Good day, and thank you for standing by. Welcome to the Waystar Third Quarter 2025 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Sue Dooley, Vice President of Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, everyone, and thank you for joining Waystar Third Quarter 2025 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'd 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 file with the SEC, all of which are available on the IR 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, Sue, and good afternoon, everyone. In Q3, Waystar continued its strong momentum, achieving solid revenue growth and profitability. This performance was anchored by healthy client retention and expansion, reflecting our leading position in modernizing the health care payment process. Our cloud-based AI-powered software creates compelling value that drives meaningful ROI, strengthens client financial outcomes and improves transparency in the cost of patient care. Let's review a few key highlights. Reflecting strong execution, Waystar delivered another quarter of double-digit revenue growth and strong margins, outpacing our guidance on both measures. Revenue grew to $269 million, representing 12% year-over-year growth with an adjusted EBITDA margin of 42%. On October 1, Waystar completed the acquisition of Iodine Software, expanding our reach to more providers uniting clinical, administrative and financial data, increasing the total addressable market and unlocking new opportunities to drive profitable growth. We announced innovations across our AI-powered platform and engaged hundreds of health care's top technology and industry leaders at Waystar True North, our annual client conference, to foster connection, celebrate success and ensure our product roadmap continues to meet providers' needs today and in the future. At Waystar, the mission is clear: to simplify health care payments. The health care financial system is complex, fragmented and administratively heavy and Waystar is modernizing it through a cloud-based platform that streamlines the entire process. Our technology helps providers get paid faster, more accurately and with less administrative burden so they can focus on what matters most, delivering quality patient care. Purpose-built for health care, our platform integrates with more than 500 electronic health records and practice management systems. This extensive integration enables us to serve over 1 million providers nationwide of all types and sizes. And we believe Waystar's impact is unmatched. Waystar leads the market in advanced automation and intelligence, leveraging AI-powered workflows, unrivaled data assets and meaningful innovation. Our powerful software fuels industry-leading client satisfaction and is transforming the financial and administrative engine of health care. As the industry seeks greater efficiency, transparency and value, we believe Waystar is positioned to capture a vast and durable growth opportunity for years to come. Turning to the completion of the Iodine Software acquisition. Waystar has taken a major step forward in our mission. The addition of Iodine expands our total addressable market by more than 15%, accelerates innovation and strengthens our ability to drive durable, profitable growth. We've also welcomed nearly 150 health systems, representing more than 1,000 hospitals to our client base. Iodine brings proven AI-powered mid-cycle capabilities, including clinical documentation integrity, utilization management and pre-bill anomaly detection. With Iodine now part of Waystar, we're uniting clinical, financial, administrative and payer data in a single intelligent platform. By infusing these capabilities and data into our software, we're extending and compounding the value Waystar provides before, during and after care. Our platform and access to this tremendous data spans every stage of the revenue cycle, powering AI insights, automation and accuracy that enable complete compliant and defensible claims, accelerating reimbursement and strengthening provider financial performance. We estimate that Iodine accelerates portions of our product roadmap by nearly 2 years as we deliver the next generation of clinically informed AI-powered capabilities. We are pleased to have Iodine Founder, William Chan, now serving as Waystar's Chief AI and Product Officer. In this role, William is shaping the future of the Waystar platform and advancing our innovation agenda. He is joined by several senior leaders and domain experts from Iodine who bring deep clinical and technical expertise to accelerate our progress. To give you a sense of what's ahead, we envision a future where AI continuously scans data, identifying anomalies across patients, providers and payers, automating tasks, validating documentation accuracy and predicting and delivering financial outcomes. This is the path toward true autonomous AI in health care revenue management. And ultimately, we believe these innovations will power the future of the health care system. Waystar recently hosted its sold-out client conference, Waystar True North, convening more than 500 revenue cycle leaders, one of the largest gatherings of decision-makers in the industry. At the conference, we highlighted client results that generated meaningful ROI and strong performance. A few examples of client impact include reduced prior authorization submission time by 70% within weeks of implementation at a large regional health system, achieved a 4x ROI for a major nonprofit health system through lower denials and higher revenue capture and increased point-of-service cash collections while redeploying the equivalent of 10 full-time employees to