管理層發言
Good day, and thank you for standing by. Welcome to the Waystar Second Quarter 2026 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Edward Parker, Head of Investor Relations. Please go ahead.
Thank you, operator. Good afternoon, everyone, and thank you for joining Waystar's Second Quarter 2026 Earnings Call. Joining me today are Matt Hawkins, Waystar's Chief Executive Officer; and Steven Oreskovich, Waystar's Chief Financial Officer. This afternoon, we issued a press release announcing our financial results and published an accompanying presentation deck. You can find these materials at investors.waystar.com. Before we begin, I would like to remind you that this call contains forward-looking statements, which are predictions or beliefs about future events or performance. 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 Investor Relations page of our website. Any forward-looking statements made on this call are only as of today and will not be updated unless required by law. We will also discuss certain non-GAAP financial measures. These measures are intended to provide additional insight into our performance and should not be considered in isolation or as a substitute for financial information prepared in accordance with GAAP. We have provided reconciliations of the non-GAAP financial measures included in our remarks to the most directly comparable GAAP measures, together with explanations of these measures in the appendix of the presentation slide deck and our earnings release. With that, I'd like to turn the call over to Matt.
Thank you, Edward, and good afternoon, everyone. Thank you for joining our Q2 2026 earnings call. We delivered another solid quarter as we executed our strategy, supported our clients and advanced the Waystar platform toward a more autonomous revenue cycle. During the quarter, we delivered revenue of $320 million, representing 18% year-over-year growth and adjusted EBITDA of $137 million, resulting in an adjusted EBITDA margin of 43%, which exceeded consensus expectations for the quarter. We also delivered another strong quarter of bookings, supported by ongoing momentum with larger provider organizations, expansion across our client base and sustained demand for Waystar's AI-powered solutions. While the operating environment continues to evolve, the breadth of our platform, the diversity of our client base and the mission-critical nature of our solutions support healthy demand across the business. At Waystar, our focus is to help providers lower the cost to collect, accelerate reimbursement and improve payment accuracy across the revenue cycle. In Q2, we saw healthy demand across the business, ongoing client expansion and broader adoption of Waystar solutions. Large platform deployments drove strong bookings during the quarter, including a double-digit number of $1 million-plus ACV bookings, reinforcing the trend we have discussed over the past several quarters and our view that providers increasingly value a connected platform approach. Larger client relationships also continue to grow. Clients generating more than $100,000 of trailing 12-month revenue grew to 1,453, up 15% year-over-year. Within this cohort, clients have expanded their use of Waystar solutions over the past several years, demonstrating the compounding value clients realize as they adopt additional Waystar capabilities over time. Net revenue retention was 108%, within our historical range, demonstrating continued expansion within our existing client base. At the same time, new clients are increasingly selecting multiple Waystar solutions as part of their initial purchase decision. Platform consolidation continues to accelerate as providers move away from fragmented point solutions in favor of a single connected software platform. KLAS Research's inaugural revenue cycle management suites report reflects that shift. Among providers using multiple solutions from a single vendor, the study found that Waystar clients reported some of the strongest improvements in collections performance and cost to collect, providing independent validation of the operational and financial benefits providers can achieve when more of the revenue cycle is managed on a single platform. One of our $1 million-plus ACV bookings is a nonprofit health system serving Central New Jersey and Southeastern Pennsylvania. The win reflects the value of Waystar's platform with the provider selecting Waystar to replace three separate vendors across claims management, patient financial care, clinical documentation integrity and revenue capture. We also continue to see existing clients expand their relationships with Waystar. This quarter, one of the largest nonprofit health systems in the country began implementing an expanded partnership across eligibility verification and insurance coverage detection. Already a 7-figure Waystar client, the added solutions are expected to generate more than $1 million in incremental annual revenue, reinforcing the advantage of a single connected platform over a patchwork of point solutions. Another established client and multibillion-dollar academic health system with more than 3,000 beds and 9,000 physicians also recently went live with additional Waystar Altitude AI capabilities designed to prevent denials as part of its strategy to centralize revenue cycle operations. The go-live increases the client's annual investment in Waystar by an incremental 7 figures while helping lower its cost to collect, reduce manual follow-up and operate more efficiently at enterprise scale. During the quarter, we also saw encouraging adoption of Iodine solutions within the existing Waystar client base. More than $6 million of bookings came from existing Waystar clients purchasing Iodine capabilities, an early proof point of our expanding cross-sell opportunity as clients bring together financial and clinical data to improve outcomes. As coverage dynamics evolve and self-pay populations grow, providers need stronger capabilities to identify available coverage and protect reimbursement. In a newly published success story, ProMedica, a hospital and physician network serving 4.7 million patients annually, leveraged Waystar's patient insurance coverage solution to uncover nearly $10 million in previously unidentified billing opportunities that may have otherwise been missed. This quarter, we published an in-depth analysis of data from hundreds of hospitals using Waystar's clinical integrity and revenue capture capabilities. The