Waystar Holding Corp

NASDAQ:WAY

Earnings Call Analysis

Waystar's Strong Growth Amid Cybersecurity Challenges

Waystar reported a robust Q2 2024, with revenue reaching $235 million, reflecting a 20% rise year-over-year. This growth was fueled by onboarding over 30,000 clients following a competitor's cyberattack. Adjusted EBITDA was $94 million, marking a 12% increase, maintaining a 40% margin. The firm's full-year revenue guidance is estimated between $902 million to $918 million, predicting a 15% annual growth. With unlevered free cash flow of $50 million and enhanced capital structure post-IPO, Waystar aims to leverage its strong client relationships and cross-sell opportunities to sustain its growth trajectory.

Strong Q2 Performance and Revenue Growth

Waystar reported a robust second quarter, showcasing strong financial results with a revenue increase to $235 million—a 20% year-over-year growth rate, surpassing the company's usual low double-digit expectations. This growth has been buoyed by solid client retention, new sales, and increased patient payment processing volumes on their platform. Notably, Waystar successfully onboarded over 30,000 providers affected by a cyberattack on a competitor, further boosting their revenue outlook.

Favorable Factors Influencing Performance

The remarkable growth in Q2 can be attributed to several key factors: the onboarding of new clients, increased patient visits that led to higher payment volumes, and two small acquisitions that enhanced revenue comparability. Even after normalizing for these elements, the underlying business still experienced growth slightly above the expected low double-digit range.

Adjusted EBITDA and Operational Efficiency

Waystar's adjusted EBITDA for Q2 grew by 12% year-over-year to $94 million, maintaining a healthy EBITDA margin of approximately 40%. This figure aligns with the company's goal for operational efficiency while simultaneously incurring costs related to onboarding new clients and integrating acquisitions. There are ongoing efforts to enhance operational efficiencies, which could further expand margins in the future.

Improvement in Financial Position

After their recent IPO, Waystar utilized proceeds to reduce debt by $909 million, decreasing their net leverage ratio to 3.7x at Q2's end. With further debt reduction, this ratio improved to approximately 3.4x by July. This strategic approach positions Waystar in a solid financial standing, enabling continued investment in growth initiatives.

Client Metrics and Revenue Retention

The number of clients generating over $100,000 in revenue annually rose to 1,117, reflecting a 9% year-over-year growth—an encouraging sign for future revenue generation. Additionally, Waystar's net revenue retention stood at 108%, indicating strong client relationships and the potential for upselling additional services to existing clients.

Cybersecurity and Market Position Enhancement

Waystar's response to the cyberattack on a competitor not only enabled them to capture new business but also reinforced their position in the market. The urgent need for healthcare providers to secure reliable systems led to a rapid transition to Waystar's platform, resulting in faster-than-normal implementation timelines. The company expects to solidify long-term relationships with these new clients.

Full-Year Guidance and Future Outlook

Looking ahead, Waystar has issued guidance for fiscal 2024, forecasting revenue in the range of $902 million to $918 million, translating to approximately 15% growth over the previous year. The company anticipates adjusted EBITDA between $360 million and $368 million, reflecting an expected growth rate of 9% year-over-year, all while maintaining a robust adjusted EBITDA margin of 40%.

Investment in Innovation and Technology

Waystar is actively pursuing generative AI developments to enhance their healthcare payment processes. These innovations aim at streamlining operations and addressing evolving market needs, which are positioned to further strengthen the company's competitive edge and potentially yield additional revenue sources.

Earnings Call Transcript 2024-Q2

[Operator]

Good day, and thank you for standing by. Welcome to the Waystar Second Quarter 2024 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would like to hand the conference over to your speaker today, Sandy Draper, Chief of Staff and Vice President of Special Projects. Please go ahead, sir.

[Alexander Draper, executive]

Thank you, operator, and good afternoon, everyone. It's my pleasure to welcome you to Waystar Holding Corporation's Second Quarter 2024 Earnings Call. Today's call is being webcast and a replay, along with the transcript will be available on our website, along with other related materials following the conclusion of this call.

Matt Hawkins, Waystar's Chief Executive Officer; and Steve Oreskovich, Waystar's Chief Financial Officer, are joining me today. After their remarks, we will open the call to your questions.

Earlier today, we issued a press release announcing our financial results and a presentation slide deck to accompany our prepared remarks. The materials are available on the Investor Relations section of our website at investors.waystar.com.

Before we get started, I will remind you that this call contains forward-looking statements which include all statements that are not historical facts. Examples of these statements include expectations of future growth and margins. These statements do not guarantee future performance and involve a number of risks and uncertainties, and undue reliance should not be placed on these forward-looking statements. Actual results may 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 and our business generally, please refer to this evening's press release and our prospectus filed with the SEC on June 7, 2024, and in other reports we file with the SEC, all of which are available on the Investor Relations page of our website.

Any forward-looking statements provided during this call are made only as of the date of this call, and we undertake no obligation to update and will revise such statements except as required by law. During today's call, we will also discuss certain non-GAAP financial measures, which we believe may be useful in evaluating our financial performance. We have provided reconciliations of adjusted EBITDA and non-GAAP net income and earnings per share and certain other 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. These non-GAAP measures should not be considered in isolation or as a substitute for financial results prepared in accordance with GAAP.

Lastly, we are pleased to note our participation in the Canaccord Genuity Annual Growth Conference in Boston on August 13, where we look forward to engaging with many of you. With that, I'll turn it over to Matt.