higher-value work and a large Midwestern health system. These outcomes reinforce the scalability and financial impact of the Waystar platform and our ability to deliver sustainable, profitable growth. Also at Waystar True North, we convened the Waystar Advisory Board, senior executive decision-makers and early adopters of Waystar software from leading provider organizations who provide invaluable insights that fuel our innovation and help shape our strategy. Our discussions reflected the realities providers face today, rising utilization accelerating denial rates and ongoing workforce shortages that continue to pressure margins. Many are turning to AI, seeking technology to drive greater efficiency, reduce administrative waste and deliver the financial transparency that builds trust across all stakeholders. Despite this progress, key barriers remain, most notably data fragmentation. Much of the health care data is siloed or locked in unstructured formats, such as clinical charts and notes, PDFs, lab reports and images, limiting the effectiveness of AI. An MIT study found that nearly 95% of AI initiatives rely on incomplete or inconsistent data. The results, without high-quality data, AI doesn't create efficiency, it creates more work. The second challenge is integration. Providers need technology that operates seamlessly within their current systems and workflows. Without interoperability, the value of AI remains unrealized. And finally, cybersecurity remains critical as AI becomes more deeply embedded in clinical and financial processes. Secure, compliant data management at every point of contact is essential. These challenges underscore the need for a unified, intelligent and trusted platform and this is where Waystar is uniquely positioned to lead. An independent market study ranked Waystar the #1 trusted vendor among top competitors, recognizing a sustained commitment to data protection, client experience and innovation. Insights from the Waystar Advisory Board and independent studies reinforce our differentiated position and confirm the growing demand for a unified, intelligent and trusted platform. We continue to build client confidence and deepen relationships that drive expansion, accelerate adoption and power the next generation of innovation across the platform. At the heart of Waystar's differentiation is innovation. Our platform advances continuously with hundreds of new capabilities launched each quarter to improve automation, accuracy and ease of use. Twice each year, new product capabilities are unveiled through the innovation showcase, highlighting how the platform is advancing to meet providers' needs. Launched at Waystar True North, our fall innovation showcase introduced new AI-powered capabilities that address some of the most pressing challenges in health care, including denial prevention and recovery and patient financial care, driving better outcomes for providers and the patients they serve. The important advancements we announced include denial prevention. Waystar AltitudeAI targets the 60% of denials that are preventable, reducing time related to critical prevention work by 95% for a midsized health system and building on our industry-leading 98.5% plus first pass clean claim rate across our client base, accelerating reimbursement and improving cash flow. In denial recovery, Waystar is addressing the $20 billion annual denial problem. Waystar AltitudeAI enables providers to create hundreds of appeal packages simultaneously, more than 90% faster than before, driving double-digit increases in overturn rates for early adopters and improving reimbursement speed and accuracy and patient financial engagement. To address the $17 billion uncompensated care gap related to patient collections, Waystar's cost estimation capability is seamlessly integrated within our patient digital experience to increase pre-service patient payments, accelerate cash flow and reduce uncompensated care. Client feedback on these innovations has been very positive, validating our roadmap and reinforcing the growing demand for AI-powered automation. This innovation continues to build client confidence and deepen long-term relationships that drive adoption, expansion and sustained growth across the Waystar platform. Trust remains central to our success. Following Waystar True North, attendees reported a 93% confidence level in Waystar as a trusted partner. That confidence is reflected in our performance with strong Net Promoter Scores and a net revenue retention rate of 113%. The number of clients generating more than $100,000 in trailing 12-month revenue grew to 1,306 in Q3, an increase of 11% year-over-year. And the market is taking note of our progress. We were proud to receive two prestigious awards during the third quarter, powerful validation for Waystar. Fast Company named Waystar one of the Best Workplaces for Innovators in North America, and the 2025 Stevie Awards named Waystar Healthcare Company of the Year and honored us as the top-ranked payments solution. In closing, sustainable transformation in health care requires a strong foundation. We believe Waystar's industry-leading AI-powered platform is that foundation, the essential differentiated choice for providers seeking to simplify health care payments and achieve better outcomes. Waystar's momentum is strong and accelerating as we advance our mission and capture a large expanding market opportunity. We are operating with discipline and delivering results, building a rule of 50-plus software business with the ability to compound revenue and profitable growth. With that, I'll turn it over to Steve to walk through the financial details from the quarter.