analysis showed clients experienced outsized returns, including 3x greater financial impact from integrated clinical documentation workflows, generating $2.17 million in incremental reimbursement for 10,000 discharges and a 90% year-over-year increase in rebuild dollars caught by our revenue leakage protection capabilities. Collectively, these examples demonstrate the value of the Waystar platform. As clients adopt more capabilities, they reduce complexity, improve performance and drive stronger financial outcomes. The momentum we're seeing across the business reflects more than strong execution, it reflects the position Waystar occupies within the health care payment ecosystem and the advantages that position creates for our clients. Waystar sits at the center of the health care payment ecosystem, connecting providers and payers through critical workflows that span the payment life cycle from authorization and claim submission through adjudication, payment and reimbursement. Providers see their workflows, payers see their workflows. Waystar connects and acts autonomously across both. Operating at that intersection gives us insight into the interactions, dependencies and friction points between providers and payers. That perspective enables us to improve performance across the revenue cycle and deliver better payment outcomes. Every transaction provides intelligence about how payments move through the system. As payer requirements change, Waystar helps identify friction, adapt quickly and continuously improve performance across the network. The result is stronger operational and financial performance for clients, including faster payment decisions, accelerated time to payment, fewer errors and less rework across the revenue cycle. Waystar processes more than 7.5 billion transactions annually. The scale of that network creates a unique combination of connectivity, data, workflow intelligence and payment intelligence that strengthens the value of the platform, supports innovation across the business and increasingly enables the application of AI across the revenue cycle. These advantages are reinforced by the four structural foundations you've heard me discuss previously: mission-critical infrastructure, proprietary data and extensively deployed network and deep domain expertise. We believe these advantages contribute to the strong win rates we achieve and support our ability to compete successfully against point solutions, broader software platforms, end-to-end service providers and newer market entrants. Taken together, these strengths create a durable advantage that is difficult to replicate and increasingly valuable as providers look to reduce administrative burden, improve efficiency and drive better financial outcomes. As we've discussed over the last several quarters, we continue advancing our vision of creating the industry's first autonomous revenue cycle. Our goal is not simply to deploy AI, it is to orchestrate the right AI at the right moment across the revenue cycle to reduce administrative burden, improve performance and deliver better outcomes for providers. Our AI deployment is not experimental. It is embedded and monetized, and it delivers meaningful outcomes inside the mission-critical workflows our clients rely on every day. External recognition during the quarter provided additional validation of these efforts with Waystar named to the TIME100 Most Influential Companies list and earning the Time Impact in AI award. More than a dozen clients have committed to our next-generation anomaly detection solution during the first half of the year. This solution represents an important step forward because it combines Iodine's clinical documentation capabilities with Waystar's revenue capture engine. We are encouraged by the interest it is generating from large hospitals and health systems. Early adopters are seeing approximately $3 million in incremental revenue recovered per 10,000 admissions through automated revenue leakage detection. We are also seeing promising results from our newest Waystar Altitude AI-powered solution focused on payer takebacks. U.S. Renal Care, a dialysis provider with more than 500 centers across 32 states, achieved an 88% autonomous match rate between recoupments and original claims, reducing the time spent managing recoupments by approximately 80%. As we look ahead, we are focused on the same priorities that have guided us over the last several quarters: simplifying health care payments, driving innovation and delivering meaningful value for our clients, our team members and our shareholders. The fundamentals of the business are strong, client partnerships are healthy and our long-term opportunity is significant. We look forward to sharing more about our strategy, client adoption trends and long-term vision at the Investor Day in August. Before I turn the call over to Steve, I want to take a moment to recognize him and thank him for everything he has done for Waystar. As we announced earlier today, Steve will be transitioning from the Chief Financial Officer role after eight years with the company. Steve has been a tremendous leader, trusted adviser and great friend. He has played a critical role in helping build Waystar into the company we are today, helping us scale the business, build a world-class finance organization, navigate our IPO and establish the strong financial foundation that supports our continued growth today. More importantly, Steve has been an invaluable partner to me and our leadership team. His judgment, integrity and steady leadership have had a lasting impact on this company, and we are all better because of his contributions. While Steve will be transitioning from the CFO role, he will remain with Waystar as an adviser over the coming months to help ensure a smooth transition. We are pleased to welcome Alpana Wegner, who joined Waystar this week as our next CFO. Alpana brings extensive public company finance and software industry leadership experience, having served as CFO at several public software companies and held a variety of senior finance and operating leadership roles throughout her career. I look forward to introducing her to you in the coming weeks. Steve, thank you again. You've been a great partner and a great friend. On behalf of all of us at Waystar, thank you for your leadership, your friendship and everything you've done for this company. We wish you and your family the very best. With that, I'll turn it over to you.