[Matthew Hawkins, executive]

Thank you, Sandy, and good afternoon, everyone. Thank you for joining our inaugural earnings call as a publicly traded company. On today's call, we will cover the following 4 topics: First, I will review Waystar second quarter results, reflecting on our strong performance and highlighting a few areas that favorably impacted our results; second, I will provide insight into our response to and the impact of February 21, cybersecurity attack on a competitor's claims clearinghouse; third, I'll take the opportunity to share what we are building at Waystar, including innovations and developments that are shaping our future; and last, I'll turn the call over to Steve Oreskovich, our CFO, who will walk through more detailed financial materials and highlight guidance for the full year 2024.

We're pleased to report that we have delivered a strong second quarter, continuing our momentum and showcasing the efforts of our entire team. Q2 revenue was $235 million, representing a 20% year-over-year growth. Our revenue growth in the quarter, which was greater than the low double-digit growth rate that we typically expect is attributable to a few primary factors. First, our business continued to perform well in Q2. We maintained solid client retention, closed a number of new sales opportunities that we expect to implement at our regular cadence and continue to grow our bookings pipeline.

Second, Q2 revenue had some favorability due to increases in patient payment volumes that we processed on the Waystar software platform. We believe this outperformance is due to expected increases in patient visits as well as patients choosing to make payments to fulfill their insurance deductible at a modestly faster pace. We note that there is some seasonality in the timing of when patients fulfill their insurance deductibles in any given year.

Third, we completed two small acquisitions in the second half of 2023, which favorably impacted the year-over-year comparison versus last year. And finally, as I will address in more detail in just a moment, our revenue growth benefited from our efforts to onboard thousands of providers to the Waystar software platform, after these providers' operations were disrupted by the February 21 cyberattack against a competitor. Importantly, we expect to retain the majority of this revenue uplift going forward.

So to summarize, we were pleased with our business performance and a few favorable factors in Q2 supplemented our revenue growth. Normalized for these items, the business grew slightly above our expected low double-digit range. We're also pleased to report that Q2 adjusted EBITDA was $94 million, up 12% year-over-year and in line with our adjusted EBITDA margin goal of 40%. Within Q2 adjusted EBITDA, we incurred expenses associated with onboarding thousands of providers to the Waystar software platform, who are impacted by the February 21 cyberattack. We also focused on integrating recent acquisitions, and incrementally investing in growth, cybersecurity and innovation-related initiatives. From a margin perspective, we're pleased with our adjusted EBITDA margin and are actively pursuing ways to drive operational efficiency to maintain and expand margins over the longer term.

Our business model promotes strong cash flow conversion and Q2 was no exception. In the second quarter, we generated unlevered free cash flow of $50 million. The combination of our strong cash flow profile and our recent IPO puts Waystar in a sound financial position. As we committed, we used the proceeds of our initial public offering in June to pay down debt bringing our net leverage to 3.7x at the end of the quarter, reflecting subsequent debt pay down with the proceeds from the partial exercise of the IPO greenshoe option in early July. Our net leverage ratio is approximately 3.4x today.

In addition, I want to highlight two key metrics that we use to track our business's performance and give us confidence in our durable growth model. First, the number of clients generating more than $100,000 in trailing 12-month revenue increased to 1,117, an increase of 9% year-over-year. We believe this metric demonstrates our ability to land and then expand business with our clients. Second, our net revenue retention in Q2 was 108% and within the range of the 108% to 110% that we have seen over the past 10 quarters. Our strong net revenue retention highlights the enduring relationships we established with our clients begin with strong gross revenue retention and then delivering value to our clients as we focus on expanding the Waystar software modules they use through our cross and upsell efforts. Steve will discuss Q2 financials in more detail, and also provide guidance for fiscal year 2024.

Now on to the second point, on a topic that I know many of you are keenly focused on, Waystar's response to and the impact of the February 21 competitor cyberattack event. Following this unfortunate event in the market, health care providers and patients faced tremendous disruption. At Waystar, we quickly focused our efforts and marshaled additional resources to help impacted providers simplify their health care payments and regain cash flow. We are pleased to report that Waystar has helped more than 30,000 providers move rapidly to the Waystar software platform, many in as little as 3 days, to minimize their disruption during this time and to get paid for the health care services they delivered.

This urgency to maintain continuity and critical business operations resulted in pulling forward implementation time lines for many of these providers and the corresponding time to revenue for Waystar. We feel grateful to be in a position to help thousands of providers resume normal business operations so quickly. Importantly, we expect to build enduring relationships with these new clients. most of whom signed standard Waystar business agreements with 2- to 3-year terms and annual auto renewals thereafter.

This incident not only created a near-term opportunity for Waystar to help thousands of providers but also a longer-term opportunity to cross-sell additional Waystar software modules to these provider organizations. For many, this cyberattack reinforced the importance of using a modern cloud-based software platform such as Waystar, which provider organizations can deploy rapidly with limited to no disruption while successfully managing their finances. Due to Waystar's performance during this trying period, we believe our competitive position in the industry is even stronger, and we continue to work hard to help provider organizations and to capitalize on the positive momentum that we have seen.

I want to also comment briefly on Waystar's approach to cybersecurity. We understand the importance of protecting our clients' data and privacy. We are committed to proactively monitoring and safeguarding our clients' information in today's ever-evolving cyber landscape. Waystar utilizes a robust framework for cybersecurity to proactively monitor, measure and mitigate risk. We validate our cyber program and readiness with regular high trust PCI, SOC 2 and NIST audits.