Thanks, Matt. Please note that my comments regarding third quarter and year-to-date results reflect Waystar's performance only, while full year guidance and implied Q4 guidance include a full quarter of contribution from Iodine. Revenue increased 12% year-over-year in the third quarter to $269 million, driven by healthy client retention and expansion, highlighting our durable, predictable model of low double-digit revenue growth annually on a normalized basis. We also expanded our client base, generating more than $100,000 of LTM revenue by 38 clients in the third quarter to 1,306 at quarter end, an increase of 11% year-over-year. Our net retention rate, or NRR, was 113% for the last 12 months compared to 15% year-over-year revenue growth 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 and elevated patient utilization of the health care system since early 2024. Subscription revenue of $134 million increased 14% year-over-year and 3% sequentially. Going forward, we expect Iodine to further enrich our subscription revenue mix. Volume-based revenue of $132 million increased 10% year-over-year and decreased 4% sequentially, in line with our seasonality expectations associated with revenue from patient payment solutions. Also, we saw overall patient utilization in the third quarter begin to revert back to historical growth rates. Adjusted EBITDA of $113 million for the third quarter increased 17% year-over-year. Our adjusted EBITDA margin was 42%, above our long-term target of approximately 40%. The adjusted EBITDA outperformance was driven by a revenue shift to higher-margin solutions, along with ongoing operational cost initiatives, outpacing reinvestments in areas such as innovation, cybersecurity and client experience. Please note that none of the $15 million of expected cost synergies from the Iodine acquisition are reflected in our third quarter results. We have already notified and acted on approximately 70% of annualized cost synergies. We expect these action synergies to be realized and beginning to positively impact results over the next few quarters. We are confident in our ability to achieve the full cost synergies within the previously communicated period of 18 to 24 months post close. We further believe our track record and M&A will demonstrate with time and integration that Iodine's clinical expertise, robust data and AI capabilities add to our long-term profitable growth profile. Turning to cash flow and the balance sheet. We ended the quarter with $421 million in cash and equivalents and $1.2 billion in gross debt. As a reminder, in conjunction with the Iodine acquisition, we issued $250 million of debt and drew on $30 million of our revolving credit facility. We also lowered the interest rate on both facilities by 25 basis points to SOFR plus 200 for the entire debt and SOFR plus 1.75 for the revolver. Unlevered free cash flow was $96 million in the third quarter of 2025 with an unlevered free cash flow to adjusted EBITDA conversion ratio of 85% for the third quarter and 86% year-to-date, which are both well ahead of our 70% long-term target. The trend of high cash flow conversion, coupled with the expansion of our trailing 12-month adjusted EBITDA, generated a 1.9x leverage ratio at September 30, which is down almost a full turn since the beginning of the year, ahead of our previously stated goal of reducing our leverage ratio by approximately 1 turn annually. If we carry this calculation forward to October 1, 2025, to account for the Iodine acquisition, the leverage ratio would be 3.4x. We are confident in our ability to delever approximately 1 turn annually. Regarding 2025 full year guidance, please note that the following includes a full quarter of contribution from Iodine. We are raising revenue guidance for 2025 to a range of $1.085 billion to $1.093 billion, with the midpoint of $1.089 billion, representing a 15% year-over-year growth rate. This is an increase of $53 million or 5% versus the prior guidance midpoint. The increase represents a 12% year-over-year growth rate for stand-alone Waystar and an expectation of approximately $30 million of revenue from Iodine in the fourth quarter. Our expectation for Iodine revenue for the full year 2025 is approximately $120 million, which includes alignment with Waystar accounting policies and is in line with prior expectations. Further, given our approach to rapidly uniting all aspects of Iodine and the significant progress we have made towards organizational alignment, including product development, go-to-market and cross-selling, we don't expect to separately break out Iodine going forward. We are also raising adjusted EBITDA guidance to a range of $451 million to $455 million with a midpoint of $453 million, increasing by $31 million or 7% versus the prior guidance midpoint. We now expect an adjusted EBITDA margin of approximately 42% for 2025, driven in part by the outperformance through the first 3 quarters of the year. This guidance assumes $12 million of contribution from Iodine in the fourth quarter at its historic adjusted EBITDA margin of approximately 40%. We look forward to providing 2026 guidance on our next earnings call. This concludes our opening remarks. With that, we are ready for your questions.