Thanks, Matt, and thank you for the kind words. Serving as CFO of Waystar over the past eight years has been one of the greatest privileges of my professional career. I've had the opportunity to work alongside an exceptional team, support incredible clients and be part of a remarkable journey. I'm incredibly proud of what we've built together and even more confident in where the company is headed. I want to thank our team members, clients, shareholders and the many friends I've made along the way for their trust, support and partnership. I'm grateful for the opportunity to have been part of this team and this company. And with that, let me turn to the quarter. Revenue increased 18% year-over-year in the second quarter to $320 million and organic revenue grew 7% year-over-year. Excluding previously discussed items affecting comparability, normalized organic growth was approximately 10% in the quarter. Performance in the quarter reflects expansion across the client base, healthy adoption of high-value solutions and continued strong execution. Total booking value and expected margin composition again exceeded internal expectations. Bookings also include a double-digit count of $1 million-plus annual contract value engagements with activity continuing to skew towards larger platform deployments and new solutions such as the pre-bill demand Matt discussed. Clients generating more than $100,000 of revenue in the last 12 months increased by 20 in the second quarter to 1,453 at quarter end, an increase of 15% year-over-year. Our net revenue retention rate also viewed on a last 12-month basis was 108% at the end of Q2, within our historical range of 108% to 110%. Subscription revenue of $176 million for the second quarter increased 34% year-over-year, 2% sequentially and was 55% of total revenue. On an organic basis, subscription revenue grew 12% year-over-year, continuing to grow at a double-digit rate and reinforcing the health of the core Waystar business. Volume-based revenue of $142 million for the second quarter increased 3% year-over-year and 2% sequentially. Please recall the items impacting second quarter year-over-year comparability are volume-based. We are pleased that both subscription and volume-based revenue performance aligned with expectations indicated on our prior earnings call. Adjusted EBITDA of $137 million for the second quarter increased 21.5% year-over-year. The adjusted EBITDA margin of 43% was consistent with the prior quarter and is indicative of the scalable nature of our platform model, disciplined cost management and the favorable margin profile of the solutions driving growth across the business. Our capital position remains strong with healthy cash flows as we ended the quarter with $192 million in cash, equivalents, and short-term investments and $1.5 billion in gross debt. In May, our Board of Directors authorized a stock repurchase plan for up to $200 million. And during the second quarter, we repurchased $13 million worth of Waystar stock at an average price of $19.24 per share. Unlevered free cash flow was $64 million in the second quarter, and we converted 47% of adjusted EBITDA to unlevered free cash flow. Cash flow and the conversion ratio reflect the typical timing of estimated federal tax payments in the quarter. Additionally, capital expenditures, including capitalized software development, increased year-over-year as we continue investing in AI platform capabilities that we believe will support future growth, drive greater automation and advance our vision for the autonomous revenue cycle over time. As of June 30, net leverage was 2.5x compared to 2.7x at the end of last quarter, which aligns with our historical ability to, and cadence of, delevering and is well below our goal of running the business at or below a 3x leverage ratio. Based on our performance through the first half of 2026 and current expectations for the rest of the year, we are raising the low end of our revenue guidance range by $2 million, resulting in a revised guidance range of $1.276 billion to $1.294 billion and a midpoint of $1.285 billion, representing 17% year-over-year growth. We are also raising our adjusted EBITDA guidance to a range of $535 million to $545 million, with a midpoint of $540 million, an increase of $5 million versus prior guidance midpoint. This concludes our opening remarks. With that, we are ready for your questions. Operator, please open the call.