In light of the recent cyberattack on a competitor system, it's important to note that we have already been using modern cybersecurity protocols such as requiring multifactor authentication for system access, credential restrictions and theft alerts, data exfiltration and endpoint detection capabilities and system backups that cannot be modified by malware or bad actors to secure our software platform and data. We believe our rigorous approach to cybersecurity can help us minimize the cost of any potential disruption through system resiliency and rapid restoration, and we will remain vigilant in safeguarding against potential threats.

Now on to the third point. In our inaugural call, I want to highlight Waystar's mission and what makes our company unique. We are focused on simplifying health care payments through our modern end-to-end cloud-based software enabling our provider clients to prioritize patient care and optimize their financial performance. We are transforming health care payments for providers while simultaneously helping patients to navigate and often frustrating health care payments experience with greater transparency and clarity.

I will now highlight 6 attributes that make us unique and fuel our belief in the positive benefits we can deliver to our clients. First, we are a software company, purpose-built for health care. We are not a services company trying to become more tech-enabled, building great software to disrupt long-standing payment challenges is the focus of Waystar's work. Second, our software is mission-critical to our clients. In 2023, we facilitated over 5 billion health care payment transactions, including over $1.2 trillion in gross claims. When clients adopt the Waystar platform, we become essential to their business operations and cash flow generation, we develop long enduring relationships with clients because our software helps them get paid faster more accurately and more efficiently than ever before. Our strong client and revenue retention attest to this.

Third, our differentiated cloud-based software platform with advanced technology is integrated into more than 500 electronic health record and practice management systems. This allows us to serve more than 1 million providers of all sizes across every setting of care. Our platform enables us to deliver several benefits to our clients. We rapidly deploy and implement our cloud software to serve clients of all types and sizes, addressing their unique needs. Waystar's end-to-end capabilities enable providers to manage all of their health care payments through a single platform, which serves as a meaningful differentiator for Waystar relative to numerous point solution vendors that exist in the market. We believe that no competitor matches the breadth, depth and quality of our software platform. And we deliver an average of 300 software feature innovations and improvements each quarter without interrupting the operations of our clients. And our clients achieve the real return on investment they expect as they work with Waystar.

Fourth, as we are at the forefront of actively deploying AI and machine learning to automate work, prioritize tasks and eliminate errors as clients use Waystar software, our software uses AI pervasively today. And we are well positioned to harness the power of generative AI to drive ROI for our clients. We recently announced that we have identified more than a dozen promising new generative AI capabilities across the health care payments processes. Our collaboration with Google Cloud builds on Waystar's proven track record of deploying innovative AI solutions. I'd like to highlight just a few generative AI use cases we are actively developing.

First, a copilot to further automate prior authorization submission. We believe this will materially differentiate our existing prior authorization product, positioning it to accelerate the pace of penetration. Second, a copilot to automate appeal management when a claim has been denied, substantially accelerating speed to payment. And third, an agent to enable real-time conversion of payer policy changes into claims rules. This technology will allow clients to upload their specific payer contracts and policies to Waystar's cloud rules engine with high degree of automation and accuracy, driving lower denial rates and improving the ROI of Waystar's products versus the competition.

In addition, we have several longer-term generative AI products in our pipeline for 2025 and beyond that drive automation and efficiency across the processes that lead to accurate health care payments. The fifth attribute is that we have a strong track record of delighting our clients, resulting in #1 rankings in client satisfaction in several industry surveys and strong Net Promoter Scores. We have an active and engaged client advisory board and delighted referenceable clients.

And finally, we have a highly visible and durable revenue growth model with sustainable 40% plus EBITDA -- adjusted EBITDA margins. We believe there is meaningful embedded growth within our client base and a large addressable market to pursue. We are focused on building and sustaining this momentum that we have created.

Now I will turn the call over to Steve to discuss our results in more detail and highlight our full year guidance for 2024.

[Steven Oreskovich, executive]

Thanks, Matt. Before I discuss the results and guidance, I'd like to briefly cover the durable and visible financial model you mentioned as it is the basis of our highly recurring, predictable and profitable growth at scale. Over the past several years, we have consistently delivered low double-digit revenue growth and adjusted EBITDA margins of 40% or more. Over 99% of our revenue comes from our cloud-based software platform, which means we derive less than 1% of revenues from services. Software revenue consists of contractually committed subscriptions and predictable recurring volumes processed on the platform.

In Q2, revenue was roughly equal between these two streams and both grew double digits. The subscription fee provides a fixed recurring revenue stream while the volume-based component allows us to benefit from our clients' growth. We generate more revenue as our clients see more patients and deliver more care. Apart from seasonality tied to health plan deductibles and seasonal illnesses, volumes are relatively stable and predictable year-to-year given that the demand for health care is largely inelastic and growing annually. Therefore, in the aggregate, we believe we have meaningful visibility over the entire revenue base. Another important metric that demonstrates the visibility of our model as our net revenue retention. Over the past 10 quarters, we have shown a net revenue retention rate between 108% and 110%, and on a trailing 12-month basis, with Q2 at 108%.

Turning to financial results. We had a strong second quarter with all financial metrics showing impressive growth. Revenue increased 20% year-over-year to $235 million. This growth was primarily driven by 4 outcomes. First, our business model continues to be strong. This is evidenced by the successful expansion in the number of clients of scale to 1,117 as of the end of Q2, adding 37 new clients in the quarter who produced more than $100,000 of LTM revenue. This expansion validates our land-and-expand strategy. as well as our ability to sell more multiple solution deals to new clients.