Our first question comes from Ryan Daniels at William Blair.

Congrats on the strong performance. Matt, maybe one for you. Interesting that True North took place right around the Iodine transaction close. And I'm curious if you had the opportunity to introduce clients to that and see new Iodine clients? And just overall, kind of what areas were key focus and what the overall feedback on Iodine and Waystar from the Iodine clients were?

Thanks, Ryan. The client conference was perfectly timed for us. Waystar True North was fantastic. As we mentioned, it was sold out, and we showcased an innovation lab where clients could engage with our technology advancements and experience AI in action. We also highlighted how Iodine, which is a comprehensive software solution for the middle revenue cycle, can effectively connect Waystar's front-end and back-end solutions. The client feedback was overwhelmingly positive. We received insights from our Advisory Board meeting that took place just before the conference, and I noted a couple of specific comments. One participant expressed excitement about our announcement, stating that it will be fantastic for us and for health care. Another mentioned being an Iodine user and expressed enthusiasm about the acquisition, describing it as a perfect fit. As we contemplate the opportunity to merge these two exceptional companies, we believe it is an ideal strategic match that moves us closer to our ultimate goal of creating a flawless insurance claim. Thank you for the question.

Our next question comes from the line of Brian Peterson from Raymond James.

I'll echo my congrats on a strong quarter. Matt, maybe a high-level one for you, especially as you think about the platform with Iodine in the fold, how do you think about the cadence of the legacy or replacement of legacy processes in RCM? I know some of these sales cycles for hospital health systems can be long. But I'm curious in kind of an AI-enabled and Agentic world, will we start to see customers maybe move faster to tackle this opportunity?

Thank you, Brian. I'll start by providing some background on Iodine and how we're focusing on selling the full Waystar platform. Iodine operates in the mid-revenue cycle and offers powerful software for clinical documentation, integrity, utilization management, and pre-bill anomaly detection. These features bring structure to unstructured clinical information, identifying missing or incorrect codes before a bill is finalized. The system ensures human oversight, deploying over 160 leading AI models within Iodine software that allow human validation of the AI's code identification. This process has resulted in a 70% reduction in the need for re-review of codes prior to claim submission. This aligns perfectly with Waystar’s next-generation cloud platform, positioning us to maintain market leadership and become the preferred revenue cycle solution. We have cross-trained our sales teams and identified significant cross-sell and upsell opportunities, as only 35% to 40% of our clients currently use both Iodine and Waystar. We've begun introducing Iodine to Waystar clients while also presenting Waystar to Iodine clients, creating opportunities to replace outdated software and promote our comprehensive platform. Iodine processes over 160 million patient encounters and around 34% of annual patient discharges in the U.S., providing us with a wealth of clinical information to integrate into our large language models. This will enhance our capabilities in automating prior authorizations, improving claims processing, and streamlining the appeal management process. We're excited about the increasing platform sales opportunities ahead. Thank you for your question, Brian.