分析師問答
Our first question comes from Ryan Daniels with William Blair.
Yes, Matt, a quick question for you, and congratulations to Steve on the announcement. Best wishes to you. I was hoping you could go into a little bit of detail about what you're hearing in the end market with kind of all the noise that's going on in health care with the ACA exchange lives rolling off into uninsured with Medicaid lives going down with OBRA likely to continue to push that down. I guess the question is, what are you seeing in regards to transaction volume or patient pay because of that? And then what are you hearing from your customers about demand for different solutions to help them combat some of those changes in the market?
Thank you, Ryan. I appreciate your thoughtful question and your well wishes for Steve. We are seeing the demand environment return from a transaction utilization perspective to the long-term average of about 1% to 2%. We know that the long-term secular trend is that 1% to 2%. In recent years, it's been higher based on probably a little bit of COVID catch-up, maybe higher 3% or 4%. There are some trends that you rightly highlighted, whether it's a little bit of regulatory uncertainty around certain uninsured populations or things like that, the decrease in Medicaid lives covered that does create uninsurance. That really does create demand for Waystar solutions. When you think about what providers are most focused on, it is lowering the cost to collect, optimizing payment yield, whether from an insurance reimbursement or from a patient, and reducing time to collect. We know that they want to use a platform approach versus a point solution because there's this point solution fatigue where many of them are using well over a dozen point solutions in a patchwork way to try to figure out how they can optimize their collections and address their patient population. And we think that setup is squarely within the line of what the value proposition is for Waystar solutions. We know that our solutions are mission-critical and that they can be very helpful to providers in addressing the utilization environment, helping them do more with less, helping them have optionality to address the self-pay population or the uninsured population with many of the software modules and capabilities that we have on Waystar's platform and certainly to continue to optimize and detect coverage where a patient may be eligible for coverage; our solutions use AI to detect that coverage. And so we think those factors all contribute to a strong demand environment that we see at Waystar and have contributed to strong bookings momentum and a robust pipeline as we address the second half of the year.
Our next question comes from Michael Cherny with Leerink Partners.
Maybe if I can delve a little bit on Ryan's question, thinking about the end market. As you go into RFPs and really nice to see some of these business wins, but especially now as you go in with Iodine, what is the pitch that you're making? And are you seeing any different responses either against module components or potentially embedded EHR players as you drive towards your NRR levels and other new wins that you saw in the quarter?
Thank you, Michael. We are seeing client interest in combining clinical and financial intelligence. And that's exactly the opportunity that we saw when we acquired Iodine. We know that in doing so, what we're doing is effectively reaching further upstream into the clinical workflows and beginning there, working to prevent denials from occurring in the first place, which really helps providers. We're working to detect anomalies where as they begin to form a claim, we want that claim to be highly accurate. So we're deploying AI to help them. We've seen some really nice wins, as we called out in our prepared remarks in the quarter, more than $6 million of some of the pre-bill anomaly detection capabilities that really come about because now Iodine and Waystar are one company. We see strong pipeline and momentum in that regard. And again, all of it is oriented toward what our vision was at the outset of acquiring Iodine, which was to use Iodine as the AI engine to help form new solutions that are AI-based that can thematically prevent denials from occurring and create that perfect, undeniable claim that will lead to accurate and timely payment. So we do like the setup, and we feel good about the strategy and believe it's intact.
Our next question comes from Steven Valiquette with Mizuho Securities.
Just kind of a high-level question. Just kind of curious about just overall RCM platform approach. Obviously, now you have Iodine with CDI software. A lot of vendors sell medical coding software and CDI together. Just curious about your appetite for other vertical solutions within RCM to kind of round things out? And does medical coding software make sense tied into CDI?