Second, we processed more patient payments from existing clients on our software platform than we have typically seen in the second quarter over the past couple of years. We expect the associated beat to offset in the second half of 2024 and have appropriately factored this into our full year guidance. Third, as indicated in our filings, we completed two small acquisitions in the second half of 2023. Consequently, the timing of the acquisitions modestly benefit the second quarter year-over-year growth rate.

And finally, our team's 24/7 work to swiftly onboard new clients impacted by the competitors cyberattack and to help existing Waystar clients in minimizing the impact on their operations generated $9 million of incremental revenue in Q2 versus what we would have expected from our historical win rates and associated implementation timing. To provide context, we typically see client implementation cycles of a few to several months due to client and insurance payer readiness factors versus the 3-day implementations Matt previously mentioned.

Most importantly, we believe the majority of revenue generated from this work will be enduring and increase our long-term revenue baseline. While 20% year-over-year growth for Q2 and 19% growth in the first half of 2024 are strong, we also recognize some of the items that we have highlighted today or referenced in our filings impact the year-over-year comparability. Normalizing for those items, revenue growth would be closer to 13%, and which is slightly above our expected low double-digit range.

GAAP net loss for the second quarter of 2024 was $28 million compared to a net loss of $11 million in the prior year. Q2 2024 results include $37 million of stock-based compensation costs with $33 million associated with performance-based options expense from going public. They also include $4 million of year-over-year channel partner commission increase based on revenue performance. Adjusted EBITDA of $94 million for the second quarter increased 12% year-over-year. The adjusted EBITDA margin of 40% also reflects investment in the business to ensure we were able to meet client expectations and ongoing investments in the areas Matt mentioned, including innovation and cybersecurity.

Switching gears. We have significantly improved our capital structure through several events since the beginning of the year. First, we used the net proceeds from the IPO to pay down $909 million in debt. This payment and our consistent ability to delever through solid financial performance resulted in upgrades of 2 notches from all 3 rating agencies. We use these two outcomes to reprice our debt in late June, reducing our interest rate to SOFR plus 2.75% and down from SOFR plus 4% at the beginning of the year.

And finally, after the quarter ended, most of the IPO greenshoe was exercised for net proceeds of $103 million, and we used those proceeds along with a bit of cash on hand to pay down an additional $111 million of debt. We ended the quarter with $1.36 billion of total debt and net debt of $1.29 billion. On a trailing 12-month basis, our net debt to adjusted EBITDA leverage is 3.7x, down from 6.6x at the beginning of the year. And if one were to adjust the leverage ratio to reflect the additional debt pay down in July, it would have decreased to 3.4x.

Unlevered free cash flow was $50 million in the second quarter of 2024 compared to $77 million in the prior year. Our unlevered free cash flow includes a tax burden of $26 million in Q2 versus $6 million last year as we are a full taxpayer. Our capital allocation priorities remain the same. We expect to continue to delever the balance sheet, targeting approximately one turn a year. We continue to invest in the business to drive sustainable top line growth, and we will also look at opportunities for inorganic growth based on our disciplined acquisition criteria.

As evidenced from the financial discussion, we had a solid first half of 2024 and are confident in our outlook for the remainder of the year. For fiscal 2024, we expect revenue to be within the range of $902 million to $918 million. At the midpoint, this represents 15% growth over 2023. For additional context, we expect both subscription and volume-based revenue to grow by over 10% year-over-year. We have also considered the seasonality aspect of patient payments processed on the software platform which is typically more robust in the first half of the year because patient deductibles reset at the beginning of each year.

Additionally, while we experienced revenue overperformance in Q2, due to the impact of rapid implementations as we helped providers. Our full year guidance reflects an expectation of normal implementation time lines going forward. Our expectations for adjusted EBITDA incorporate public company expenses, continued investment in client support, innovation and cybersecurity along with higher channel partner commission costs due to strong sales. Factoring in these items, we expect to deliver adjusted EBITDA between $360 million and $368 million, representing 9% year-over-year growth at the midpoint of guidance, along with an adjusted EBITDA margin of 40% for 2024.

We are now ready to answer your questions.

[Operator]

[Operator Instructions] And our first question comes from the line of Anne Samuel with JPMorgan.

[Anne McCormick, analyst]

Congrats on the great print. I was hoping maybe you could talk a little bit about -- in your conversations with clients, post the change disruption. How are they thinking about -- how they were historically tied to one vendor and that caused them some disruption? Are you [indiscernible] have an appetite for diversification, so they don't end up kind of being stuck again. How are they talking about that? And how are they thinking about vendor diversification?

[Matthew Hawkins, executive]

Thanks, Annie, for the question. This is Matt. Let me try to provide our perspective. We -- first of all, we're very grateful to be in a position where we could help the thousands of providers as we've described. I think we were able to not only showcase the speed and ability of Waystar and our team members to rapidly respond to help these providers. But I think it's -- we did so, as we also mentioned in the prepared remarks, using standard Waystar agreements that, as we've described, are multiyear in nature with auto-renewing aspects thereafter.

What we believe is the majority of the clients that move to the Waystar platform are looking certainly for a cyber secure platform. And we, as described, will be vigilant and focused on cybersecurity posture. We think while there is some chatter or market noise around needing redundancy or having a resilient network, we also believe that, that could be rather inefficient. A question would be, will people have multiple EHR solutions because they want redundancy, that just doesn't seem very tenable. And so what we'll focus on is establishing that we can be a trusted partner. We're proving that now we're actually beginning to have conversations with many of these clients about expanding the use of the Waystar software platform to include other software modules. I hope that's a helpful perspective.