Our next question comes from the line of Adam Hotchkiss from Goldman Sachs.

I think, Steve, you mentioned that patient utilization has started to move back to historical levels. Could you maybe just expand a little bit on that? And I know that the volume-based business declined 4% sequentially. I think it's a little bit more than we've seen in the last couple of years. So could you maybe just expand on what the right way for us to think about seasonality in a more normalized environment going forward looks like?

Yes. Certainly, Adam. So I can share a few thoughts here. So maybe a couple of level-setting thoughts and then I can specifically address your questions. Recall that our solutions help providers become more efficient and effective, so they have the ability to capture utilization upside of the health care system as we've seen in the past several quarters. Also, our mix of revenue is generally 50% from subscription based and 50% volume-based with the volume base coming from both provider solutions, those solutions that help providers interact with and obtain payments from commercial payments and governmental entities as well as you mentioned, Adam, patient payments, those that help them interact with and collect from patients. So my prepared comment is based on what we're seeing, particularly within patient payments, which, as you noted, has a natural first half, second half seasonality aspect to it based on the timing of patients with high deductible plans. And notably, what I was looking at qualifying is we started to see the timing of patients reaching deductibles occur earlier in the third quarter than we had last year. It's an early indication though versus a long-term or a trended expectation. So we've kind of taken that into context in how our approach is to guidance, which we believe is prudent. So as we set guidance, particularly for the remainder of 2025 and implied fourth quarter, we've taken that into account. What I mean there, Adam, is if our volume-based outcomes and the patient utilization continue on sort of that same trended rate we've seen for the first three quarters of the year, we would expect to come in at the high side of guidance. If we see that those patients that are reaching those deductibles within those high deductible plans continue as we started to see them here in the third quarter and that sequential change versus the third quarter and second quarter, we could be at closer to the midpoint of guidance versus potentially even on the lower end of guidance. So hopefully, that's helpful context.

Our next question comes from the line of Allen Lutz, Allen from Bank of America.

At one of your innovation showcases several weeks ago, you talked about shipping patients from mail payments to mobile. Can you talk a little bit about discussions with your customers around making that change and how long that would take? And then how should we think about the relative gross margin delta between those two products?

Thank you, Allen, and thank you for joining our innovation showcase, which is available on our website. We host it twice a year, in spring and fall, with the most recent one coinciding with the Waystar True North Client Conference. It had a fantastic reception, almost like a concert atmosphere. Regarding the digitization of patient statements and integrating patient payments with an informative digital statement, we see a shift in the margin profile and its overall impact. We anticipate a significant opportunity to transition from analog methods to digital solutions in various healthcare areas, and we believe Waystar can lead in this effort. A major challenge on the analog side is the excessive use of paper in healthcare, including faxes and physical patient statements. Many individuals still prefer to receive their statements in paper form for review. Waystar is dedicated to making this process more intuitive and easy, while also integrating payment functionalities to enhance transparency and facilitate accurate, timely payments to providers. We are currently making these digital solutions available, and providers are starting to adopt this strategy, expressing their desire for patients to opt in. We expect this transformation to take time and won't happen overnight. It represents a long-term opportunity for us to help providers connect with patients, ensuring that Waystar will be a market leader in this space. The evolving patient experience is important, as we're introducing patient statements that serve an educational purpose for patients. This is also beneficial for providers. In our patient financial care suite, we focus on measuring patient Net Promoter Scores, not just those of providers. Our findings show that when patients understand their financial responsibilities at the point of care, their Net Promoter Scores improve due to increased transparency, allowing them to plan their payments effectively. Waystar's software also allows providers to set up payment plans as part of this integrated solution. We know that digitization is advancing, and we aim to facilitate and drive this transformation for both providers and patients.

The next question comes from Vikram Kesavabhotla from Baird.