Thanks, Steven. We're absolutely focused on building toward the robust autonomous revenue cycle solution. The acquisition and the strategic logic of why Iodine is very much a part of that vision because we're uniting the front end of our platform with the middle part, that perfect puzzle piece you've heard me describe in quarters past with the back-end clearinghouse capabilities, which, as you all know, the clearinghouse is the heart and soul of the revenue cycle because that's where all the things that you do building up to payment, that's where the action occurs, and where the rubber hits the road, so to speak. Our platform is a system of action, and it's driving real benefit. Within the mid-cycle, you highlight some important things that we believe that we have the right to do or the right to partner with others in the space. On the one end is clinical documentation improvement capability where, again, Iodine is deploying over 150 AI models and delivering more all the time. There is the ambient listening category; we know those players and there's opportunity for us to partner there. On the other end, you highlighted coding, in particular the autonomous coding category or the auto coding category. With all the work that we're doing, we believe that we have the right to explore that area and expand our addressable market opportunity. We are studying that space carefully, and I won't say more than that at this point in time. But when you look long term at what we're building toward, envision this autonomously acting revenue cycle platform where a lot of work is shifting from automated work to orchestrated work by agents acting on behalf of revenue cycle experts to create that perfect, round-the-clock behaving solution that benefits providers and creates a highly informed patient who can engage in their financial responsibility where we seek payments as well. That's where we're headed. I hope my answer helps address some of the ways we're thinking about added opportunity in the middle part of the revenue cycle.
Our next question comes from Scott Schoenhaus with KeyBanc.
So you noted the strength in the large provider clients and you talked about bookings. I'm just wondering on the RFP process specifically and the pipeline there. Are you seeing more large provider clients this year versus last year in your RFP process? And what are they coming specifically for? Is Iodine like the lead catalyst for that? I'm just trying to get a better sense of the RFP process given all the concern around large hospital systems contemplating whether in-house or other third-party AI platforms here.
Yes. Thank you, Scott. We are seeing an uptick in RFPs, and we're participating in more RFPs, and that is leading to the types of strong bookings results that we see. Because these are larger wins, recent wins and as we look ahead in our robust pipeline, there are RFP activities going on within our bookings pipeline; some of these are taking slightly longer to implement. It's not just one solution. It's multiple solutions, front, middle or back and often all. That's thrilling for us to be able to participate in those things. We're creating delighted clients as we take them live. When I step back, Scott, this is what we were alluding to back in 2024 when we were working to rapidly address not only the Phase 1 clients that needed rescuing when a competitor of ours was cyberattacked and their network was taken down, but we alluded to a Phase 2, which we thought was going to be a longer tail. We didn't know how to time box it at the time or how big it would be, but we had a sense this was going to be a longer Phase 2. We're living in that now. We have seen an uptick. Some of that uptick has already resulted in bookings, but we don't see that diminishing. We believe that Waystar is well positioned to continue to participate and to win given the strength of our win rates. I'd highlight in our prepared remarks the report that named us a top platform solution. It's an inaugural report in this topic. We were thrilled with that. I think that's an evidence point for how we're positioning Waystar to be successful in this exciting Phase 2 that you've heard us talk about.
Our next question comes from Brian Peterson with Raymond James.
Congrats on the strong bookings. So I wanted to unpack the transaction component a bit. And how did that trend versus your internal expectations in the quarter? It looks like the patient volume was up a bit, but the provider was down. Is there anything that you can share that gives us more context on that?
Yes. Thanks, Brian. I'll take that. For the quarter, the patient utilization aligns with both our expectations and with overall guidance for the year. As Matt alluded to earlier, it's in line with what we've seen from a long-term historical annual uplift year-over-year, recognizing that we're looking at a tough comp when we're looking at '26 versus '25 because that utilization was elevated in '25. To your question, and I'll specify a little more on the volume-based revenue: we talked about that in the past being about 45% of revenue, $142 million in the quarter. That is up 3% year-over-year. If you were to normalize the items that we talked about on prior calls, whether they were specific to '25 or earlier in '26, that volume-based revenue on a normalized basis is more like 8% year-over-year. So we feel really good about where it is for the quarter and then where we've seen it so far year-to-date versus our expectations from a guidance perspective, recognizing that it is in line with the long-term historical trends versus what we've experienced in the last couple of years.
Yes. I'd add really quickly to what Steve just highlighted. Speaking specifically, we called out those three large client implementations a year ago in '25 that we were able to take live on a very compressed timeline. As we noted then, they were larger and the nature of the agreements we had with them were transactional volume-based. That is part of what leads to the year-over-year comp that optically looks the way it does. But we feel good about the volume-based aspect of our business and the growth opportunity there.