[Anne McCormick, analyst]

It is, and it sounds like a great opportunity for you. Maybe just my follow-up would be on the back half volume-based revenue expectations. I was hoping you could just provide a little bit more color there, maybe what's driving that?

[Matthew Hawkins, executive]

Okay. Let me turn to Steve for that one.

[Steven Oreskovich, executive]

Thanks, Matt. Thanks, Annie. Yes, so at midpoint of guidance, 15% for the full year would imply roughly about 12.5% year-over-year growth in the second half of the year. We did see and talked about in the walk from the first half of the year, 19% to more of a normalized view of 13%, which I didn't mention in the prepared remarks, patient payment volume coming in stronger in the first half of the year, meaning we've seen patients utilizing the health care system and the amount of payments being greater than what we've seen in prior years. So we've reflected that in the second half of the year expectations.

I think you also see -- in the deck, you may not have had a chance to look at it yet, but the investor deck we put on our website, that obviously, we've continued to grow and for the past several quarters now and continue to grow sequentially the subscription-based revenue. And I think that's a fair assumption to -- as you think about the second half of the year, that sequential growth. I think what we reflected in that back half of the year for the volume base is the overperformance or greater performance that we've seen from the patient payments side of the business for the first half of the year.

[Matthew Hawkins, executive]

Yes, some seasonality that's natural in our business.

[Steven Oreskovich, executive]

Correct.

[Operator]

And our next question is going to come from the line of Adam Hotchkiss with Goldman Sachs.

[Adam Hotchkiss, analyst]

Great. I guess to start, I'd be curious on what you're seeing in the software buying environment agnostic of the cyberattack demand increase. How would you describe the prioritization stack for purchase decision makers at the hospital and health systems for RCM technology? And then I just had a quick follow-up.

[Matthew Hawkins, executive]

Thanks, Adam. We see it as very important. RCM is a top priority to decision makers as we reflect on the broader macro market, so to speak. I think it's fair to acknowledge that health care is an important industry for all of us. It relates to us personally in the United States, we're spending a substantial amount of money on health care each year, where there's also significant waste, more than $750 billion a year of waste. And so we see what's on decision-makers' minds is how to gain more operating efficiency within their systems. We know that hospital margins have been challenged. We've seen that smoothing out over the last 6 months when you read some different industry reports. What we've noted is that there is a desire amongst prospects and clients to consume more of the Waystar software platform. There's a emphasis on platform versus point solution. I think part of that might be tied to some cybersecurity impact, harder to cyber secure multiple point solutions than it is to work with a trusted partner that has a platform and a cyber secure approach.

But when you think about broader economic macro trends, talk around potential recession even. What we would say is health care as an industry is recession-resistant not recession proof, but recession resistant, even during market downturns, people still need health care services. But I think Waystar as a perspective is that we are helping decision makers because our software platform delivers operating efficiency. We are automating work we're reducing error associated with all of the billing, insurance and interactions and collection interactions between providers and insurance companies and providers and patients. We're bringing efficiency and automation to that.

And so we become an important part of the dialogue. We've seen an uptick in our RFPs. We see -- we like the position of our bookings pipeline and our high-performing sales organization are having conversations with decision-makers that we feel like it gives us a sense of confidence as we look into this economy as we stay close to decision makers and as we continue to do work at Waystar to execute on our business plan.

[Adam Hotchkiss, analyst]

Okay. Great. I appreciate all that detail. That was really helpful. And then, Steve, you mentioned the financial impact from the cyberattack at one of your competitors. Could you maybe just talk about what you're baking in there for the back half of the year? Are you continuing to see customers come in the door as recent as the last couple of months, there is -- that faded, as February 21 moves further in the background. And then when you think about the dollar amounts that you're baking in for the back half of the year, how much of -- what's in guidance now is just what you've already done? And how do you view the upside potential from the creation of some of these relationships and module cross-sell?

[Steven Oreskovich, executive]

Yes. Thanks, Adam. I think as you alluded to, we saw a $9 million of uplift in the second quarter. versus a typical cadence we have expected as a result of the competitor cyberattacks, some of that being generated from greater business wins. We have very high win rates to begin with. A lot of that also being generated from the faster implementation. We've -- it was kind of -- well, it was a bad event for the industry and it impacted clients. It also reinforce what we have been saying in the past that it does not take long to switch to Waystar and implement, and we can implement people quickly. It generally is the time line in which it falls and the client readiness and then in some of the payer connectivity readiness.

And I think as far as we look out into the second half of the year, I think I briefly mentioned, we would expect those implementation time lines for clients that we've continued signing new clients to revert back more towards the norm, right? And that's sort of how we were thinking through it. And I think it's appropriate for us as a -- in our initial foray into the public markets to think in that manner. We've also, as you alluded to, have a very good track record of cross-selling into our client base. And obviously, these clients, there's a bolus of clients that are -- that are newer to us and that we brought on board in the second quarter.

And I think we -- I think also as we think through the second half of the year, do we see opportunities for cross-sell and further revenue expansion. I think, yes, we definitely do. I think we would characterize that more towards a longer term and enduring out in follow-on years versus seeing an immediate impact coming in the second half of the year.