I wanted to ask about the Iodine acquisition as well. And I think in your prepared remarks, you said that this could accelerate parts of your product roadmap by nearly 2 years. And I'm just wondering if you can elaborate on that comment a little more. What are some of the best examples of how this is adding to your innovation process? And how should we think about the timeline to seeing some of those combined capabilities start to emerge in the product portfolio?

Thank you, Vikram. I want to share some concrete examples of why we're excited and how we believe this will speed up our roadmap by almost two years. One example is our Waystar product called prior authorizations. We are automating 90% of the prior authorization process for provider organizations. Occasionally, when a provider submits an authorization request, the payer may request clinical information to determine medical necessity. If Waystar collects that clinical information on its own, we would connect with our hospitals, build necessary APIs, and gather the information needed. By integrating Iodine's robust clinical data set with Waystar, we not only create one of the most comprehensive administrative and clinical data sets in the U.S., but we can also leverage this data for medical necessity-based prior authorizations. Another example involves claim denials, which are a significant concern for provider decision-makers. With 450 million claims denied each year, appealing these denials often benefits from including clinical information in the appeal letter. This information can support reasons for overturning the denial and ensure the provider receives payment. Waystar has solutions in place for prior authorization and appeal management letters utilizing generative AI, maintaining a human touch while infusing clinical data to improve success rates. These examples illustrate our enthusiasm about enhancing Waystar's software with clinical information. Additionally, as we understand Iodine's software capabilities better, we can leverage the vast amount of administrative data from the 6 billion insurance transactions we process annually to enhance Iodine's solutions in clinical documentation improvement and pre-bill anomaly detection. I hope these examples clarify our position, Vikram.

Our next question comes from Elizabeth Anderson from Evercore ISI.

Congratulations on the quarter. You've provided a lot of detail about how Iodine fits into the portfolio and your perspective for the fourth quarter. I was curious about hospitals experiencing margin pressure, whether you've observed any changes in the types of modules that hospitals are interested in. Are they leaning towards certain solutions over others? Any additional insights you could share would help in understanding the broader landscape.

Thank you, Elizabeth. Regarding the hospital demand environment, I would like to share a couple of key insights and discuss the solutions that appeal to decision-makers. We understand that these leaders seek efficiency and prefer to collaborate with partners who can ensure faster, accurate, and efficient payments. They also prioritize cybersecurity solutions. Additionally, there is an increasing focus on denial rates and their underlying causes, which aligns perfectly with Waystar's value proposition. Our solutions are essential for driving efficient cash flows, making us a priority among decision-makers. As we've noted over the past few quarters, we tend to gain priority because we are critical to their operations. We continue to see strong and growing demand for our platform. Interestingly, provider decision-makers are beginning to recognize the advantages of utilizing more than one or two of Waystar's software modules. For instance, when they adopt our claims management suite, known for its exceptionally high first-pass claim acceptance rate of over 98.5% across our network, we can discuss additional options like eligibility automation and insurance coverage detection, which statistically minimize claim denials. We also engage with provider decision-makers about prior authorization automation, as lack of authorization is a common reason for claim denials. Overall, we observe a rising interest in reducing denials and are able to demonstrate our value during the discovery process by comparing clients' current metrics with those achievable through our enhanced solutions. Key areas of interest include eligibility automation, coverage detection, and prior authorization. Furthermore, our denial and appeal management software, enhanced by our autonomous generative AI initiatives, is increasingly appealing to providers.

Our next question comes from Daniel Grosslight from Citi.

Congrats on the quarter and closing Iodine. I was at a conference recently and the most striking thing to me was just the number of vendors that have popped up with AI-powered RCM capabilities. Given what seems to be increasing competitive intensity, can you talk a little bit about how your go-to-market strategy has changed or will change and how bringing William on as your Chief AI and Product Officer may impact this?