Our next question comes from Brian Tanquilut with Jefferies.
Steve, and good luck with the move. So maybe just my question, as I think about guidance and the move on the EBITDA range, you beat by $7 million in Q1, $6 million in Q2 roughly. Just curious, is there anything we should be thinking about in the back half of the year that's kind of preventing you from guiding at least by the beats that you've seen this year?
Brian, thank you. So first, we're pleased with the performance of the business. This is the ninth consecutive quarter of beating analysts' expectations and consensus on both revenue and EBITDA. We have confidence in our full year outlook. A couple of thoughts on EBITDA production in particular: we have a number of internal initiatives that you've heard us talk about in the past. Some of those are AI operating-leverage type initiatives that create improvement in gross margin, which I think you see show up in our P&L, and continued expansion of our adjusted EBITDA margin as noted in the quarter. We're balancing that with the tremendous opportunity we see to continue to invest for the long-term growth of the business. That is additional growth investments in AI and continuing to position Waystar to be the category leader of this AI-first autonomous revenue cycle platform. We are certainly confident in our full year guide on revenue and EBITDA, but we want to reserve a little bit of room for us to invest as appropriate. The 40-plus percent adjusted EBITDA margins that we're delivering are great because it is putting us in a strong capital position as you see us driving free cash flow. Steve, would you highlight anything incrementally?
Yes. Just to tie out what Matt just said, as you look through the entirety of the financials, I called out the capitalized software spend where it ties directly into what Matt said about how we're focused on driving new solutions and inserting AI into our existing platform to round out the capabilities and drive an already impressive ROI for our clients even higher. If you looked at the capitalized software spend in the first half of the year, you'd see us roughly double what it was in 2025. That is a reflection of how we're investing into the products today to drive revenue growth for the future. We're doing it in a thoughtful manner as you could see from the unlevered free cash flow conversion of adjusted EBITDA being 47% in the quarter. I mentioned a couple of other items, but we're looking to invest prudently throughout the business. As Matt said, we would expect some of that to be flowing through to the P&L in the second half of the year. As we look at the full year guide of a 42% adjusted EBITDA margin, I think that's a strong outcome based on how we're investing for the future while being stewards of the business today.
Our next question comes from Elizabeth Anderson with Evercore ISI.
This is Ayush on for Elizabeth. You talked about the 6- to 18-month lead time for larger bookings a couple of quarters ago. And as you scale this number of $1 million contracts, as you kind of mentioned in the prepared remarks, are you seeing that range tighten closer to like 0 to 12 months now? Or is 6 to 18 months sort of the right way to still think about it? Thanks, Ayush and give Elizabeth our best.
I'd say 6 to 18 months is still generally how we're thinking about it. We're certainly working to pull that in as tight as we can. We see once in a while people moving much faster, and we're always grateful for that as we position ourselves to win. But most often, it's a very deliberate, thoughtful process that provider decision-makers go through and it tends to be 6 to 18 months, especially for the larger deals we've highlighted. The good news is we have a robust growth team. We have a proven track record in how we discover opportunities in accounts. We're able to sell the full platform and also able to go to where the clients need help the most. Sometimes the variability there is if the client wants help in one particular area, that might be more 6 to 9 or 12 months. If they want the full platform or multiple solutions on the platform, like what we're seeing, that traditional average of 6 to 18 tends to hold true. So it's a proven method, and we're always working to compress it because we know the benefits of doing so on our P&L, but we've got a great team pursuing it.
Our next question comes from Ryan Halsted with RBC Capital Markets.
I thought maybe you could comment just on the NRR, which has been kind of steadily stepping down. Appreciating all the color you've offered so far on the business. It would be helpful just to kind of hear it in the context of NRR in terms of the moving parts. Should we be reading into it some impact of the volume-based business? Or is it sort of a lack of upsell? Or is there even some attrition? Any sort of color on the inputs that go into the NRR would be helpful.