[Matthew Hawkins, executive]

I would also add, Adam, that we are learning through this period of time. We're very active in helping these clients, as I mentioned, to supplement what Steve said. We do see an uptick in RFPs, where Waystar is getting invited to participate in more and more of these conversations, some of those, many of those are clearinghouse related. And so we see -- as we've described, the near term, call it 2024 impact that what we'll say the longer-term opportunity, we'll continue to learn and hopefully be able to describe more as we get a little further out in the future. But one thing for sure, we are focused on having conversations with clients and prospects who we know we can help. And once they become a client of Waystar, then we naturally have cross-sell and upsell conversations with them.

[Operator]

And our next question is going to come from the line of Saket Kalia with Barclays.

[Saket Kalia, analyst]

Okay. Great. Matt, Steve, nice result here, and congrats on your first quarter as a public company.

[Matthew Hawkins, executive]

Thank you, Saket. It's -- sure nice to have this one done, and we look forward to the conversation.

[Saket Kalia, analyst]

Sure. Matt, maybe just to start with you. Maybe just to change it up a little bit. It was great to see the upside in volume-related revenue. And I know that there was some timing benefit there, but can we just talk a little bit about the patient payments business? And why you maybe feel like there's an opportunity for share gain in that market?

[Matthew Hawkins, executive]

Yes. We now understand an important part of a provider's total revenue is increasingly coming from patients themselves. Who, as you know, are participating in high deductible health plans. At a faster rate than ever, their out-of-pocket responsibility is increasing each year. And so Waystar, as we've described, as we talk about the Waystar software platform has united insurance and payer interactions for providers, both commercial insurance as well as government insurance, I think Medicare and Medicaid as well as patient payment processing all on a single cloud-based platform.

We think that's very important because it gives the provider a total view of their sources of payment. It's also important because it positively impacts patients. We know from our own work and from hearing and listening to patients and perhaps experiencing that for ourselves, that patients want more transparency in their care. They want more understanding of what their financial responsibility is. And oftentimes, they want that before they receive health care versus the 60 or 90 days post care.

Well, that's where Waystar software can really be helpful. Because of the 5 billion insurance transactions we're processing each year within our platform, we gained a tremendous amount of insight and intelligence that informs what the patient financial responsibility is likely to be, and we can produce a highly accurate patient payment estimate often pre-care. That then the provider can use to engage with the patient to put appropriate payment form on file within Waystar's software, we call it the Waystar patient wallet and then begin to interact with that patient, put them on a financial care plan, or be able to process the payment appropriately over a period of time.

We're seeing that capability take hold. And so that is influencing our volumes. We know that when providers use this portion of our software, the patient payment portion of our software. It's increasing certainly patient satisfaction, but it's also increasing collection rates and improving time to collection and overall likelihood of getting collected in a collection. And so those things are at a kind of a high level are absolutely influencing the use of how providers are thinking about patient payments.

And we also know that providers see patients I think historically, you might say, well, provider organizations are just treating patients carefully with care, but also like a transaction. Increasingly, we see many large health systems and hospitals view the patient in kind of a long-term relationship, a patient relationship that they like to sustain. And so all those factors are influencing patient payment volumes that we're processing on the software platform. We're bringing improvement and transparency and elegance to what has historically been a very cumbersome process for both providers and patients.

[Saket Kalia, analyst]

That makes a lot of sense. Steve, maybe for my follow-up for you. That 13% normalized growth number was actually a very helpful metric. And apologies if I missed it, but can we just go maybe 1 level deeper into the bridge from the 20% reported growth to 13%. I think you mentioned something about $9 million in terms of benefit from sort of competitor disruption. But can you just maybe walk us through that bridge from 20% to 13%? How much was from that? How much was from outside patient payments or any other granularity that you can provide to help bridge that?

[Steven Oreskovich, executive]

Yes, definitely. Saket. So you are correct. They're probably -- if you think about it for the second quarter, there's 3 items, if you want to think it more holistically in the first half of the year. I'd had a fourth item that we talked about in our S-1 filing of a contract, a customer contract being terminated by request of that client in the March time frame as a result of them spinning off a portion of their business. So again, if you think about it from the second quarter, it's really the work surrounding the competitor's cyberattack. That's probably the most meaningful item in that bridge.

Second is the fact that in the amount of transactions, patient payment transactions that we saw come through our clients during the second quarter being above what we've seen historically. And then the third, as we had indicated in the prepared remarks just the timing of two small acquisitions in the second half of '23 and their benefit when you're looking at Q2 year-over-year growth rate. And I would expand each of those 3 as we look to the first half of the year, year-over-year growth rate. And then add on that last item, that last item, we had mentioned in the S-1 filing was about roughly $4 million of benefit to the first quarter, if you think about that versus ratable timing over the rest of the year at the halfway mark, that would be about $2.5 million worth of benefit.

[Operator]

Our next question is going to come from the line of Ryan Daniels with William Blair.

[Ryan Daniels, analyst]

I'll add to the chorus of congratulations, Matt, maybe I'll start with my first for you. You mentioned there's a broader adoption of the full solution platform. And I'm curious, two things. Number one, is that really among new clients moving over to Waystar, are you seeing that same desire among your current client base? And then number two, depending on your answer there, does that change at all your sales team or go-to-market strategy?

[Matthew Hawkins, executive]

Thanks Ryan, I appreciate your thoughtful question. We're noticing a couple of things that we are particularly pleased with and encouraged by we are noticing that there are increasingly more clients that are utilizing the end-to-end platform from the start. One of the metrics as you'll recall that we report on is the number of clients that are producing over $100,000 of LTM revenue. So we start there, and we believe that's an important metric because it measures both to your question, the new clients that join us and are consuming our several modules or perhaps even the whole platform at the outset.