Thank you, Daniel, for your question. Let me discuss our approach, competition, and growth opportunities. We have a robust pipeline with a healthy mix of new and cross-sell opportunities. Notably, our recent product launches, particularly the AltitudeAI solutions, are beginning to significantly contribute to our pipeline and year-to-date results, which is crucial. Our go-to-market team is exceptional. They are dedicated not only to delivering results but also to transforming healthcare, and I'm privileged to work alongside such a talented group. Regarding our strategy, we believe we have a leading approach, but we won't reveal all our methods here. We train our team to enhance productivity and improve our understanding of client needs, which facilitates ROI-based discussions and promotes our solutions. As for competition, we are actively observing market developments. We recognize that imitation can be flattering, and we appreciate it. While there is considerable noise from flashy market announcements, our focus remains on executing our business plan. We are experiencing ongoing momentum and success with our platform approach, actively promoting real ROI conversations and transitioning from AI hype to tangible ROI reality. We believe we offer the best platform in the market, providing an end-to-end solution with the lowest total cost of ownership and highest ROI. Our win rates remain consistently high and have improved since our last report. We are optimistic about our strong pipeline, increasing participation in requests for proposals, and sales activities. We acknowledge the heightened interest in the revenue cycle management category and believe our cloud-native architecture, along with our sophisticated rules engine and AI capabilities, gives us a competitive edge, resulting in high client satisfaction.

Our next question comes from the line of Saket Kalia.

Matt, maybe for you, actually, I want to pick up on that thread a little bit. It sounds like there's been a ton of innovation through AltitudeAI, and you just talked about how it's starting to contribute to Waystar. I was just curious how you kind of think about monetization. Some software companies create separately billable SKUs, right, that sort of add an AI layer on top. Some are able to sort of deliver or charge additional value. How do you kind of think about that monetization strategy for Waystar?

Thank you, Saket. For us, monetization takes several forms, and we are starting to see results now. It begins with retaining customers and building long-lasting relationships as they utilize our software and recognize its benefits, leading to real returns. Additionally, we have an annual price uplift program that has been running for several years, and we are starting to price based on the value we provide, especially with the recent introduction of autonomous or generative AI features in our software modules. We are also exploring the introduction of new software modules. We've made progress in a few areas and are eager to share these with our clients, although we won't disclose specific details publicly yet. It's essential to note that Waystar has a long history of integrating AI into our platform. In the current landscape, where AI represents a significant opportunity, particularly in healthcare, we see a gap where technology is advancing faster than human adaptation. Healthcare providers are eager to utilize AI and benefit from it. At Waystar, we aim to set a standard for responsible and ethical AI deployment, ensuring that our clients can trust us. We see a chance to leverage AI for positive impact, advocating for providers and patients to enhance access to care, transparency, fairness, and empathy, while also minimizing waste and burden. One key takeaway is that providers express a desire to use AI, but they often struggle to see how it integrates into their workflows. Our platform is designed as a workflow tool, and we've been deploying AI throughout it, making it intuitive and user-friendly for end-users. We are conditioning users to seamlessly engage with AI as they navigate our platform, providing the right AI solutions to specific use cases, often with human validation when necessary to ensure accuracy. Our AI is designed to simplify tasks for users, sometimes in ways they might not even recognize, as it operates in the background to automate processes and prioritize tasks. Our focus remains on transforming AI hype into real-world value, and we are optimistic about the products we've launched, the pricing success we're achieving, and the enduring relationships we are building with our clients.

Our next question comes from the line of Charles Rhyee from TD Cowen.

Matt, in recent months, we've seen significant announcements from major EHR vendors, like Epic at their annual event and Oracle discussing Cerner. They are beginning to integrate more AI into EHR systems and are exploring solutions for revenue cycle management using agents. Can you share your perspective on how this evolution might unfold? Additionally, could you discuss how the Waystar platform interacts with EHR systems and highlight any key differences in functionality? It would also be helpful to understand how all of these elements can coexist.