Certainly, Ryan. We view the LTM NRR of 108% this quarter as very healthy and in alignment with our long-term historical range. We've shown a slide in our investor deck that bridges gross revenue retention to NRR. If you look at those components, gross revenue retention continues to remain very strong at about 97%. The trend you're noticing is primarily a factor of two things. One is the clients and the time to rapid revenue that Matt had mentioned earlier and how they benefited NRR for the quarterly period around Q2 of '25 through Q1 of '26. That added to what historically we had seen. And the fact that we had higher utilization rates through the middle to about midway through the second half of 2025 also had a positive benefit. So if you look at that slide in our IR deck, you'd see that historically it's been about 108% to 110% and the components that lead from gross to net are in about those same ranges indicated on that slide. We are comfortable with the 108% and wouldn't read more into it than we've had some tailwind items the past few quarters that have allowed it to be above that historical range.
Our next question comes from Richard Close with Canaccord Genuity.
Steve, I enjoyed working with you over the last several years. With respect to — you have a strong partnership with Google on the AI front. I'm just curious what you're seeing in terms of cost to compute as AI is integrated into your platform and how that gets baked into your guidance; how you think about cost of compute?
Thanks, Richard, for the kind words. As Matt talked earlier about internal initiatives that are ongoing to add scalability to our operating profile, one of the reinvestment areas we've discussed is being able to utilize the benefits of those operational activities to cover things like cost to compute without impacting our overall margin profile. You can see that in the first couple of quarters with gross margin remaining about 70%, which is in line with back half of '25, and overall adjusted EBITDA margin as we look through the P&L. We feel good about how we set the contracts with Google and the cost structure we have with them without going into too much detail, and we expect that as we continue to sell more AI and AI-enabled solutions into our client base, we will absorb those costs through other areas of ongoing operational improvements.
Yes. I'd add a couple of things. Token expense is a common concern in the broader market discussion. What we do at Waystar is have an internal governance model, an AI governance approach that is exportable, and we can help our clients manage how they think about AI. As we create this operating-system approach for the autonomous revenue cycle, we expect to deliver foundation model capability and agentic capability while carefully and thoughtfully managing token expense and the use of foundation-model expense on behalf of our clients. We have a unique approach. We're grateful for our constructive relationship with Google; they're a hyperscaler doing progressive things and there are breakthrough developments from co-development efforts. Among those is the importance of governing the use of those models. We've trained 100% of our internal team and given them access to various foundation models to do real work, and we're taking a thoughtful approach to how to govern expense internally and on behalf of clients. We expect a steady long-term view that we can do this effectively.
Our next question comes from George Hill with DB.
I've got kind of two quick ones. Steve, can you talk about, given the slowdown in the volume-based growth, what's embedded in the guidance for the back half of the year? And if that's a number that continues to grow in the 3% range or if we should expect to see a continued deceleration there? And then my other follow-up: can you talk a little bit about where the leverage in the model is coming from because the revenue guide for the year is up modestly, while the EBITDA guide is up more than the revenue guide. From a margin perspective that math doesn't perfectly align, but clearly there's costs coming out faster than revenues rolling on. I'd love to understand the dynamics between the revenue guide and the increase in the EBITDA.
Certainly, George. On volume-based revenue for the rest of the year, the baseline is patient utilization of the health care system. Our original guidance reflected an expected 1% to 2% uplift annually year-over-year. That expectation hasn't changed. Regarding the 3% year-over-year increase in volume-based revenue for Q2, think about full-year guidance and the normalized organic rate of about 8% that I mentioned earlier in the call when normalizing for comparability items. As for the revenue range and the uplift in adjusted EBITDA guidance, the difference is a factor of a couple of things. It's a reflection of how we've run the business in the first half of the year where adjusted EBITDA was at 43%. While we still expect 42% for the full year, we've run the business a little above our full-year expectation to date. We also continue to invest in AI and product capabilities, which may flow through the P&L in the second half of the year. Another piece is the bookings mix: we continue to see bookings translate into higher-margin deals and that is being reflected in the P&L as those bookings convert to revenue. Altogether, that mix, operating leverage and disciplined cost management support the uplift in EBITDA guidance versus the modest change in revenue guidance.
Our next question comes from Allen Lutz with Bank of America.
First, Steve, it was great working with you. Best wishes moving forward. I have two questions in one here. Last quarter, AI was 40% of bookings. I don't know if you provided what it was this quarter, but if you are going to provide it, can you let us know what that was? And then, Steve, as we think about the level of capitalized software, as you talked about earlier on the call, it's gone up over the past year and over the past couple of quarters. Can you talk about this level of capitalized software? Is this the right run rate? And then as you think about the duration of the higher capitalized software spend, is there any time frame that you can give for us there?
