10-Q: Waystar Q3 Net Income Soars, Bolstered by Iodine Acquisition
Quarterly Report
Waystar Holding Corp. reported a significant increase in net income and revenue for the third quarter and nine months ended September 30, 2025, alongside the strategic acquisition of Iodine Software.
Summary
- Revenue for the three months ended September 30, 2025, increased by 11.9% to $268.7 million, up from $240.1 million in the prior year.
- Net income for the three months ended September 30, 2025, dramatically improved to $30.6 million, compared to $5.4 million in the same period last year, a 466.2% increase.
- For the nine months ended September 30, 2025, revenue grew by 13.8% to $795.7 million, up from $699.4 million.
- Net income for the nine months ended September 30, 2025, reached $92.1 million, a substantial turnaround from a net loss of $38.2 million in the prior year period.
- Adjusted EBITDA for the three months increased by 16.6% to $112.7 million, with an Adjusted EBITDA margin of 42.0%.
- Adjusted EBITDA for the nine months increased by 17.5% to $333.0 million, with an Adjusted EBITDA margin of 41.8%.
- The Net Revenue Retention Rate for the twelve months ended September 30, 2025, improved to 113.1% from 109.4% in the prior year.
- The company completed the acquisition of Iodine Software Holdings, Inc. on October 1, 2025, for approximately $458.6 million in cash and 16,639,920 shares of common stock.
- Waystar increased its First Lien Credit Facility by $250.0 million and its Revolving Credit Facility from $400.0 million to $500.0 million on October 1, 2025, to help fund the Iodine acquisition.
Sentiment
Score: 9
Explanation: The company demonstrated exceptional financial performance with a significant turnaround to net profitability, strong revenue growth, and improved operational efficiency. The strategic acquisition of Iodine Software and expansion of credit facilities position it well for future growth and market leadership in healthcare technology. The high Net Revenue Retention Rate further underscores strong business fundamentals.
Positives
- Net income for the three months ended September 30, 2025, surged by 466.2% to $30.6 million, indicating strong profitability.
- The company achieved a significant turnaround to net income of $92.1 million for the nine months ended September 30, 2025, from a net loss of $38.2 million in the prior year.
- Revenue growth remained robust, with an 11.9% increase for the quarter and a 13.8% increase for the nine-month period, driven by both subscription and volume-based services.
- Adjusted EBITDA margins improved to 42.0% for the quarter and 41.8% for the nine months, demonstrating enhanced operational efficiency.
- The Net Revenue Retention Rate increased to 113.1%, reflecting strong client satisfaction and expansion within the existing client base.
- The number of clients generating over $100,000 in revenue increased to 1,306, up from 1,173, indicating growth in high-value customer relationships.
- Interest expense significantly decreased by 56.7% for the nine-month period due to prior debt paydowns, improving overall financial leverage.
- The strategic acquisition of Iodine Software Holdings, Inc. is expected to bolster AI leadership and improve financial performance for providers.
Negatives
- General and administrative expenses increased by 42.8% for the three months ended September 30, 2025, primarily due to third-party professional fees related to acquisition activity, debt repricing, and secondary offerings.
- Sales and marketing expenses increased by 17.4% for the three months ended September 30, 2025, driven by higher channel partner fees and amortization of internal commission costs.
- The company incurred $1.4 million in expenses for the three months and $4.6 million for the nine months ended September 30, 2025, on behalf of selling stockholders for secondary offerings, from which the company received no proceeds.
Risks
- Operating in a highly competitive industry.
- Ability to retain existing clients and attract new clients.
- Ability to successfully execute business strategies and integrate acquired businesses, including Iodine.
- Dependence on senior management team and certain key employees, and ability to attract and retain highly skilled employees.
- Ability to develop and market new solutions, or enhance existing solutions, to respond to technological changes or evolving industry standards.
- Interoperability, connectivity, and integration of solutions with clients and their vendors' networks.
- Consequences if the company cannot obtain, process, use, disclose, or distribute highly regulated data.
- Reliance on certain third-party vendors and providers.
- Privacy concerns and security breaches or incidents relating to the platform.
- Complex and evolving laws and regulations regarding privacy, data protection, and cybersecurity.
- Ability to adequately protect and enforce intellectual property rights.
- Heavily regulated industry in which the company conducts business, including healthcare laws and data privacy and security laws.
- Legal, regulatory, and other proceedings that could result in adverse outcomes.
- Restrictive covenants in the agreements governing the Credit Facilities.
- Interest rate fluctuations.
- Unavailability of additional capital on acceptable terms or at all.
- Impact of general macroeconomic conditions.
- The interests of the Institutional Investors may be different than the interests of other holders of the company's securities.
- Status as an emerging growth company and whether reduced disclosure requirements will make common stock less attractive to investors.
Future Outlook
The company anticipates continued growth and profitability, driven by expanding relationships with existing clients, increasing its client base, and leveraging its AI-powered platform. The recent acquisition of Iodine Software is expected to further enhance AI leadership, automate manual work, and improve financial performance for healthcare providers. Future growth will also depend on the ability to maintain product leadership, invest in research and development, and adapt to evolving industry standards and technological changes.
Management Comments
- Our business model is designed such that as our clients grow to serve more patients, their claims and transactional volumes increase, resulting in corresponding growth in our business.
- Our platform benefits from powerful network effects. Our cloud-based software is driven by a sophisticated, automated, and curated rules engine, employing AI to generate and incorporate real-time feedback from millions of network transactions processed through our platform each day.
- Every transaction we process provides additional data insights across providers, patients, and payers, which are embedded in updates that are deployed efficiently across our client base.
- We have demonstrated an ability to drive recurring, predictable, and profitable growth. Over 99% of our revenue is either recurring subscription or based on highly predictable volumes.
Industry Context
Waystar operates in the highly competitive and evolving healthcare technology sector, specifically focusing on cloud-based solutions for healthcare payments and revenue cycle management. The company's emphasis on AI and advanced algorithms aligns with broader industry trends towards automation, data-driven insights, and efficiency improvements in healthcare administration. The acquisition of Iodine Software, a leader in AI-powered clinical intelligence, positions Waystar to capitalize on the growing demand for integrated solutions that enhance clinical documentation and prevent revenue leakage, further solidifying its role in transforming complex healthcare payment processes.
Legal Proceedings
- No material legal proceedings are currently expected to have a material effect on the company's consolidated financial position, results of operations, or cash flows.
Related Party Transactions
- Outstanding debt of $56.4 million as of September 30, 2025, from Bain Affiliated Funds and CPPIB Credit Investments III Inc., affiliates of Bain Capital LP and Canada Pension Plan Investment Board.
- Related party interest expense of $0.9 million for the three months and $2.5 million for the nine months ended September 30, 2025, paid to Affiliated Debtholders.
- Revenue of $0.8 million for the three months and $1.9 million for the nine months ended September 30, 2025, earned from five clients where Bain Capital LP has a significant interest.
- Expenses of $0.6 million for the three months and $1.8 million for the nine months ended September 30, 2025, for software services from two vendors where Bain Capital LP has a significant interest.
Stakeholder Impact
- **Shareholders**: Positive financial results, including significant net income growth and improved Adjusted EBITDA, are likely to enhance shareholder value. The strategic Iodine acquisition and increased credit facilities indicate growth potential. However, secondary offerings by institutional investors could create selling pressure.
- **Employees**: Continued growth and strategic acquisitions may lead to new opportunities. Employee equity plans (stock options, RSUs, ESPP) provide incentives and potential wealth creation. Management's adoption of Rule 10b5-1 trading plans indicates planned stock transactions.
- **Customers**: The acquisition of Iodine Software is expected to enhance AI capabilities and improve solutions, leading to better data integrity, reduced labor costs, and faster reimbursement for healthcare providers. The high Net Revenue Retention Rate suggests strong customer satisfaction.
- **Creditors**: Debt repricing and increased credit facilities demonstrate ongoing financial management and access to capital. Reduced interest expense from prior debt paydowns improves the company's ability to service its debt obligations.
- **Suppliers/Vendors**: Continued reliance on third-party vendors, including those with related party interests, indicates ongoing business relationships.
Next Steps
- Finalize accounting conclusions related to the Iodine Software Holdings, Inc. acquisition.
- Finalize accounting conclusions related to the $15.0 million settlement agreement for the termination of a prior office lease.
- Continue to expand relationships with existing clients and grow the client base.
- Develop and market new solutions and enhance existing ones to respond to technological changes and evolving industry standards.
- Manage the integration of Iodine Software to bolster AI leadership and improve provider financial performance.
- Grant shares under the 2024 Equity Incentive Plan (5.4 million shares available for future grants).
- Conduct semi-annual offerings to purchase shares under the Employee Stock Purchase Plan (ESPP) on or about June 30 and December 31.
Key Dates
| Date | Description |
|---|---|
| 2019-10-22 | Date of the First Lien Credit Agreement and approval of the Waystar Holding Corp. 2019 Stock Incentive Plan. |
| 2021-08-13 | Date of the Receivables financing agreement. |
| 2023-01-13 | Date of entry into an interest rate swap to mitigate risk on the First Lien Credit Facility. |
| 2023-01-31 | Effective date of the first interest rate swap. |
| 2024-06-06 | Effective date of the Waystar Holding Corp. 2024 Equity Incentive Plan and the 2024 Employee Stock Purchase Plan (ESPP). |
| 2024-06-10 | Effective date of the company's amended and restated certificate of incorporation and the Amended and Restated Registration Rights Agreement in connection with the IPO. |
| 2024-07-05 | Underwriters exercised option to purchase 5,059,010 additional shares of common stock from the IPO. |
| 2024-09-30 | End of the prior year's third fiscal quarter. |
| 2024-10-01 | Maturity of a favorable interest rate swap. |
| 2024-12-15 | Effective date for ASU 2023-09 (Improvements to Income Tax Disclosures) for public business entities. |
| 2024-12-31 | End of the prior fiscal year. |
| 2025-02-18 | Filing date of the 2024 Annual Report on Form 10-K. |
| 2025-02-24 | Closing date of the First Secondary Offering by Institutional Investors. |
| 2025-04-01 | Date of entry into an interest rate swap to mitigate risk on the First Lien Credit Facility. |
| 2025-04-09 | Date of entry into an interest rate swap to mitigate risk on the First Lien Credit Facility. |
| 2025-05-15 | Closing date of the Second Secondary Offering by Institutional Investors. |
| 2025-07-23 | Date of entry into the Merger Agreement to acquire Iodine Software Holdings, Inc. |
| 2025-08-12 | Execution date of the Eleventh Amendment to the First Lien Credit Agreement, repricing the outstanding balance. |
| 2025-08-24 | Eric Lee (Ric) Sinclair III, Chief Business Officer, adopted a Rule 10b5-1(c) trading plan. |
| 2025-09-09 | Craig Bridge, Chief Transformation Officer, adopted a Rule 10b5-1(c) trading plan. |
| 2025-09-10 | Closing date of the Third Secondary Offering by Institutional Investors. |
| 2025-09-11 | Melissa Miller (Chief Marketing Officer), Steven Oreskovich (Chief Financial Officer), and Christopher Schremser (Chief Technology Officer) each adopted a Rule 10b5-1(c) trading plan. |
| 2025-09-30 | End of the current quarterly period. |
| 2025-10-01 | Completion date of the acquisition of Iodine Software Holdings, Inc. and entry into the Twelfth Amendment to the First Lien Credit Agreement. |
| 2025-10-20 | Date for outstanding common stock count (191,316,583 shares). |
| 2025-10-28 | Settlement agreement reached to terminate a prior office lease. |
| 2025-10-29 | Filing date of the Quarterly Report on Form 10-Q. |
| 2026-01-31 | End date of the second interest rate swap and start date of the third and fourth interest rate swaps. |
| 2026-03-31 | End date of the third and fourth interest rate swaps. |
| 2026-10-31 | Principal due date for the Receivables Facility. |
| 2026-12-15 | Effective date for ASU 2024-13 (Expense Disaggregation Disclosures) for annual reporting periods for public business entities. |
| 2026-12-31 | Expiration date for several Rule 10b5-1(c) trading plans. |
| 2027-12-15 | Effective date for ASU 2024-13 for interim reporting periods for public business entities, and ASU 2025-06 (Targeted Improvements to the Accounting for Internal-Use Software) for annual periods for all entities. |
| 2029-10-22 | Remaining balance due date for the First Lien Credit Facility. |
Recommendation
strong buyWaystar's latest 10-Q filing presents a compelling investment case, warranting a 'strong buy' recommendation. The company has demonstrated exceptional financial performance, highlighted by a dramatic shift from a net loss to substantial net income for the nine-month period and a significant increase in quarterly net income. Robust revenue growth, coupled with expanding Adjusted EBITDA margins, underscores operational efficiency and strong market demand for its mission-critical cloud technology in healthcare payments. The impressive 113.1% Net Revenue Retention Rate and growth in high-value customers signal deep client relationships and a predictable, recurring revenue stream. Strategically, the acquisition of Iodine Software, a leader in AI-powered clinical intelligence, is a transformative move expected to bolster Waystar's AI capabilities, automate workflows, and enhance value for healthcare providers, positioning the company for sustained competitive advantage. Furthermore, proactive debt management, including significant paydowns and favorable repricing, has substantially reduced interest expenses, improving the company's financial health and flexibility. While increased operating expenses in sales, marketing, and general administration reflect growth investments and acquisition-related costs, the overall trajectory is overwhelmingly positive. These factors collectively indicate a company with strong fundamentals, strategic foresight, and significant growth potential in a critical industry, making it a highly attractive opportunity for seasoned investors.
Keywords
Healthcare technology, Revenue cycle management, RCM, AI, Cloud software, Healthcare payments, Financial performance, Iodine acquisition, SEC filing, 10-Q
Disclaimer:The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.