Thank you. It's interesting because we currently have over 1,000 hospitals as clients, the majority of which use Epic and Waystar. We also have numerous clients using Cerner, Meditech, and other practice management and EHR systems who are pleased with Waystar software. You mentioned that these organizations are "talking" about revenue cycle management, while Waystar is fully dedicated to it. That's our sole focus. Our team is committed to simplifying health care payments by leveraging modern AI capabilities. We are utilizing various advanced language models available in the market, but we believe the true value lies in accessing data to train these models. These models should be referred to as large object models since they can process more than just language; they also handle lab charts, PDF documents, and images. Waystar is actively engaged in this work. We believe we can serve as an exceptional partner and key technology for these EHR systems, which often become overly complex as they tackle multiple challenges. Our proven interoperability and integration with their systems have impressed their clients, and we are eager to partner with these systems. Regarding interoperability and connectivity, I want to emphasize that Waystar advocates for modern connectivity through APIs to all payers. We are connected with the majority of payers in the United States and also integrate with more than 500 different electronic health record, practice management, and hospital information system vendors. Hence, we believe we can be a strong partner, as evidenced by our support for their growth and success with our software.

Our final question comes from Jailendra Singh from Truist Securities.

Congrats on a very strong quarter. I wanted to ask about EBITDA margin trends. I know you guys have talked about 40% as being the reasonable long-term target. But what are your views on the sustainability of some of these margin efficiencies and gains you've seen recently? You shared several examples around the ways you're using AI to create value for your clients. But given your expertise, is it fair to assume you're using AI to drive some internal operational efficiencies? And what kind of opportunities do you see in that area?

Thank you for your question, Jailendra. It's an important one for us. We truly appreciate all inquiries. To start, I want to emphasize that our business model is designed for long-term, sustainable low double-digit revenue growth. We've mentioned our target for adjusted EBITDA margins at 40%, and we remain focused on that goal. While we could potentially achieve higher EBITDA margins, we believe that maintaining around 40% is prudent as we invest in innovation, cybersecurity, and market capabilities during this unique time in healthcare. We're pleased with the recent quarter's results, slightly above that target, but we recognize the need for ongoing investments while keeping our long-term targets in mind. Regarding our internal AI initiatives, I’d like to point out that William is serving as our Chief AI and Product Officer, and we are excited about his contributions alongside our talented team dedicated to achieving our long-term goals. We’ve also established an internal AI team known as the Kaizen AI team, which collaborates across all areas of Waystar to identify use cases where AI can enhance our operations and create market-leading experiences. We believe AI acts as a productivity enhancement tool that will enable us to scale effectively by making our team members more efficient. We’ve provided every team member with a Copilot license and have trained them on how to use it responsibly and ethically in line with our business practices. Internally, we hold contests to celebrate innovative uses of Copilot, which help improve or automate previously manual tasks, ultimately enhancing our team’s productivity and client satisfaction. For instance, our development teams are leveraging GitHub and Copilot, yielding increased efficiency in coding, code reviews, and testing. We are enthusiastic about the prospects of AI and expect to uncover more opportunities to enhance our operational efficiency. While these efficiencies may not entirely convert into adjusted EBITDA, we might choose to reinvest some of the savings back into the business to fuel innovation and improve our market position. Currently, we are exploring over 100 use cases for AI within Waystar, and we are very optimistic about this initiative.

Thank you. This concludes the question-and-answer session. Now I will turn the call over to Matt Hawkins, CEO, for closing remarks.

Thank you all for participating today and for your insightful questions. We are pleased with the performance of the business and sense a strong momentum. As a result, we are raising our full-year guidance. We are excited to have completed the Iodine acquisition and are eager to work together as one team to drive transformative change in health care. I attribute our success to our dedicated team, and I feel honored to work alongside such talented individuals who are committed to our mission of simplifying health care payments. We are building a market-leading platform and are starting to gain valuable data and network effects as we process more transactions, which will enhance our automation and increase client value, retention, and stickiness. We are enthusiastic about our ongoing efforts and look forward to executing our business plan. Thank you for your time today.

Thank you, everyone, for your participation in today's conference. This does conclude the program. You may now disconnect.