Yes, Allen. On the bookings composition, we saw approximately 40% of bookings in this quarter again come from AI-enabled solutions, so similar to last quarter. On capitalized software development costs, the near-term run rate through the rest of 2026 would be consistent with what we've seen in the first couple of quarters. We roughly doubled capitalized software spend year-over-year in the first half as we accelerate delivery of AI-powered solutions. Absent new strategic opportunities where we might choose to invest more to rapidly bring new solutions to market, we believe the current level is a good indication of the pace for the rest of the year. We reserve the right to increase that spend if warranted, but we'll remain conscious of our unlevered free cash flow conversion and will not pursue spending that would jeopardize cash flow in the near term.
It's a great question. We're working to meet a unique moment in time. We feel we have a strong position to be a category leader and to build the market's first and most robust autonomous revenue cycle platform. You have seen us step up our capitalized software spend. We're doing a number of things internally that accelerate our ability to deliver AI-powered solutions: models deployed to do specific work that we know from testing with clients will produce good outcomes. We're disciplined, but we want to meet this moment, which is why we've doubled cap software spend thus far. You'll continue to see us be disciplined while taking the right steps for long-term shareholder and client benefit. Our strong P&L and free cash flow conversion give us optionality to do that.
Our next question comes from Craig Hettenbach with Morgan Stanley.
Question on 2026 guidance. Implied for the back half is roughly unchanged. Anything you would call out between Q3 and Q4? And then as you think through the larger deal sizes, some that are extending out to 18 months for ramp-up, how do you think about the visibility as you head into next year?
Craig, we would expect the Q3/Q4 dynamics to reflect typical seasonality in patient collections: patients on high-deductible plans often meet their deductibles by year-end, which can result in slightly lower patient revenue in Q4 versus Q3. That seasonality is similar to prior years. Regarding large $1 million-plus deals, they give us good visibility and confidence as we look into the future. We've talked previously about how cross-sell items like Iodine solutions translate to revenue over time and the opportunity in 2027. We remain confident that those opportunities will contribute meaningfully as they convert.
Yes, I think that's right. '26 feels like it's about sales execution and setting up implementations. We expect revenue contribution and platform benefits to become increasingly visible through '27. The $1 million-plus deals give us added conviction that the long-term opportunity is performing well.
And our final question comes from Charles Rhyee with TD Cowen.
Steve, nice working with you. Good luck in the future. I guess maybe I want to follow up on an earlier question that Matt and Steve responded to. When we think about competition and obviously, the concerns are that big health systems can leverage added services from their EHR vendor who are trying to move into rev cycle. I understand the value proposition that you guys are presenting and the greater ROI that customers can expect from deploying Waystar. But can you talk a little bit about when you're in discussion in the pipeline, do you run into a situation where customers are saying, 'We can try the EHR solution first and then see how that goes and then we'll come back'? Or is there an understanding that revenue cycle being as mission-critical as it is, maybe there's not value to try something that's not as good? I'm trying to understand the decision tree that clients go through and how that fits into your discussions.
Thanks, Charles. Regarding large EHR systems, revenue cycle management isn't simply an extension of the EHR. It requires different development, different connections to payers and a different cadence. The large EHR vendors are important partners to us; many of our clients use these EHRs. But where they are the system of record, Waystar is the system of action, and our focus is building the best solutions that create the best outcomes in the revenue cycle for our clients. The decision tree we see is that clients prioritize outcomes and ROI more than novelty or a free or built-in solution. If a solution doesn't change outcomes, it becomes very expensive over time. Clients want to see outcomes from end to end. We work well with EHR systems of record while Waystar operates as the system of action. We have many evidences of winning business where a minimum viable product or an announced solution isn't achieving the provider's goals. The provider wants benefit today, and we're delivering benefit today. We're grateful for our EHR partners; we integrate with over 500 EHR vendors and over 200 active channel partners. We appreciate the thoughtful questions today. Let me thank everybody for their time and the call. I'd like to also thank our team for helping us produce these results. We feel grateful to serve our clients and appreciate your questions today. Thanks, everybody.
This concludes today's conference call. Thank you for participating. You may now disconnect.