It also measures as clients -- we may land in one area, for example, in Q2, we had, as you know, the urgent work of helping clients begin to use the Waystar clearinghouse. Well, that's a software module within the Waystar software platform. And we land there typically and then we'll expand the relationship with them over time. And so we're pleased with both the new client pursuit, which -- where we were organized with high-performing sales team members, as well as our efforts to once landed to expand the relationship. And so that metric that we report on is a reflection of both new and existing clients who are consuming more and more of the Waystar software platform.

[Steven Oreskovich, executive]

Yes. I think, Ryan, maybe to add a little bit of financial context surrounding your question. And I think Saket may have asked about it or maybe alluded to it in his question to Matt as well. We documented or disclosed, [ sorry ], in the S-1 that provider solutions generate about 70% of revenue in patient payment solutions generate about 30% of the revenue. And for the first half of 2024, we've seen both -- we've seen that sort of mix continue at substantially the same rate in both -- which implies then both are growing well over 10% as well.

So I think we like the totality of the solution offering, and I don't think we've seen any big shift in mix there and think both markets, the opportunity within the client base and the broader health care base were both sets of high-level family solutions are -- still remain significant.

[Matthew Hawkins, executive]

I think that's right. And Ryan, if it's okay. Let me address the second part of your question, which was focused on given what we've seen, are there any kind of go-to-market team implications. And what I'd say there is, as you'll know very well, we're going after a very large addressable market opportunity of $15 billion a year. Where we have substantial opportunity to grow within the market. We feel like our new client pursuit is well organized, both in hospitals and health systems as well as on the ambulatory side of our business. And then we also -- part of that market, that addressable market is, again, once we land a client, then we get right to work and expand those relationships and create a unique client experience so that they want to use more of our software. And I feel like we're well organized from a go-to-market perspective there as well.

[Operator]

And our next question is going to come from the line of Elizabeth Anderson with Evercore ISI.

[Elizabeth Anderson, analyst]

Congratulations on your first quarter as a public company. I was wondering if you could comment on the visibility that you guys are getting sort of from the chain situation. Like if we think about the 1,117 customers that over $100,000, you announced in the quarter, like, that doesn't count some of these new ones that have come through. So as we think about kind of the increased visibility that, that brings you internally, I was wondering what you could potentially share with that. And then maybe as a follow-up, I have a question about the bookings and pipeline.

[Matthew Hawkins, executive]

Okay. So we at Waystar -- and thank you, Elizabeth. We pride ourselves on staying very close to our clients and to opportunities within our pipeline. Where we track things. We measure a lot of things as you can appreciate. So we know a lot we're learning. There's been a surge of work, as we've described to help many new providers begin to use the Waystar software platform. What I'd say is it's -- we're continuing to help those clients begin to use Waystar and learn and identify opportunities that are beginning to show up in our bookings pipeline of opportunity. So we'll continue to track that and report our progress as we get the opportunity to visit with you in the future.

[Operator]

Our next question is going to come from the line of Sean Dodge with RBC Capital Markets.

[Thomas Kelliher, analyst]

This is Thomas Kelliher on for Sean. Congrats on the results. I wanted to follow up on the previous questions on patient payments, and I want to make sure I heard this right. Are you expecting this part of the business to sort of grow in tandem with the other solutions? Or are you expecting this to grow a little bit faster?

[Steven Oreskovich, executive]

Yes, Thomas, this is Steve, I think if you think about the base, the 70-30 split with provider solutions being 70% of the business, patient payments, 30% of the business. Naturally, just due to the sort of the law of numbers, that growth rate for patient payment solutions is going to be a little bit larger than provider solutions inherent in the expectation for the full year guidance. I would say though that, obviously, maintaining that 70-30 split that we've seen historically and seen that in the first half is also part of -- would be part of our expectations as well. So we see both sides -- or both, I shouldn't say sides, both high-level product family is growing very nicely, not only in the historical results, but what we would expect for the rest of 2024.

[Thomas Kelliher, analyst]

I appreciate that color. And then just a quick follow-up on that. Are there any near-term opportunities to drive first margin expansion in that business as well?

[Steven Oreskovich, executive]

Yes. So we've talked about, I think, in our long-term target of low double-digit revenue growth annually and adjusted EBITDA margin that we would look to -- look for opportunities as they make sense to reinvest in the business to maintain somewhere around that low double digit -- or sorry, that 40% plus adjusted EBITDA margin, investing in areas like bolstering an already strong cybersecurity posture or in generative AI solutions. Are there opportunities then that we would look at from a scalability perspective that would allow us to do that?

Definitely, right? I think there's opportunities as we look at those two acquisitions, the smaller acquisitions that we finalized in 2023 to sort of finish the putt surrounding synergy expectations that we have associated with them. I think there's also opportunities in projects that we're looking at internally that looks at that 60% direct cost associated with patient payments and our ability to look at whether it's the interchange rails in which those payments are processed on to better those from a cost structure perspective, or for those interactions with the patient population that still occurs through a printed statement that gets mailed. There's an opportunity to change that into a more digital interaction that long term we think benefits the overall margin profile of the business and allows us to continue to invest back in the business, running it at 40% plus adjusted EBITDA.

[Operator]

And our next question will come from the line of George Hill with DB.

[George Hill, analyst]

Yes. Welcome to the public markets. Matt and Steve, I guess on -- as it relates to the patient payments portion of the business, we talked about the split, and I know it's a smaller part. But I guess the question I'd ask is, have you guys seen any sign of consumer weakness as it relates to patient financial responsibility part of the business?

