, nice working with you. Good luck in the future. I want to follow up on an earlier question that Matt and Steve, you kind of responded to. When we think about competition and obviously there's some concerns here that big health systems can leverage added services from their EHR vendor who are trying to move into rev cycle. I understand the value proposition that you guys are presenting and the greater ROI that customers can expect from deploying Waystar.

Can you talk a little bit about then when you're in discussion in the pipeline, do you run into situation where a customer is saying, "Well, we can just try this first and then see how that goes, and then we'll come back?" Or is there an understanding that rev cycle being as mission-critical it is, maybe there's just not that value to try something that's maybe not as good. Just trying to understand a little bit the decision tree that clients could be going through or are going through and how that fits into your discussions. Thanks. Thanks, Charles. This is a good question for us to address.

Speaking of the large EHR systems, what I'd say is Revenue Cycle Management isn't simply an extension of the EHR. It's not a natural extension to the EHR because it's a different development cycle. It requires different connection to payers. It's a different cadence, et cetera. I'd say the large EHR vendors, they're important partners to us. We're grateful for their partnership. We work with nearly 2,000 hospitals, and many of them use these large EHR solutions. I think where we see the decision tree is By the way, we haven't really noted a change in the competitive environment. I think that's really important to establish here, that the decision tree is, first and foremost, clients want outcomes. They prioritize outcomes and ROI more than they do novelty, point solution, and free or built-in cost.

They really want outcomes, because if you don't change outcomes, then you could have a free or included solution that becomes very expensive, because if your denial rate stays at 15%, that's a very expensive solution. The second point is, in the prioritization or decision tree of things is not only do they want outcomes, they want to see it from one end to the other. You think about some of these large EHR systems, like an Epic. Epic is the EHR system of record in many of these hospitals. Cerner's another one. MEDITECH's another one. We're grateful to work with each of them. Where they are the system of record, Waystar is the system of action, and our only focus is to build the best solutions that create the best outcomes in the revenue cycle for our clients. That's all we do. We think that as much as you hear about an EHR first approach, we think that there's a Waystar first approach, and we work well in many places with EHR systems of record where Waystar is a system of action.

We have many evidences of where we're winning and securing business, where a minimum viable product or an announced solution isn't showing up in the market and achieving the goal that that provider's looking to achieve. They're looking for benefit today, and we're giving them benefit today. That's how I'd respond to that, and again, grateful for the partners that we have. We serve over and work with, integrate with over 500 different EHR vendors and over 200 active channel partners. We're grateful to be that system of action and that Waystar first approach to so many.

As we wrap up today, let me thank everybody for the time and the call. I'd like to also thank our team for helping us produce these results. We feel so grateful to serve the clients that we do, and we're grateful for your thoughtful questions today. Thanks, everybody. This concludes today's conference call.

Thank you for participating. You may disconnect.