And I guess my follow-up question there were going to be like, I'm trying to understand like, is the core, like, is the collections portion growing in line with what unit sales look like or whatever is the right way to think of that metric. But this is really like a patient financial responsibility/consumer credit question. Like, are you guys seeing any erosion in that part of the business? And then I have a quick follow-up, if you don't mind.

[Steven Oreskovich, executive]

Yes, certainly, George, this is Steve. I think -- what we've seen is actually stronger interaction and payments coming from patients in the first half of the year. And it's reflected stronger meaning above and beyond the normal seasonality we would expect to see, right? And we reflected that in the prepared -- or our prepared comments, sorry. If we think about your question, I think the second part of your question is how do we think about the potential weakness, if you want to call it that, in the consumer aspects of it that may surface in the second half of the year as we're hearing commentary from other companies more broadly.

I don't think that we've seen anything specific to date that would state that. But I think the other thing is -- and being prudent in our expectations and guidance range. I think we've accounted for that as we think through the overall revenue guidance that we provided of top line growth of $918 million to $902 million.

[George Hill, analyst]

Okay. That's great color. And my quick follow-up would be is some other competitors in the space have commented that the sales environment into the provider setting seems to be getting a little bit more challenging and are kind of trying to migrate the sales model from, I'll call it, more modular to more bundled. And we just -- I'd kind of ask if you feel like you're seeing any incremental challenges kind of in the sales process and kind of just if that would drive any changes on how you guys think about that go-to-market strategy?

[Matthew Hawkins, executive]

George, it's Matt. A short answer is, we have a strong and compelling ROI-based sales approach. We have many referenceable clients and case studies that support this ROI and our approach, I can't comment on what other companies you're referencing. What I can say is, we have a robust pipeline of opportunity. We take an approach where it's very thoughtful. We discover, we go -- we have thoughtful dialogue. We understand the needs and the pain points of these prospects and clients that we work with as we create and identify opportunities.

And then we're bringing appropriate resources and expertise to bear, reflecting our understanding of how to improve and that leads to really good conversations and engagement with clients. And so I would say our ROI-based approach is one that we feel confident and we'll continue to emphasize as we go to market.

[Operator]

And our next question is going to come from the line of Richard Close with Canaccord Genuity.

[Richard Close, analyst]

Yes. Congratulations. Just to maybe hit on the digitization of payments a little bit more. As you go away from paper, I'm just curious the percentage of your client base that's still doing paper statements and collections through mail? And then as you think about as it moves to digitizing, like, the success difference between the traditional paper and digitized?

[Matthew Hawkins, executive]

Thanks, Richard. So what we would say is as you'll recall, Waystar has taken a holistic approach to connecting providers to patients in the ways that patients want to be connected to. And the fact is there is still a portion of the population that prefers a paper-based invoice or statement. And so we facilitate that today. We are -- we also have solutions that enable a digital engagement and a digital conversation that are taking -- it's taking hold and providers and patients are using solutions increasingly.

And so we see over time the increasing opportunity to drive that digital engagement. We don't disclose the portion of our business that is -- that has this paper-based patient statement. But we do see, over time, there being opportunity to continue to help providers connect to patients and do so increasingly with modern digital tools that both providers and patients will benefit from as we go forward.

[Richard Close, analyst]

And then the success between the two? I mean, I assume digital is much more successful getting the patients to pay?

[Matthew Hawkins, executive]

We are seeing and tracking most of our case studies, I would say, that track faster collection rates and higher collection rates, emphasize the digital engagement tools. That's what we would expect as we lean into that opportunity over the longer term.

[Operator]

Our next question is going to come from the line of Brian Peterson with Raymond James.

[Brian Peterson, analyst]

Congrats on the strong print right out of the gate. I appreciate all detail here, Steve, on the $9 million in the impact. But I'd love to understand, if we think about that revenue, how much of that was kind of net new customers to Waystar versus customers that may have needed help in facing those challenges. And is there any commonality between where you saw a bigger increase in terms of areas or customers or locations, we just want to understand that a little better.

[Matthew Hawkins, executive]

Yes. What we would say -- and thanks, Brian, and I appreciate your kind comments. What we would say is that the $9 million of Q2 revenue that we've outlined as a -- or highlighted as a benefit to us in the second quarter that comes from these over 30,000 providers that we've been able to help really comes in two general categories. The first category that we've seen our existing clients that might be using one portion of the Waystar software platform, that reached out to us quickly and then rapidly began using more of our software. That came in all types of providers and all sides of the organization. So the large hospitals and health systems as well as those that are practicing in smaller care setting.

We also have noticed the phenomenon of simply adding net new clients to the Waystar platform, where there was urgency to move from the cyberattack competitor system to Waystar. And again, we would characterize that as being across the United States, all types, all sizes of care settings. And again, we would just underscore that we're grateful to be in a position to respond so quickly to help these providers. And we'll continue to learn more and report on our progress and any insight that we continue to gain as we go forward.

[Operator]

And I would now like to hand the conference back over to Matt Hawkins for any further remarks.

[Matthew Hawkins, executive]

Okay. Well, thank you so much, Michelle, for organizing and running the call today. Before signing off, I want to thank our dedicated Waystar team members. And if there's a public forum to do that, I just want to say thanks. They're fantastic. We also have incredible clients and new and existing investors who have supported us on our journey as a newly public company. We're passionate about what we're building at Waystar and we're focused on executing our business plan to achieve results in the next quarter as well as the year ahead. So thank you for joining today, and we wish everybody a great evening.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect.